UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number811-22127
Columbia Funds Variable Series Trust II
(Exact name of registrant as specified in charter)
290 Congress Street, Boston, MA 02210
(Address of principal executive offices) (Zip code)
Daniel J. Beckman
c/o Columbia Management Investment Advisers, LLC
290 Congress Street
Boston, MA 02210
Ryan C. Larrenaga, Esq.
c/o Columbia Management Investment Advisers, LLC
290 Congress Street
Boston, MA 02210
(Name and address of agent for service)
Registrant's telephone number, including area code: (800) 345-6611
Date of fiscal year end: December 31
Date of reporting period: December 31, 2021
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. Reports to Stockholders.
Variable Portfolio
– Managed Volatility Moderate Growth Fund
Please remember that you may not
buy (nor will you own) shares of the Fund directly. The Fund is available through variable annuity contracts and variable life insurance policies offered by the separate accounts of participating insurance companies
as well as qualified pension and retirement plans. Please contact your financial advisor or insurance representative for more information.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
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Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which Variable Portfolio – Managed Volatility Moderate Growth Fund (the Fund) holds investments consistent with the procedures as stated in the Statement of Additional
Information (SAI). You may obtain a copy of the SAI without charge by calling 800.345.6611; contacting your financial intermediary or searching the website of the Securities and Exchange Commission (SEC) at sec.gov.
Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge
by visiting columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. The Fund’s Form N-PORT is available on the SEC’s website at sec.gov. The Fund’s complete
schedule of portfolio holdings, as filed on Form N-PORT, can also be obtained without charge, upon request, by calling 800.345.6611.
Additional Fund information
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
290 Congress Street
Boston, MA 02210
Fund distributor
Columbia Management Investment Distributors,
Inc.
290 Congress Street
Boston, MA 02210
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
Variable Portfolio – Managed Volatility
Moderate Growth Fund | Annual Report 2021
Fund at a Glance
Investment objective
The Fund
pursues total return while seeking to manage the Fund’s exposure to equity market volatility.
Portfolio management
Brian Virginia
Lead Portfolio Manager
Managed Fund since 2014
Anwiti Bahuguna, Ph.D.
Portfolio Manager
Managed Fund since 2015
David Weiss, CFA
Portfolio Manager
Managed Fund since 2016
Joshua Kutin, CFA
Portfolio Manager
Managed Fund since 2018
| Variable Portfolio – Managed Volatility Moderate Growth Fund | Annual Report 2021 | 3 |
Fund at a Glance (continued)
Performance of a hypothetical $10,000 investment (April 19, 2012 — December 31, 2021)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class 2 shares of Variable Portfolio – Managed Volatility Moderate Growth Fund during the stated time period, and does not reflect the deduction of taxes, if
any, that a shareholder may pay on Fund distributions or on the redemption of Fund shares. The returns also do not reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance
policy or qualified pension or retirement plan, if any.
| 4 | Variable Portfolio – Managed Volatility Moderate Growth Fund | Annual Report 2021 |
Manager Discussion of Fund Performance
For the 12-month period that
ended December 31, 2021, Class 2 shares of the Fund returned 8.70%. The Fund underperformed its Blended Benchmark, which returned 9.43%. The Bloomberg U.S. Aggregate Bond Index returned -1.54% over the same period.
Market overview
As pandemic-related restrictions
were eased, robust economic growth and corporate earnings drove gains for stocks. Both U.S. monetary and fiscal policy were highly supportive, as Congress approved massive spending packages that included direct
payments to citizens and the U.S. Federal Reserve (Fed) maintained its benchmark overnight lending rate near zero while engaging in bond market purchases to keep longer term borrowing costs low.
The fourth quarter of 2021 saw the
Fed adopt a more hawkish tone in response to persistently high inflation, driven in large part by supply chain constraints and rising commodity prices, which led to increased market volatility. Nonetheless, the major
large-cap indexes ended the year at or near all-time highs, with technology and communication services stocks the key drivers of market performance.
For the full year, most major
equity asset classes generated strong positive returns. U.S. equities continued to outperform international equities. Large-cap stocks outperformed mid- to small-cap stocks, but the dominance of growth over value
faded, with value stocks outperforming growth in the small-to mid-cap space for the year. Bond market returns for the 12-month period were muted, given that U.S. Treasury yields increased. U.S. high-yield corporate
bonds delivered some of the strongest gains across fixed-income markets while U.S. investment-grade corporate bonds delivered negative returns for the period.
The Fund’s notable
detractors during the period
| • | Underperformance during the period came primarily from underlying strategic equity fund managers and the dynamic algorithm which assists in helping direct overall levels of equity allocation. |
| • | Underlying fund manager performance in U.S. large-cap, and international equity strategies also weighed on relative performance results. |
| • | Several large growth-oriented managers faced significant headwinds during the period. Earnings yield figures dropped for some of their larger holdings and perceived risks from longer dated cash flows for significant growers in the large-cap universe were cause for some market participants to reduce exposure to this cohort during the second half of the period. |
The Fund’s notable
contributors during the period
| • | The managers’ tactical discretion applied versus the dynamic algorithm’s suggested equity allocations proved to be the largest contributor to relative performance in the period. |
| ○ | The managers’ tactically adjusted actual equity exposure throughout the period, erring on the side of a constructive view toward equities, which lent itself to an overweight equity allocation versus the suggested dynamic algorithm equity weighting. Given the positive return environment for global equities, this tactical preference to maintain overweight equity allocations proved beneficial to relative performance. In addition, this tactical positioning helped dampen overall portfolio volatility. |
| • | Underlying fund manager performance in fixed income also contributed to Fund performance during the period. Core fixed-income managers with exposure to lower quality corporate debt helped boost relative performance over the period. |
Derivatives usage
Derivative securities were used
to execute asset allocation changes based on the Fund’s dynamic algorithm. Protective put options, which are used in an attempt to help shield investors from outsized losses in periods of significant equity
market declines, weighed on returns as risk assets performed well during the period. The Fund’s use of futures contracts during the period lessened the negative impact of the protective put options.
| Variable Portfolio – Managed Volatility Moderate Growth Fund | Annual Report 2021 | 5 |
Manager Discussion of Fund Performance (continued)
The views expressed in this report
reflect the current views of the respective parties who have contributed to this report. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult
to predict, so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective parties
disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Columbia fund are based on numerous factors, may not be relied on as an
indication of trading intent on behalf of any particular Columbia fund. References to specific securities should not be construed as a recommendation or investment advice.
| 6 | Variable Portfolio – Managed Volatility Moderate Growth Fund | Annual Report 2021 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur ongoing
costs, which generally include management fees, distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to help you compare these costs with the ongoing costs of investing in other mutual funds.
The information below does not
reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy (collectively, Contracts) or qualified pension and retirement plan (Qualified Plan), if any. The total fees
and expenses you bear may therefore be higher than those shown below.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount invested, to estimate the
expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
In addition to the ongoing expenses
which the Fund bears directly, the Fund’s shareholders indirectly bear the Fund’s allocable share of the costs and expenses of each underlying fund in which the Fund invests. You can also estimate the
effective expenses paid during the period, which includes the indirect fees associated with investing in the underlying funds, by using the amounts listed in the "Effective expenses paid during the period" column.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as redemption or exchange fees, or expenses that apply to the subaccount or the Contract. Therefore, the
hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If the fees and expenses imposed under your Contract or
Qualified Plan, if any, were included, your costs would be higher.
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 365.
Effective expenses paid during the
period and the Fund’s effective annualized expense ratio include expenses borne directly to the class plus the Fund’s pro rata portion of the ongoing expenses charged by the underlying funds using the
expense ratio of each class of the underlying funds as of the underlying fund’s most recent shareholder report.
| Variable Portfolio – Managed Volatility Moderate Growth Fund | Annual Report 2021 | 7 |
Portfolio of Investments
December 31, 2021
December 31, 2021
(Percentages represent value of
investments compared to net assets)
Investments in securities
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 8 | Variable Portfolio – Managed Volatility Moderate Growth Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Variable Portfolio – Managed Volatility Moderate Growth Fund | Annual Report 2021 | 9 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 10 | Variable Portfolio – Managed Volatility Moderate Growth Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Variable Portfolio – Managed Volatility Moderate Growth Fund | Annual Report 2021 | 11 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 12 | Variable Portfolio – Managed Volatility Moderate Growth Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
At December 31, 2021,
securities and/or cash totaling $100,732,358 were pledged as collateral.
Investments in
derivatives
| Long futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| Australian Dollar | 240 | 03/2022 | USD | 17,467,200 | 556,152 | — |
| British Pound | 237 | 03/2022 | USD | 20,042,794 | 424,618 | — |
| Canadian Dollar | 920 | 03/2022 | USD | 72,726,000 | 793,701 | — |
| EURO STOXX 50 Index | 458 | 03/2022 | EUR | 19,636,750 | 466,134 | — |
| FTSE 100 Index | 70 | 03/2022 | GBP | 5,126,800 | 130,095 | — |
| New Zealand Dollar | 430 | 03/2022 | USD | 29,427,050 | 473,602 | — |
| OMXS30 Index | 885 | 01/2022 | SEK | 214,103,625 | 1,307,976 | — |
| Russell 2000 Index E-mini | 99 | 03/2022 | USD | 11,101,860 | 165,332 | — |
| S&P 500 Index E-mini | 4,488 | 03/2022 | USD | 1,067,807,400 | 20,756,799 | — |
| TOPIX Index | 171 | 03/2022 | JPY | 3,406,320,000 | — | (42,623) |
| U.S. Long Bond | 1,724 | 03/2022 | USD | 276,594,250 | 1,977,420 | — |
| U.S. Long Bond | 82 | 03/2022 | USD | 13,155,875 | — | (55,458) |
| U.S. Treasury 10-Year Note | 2,575 | 03/2022 | USD | 335,957,031 | 2,402,224 | — |
| U.S. Treasury 2-Year Note | 1,366 | 03/2022 | USD | 298,022,783 | — | (369,195) |
| U.S. Treasury 5-Year Note | 4,364 | 03/2022 | USD | 527,941,721 | 1,619,424 | — |
| U.S. Treasury 5-Year Note | 215 | 03/2022 | USD | 26,009,961 | — | (44,659) |
| U.S. Ultra Treasury Bond | 1,007 | 03/2022 | USD | 198,504,875 | 1,820,776 | — |
| U.S. Ultra Treasury Bond | 50 | 03/2022 | USD | 9,856,250 | — | (68,337) |
| Total | 32,894,253 | (580,272) | ||||
| Short futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| Euro FX | (193) | 03/2022 | USD | (27,508,531) | — | (231,779) |
| Japanese Yen | (400) | 03/2022 | USD | (43,490,000) | 568,500 | — |
| MSCI Singapore Index | (330) | 01/2022 | SGD | (11,224,950) | — | (55,253) |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Variable Portfolio – Managed Volatility Moderate Growth Fund | Annual Report 2021 | 13 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
| Short futures contracts (continued) | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| S&P 500 Index E-mini | (636) | 03/2022 | USD | (151,320,300) | — | (6,749,657) |
| S&P/TSX 60 Index | (220) | 03/2022 | CAD | (56,359,600) | — | (746,875) |
| SPI 200 Index | (34) | 03/2022 | AUD | (6,244,950) | — | (46,637) |
| Swiss Franc | (415) | 03/2022 | USD | (57,021,000) | — | (777,879) |
| U.S. Treasury 10-Year Note | (24) | 03/2022 | USD | (3,131,250) | — | (9,614) |
| U.S. Treasury Ultra 10-Year Note | (30) | 03/2022 | USD | (4,393,125) | — | (27,722) |
| U.S. Ultra Treasury Bond | (4) | 03/2022 | USD | (788,500) | — | (1,845) |
| Total | 568,500 | (8,647,261) | ||||
| Cleared credit default swap contracts - sell protection | ||||||||||||
| Reference entity | Counterparty | Maturity date | Receive fixed rate (%) | Payment frequency | Implied credit spread (%)* | Notional currency | Notional amount | Value ($) | Upfront payments ($) | Upfront receipts ($) | Unrealized appreciation ($) | Unrealized depreciation ($) |
| Markit CDX North America Investment Grade Index, Series 37 | Morgan Stanley | 12/20/2026 | 1.000 | Quarterly | 0.494 | USD | 200,000,000 | 454,919 | — | — | 454,919 | — |
| * | Implied credit spreads, represented in absolute terms, utilized in determining the market value of credit default swap agreements on corporate or sovereign issues as of period end serve as an indicator of the current status of the payment/performance risk and represent the likelihood or risk of default for the credit derivative. The implied credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Wider credit spreads represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement. |
Notes to Portfolio of
Investments
| (a) | Represents privately placed and other securities and instruments exempt from Securities and Exchange Commission registration (collectively, private placements), such as Section 4(a)(2) and Rule 144A eligible securities, which are often sold only to qualified institutional buyers. At December 31, 2021, the total value of these securities amounted to $6,091,529, which represents 0.04% of total net assets. |
| (b) | Represents a variable rate security with a step coupon where the rate adjusts according to a schedule for a series of periods, typically lower for an initial period and then increasing to a higher coupon rate thereafter. The interest rate shown was the current rate as of December 31, 2021. |
| (c) | Variable rate security. The interest rate shown was the current rate as of December 31, 2021. |
| (d) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended December 31, 2021 are as follows: |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 14 | Variable Portfolio – Managed Volatility Moderate Growth Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Notes
to Portfolio of Investments (continued)
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Capital gain distributions($) | Realized gain (loss)($) | Dividends — affiliated issuers ($) | End of period shares |
| Columbia Variable Portfolio – Dividend Opportunity Fund, Class 1 Shares | |||||||||
| 267,718,588 | — | (169,670,344) | (98,048,244) | — | — | 104,516,498 | — | — | |
| Columbia Variable Portfolio – Intermediate Bond Fund, Class 1 Shares | |||||||||
| 771,460,379 | 115,678,797 | (40,620,225) | (81,814,730) | 764,704,221 | 55,207,981 | (639,720) | 25,460,107 | 74,171,118 | |
| Columbia Variable Portfolio – Large Cap Growth Fund, Class 1 Shares | |||||||||
| 370,887,568 | 37,594,441 | (34,511,664) | 47,769,085 | 421,739,430 | — | 62,798,241 | — | 11,113,029 | |
| Columbia Variable Portfolio – Limited Duration Credit Fund, Class 1 Shares | |||||||||
| 219,234,000 | 21,834,555 | (2,016,322) | (5,086,536) | 233,965,697 | — | (98,725) | 3,806,921 | 23,777,002 | |
| Columbia Variable Portfolio – Long Government/Credit Bond Fund, Class 1 Shares | |||||||||
| 396,841,639 | 148,681,885 | (25,638,850) | (45,963,331) | 473,921,343 | 23,000,075 | 3,469,560 | 9,972,716 | 42,352,220 | |
| Columbia Variable Portfolio – Mid Cap Growth Fund, Class 1 Shares | |||||||||
| 110,188,208 | 37,979 | (15,712,638) | (7,023,439) | 87,490,110 | — | 22,449,424 | — | 1,669,340 | |
| Columbia Variable Portfolio – Overseas Core Fund, Class 1 Shares | |||||||||
| 535,461,919 | 383,638,809 | (4,185,790) | 34,284,624 | 949,199,562 | 18,021,898 | 1,556,083 | 11,336,142 | 62,944,268 | |
| Columbia Variable Portfolio – Select Large Cap Equity Fund, Class 1 Shares | |||||||||
| 323,819,754 | 410,123,079 | (38,452,313) | 146,401,315 | 841,891,835 | — | 28,777,673 | — | 45,730,138 | |
| Columbia Variable Portfolio – Select Large Cap Value Fund, Class 1 Shares | |||||||||
| 277,259,995 | 143,984,668 | (39,140,913) | 45,419,378 | 427,523,128 | — | 45,528,855 | — | 11,424,990 | |
| Columbia Variable Portfolio – Select Mid Cap Value Fund, Class 1 Shares | |||||||||
| 110,168,557 | 267 | (25,230,878) | 8,955,840 | 93,893,786 | — | 18,989,019 | — | 2,545,927 | |
| Columbia Variable Portfolio – Small Cap Value Fund, Class 1 Shares | |||||||||
| 96,662,349 | 603,822 | (25,204,066) | 17,197,986 | 89,260,091 | — | 8,396,285 | 597,073 | 4,301,691 | |
| Columbia Variable Portfolio – Small Company Growth Fund, Class 1 Shares | |||||||||
| 112,774,415 | 23,904,849 | (18,245,717) | (31,904,629) | 86,528,918 | 15,390,335 | 17,575,034 | — | 3,547,721 | |
| Columbia Variable Portfolio – U.S. Government Mortgage Fund, Class 1 Shares | |||||||||
| 217,646,838 | 24,956,188 | (816,589) | (10,847,190) | 230,939,247 | 3,712,400 | 19,996 | 4,784,047 | 22,334,550 | |
| CTIVP® – Allspring Short Duration Government Fund, Class 1 Shares | |||||||||
| 170,632,512 | 13,064,916 | (725,436) | (8,625,334) | 174,346,658 | 3,147,146 | (10,920) | 2,776,499 | 17,754,242 | |
| CTIVP® – American Century Diversified Bond Fund, Class 1 Shares | |||||||||
| 542,390,250 | 83,925,664 | (13,192,328) | (22,466,514) | 590,657,072 | 12,529,566 | 535,335 | 13,712,746 | 52,456,223 | |
| CTIVP® – Lazard International Equity Advantage Fund, Class 1 Shares | |||||||||
| 291,141,099 | 38,071,419 | (299,742,946) | (29,469,572) | — | 19,232,389 | 14,769,092 | 8,102,869 | — | |
| CTIVP® – Loomis Sayles Growth Fund, Class 1 Shares | |||||||||
| 341,220,763 | 19,970,243 | (23,255,892) | 25,131,389 | 363,066,503 | — | 39,927,827 | — | 6,180,907 | |
| CTIVP® – Los Angeles Capital Large Cap Growth Fund, Class 1 Shares | |||||||||
| 288,370,685 | — | (135,534,488) | (152,836,197) | — | — | 169,080,146 | — | — | |
| CTIVP® – MFS® Value Fund, Class 1 Shares | |||||||||
| 213,535,754 | 137,877,493 | (28,208,161) | 50,305,343 | 373,510,429 | — | 30,039,107 | — | 9,860,360 | |
| CTIVP® – Morgan Stanley Advantage Fund, Class 1 Shares | |||||||||
| 352,374,205 | 24,869,796 | (15,701,935) | (42,027,941) | 319,514,125 | — | 31,958,207 | — | 5,325,235 | |
| CTIVP® – T. Rowe Price Large Cap Value Fund, Class 1 Shares | |||||||||
| 245,820,279 | 112,334,644 | (36,981,595) | 50,562,883 | 371,736,211 | — | 31,818,353 | — | 11,034,022 | |
| CTIVP® – TCW Core Plus Bond Fund, Class 1 Shares | |||||||||
| 724,238,216 | 105,521,130 | (12,023,002) | (53,028,650) | 764,707,694 | 33,763,187 | 562,902 | 10,694,305 | 71,201,834 | |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Variable Portfolio – Managed Volatility Moderate Growth Fund | Annual Report 2021 | 15 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Notes
to Portfolio of Investments (continued)
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Capital gain distributions($) | Realized gain (loss)($) | Dividends — affiliated issuers ($) | End of period shares |
| CTIVP® – Victory Sycamore Established Value Fund, Class 1 Shares | |||||||||
| 146,377,272 | — | (46,972,134) | (7,380,344) | 92,024,794 | — | 40,953,937 | — | 2,129,711 | |
| CTIVP® – Westfield Mid Cap Growth Fund, Class 1 Shares | |||||||||
| 149,245,500 | 33,225 | (32,456,103) | (26,582,467) | 90,240,155 | — | 41,253,717 | — | 1,884,321 | |
| Variable Portfolio – Partners Core Bond Fund, Class 1 Shares | |||||||||
| 864,076,368 | 81,314,438 | (15,876,457) | (45,804,797) | 883,709,552 | 22,463,656 | 148,586 | 12,603,465 | 79,470,283 | |
| Variable Portfolio – Partners Core Equity Fund, Class 1 Shares | |||||||||
| 418,223,046 | 424,842 | (43,639,288) | 41,492,998 | 416,501,598 | — | 58,283,978 | — | 11,527,860 | |
| Variable Portfolio – Partners International Core Equity Fund, Class 1 Shares | |||||||||
| 712,697,382 | 123,139,500 | (360,606,979) | 37,578,261 | 512,808,164 | — | 29,295,707 | 13,142,130 | 37,789,843 | |
| Variable Portfolio – Partners International Growth Fund, Class 1 Shares | |||||||||
| 252,864,882 | 65,663,325 | (3,166,809) | 14,399,265 | 329,760,663 | 14,469,211 | 774,514 | 200,924 | 22,524,635 | |
| Variable Portfolio – Partners International Value Fund, Class 1 Shares | |||||||||
| 247,696,817 | 138,103,539 | (74,151,923) | 20,321,568 | 331,970,001 | — | (5,403,307) | 4,609,377 | 32,803,360 | |
| Variable Portfolio – Partners Small Cap Growth Fund, Class 1 Shares | |||||||||
| 232,798,408 | 14,955,064 | (19,354,415) | (2,557,224) | 225,841,833 | — | 23,835,221 | — | 5,921,391 | |
| Variable Portfolio – Partners Small Cap Value Fund, Class 1 Shares | |||||||||
| 186,613,338 | 43,955,015 | (21,955,739) | 33,726,502 | 242,339,116 | — | 15,157,347 | — | 6,453,771 | |
| Total | 13,911,035,343 | (89,568,543) | 14,593,293,739 | 220,937,844 | 1,134,420,581 | 123,628,883 | |||
| (e) | Non-income producing investment. |
| (f) | Represents a security purchased on a when-issued basis. |
| (g) | The rate shown is the seven-day current annualized yield at December 31, 2021. |
Abbreviation Legend
| LIBOR | London Interbank Offered Rate |
| TBA | To Be Announced |
Currency Legend
| AUD | Australian Dollar |
| CAD | Canada Dollar |
| EUR | Euro |
| GBP | British Pound |
| JPY | Japanese Yen |
| SEK | Swedish Krona |
| SGD | Singapore Dollar |
| USD | US Dollar |
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 16 | Variable Portfolio – Managed Volatility Moderate Growth Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Fair value measurements (continued)
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
Certain investments that have been
measured at fair value using the net asset value (NAV) per share (or its equivalent) are not categorized in the fair value hierarchy. The fair value amounts presented in the table are intended to reconcile the fair
value hierarchy to the amounts presented in the Portfolio of Investments. The Variable Portfolios serve as investment vehicles for variable annuity contracts and variable life insurance policies. Principle investment
strategies within these Variable Portfolios vary based on the Portfolios investment objective. Investments in the Variable Portfolios may be redeemed on a daily basis without restriction.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at December 31, 2021:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Assets at NAV ($) | Total ($) | |
| Investments in Securities | |||||
| Corporate Bonds & Notes | — | 54,626,855 | — | — | 54,626,855 |
| Equity Funds | — | — | — | 7,782,932,907 | 7,782,932,907 |
| Exchange-Traded Equity Funds | 810,356,607 | — | — | — | 810,356,607 |
| Exchange-Traded Fixed Income Funds | 681,353,012 | — | — | — | 681,353,012 |
| Fixed Income Funds | — | — | — | 4,116,951,484 | 4,116,951,484 |
| Residential Mortgage-Backed Securities - Agency | — | 1,441,209,433 | — | — | 1,441,209,433 |
| Options Purchased Puts | 137,891,250 | — | — | — | 137,891,250 |
| Money Market Funds | 2,693,409,348 | — | — | — | 2,693,409,348 |
| Total Investments in Securities | 4,323,010,217 | 1,495,836,288 | — | 11,899,884,391 | 17,718,730,896 |
| Investments in Derivatives | |||||
| Asset | |||||
| Futures Contracts | 33,462,753 | — | — | — | 33,462,753 |
| Swap Contracts | — | 454,919 | — | — | 454,919 |
| Liability | |||||
| Futures Contracts | (9,227,533) | — | — | — | (9,227,533) |
| Total | 4,347,245,437 | 1,496,291,207 | — | 11,899,884,391 | 17,743,421,035 |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The Fund’s assets assigned to
the Level 2 input category are generally valued using the market approach, in which a security’s value is determined through reference to prices and information from market transactions for similar or identical
assets.
Futures contracts and swap contracts
are valued at unrealized appreciation (depreciation).
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Variable Portfolio – Managed Volatility Moderate Growth Fund | Annual Report 2021 | 17 |
Statement of Assets and Liabilities
December 31, 2021
December 31, 2021
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $2,676,399,577) | $2,987,545,907 |
| Affiliated issuers (cost $11,647,935,015) | 14,593,293,739 |
| Options purchased (cost $214,042,064) | 137,891,250 |
| Cash collateral held at broker for: | |
| TBA | 1,771,000 |
| Margin deposits on: | |
| Futures contracts | 93,994,060 |
| Swap contracts | 4,967,298 |
| Receivable for: | |
| Investments sold | 11,134,798 |
| Capital shares sold | 1,612 |
| Dividends | 2,585,875 |
| Interest | 1,806,056 |
| Foreign tax reclaims | 1,438 |
| Variation margin for futures contracts | 4,648,741 |
| Variation margin for swap contracts | 40,454 |
| Prepaid expenses | 111,545 |
| Total assets | 17,839,793,773 |
| Liabilities | |
| Payable for: | |
| Investments purchased on a delayed delivery basis | 1,442,596,808 |
| Capital shares purchased | 15,908,466 |
| Variation margin for futures contracts | 3,524,448 |
| Management services fees | 79,769 |
| Distribution and/or service fees | 112,271 |
| Service fees | 831,254 |
| Compensation of board members | 576,098 |
| Compensation of chief compliance officer | 3,022 |
| Other expenses | 68,449 |
| Total liabilities | 1,463,700,585 |
| Net assets applicable to outstanding capital stock | $16,376,093,188 |
| Represented by | |
| Trust capital | $16,376,093,188 |
| Total - representing net assets applicable to outstanding capital stock | $16,376,093,188 |
| Class 1 | |
| Net assets | $11,154,605 |
| Shares outstanding | 595,623 |
| Net asset value per share | $18.73 |
| Class 2 | |
| Net assets | $16,364,938,583 |
| Shares outstanding | 878,748,363 |
| Net asset value per share | $18.62 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 18 | Variable Portfolio – Managed Volatility Moderate Growth Fund | Annual Report 2021 |
Statement of Operations
Year Ended December 31, 2021
Year Ended December 31, 2021
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $31,776,013 |
| Dividends — affiliated issuers | 123,628,883 |
| Interest | 1,735,770 |
| Total income | 157,140,666 |
| Expenses: | |
| Management services fees | 28,974,290 |
| Distribution and/or service fees | |
| Class 2 | 40,699,123 |
| Service fees | 9,784,221 |
| Compensation of board members | 311,944 |
| Custodian fees | 50,335 |
| Printing and postage fees | 79,360 |
| Audit fees | 29,500 |
| Legal fees | 157,392 |
| Interest on collateral | 333,994 |
| Compensation of chief compliance officer | 2,829 |
| Other | 111,234 |
| Total expenses | 80,534,222 |
| Net investment income | 76,606,444 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 2,139,937 |
| Investments — affiliated issuers | 1,134,420,581 |
| Capital gain distributions from underlying affiliated funds | 220,937,844 |
| Foreign currency translations | (764,076) |
| Futures contracts | 194,584,833 |
| Options purchased | (205,483,646) |
| Swap contracts | 2,508,594 |
| Net realized gain | 1,348,344,067 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | 58,775,215 |
| Investments — affiliated issuers | (89,568,543) |
| Foreign currency translations | (1,365,719) |
| Futures contracts | 6,935,924 |
| Options purchased | (45,159,623) |
| Swap contracts | (240,612) |
| Net change in unrealized appreciation (depreciation) | (70,623,358) |
| Net realized and unrealized gain | 1,277,720,709 |
| Net increase in net assets resulting from operations | $1,354,327,153 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| Variable Portfolio – Managed Volatility Moderate Growth Fund | Annual Report 2021 | 19 |
Statement of Changes in Net Assets
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | |
| Operations | ||
| Net investment income | $76,606,444 | $75,321,478 |
| Net realized gain | 1,348,344,067 | 695,904,185 |
| Net change in unrealized appreciation (depreciation) | (70,623,358) | 709,813,180 |
| Net increase in net assets resulting from operations | 1,354,327,153 | 1,481,038,843 |
| Decrease in net assets from capital stock activity | (824,111,038) | (866,247,727) |
| Total increase in net assets | 530,216,115 | 614,791,116 |
| Net assets at beginning of year | 15,845,877,073 | 15,231,085,957 |
| Net assets at end of year | $16,376,093,188 | $15,845,877,073 |
| Year Ended | Year Ended | |||
| December 31, 2021 | December 31, 2020 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class 1 | ||||
| Subscriptions | 362,865 | 6,635,428 | 202,192 | 3,183,309 |
| Redemptions | (15,595) | (287,069) | (24,199) | (380,912) |
| Net increase | 347,270 | 6,348,359 | 177,993 | 2,802,397 |
| Class 2 | ||||
| Subscriptions | 2,671,476 | 47,602,993 | 2,103,345 | 33,682,124 |
| Redemptions | (48,622,556) | (878,062,390) | (58,737,846) | (902,732,248) |
| Net decrease | (45,951,080) | (830,459,397) | (56,634,501) | (869,050,124) |
| Total net decrease | (45,603,810) | (824,111,038) | (56,456,508) | (866,247,727) |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 20 | Variable Portfolio – Managed Volatility Moderate Growth Fund | Annual Report 2021 |
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| Variable Portfolio – Managed Volatility Moderate Growth Fund | Annual Report 2021 | 21 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect any fees and expenses imposed under your
Contract and/or Qualified Plan, as applicable; such fees and expenses would reduce the total returns for all periods shown. Total return and portfolio turnover are not annualized for periods of less than one year. The
portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain derivatives, if any. If such transactions were included, the Fund’s portfolio
turnover rate may be higher.
| Net asset value, beginning of period | Net investment income | Net realized and unrealized gain (loss) | Total from investment operations | |
| Class 1 | ||||
| Year Ended 12/31/2021 | $17.18 | 0.13 | 1.42 | 1.55 |
| Year Ended 12/31/2020 | $15.53 | 0.13 | 1.52 | 1.65 |
| Year Ended 12/31/2019(d) | $14.19 | 0.13 | 1.21 | 1.34 |
| Class 2 | ||||
| Year Ended 12/31/2021 | $17.13 | 0.08 | 1.41 | 1.49 |
| Year Ended 12/31/2020 | $15.52 | 0.08 | 1.53 | 1.61 |
| Year Ended 12/31/2019 | $13.36 | 0.18 | 1.98 | 2.16 |
| Year Ended 12/31/2018 | $14.19 | 0.13 | (0.96) | (0.83) |
| Year Ended 12/31/2017 | $12.41 | 0.09 | 1.69 | 1.78 |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Ratios include interest on collateral expense which is less than 0.01%. |
| (d) | Class 1 shares commenced operations on February 20, 2019. Per share data and total return reflect activity from that date. |
| (e) | Annualized. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 22 | Variable Portfolio – Managed Volatility Moderate Growth Fund | Annual Report 2021 |
Financial Highlights (continued)
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets(a) | Total net expense ratio to average net assets(a),(b) | Net investment income ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Class 1 | |||||||
| Year Ended 12/31/2021 | $18.73 | 9.02% | 0.25%(c) | 0.25%(c) | 0.69% | 184% | $11,155 |
| Year Ended 12/31/2020 | $17.18 | 10.63% | 0.25% | 0.25% | 0.82% | 163% | $4,268 |
| Year Ended 12/31/2019(d) | $15.53 | 9.44% | 0.24%(e) | 0.24%(e) | 1.01%(e) | 138% | $1,093 |
| Class 2 | |||||||
| Year Ended 12/31/2021 | $18.62 | 8.70% | 0.49%(c) | 0.49%(c) | 0.47% | 184% | $16,364,939 |
| Year Ended 12/31/2020 | $17.13 | 10.37% | 0.50% | 0.50% | 0.51% | 163% | $15,841,609 |
| Year Ended 12/31/2019 | $15.52 | 16.17% | 0.49% | 0.49% | 1.25% | 138% | $15,229,993 |
| Year Ended 12/31/2018 | $13.36 | (5.85%) | 0.49% | 0.49% | 0.90% | 92% | $13,743,943 |
| Year Ended 12/31/2017 | $14.19 | 14.34% | 0.47% | 0.47% | 0.69% | 98% | $14,678,387 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Variable Portfolio – Managed Volatility Moderate Growth Fund | Annual Report 2021 | 23 |
Notes to Financial Statements
December 31, 2021
December 31, 2021
Note 1. Organization
Variable Portfolio –
Managed Volatility Moderate Growth Fund (the Fund), a series of Columbia Funds Variable Series Trust II (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended
(the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust.
The Fund is a
“fund-of-funds”, investing significantly in affiliated funds managed by Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc.
(Ameriprise Financial), its affiliates, or third-party advised (unaffiliated) funds, including exchange-traded funds (collectively, Underlying Funds). The Fund is exposed to the same risks as the Underlying Funds in
direct proportion to the allocation of its assets among the Underlying Funds. For information on the investment strategies, operations and risks of the Underlying Funds, please refer to the Fund’s current
prospectus as well as the prospectuses and shareholder reports of the Underlying Funds, which are available from the Securities and Exchange Commission’s website at www.sec.gov. or on the Underlying
Funds’ website at www.columbiathreadneedleus.com/resources/literature.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers Class 1 and Class 2 shares to separate accounts funding variable annuity contracts and variable life insurance policies (collectively, Contracts) issued by
affiliated life insurance companies (Participating Insurance Companies) and other qualified institutional investors (Qualified Investors) authorized by Columbia Management Investment Distributors, Inc. (the
Distributor). You may not buy (nor will you own) shares of the Fund directly. You may invest by buying a Contract.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Equity securities listed on an
exchange are valued at the closing price or last trade price on their primary exchange at the close of business of the New York Stock Exchange. Securities with a closing price not readily available or not listed on
any exchange are valued at the mean between the closing bid and ask prices. Listed preferred stocks convertible into common stocks are valued using an evaluated price from a pricing service.
Debt securities generally are
valued by pricing services approved by the Board of Trustees based upon market transactions for normal, institutional-size trading units of similar securities. The services may use various pricing techniques that take
into account, as applicable, factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data, as well as approved independent broker-dealer quotes. Debt securities for
which quotations are not readily available or not believed to be reflective of market value may also be valued based upon a bid quote from an approved independent broker-dealer. Debt securities maturing in 60 days or
less are valued primarily at amortized market value, unless this method results in a valuation that management believes does not approximate fair value.
Asset- and mortgage-backed
securities are generally valued by pricing services, which utilize pricing models that incorporate the securities’ cash flow and loan performance data. These models also take into account available market data,
including trades, market quotations, and benchmark yield curves for identical or similar securities. Factors used to identify similar securities may include, but are not limited to, issuer, collateral type, vintage,
prepayment speeds, collateral performance, credit ratings, credit enhancement and expected life. Asset-backed securities for which quotations are readily available may
| 24 | Variable Portfolio – Managed Volatility Moderate Growth Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
also be valued based upon an over-the-counter or
exchange bid quote from an approved independent broker-dealer. Debt securities maturing in 60 days or less are valued primarily at amortized market value, unless this method results in a valuation that management
believes does not approximate fair value.
Investments in the Underlying Funds
(other than exchange-traded funds (ETFs)), are valued at the latest net asset value reported by those companies as of the valuation time.
Futures and options on futures
contracts are valued based upon the settlement price at the close of regular trading on their principal exchanges or, in the absence of a settlement price, at the mean of the latest quoted bid and ask prices.
Option contracts are valued at the
mean of the latest quoted bid and ask prices on their primary exchanges. Option contracts, including over-the-counter option contracts, with no readily available market quotations are valued using mid-market
evaluations from independent third-party vendors.
Swap transactions are valued
through an independent pricing service or broker, or if neither is available, through an internal model based upon observable inputs.
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Foreign currency transactions and
translations
The values of all assets and
liabilities denominated in foreign currencies are generally translated into U.S. dollars at exchange rates determined at the close of regular trading on the New York Stock Exchange. Net realized and unrealized gains
(losses) on foreign currency transactions and translations include gains (losses) arising from the fluctuation in exchange rates between trade and settlement dates on securities transactions, gains (losses) arising
from the disposition of foreign currency and currency gains (losses) between the accrual and payment dates on dividends, interest income and foreign withholding taxes.
For financial statement purposes,
the Fund does not distinguish that portion of gains (losses) on investments which is due to changes in foreign exchange rates from that which is due to changes in market prices of the investments. Such fluctuations
are included with the net realized and unrealized gains (losses) on investments in the Statement of Operations.
Derivative instruments
The Fund invests in certain
derivative instruments, as detailed below, in seeking to meet its investment objectives. Derivatives are instruments whose values depend on, or are derived from, in whole or in part, the value of one or more
securities, currencies, commodities, indices, or other assets or instruments. Derivatives may be used to increase investment flexibility (including to maintain cash reserves while maintaining desired exposure to
certain assets), for risk management (hedging) purposes, to facilitate trading, to reduce transaction costs and to pursue higher investment returns. The Fund may also use derivative instruments to mitigate certain
investment risks, such as foreign currency exchange rate risk, interest rate risk and credit risk. Derivatives may involve various risks, including the potential inability of the counterparty to fulfill its
obligations under the terms of the contract, the potential for an illiquid secondary market (making it difficult for the Fund to sell or terminate, including at favorable prices) and the potential for market movements
which may expose the Fund to gains or losses in excess of the amount shown in the Statement of Assets and Liabilities. The notional amounts of derivative instruments, if applicable, are not recorded in the financial
statements.
| Variable Portfolio – Managed Volatility Moderate Growth Fund | Annual Report 2021 | 25 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
A derivative instrument may suffer
a marked-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform its
obligations under the contract. The Fund’s risk of loss from counterparty credit risk on over-the-counter derivatives is generally limited to the aggregate unrealized gain netted against any collateral held by
the Fund and the amount of any variation margin held by the counterparty, plus any replacement costs or related amounts. With exchange-traded or centrally cleared derivatives, there is reduced counterparty credit risk
to the Fund since the clearinghouse or central counterparty (CCP) provides some protection in the case of clearing member default. The clearinghouse or CCP stands between the buyer and the seller of the contract;
therefore, additional counterparty credit risk is failure of the clearinghouse or CCP. However, credit risk still exists in exchange-traded or centrally cleared derivatives with respect to initial and variation margin
that is held in a broker’s customer account. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy
and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients and such shortfall is remedied by the CCP or otherwise, U.S. bankruptcy laws will typically
allocate that shortfall on a pro-rata basis across all the clearing broker’s customers (including the Fund), potentially resulting in losses to the Fund.
In order to better define its
contractual rights and to secure rights that will help the Fund mitigate its counterparty risk, the Fund may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (ISDA Master Agreement)
or similar agreement with its derivatives counterparties. An ISDA Master Agreement is an agreement between the Fund and a counterparty that governs over-the-counter derivatives and foreign exchange forward contracts
and contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset
with the counterparty certain derivative instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically
permit a single net payment in the event of default (close-out netting), including the bankruptcy or insolvency of the counterparty. Note, however, that bankruptcy or insolvency laws of a particular jurisdiction may
impose restrictions on or prohibitions against the right of offset or netting in bankruptcy, insolvency or other events.
Collateral (margin) requirements
differ by type of derivative. Margin requirements are established by the clearinghouse or CCP for exchange-traded and centrally cleared derivatives. Brokers can ask for margin in excess of the minimum in certain
circumstances. Collateral terms for most over-the-counter derivatives are subject to regulatory requirements to exchange variation margin with trading counterparties and may have contract specific margin terms as
well. For over-the-counter derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the marked-to-market amount for each transaction under such agreement and
comparing that amount to the value of any variation margin currently pledged by the Fund and/or the counterparty. Generally, the amount of collateral due from or to a party has to exceed a minimum transfer amount
threshold (e.g., $250,000) before a transfer has to be made. To the extent amounts due to the Fund from its counterparties are not fully collateralized, contractually or otherwise, the Fund bears the risk of loss from
counterparty nonperformance. The Fund may also pay interest expense on cash collateral received from the broker. Any interest expense paid by the Fund is shown on the Statement of Operations. The Fund attempts to
mitigate counterparty risk by only entering into agreements with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those
counterparties.
Certain ISDA Master Agreements
allow counterparties of over-the-counter derivatives transactions to terminate derivatives contracts prior to maturity in the event the Fund’s net asset value declines by a stated percentage over a specified
time period or if the Fund fails to meet certain terms of the ISDA Master Agreement, which would cause the Fund to accelerate payment of any net liability owed to the counterparty. The Fund also has termination
rights if the counterparty fails to meet certain terms of the ISDA Master Agreement. In determining whether to exercise such termination rights, the Fund would consider, in addition to counterparty credit risk,
whether termination would result in a net liability owed from the counterparty.
For financial reporting purposes,
the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statement of Assets and Liabilities.
Futures contracts
Futures contracts are
exchange-traded and represent commitments for the future purchase or sale of an asset at a specified price on a specified date. The Fund bought and sold futures contracts to produce incremental earnings, to manage the
duration and yield curve exposure of the Fund versus the benchmark, to manage exposure to movements in interest rates, to
| 26 | Variable Portfolio – Managed Volatility Moderate Growth Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
manage exposure to the securities market and to
maintain appropriate equity market exposure while keeping sufficient cash to accommodate daily redemptions. These instruments may be used for other purposes in future periods. Upon entering into futures contracts, the
Fund bears risks that it may not achieve the anticipated benefits of the futures contracts and may realize a loss. Additional risks include counterparty credit risk, the possibility of an illiquid market, and that a
change in the value of the contract or option may not correlate with changes in the value of the underlying asset.
Upon entering into a futures
contract, the Fund deposits cash or securities with the broker, known as a futures commission merchant (FCM), in an amount sufficient to meet the initial margin requirement. The initial margin deposit must be
maintained at an established level over the life of the contract. Cash deposited as initial margin is recorded in the Statement of Assets and Liabilities as margin deposits. Securities deposited as initial margin are
designated in the Portfolio of Investments. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily change in the contract value and are
recorded as variation margin receivable or payable and are offset in unrealized gains or losses. The Fund generally expects to earn interest income on its margin deposits. The Fund recognizes a realized gain or loss
when the contract is closed or expires. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities.
Options contracts
Options are contracts which entitle
the holder to purchase or sell securities or other identified assets at a specified price, or in the case of index option contracts, to receive or pay the difference between the index value and the strike price of the
index option contract. Option contracts can be either exchange-traded or over-the-counter. The Fund purchased option contracts to produce incremental earnings, to decrease the Fund’s exposure to equity market
risk and to protect gains. These instruments may be used for other purposes in future periods. Completion of transactions for option contracts traded in the over-the-counter market depends upon the performance of the
other party. Collateral may be collected or posted by the Fund to secure over-the-counter option contract trades. Collateral held or posted by the Fund for such option contract trades must be returned to the broker or
the Fund upon closure, exercise or expiration of the contract.
Options contracts purchased are
recorded as investments. When the Fund writes an options contract, the premium received is recorded as an asset and an amount equivalent to the premium is recorded as a liability in the Statement of Assets and
Liabilities and is subsequently adjusted to reflect the current fair value of the option written. Changes in the fair value of the written option are recorded as unrealized appreciation or depreciation until the
contract is exercised or has expired. The Fund realizes a gain or loss when the option contract is closed or expires. When option contracts are exercised, the proceeds on sales for a written call or purchased put
option contract, or the purchase cost for a written put or purchased call option contract, is adjusted by the amount of premium received or paid.
For over-the-counter options
purchased, the Fund bears the risk of loss of the amount of the premiums paid plus the positive change in market values net of any collateral held by the Fund should the counterparty fail to perform under the
contracts. Option contracts written by the Fund do not typically give rise to significant counterparty credit risk, as options written generally obligate the Fund and not the counterparty to perform. The risk in
writing a call option contract is that the Fund gives up the opportunity for profit if the market price of the security increases above the strike price and the option contract is exercised. The risk in writing a put
option contract is that the Fund may incur a loss if the market price of the security decreases below the strike price and the option contract is exercised. Exercise of a written option could result in the Fund
purchasing or selling a security or foreign currency when it otherwise would not, or at a price different from the current market value. In purchasing and writing options, the Fund bears the risk of an unfavorable
change in the value of the underlying instrument or the risk that the Fund may not be able to enter into a closing transaction due to an illiquid market.
Swap contracts
Swap contracts are negotiated in
the over-the-counter market and may be entered into as a bilateral contract or centrally cleared (centrally cleared swap contract). In a centrally cleared swap contract, immediately following execution of the swap
contract with a broker, the swap contract is novated to a central counterparty (the CCP) and the CCP becomes the Fund’s counterparty to the centrally cleared swap contract. The Fund is required to deposit
initial margin with the futures commission merchant (FCM), which pledges it through to the CCP in the form of cash or securities in an amount that varies depending on the size and risk profile of the particular swap
contract. Securities deposited as initial margin are designated in the Portfolio of Investments and cash deposited is recorded in the Statement of Assets and Liabilities as margin deposits. For a bilateral
| Variable Portfolio – Managed Volatility Moderate Growth Fund | Annual Report 2021 | 27 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
swap contract, the Fund has credit exposure to the
broker, but exchanges daily variation margin with the broker based on the mark-to-market value of the swap contract to minimize that exposure. For centrally cleared swap contracts, the Fund has minimal credit exposure
to the FCM because the CCP stands between the Fund and the relevant buyer/seller on the other side of the contract. Swap contracts are marked-to-market daily and changes in value are recorded as unrealized
appreciation (depreciation). The daily change in valuation of centrally cleared swap contracts, if any, is recorded as a receivable or payable for variation margin in the Statement of Assets and Liabilities.
Entering into these contracts
involves, to varying degrees, elements of interest, liquidity and counterparty credit risk in excess of the amounts recognized in the Statement of Assets and Liabilities. Such risks involve the possibility that there
may be unfavorable changes in interest rates, market conditions or other conditions, that it may be difficult to initiate a swap transaction or liquidate a position at an advantageous time or price which may result in
significant losses, and that the FCM or CCP may not fulfill its obligation under the contract.
Credit default swap contracts
The Fund entered into credit
default swap contracts to increase or decrease its credit exposure to an index and to manage credit risk exposure. These instruments may be used for other purposes in future periods. Credit default swap contracts are
transactions in which one party pays fixed periodic payments to a counterparty in consideration for an agreement from the counterparty to make a specific payment should a specified credit event(s) take place. Although
specified credit events are contract specific, credit events are typically bankruptcy, failure to pay, restructuring, obligation acceleration, obligation default, or repudiation/moratorium.
As the purchaser of a credit
default swap contract, the Fund purchases protection by paying a periodic interest rate on the notional amount to the counterparty. The interest amount is accrued daily as a component of unrealized appreciation
(depreciation) and is recorded as a realized loss upon payment. If a credit event as specified in the contract occurs, the Fund may have the option either to deliver the reference obligation to the seller in exchange
for a cash payment of its par amount, or to receive a net cash settlement equal to the par amount less an agreed-upon value of the reference obligation as of the date of the credit event. The difference between the
value of the obligation or cash delivered and the notional amount received will be recorded as a realized gain (loss).
As the seller of a credit default
swap contract, the Fund sells protection to a buyer and will generally receive a periodic interest rate on a notional amount. The interest amount is accrued daily as a component of unrealized appreciation
(depreciation) and is recorded as a realized gain upon receipt of the payment. If a credit event as specified in the contract with the counterparty occurs, the Fund may either be required to accept the reference
obligation from the buyer in exchange for a cash payment of its notional amount, or to pay the buyer a net cash settlement equal to the notional amount less an agreed-upon value of the reference obligation (recovery
value) as of the date of the credit event. The difference between the value of the obligation or cash received and the notional amount paid will be recorded as a realized gain (loss). The maximum potential amount of
undiscounted future payments the Fund could be required to make as the seller of protection under a credit default swap contract is equal to the notional amount of the reference obligation. These potential amounts may
be partially offset by any recovery values of the respective reference obligations or upfront receipts upon entering into the agreement. The notional amounts and market values of all credit default swap contracts in
which the Fund is the seller of protection, if any, are disclosed in the Credit Default Swap Contracts Outstanding schedule following the Portfolio of Investments.
As a protection seller, the Fund
bears the risk of loss from the credit events specified in the contract with the counterparty. For credit default swap contracts on credit indices, quoted market prices and resulting market values serve as an
indicator of the current status of the payment/performance risk. Increasing market values, in absolute terms when compared to the notional amount of the swap, represent a deterioration of the reference entity’s
credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the contract.
| 28 | Variable Portfolio – Managed Volatility Moderate Growth Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Effects of derivative transactions in
the financial statements
The following tables are intended
to provide additional information about the effect of derivatives on the financial statements of the Fund, including: the fair value of derivatives by risk category and the location of those fair values in the
Statement of Assets and Liabilities; and the impact of derivative transactions over the period in the Statement of Operations, including realized and unrealized gains (losses). The derivative instrument schedules
following the Portfolio of Investments present additional information regarding derivative instruments outstanding at the end of the period, if any.
The following table is a summary of
the fair value of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) at December 31, 2021:
| Asset derivatives | ||
| Risk exposure category | Statement of assets and liabilities location | Fair value ($) |
| Credit risk | Component of trust capital — unrealized appreciation on swap contracts | 454,919* |
| Equity risk | Component of trust capital — unrealized appreciation on futures contracts | 22,826,336* |
| Equity risk | Investments, at value — Options Purchased | 137,891,250 |
| Foreign exchange risk | Component of trust capital — unrealized appreciation on futures contracts | 2,816,573* |
| Interest rate risk | Component of trust capital — unrealized appreciation on futures contracts | 7,819,844* |
| Total | 171,808,922 |
| Liability derivatives | ||
| Risk exposure category | Statement of assets and liabilities location | Fair value ($) |
| Equity risk | Component of trust capital - unrealized depreciation on futures contracts | 7,641,045* |
| Foreign exchange risk | Component of trust capital - unrealized depreciation on futures contracts | 1,009,658* |
| Interest rate risk | Component of trust capital - unrealized depreciation on futures contracts | 576,830* |
| Total | 9,227,533 |
| * | Includes cumulative appreciation (depreciation) as reported in the tables following the Portfolio of Investments. Only the current day’s variation margin is reported in receivables or payables in the Statement of Assets and Liabilities. |
| Variable Portfolio – Managed Volatility Moderate Growth Fund | Annual Report 2021 | 29 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
The following table indicates the
effect of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) in the Statement of Operations for the year ended December 31, 2021:
| Amount of realized gain (loss) on derivatives recognized in income | ||||
| Risk exposure category | Futures contracts ($) | Options contracts purchased ($) | Swap contracts ($) | Total ($) |
| Credit risk | — | — | 2,508,594 | 2,508,594 |
| Equity risk | 317,994,478 | (205,483,646) | — | 112,510,832 |
| Foreign exchange risk | (27,774,373) | — | — | (27,774,373) |
| Interest rate risk | (95,635,272) | — | — | (95,635,272) |
| Total | 194,584,833 | (205,483,646) | 2,508,594 | (8,390,219) |
| Change in unrealized appreciation (depreciation) on derivatives recognized in income | ||||
| Risk exposure category | Futures contracts ($) | Options contracts purchased ($) | Swap contracts ($) | Total ($) |
| Credit risk | — | — | (240,612) | (240,612) |
| Equity risk | 1,229,099 | (45,159,623) | — | (43,930,524) |
| Foreign exchange risk | (4,602,469) | — | — | (4,602,469) |
| Interest rate risk | 10,309,294 | — | — | 10,309,294 |
| Total | 6,935,924 | (45,159,623) | (240,612) | (38,464,311) |
The following table is a summary
of the average outstanding volume by derivative instrument for the year ended December 31, 2021:
| Derivative instrument | Average notional amounts ($)* |
| Futures contracts — long | 3,544,845,034 |
| Futures contracts — short | 251,579,236 |
| Credit default swap contracts — sell protection | 200,000,000 |
| Derivative instrument | Average value ($)* |
| Options contracts — purchased | 186,597,411 |
| * | Based on the ending quarterly outstanding amounts for the year ended December 31, 2021. |
Asset- and mortgage-backed
securities
The Fund may invest in asset-backed
and mortgage-backed securities. The maturity dates shown represent the original maturity of the underlying obligation. Actual maturity may vary based upon prepayment activity on these obligations. All, or a portion,
of the obligation may be prepaid at any time because the underlying asset may be prepaid. As a result, decreasing market interest rates could result in an increased level of prepayment. An increased prepayment rate
will have the effect of shortening the maturity of the security. Unless otherwise noted, the coupon rates presented are fixed rates.
Delayed delivery securities
The Fund may trade securities on
other than normal settlement terms, including securities purchased or sold on a “when-issued” or "forward commitment" basis. This may increase risk to the Fund since the other party to the transaction may
fail to deliver, which could cause the Fund to subsequently invest at less advantageous prices. The Fund designates cash or liquid securities in an amount equal to the delayed delivery commitment.
| 30 | Variable Portfolio – Managed Volatility Moderate Growth Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
To be announced securities
The Fund may trade securities on a
To Be Announced (TBA) basis. As with other delayed-delivery transactions, a seller agrees to issue a TBA security at a future date. However, the seller does not specify the particular securities to be delivered.
Instead, the Fund agrees to accept any security that meets specified terms.
In some cases, Master Securities
Forward Transaction Agreements (MSFTAs) may be used to govern transactions of certain forward-settling agency mortgage-backed securities, such as delayed-delivery and TBAs, between the Fund and counterparty. The MSFTA
maintains provisions for, among other things, initiation and confirmation, payment and transfer, events of default, termination, and maintenance of collateral relating to such transactions.
Mortgage dollar roll transactions
The Fund may enter into mortgage
“dollar rolls” in which the Fund sells securities for delivery in the current month and simultaneously contracts with the same counterparty to repurchase similar but not identical securities (same type,
coupon and maturity) on a specified future date. During the roll period, the Fund loses the right to receive principal and interest paid on the securities sold. However, the Fund may benefit because it receives
negotiated amounts in the form of reductions of the purchase price for the future purchase plus the interest earned on the cash proceeds of the securities sold until the settlement date of the forward purchase. The
Fund records the incremental difference between the forward purchase and sale of each forward roll as a realized gain or loss. Unless any realized gains exceed the income, capital appreciation, and gain or loss due to
mortgage prepayments that would have been realized on the securities sold as part of the mortgage dollar roll, the use of this technique may diminish the investment performance of the Fund compared to what the
performance would have been without the use of mortgage dollar rolls. All cash proceeds will be invested in instruments that are permissible investments for the Fund. The Fund identifies cash or liquid securities in
an amount equal to the forward purchase price.
For financial reporting and tax
purposes, the Fund treats “to be announced” mortgage dollar rolls as two separate transactions, one involving the purchase of a security and a separate transaction involving a sale. These transactions may
increase the Fund’s portfolio turnover rate. The Fund does not currently enter into mortgage dollar rolls that are accounted for as financing transactions.
Mortgage dollar rolls involve the
risk that the market value of the securities the Fund is obligated to repurchase may decline below the repurchase price, or that the counterparty may default on its obligations.
Offsetting of assets and
liabilities
The following table presents the
Fund’s gross and net amount of assets and liabilities available for offset under netting arrangements as well as any related collateral received or pledged by the Fund as of December 31, 2021:
| JPMorgan ($) | Morgan Stanley ($) | Total ($) | |
| Assets | |||
| Centrally cleared credit default swap contracts (a) | - | 40,454 | 40,454 |
| Options purchased puts | 137,891,250 | - | 137,891,250 |
| Total assets | 137,891,250 | 40,454 | 137,931,704 |
| Total financial and derivative net assets | 137,891,250 | 40,454 | 137,931,704 |
| Total collateral received (pledged) (b) | - | - | - |
| Net amount (c) | 137,891,250 | 40,454 | 137,931,704 |
| (a) | Centrally cleared swaps are included within payable/receivable for variation margin on the Statement of Assets and Liabilities. |
| (b) | In some instances, the actual collateral received and/or pledged may be more than the amount shown due to overcollateralization. |
| (c) | Represents the net amount due from/(to) counterparties in the event of default. |
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
| Variable Portfolio – Managed Volatility Moderate Growth Fund | Annual Report 2021 | 31 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Income recognition
Interest income is recorded on an
accrual basis. Market premiums and discounts, including original issue discounts, are amortized and accreted, respectively, over the expected life of the security on all debt securities, unless otherwise noted. The
Fund classifies gains and losses realized on prepayments received on mortgage-backed securities as adjustments to interest income.
The Fund may place a debt security
on non-accrual status and reduce related interest income when it becomes probable that the interest will not be collected and the amount of uncollectible interest can be reasonably estimated. A defaulted debt security
is removed from non-accrual status when the issuer resumes interest payments or when collectability of interest is reasonably assured.
Corporate actions and dividend
income are recorded on the ex-dividend date.
The Fund may receive distributions
from holdings in equity securities, business development companies (BDCs), exchange-traded funds (ETFs), limited partnerships (LPs), other regulated investment companies (RICs), and real estate investment trusts
(REITs), which report information as to the tax character of their distributions annually. These distributions are allocated to dividend income, capital gain and return of capital based on actual information reported.
Return of capital is recorded as a reduction of the cost basis of securities held. If the Fund no longer owns the applicable securities, return of capital is recorded as a realized gain. With respect to REITs, to the
extent actual information has not yet been reported, estimates for return of capital are made by Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise
Financial, Inc. (Ameriprise Financial). The Investment Manager’s estimates are subsequently adjusted when the actual character of the distributions is disclosed by the REITs, which could result in a
proportionate change in return of capital to shareholders.
Awards from class action litigation
are recorded as a reduction of cost basis if the Fund still owns the applicable securities on the payment date. If the Fund no longer owns the applicable securities on the payment date, the proceeds are recorded as
realized gains.
Income and capital gain
distributions from the Underlying Funds, if any, are recorded on the ex-dividend date.
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
Federal income tax status
The Fund is treated as a
partnership for federal income tax purposes, and the Fund does not expect to make regular distributions. The Fund will not be subject to federal income tax, and therefore, there is no provision for federal income
taxes. The partners of the Fund are subject to tax on their distributive share of the Fund’s income and loss. The components of the Fund’s net assets are reported at the partner-level for federal income
tax purposes, and therefore, are not presented in the Statement of Assets and Liabilities.
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
| 32 | Variable Portfolio – Managed Volatility Moderate Growth Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Foreign taxes
The Fund may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries, as applicable, based upon its current interpretation of tax rules
and regulations that exist in the markets in which it invests.
Realized gains in certain countries
may be subject to foreign taxes at the Fund level, based on statutory rates. The Fund accrues for such foreign taxes on realized and unrealized gains at the appropriate rate for each jurisdiction, as applicable. The
amount, if any, is disclosed as a liability on the Statement of Assets and Liabilities.
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees and
underlying fund fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager). Under the Management Agreement, the Investment Manager provides the Fund with investment research and advice, as well as
administrative and accounting services. The management services fee is an annual fee that is a blend of (i) 0.02% on assets invested in affiliated underlying funds (including exchange-traded funds and closed-end
funds) that pay a management services fee (or investment advisory services fee, as applicable) to the Investment Manager and (ii) a fee that declines from 0.72% to 0.52%, depending on asset levels, on assets
invested in securities (other than affiliated underlying funds (including exchange-traded funds and closed-end funds) that pay a management services fee (or investment advisory services fee, as applicable) to the
Investment Manager) including other funds advised by the Investment Manager that do not pay a management services fee to the Investment Manager, third party funds, derivatives and individual securities. The effective
management services fee rate for the year ended December 31, 2021 was 0.18% of the Fund’s average daily net assets.
In addition to the fees and
expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the Underlying Funds in which the Fund invests. Because the Underlying Funds have varied expense and fee
levels and the Fund may own different proportions of Underlying Funds at different times, the amount of fees and expenses incurred indirectly by the Fund will vary. These expenses are not reflected in the expenses
shown in Statement of Operations and are not included in the ratios to average net assets shown in the Financial Highlights.
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. Under a Deferred Compensation Plan (the
Deferred Plan), these members of the Board of Trustees may elect to defer payment of up to 100% of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of
certain funds managed by the Investment Manager. The Fund’s liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Deferred Plan. All
amounts payable under the Deferred Plan constitute a general unsecured obligation of the Fund. The expense for the Deferred Plan, which includes Trustees’ fees deferred during the current period as well as any
gains or losses on the Trustees’ deferred compensation balances as a result of market fluctuations, is included in "Compensation of board members" on the Statement of Operations.
| Variable Portfolio – Managed Volatility Moderate Growth Fund | Annual Report 2021 | 33 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
Service fees
The Fund has entered into a
Shareholder Services Agreement with Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial. Under this
agreement, the Fund pays a service fee equal to the payments made by the Transfer Agent to Participating Insurance Companies and other financial intermediaries (together, Participating Organizations) for services each
such Participating Organization provides to its clients, customers and participants that are invested directly or indirectly in the Fund, up to a cap approved by the Board of Trustees from time to time. The effective
service fee rate for the year ended December 31, 2021, was 0.06% of the Fund’s average daily net assets.
The Transfer Agent may retain as
compensation for its services revenues from fees for wire, telephone and redemption orders, account transcripts due the Transfer Agent from Fund shareholders and interest (net of bank charges) earned with respect to
balances in accounts the Transfer Agent maintains in connection with its services to the Fund.
Distribution and/or service fees
The Fund has an agreement with the
Distributor, an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution services. Under a Plan and Agreement of Distribution, the Fund pays a fee at an annual rate
of up to 0.25% of the Fund’s average daily net assets attributable to Class 2 shares. The Fund pays no distribution and service fees for Class 1 shares.
Expenses waived/reimbursed by the
Investment Manager and its affiliates
The Investment Manager and certain
of its affiliates have contractually agreed to waive fees and/or reimburse expenses (excluding certain fees and expenses described below) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, so that the Fund’s net operating expenses, including indirect expenses of the Underlying Funds, after giving effect to fees waived/expenses reimbursed and any balance credits
and/or overdraft charges from the Fund’s custodian, do not exceed the following annual rate(s) as a percentage of the classes’ average daily net assets:
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), transaction costs and brokerage commissions, costs related to any securities lending program, dividend expenses associated with securities sold short, inverse floater program
fees and expenses, transaction charges and interest on borrowed money, interest, costs associated with certain shareholder meetings, infrequent and/or unusual expenses and any other expenses the exclusion of which is
specifically approved by the Board of Trustees. This agreement may be modified or amended only with approval from the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses
reimbursed under the expense reimbursement arrangements described above are not recoverable by the Investment Manager or its affiliates in future periods.
| 34 | Variable Portfolio – Managed Volatility Moderate Growth Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Note 4. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $27,594,036,152 and $28,198,642,441, respectively, for the year ended December 31, 2021, of which
$24,635,540,291 and $24,399,915,324, respectively, were U.S. government securities. The amount of purchase and sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 5. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes
referred to as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
Note 6. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund did not borrow or lend
money under the Interfund Program during the year ended December 31, 2021.
Note 7. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to an October 28, 2021 amendment and restatement, the credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment
Manager or an affiliated investment manager, severally and not jointly, permits collective borrowings up to $950 million. Interest is currently charged to each participating fund based on its borrowings at a rate
equal to the higher of (i) the federal funds effective rate, (ii) the secured overnight financing rate plus 0.11448% and (iii) the overnight bank funding rate, plus in each case, 1.00%. Each borrowing under the credit
facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The
commitment fee is included in other expenses in the Statement of Operations. This agreement expires annually in October unless extended or renewed. Prior to the October 28, 2021 amendment and restatement, the Fund had
access to a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. which permitted collective borrowings up to $950 million. Interest was
charged to each participating fund based on its borrowings at a rate equal to the higher of (i) the federal funds effective rate, (ii) the one-month London Interbank Offered Rate (LIBOR) rate and (iii) the overnight
bank funding rate, plus in each case, 1.25%.
The Fund had no borrowings during
the year ended December 31, 2021.
| Variable Portfolio – Managed Volatility Moderate Growth Fund | Annual Report 2021 | 35 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Note 8. Significant
risks
Derivatives risk
Losses involving derivative
instruments may be substantial, because a relatively small movement in the underlying reference (which is generally the price, rate or other economic indicator associated with a security(ies), commodity, currency or
index or other instrument or asset) may result in a substantial loss for the Fund. In addition to the potential for increased losses, the use of derivative instruments may lead to increased volatility within the Fund.
Derivatives will typically increase the Fund’s exposure to principal risks to which it is otherwise exposed, and may expose the Fund to additional risks, including correlation risk, counterparty risk, hedging
risk, leverage risk, liquidity risk and pricing risk.
Market risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
The coronavirus disease 2019 and
its variants (COVID-19) pandemic has resulted in, and may continue to result in, significant global economic and societal disruption and market volatility due to disruptions in market access, resource availability,
facilities operations, imposition of tariffs, export controls and supply chain disruption, among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement
and loss in human and other resources. The uncertainty surrounding the magnitude, duration, reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental
authorities or other third parties, present unknowns that are yet to unfold. The impacts, as well as the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and
pandemics that may arise in the future – could negatively affect global economies and markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in
emerging market countries may be greater due to generally less established healthcare systems, governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing
political, social and economic risks in certain countries or globally. The disruptions caused by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively
impact the Fund’s ability to achieve its investment objectives. Any such event(s) could have a significant adverse impact on the value and risk profile of the Fund.
Shareholder concentration risk
At December 31, 2021, affiliated
shareholders of record owned 100.0% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of
less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Note 9. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
| 36 | Variable Portfolio – Managed Volatility Moderate Growth Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Note 10. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in
connection with the conduct of their business activities. Ameriprise Financial believes that the Fund is not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject
of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with
the Fund. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (SEC) on legal and regulatory matters that relate to
Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that
these matters, or the adverse publicity associated with them, will not result in increased Fund redemptions, reduced sale of Fund shares or other adverse consequences to the Fund. Further, although we believe
proceedings are not likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines,
penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial or one or more of its affiliates that provides services to
the Fund.
| Variable Portfolio – Managed Volatility Moderate Growth Fund | Annual Report 2021 | 37 |
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees of Columbia
Funds Variable Series Trust II and Shareholders of Variable Portfolio – Managed Volatility Moderate Growth Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of Variable Portfolio – Managed Volatility Moderate Growth Fund (one of the funds constituting Columbia Funds Variable Series Trust
II, referred to hereafter as the "Fund") as of December 31, 2021, the related statement of operations for the year ended December 31, 2021, the statement of changes in net assets for each of the two years in the
period ended December 31, 2021, including the related notes, and the financial highlights for each of the periods indicated therein (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, 2021, 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, 2021 and the financial highlights for each of the periods indicated therein in conformity with accounting principles generally accepted in the United States of
America.
Basis for Opinion
These financial statements are the
responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these
financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2021 by correspondence with the custodian, transfer agent and brokers. We believe that
our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Minneapolis, Minnesota
February 18, 2022
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| 38 | Variable Portfolio – Managed Volatility Moderate Growth Fund | Annual Report 2021 |
TRUSTEES AND
OFFICERS
The Board oversees the
Fund’s operations and appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following table provides basic biographical information about the
Fund’s Trustees as of the printing of this report, including their principal occupations during the past five years, although specific titles for individuals may have varied over the period. The year set forth
beneath Length of Service in the table below is the year in which the Trustee was first appointed or elected as Trustee to any Fund currently in the Columbia Funds Complex or a predecessor thereof. Under current Board
policy, each Trustee generally serves until December 31 of the year such Trustee turns seventy-five (75).
Independent trustees
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| George S. Batejan c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1953 | Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 176 | Former Chairman of the Board, NICSA (National Investment Company Services Association) (Executive Committee, Nominating Committee and Governance Committee), 2014-2016; former Director, Intech Investment Management, 2011-2016; former Board Member, Metro Denver Chamber of Commerce, 2015-2016; former Advisory Board Member, University of Colorado Business School, 2015-2018 |
| Kathleen Blatz c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2006 | Attorney, specializing in arbitration and mediation; Chief Justice, Minnesota Supreme Court, 1998-2006; Associate Justice, Minnesota Supreme Court, 1996-1998; Fourth Judicial District Court Judge, Hennepin County, 1994-1996; Attorney in private practice and public service, 1984-1993; State Representative, Minnesota House of Representatives, 1979-1993, which included service on the Tax and Financial Institutions and Insurance Committees; Member and Interim Chair, Minnesota Sports Facilities Authority, January 2017-July 2017; Interim President and Chief Executive Officer, Blue Cross Blue Shield of Minnesota (health care insurance), February-July 2018, April-October 2021 | 176 | Former Trustee, Blue Cross Blue Shield of Minnesota, 2009-2021 (Chair of the Business Development Committee, 2014-2017; Chair of the Governance Committee, 2017-2019); former Member and Chair of the Board, Minnesota Sports Facilities Authority, January 2017-July 2017; former Director, Robina Foundation, 2009-2020 (Chair, 2014-2020); Director, Schulze Family Foundation, since 2021 |
| Pamela G. Carlton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2007 | President, Springboard — Partners in Cross Cultural Leadership (consulting company) since 2003; Managing Director of US Equity Research, JP Morgan Chase, 1999-2003; Director of US Equity Research, Chase Asset Management, 1996-1999; Co-Director Latin America Research, 1993-1996, COO Global Research, 1992-1996, Co-Director of US Research, 1991-1992, Investment Banker, Morgan Stanley, 1982-1991, Morgan Stanley; Attorney, Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 176 | Trustee, New York Presbyterian Hospital Board (Executive Committee and Chair of People Committee) since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee); Director, Apollo Commercial Real Estate Finance, Inc. since 2021; the Governing Council of the Independent Directors Council (IDC), since 2021 |
| Variable Portfolio – Managed Volatility Moderate Growth Fund | Annual Report 2021 | 39 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Janet Langford Carrig c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1957 | Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 174 | Director, EQT Corporation (natural gas producer) since 2019; Director, Whiting Petroleum Corporation (independent oil and gas company) since 2020 |
| J. Kevin Connaughton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2020 | Member, FINRA National Adjudicatory Council since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Consultant to Independent Trustees of CFVIT and CFST I from March 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Managing Director and General Manager of Mutual Fund Products, Columbia Management Investment Advisers, LLC, May 2010-February 2015; President, Columbia Funds, 2008-2015; and senior officer of Columbia Funds and affiliated funds, 2003-2015 | 174 | Former Director, The Autism Project, March 2015-December 2021; former Member of the Investment Committee, St. Michael’s College, November 2015-February 2020; former Trustee, St. Michael’s College, June 2017-September 2019; former Trustee, New Century Portfolios, January 2015-December 2017 |
| Olive M. Darragh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since 2020 | Managing Director of Darragh Inc. (strategy and talent management consulting firm) since 2010; Founder and CEO, Zolio, Inc. (investment management talent identification platform) since 2004; Consultant to Independent Trustees of CFVIT and CFST I from June 2019 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 2001-2004 | 174 | Former Director, University of Edinburgh Business School (Member of US Board); former Director, Boston Public Library Foundation |
| Patricia M. Flynn c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1950 | Trustee since 2004 | Trustee Professor of Economics and Management, Bentley University since 1976 (also teaches and conducts research on corporate governance); Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 176 | Trustee, MA Taxpayers Foundation since 1997; Board of Governors, Innovation Institute, MA Technology Collaborative, 2010-2020; former Board of Directors, The MA Business Roundtable, 2003-2019 |
| Brian J. Gallagher c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 176 | Trustee, Catholic Schools Foundation since 2004 |
| 40 | Variable Portfolio – Managed Volatility Moderate Growth Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Douglas A. Hacker c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1955 | Co-Chair since 2021; Chair of CFST I and CFVIT since 2014; Trustee of CFST I and CFVIT since 1996 and CFST, CFST II, CFVST II, CET I and CET II since 2021 | Independent business executive since May 2006; Executive Vice President – Strategy of United Airlines, December 2002 - May 2006; President of UAL Loyalty Services (airline marketing company), September 2001-December 2002; Executive Vice President and Chief Financial Officer of United Airlines, July 1999-September 2001 | 176 | Director, Spartan Nash Company (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing); former Director, Nash Finch Company (food distributor), 2005-2013; former Director, SeaCube Container Leasing Ltd. (container leasing), 2010-2013; and former Director, Travelport Worldwide Limited (travel information technology), 2014-2019 |
| Nancy T. Lukitsh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1956 | Trustee since 2011 | Senior Vice President, Partner and Director of Marketing, Wellington Management Company, LLP (investment adviser), 1997-2010; Chair, Wellington Management Portfolios (commingled non-U.S. investment pools), 2007 -2010; Director, Wellington Trust Company, NA and other Wellington affiliates, 1997-2010 | 174 | None |
| David M. Moffett c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2011 | Retired; Consultant to Bridgewater and Associates | 174 | Director, CSX Corporation (transportation suppliers); Director, Genworth Financial, Inc. (financial and insurance products and services); Director, PayPal Holdings Inc. (payment and data processing services); Trustee, University of Oklahoma Foundation; former Director, eBay Inc. (online trading community), 2007-2015; and former Director, CIT Bank, CIT Group Inc. (commercial and consumer finance), 2010-2016 |
| Catherine James Paglia c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Co-Chair since 2021; Chair of CFST, CFST II, CFVST II, CET I and CET II since 2020; Trustee of CFST, CFST II and CFVST II since 2004 and CFST I and CFVIT since 2021 | Director, Enterprise Asset Management, Inc. (private real estate and asset management company) since September 1998; Managing Director and Partner, Interlaken Capital, Inc., 1989-1997; Vice President, 1982-1985, Principal, 1985-1987, Managing Director, 1987-1989, Morgan Stanley; Vice President, Investment Banking, 1980-1982, Associate, Investment Banking, 1976-1980, Dean Witter Reynolds, Inc. | 176 | Director, Valmont Industries, Inc. (irrigation systems manufacturer) since 2012; Trustee, Carleton College (on the Investment Committee); Trustee, Carnegie Endowment for International Peace (on the Investment Committee) |
| Variable Portfolio – Managed Volatility Moderate Growth Fund | Annual Report 2021 | 41 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Minor M. Shaw c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1947 | Trustee since 2003 | President, Micco LLC (private investments) since 2011; President, Micco Corp. (family investment business), 1998-2011 | 176 | Director, Blue Cross Blue Shield of South Carolina (Chair of Compensation Committee) since April 2008; Trustee, Hollingsworth Funds (on the Investment Committee) since 2016 (previously Board Chair from 2016-2019); Former Advisory Board member, Duke Energy Corp., 2016-2020; Chair of the Duke Endowment; Chair of Greenville – Spartanburg Airport Commission; former Trustee, BofA Funds Series Trust (11 funds), 2003-2011; former Director, Piedmont Natural Gas, 2004-2016; former Director, National Association of Corporate Directors, Carolinas Chapter, 2013-2018; Chair, Daniel-Mickel Foundation since 1998 |
| Natalie A. Trunow c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1967 | Trustee since 2020 | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services), January 2016-January 2021; Non-executive Member of the Investment Committee and Valuation Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services), August 2018-January 2021; Advisor, Paradigm Asset Management, November 2016-December 2021; Consultant to Independent Trustees of CFVIT and CFST I from September 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Director of Investments/Consultant, Casey Family Programs, April 2016-November 2016; Senior Vice President and Chief Investment Officer, Calvert Investments, August 2008-January 2016; Section Head and Portfolio Manager, General Motors Asset Management, June 1997-August 2008 | 174 | Former Director, Investment Committee, Health Services for Children with Special Needs, Inc., 2012-2019; Director, Chair of Audit Committee, Consumer Credit Counseling Services (formerly Guidewell Financial Solutions), since 2019; Independent Director, Investment Committee and Valuation Committee, Sarona Asset Management, since 2019 |
| Sandra Yeager c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2017 | Retired; President and founder, Hanoverian Capital, LLC (SEC registered investment advisor firm), 2008-2016; Managing Director, DuPont Capital, 2006-2008; Managing Director, Morgan Stanley Investment Management, 2004-2006; Senior Vice President, Alliance Bernstein, 1990-2004 | 176 | Former Director, NAPE Education Foundation, October 2016-October 2020 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Fund Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I (CET I), Columbia ETF Trust II (CET II), Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Beckman, Gallagher and Hacker and Mses. Blatz, Carlton, Flynn, Paglia, Shaw and Yeager serve as Directors of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
| 42 | Variable Portfolio – Managed Volatility Moderate Growth Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Interested trustee affiliated with Investment Manager*
Interested trustee affiliated with Investment Manager*
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during the past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex overseen | Other directorships held by Trustee during the past five years |
| Daniel J. Beckman c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since November 2021(a) | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC (since April 2015); officer of Columbia Funds and affiliated funds since 2020. | 176 | Director, Ameriprise Trust Company, since October 2016; Director, Columbia Management Investment Distributors, Inc. since November 2018; Board of Governors, Columbia Wanger Asset Management, LLC since January 2022 |
| * | Interested person (as defined under the 1940 Act) by reason of being an officer, director, security holder and/or employee of the Investment Manager or Ameriprise Financial. |
| (a) | Mr. Beckman serves as the President and Principal Executive Officer of the Columbia Funds (since 2021). |
The Statement of Additional
Information has additional information about the Fund’s Board members and is available, without charge, upon request by calling 800.345.6611 or contacting your financial intermediary.
The Board has appointed officers
who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. The following table provides basic information about the Officers of the
Fund, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Beckman, who is President and Principal Executive Officer, the
Fund’s other officers are:
Fund officers
| Variable Portfolio – Managed Volatility Moderate Growth Fund | Annual Report 2021 | 43 |
TRUSTEES AND OFFICERS (continued)
Fund officers (continued)
Fund officers (continued)
| 44 | Variable Portfolio – Managed Volatility Moderate Growth Fund | Annual Report 2021 |
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For Fund and other investment product prospectuses, which contain this and other important information, contact your
financial advisor or insurance representative. Please read the prospectus carefully before you invest. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved. Columbia Management Investment Distributors, Inc., 290 Congress Street, Boston, MA 02210
© 2022 Columbia Management Investment
Advisers, LLC.
S-6538 AW (2/22)
Columbia Variable
Portfolio – Select Small Cap Value Fund
Please remember that you may not
buy (nor will you own) shares of the Fund directly. The Fund is available through variable annuity contracts and variable life insurance policies offered by the separate accounts of participating insurance companies
as well as qualified pension and retirement plans. Please contact your financial advisor or insurance representative for more information.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
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| 26 |
Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which Columbia Variable Portfolio – Select Small Cap Value Fund (the Fund) holds investments consistent with the procedures as stated in the Statement of Additional
Information (SAI). You may obtain a copy of the SAI without charge by calling 800.345.6611; contacting your financial intermediary or searching the website of the Securities and Exchange Commission (SEC) at sec.gov.
Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge
by visiting columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. The Fund’s Form N-PORT is available on the SEC’s website at sec.gov. The Fund’s complete
schedule of portfolio holdings, as filed on Form N-PORT, can also be obtained without charge, upon request, by calling 800.345.6611.
Additional Fund information
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
290 Congress Street
Boston, MA 02210
Fund distributor
Columbia Management Investment Distributors,
Inc.
290 Congress Street
Boston, MA 02210
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
Columbia Variable Portfolio – Select Small
Cap Value Fund | Annual Report 2021
Fund at a Glance
Investment objective
The Fund
seeks to provide shareholders with long-term capital growth.
Portfolio management
Kari Montanus
Lead Portfolio Manager
Managed Fund since 2014
Jonas Patrikson, CFA
Portfolio Manager
Managed Fund since 2018
| Columbia Variable Portfolio – Select Small Cap Value Fund | Annual Report 2021 | 3 |
Fund at a Glance (continued)
Performance of a hypothetical $10,000 investment (December 31, 2011 — December 31, 2021)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class 2 shares of Columbia Variable Portfolio – Select Small Cap Value Fund during the stated time period, and does not reflect the deduction of taxes, if any,
that a shareholder may pay on Fund distributions or on the redemption of Fund shares. The returns also do not reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance
policy or qualified pension or retirement plan, if any.
| 4 | Columbia Variable Portfolio – Select Small Cap Value Fund | Annual Report 2021 |
Manager Discussion of Fund Performance
For the 12-month period that
ended December 31, 2021, the Fund’s Class 2 shares returned 30.62%. The Fund outperformed its benchmark, the Russell 2000 Value Index, which returned 28.27% for the same time period.
Market overview
U.S. equities posted strong gains
in 2021. As pandemic-related restrictions were eased, robust economic growth and corporate earnings drove gains for stocks. Both U.S. monetary and fiscal policy were highly supportive, as Congress approved massive
spending packages that included direct payments to citizens and the U.S. Federal Reserve (Fed) maintained its benchmark overnight lending rate near zero while engaging in bond market purchases to keep longer term
borrowing costs low. The fourth quarter of 2021 saw the Fed adopt a more hawkish tone in response to persistently high inflation, driven in large part by supply chain constraints and rising commodity prices, which led
to increased market volatility.
All eleven sectors within the
benchmark delivered positive gains for the period. The energy, consumer discretionary, communication services, real estate and materials sectors delivered the strongest gains, outperforming the overall
benchmark’s return for the period. The health care sector lagged most, followed by utilities, consumer staples and information technology.
The Fund’s notable
contributors during the period
| • | The Fund’s outperformance of its benchmark during the period was driven primarily by strong stock selection, particularly within the information technology and health care sectors. |
| • | Sector allocations also contributed to the Fund’s performance, most notably the Fund’s relative underweight to the poorly performing health care sector and the Fund’s weighting in the communication services sector, which performed strongly for the period. |
| • | Strong performers within the information technology space included Extreme Networks, Inc. and Kulicke & Soffa Industries, Inc. |
| ○ | Shares in Extreme Networks, Inc. a company which provides software-driven networking solutions to clients across a range of industries, climbed after reporting earnings that beat on both the top and bottom line. The company reported these impressive results despite supply constraints, as demand within their sports and entertainment and retail lines rebounded and their cloud business continued to grow. |
| ○ | Shares in semiconductor company Kulicke & Soffa Industries, Inc. rose, as there continued to be stronger-than-expected demand from its general semiconductor, auto and LED end markets. |
| • | Devon Energy Corp., an oil exploration and production company, was another strong contributor to overall relative performance. The company reported better-than-expected results during the period, driven by higher production and lower operating costs. The company continued to generate what we believe to be impressive amounts of free cash flow and we think the company remains committed to returning cash to shareholders through their pioneering variable dividend. |
| • | Within materials, the construction materials company Summit Materials, Inc. was a notable outperformer for the Fund. The company, which supplies concrete, cement and asphalt, posted solid results driven by volume increases. The potential for an infrastructure bill also drove the stock higher. |
| • | The Fund’s position in Axos Financial, Inc. a leader in digital banking, was a notable contributor within financials. Shares in the bank were buoyed by the rise in rates and steepening yield curve during the period. The company also closed on their acquisition of E*TRADE Advisor Services. |
The Fund’s notable
detractors during the period
| • | Stock selection within the consumer discretionary sector weighed most on the Fund’s performance versus its benchmark during the period. |
| • | An underweight to the energy sector, the strongest performing sector within the benchmark, also detracted from relative results, as did the Fund’s cash position during the period. |
| Columbia Variable Portfolio – Select Small Cap Value Fund | Annual Report 2021 | 5 |
Manager Discussion of Fund Performance (continued)
| • | Individual detractors from relative performance included a Fund position in power generator manufacturing company Bloom Energy Corp. The company reported earnings that saw lower-than-expected revenue and gross margin numbers. However, the company maintained their yearly guidance, and the potential for their green hydrogen-powered fuel cells continued to be high. |
| • | The biggest detractor from relative performance was a lack of exposure to video game retailer GameStop Corp. Shares in GameStop skyrocketed during the first quarter of 2021, as retail investors from internet forums such as Reddit piled into the stock, causing an unprecedented short squeeze that led to significant losses for some notable hedge funds. The Fund was not invested in GameStop, which by the end of the first quarter was up over 900% and became one of the largest names in the benchmark. We are fundamental investors and believe that stock prices track fundamentals over the long-term, and so were not invested in the name. |
| • | Other notable detractors included LHC Group, Inc., a leading provider of in-home health care services. The company reported first quarter earnings that were comfortably above consensus expectations and capped off a strong 2020. However, forward guidance was lower than expected due to COVID-19 and weather-related headwinds. |
| • | Within materials, the Fund’s position in specialty metals company Allegheny Technologies, Inc. was a notable detractor from relative results. The company reported lower-than-expected numbers during the third quarter of 2021, as the impact of a workers’ strike at many of their plants weighed on results. However, the company reached a new agreement with the United Steelworkers union to end the strike. The slower to recover aerospace business due to the COVID-19 pandemic also weighed on sentiment, but we believe should recover as the pandemic fades and travel resumes. |
| • | Also detracting from returns was a position in PROG Holdings, Inc. PROG provides retail sales and lease ownership of furniture, appliances, electronics and accessories, partnering with retail brands to provide virtual lease-to-own solutions. Shares have been under pressure since the company spun off from Aaron’s. However, they announced a $300 million share repurchase authorization during the first quarter of 2021. |
The views expressed in this report
reflect the current views of the respective parties who have contributed to this report. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult
to predict, so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective parties
disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Columbia fund are based on numerous factors, may not be relied on as an
indication of trading intent on behalf of any particular Columbia fund. References to specific securities should not be construed as a recommendation or investment advice.
| 6 | Columbia Variable Portfolio – Select Small Cap Value Fund | Annual Report 2021 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur ongoing
costs, which generally include management fees, distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to help you compare these costs with the ongoing costs of investing in other mutual funds.
The information below does not
reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy (collectively, Contracts) or qualified pension and retirement plan (Qualified Plan), if any. The total fees
and expenses you bear may therefore be higher than those shown below.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount invested, to estimate the
expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as redemption or exchange fees, or expenses that apply to the subaccount or the Contract. Therefore, the
hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If the fees and expenses imposed under your Contract or
Qualified Plan, if any, were included, your costs would be higher.
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 365.
Expenses do not include fees and
expenses incurred indirectly by the Fund from its investment in underlying funds, including affiliated and non-affiliated pooled investment vehicles, such as mutual funds and exchange-traded funds.
Had Columbia Management Investment
Advisers, LLC and/or certain of its affiliates not waived/reimbursed certain fees and expenses, account value at the end of the period would have been reduced.
| Columbia Variable Portfolio – Select Small Cap Value Fund | Annual Report 2021 | 7 |
Portfolio of Investments
December 31, 2021
December 31, 2021
(Percentages represent value of
investments compared to net assets)
Investments in securities
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 8 | Columbia Variable Portfolio – Select Small Cap Value Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Select Small Cap Value Fund | Annual Report 2021 | 9 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Notes to Portfolio of
Investments
| (a) | Non-income producing investment. |
| (b) | The rate shown is the seven-day current annualized yield at December 31, 2021. |
| (c) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended December 31, 2021 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Realized gain (loss)($) | Dividends($) | End of period shares |
| Columbia Short-Term Cash Fund, 0.085% | ||||||||
| 1,436,506 | 23,906,767 | (23,264,018) | (70) | 2,079,185 | (38) | 1,747 | 2,079,601 | |
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at December 31, 2021:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Investments in Securities | ||||
| Common Stocks | ||||
| Communication Services | 3,824,461 | — | — | 3,824,461 |
| Consumer Discretionary | 9,322,196 | — | — | 9,322,196 |
| Consumer Staples | 2,030,388 | — | — | 2,030,388 |
| Energy | 4,642,303 | — | — | 4,642,303 |
| Financials | 28,758,017 | — | — | 28,758,017 |
| Health Care | 8,536,206 | — | — | 8,536,206 |
| Industrials | 17,543,485 | — | — | 17,543,485 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 10 | Columbia Variable Portfolio – Select Small Cap Value Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Fair value measurements (continued)
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Information Technology | 13,812,364 | — | — | 13,812,364 |
| Materials | 7,946,305 | — | — | 7,946,305 |
| Real Estate | 9,657,702 | — | — | 9,657,702 |
| Utilities | 1,740,909 | — | — | 1,740,909 |
| Total Common Stocks | 107,814,336 | — | — | 107,814,336 |
| Money Market Funds | 2,079,185 | — | — | 2,079,185 |
| Total Investments in Securities | 109,893,521 | — | — | 109,893,521 |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Select Small Cap Value Fund | Annual Report 2021 | 11 |
Statement of Assets and Liabilities
December 31, 2021
December 31, 2021
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $72,259,925) | $107,814,336 |
| Affiliated issuers (cost $2,079,255) | 2,079,185 |
| Receivable for: | |
| Capital shares sold | 1,487 |
| Dividends | 93,316 |
| Expense reimbursement due from Investment Manager | 474 |
| Prepaid expenses | 7,131 |
| Total assets | 109,995,929 |
| Liabilities | |
| Payable for: | |
| Capital shares purchased | 89,529 |
| Management services fees | 2,618 |
| Distribution and/or service fees | 495 |
| Service fees | 12,941 |
| Compensation of board members | 52,643 |
| Compensation of chief compliance officer | 20 |
| Audit fees | 14,750 |
| Other expenses | 3,923 |
| Total liabilities | 176,919 |
| Net assets applicable to outstanding capital stock | $109,819,010 |
| Represented by | |
| Trust capital | $109,819,010 |
| Total - representing net assets applicable to outstanding capital stock | $109,819,010 |
| Class 1 | |
| Net assets | $6,363,659 |
| Shares outstanding | 177,897 |
| Net asset value per share | $35.77 |
| Class 2 | |
| Net assets | $41,124,616 |
| Shares outstanding | 1,182,747 |
| Net asset value per share | $34.77 |
| Class 3 | |
| Net assets | $62,330,735 |
| Shares outstanding | 1,766,465 |
| Net asset value per share | $35.29 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 12 | Columbia Variable Portfolio – Select Small Cap Value Fund | Annual Report 2021 |
Statement of Operations
Year Ended December 31, 2021
Year Ended December 31, 2021
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $1,486,875 |
| Dividends — affiliated issuers | 1,747 |
| Foreign taxes withheld | (7,209) |
| Total income | 1,481,413 |
| Expenses: | |
| Management services fees | 898,356 |
| Distribution and/or service fees | |
| Class 2 | 92,199 |
| Class 3 | 73,950 |
| Service fees | 81,837 |
| Compensation of board members | 24,601 |
| Custodian fees | 3,010 |
| Printing and postage fees | 13,504 |
| Audit fees | 29,500 |
| Legal fees | 10,982 |
| Compensation of chief compliance officer | 21 |
| Other | 9,276 |
| Total expenses | 1,237,236 |
| Fees waived or expenses reimbursed by Investment Manager and its affiliates | (190,876) |
| Total net expenses | 1,046,360 |
| Net investment income | 435,053 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 6,705,431 |
| Investments — affiliated issuers | (38) |
| Net realized gain | 6,705,393 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | 18,264,964 |
| Investments — affiliated issuers | (70) |
| Net change in unrealized appreciation (depreciation) | 18,264,894 |
| Net realized and unrealized gain | 24,970,287 |
| Net increase in net assets resulting from operations | $25,405,340 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| Columbia Variable Portfolio – Select Small Cap Value Fund | Annual Report 2021 | 13 |
Statement of Changes in Net Assets
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | |
| Operations | ||
| Net investment income | $435,053 | $235,792 |
| Net realized gain | 6,705,393 | 5,348,925 |
| Net change in unrealized appreciation (depreciation) | 18,264,894 | 303,411 |
| Net increase in net assets resulting from operations | 25,405,340 | 5,888,128 |
| Increase (decrease) in net assets from capital stock activity | 1,637,478 | (6,884,878) |
| Total increase (decrease) in net assets | 27,042,818 | (996,750) |
| Net assets at beginning of year | 82,776,192 | 83,772,942 |
| Net assets at end of year | $109,819,010 | $82,776,192 |
| Year Ended | Year Ended | |||
| December 31, 2021 | December 31, 2020 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class 1 | ||||
| Subscriptions | 226,494 | 7,733,265 | 80,979 | 1,724,716 |
| Redemptions | (208,193) | (7,074,331) | (92,412) | (2,015,631) |
| Net increase (decrease) | 18,301 | 658,934 | (11,433) | (290,915) |
| Class 2 | ||||
| Subscriptions | 253,344 | 8,281,484 | 170,210 | 3,457,019 |
| Redemptions | (175,559) | (5,714,130) | (163,785) | (3,637,796) |
| Net increase (decrease) | 77,785 | 2,567,354 | 6,425 | (180,777) |
| Class 3 | ||||
| Subscriptions | 112,840 | 3,719,235 | 31,271 | 681,424 |
| Redemptions | (162,272) | (5,308,045) | (342,975) | (7,094,610) |
| Net decrease | (49,432) | (1,588,810) | (311,704) | (6,413,186) |
| Total net increase (decrease) | 46,654 | 1,637,478 | (316,712) | (6,884,878) |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 14 | Columbia Variable Portfolio – Select Small Cap Value Fund | Annual Report 2021 |
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| Columbia Variable Portfolio – Select Small Cap Value Fund | Annual Report 2021 | 15 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect any fees and expenses imposed under your
Contract and/or Qualified Plan, as applicable; such fees and expenses would reduce the total returns for all periods shown. Total return and portfolio turnover are not annualized for periods of less than one year. The
portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain derivatives, if any. If such transactions were included, the Fund’s portfolio
turnover rate may be higher.
| Net asset value, beginning of period | Net investment income (loss) | Net realized and unrealized gain (loss) | Total from investment operations | |
| Class 1 | ||||
| Year Ended 12/31/2021 | $27.32 | 0.20 | 8.25 | 8.45 |
| Year Ended 12/31/2020 | $25.02 | 0.11 | 2.19 | 2.30 |
| Year Ended 12/31/2019 | $21.25 | 0.16 | 3.61 | 3.77 |
| Year Ended 12/31/2018 | $24.31 | 0.11 | (3.17) | (3.06) |
| Year Ended 12/31/2017 | $21.65 | (0.02) | 2.68 | 2.66 |
| Class 2 | ||||
| Year Ended 12/31/2021 | $26.62 | 0.11 | 8.04 | 8.15 |
| Year Ended 12/31/2020 | $24.44 | 0.05 | 2.13 | 2.18 |
| Year Ended 12/31/2019 | $20.81 | 0.10 | 3.53 | 3.63 |
| Year Ended 12/31/2018 | $23.87 | 0.05 | (3.11) | (3.06) |
| Year Ended 12/31/2017 | $21.30 | 0.04 | 2.53 | 2.57 |
| Class 3 | ||||
| Year Ended 12/31/2021 | $26.98 | 0.15 | 8.16 | 8.31 |
| Year Ended 12/31/2020 | $24.74 | 0.08 | 2.16 | 2.24 |
| Year Ended 12/31/2019 | $21.04 | 0.14 | 3.56 | 3.70 |
| Year Ended 12/31/2018 | $24.10 | 0.08 | (3.14) | (3.06) |
| Year Ended 12/31/2017 | $21.48 | 0.06 | 2.56 | 2.62 |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 16 | Columbia Variable Portfolio – Select Small Cap Value Fund | Annual Report 2021 |
Financial Highlights (continued)
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets(a) | Total net expense ratio to average net assets(a),(b) | Net investment income (loss) ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Class 1 | |||||||
| Year Ended 12/31/2021 | $35.77 | 30.93% | 1.04% | 0.85% | 0.59% | 16% | $6,364 |
| Year Ended 12/31/2020 | $27.32 | 9.19% | 1.09% | 0.86% | 0.49% | 28% | $4,360 |
| Year Ended 12/31/2019 | $25.02 | 17.74% | 1.05% | 0.88% | 0.68% | 21% | $4,280 |
| Year Ended 12/31/2018 | $21.25 | (12.59%) | 1.04% | 0.88% | 0.43% | 13% | $3,163 |
| Year Ended 12/31/2017 | $24.31 | 12.29% | 1.02% | 0.89% | (0.09%) | 23% | $4,111 |
| Class 2 | |||||||
| Year Ended 12/31/2021 | $34.77 | 30.62% | 1.29% | 1.10% | 0.34% | 16% | $41,125 |
| Year Ended 12/31/2020 | $26.62 | 8.92% | 1.34% | 1.11% | 0.25% | 28% | $29,417 |
| Year Ended 12/31/2019 | $24.44 | 17.44% | 1.30% | 1.13% | 0.44% | 21% | $26,851 |
| Year Ended 12/31/2018 | $20.81 | (12.82%) | 1.29% | 1.13% | 0.20% | 13% | $24,086 |
| Year Ended 12/31/2017 | $23.87 | 12.06% | 1.29% | 1.14% | 0.19% | 23% | $28,050 |
| Class 3 | |||||||
| Year Ended 12/31/2021 | $35.29 | 30.80% | 1.16% | 0.98% | 0.45% | 16% | $62,331 |
| Year Ended 12/31/2020 | $26.98 | 9.05% | 1.21% | 0.99% | 0.37% | 28% | $48,999 |
| Year Ended 12/31/2019 | $24.74 | 17.59% | 1.18% | 1.00% | 0.57% | 21% | $52,643 |
| Year Ended 12/31/2018 | $21.04 | (12.70%) | 1.17% | 1.01% | 0.33% | 13% | $51,927 |
| Year Ended 12/31/2017 | $24.10 | 12.20% | 1.16% | 1.02% | 0.25% | 23% | $67,684 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Select Small Cap Value Fund | Annual Report 2021 | 17 |
Notes to Financial Statements
December 31, 2021
December 31, 2021
Note 1. Organization
Columbia Variable Portfolio
– Select Small Cap Value Fund (the Fund), a series of Columbia Funds Variable Series Trust II (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended (the
1940 Act), as an open-end management investment company organized as a Massachusetts business trust.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers Class 1, Class 2 and Class 3 shares to separate accounts funding variable annuity contracts and variable life insurance policies (collectively, Contracts) issued
by affiliated and unaffiliated life insurance companies (Participating Insurance Companies) as well as qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors (Qualified
Investors) authorized by Columbia Management Investment Distributors, Inc. (the Distributor). You may not buy (nor will you own) shares of the Fund directly. You may invest by participating in a Qualified Plan or by
buying a Contract and making allocations to the Fund. Although all share classes generally have identical voting, dividend and liquidation rights, each share class votes separately when required by the Trust’s
organizational documents or by law. Different share classes pay different net investment income distribution amounts to the extent the expenses of such share classes differ, and distributions in liquidation will be
proportional to the net asset value of each share class. Each share class has its own cost structure and other features.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Equity securities listed on an
exchange are valued at the closing price or last trade price on their primary exchange at the close of business of the New York Stock Exchange. Securities with a closing price not readily available or not listed on
any exchange are valued at the mean between the closing bid and ask prices. Listed preferred stocks convertible into common stocks are valued using an evaluated price from a pricing service.
Foreign equity securities are
valued based on the closing price or last trade price on their primary exchange at the close of business of the New York Stock Exchange. If any foreign equity security closing prices are not readily available,
the securities are valued at the mean of the latest quoted bid and ask prices on such exchanges or markets. Foreign currency exchange rates are determined at the scheduled closing time of the New York Stock Exchange.
Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange; therefore, the closing prices for securities in such markets or on such exchanges may not fully reflect
events that occur after such close but before the close of the New York Stock Exchange. In those situations, foreign securities will be fair valued pursuant to a policy adopted by the Board of Trustees. Under the
policy, the Fund may utilize a third-party pricing service to determine these fair values. The third-party pricing service takes into account multiple factors, including, but not limited to, movements in the U.S.
securities markets, certain depositary receipts, futures contracts and foreign exchange rates that have occurred subsequent to the close of the foreign exchange or market, to determine a good faith estimate that
reasonably reflects the current market conditions as of the close of the New York Stock Exchange. The fair value of a security is likely to be different from the quoted or published price, if available.
Investments in open-end investment
companies (other than exchange-traded funds (ETFs)), are valued at the latest net asset value reported by those companies as of the valuation time.
| 18 | Columbia Variable Portfolio – Select Small Cap Value Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
Income recognition
Corporate actions and dividend
income are generally recorded net of any non-reclaimable tax withholdings, on the ex-dividend date or upon receipt of an ex-dividend notification in the case of certain foreign securities.
The Fund may receive distributions
from holdings in equity securities, business development companies (BDCs), exchange-traded funds (ETFs), limited partnerships (LPs), other regulated investment companies (RICs), and real estate investment trusts
(REITs), which report information as to the tax character of their distributions annually. These distributions are allocated to dividend income, capital gain and return of capital based on actual information reported.
Return of capital is recorded as a reduction of the cost basis of securities held. If the Fund no longer owns the applicable securities, return of capital is recorded as a realized gain. With respect to REITs, to the
extent actual information has not yet been reported, estimates for return of capital are made by Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise
Financial, Inc. (Ameriprise Financial). The Investment Manager’s estimates are subsequently adjusted when the actual character of the distributions is disclosed by the REITs, which could result in a
proportionate change in return of capital to shareholders.
Awards from class action litigation
are recorded as a reduction of cost basis if the Fund still owns the applicable securities on the payment date. If the Fund no longer owns the applicable securities on the payment date, the proceeds are recorded as
realized gains.
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
Federal income tax status
The Fund is treated as a
partnership for federal income tax purposes, and the Fund does not expect to make regular distributions. The Fund will not be subject to federal income tax, and therefore, there is no provision for federal income
taxes. The partners of the Fund are subject to tax on their distributive share of the Fund’s income and loss. The components of the Fund’s net assets are reported at the partner-level for federal income
tax purposes, and therefore, are not presented in the Statement of Assets and Liabilities.
| Columbia Variable Portfolio – Select Small Cap Value Fund | Annual Report 2021 | 19 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Foreign taxes
The Fund may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries, as applicable, based upon its current interpretation of tax rules
and regulations that exist in the markets in which it invests.
Realized gains in certain countries
may be subject to foreign taxes at the Fund level, based on statutory rates. The Fund accrues for such foreign taxes on realized and unrealized gains at the appropriate rate for each jurisdiction, as applicable. The
amount, if any, is disclosed as a liability on the Statement of Assets and Liabilities.
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Under the Management Agreement, the
Investment Manager provides the Fund with investment research and advice, as well as administrative and accounting services. The management services fee is an annual fee that is equal to a percentage of the
Fund’s daily net assets that declines from 0.87% to 0.75% as the Fund’s net assets increase. The effective management services fee rate for the year ended December 31, 2021 was 0.87% of the Fund’s
average daily net assets.
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. Under a Deferred Compensation Plan (the
Deferred Plan), these members of the Board of Trustees may elect to defer payment of up to 100% of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of
certain funds managed by the Investment Manager. The Fund’s liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Deferred Plan. All
amounts payable under the Deferred Plan constitute a general unsecured obligation of the Fund. The expense for the Deferred Plan, which includes Trustees’ fees deferred during the current period as well as any
gains or losses on the Trustees’ deferred compensation balances as a result of market fluctuations, is included in "Compensation of board members" on the Statement of Operations.
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
| 20 | Columbia Variable Portfolio – Select Small Cap Value Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Service fees
The Fund has entered into a
Shareholder Services Agreement with Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial. Under this
agreement, the Fund pays a service fee equal to the payments made by the Transfer Agent to Participating Insurance Companies and other financial intermediaries (together, Participating Organizations) for services each
such Participating Organization provides to its clients, customers and participants that are invested directly or indirectly in the Fund, up to a cap approved by the Board of Trustees from time to time. The effective
service fee rate for the year ended December 31, 2021, was 0.08% of the Fund’s average daily net assets.
The Transfer Agent may retain as
compensation for its services revenues from fees for wire, telephone and redemption orders, account transcripts due the Transfer Agent from Fund shareholders and interest (net of bank charges) earned with respect to
balances in accounts the Transfer Agent maintains in connection with its services to the Fund.
Distribution and/or service fees
The Fund has an agreement with the
Distributor, an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution services. Under a Plan and Agreement of Distribution, the Fund pays a fee at an annual rate
of up to 0.25% of the Fund’s average daily net assets attributable to Class 2 shares and an annual rate of up to 0.125% of the Fund’s average daily net assets attributable to Class 3 shares. The Fund pays
no distribution and service fees for Class 1 shares.
Expenses waived/reimbursed by the
Investment Manager and its affiliates
The Investment Manager and certain
of its affiliates have contractually agreed to waive fees and/or reimburse expenses (excluding certain fees and expenses described below) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, so that the Fund’s net operating expenses, after giving effect to fees waived/expenses reimbursed and any balance credits and/or overdraft charges from the Fund’s
custodian, do not exceed the following annual rate(s) as a percentage of the classes’ average daily net assets:
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), expenses associated with investments in affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange-traded funds), transaction costs and
brokerage commissions, costs related to any securities lending program, dividend expenses associated with securities sold short, inverse floater program fees and expenses, transaction charges and interest on borrowed
money, interest, costs associated with certain shareholder meetings, infrequent and/or unusual expenses and any other expenses the exclusion of which is specifically approved by the Board of Trustees. This
agreement may be modified or amended only with approval from the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements
described above are not recoverable by the Investment Manager or its affiliates in future periods.
Note 4. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $17,480,494 and $16,001,629, respectively, for the year ended December 31, 2021. The amount of purchase and
sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
| Columbia Variable Portfolio – Select Small Cap Value Fund | Annual Report 2021 | 21 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Note 5. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes
referred to as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
Note 6. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund did not borrow or lend
money under the Interfund Program during the year ended December 31, 2021.
Note 7. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to an October 28, 2021 amendment and restatement, the credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment
Manager or an affiliated investment manager, severally and not jointly, permits collective borrowings up to $950 million. Interest is currently charged to each participating fund based on its borrowings at a rate
equal to the higher of (i) the federal funds effective rate, (ii) the secured overnight financing rate plus 0.11448% and (iii) the overnight bank funding rate, plus in each case, 1.00%. Each borrowing under the credit
facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The
commitment fee is included in other expenses in the Statement of Operations. This agreement expires annually in October unless extended or renewed. Prior to the October 28, 2021 amendment and restatement, the Fund had
access to a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. which permitted collective borrowings up to $950 million. Interest was
charged to each participating fund based on its borrowings at a rate equal to the higher of (i) the federal funds effective rate, (ii) the one-month London Interbank Offered Rate (LIBOR) rate and (iii) the overnight
bank funding rate, plus in each case, 1.25%.
The Fund had no borrowings during
the year ended December 31, 2021.
Note 8. Significant
risks
Financial sector risk
The Fund is more susceptible to the
particular risks that may affect companies in the financial services sector than if it were invested in a wider variety of companies in unrelated sectors. Companies in the financial services sector are subject to
certain risks, including the risk of regulatory change, decreased liquidity in credit markets and unstable interest rates. Such companies may have concentrated portfolios, such as a high level of loans to one or more
industries or sectors, which makes them vulnerable to economic conditions that affect such industries or sectors. Performance of such companies may be affected by competitive pressures and exposure to investments,
agreements and counterparties, including credit products that, under certain circumstances, may lead to losses (e.g., subprime loans). Companies in the financial services sector are
| 22 | Columbia Variable Portfolio – Select Small Cap Value Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
subject to extensive governmental regulation that
may limit the amount and types of loans and other financial commitments they can make, and interest rates and fees that they may charge. In addition, profitability of such companies is largely dependent upon the
availability and the cost of capital.
Market risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
The coronavirus disease 2019 and
its variants (COVID-19) pandemic has resulted in, and may continue to result in, significant global economic and societal disruption and market volatility due to disruptions in market access, resource availability,
facilities operations, imposition of tariffs, export controls and supply chain disruption, among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement
and loss in human and other resources. The uncertainty surrounding the magnitude, duration, reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental
authorities or other third parties, present unknowns that are yet to unfold. The impacts, as well as the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and
pandemics that may arise in the future – could negatively affect global economies and markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in
emerging market countries may be greater due to generally less established healthcare systems, governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing
political, social and economic risks in certain countries or globally. The disruptions caused by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively
impact the Fund’s ability to achieve its investment objectives. Any such event(s) could have a significant adverse impact on the value and risk profile of the Fund.
Shareholder concentration risk
At December 31, 2021, affiliated
shareholders of record owned 82.7% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of
less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Small- and mid-cap company risk
Investments in small- and
mid-capitalization companies (small- and mid-cap companies) often involve greater risks than investments in larger, more established companies (larger companies) because small- and mid-cap companies tend to have less
predictable earnings and may lack the management experience, financial resources, product diversification and competitive strengths of larger companies. Securities of small- and mid-cap companies may be less liquid
and more volatile than the securities of larger companies.
Note 9. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
| Columbia Variable Portfolio – Select Small Cap Value Fund | Annual Report 2021 | 23 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Note 10. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in
connection with the conduct of their business activities. Ameriprise Financial believes that the Fund is not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject
of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with
the Fund. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (SEC) on legal and regulatory matters that relate to
Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that
these matters, or the adverse publicity associated with them, will not result in increased Fund redemptions, reduced sale of Fund shares or other adverse consequences to the Fund. Further, although we believe
proceedings are not likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines,
penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial or one or more of its affiliates that provides services to
the Fund.
| 24 | Columbia Variable Portfolio – Select Small Cap Value Fund | Annual Report 2021 |
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees of Columbia
Funds Variable Series Trust II and Shareholders of Columbia Variable Portfolio – Select Small Cap Value Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of Columbia Variable Portfolio – Select Small Cap Value Fund (one of the funds constituting Columbia Funds Variable Series Trust II,
referred to hereafter as the "Fund") as of December 31, 2021, the related statement of operations for the year ended December 31, 2021, the statement of changes in net assets for each of the two years in the period
ended December 31, 2021, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2021 (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, 2021, 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, 2021 and the financial highlights for each of the five years in the period ended December 31, 2021 in conformity with accounting principles generally
accepted in the United States of America.
Basis for Opinion
These financial statements are the
responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these
financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2021 by correspondence with the custodian and transfer agent. We believe that our
audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Minneapolis, Minnesota
February 18, 2022
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| Columbia Variable Portfolio – Select Small Cap Value Fund | Annual Report 2021 | 25 |
TRUSTEES AND
OFFICERS
The Board oversees the
Fund’s operations and appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following table provides basic biographical information about the
Fund’s Trustees as of the printing of this report, including their principal occupations during the past five years, although specific titles for individuals may have varied over the period. The year set forth
beneath Length of Service in the table below is the year in which the Trustee was first appointed or elected as Trustee to any Fund currently in the Columbia Funds Complex or a predecessor thereof. Under current Board
policy, each Trustee generally serves until December 31 of the year such Trustee turns seventy-five (75).
Independent trustees
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| George S. Batejan c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1953 | Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 176 | Former Chairman of the Board, NICSA (National Investment Company Services Association) (Executive Committee, Nominating Committee and Governance Committee), 2014-2016; former Director, Intech Investment Management, 2011-2016; former Board Member, Metro Denver Chamber of Commerce, 2015-2016; former Advisory Board Member, University of Colorado Business School, 2015-2018 |
| Kathleen Blatz c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2006 | Attorney, specializing in arbitration and mediation; Chief Justice, Minnesota Supreme Court, 1998-2006; Associate Justice, Minnesota Supreme Court, 1996-1998; Fourth Judicial District Court Judge, Hennepin County, 1994-1996; Attorney in private practice and public service, 1984-1993; State Representative, Minnesota House of Representatives, 1979-1993, which included service on the Tax and Financial Institutions and Insurance Committees; Member and Interim Chair, Minnesota Sports Facilities Authority, January 2017-July 2017; Interim President and Chief Executive Officer, Blue Cross Blue Shield of Minnesota (health care insurance), February-July 2018, April-October 2021 | 176 | Former Trustee, Blue Cross Blue Shield of Minnesota, 2009-2021 (Chair of the Business Development Committee, 2014-2017; Chair of the Governance Committee, 2017-2019); former Member and Chair of the Board, Minnesota Sports Facilities Authority, January 2017-July 2017; former Director, Robina Foundation, 2009-2020 (Chair, 2014-2020); Director, Schulze Family Foundation, since 2021 |
| Pamela G. Carlton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2007 | President, Springboard — Partners in Cross Cultural Leadership (consulting company) since 2003; Managing Director of US Equity Research, JP Morgan Chase, 1999-2003; Director of US Equity Research, Chase Asset Management, 1996-1999; Co-Director Latin America Research, 1993-1996, COO Global Research, 1992-1996, Co-Director of US Research, 1991-1992, Investment Banker, Morgan Stanley, 1982-1991, Morgan Stanley; Attorney, Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 176 | Trustee, New York Presbyterian Hospital Board (Executive Committee and Chair of People Committee) since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee); Director, Apollo Commercial Real Estate Finance, Inc. since 2021; the Governing Council of the Independent Directors Council (IDC), since 2021 |
| 26 | Columbia Variable Portfolio – Select Small Cap Value Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Janet Langford Carrig c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1957 | Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 174 | Director, EQT Corporation (natural gas producer) since 2019; Director, Whiting Petroleum Corporation (independent oil and gas company) since 2020 |
| J. Kevin Connaughton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2020 | Member, FINRA National Adjudicatory Council since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Consultant to Independent Trustees of CFVIT and CFST I from March 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Managing Director and General Manager of Mutual Fund Products, Columbia Management Investment Advisers, LLC, May 2010-February 2015; President, Columbia Funds, 2008-2015; and senior officer of Columbia Funds and affiliated funds, 2003-2015 | 174 | Former Director, The Autism Project, March 2015-December 2021; former Member of the Investment Committee, St. Michael’s College, November 2015-February 2020; former Trustee, St. Michael’s College, June 2017-September 2019; former Trustee, New Century Portfolios, January 2015-December 2017 |
| Olive M. Darragh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since 2020 | Managing Director of Darragh Inc. (strategy and talent management consulting firm) since 2010; Founder and CEO, Zolio, Inc. (investment management talent identification platform) since 2004; Consultant to Independent Trustees of CFVIT and CFST I from June 2019 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 2001-2004 | 174 | Former Director, University of Edinburgh Business School (Member of US Board); former Director, Boston Public Library Foundation |
| Patricia M. Flynn c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1950 | Trustee since 2004 | Trustee Professor of Economics and Management, Bentley University since 1976 (also teaches and conducts research on corporate governance); Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 176 | Trustee, MA Taxpayers Foundation since 1997; Board of Governors, Innovation Institute, MA Technology Collaborative, 2010-2020; former Board of Directors, The MA Business Roundtable, 2003-2019 |
| Brian J. Gallagher c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 176 | Trustee, Catholic Schools Foundation since 2004 |
| Columbia Variable Portfolio – Select Small Cap Value Fund | Annual Report 2021 | 27 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Douglas A. Hacker c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1955 | Co-Chair since 2021; Chair of CFST I and CFVIT since 2014; Trustee of CFST I and CFVIT since 1996 and CFST, CFST II, CFVST II, CET I and CET II since 2021 | Independent business executive since May 2006; Executive Vice President – Strategy of United Airlines, December 2002 - May 2006; President of UAL Loyalty Services (airline marketing company), September 2001-December 2002; Executive Vice President and Chief Financial Officer of United Airlines, July 1999-September 2001 | 176 | Director, Spartan Nash Company (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing); former Director, Nash Finch Company (food distributor), 2005-2013; former Director, SeaCube Container Leasing Ltd. (container leasing), 2010-2013; and former Director, Travelport Worldwide Limited (travel information technology), 2014-2019 |
| Nancy T. Lukitsh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1956 | Trustee since 2011 | Senior Vice President, Partner and Director of Marketing, Wellington Management Company, LLP (investment adviser), 1997-2010; Chair, Wellington Management Portfolios (commingled non-U.S. investment pools), 2007 -2010; Director, Wellington Trust Company, NA and other Wellington affiliates, 1997-2010 | 174 | None |
| David M. Moffett c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2011 | Retired; Consultant to Bridgewater and Associates | 174 | Director, CSX Corporation (transportation suppliers); Director, Genworth Financial, Inc. (financial and insurance products and services); Director, PayPal Holdings Inc. (payment and data processing services); Trustee, University of Oklahoma Foundation; former Director, eBay Inc. (online trading community), 2007-2015; and former Director, CIT Bank, CIT Group Inc. (commercial and consumer finance), 2010-2016 |
| Catherine James Paglia c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Co-Chair since 2021; Chair of CFST, CFST II, CFVST II, CET I and CET II since 2020; Trustee of CFST, CFST II and CFVST II since 2004 and CFST I and CFVIT since 2021 | Director, Enterprise Asset Management, Inc. (private real estate and asset management company) since September 1998; Managing Director and Partner, Interlaken Capital, Inc., 1989-1997; Vice President, 1982-1985, Principal, 1985-1987, Managing Director, 1987-1989, Morgan Stanley; Vice President, Investment Banking, 1980-1982, Associate, Investment Banking, 1976-1980, Dean Witter Reynolds, Inc. | 176 | Director, Valmont Industries, Inc. (irrigation systems manufacturer) since 2012; Trustee, Carleton College (on the Investment Committee); Trustee, Carnegie Endowment for International Peace (on the Investment Committee) |
| 28 | Columbia Variable Portfolio – Select Small Cap Value Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Minor M. Shaw c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1947 | Trustee since 2003 | President, Micco LLC (private investments) since 2011; President, Micco Corp. (family investment business), 1998-2011 | 176 | Director, Blue Cross Blue Shield of South Carolina (Chair of Compensation Committee) since April 2008; Trustee, Hollingsworth Funds (on the Investment Committee) since 2016 (previously Board Chair from 2016-2019); Former Advisory Board member, Duke Energy Corp., 2016-2020; Chair of the Duke Endowment; Chair of Greenville – Spartanburg Airport Commission; former Trustee, BofA Funds Series Trust (11 funds), 2003-2011; former Director, Piedmont Natural Gas, 2004-2016; former Director, National Association of Corporate Directors, Carolinas Chapter, 2013-2018; Chair, Daniel-Mickel Foundation since 1998 |
| Natalie A. Trunow c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1967 | Trustee since 2020 | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services), January 2016-January 2021; Non-executive Member of the Investment Committee and Valuation Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services), August 2018-January 2021; Advisor, Paradigm Asset Management, November 2016-December 2021; Consultant to Independent Trustees of CFVIT and CFST I from September 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Director of Investments/Consultant, Casey Family Programs, April 2016-November 2016; Senior Vice President and Chief Investment Officer, Calvert Investments, August 2008-January 2016; Section Head and Portfolio Manager, General Motors Asset Management, June 1997-August 2008 | 174 | Former Director, Investment Committee, Health Services for Children with Special Needs, Inc., 2012-2019; Director, Chair of Audit Committee, Consumer Credit Counseling Services (formerly Guidewell Financial Solutions), since 2019; Independent Director, Investment Committee and Valuation Committee, Sarona Asset Management, since 2019 |
| Sandra Yeager c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2017 | Retired; President and founder, Hanoverian Capital, LLC (SEC registered investment advisor firm), 2008-2016; Managing Director, DuPont Capital, 2006-2008; Managing Director, Morgan Stanley Investment Management, 2004-2006; Senior Vice President, Alliance Bernstein, 1990-2004 | 176 | Former Director, NAPE Education Foundation, October 2016-October 2020 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Fund Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I (CET I), Columbia ETF Trust II (CET II), Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Beckman, Gallagher and Hacker and Mses. Blatz, Carlton, Flynn, Paglia, Shaw and Yeager serve as Directors of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
| Columbia Variable Portfolio – Select Small Cap Value Fund | Annual Report 2021 | 29 |
TRUSTEES AND OFFICERS (continued)
Interested trustee affiliated with Investment Manager*
Interested trustee affiliated with Investment Manager*
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during the past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex overseen | Other directorships held by Trustee during the past five years |
| Daniel J. Beckman c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since November 2021(a) | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC (since April 2015); officer of Columbia Funds and affiliated funds since 2020. | 176 | Director, Ameriprise Trust Company, since October 2016; Director, Columbia Management Investment Distributors, Inc. since November 2018; Board of Governors, Columbia Wanger Asset Management, LLC since January 2022 |
| * | Interested person (as defined under the 1940 Act) by reason of being an officer, director, security holder and/or employee of the Investment Manager or Ameriprise Financial. |
| (a) | Mr. Beckman serves as the President and Principal Executive Officer of the Columbia Funds (since 2021). |
The Statement of Additional
Information has additional information about the Fund’s Board members and is available, without charge, upon request by calling 800.345.6611 or contacting your financial intermediary.
The Board has appointed officers
who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. The following table provides basic information about the Officers of the
Fund, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Beckman, who is President and Principal Executive Officer, the
Fund’s other officers are:
Fund officers
| 30 | Columbia Variable Portfolio – Select Small Cap Value Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Fund officers (continued)
Fund officers (continued)
| Columbia Variable Portfolio – Select Small Cap Value Fund | Annual Report 2021 | 31 |
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For Fund and other investment product prospectuses, which contain this and other important information, contact your
financial advisor or insurance representative. Please read the prospectus carefully before you invest. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved. Columbia Management Investment Distributors, Inc., 290 Congress Street, Boston, MA 02210
© 2022 Columbia Management Investment
Advisers, LLC.
S-6484 AW (2/22)
Columbia Variable
Portfolio – Balanced Fund
Please remember that you may not
buy (nor will you own) shares of the Fund directly. The Fund is available through variable annuity contracts and variable life insurance policies offered by the separate accounts of participating insurance companies
as well as qualified pension and retirement plans. Please contact your financial advisor or insurance representative for more information.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
| 3 | |
| 5 | |
| 7 | |
| 8 | |
| 35 | |
| 36 | |
| 37 | |
| 38 | |
| 40 | |
| 52 | |
| 53 |
Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which Columbia Variable Portfolio – Balanced Fund (the Fund) holds investments consistent with the procedures as stated in the Statement of Additional Information
(SAI). You may obtain a copy of the SAI without charge by calling 800.345.6611; contacting your financial intermediary or searching the website of the Securities and Exchange Commission (SEC) at sec.gov. Information
regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge by visiting
columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. The Fund’s Form N-PORT is available on the SEC’s website at sec.gov. The Fund’s complete
schedule of portfolio holdings, as filed on Form N-PORT, can also be obtained without charge, upon request, by calling 800.345.6611.
Additional Fund information
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
290 Congress Street
Boston, MA 02210
Fund distributor
Columbia Management Investment Distributors,
Inc.
290 Congress Street
Boston, MA 02210
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
Columbia Variable Portfolio – Balanced
Fund | Annual Report 2021
Fund at a Glance
Investment objective
The Fund
seeks maximum total investment return through a combination of capital growth and current income.
Portfolio management
Guy Pope, CFA
Lead Portfolio Manager
Managed Fund since 2011
Jason Callan
Portfolio Manager
Managed Fund since 2018
Gregory Liechty
Portfolio Manager
Managed Fund since 2011
Ronald Stahl, CFA
Portfolio Manager
Managed Fund since 2011
| Columbia Variable Portfolio – Balanced Fund | Annual Report 2021 | 3 |
Fund at a Glance (continued)
Performance of a hypothetical $10,000 investment (December 31, 2011 — December 31, 2021)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class 3 shares of Columbia Variable Portfolio – Balanced Fund during the stated time period, and does not reflect the deduction of taxes, if any, that a shareholder
may pay on Fund distributions or on the redemption of Fund shares. The returns also do not reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy or qualified
pension or retirement plan, if any.
| 4 | Columbia Variable Portfolio – Balanced Fund | Annual Report 2021 |
Manager Discussion of Fund Performance
For the 12-month period that
ended December 31, 2021, Class 3 shares of the Fund returned 14.74%. The Fund underperformed its Blended Benchmark, which returned 15.86% for the same time period. The Fund’s equity benchmark, the S&P 500
Index, returned 28.71% and the Fund’s fixed-income benchmark, the Bloomberg U.S. Aggregate Bond Index, returned -1.54% for the 12-month period.
Market overview
U.S. equities displayed
remarkable resilience during the year, finishing with a solid gain despite a number of potential headwinds. Investors had to contend with the emergence of the Omicron variant of COVID-19, which was contagious enough
to raise concerns that a new wave of lockdowns could be necessary. The markets also faced a major shift in U.S. Federal Reserve (Fed) policy. Whereas the Fed had previously viewed rising inflation as a transitory
development, continued price pressures caused the central bank to announce the tapering of its stimulative quantitative easing program. In addition, it began to prepare the financial markets for the likelihood of
multiple interest rate increases in 2022. The failure of the Build Back Better bill removed a source of anticipated fiscal stimulus. Nevertheless, most major U.S. indices closed the year at or near their all-time
highs on the strength of robust investment inflows and the lack of compelling total return potential in bonds.
Investors continued to search for
yield in the low interest rate environment, which helped most spread sectors outperform Treasuries over the year. Broadly speaking, the best performing sectors within the fixed-income benchmark on an excess return
basis included lower rated (A and BBB rated) commercial mortgage-backed securities (CMBS), BBB rated corporates and longer maturity (10-25 years) corporates. Meanwhile, underperformers included fixed rate agency
mortgage-backed securities (MBS), U.S. agencies and sovereigns.
The Fed’s monetary policy,
including keeping short term rates at zero and its monthly asset purchases, continued to help provide liquidity and stability in financial markets. In 2021, interest rates increased across the curve with shorter
maturity yields rising in anticipation of future interest rate hikes. Over the 12-month period, spreads for lower quality corporates (BBB rated) tightened by more than spreads for higher quality corporates. Lower
quality corporates outperformed higher quality corporates in 2021.
The Fund’s notable
detractors during the period
In the equity portion
| • | The Fund’s relative underperformance was driven by a combination of stock selection and sector allocation during the period. |
| • | From an allocation perspective, overweights to the communication services and materials sectors hurt relative performance as both sectors underperformed the benchmark during the period. |
| • | An underweight to the strong performing real estate sector also detracted. |
| • | The industrials sector was the weakest sector for the Fund, driven primarily by stock selection, most notably Fund holdings in Uber Technologies, Southwest Airlines, Co. and Honeywell International Inc. |
| • | Health care was also an area of detraction. Fund holdings that weighed on relative performance included biotech companies Biogen, Inc., BioMarin Pharmaceutical, Inc. and Vertex Pharmaceuticals, Inc., health care equipment companies Dentsply Sirona, Inc. and Medtronic PLC, and pharmaceutical giant Johnson & Johnson. |
| • | Activision Blizzard, Inc. and T-Mobile USA, Inc., both within the communication services sector, were among the Fund’s largest top detractors during the period. |
| • | Within the consumer staples sector, Coca-Cola Company and Sysco Corporation disappointed during the period. |
| • | Within consumer discretionary, the Fund’s large holding in Amazon.com weighed on results, as did holdings in retailers Dollar Tree, Inc. and Gap, Inc. |
| Columbia Variable Portfolio – Balanced Fund | Annual Report 2021 | 5 |
Manager Discussion of Fund Performance (continued)
In the fixed-income portion
| • | The primary detractor from performance in the fixed-income portion of the Fund during the period was yield curve positioning. |
The Fund’s notable
contributors during the period
In the equity portion
| • | The Fund’s overweight allocations to the financials and energy sectors contributed to performance versus the benchmark. |
| • | Underweight allocations to the utilities and consumer staples sectors also added to relative results. |
| • | The information technology sector was the Fund’s strongest area of contribution, with the Fund’s performance driven by strong stock selection. Fund holdings that delivered strong results for the Fund included software companies Intuit, Inc., Microsoft Corp. and Palo Alto Networks. Semiconductor and semiconductor equipment companies NVIDIA Corp., Lam Research Corp., and Marvell Technology were also strong contributors to Fund performance. |
| • | Within energy, all three of the Fund’s holdings, Canadian Natural Resources Limited, Chevron and EOG Resources, Inc., benefited Fund performance versus the benchmark. |
| • | Within the financials sector notable contributors included Morgan Stanley, Bank of America Corp. and American Express. |
| • | Google parent Alphabet Inc., in the communications sector, was one of the Fund’s top individual contributors during the period. |
In the fixed-income portion
| • | Allocations to spread sectors generally benefited performance in the fixed-income portion of the Fund for the 12-month period ending December 2021. |
| ○ | The Fund’s non-agency collateralized mortgage obligation (CMO) exposure had the greatest contribution to total return. |
| ○ | The Fund had overweight positions in asset-backed securities (ABS) and non-agency CMBS, both of which provided material contributions to total return in 2021. |
| • | High-yield corporate bond exposure was also additive to performance. |
| • | The fixed-income portion of the Fund was underweight in agency residential mortgage-backed securities (RMBS), which benefited performance as spreads widened and the sector posted negative excess returns. |
| • | Security selection was additive to performance within the ABS, investment-grade corporate, non-agency CMBS and agency RMBS sectors. |
| • | The Fund maintained a shorter duration versus the benchmark for the majority of the year, which benefited performance as yields increased. In 2021, the 10-year Treasury yield increased approximately 60 basis points (bps; a basis point is 1/100 of a percent) from 0.91% to 1.51%. |
The views expressed in this report
reflect the current views of the respective parties who have contributed to this report. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult
to predict, so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective parties
disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Columbia fund are based on numerous factors, may not be relied on as an
indication of trading intent on behalf of any particular Columbia fund. References to specific securities should not be construed as a recommendation or investment advice.
| 6 | Columbia Variable Portfolio – Balanced Fund | Annual Report 2021 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur ongoing
costs, which generally include management fees, distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to help you compare these costs with the ongoing costs of investing in other mutual funds.
The information below does not
reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy (collectively, Contracts) or qualified pension and retirement plan (Qualified Plan), if any. The total fees
and expenses you bear may therefore be higher than those shown below.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount invested, to estimate the
expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as redemption or exchange fees, or expenses that apply to the subaccount or the Contract. Therefore, the
hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If the fees and expenses imposed under your Contract or
Qualified Plan, if any, were included, your costs would be higher.
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 365.
Expenses do not include fees and
expenses incurred indirectly by the Fund from its investment in underlying funds, including affiliated and non-affiliated pooled investment vehicles, such as mutual funds and exchange-traded funds.
| Columbia Variable Portfolio – Balanced Fund | Annual Report 2021 | 7 |
Portfolio of Investments
December 31, 2021
December 31, 2021
(Percentages represent value of
investments compared to net assets)
Investments in securities
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 8 | Columbia Variable Portfolio – Balanced Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Balanced Fund | Annual Report 2021 | 9 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 10 | Columbia Variable Portfolio – Balanced Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Balanced Fund | Annual Report 2021 | 11 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 12 | Columbia Variable Portfolio – Balanced Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Balanced Fund | Annual Report 2021 | 13 |
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 14 | Columbia Variable Portfolio – Balanced Fund | Annual Report 2021 |
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Balanced Fund | Annual Report 2021 | 15 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 16 | Columbia Variable Portfolio – Balanced Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Balanced Fund | Annual Report 2021 | 17 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 18 | Columbia Variable Portfolio – Balanced Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Balanced Fund | Annual Report 2021 | 19 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 20 | Columbia Variable Portfolio – Balanced Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Balanced Fund | Annual Report 2021 | 21 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 22 | Columbia Variable Portfolio – Balanced Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Balanced Fund | Annual Report 2021 | 23 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 24 | Columbia Variable Portfolio – Balanced Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Balanced Fund | Annual Report 2021 | 25 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 26 | Columbia Variable Portfolio – Balanced Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Balanced Fund | Annual Report 2021 | 27 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 28 | Columbia Variable Portfolio – Balanced Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Balanced Fund | Annual Report 2021 | 29 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 30 | Columbia Variable Portfolio – Balanced Fund | Annual Report 2021 |
At December 31, 2021,
securities and/or cash totaling $2,114,566 were pledged as collateral.
Investments in
derivatives
| Long futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| U.S. Treasury 10-Year Note | 785 | 03/2022 | USD | 102,417,969 | 295,807 | — |
| U.S. Treasury 10-Year Note | 75 | 03/2022 | USD | 9,785,156 | — | (30,202) |
| U.S. Treasury 2-Year Note | 50 | 03/2022 | USD | 10,908,594 | — | (21,189) |
| U.S. Treasury 5-Year Note | 340 | 03/2022 | USD | 41,132,031 | — | (24,319) |
| U.S. Ultra Treasury Bond | 20 | 03/2022 | USD | 3,942,500 | 40,429 | — |
| Total | 336,236 | (75,710) | ||||
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Balanced Fund | Annual Report 2021 | 31 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Notes to Portfolio of
Investments
| (a) | Represents privately placed and other securities and instruments exempt from Securities and Exchange Commission registration (collectively, private placements), such as Section 4(a)(2) and Rule 144A eligible securities, which are often sold only to qualified institutional buyers. At December 31, 2021, the total value of these securities amounted to $325,766,876, which represents 22.44% of total net assets. |
| (b) | Variable rate security. The interest rate shown was the current rate as of December 31, 2021. |
| (c) | Represents fair value as determined in good faith under procedures approved by the Board of Trustees. At December 31, 2021, the total value of these securities amounted to $10,802,435, which represents 0.74% of total net assets. |
| (d) | Valuation based on significant unobservable inputs. |
| (e) | Variable or floating rate security, the interest rate of which adjusts periodically based on changes in current interest rates and prepayments on the underlying pool of assets. The interest rate shown was the current rate as of December 31, 2021. |
| (f) | Non-income producing investment. |
| (g) | Payment-in-kind security. Interest can be paid by issuing additional par of the security or in cash. |
| (h) | Represents a variable rate security with a step coupon where the rate adjusts according to a schedule for a series of periods, typically lower for an initial period and then increasing to a higher coupon rate thereafter. The interest rate shown was the current rate as of December 31, 2021. |
| (i) | Principal and interest may not be guaranteed by a governmental entity. |
| (j) | This security or a portion of this security has been pledged as collateral in connection with derivative contracts. |
| (k) | Represents a security purchased on a when-issued basis. |
| (l) | The stated interest rate represents the weighted average interest rate at December 31, 2021 of contracts within the senior loan facility. Interest rates on contracts are primarily determined either weekly, monthly or quarterly by reference to the indicated base lending rate and spread and the reset period. These base lending rates are primarily the LIBOR and other short-term rates. Base lending rates may be subject to a floor or minimum rate. The interest rate for senior loans purchased on a when-issued or delayed delivery basis will be determined upon settlement, therefore no interest rate is disclosed. Senior loans often require prepayments from excess cash flows or permit the borrowers to repay at their election. The degree to which borrowers repay cannot be predicted with accuracy. As a result, remaining maturities of senior loans may be less than the stated maturities. Generally, the Fund is contractually obligated to receive approval from the agent bank and/or borrower prior to the disposition of a senior loan. |
| (m) | Represents a security purchased on a forward commitment basis. |
| (n) | The rate shown is the seven-day current annualized yield at December 31, 2021. |
| (o) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended December 31, 2021 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Realized gain (loss)($) | Dividends($) | End of period shares |
| Columbia Short-Term Cash Fund, 0.085% | ||||||||
| 76,557,600 | 452,626,572 | (439,209,182) | (4,970) | 89,970,020 | (3,982) | 57,466 | 89,988,018 | |
Abbreviation Legend
| CMO | Collateralized Mortgage Obligation |
| LIBOR | London Interbank Offered Rate |
| SOFR | Secured Overnight Financing Rate |
| TBA | To Be Announced |
Currency Legend
| USD | US Dollar |
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 32 | Columbia Variable Portfolio – Balanced Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Fair value measurements (continued)
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at December 31, 2021:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Investments in Securities | ||||
| Asset-Backed Securities — Non-Agency | — | 91,919,413 | 5,177,435 | 97,096,848 |
| Commercial Mortgage-Backed Securities - Non-Agency | — | 78,014,480 | — | 78,014,480 |
| Common Stocks | ||||
| Communication Services | 109,809,217 | — | — | 109,809,217 |
| Consumer Discretionary | 85,823,846 | — | — | 85,823,846 |
| Consumer Staples | 41,675,701 | — | — | 41,675,701 |
| Energy | 27,484,216 | — | — | 27,484,216 |
| Financials | 92,721,541 | — | — | 92,721,541 |
| Health Care | 125,149,101 | — | — | 125,149,101 |
| Industrials | 77,373,977 | — | — | 77,373,977 |
| Information Technology | 300,740,401 | — | — | 300,740,401 |
| Materials | 28,733,217 | — | — | 28,733,217 |
| Real Estate | 11,450,560 | — | — | 11,450,560 |
| Utilities | 16,198,628 | — | — | 16,198,628 |
| Total Common Stocks | 917,160,405 | — | — | 917,160,405 |
| Convertible Bonds | — | 80,457 | — | 80,457 |
| Corporate Bonds & Notes | — | 93,406,095 | — | 93,406,095 |
| Exchange-Traded Equity Funds | 12,585,797 | — | — | 12,585,797 |
| Foreign Government Obligations | — | 61,333 | — | 61,333 |
| Residential Mortgage-Backed Securities - Agency | — | 80,151,376 | — | 80,151,376 |
| Residential Mortgage-Backed Securities - Non-Agency | — | 143,192,848 | 9,425,000 | 152,617,848 |
| Senior Loans | — | 387,839 | 4,616 | 392,455 |
| U.S. Treasury Obligations | 4,319,953 | — | — | 4,319,953 |
| Money Market Funds | 89,970,020 | — | — | 89,970,020 |
| Total Investments in Securities | 1,024,036,175 | 487,213,841 | 14,607,051 | 1,525,857,067 |
| Investments in Derivatives | ||||
| Asset | ||||
| Futures Contracts | 336,236 | — | — | 336,236 |
| Liability | ||||
| Futures Contracts | (75,710) | — | — | (75,710) |
| Total | 1,024,296,701 | 487,213,841 | 14,607,051 | 1,526,117,593 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Balanced Fund | Annual Report 2021 | 33 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Fair value measurements (continued)
See the Portfolio of Investments for all investment classifications not indicated in the table.
See the Portfolio of Investments for all investment classifications not indicated in the table.
The Fund’s assets assigned to
the Level 2 input category are generally valued using the market approach, in which a security’s value is determined through reference to prices and information from market transactions for similar or identical
assets.
Derivative instruments are valued at
unrealized appreciation (depreciation).
The following table is a
reconciliation of Level 3 assets for which significant observable and unobservable inputs were used to determine fair value:
| Balance as of 12/31/2020 ($) | Increase (decrease) in accrued discounts/ premiums ($) | Realized gain (loss) ($) | Change in unrealized appreciation (depreciation)(a) ($) | Purchases ($) | Sales ($) | Transfers into Level 3 ($) | Transfers out of Level 3 ($) | Balance as of 12/31/2021 ($) | |
| Asset-Backed Securities — Non-Agency | 877,377 | — | — | 2,435 | 5,175,000 | — | — | (877,377) | 5,177,435 |
| Residential Mortgage-Backed Securities — Non-Agency | 3,799,257 | — | 2,088 | (4,889) | 9,424,994 | (3,796,450) | — | — | 9,425,000 |
| Senior Loans | — | — | — | (158) | — | — | 4,774 | — | 4,616 |
| Total | 4,676,634 | — | 2,088 | (2,612) | 14,599,994 | (3,796,450) | 4,774 | (877,377) | 14,607,051 |
(a) Change in unrealized
appreciation (depreciation) relating to securities held at December 31, 2021 was $2,283, which is comprised of Asset-Backed Securities — Non-Agency of $2,435, Residential Mortgage-Backed Securities —
Non-Agency of $6 and Senior Loans of $(158).
The Fund’s assets assigned to
the Level 3 category are valued utilizing the valuation technique deemed the most appropriate in the circumstances. Certain residential mortgage backed securities, asset backed securities and senior loans classified
as Level 3 securities are valued using the market approach and utilize single market quotations from broker dealers which may have included, but were not limited to, observable transactions for identical or similar
assets in the market and the distressed nature of the security. The appropriateness of fair values for these securities is monitored on an ongoing basis which may include results of back testing, manual price reviews
and other control procedures. Significant increases (decreases) to any of these inputs would have resulted in a significantly higher (lower) fair value measurement.
Financial assets were transferred
from Level 2 to Level 3 due to utilizing a single market quotation from a broker dealer. As a result, management concluded that the market input(s) were generally unobservable.
Financial assets were transferred
from Level 3 to Level 2 as observable market inputs were utilized and management determined that there was sufficient, reliable and observable market data to value these assets as of period end.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 34 | Columbia Variable Portfolio – Balanced Fund | Annual Report 2021 |
Statement of Assets and Liabilities
December 31, 2021
December 31, 2021
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $1,143,943,139) | $1,435,887,047 |
| Affiliated issuers (cost $89,976,027) | 89,970,020 |
| Cash | 3,901 |
| Receivable for: | |
| Capital shares sold | 348,883 |
| Dividends | 628,305 |
| Interest | 1,568,032 |
| Foreign tax reclaims | 36,689 |
| Variation margin for futures contracts | 111,250 |
| Prepaid expenses | 15,095 |
| Total assets | 1,528,569,222 |
| Liabilities | |
| Payable for: | |
| Investments purchased | 56,331 |
| Investments purchased on a delayed delivery basis | 74,970,615 |
| Capital shares purchased | 1,592,018 |
| Management services fees | 26,777 |
| Distribution and/or service fees | 5,056 |
| Service fees | 74,247 |
| Compensation of board members | 130,972 |
| Compensation of chief compliance officer | 262 |
| Other expenses | 47,554 |
| Total liabilities | 76,903,832 |
| Net assets applicable to outstanding capital stock | $1,451,665,390 |
| Represented by | |
| Trust capital | $1,451,665,390 |
| Total - representing net assets applicable to outstanding capital stock | $1,451,665,390 |
| Class 1 | |
| Net assets | $11,736,434 |
| Shares outstanding | 278,313 |
| Net asset value per share | $42.17 |
| Class 2 | |
| Net assets | $33,190,774 |
| Shares outstanding | 801,850 |
| Net asset value per share | $41.39 |
| Class 3 | |
| Net assets | $1,406,738,182 |
| Shares outstanding | 33,642,077 |
| Net asset value per share | $41.81 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Balanced Fund | Annual Report 2021 | 35 |
Statement of Operations
Year Ended December 31, 2021
Year Ended December 31, 2021
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $11,587,586 |
| Dividends — affiliated issuers | 57,466 |
| Interest | 10,100,740 |
| Foreign taxes withheld | (69,802) |
| Total income | 21,675,990 |
| Expenses: | |
| Management services fees | 9,342,836 |
| Distribution and/or service fees | |
| Class 2 | 23,886 |
| Class 3 | 1,711,112 |
| Service fees | 834,973 |
| Compensation of board members | 54,350 |
| Custodian fees | 47,474 |
| Printing and postage fees | 45,333 |
| Audit fees | 39,500 |
| Legal fees | 22,573 |
| Interest on collateral | 565 |
| Compensation of chief compliance officer | 256 |
| Other | 42,252 |
| Total expenses | 12,165,110 |
| Net investment income | 9,510,880 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 175,714,848 |
| Investments — affiliated issuers | (3,982) |
| Foreign currency translations | 841 |
| Futures contracts | (3,442,544) |
| Net realized gain | 172,269,163 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | 6,482,250 |
| Investments — affiliated issuers | (4,970) |
| Foreign currency translations | (342) |
| Futures contracts | 198,160 |
| Net change in unrealized appreciation (depreciation) | 6,675,098 |
| Net realized and unrealized gain | 178,944,261 |
| Net increase in net assets resulting from operations | $188,455,141 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 36 | Columbia Variable Portfolio – Balanced Fund | Annual Report 2021 |
Statement of Changes in Net Assets
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | |
| Operations | ||
| Net investment income | $9,510,880 | $12,917,730 |
| Net realized gain | 172,269,163 | 85,675,381 |
| Net change in unrealized appreciation (depreciation) | 6,675,098 | 92,757,924 |
| Net increase in net assets resulting from operations | 188,455,141 | 191,351,035 |
| Decrease in net assets from capital stock activity | (27,044,181) | (39,462,226) |
| Total increase in net assets | 161,410,960 | 151,888,809 |
| Net assets at beginning of year | 1,290,254,430 | 1,138,365,621 |
| Net assets at end of year | $1,451,665,390 | $1,290,254,430 |
| Year Ended | Year Ended | |||
| December 31, 2021 | December 31, 2020 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class 1 | ||||
| Subscriptions | 190,375 | 7,621,888 | 76,403 | 2,557,037 |
| Redemptions | (9,891) | (401,576) | (2,359) | (73,720) |
| Net increase | 180,484 | 7,220,312 | 74,044 | 2,483,317 |
| Class 2 | ||||
| Subscriptions | 822,232 | 33,120,788 | — | — |
| Redemptions | (20,503) | (833,012) | — | — |
| Net increase | 801,729 | 32,287,776 | — | — |
| Class 3 | ||||
| Subscriptions | 587,750 | 22,773,586 | 724,475 | 24,019,990 |
| Redemptions | (2,251,153) | (89,325,855) | (2,127,137) | (65,965,533) |
| Net decrease | (1,663,403) | (66,552,269) | (1,402,662) | (41,945,543) |
| Total net decrease | (681,190) | (27,044,181) | (1,328,618) | (39,462,226) |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Balanced Fund | Annual Report 2021 | 37 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect any fees and expenses imposed under your
Contract and/or Qualified Plan, as applicable; such fees and expenses would reduce the total returns for all periods shown. Total return and portfolio turnover are not annualized for periods of less than one year. The
portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain derivatives, if any. If such transactions were included, the Fund’s portfolio
turnover rate may be higher.
| Net asset value, beginning of period | Net investment income | Net realized and unrealized gain (loss) | Total from investment operations | |
| Class 1 | ||||
| Year Ended 12/31/2021 | $36.71 | 0.33 | 5.13 | 5.46 |
| Year Ended 12/31/2020 | $31.17 | 0.40 | 5.14 | 5.54 |
| Year Ended 12/31/2019 | $25.35 | 0.48 | 5.34 | 5.82 |
| Year Ended 12/31/2018 | $26.90 | 0.42 | (1.97) | (1.55) |
| Year Ended 12/31/2017 | $23.46 | 0.34 | 3.10 | 3.44 |
| Class 2 | ||||
| Year Ended 12/31/2021 | $36.11 | 0.24 | 5.04 | 5.28 |
| Year Ended 12/31/2020 | $30.74 | 0.33 | 5.04 | 5.37 |
| Year Ended 12/31/2019 | $25.06 | 0.41 | 5.27 | 5.68 |
| Year Ended 12/31/2018 | $26.66 | 0.34 | (1.94) | (1.60) |
| Year Ended 12/31/2017 | $23.30 | 0.28 | 3.08 | 3.36 |
| Class 3 | ||||
| Year Ended 12/31/2021 | $36.44 | 0.27 | 5.10 | 5.37 |
| Year Ended 12/31/2020 | $30.99 | 0.36 | 5.09 | 5.45 |
| Year Ended 12/31/2019 | $25.24 | 0.45 | 5.30 | 5.75 |
| Year Ended 12/31/2018 | $26.82 | 0.38 | (1.96) | (1.58) |
| Year Ended 12/31/2017 | $23.42 | 0.30 | 3.10 | 3.40 |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Ratios include interest on collateral expense which is less than 0.01%. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 38 | Columbia Variable Portfolio – Balanced Fund | Annual Report 2021 |
Financial Highlights (continued)
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets(a) | Total net expense ratio to average net assets(a),(b) | Net investment income ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Class 1 | |||||||
| Year Ended 12/31/2021 | $42.17 | 14.88% | 0.75%(c) | 0.75%(c) | 0.82% | 118% | $11,736 |
| Year Ended 12/31/2020 | $36.71 | 17.77% | 0.78% | 0.77% | 1.21% | 145% | $3,591 |
| Year Ended 12/31/2019 | $31.17 | 22.96% | 0.79% | 0.76% | 1.63% | 126% | $741 |
| Year Ended 12/31/2018 | $25.35 | (5.76%) | 0.78% | 0.75% | 1.53% | 81% | $3 |
| Year Ended 12/31/2017 | $26.90 | 14.66% | 0.77% | 0.74% | 1.36% | 63% | $3 |
| Class 2 | |||||||
| Year Ended 12/31/2021 | $41.39 | 14.62% | 1.00%(c) | 1.00%(c) | 0.60% | 118% | $33,191 |
| Year Ended 12/31/2020 | $36.11 | 17.47% | 1.00% | 1.00% | 1.04% | 145% | $4 |
| Year Ended 12/31/2019 | $30.74 | 22.66% | 1.03% | 1.01% | 1.43% | 126% | $4 |
| Year Ended 12/31/2018 | $25.06 | (6.00%) | 1.03% | 1.00% | 1.27% | 81% | $3 |
| Year Ended 12/31/2017 | $26.66 | 14.42% | 1.02% | 0.99% | 1.11% | 63% | $3 |
| Class 3 | |||||||
| Year Ended 12/31/2021 | $41.81 | 14.74% | 0.88%(c) | 0.88%(c) | 0.69% | 118% | $1,406,738 |
| Year Ended 12/31/2020 | $36.44 | 17.58% | 0.90% | 0.89% | 1.13% | 145% | $1,286,659 |
| Year Ended 12/31/2019 | $30.99 | 22.78% | 0.91% | 0.88% | 1.57% | 126% | $1,137,620 |
| Year Ended 12/31/2018 | $25.24 | (5.89%) | 0.91% | 0.87% | 1.40% | 81% | $1,004,017 |
| Year Ended 12/31/2017 | $26.82 | 14.52% | 0.91% | 0.89% | 1.20% | 63% | $1,165,032 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Balanced Fund | Annual Report 2021 | 39 |
Notes to Financial Statements
December 31, 2021
December 31, 2021
Note 1. Organization
Columbia Variable Portfolio
– Balanced Fund (the Fund), a series of Columbia Funds Variable Series Trust II (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as
an open-end management investment company organized as a Massachusetts business trust.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers Class 1, Class 2 and Class 3 shares to separate accounts funding variable annuity contracts and variable life insurance policies (collectively, Contracts) issued
by affiliated and unaffiliated life insurance companies (Participating Insurance Companies) as well as qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors (Qualified
Investors) authorized by Columbia Management Investment Distributors, Inc. (the Distributor). You may not buy (nor will you own) shares of the Fund directly. You may invest by participating in a Qualified Plan or by
buying a Contract and making allocations to the Fund. Although all share classes generally have identical voting, dividend and liquidation rights, each share class votes separately when required by the Trust’s
organizational documents or by law. Different share classes pay different net investment income distribution amounts to the extent the expenses of such share classes differ, and distributions in liquidation will be
proportional to the net asset value of each share class. Each share class has its own cost structure and other features.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Equity securities listed on an
exchange are valued at the closing price or last trade price on their primary exchange at the close of business of the New York Stock Exchange. Securities with a closing price not readily available or not listed on
any exchange are valued at the mean between the closing bid and ask prices. Listed preferred stocks convertible into common stocks are valued using an evaluated price from a pricing service.
Debt securities generally are
valued by pricing services approved by the Board of Trustees based upon market transactions for normal, institutional-size trading units of similar securities. The services may use various pricing techniques that take
into account, as applicable, factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data, as well as approved independent broker-dealer quotes. Debt securities for
which quotations are not readily available or not believed to be reflective of market value may also be valued based upon a bid quote from an approved independent broker-dealer. Debt securities maturing in 60 days or
less are valued primarily at amortized market value, unless this method results in a valuation that management believes does not approximate fair value.
Asset- and mortgage-backed
securities are generally valued by pricing services, which utilize pricing models that incorporate the securities’ cash flow and loan performance data. These models also take into account available market data,
including trades, market quotations, and benchmark yield curves for identical or similar securities. Factors used to identify similar securities may include, but are not limited to, issuer, collateral type, vintage,
prepayment speeds, collateral performance, credit ratings, credit enhancement and expected life. Asset-backed securities for which quotations are readily available may also be valued based upon an over-the-counter or
exchange bid quote from an approved independent broker-dealer. Debt securities maturing in 60 days or less are valued primarily at amortized market value, unless this method results in a valuation that management
believes does not approximate fair value.
| 40 | Columbia Variable Portfolio – Balanced Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Senior loan securities for which
reliable market quotations are readily available are generally valued by pricing services at the average of the bids received.
Foreign equity securities are
valued based on the closing price or last trade price on their primary exchange at the close of business of the New York Stock Exchange. If any foreign equity security closing prices are not readily available,
the securities are valued at the mean of the latest quoted bid and ask prices on such exchanges or markets. Foreign currency exchange rates are determined at the scheduled closing time of the New York Stock Exchange.
Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange; therefore, the closing prices for securities in such markets or on such exchanges may not fully reflect
events that occur after such close but before the close of the New York Stock Exchange. In those situations, foreign securities will be fair valued pursuant to a policy adopted by the Board of Trustees. Under the
policy, the Fund may utilize a third-party pricing service to determine these fair values. The third-party pricing service takes into account multiple factors, including, but not limited to, movements in the U.S.
securities markets, certain depositary receipts, futures contracts and foreign exchange rates that have occurred subsequent to the close of the foreign exchange or market, to determine a good faith estimate that
reasonably reflects the current market conditions as of the close of the New York Stock Exchange. The fair value of a security is likely to be different from the quoted or published price, if available.
Investments in open-end investment
companies (other than exchange-traded funds (ETFs)), are valued at the latest net asset value reported by those companies as of the valuation time.
Futures and options on futures
contracts are valued based upon the settlement price at the close of regular trading on their principal exchanges or, in the absence of a settlement price, at the mean of the latest quoted bid and ask prices.
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Foreign currency transactions and
translations
The values of all assets and
liabilities denominated in foreign currencies are generally translated into U.S. dollars at exchange rates determined at the close of regular trading on the New York Stock Exchange. Net realized and unrealized gains
(losses) on foreign currency transactions and translations include gains (losses) arising from the fluctuation in exchange rates between trade and settlement dates on securities transactions, gains (losses) arising
from the disposition of foreign currency and currency gains (losses) between the accrual and payment dates on dividends, interest income and foreign withholding taxes.
For financial statement purposes,
the Fund does not distinguish that portion of gains (losses) on investments which is due to changes in foreign exchange rates from that which is due to changes in market prices of the investments. Such fluctuations
are included with the net realized and unrealized gains (losses) on investments in the Statement of Operations.
Derivative instruments
The Fund invests in certain
derivative instruments, as detailed below, in seeking to meet its investment objectives. Derivatives are instruments whose values depend on, or are derived from, in whole or in part, the value of one or more
securities, currencies, commodities, indices, or other assets or instruments. Derivatives may be used to increase investment flexibility (including to maintain cash reserves while maintaining desired exposure to
certain assets), for risk management (hedging) purposes, to facilitate trading, to reduce transaction costs and to pursue higher investment returns. The Fund may
| Columbia Variable Portfolio – Balanced Fund | Annual Report 2021 | 41 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
also use derivative instruments to mitigate
certain investment risks, such as foreign currency exchange rate risk, interest rate risk and credit risk. Derivatives may involve various risks, including the potential inability of the counterparty to fulfill its
obligations under the terms of the contract, the potential for an illiquid secondary market (making it difficult for the Fund to sell or terminate, including at favorable prices) and the potential for market movements
which may expose the Fund to gains or losses in excess of the amount shown in the Statement of Assets and Liabilities. The notional amounts of derivative instruments, if applicable, are not recorded in the financial
statements.
A derivative instrument may suffer
a marked-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform its
obligations under the contract. The Fund’s risk of loss from counterparty credit risk on over-the-counter derivatives is generally limited to the aggregate unrealized gain netted against any collateral held by
the Fund and the amount of any variation margin held by the counterparty, plus any replacement costs or related amounts. With exchange-traded or centrally cleared derivatives, there is reduced counterparty credit risk
to the Fund since the clearinghouse or central counterparty (CCP) provides some protection in the case of clearing member default. The clearinghouse or CCP stands between the buyer and the seller of the contract;
therefore, additional counterparty credit risk is failure of the clearinghouse or CCP. However, credit risk still exists in exchange-traded or centrally cleared derivatives with respect to initial and variation margin
that is held in a broker’s customer account. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy
and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients and such shortfall is remedied by the CCP or otherwise, U.S. bankruptcy laws will typically
allocate that shortfall on a pro-rata basis across all the clearing broker’s customers (including the Fund), potentially resulting in losses to the Fund.
In order to better define its
contractual rights and to secure rights that will help the Fund mitigate its counterparty risk, the Fund may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (ISDA Master Agreement)
or similar agreement with its derivatives counterparties. An ISDA Master Agreement is an agreement between the Fund and a counterparty that governs over-the-counter derivatives and foreign exchange forward contracts
and contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset
with the counterparty certain derivative instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically
permit a single net payment in the event of default (close-out netting), including the bankruptcy or insolvency of the counterparty. Note, however, that bankruptcy or insolvency laws of a particular jurisdiction may
impose restrictions on or prohibitions against the right of offset or netting in bankruptcy, insolvency or other events.
Collateral (margin) requirements
differ by type of derivative. Margin requirements are established by the clearinghouse or CCP for exchange-traded and centrally cleared derivatives. Brokers can ask for margin in excess of the minimum in certain
circumstances. Collateral terms for most over-the-counter derivatives are subject to regulatory requirements to exchange variation margin with trading counterparties and may have contract specific margin terms as
well. For over-the-counter derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the marked-to-market amount for each transaction under such agreement and
comparing that amount to the value of any variation margin currently pledged by the Fund and/or the counterparty. Generally, the amount of collateral due from or to a party has to exceed a minimum transfer amount
threshold (e.g., $250,000) before a transfer has to be made. To the extent amounts due to the Fund from its counterparties are not fully collateralized, contractually or otherwise, the Fund bears the risk of loss from
counterparty nonperformance. The Fund may also pay interest expense on cash collateral received from the broker. Any interest expense paid by the Fund is shown on the Statement of Operations. The Fund attempts to
mitigate counterparty risk by only entering into agreements with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those
counterparties.
Certain ISDA Master Agreements
allow counterparties of over-the-counter derivatives transactions to terminate derivatives contracts prior to maturity in the event the Fund’s net asset value declines by a stated percentage over a specified
time period or if the Fund fails to meet certain terms of the ISDA Master Agreement, which would cause the Fund to accelerate payment of any net liability owed to the counterparty. The Fund also has termination
rights if the counterparty fails to meet certain terms of the ISDA Master Agreement. In determining whether to exercise such termination rights, the Fund would consider, in addition to counterparty credit risk,
whether termination would result in a net liability owed from the counterparty.
| 42 | Columbia Variable Portfolio – Balanced Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
For financial reporting purposes,
the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statement of Assets and Liabilities.
Futures contracts
Futures contracts are
exchange-traded and represent commitments for the future purchase or sale of an asset at a specified price on a specified date. The Fund bought and sold futures contracts to manage the duration and yield curve
exposure of the Fund versus the benchmark and to manage exposure to movements in interest rates. These instruments may be used for other purposes in future periods. Upon entering into futures contracts, the Fund bears
risks that it may not achieve the anticipated benefits of the futures contracts and may realize a loss. Additional risks include counterparty credit risk, the possibility of an illiquid market, and that a change in
the value of the contract or option may not correlate with changes in the value of the underlying asset.
Upon entering into a futures
contract, the Fund deposits cash or securities with the broker, known as a futures commission merchant (FCM), in an amount sufficient to meet the initial margin requirement. The initial margin deposit must be
maintained at an established level over the life of the contract. Cash deposited as initial margin is recorded in the Statement of Assets and Liabilities as margin deposits. Securities deposited as initial margin are
designated in the Portfolio of Investments. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily change in the contract value and are
recorded as variation margin receivable or payable and are offset in unrealized gains or losses. The Fund generally expects to earn interest income on its margin deposits. The Fund recognizes a realized gain or loss
when the contract is closed or expires. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities.
Effects of derivative transactions in
the financial statements
The following tables are intended
to provide additional information about the effect of derivatives on the financial statements of the Fund, including: the fair value of derivatives by risk category and the location of those fair values in the
Statement of Assets and Liabilities; and the impact of derivative transactions over the period in the Statement of Operations, including realized and unrealized gains (losses). The derivative instrument schedules
following the Portfolio of Investments present additional information regarding derivative instruments outstanding at the end of the period, if any.
The following table is a summary of
the fair value of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) at December 31, 2021:
| * | Includes cumulative appreciation (depreciation) as reported in the tables following the Portfolio of Investments. Only the current day’s variation margin is reported in receivables or payables in the Statement of Assets and Liabilities. |
| Columbia Variable Portfolio – Balanced Fund | Annual Report 2021 | 43 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
The following table indicates the
effect of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) in the Statement of Operations for the year ended December 31, 2021:
| Amount of realized gain (loss) on derivatives recognized in income | |
| Risk exposure category | Futures contracts ($) |
| Interest rate risk | (3,442,544) |
| Change in unrealized appreciation (depreciation) on derivatives recognized in income | |
| Risk exposure category | Futures contracts ($) |
| Interest rate risk | 198,160 |
The following table is a summary
of the average outstanding volume by derivative instrument for the year ended December 31, 2021:
| Derivative instrument | Average notional amounts ($)* |
| Futures contracts — long | 136,428,618 |
| * | Based on the ending quarterly outstanding amounts for the year ended December 31, 2021. |
Investments in senior loans
The Fund may invest in senior loan
assignments. When the Fund purchases an assignment of a senior loan, the Fund typically has direct rights against the borrower; provided, however, that the Fund’s rights may be more limited than the lender from
which it acquired the assignment and the Fund may be able to enforce its rights only through an administrative agent. Although certain senior loan assignments are secured by collateral, the Fund could experience
delays or limitations in realizing such collateral or have its interest subordinated to other indebtedness of the obligor. In the event that the administrator or collateral agent of a loan becomes insolvent or enters
into receivership or bankruptcy, the Fund may incur costs and delays in realizing payment or may suffer a loss of principal and/or interest. The risk of loss is greater for unsecured or subordinated loans. In
addition, senior loan assignments are vulnerable to market, economic or other conditions or events that may reduce the demand for senior loan assignments and certain senior loan assignments which were liquid when
purchased, may become illiquid.
The Fund may enter into senior loan
assignments where all or a portion of the loan may be unfunded. The Fund is obligated to fund these commitments at the borrower’s discretion. These commitments, if any, are generally traded and priced in the
same manner as other senior loan securities and are disclosed as unfunded senior loan commitments in the Fund’s Portfolio of Investments with a corresponding payable for investments purchased. The Fund
designates cash or liquid securities to cover these commitments.
Asset- and mortgage-backed
securities
The Fund may invest in asset-backed
and mortgage-backed securities. The maturity dates shown represent the original maturity of the underlying obligation. Actual maturity may vary based upon prepayment activity on these obligations. All, or a portion,
of the obligation may be prepaid at any time because the underlying asset may be prepaid. As a result, decreasing market interest rates could result in an increased level of prepayment. An increased prepayment rate
will have the effect of shortening the maturity of the security. Unless otherwise noted, the coupon rates presented are fixed rates.
Delayed delivery securities
The Fund may trade securities on
other than normal settlement terms, including securities purchased or sold on a “when-issued” or "forward commitment" basis. This may increase risk to the Fund since the other party to the transaction may
fail to deliver, which could cause the Fund to subsequently invest at less advantageous prices. The Fund designates cash or liquid securities in an amount equal to the delayed delivery commitment.
| 44 | Columbia Variable Portfolio – Balanced Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
To be announced securities
The Fund may trade securities on a
To Be Announced (TBA) basis. As with other delayed-delivery transactions, a seller agrees to issue a TBA security at a future date. However, the seller does not specify the particular securities to be delivered.
Instead, the Fund agrees to accept any security that meets specified terms.
In some cases, Master Securities
Forward Transaction Agreements (MSFTAs) may be used to govern transactions of certain forward-settling agency mortgage-backed securities, such as delayed-delivery and TBAs, between the Fund and counterparty. The MSFTA
maintains provisions for, among other things, initiation and confirmation, payment and transfer, events of default, termination, and maintenance of collateral relating to such transactions.
Mortgage dollar roll transactions
The Fund may enter into mortgage
“dollar rolls” in which the Fund sells securities for delivery in the current month and simultaneously contracts with the same counterparty to repurchase similar but not identical securities (same type,
coupon and maturity) on a specified future date. During the roll period, the Fund loses the right to receive principal and interest paid on the securities sold. However, the Fund may benefit because it receives
negotiated amounts in the form of reductions of the purchase price for the future purchase plus the interest earned on the cash proceeds of the securities sold until the settlement date of the forward purchase. The
Fund records the incremental difference between the forward purchase and sale of each forward roll as a realized gain or loss. Unless any realized gains exceed the income, capital appreciation, and gain or loss due to
mortgage prepayments that would have been realized on the securities sold as part of the mortgage dollar roll, the use of this technique may diminish the investment performance of the Fund compared to what the
performance would have been without the use of mortgage dollar rolls. All cash proceeds will be invested in instruments that are permissible investments for the Fund. The Fund identifies cash or liquid securities in
an amount equal to the forward purchase price.
For financial reporting and tax
purposes, the Fund treats “to be announced” mortgage dollar rolls as two separate transactions, one involving the purchase of a security and a separate transaction involving a sale. These transactions may
increase the Fund’s portfolio turnover rate. The Fund does not currently enter into mortgage dollar rolls that are accounted for as financing transactions.
Mortgage dollar rolls involve the
risk that the market value of the securities the Fund is obligated to repurchase may decline below the repurchase price, or that the counterparty may default on its obligations.
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
The trade date for senior loans
purchased in the primary market is the date on which the loan is allocated. The trade date for senior loans purchased in the secondary market is the date on which the transaction is entered into.
Income recognition
Interest income is recorded on an
accrual basis. Market premiums and discounts, including original issue discounts, are amortized and accreted, respectively, over the expected life of the security on all debt securities, unless otherwise noted. The
Fund classifies gains and losses realized on prepayments received on mortgage-backed securities as adjustments to interest income. For convertible securities, premiums attributable to the conversion feature are
not amortized.
The Fund may place a debt security
on non-accrual status and reduce related interest income when it becomes probable that the interest will not be collected and the amount of uncollectible interest can be reasonably estimated. A defaulted debt security
is removed from non-accrual status when the issuer resumes interest payments or when collectability of interest is reasonably assured.
Corporate actions and dividend
income are generally recorded net of any non-reclaimable tax withholdings, on the ex-dividend date or upon receipt of an ex-dividend notification in the case of certain foreign securities.
| Columbia Variable Portfolio – Balanced Fund | Annual Report 2021 | 45 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
The Fund may receive distributions
from holdings in equity securities, business development companies (BDCs), exchange-traded funds (ETFs), limited partnerships (LPs), other regulated investment companies (RICs), and real estate investment trusts
(REITs), which report information as to the tax character of their distributions annually. These distributions are allocated to dividend income, capital gain and return of capital based on actual information reported.
Return of capital is recorded as a reduction of the cost basis of securities held. If the Fund no longer owns the applicable securities, return of capital is recorded as a realized gain. With respect to REITs, to the
extent actual information has not yet been reported, estimates for return of capital are made by Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise
Financial, Inc. (Ameriprise Financial). The Investment Manager’s estimates are subsequently adjusted when the actual character of the distributions is disclosed by the REITs, which could result in a
proportionate change in return of capital to shareholders.
Awards from class action litigation
are recorded as a reduction of cost basis if the Fund still owns the applicable securities on the payment date. If the Fund no longer owns the applicable securities on the payment date, the proceeds are recorded as
realized gains.
The value of additional securities
received as an income payment through a payment in kind, if any, is recorded as interest income and increases the cost basis of such securities.
The Fund may receive other income
from senior loans, including amendment fees, consent fees and commitment fees. These fees are recorded as income when received by the Fund. These amounts are included in Interest Income in the Statement of
Operations.
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
Federal income tax status
The Fund is treated as a
partnership for federal income tax purposes, and the Fund does not expect to make regular distributions. The Fund will not be subject to federal income tax, and therefore, there is no provision for federal income
taxes. The partners of the Fund are subject to tax on their distributive share of the Fund’s income and loss. The components of the Fund’s net assets are reported at the partner-level for federal income
tax purposes, and therefore, are not presented in the Statement of Assets and Liabilities.
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Foreign taxes
The Fund may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries, as applicable, based upon its current interpretation of tax rules
and regulations that exist in the markets in which it invests.
Realized gains in certain countries
may be subject to foreign taxes at the Fund level, based on statutory rates. The Fund accrues for such foreign taxes on realized and unrealized gains at the appropriate rate for each jurisdiction, as applicable. The
amount, if any, is disclosed as a liability on the Statement of Assets and Liabilities.
| 46 | Columbia Variable Portfolio – Balanced Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Under the Management Agreement, the
Investment Manager provides the Fund with investment research and advice, as well as administrative and accounting services. The management services fee is an annual fee that is equal to a percentage of the
Fund’s daily net assets that declines from 0.72% to 0.52% as the Fund’s net assets increase. The effective management services fee rate for the year ended December 31, 2021 was 0.67% of the Fund’s
average daily net assets.
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. Under a Deferred Compensation Plan (the
Deferred Plan), these members of the Board of Trustees may elect to defer payment of up to 100% of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of
certain funds managed by the Investment Manager. The Fund’s liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Deferred Plan. All
amounts payable under the Deferred Plan constitute a general unsecured obligation of the Fund. The expense for the Deferred Plan, which includes Trustees’ fees deferred during the current period as well as any
gains or losses on the Trustees’ deferred compensation balances as a result of market fluctuations, is included in "Compensation of board members" on the Statement of Operations.
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
Service fees
The Fund has entered into a
Shareholder Services Agreement with Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial. Under this
agreement, the Fund pays a service fee equal to the payments made by the Transfer Agent to Participating Insurance Companies and other financial intermediaries (together, Participating Organizations) for services each
such Participating Organization provides to its clients, customers and participants that are invested directly or indirectly in the Fund, up to a cap approved by the Board of Trustees from time to time. The effective
service fee rate for the year ended December 31, 2021, was 0.06% of the Fund’s average daily net assets.
The Transfer Agent may retain as
compensation for its services revenues from fees for wire, telephone and redemption orders, account transcripts due the Transfer Agent from Fund shareholders and interest (net of bank charges) earned with respect to
balances in accounts the Transfer Agent maintains in connection with its services to the Fund.
| Columbia Variable Portfolio – Balanced Fund | Annual Report 2021 | 47 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Distribution and/or service fees
The Fund has an agreement with the
Distributor, an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution services. Under a Plan and Agreement of Distribution, the Fund pays a fee at an annual rate
of up to 0.25% of the Fund’s average daily net assets attributable to Class 2 shares and an annual rate of up to 0.125% of the Fund’s average daily net assets attributable to Class 3 shares. The Fund pays
no distribution and service fees for Class 1 shares.
Expenses waived/reimbursed by the
Investment Manager and its affiliates
The Investment Manager and certain
of its affiliates have contractually agreed to waive fees and/or reimburse expenses (excluding certain fees and expenses described below) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, so that the Fund’s net operating expenses, after giving effect to fees waived/expenses reimbursed and any balance credits and/or overdraft charges from the Fund’s
custodian, do not exceed the following annual rate(s) as a percentage of the classes’ average daily net assets:
| May 1, 2021 through April 30, 2022 | Prior to May 1, 2021 | |
| Class 1 | 0.76% | 0.77% |
| Class 2 | 1.01 | 1.02 |
| Class 3 | 0.885 | 0.895 |
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), expenses associated with investments in affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange-traded funds), transaction costs and
brokerage commissions, costs related to any securities lending program, dividend expenses associated with securities sold short, inverse floater program fees and expenses, transaction charges and interest on borrowed
money, interest, costs associated with certain shareholder meetings, infrequent and/or unusual expenses and any other expenses the exclusion of which is specifically approved by the Board of Trustees. This
agreement may be modified or amended only with approval from the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements
described above are not recoverable by the Investment Manager or its affiliates in future periods.
Note 4. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $1,619,483,511 and $1,666,388,722, respectively, for the year ended December 31, 2021, of which $955,839,331
and $980,351,550, respectively, were U.S. government securities. The amount of purchase and sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 5. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes
referred to as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
| 48 | Columbia Variable Portfolio – Balanced Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Note 6. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund did not borrow or lend
money under the Interfund Program during the year ended December 31, 2021.
Note 7. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to an October 28, 2021 amendment and restatement, the credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment
Manager or an affiliated investment manager, severally and not jointly, permits collective borrowings up to $950 million. Interest is currently charged to each participating fund based on its borrowings at a rate
equal to the higher of (i) the federal funds effective rate, (ii) the secured overnight financing rate plus 0.11448% and (iii) the overnight bank funding rate, plus in each case, 1.00%. Each borrowing under the credit
facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The
commitment fee is included in other expenses in the Statement of Operations. This agreement expires annually in October unless extended or renewed. Prior to the October 28, 2021 amendment and restatement, the Fund had
access to a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. which permitted collective borrowings up to $950 million. Interest was
charged to each participating fund based on its borrowings at a rate equal to the higher of (i) the federal funds effective rate, (ii) the one-month London Interbank Offered Rate (LIBOR) rate and (iii) the overnight
bank funding rate, plus in each case, 1.25%.
The Fund had no borrowings during
the year ended December 31, 2021.
Note 8. Significant
risks
Credit risk
Credit risk is the risk that the
value of debt instruments in the Fund’s portfolio may decline because the issuer defaults or otherwise becomes unable or unwilling, or is perceived to be unable or unwilling, to honor its financial obligations,
such as making payments to the Fund when due. Credit rating agencies assign credit ratings to certain debt instruments to indicate their credit risk. Lower-rated or unrated debt instruments held by the Fund may
present increased credit risk as compared to higher-rated debt instruments.
Information technology sector risk
The Fund is more susceptible to the
particular risks that may affect companies in the information technology sector than if it were invested in a wider variety of companies in unrelated sectors. Companies in the information technology sector are subject
to certain risks, including the risk that new services, equipment or technologies will not be accepted by consumers and businesses or will become rapidly obsolete. Performance of such companies may be affected by
factors including obtaining and protecting patents (or the failure to do so) and significant competitive pressures, including aggressive pricing of their products or services, new market entrants, competition for
market share and short product cycles due to an accelerated rate of technological developments. Such competitive pressures may lead to limited earnings and/or falling profit margins. As a result, the value of their
securities may fall or fail to rise. In addition, many information technology sector companies have limited operating histories and prices of these companies’ securities historically have been more volatile than
other
| Columbia Variable Portfolio – Balanced Fund | Annual Report 2021 | 49 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
securities, especially over the short term. Some
companies in the information technology sector are facing increased government and regulatory scrutiny and may be subject to adverse government or regulatory action, which could negatively impact the value of their
securities.
Interest rate risk
Interest rate risk is the risk of
losses attributable to changes in interest rates. In general, if prevailing interest rates rise, the values of debt instruments tend to fall, and if interest rates fall, the values of debt instruments tend to rise.
Actions by governments and central banking authorities can result in increases or decreases in interest rates. Higher periods of inflation could lead such authorities to raise interest rates. Increasing interest rates
may negatively affect the value of debt securities held by the Fund, resulting in a negative impact on the Fund’s performance and net asset value per share. In general, the longer the maturity or duration of a
debt security, the greater its sensitivity to changes in interest rates. The Fund is subject to the risk that the income generated by its investments may not keep pace with inflation.
Liquidity risk
Liquidity risk is the risk
associated with a lack of marketability of investments which may make it difficult to sell the investment at a desirable time or price. Changing regulatory, market or other conditions or environments (for example, the
interest rate or credit environments) may adversely affect the liquidity of the Fund’s investments. The Fund may have to accept a lower selling price for the holding, sell other investments, or forego another,
more appealing investment opportunity. Generally, the less liquid the market at the time the Fund sells a portfolio investment, the greater the risk of loss or decline of value to the Fund. A less liquid market can
lead to an increase in Fund redemptions, which may negatively impact Fund performance and net asset value per share, including, for example, if the Fund is forced to sell securities in a down market.
Market risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
The coronavirus disease 2019 and
its variants (COVID-19) pandemic has resulted in, and may continue to result in, significant global economic and societal disruption and market volatility due to disruptions in market access, resource availability,
facilities operations, imposition of tariffs, export controls and supply chain disruption, among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement
and loss in human and other resources. The uncertainty surrounding the magnitude, duration, reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental
authorities or other third parties, present unknowns that are yet to unfold. The impacts, as well as the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and
pandemics that may arise in the future – could negatively affect global economies and markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in
emerging market countries may be greater due to generally less established healthcare systems, governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing
political, social and economic risks in certain countries or globally. The disruptions caused by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively
impact the Fund’s ability to achieve its investment objectives. Any such event(s) could have a significant adverse impact on the value and risk profile of the Fund.
| 50 | Columbia Variable Portfolio – Balanced Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Mortgage- and other asset-backed
securities risk
The value of any mortgage-backed
and other asset-backed securities including collateralized debt obligations, if any, held by the Fund may be affected by, among other things, changes or perceived changes in: interest rates; factors concerning the
interests in and structure of the issuer or the originator of the mortgages or other assets; the creditworthiness of the entities that provide any supporting letters of credit, surety bonds or other credit enhancements;
or the market’s assessment of the quality of underlying assets. Payment of principal and interest on some mortgage-backed securities (but not the market value of the securities themselves) may be guaranteed by
the full faith and credit of a particular U.S. Government agency, authority, enterprise or instrumentality, and some, but not all, are also insured or guaranteed by the U.S. Government. Mortgage-backed securities
issued by non-governmental issuers (such as commercial banks, savings and loan institutions, private mortgage insurance companies, mortgage bankers and other secondary market issuers) may entail greater risk than
obligations guaranteed by the U.S. Government. Mortgage- and other asset-backed securities are subject to liquidity risk and prepayment risk. A decline or flattening of housing values may cause delinquencies in
mortgages (especially sub-prime or non-prime mortgages) underlying mortgage-backed securities and thereby adversely affect the ability of the mortgage-backed securities issuer to make principal and/or interest
payments to mortgage-backed securities holders, including the Fund. Rising or high interest rates tend to extend the duration of mortgage- and other asset-backed securities, making their prices more volatile and more
sensitive to changes in interest rates.
Shareholder concentration risk
At December 31, 2021, affiliated
shareholders of record owned 99.6% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of
less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Note 9. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
Note 10. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in
connection with the conduct of their business activities. Ameriprise Financial believes that the Fund is not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject
of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with
the Fund. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (SEC) on legal and regulatory matters that relate to
Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that
these matters, or the adverse publicity associated with them, will not result in increased Fund redemptions, reduced sale of Fund shares or other adverse consequences to the Fund. Further, although we believe
proceedings are not likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines,
penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial or one or more of its affiliates that provides services to
the Fund.
| Columbia Variable Portfolio – Balanced Fund | Annual Report 2021 | 51 |
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees of Columbia
Funds Variable Series Trust II and Shareholders of Columbia Variable Portfolio – Balanced Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of Columbia Variable Portfolio – Balanced Fund (one of the funds constituting Columbia Funds Variable Series Trust II, referred to
hereafter as the "Fund") as of December 31, 2021, the related statement of operations for the year ended December 31, 2021, the statement of changes in net assets for each of the two years in the period ended December
31, 2021, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2021 (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, 2021, 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, 2021 and the financial highlights for each of the five years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in the
United States of America.
Basis for Opinion
These financial statements are the
responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these
financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2021 by correspondence with the custodian, transfer agent, brokers and agent banks;
when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Minneapolis, Minnesota
February 22, 2022
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| 52 | Columbia Variable Portfolio – Balanced Fund | Annual Report 2021 |
TRUSTEES AND
OFFICERS
The Board oversees the
Fund’s operations and appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following table provides basic biographical information about the
Fund’s Trustees as of the printing of this report, including their principal occupations during the past five years, although specific titles for individuals may have varied over the period. The year set forth
beneath Length of Service in the table below is the year in which the Trustee was first appointed or elected as Trustee to any Fund currently in the Columbia Funds Complex or a predecessor thereof. Under current Board
policy, each Trustee generally serves until December 31 of the year such Trustee turns seventy-five (75).
Independent trustees
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| George S. Batejan c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1953 | Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 176 | Former Chairman of the Board, NICSA (National Investment Company Services Association) (Executive Committee, Nominating Committee and Governance Committee), 2014-2016; former Director, Intech Investment Management, 2011-2016; former Board Member, Metro Denver Chamber of Commerce, 2015-2016; former Advisory Board Member, University of Colorado Business School, 2015-2018 |
| Kathleen Blatz c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2006 | Attorney, specializing in arbitration and mediation; Chief Justice, Minnesota Supreme Court, 1998-2006; Associate Justice, Minnesota Supreme Court, 1996-1998; Fourth Judicial District Court Judge, Hennepin County, 1994-1996; Attorney in private practice and public service, 1984-1993; State Representative, Minnesota House of Representatives, 1979-1993, which included service on the Tax and Financial Institutions and Insurance Committees; Member and Interim Chair, Minnesota Sports Facilities Authority, January 2017-July 2017; Interim President and Chief Executive Officer, Blue Cross Blue Shield of Minnesota (health care insurance), February-July 2018, April-October 2021 | 176 | Former Trustee, Blue Cross Blue Shield of Minnesota, 2009-2021 (Chair of the Business Development Committee, 2014-2017; Chair of the Governance Committee, 2017-2019); former Member and Chair of the Board, Minnesota Sports Facilities Authority, January 2017-July 2017; former Director, Robina Foundation, 2009-2020 (Chair, 2014-2020); Director, Schulze Family Foundation, since 2021 |
| Pamela G. Carlton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2007 | President, Springboard — Partners in Cross Cultural Leadership (consulting company) since 2003; Managing Director of US Equity Research, JP Morgan Chase, 1999-2003; Director of US Equity Research, Chase Asset Management, 1996-1999; Co-Director Latin America Research, 1993-1996, COO Global Research, 1992-1996, Co-Director of US Research, 1991-1992, Investment Banker, Morgan Stanley, 1982-1991, Morgan Stanley; Attorney, Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 176 | Trustee, New York Presbyterian Hospital Board (Executive Committee and Chair of People Committee) since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee); Director, Apollo Commercial Real Estate Finance, Inc. since 2021; the Governing Council of the Independent Directors Council (IDC), since 2021 |
| Columbia Variable Portfolio – Balanced Fund | Annual Report 2021 | 53 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Janet Langford Carrig c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1957 | Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 174 | Director, EQT Corporation (natural gas producer) since 2019; Director, Whiting Petroleum Corporation (independent oil and gas company) since 2020 |
| J. Kevin Connaughton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2020 | Member, FINRA National Adjudicatory Council since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Consultant to Independent Trustees of CFVIT and CFST I from March 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Managing Director and General Manager of Mutual Fund Products, Columbia Management Investment Advisers, LLC, May 2010-February 2015; President, Columbia Funds, 2008-2015; and senior officer of Columbia Funds and affiliated funds, 2003-2015 | 174 | Former Director, The Autism Project, March 2015-December 2021; former Member of the Investment Committee, St. Michael’s College, November 2015-February 2020; former Trustee, St. Michael’s College, June 2017-September 2019; former Trustee, New Century Portfolios, January 2015-December 2017 |
| Olive M. Darragh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since 2020 | Managing Director of Darragh Inc. (strategy and talent management consulting firm) since 2010; Founder and CEO, Zolio, Inc. (investment management talent identification platform) since 2004; Consultant to Independent Trustees of CFVIT and CFST I from June 2019 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 2001-2004 | 174 | Former Director, University of Edinburgh Business School (Member of US Board); former Director, Boston Public Library Foundation |
| Patricia M. Flynn c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1950 | Trustee since 2004 | Trustee Professor of Economics and Management, Bentley University since 1976 (also teaches and conducts research on corporate governance); Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 176 | Trustee, MA Taxpayers Foundation since 1997; Board of Governors, Innovation Institute, MA Technology Collaborative, 2010-2020; former Board of Directors, The MA Business Roundtable, 2003-2019 |
| Brian J. Gallagher c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 176 | Trustee, Catholic Schools Foundation since 2004 |
| 54 | Columbia Variable Portfolio – Balanced Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Douglas A. Hacker c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1955 | Co-Chair since 2021; Chair of CFST I and CFVIT since 2014; Trustee of CFST I and CFVIT since 1996 and CFST, CFST II, CFVST II, CET I and CET II since 2021 | Independent business executive since May 2006; Executive Vice President – Strategy of United Airlines, December 2002 - May 2006; President of UAL Loyalty Services (airline marketing company), September 2001-December 2002; Executive Vice President and Chief Financial Officer of United Airlines, July 1999-September 2001 | 176 | Director, Spartan Nash Company (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing); former Director, Nash Finch Company (food distributor), 2005-2013; former Director, SeaCube Container Leasing Ltd. (container leasing), 2010-2013; and former Director, Travelport Worldwide Limited (travel information technology), 2014-2019 |
| Nancy T. Lukitsh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1956 | Trustee since 2011 | Senior Vice President, Partner and Director of Marketing, Wellington Management Company, LLP (investment adviser), 1997-2010; Chair, Wellington Management Portfolios (commingled non-U.S. investment pools), 2007 -2010; Director, Wellington Trust Company, NA and other Wellington affiliates, 1997-2010 | 174 | None |
| David M. Moffett c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2011 | Retired; Consultant to Bridgewater and Associates | 174 | Director, CSX Corporation (transportation suppliers); Director, Genworth Financial, Inc. (financial and insurance products and services); Director, PayPal Holdings Inc. (payment and data processing services); Trustee, University of Oklahoma Foundation; former Director, eBay Inc. (online trading community), 2007-2015; and former Director, CIT Bank, CIT Group Inc. (commercial and consumer finance), 2010-2016 |
| Catherine James Paglia c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Co-Chair since 2021; Chair of CFST, CFST II, CFVST II, CET I and CET II since 2020; Trustee of CFST, CFST II and CFVST II since 2004 and CFST I and CFVIT since 2021 | Director, Enterprise Asset Management, Inc. (private real estate and asset management company) since September 1998; Managing Director and Partner, Interlaken Capital, Inc., 1989-1997; Vice President, 1982-1985, Principal, 1985-1987, Managing Director, 1987-1989, Morgan Stanley; Vice President, Investment Banking, 1980-1982, Associate, Investment Banking, 1976-1980, Dean Witter Reynolds, Inc. | 176 | Director, Valmont Industries, Inc. (irrigation systems manufacturer) since 2012; Trustee, Carleton College (on the Investment Committee); Trustee, Carnegie Endowment for International Peace (on the Investment Committee) |
| Columbia Variable Portfolio – Balanced Fund | Annual Report 2021 | 55 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Minor M. Shaw c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1947 | Trustee since 2003 | President, Micco LLC (private investments) since 2011; President, Micco Corp. (family investment business), 1998-2011 | 176 | Director, Blue Cross Blue Shield of South Carolina (Chair of Compensation Committee) since April 2008; Trustee, Hollingsworth Funds (on the Investment Committee) since 2016 (previously Board Chair from 2016-2019); Former Advisory Board member, Duke Energy Corp., 2016-2020; Chair of the Duke Endowment; Chair of Greenville – Spartanburg Airport Commission; former Trustee, BofA Funds Series Trust (11 funds), 2003-2011; former Director, Piedmont Natural Gas, 2004-2016; former Director, National Association of Corporate Directors, Carolinas Chapter, 2013-2018; Chair, Daniel-Mickel Foundation since 1998 |
| Natalie A. Trunow c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1967 | Trustee since 2020 | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services), January 2016-January 2021; Non-executive Member of the Investment Committee and Valuation Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services), August 2018-January 2021; Advisor, Paradigm Asset Management, November 2016-December 2021; Consultant to Independent Trustees of CFVIT and CFST I from September 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Director of Investments/Consultant, Casey Family Programs, April 2016-November 2016; Senior Vice President and Chief Investment Officer, Calvert Investments, August 2008-January 2016; Section Head and Portfolio Manager, General Motors Asset Management, June 1997-August 2008 | 174 | Former Director, Investment Committee, Health Services for Children with Special Needs, Inc., 2012-2019; Director, Chair of Audit Committee, Consumer Credit Counseling Services (formerly Guidewell Financial Solutions), since 2019; Independent Director, Investment Committee and Valuation Committee, Sarona Asset Management, since 2019 |
| Sandra Yeager c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2017 | Retired; President and founder, Hanoverian Capital, LLC (SEC registered investment advisor firm), 2008-2016; Managing Director, DuPont Capital, 2006-2008; Managing Director, Morgan Stanley Investment Management, 2004-2006; Senior Vice President, Alliance Bernstein, 1990-2004 | 176 | Former Director, NAPE Education Foundation, October 2016-October 2020 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Fund Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I (CET I), Columbia ETF Trust II (CET II), Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Beckman, Gallagher and Hacker and Mses. Blatz, Carlton, Flynn, Paglia, Shaw and Yeager serve as Directors of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
| 56 | Columbia Variable Portfolio – Balanced Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Interested trustee affiliated with Investment Manager*
Interested trustee affiliated with Investment Manager*
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during the past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex overseen | Other directorships held by Trustee during the past five years |
| Daniel J. Beckman c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since November 2021(a) | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC (since April 2015); officer of Columbia Funds and affiliated funds since 2020. | 176 | Director, Ameriprise Trust Company, since October 2016; Director, Columbia Management Investment Distributors, Inc. since November 2018; Board of Governors, Columbia Wanger Asset Management, LLC since January 2022 |
| * | Interested person (as defined under the 1940 Act) by reason of being an officer, director, security holder and/or employee of the Investment Manager or Ameriprise Financial. |
| (a) | Mr. Beckman serves as the President and Principal Executive Officer of the Columbia Funds (since 2021). |
The Statement of Additional
Information has additional information about the Fund’s Board members and is available, without charge, upon request by calling 800.345.6611 or contacting your financial intermediary.
The Board has appointed officers
who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. The following table provides basic information about the Officers of the
Fund, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Beckman, who is President and Principal Executive Officer, the
Fund’s other officers are:
Fund officers
| Columbia Variable Portfolio – Balanced Fund | Annual Report 2021 | 57 |
TRUSTEES AND OFFICERS (continued)
Fund officers (continued)
Fund officers (continued)
| 58 | Columbia Variable Portfolio – Balanced Fund | Annual Report 2021 |
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For Fund and other investment product prospectuses, which contain this and other important information, contact your
financial advisor or insurance representative. Please read the prospectus carefully before you invest. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved. Columbia Management Investment Distributors, Inc., 290 Congress Street, Boston, MA 02210
© 2022 Columbia Management Investment
Advisers, LLC.
S-6677 AW (2/22)
Columbia Variable
Portfolio – Emerging Markets Bond Fund
Please remember that you may not
buy (nor will you own) shares of the Fund directly. The Fund is available through variable annuity contracts and variable life insurance policies offered by the separate accounts of participating insurance companies
as well as qualified pension and retirement plans. Please contact your financial advisor or insurance representative for more information.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
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| 33 | |
| 34 | |
| 34 |
Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which Columbia Variable Portfolio – Emerging Markets Bond Fund (the Fund) holds investments consistent with the procedures as stated in the Statement of Additional
Information (SAI). You may obtain a copy of the SAI without charge by calling 800.345.6611; contacting your financial intermediary or searching the website of the Securities and Exchange Commission (SEC) at sec.gov.
Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge
by visiting columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. The Fund’s Form N-PORT is available on the SEC’s website at sec.gov. The Fund’s complete
schedule of portfolio holdings, as filed on Form N-PORT, can also be obtained without charge, upon request, by calling 800.345.6611.
Additional Fund information
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
290 Congress Street
Boston, MA 02210
Fund distributor
Columbia Management Investment Distributors,
Inc.
290 Congress Street
Boston, MA 02210
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
Columbia Variable Portfolio – Emerging
Markets Bond Fund | Annual Report 2021
Fund at a Glance
Investment objective
The Fund
seeks to provide shareholders with high total return through current income and, secondarily, through capital appreciation.
Portfolio management
Adrian Hilton
Lead Portfolio Manager
Managed Fund since October 2020
Christopher Cooke
Portfolio Manager
Managed Fund since 2017
| Columbia Variable Portfolio – Emerging Markets Bond Fund | Annual Report 2021 | 3 |
Fund at a Glance (continued)
Performance of a hypothetical $10,000 investment (April 30, 2012 — December 31, 2021)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class 2 shares of Columbia Variable Portfolio – Emerging Markets Bond Fund during the stated time period, and does not reflect the deduction of taxes, if any,
that a shareholder may pay on Fund distributions or on the redemption of Fund shares. The returns also do not reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance
policy or qualified pension or retirement plan, if any.
| 4 | Columbia Variable Portfolio – Emerging Markets Bond Fund | Annual Report 2021 |
Fund at a Glance (continued)
| Columbia Variable Portfolio – Emerging Markets Bond Fund | Annual Report 2021 | 5 |
Manager Discussion of Fund Performance
At December 31, 2021,
approximately 35.63% of the Fund’s shares were owned in the aggregate by affiliated funds-of-funds managed by Columbia Management Investment Advisers, LLC (the Investment Manager). As a result of asset
allocation decisions by the Investment Manager, it is possible that the Fund may experience relatively large purchases or redemptions from affiliated funds-of-funds. The Investment Manager seeks to minimize the impact
of these transactions by structuring them over a reasonable period of time. The Fund may also experience increased expenses as it buys and sells securities as a result of purchases or redemptions by affiliated
funds-of-funds.
For the 12-month period that ended
December 31, 2021, the Fund’s Class 2 shares returned -2.45%. The Fund underperformed its benchmark, the JPMorgan Emerging Markets Bond Index-Global, which returned -1.51% for the same period.
Market overview
After a strong year for emerging
market bonds in 2020, the first quarter of 2021 was more challenging, with the benchmark posting negative returns. Investor sentiment toward risk assets had been initially buoyed by optimism about the rollout of
COVID-19 vaccines and further U.S. fiscal stimulus. However, the emerging markets were more greatly impacted by “risk-off” sentiment, or heightened risk aversion, than the developed markets, driven by
concerns about rising COVID-19 cases, the uneven pace of mass vaccinations and the emergence of new COVID-19 variants. Additionally, as hopes for a global economic recovery grew, increasing concern about potential
rising inflation pushed global government bond yields markedly higher. The U.S. dollar strengthened, posing another headwind for emerging markets debt. Emerging market bonds, as measured by the benchmark, rebounded to
post positive returns during the second quarter amid a more supportive backdrop. Core government bonds also rallied, with U.S. Treasury yields retreating from the highs reached earlier in the year. The improved
rollout of COVID-19 vaccines in developed countries as well as the resulting optimism about the global economy trumped fears of runaway inflation. The less risk-averse mood was boosted by anticipation of U.S. fiscal
stimulus. Throughout the first half of the annual period, a strong rise in commodities prices was a welcome ongoing tailwind for emerging market bonds, with crude oil and industrial metals registering significant
gains. However, the positive sentiment was somewhat undermined as several emerging markets countries, including Brazil, South Africa, Thailand and Taiwan, struggled to bring down COVID-19 infection rates. Among
emerging market central banks, a trend toward policy tightening grew, with policymakers in Turkey, Russia, Ukraine, Hungary, the Czech Republic, Mexico and Brazil raising interest rates amid concerns about inflation
risks. Other central banks left rates unchanged.
The benchmark posted negative
returns for the third quarter of 2021. Emerging market bonds were initially supported by positive sentiment about the post-pandemic global recovery and expectations for further U.S. stimulus, as the U.S. Senate
approved President Biden’s bipartisan infrastructure bill and simultaneously passed a $2.5 billion budget resolution. Higher energy prices and strength in soft commodities were also helpful for emerging market
bonds. However, as inflation persisted at relatively high levels in developed markets, the outlook for monetary policy turned increasingly hawkish, prompting bouts of risk-off sentiment. (Hawkish suggests higher
interest rates; opposite of dovish.) Against this backdrop, yields on core government bonds drifted higher in August and September, as U.S. Federal Reserve (Fed) Chair Powell gave a clear steer that monetary stimulus
would soon be reduced. While the ongoing hunt for yield continued to drive demand for emerging market bonds, risk sentiment faltered in the face of growing risks, including concerns about supply-chain bottlenecks,
China’s regulatory crackdown on a variety of industries and a debt crisis at Chinese property developer Evergrande, which sparked fears of contagion to global property markets and beyond. Worries about the
spread of the COVID-19 Delta variant derailing the global recovery became more prevalent, and the U.S. dollar strengthened during the third quarter, posing additional headwinds for emerging market bonds. Russia,
Chile, Peru, Brazil, Turkey and Mexico raised their respective interest rates.
The fourth quarter was another
challenging span for emerging market bonds, though the benchmark eked out a modest positive return. The sector was supported in October 2021 by rising commodity prices and improving COVID-19 vaccine rollouts in many
emerging market countries. However, as inflationary pressures showed little sign of abating, concerns grew over how aggressively central banks might act in response. Added to this were signs of a slowdown in Chinese
economic activity and a resurfacing of U.S.-China tensions. As the quarter progressed, risk sentiment was undermined by rising COVID-19 case counts in Europe, increasingly hawkish commentary from Fed officials and the
discovery of the Omicron COVID-19 variant, which triggered a flight to safety and a sharp fall in oil prices. Continuing strength in economic data and indications the new virus strain was proving less severe than
feared helped emerging market bonds recover toward the end
| 6 | Columbia Variable Portfolio – Emerging Markets Bond Fund | Annual Report 2021 |
Manager Discussion of Fund Performance (continued)
of the quarter. Chile, Mexico, Peru, Brazil,
Colombia, Russia, Romania, the Czech Republic and Ukraine each raised their respective interest rates during the fourth quarter. Turkey was a notable outlier; despite escalating inflation, the country significantly
cut its rates during the fourth quarter.
The Fund’s notable
detractors during the period
| • | Country positioning as a whole detracted from the Fund’s relative results during the annual period. |
| • | Having an overweight to Russian local currency bonds (unhedged) detracted. |
| • | Having overweighted allocations to Ghana and Egypt and an underweight to Oman, in each case relative to the benchmark, also dampened the Fund’s relative results. |
The Fund’s notable
contributors during the period
| • | Security selection overall contributed positively to the Fund’s relative results, especially in Mexico, the Philippines and Brazil. |
| ○ | In Mexico, having an overweight to the corporate bonds of PEMEX versus sovereign bonds helped most. (PEMEX, or Petroleos Mexicanos, is a state-owned petroleum company.) In December 2021, PEMEX announced a series of measures intended to improve its financial condition, which were responded to favorably by the markets. |
| ○ | In Brazil, security selection among corporate bonds proved most beneficial. |
| • | Having an overweight to Angola sovereign bonds contributed positively. |
| • | Positioning in El Salvador overall, which shifted from an overweight during the first half of 2021 to an underweight during the second half of the annual period, further bolstered the Fund’s relative results. |
Derivatives usage
During the annual period, the
Fund used U.S. Treasury futures to help keep the duration of the Fund in line with our target, relative to that of the benchmark. We used emerging market currency forward contracts in those cases where we wanted local
rates exposure but not currency exposure. The use of each of these derivative instruments successfully achieved their purpose and contributed positively to the Fund’s performance during the annual period.
The views expressed in this report
reflect the current views of the respective parties who have contributed to this report. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult
to predict, so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective parties
disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Columbia fund are based on numerous factors, may not be relied on as an
indication of trading intent on behalf of any particular Columbia fund. References to specific securities should not be construed as a recommendation or investment advice.
| Columbia Variable Portfolio – Emerging Markets Bond Fund | Annual Report 2021 | 7 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur ongoing
costs, which generally include management fees, distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to help you compare these costs with the ongoing costs of investing in other mutual funds.
The information below does not
reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy (collectively, Contracts) or qualified pension and retirement plan (Qualified Plan), if any. The total fees
and expenses you bear may therefore be higher than those shown below.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount invested, to estimate the
expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as redemption or exchange fees, or expenses that apply to the subaccount or the Contract. Therefore, the
hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If the fees and expenses imposed under your Contract or
Qualified Plan, if any, were included, your costs would be higher.
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 365.
Expenses do not include fees and
expenses incurred indirectly by the Fund from its investment in underlying funds, including affiliated and non-affiliated pooled investment vehicles, such as mutual funds and exchange-traded funds.
| 8 | Columbia Variable Portfolio – Emerging Markets Bond Fund | Annual Report 2021 |
Portfolio of Investments
December 31, 2021
December 31, 2021
(Percentages represent value of
investments compared to net assets)
Investments in securities
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Emerging Markets Bond Fund | Annual Report 2021 | 9 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 10 | Columbia Variable Portfolio – Emerging Markets Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Emerging Markets Bond Fund | Annual Report 2021 | 11 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 12 | Columbia Variable Portfolio – Emerging Markets Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
| Money Market Funds 9.9% | ||
| Shares | Value ($) | |
| Columbia Short-Term Cash Fund, 0.085%(f),(g) | 49,314,591 | 49,304,728 |
| Total Money Market Funds (Cost $49,308,273) | 49,304,728 | |
| Total Investments in Securities (Cost $504,142,084) | 493,148,482 | |
| Other Assets & Liabilities, Net | 6,351,395 | |
| Net Assets | $499,499,877 | |
At December 31, 2021, securities
and/or cash totaling $267,050 were pledged as collateral.
Investments in derivatives
| Forward foreign currency exchange contracts | |||||
| Currency to be sold | Currency to be purchased | Counterparty | Settlement date | Unrealized appreciation ($) | Unrealized depreciation ($) |
| 89,000,000 MXN | 4,275,188 USD | Goldman Sachs International | 01/11/2022 | — | (66,198) |
| 8,539,655 EUR | 9,736,710 USD | UBS | 01/11/2022 | 12,898 | — |
| Total | 12,898 | (66,198) | |||
| Short futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| U.S. Treasury Ultra 10-Year Note | (109) | 03/2022 | USD | (15,961,688) | — | (279,526) |
Notes to Portfolio of
Investments
| (a) | Principal amounts are denominated in United States Dollars unless otherwise noted. |
| (b) | Represents privately placed and other securities and instruments exempt from Securities and Exchange Commission registration (collectively, private placements), such as Section 4(a)(2) and Rule 144A eligible securities, which are often sold only to qualified institutional buyers. At December 31, 2021, the total value of these securities amounted to $326,924,551, which represents 65.45% of total net assets. |
| (c) | Represents a variable rate security with a step coupon where the rate adjusts according to a schedule for a series of periods, typically lower for an initial period and then increasing to a higher coupon rate thereafter. The interest rate shown was the current rate as of December 31, 2021. |
| (d) | Principal and interest may not be guaranteed by a governmental entity. |
| (e) | Represents securities that have defaulted on payment of interest. The Fund has stopped accruing interest on these securities. At December 31, 2021, the total value of these securities amounted to $882,702, which represents 0.18% of total net assets. |
| (f) | The rate shown is the seven-day current annualized yield at December 31, 2021. |
| (g) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended December 31, 2021 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Realized gain (loss)($) | Dividends($) | End of period shares |
| Columbia Short-Term Cash Fund, 0.085% | ||||||||
| 22,353,312 | 206,213,138 | (179,258,177) | (3,545) | 49,304,728 | (125) | 21,792 | 49,314,591 | |
Currency Legend
| EUR | Euro |
| MXN | Mexican Peso |
| USD | US Dollar |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Emerging Markets Bond Fund | Annual Report 2021 | 13 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at December 31, 2021:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Investments in Securities | ||||
| Corporate Bonds & Notes | — | 45,418,511 | — | 45,418,511 |
| Foreign Government Obligations | — | 398,425,243 | — | 398,425,243 |
| Money Market Funds | 49,304,728 | — | — | 49,304,728 |
| Total Investments in Securities | 49,304,728 | 443,843,754 | — | 493,148,482 |
| Investments in Derivatives | ||||
| Asset | ||||
| Forward Foreign Currency Exchange Contracts | — | 12,898 | — | 12,898 |
| Liability | ||||
| Forward Foreign Currency Exchange Contracts | — | (66,198) | — | (66,198) |
| Futures Contracts | (279,526) | — | — | (279,526) |
| Total | 49,025,202 | 443,790,454 | — | 492,815,656 |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The Fund’s assets assigned to
the Level 2 input category are generally valued using the market approach, in which a security’s value is determined through reference to prices and information from market transactions for similar or identical
assets.
Derivative instruments are valued at
unrealized appreciation (depreciation).
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 14 | Columbia Variable Portfolio – Emerging Markets Bond Fund | Annual Report 2021 |
Statement of Assets and Liabilities
December 31, 2021
December 31, 2021
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $454,833,811) | $443,843,754 |
| Affiliated issuers (cost $49,308,273) | 49,304,728 |
| Foreign currency (cost $419,844) | 425,642 |
| Margin deposits on: | |
| Futures contracts | 267,050 |
| Unrealized appreciation on forward foreign currency exchange contracts | 12,898 |
| Receivable for: | |
| Capital shares sold | 1,931 |
| Dividends | 2,958 |
| Interest | 6,019,467 |
| Foreign tax reclaims | 10,416 |
| Prepaid expenses | 9,494 |
| Total assets | 499,898,338 |
| Liabilities | |
| Unrealized depreciation on forward foreign currency exchange contracts | 66,198 |
| Payable for: | |
| Capital shares purchased | 128,358 |
| Variation margin for futures contracts | 28,953 |
| Foreign capital gains taxes deferred | 1 |
| Management services fees | 8,164 |
| Distribution and/or service fees | 1,707 |
| Service fees | 73,126 |
| Compensation of board members | 55,454 |
| Compensation of chief compliance officer | 91 |
| Other expenses | 36,409 |
| Total liabilities | 398,461 |
| Net assets applicable to outstanding capital stock | $499,499,877 |
| Represented by | |
| Paid in capital | 525,861,961 |
| Total distributable earnings (loss) | (26,362,084) |
| Total - representing net assets applicable to outstanding capital stock | $499,499,877 |
| Class 1 | |
| Net assets | $248,904,980 |
| Shares outstanding | 26,561,519 |
| Net asset value per share | $9.37 |
| Class 2 | |
| Net assets | $250,594,897 |
| Shares outstanding | 26,762,075 |
| Net asset value per share | $9.36 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Emerging Markets Bond Fund | Annual Report 2021 | 15 |
Statement of Operations
Year Ended December 31, 2021
Year Ended December 31, 2021
| Net investment income | |
| Income: | |
| Dividends — affiliated issuers | $21,792 |
| Interest | 21,899,818 |
| Interfund lending | 160 |
| Foreign taxes withheld | (32,631) |
| Total income | 21,889,139 |
| Expenses: | |
| Management services fees | 2,873,487 |
| Distribution and/or service fees | |
| Class 2 | 614,473 |
| Service fees | 574,646 |
| Compensation of board members | 29,483 |
| Custodian fees | 59,221 |
| Printing and postage fees | 16,804 |
| Audit fees | 36,270 |
| Legal fees | 14,364 |
| Compensation of chief compliance officer | 88 |
| Other | 37,907 |
| Total expenses | 4,256,743 |
| Net investment income | 17,632,396 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 3,001,121 |
| Investments — affiliated issuers | (125) |
| Foreign currency translations | (48,497) |
| Forward foreign currency exchange contracts | 398,174 |
| Futures contracts | (73,934) |
| Net realized gain | 3,276,739 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | (31,994,200) |
| Investments — affiliated issuers | (3,545) |
| Foreign currency translations | (13,386) |
| Forward foreign currency exchange contracts | 312,157 |
| Futures contracts | (170,727) |
| Net change in unrealized appreciation (depreciation) | (31,869,701) |
| Net realized and unrealized loss | (28,592,962) |
| Net decrease in net assets resulting from operations | $(10,960,566) |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 16 | Columbia Variable Portfolio – Emerging Markets Bond Fund | Annual Report 2021 |
Statement of Changes in Net Assets
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | |
| Operations | ||
| Net investment income | $17,632,396 | $15,894,711 |
| Net realized gain (loss) | 3,276,739 | (5,603,668) |
| Net change in unrealized appreciation (depreciation) | (31,869,701) | 20,779,470 |
| Net increase (decrease) in net assets resulting from operations | (10,960,566) | 31,070,513 |
| Distributions to shareholders | ||
| Net investment income and net realized gains | ||
| Class 1 | (9,225,316) | (7,198,846) |
| Class 2 | (9,066,729) | (7,242,728) |
| Total distributions to shareholders | (18,292,045) | (14,441,574) |
| Increase in net assets from capital stock activity | 50,006,632 | 141,361,521 |
| Total increase in net assets | 20,754,021 | 157,990,460 |
| Net assets at beginning of year | 478,745,856 | 320,755,396 |
| Net assets at end of year | $499,499,877 | $478,745,856 |
| Year Ended | Year Ended | |||
| December 31, 2021 | December 31, 2020 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class 1 | ||||
| Subscriptions | 6,237,833 | 59,984,146 | 10,938,060 | 106,832,429 |
| Distributions reinvested | 976,525 | 9,225,316 | 784,339 | 7,198,846 |
| Redemptions | (4,485,763) | (43,450,596) | (124,269) | (1,154,927) |
| Net increase | 2,728,595 | 25,758,866 | 11,598,130 | 112,876,348 |
| Class 2 | ||||
| Subscriptions | 2,474,868 | 23,735,038 | 4,039,799 | 37,360,059 |
| Distributions reinvested | 959,918 | 9,066,729 | 790,959 | 7,242,728 |
| Redemptions | (888,694) | (8,554,001) | (1,740,341) | (16,117,614) |
| Net increase | 2,546,092 | 24,247,766 | 3,090,417 | 28,485,173 |
| Total net increase | 5,274,687 | 50,006,632 | 14,688,547 | 141,361,521 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Emerging Markets Bond Fund | Annual Report 2021 | 17 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect any fees and expenses imposed under your
Contract and/or Qualified Plan, as applicable; such fees and expenses would reduce the total returns for all periods shown. Total return and portfolio turnover are not annualized for periods of less than one year. The
portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain derivatives, if any. If such transactions were included, the Fund’s portfolio
turnover rate may be higher.
| Net asset value, beginning of period | Net investment income | Net realized and unrealized gain (loss) | Total from investment operations | Distributions from net investment income | Total distributions to shareholders | |
| Class 1 | ||||||
| Year Ended 12/31/2021 | $9.97 | 0.37 | (0.59) | (0.22) | (0.38) | (0.38) |
| Year Ended 12/31/2020 | $9.62 | 0.37 | 0.31 | 0.68 | (0.33) | (0.33) |
| Year Ended 12/31/2019 | $9.01 | 0.50 | 0.60 | 1.10 | (0.49) | (0.49) |
| Year Ended 12/31/2018 | $10.15 | 0.53 | (1.23) | (0.70) | (0.44) | (0.44) |
| Year Ended 12/31/2017 | $9.50 | 0.59 | 0.52 | 1.11 | (0.46) | (0.46) |
| Class 2 | ||||||
| Year Ended 12/31/2021 | $9.96 | 0.34 | (0.59) | (0.25) | (0.35) | (0.35) |
| Year Ended 12/31/2020 | $9.61 | 0.35 | 0.31 | 0.66 | (0.31) | (0.31) |
| Year Ended 12/31/2019 | $9.00 | 0.47 | 0.61 | 1.08 | (0.47) | (0.47) |
| Year Ended 12/31/2018 | $10.15 | 0.51 | (1.25) | (0.74) | (0.41) | (0.41) |
| Year Ended 12/31/2017 | $9.49 | 0.57 | 0.52 | 1.09 | (0.43) | (0.43) |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Ratios include interest on collateral expense which is less than 0.01%. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 18 | Columbia Variable Portfolio – Emerging Markets Bond Fund | Annual Report 2021 |
Financial Highlights (continued)
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets(a) | Total net expense ratio to average net assets(a),(b) | Net investment income ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Class 1 | |||||||
| Year Ended 12/31/2021 | $9.37 | (2.20%) | 0.76% | 0.76% | 3.81% | 41% | $248,905 |
| Year Ended 12/31/2020 | $9.97 | 7.43% | 0.75%(c) | 0.75%(c) | 4.01% | 114% | $237,553 |
| Year Ended 12/31/2019 | $9.62 | 12.35% | 0.76% | 0.76% | 5.21% | 137% | $117,692 |
| Year Ended 12/31/2018 | $9.01 | (7.04%) | 0.76%(c) | 0.76%(c) | 5.53% | 64% | $103,590 |
| Year Ended 12/31/2017 | $10.15 | 11.85% | 0.75% | 0.75% | 5.88% | 42% | $110,275 |
| Class 2 | |||||||
| Year Ended 12/31/2021 | $9.36 | (2.45%) | 1.01% | 1.01% | 3.56% | 41% | $250,595 |
| Year Ended 12/31/2020 | $9.96 | 7.16% | 1.00%(c) | 1.00%(c) | 3.76% | 114% | $241,193 |
| Year Ended 12/31/2019 | $9.61 | 12.09% | 1.01% | 1.01% | 4.94% | 137% | $203,064 |
| Year Ended 12/31/2018 | $9.00 | (7.38%) | 1.02%(c) | 1.02%(c) | 5.32% | 64% | $121,570 |
| Year Ended 12/31/2017 | $10.15 | 11.69% | 1.01% | 1.01% | 5.70% | 42% | $94,637 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Emerging Markets Bond Fund | Annual Report 2021 | 19 |
Notes to Financial Statements
December 31, 2021
December 31, 2021
Note 1. Organization
Columbia Variable Portfolio
– Emerging Markets Bond Fund (the Fund), a series of Columbia Funds Variable Series Trust II (the Trust), is a non-diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended
(the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers Class 1 and Class 2 shares to separate accounts funding variable annuity contracts and variable life insurance policies (collectively, Contracts) issued by
affiliated and unaffiliated life insurance companies (Participating Insurance Companies) as well as qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors (Qualified
Investors) authorized by Columbia Management Investment Distributors, Inc. (the Distributor). You may not buy (nor will you own) shares of the Fund directly. You may invest by participating in a Qualified Plan or by
buying a Contract and making allocations to the Fund. Although all share classes generally have identical voting, dividend and liquidation rights, each share class votes separately when required by the Trust’s
organizational documents or by law. Different share classes pay different net investment income distribution amounts to the extent the expenses of such share classes differ, and distributions in liquidation will be
proportional to the net asset value of each share class. Each share class has its own cost structure and other features.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Debt securities generally are
valued by pricing services approved by the Board of Trustees based upon market transactions for normal, institutional-size trading units of similar securities. The services may use various pricing techniques that take
into account, as applicable, factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data, as well as approved independent broker-dealer quotes. Debt securities for
which quotations are not readily available or not believed to be reflective of market value may also be valued based upon a bid quote from an approved independent broker-dealer. Debt securities maturing in 60 days or
less are valued primarily at amortized market value, unless this method results in a valuation that management believes does not approximate fair value.
Investments in open-end investment
companies (other than exchange-traded funds (ETFs)), are valued at the latest net asset value reported by those companies as of the valuation time.
Forward foreign currency exchange
contracts are marked-to-market based upon foreign currency exchange rates provided by a pricing service.
Futures and options on futures
contracts are valued based upon the settlement price at the close of regular trading on their principal exchanges or, in the absence of a settlement price, at the mean of the latest quoted bid and ask prices.
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
| 20 | Columbia Variable Portfolio – Emerging Markets Bond Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Foreign currency transactions and
translations
The values of all assets and
liabilities denominated in foreign currencies are generally translated into U.S. dollars at exchange rates determined at the close of regular trading on the New York Stock Exchange. Net realized and unrealized gains
(losses) on foreign currency transactions and translations include gains (losses) arising from the fluctuation in exchange rates between trade and settlement dates on securities transactions, gains (losses) arising
from the disposition of foreign currency and currency gains (losses) between the accrual and payment dates on dividends, interest income and foreign withholding taxes.
For financial statement purposes,
the Fund does not distinguish that portion of gains (losses) on investments which is due to changes in foreign exchange rates from that which is due to changes in market prices of the investments. Such fluctuations
are included with the net realized and unrealized gains (losses) on investments in the Statement of Operations.
Derivative instruments
The Fund invests in certain
derivative instruments, as detailed below, in seeking to meet its investment objectives. Derivatives are instruments whose values depend on, or are derived from, in whole or in part, the value of one or more
securities, currencies, commodities, indices, or other assets or instruments. Derivatives may be used to increase investment flexibility (including to maintain cash reserves while maintaining desired exposure to
certain assets), for risk management (hedging) purposes, to facilitate trading, to reduce transaction costs and to pursue higher investment returns. The Fund may also use derivative instruments to mitigate certain
investment risks, such as foreign currency exchange rate risk, interest rate risk and credit risk. Derivatives may involve various risks, including the potential inability of the counterparty to fulfill its
obligations under the terms of the contract, the potential for an illiquid secondary market (making it difficult for the Fund to sell or terminate, including at favorable prices) and the potential for market movements
which may expose the Fund to gains or losses in excess of the amount shown in the Statement of Assets and Liabilities. The notional amounts of derivative instruments, if applicable, are not recorded in the financial
statements.
A derivative instrument may suffer
a marked-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform its
obligations under the contract. The Fund’s risk of loss from counterparty credit risk on over-the-counter derivatives is generally limited to the aggregate unrealized gain netted against any collateral held by
the Fund and the amount of any variation margin held by the counterparty, plus any replacement costs or related amounts. With exchange-traded or centrally cleared derivatives, there is reduced counterparty credit risk
to the Fund since the clearinghouse or central counterparty (CCP) provides some protection in the case of clearing member default. The clearinghouse or CCP stands between the buyer and the seller of the contract;
therefore, additional counterparty credit risk is failure of the clearinghouse or CCP. However, credit risk still exists in exchange-traded or centrally cleared derivatives with respect to initial and variation margin
that is held in a broker’s customer account. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy
and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients and such shortfall is remedied by the CCP or otherwise, U.S. bankruptcy laws will typically
allocate that shortfall on a pro-rata basis across all the clearing broker’s customers (including the Fund), potentially resulting in losses to the Fund.
In order to better define its
contractual rights and to secure rights that will help the Fund mitigate its counterparty risk, the Fund may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (ISDA Master Agreement)
or similar agreement with its derivatives counterparties. An ISDA Master Agreement is an agreement between the Fund and a counterparty that governs over-the-counter derivatives and foreign exchange forward contracts
and contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA
| Columbia Variable Portfolio – Emerging Markets Bond Fund | Annual Report 2021 | 21 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Master Agreement, the Fund may, under certain
circumstances, offset with the counterparty certain derivative instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master
Agreement typically permit a single net payment in the event of default (close-out netting), including the bankruptcy or insolvency of the counterparty. Note, however, that bankruptcy or insolvency laws of a
particular jurisdiction may impose restrictions on or prohibitions against the right of offset or netting in bankruptcy, insolvency or other events.
Collateral (margin) requirements
differ by type of derivative. Margin requirements are established by the clearinghouse or CCP for exchange-traded and centrally cleared derivatives. Brokers can ask for margin in excess of the minimum in certain
circumstances. Collateral terms for most over-the-counter derivatives are subject to regulatory requirements to exchange variation margin with trading counterparties and may have contract specific margin terms as
well. For over-the-counter derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the marked-to-market amount for each transaction under such agreement and
comparing that amount to the value of any variation margin currently pledged by the Fund and/or the counterparty. Generally, the amount of collateral due from or to a party has to exceed a minimum transfer amount
threshold (e.g., $250,000) before a transfer has to be made. To the extent amounts due to the Fund from its counterparties are not fully collateralized, contractually or otherwise, the Fund bears the risk of loss from
counterparty nonperformance. The Fund may also pay interest expense on cash collateral received from the broker. Any interest expense paid by the Fund is shown on the Statement of Operations. The Fund attempts to
mitigate counterparty risk by only entering into agreements with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those
counterparties.
Certain ISDA Master Agreements
allow counterparties of over-the-counter derivatives transactions to terminate derivatives contracts prior to maturity in the event the Fund’s net asset value declines by a stated percentage over a specified
time period or if the Fund fails to meet certain terms of the ISDA Master Agreement, which would cause the Fund to accelerate payment of any net liability owed to the counterparty. The Fund also has termination
rights if the counterparty fails to meet certain terms of the ISDA Master Agreement. In determining whether to exercise such termination rights, the Fund would consider, in addition to counterparty credit risk,
whether termination would result in a net liability owed from the counterparty.
For financial reporting purposes,
the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statement of Assets and Liabilities.
Forward foreign currency exchange
contracts
Forward foreign currency exchange
contracts are over-the-counter agreements between two parties to buy and sell a currency at a set price on a future date. The Fund utilized forward foreign currency exchange contracts to hedge the currency exposure
associated with some or all of the Fund’s securities and to shift foreign currency exposure back to U.S. dollars. These instruments may be used for other purposes in future periods.
The values of forward foreign
currency exchange contracts fluctuate daily with changes in foreign currency exchange rates. Changes in the value of these contracts are recorded as unrealized appreciation or depreciation until the contract is
exercised or has expired. The Fund will realize a gain or loss when the forward foreign currency exchange contract is closed or expires. Non-deliverable forward foreign currency exchange contracts are settled with the
counterparty in U.S. dollars without delivery of foreign currency.
The use of forward foreign currency
exchange contracts does not eliminate fluctuations in the prices of the Fund’s portfolio securities. The risks of forward foreign currency exchange contracts include movement in the values of the foreign
currencies relative to the U.S. dollar (or other foreign currencies) and the possibility that counterparties will not complete their contractual obligations, which may be in excess of the amount reflected, if any, in
the Statement of Assets and Liabilities.
Futures contracts
Futures contracts are
exchange-traded and represent commitments for the future purchase or sale of an asset at a specified price on a specified date. The Fund bought and sold futures contracts to manage the duration and yield curve
exposure of the Fund versus the benchmark. These instruments may be used for other purposes in future periods. Upon entering into futures contracts, the Fund bears risks that it may not achieve the anticipated
benefits of the futures contracts and may realize a loss. Additional risks include counterparty credit risk, the possibility of an illiquid market, and that a change in the value of the contract or option may not
correlate with changes in the value of the underlying asset.
| 22 | Columbia Variable Portfolio – Emerging Markets Bond Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Upon entering into a futures
contract, the Fund deposits cash or securities with the broker, known as a futures commission merchant (FCM), in an amount sufficient to meet the initial margin requirement. The initial margin deposit must be
maintained at an established level over the life of the contract. Cash deposited as initial margin is recorded in the Statement of Assets and Liabilities as margin deposits. Securities deposited as initial margin are
designated in the Portfolio of Investments. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily change in the contract value and are
recorded as variation margin receivable or payable and are offset in unrealized gains or losses. The Fund generally expects to earn interest income on its margin deposits. The Fund recognizes a realized gain or loss
when the contract is closed or expires. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities.
Effects of derivative transactions in
the financial statements
The following tables are intended
to provide additional information about the effect of derivatives on the financial statements of the Fund, including: the fair value of derivatives by risk category and the location of those fair values in the
Statement of Assets and Liabilities; and the impact of derivative transactions over the period in the Statement of Operations, including realized and unrealized gains (losses). The derivative instrument schedules
following the Portfolio of Investments present additional information regarding derivative instruments outstanding at the end of the period, if any.
The following table is a summary of
the fair value of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) at December 31, 2021:
| Liability derivatives | ||
| Risk exposure category | Statement of assets and liabilities location | Fair value ($) |
| Foreign exchange risk | Unrealized depreciation on forward foreign currency exchange contracts | 66,198 |
| Interest rate risk | Component of total distributable earnings (loss) — unrealized depreciation on futures contracts | 279,526* |
| Total | 345,724 |
| * | Includes cumulative appreciation (depreciation) as reported in the tables following the Portfolio of Investments. Only the current day’s variation margin is reported in receivables or payables in the Statement of Assets and Liabilities. |
| Columbia Variable Portfolio – Emerging Markets Bond Fund | Annual Report 2021 | 23 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
The following table indicates the
effect of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) in the Statement of Operations for the year ended December 31, 2021:
| Amount of realized gain (loss) on derivatives recognized in income | |||
| Risk exposure category | Forward foreign currency exchange contracts ($) | Futures contracts ($) | Total ($) |
| Foreign exchange risk | 398,174 | — | 398,174 |
| Interest rate risk | — | (73,934) | (73,934) |
| Total | 398,174 | (73,934) | 324,240 |
| Change in unrealized appreciation (depreciation) on derivatives recognized in income | |||
| Risk exposure category | Forward foreign currency exchange contracts ($) | Futures contracts ($) | Total ($) |
| Foreign exchange risk | 312,157 | — | 312,157 |
| Interest rate risk | — | (170,727) | (170,727) |
| Total | 312,157 | (170,727) | 141,430 |
The following table is a summary
of the average outstanding volume by derivative instrument for the year ended December 31, 2021:
| Derivative instrument | Average notional amounts ($)* |
| Futures contracts — long | 3,365,157 |
| Futures contracts — short | 11,329,844 |
| Derivative instrument | Average unrealized appreciation ($)* | Average unrealized depreciation ($)* |
| Forward foreign currency exchange contracts | 150,562 | (49,655) |
| * | Based on the ending quarterly outstanding amounts for the year ended December 31, 2021. |
Offsetting of assets and
liabilities
The following table presents the
Fund’s gross and net amount of assets and liabilities available for offset under netting arrangements as well as any related collateral received or pledged by the Fund as of December 31, 2021:
| Goldman Sachs International ($) | UBS ($) | Total ($) | |
| Assets | |||
| Forward foreign currency exchange contracts | - | 12,898 | 12,898 |
| Liabilities | |||
| Forward foreign currency exchange contracts | 66,198 | - | 66,198 |
| Total financial and derivative net assets | (66,198) | 12,898 | (53,300) |
| Total collateral received (pledged) (a) | - | - | - |
| Net amount (b) | (66,198) | 12,898 | (53,300) |
| (a) | In some instances, the actual collateral received and/or pledged may be more than the amount shown due to overcollateralization. |
| (b) | Represents the net amount due from/(to) counterparties in the event of default. |
| 24 | Columbia Variable Portfolio – Emerging Markets Bond Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
Income recognition
Interest income is recorded on an
accrual basis. Market premiums and discounts, including original issue discounts, are amortized and accreted, respectively, over the expected life of the security on all debt securities, unless otherwise noted.
The Fund may place a debt security
on non-accrual status and reduce related interest income when it becomes probable that the interest will not be collected and the amount of uncollectible interest can be reasonably estimated. A defaulted debt security
is removed from non-accrual status when the issuer resumes interest payments or when collectability of interest is reasonably assured.
Dividend income is recorded on the
ex-dividend date.
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
Federal income tax status
The Fund intends to qualify each
year as a regulated investment company under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its investment company taxable income and net capital gain, if any, for its
tax year, and as such will not be subject to federal income taxes. In addition, because the Fund meets the exception under Internal Revenue Code Section 4982(f), the Fund expects not to be subject to federal excise
tax. Therefore, no federal income or excise tax provision is recorded.
Foreign taxes
The Fund may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries, as applicable, based upon its current interpretation of tax rules
and regulations that exist in the markets in which it invests.
Realized gains in certain countries
may be subject to foreign taxes at the Fund level, based on statutory rates. The Fund accrues for such foreign taxes on realized and unrealized gains at the appropriate rate for each jurisdiction, as applicable. The
amount, if any, is disclosed as a liability on the Statement of Assets and Liabilities.
Distributions to subaccounts
Distributions to the subaccounts of
Contracts, Qualified Plans and Qualified Investors are recorded at the close of business on the record date and are payable on the first business day following the record date. Dividends from net investment income, if
any, are declared and distributed quarterly. Capital gain distributions, when available, will be made annually. However, an additional capital gain distribution may be made during the fiscal year in order to comply
with the Internal Revenue Code, as applicable to registered investment companies. Income distributions and capital gain distributions are determined in accordance with federal income tax regulations, which may differ
from GAAP. All dividends and distributions are reinvested in additional shares of the applicable share class of the Fund at the net asset value as of the ex-dividend date of the distribution.
| Columbia Variable Portfolio – Emerging Markets Bond Fund | Annual Report 2021 | 25 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Under the Management Agreement, the
Investment Manager provides the Fund with investment research and advice, as well as administrative and accounting services. The management services fee is an annual fee that is equal to a percentage of the
Fund’s daily net assets that declines from 0.600% to 0.393% as the Fund’s net assets increase. The effective management services fee rate for the year ended December 31, 2021 was 0.600% of the Fund’s
average daily net assets.
Participating Affiliates
The Investment Manager and its
investment advisory affiliates (Participating Affiliates) around the world may coordinate in providing services to their clients. From time to time the Investment Manager (or any affiliated investment subadviser to
the Fund, as the case may be) may engage its Participating Affiliates to provide a variety of services such as investment research, investment monitoring, trading and discretionary investment management (including
portfolio management) to certain accounts managed by the Investment Manager, including the Fund. These Participating Affiliates provide services to the Investment Manager (or any affiliated investment subadviser to
the Fund, as the case may be) either pursuant to subadvisory agreements, personnel-sharing agreements or other inter-company arrangements, and the Fund pays no additional fees and expenses as a result of any such
arrangements.
These Participating Affiliates,
like the Investment Manager, are direct or indirect subsidiaries of Ameriprise Financial and are registered, as appropriate, with respective regulators in their home jurisdictions and, where required, the Securities
and Exchange Commission and the Commodity Futures Trading Commission in the United States.
Pursuant to some of these
arrangements, certain employees of these Participating Affiliates may serve as "associated persons" of the Investment Manager and, in this capacity, subject to the oversight and supervision of the Investment Manager
and consistent with the investment objectives, policies and limitations set forth in the Fund’s prospectus and Statement of Additional Information (SAI), may provide such services to the Fund on behalf of the
Investment Manager.
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. Under a Deferred Compensation Plan (the
Deferred Plan), these members of the Board of Trustees may elect to defer payment of up to 100% of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of
certain funds managed by the Investment Manager. The Fund’s liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Deferred Plan. All
amounts payable under the Deferred Plan constitute a general unsecured obligation of the Fund. The expense for the Deferred Plan, which includes Trustees’ fees deferred during the current period as well as any
gains or losses on the Trustees’ deferred compensation balances as a result of market fluctuations, is included in "Compensation of board members" on the Statement of Operations.
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
| 26 | Columbia Variable Portfolio – Emerging Markets Bond Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Service fees
The Fund has entered into a
Shareholder Services Agreement with Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial. Under this
agreement, the Fund pays a service fee equal to the payments made by the Transfer Agent to Participating Insurance Companies and other financial intermediaries (together, Participating Organizations) for services each
such Participating Organization provides to its clients, customers and participants that are invested directly or indirectly in the Fund, up to a cap approved by the Board of Trustees from time to time. The effective
service fee rate for the year ended December 31, 2021, was 0.12% of the Fund’s average daily net assets.
The Transfer Agent may retain as
compensation for its services revenues from fees for wire, telephone and redemption orders, account transcripts due the Transfer Agent from Fund shareholders and interest (net of bank charges) earned with respect to
balances in accounts the Transfer Agent maintains in connection with its services to the Fund.
Distribution and/or service fees
The Fund has an agreement with the
Distributor, an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution services. Under a Plan and Agreement of Distribution, the Fund pays a fee at an annual rate
of up to 0.25% of the Fund’s average daily net assets attributable to Class 2 shares. The Fund pays no distribution and service fees for Class 1 shares.
Expenses waived/reimbursed by the
Investment Manager and its affiliates
The Investment Manager and certain
of its affiliates have contractually agreed to waive fees and/or reimburse expenses (excluding certain fees and expenses described below) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, so that the Fund’s net operating expenses, after giving effect to fees waived/expenses reimbursed and any balance credits and/or overdraft charges from the Fund’s
custodian, do not exceed the following annual rate(s) as a percentage of the classes’ average daily net assets:
| May 1, 2021 through April 30, 2022 | Prior to May 1, 2021 | |
| Class 1 | 0.80% | 0.83% |
| Class 2 | 1.05 | 1.08 |
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), expenses associated with investments in affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange-traded funds), transaction costs and
brokerage commissions, costs related to any securities lending program, dividend expenses associated with securities sold short, inverse floater program fees and expenses, transaction charges and interest on borrowed
money, interest, costs associated with certain shareholder meetings, infrequent and/or unusual expenses and any other expenses the exclusion of which is specifically approved by the Board of Trustees. This
agreement may be modified or amended only with approval from the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements
described above are not recoverable by the Investment Manager or its affiliates in future periods.
Note 4. Federal tax
information
The timing and character of
income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP because of temporary or permanent book to tax differences.
At December 31, 2021, these
differences were primarily due to differing treatment for deferral/reversal of wash sale losses, trustees’ deferred compensation, derivative investments, tax straddles, capital loss carryforward, principal
and/or interest of fixed income securities, foreign capital gains tax and foreign currency transactions. To the extent these differences were permanent, reclassifications were made among the components of the
Fund’s net assets. Temporary differences do not require reclassifications.
| Columbia Variable Portfolio – Emerging Markets Bond Fund | Annual Report 2021 | 27 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
The following reclassifications
were made:
| Undistributed net investment income ($) | Accumulated net realized (loss) ($) | Paid in capital ($) |
| (142,934) | 142,934 | — |
Net investment income (loss) and
net realized gains (losses), as disclosed in the Statement of Operations, and net assets were not affected by this reclassification.
The tax character of distributions
paid during the years indicated was as follows:
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | ||||
| Ordinary income ($) | Long-term capital gains ($) | Total ($) | Ordinary income ($) | Long-term capital gains ($) | Total ($) |
| 18,292,045 | — | 18,292,045 | 14,441,574 | — | 14,441,574 |
Short-term capital gain
distributions, if any, are considered ordinary income distributions for tax purposes.
At December 31, 2021, the
components of distributable earnings on a tax basis were as follows:
| Undistributed ordinary income ($) | Undistributed long-term capital gains ($) | Capital loss carryforwards ($) | Net unrealized (depreciation) ($) |
| 1,239,757 | — | (15,967,163) | (11,579,627) |
At December 31, 2021, the cost of
all investments for federal income tax purposes along with the aggregate gross unrealized appreciation and depreciation based on that cost was:
| Federal tax cost ($) | Gross unrealized appreciation ($) | Gross unrealized (depreciation) ($) | Net unrealized (depreciation) ($) |
| 504,395,283 | 9,220,856 | (20,800,483) | (11,579,627) |
Tax cost of investments and
unrealized appreciation/(depreciation) may also include timing differences that do not constitute adjustments to tax basis.
The following capital loss
carryforwards, determined at December 31, 2021, may be available to reduce future net realized gains on investments, if any, to the extent permitted by the Internal Revenue Code. In addition, for the year ended
December 31, 2021, capital loss carryforwards utilized, if any, were as follows:
| No expiration short-term ($) | No expiration long-term ($) | Total ($) | Utilized ($) |
| (4,526,990) | (11,440,173) | (15,967,163) | 3,244,407 |
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Note 5. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $206,241,538 and $178,616,177, respectively, for the year ended December 31, 2021. The amount of purchase and
sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
| 28 | Columbia Variable Portfolio – Emerging Markets Bond Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Note 6. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes
referred to as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
Note 7. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund’s activity in the
Interfund Program during the year ended December 31, 2021 was as follows:
| Borrower or lender | Average loan balance ($) | Weighted average interest rate (%) | Number of days with outstanding loans |
| Lender | 1,400,000 | 0.67 | 6 |
Interest income earned by the Fund
is recorded as Interfund lending in the Statement of Operations. The Fund had no outstanding interfund loans at December 31, 2021.
Note 8. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to an October 28, 2021 amendment and restatement, the credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment
Manager or an affiliated investment manager, severally and not jointly, permits collective borrowings up to $950 million. Interest is currently charged to each participating fund based on its borrowings at a rate
equal to the higher of (i) the federal funds effective rate, (ii) the secured overnight financing rate plus 0.11448% and (iii) the overnight bank funding rate, plus in each case, 1.00%. Each borrowing under the credit
facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The
commitment fee is included in other expenses in the Statement of Operations. This agreement expires annually in October unless extended or renewed. Prior to the October 28, 2021 amendment and restatement, the Fund had
access to a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. which permitted collective borrowings up to $950 million. Interest was
charged to each participating fund based on its borrowings at a rate equal to the higher of (i) the federal funds effective rate, (ii) the one-month London Interbank Offered Rate (LIBOR) rate and (iii) the overnight
bank funding rate, plus in each case, 1.25%.
The Fund had no borrowings during
the year ended December 31, 2021.
| Columbia Variable Portfolio – Emerging Markets Bond Fund | Annual Report 2021 | 29 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Note 9. Significant
risks
Credit risk
Credit risk is the risk that the
value of debt instruments in the Fund’s portfolio may decline because the issuer defaults or otherwise becomes unable or unwilling, or is perceived to be unable or unwilling, to honor its financial obligations,
such as making payments to the Fund when due. Credit rating agencies assign credit ratings to certain debt instruments to indicate their credit risk. Lower-rated or unrated debt instruments held by the Fund may
present increased credit risk as compared to higher-rated debt instruments.
Foreign securities and emerging
market countries risk
Investing in foreign securities may
involve certain risks not typically associated with investing in U.S. securities, such as increased currency volatility and risks associated with political, regulatory, economic, social, diplomatic and other
conditions or events occurring in the country or region, which may result in significant market volatility. In addition, certain foreign securities may not be as liquid as U.S. securities. Investing in emerging
markets may increase these risks and expose the Fund to elevated risks associated with increased inflation, deflation or currency devaluation. To the extent that the Fund concentrates its investment exposure to any
one or a few specific countries, the Fund will be particularly susceptible to the risks associated with the conditions, events or other factors impacting those countries or regions and may, therefore, have a greater
risk than that of a fund that is more geographically diversified.
Geographic focus risk
The Fund may be particularly
susceptible to economic, political, regulatory or other events or conditions affecting issuers and countries within the specific geographic regions in which the Fund invests. The Fund’s NAV may be more volatile
than the NAV of a more geographically diversified fund.
Latin America Region. The Fund is particularly susceptible to economic, political, regulatory, legal, social or other events or conditions affecting issuers in, or those that have investment exposure to, the
Latin America region. These include risks of elevated and volatile interest, inflation and unemployment rates. Currency devaluations, exchange rate volatility and relatively high dependence upon commodities and
international trade may also present additional risks for the Fund. Latin American economies may be susceptible to adverse government regulatory and economic intervention and controls, limitations in the ability to
repatriate investment income, capital or the proceeds of the sale of securities, inadequate investor protections, less developed custody, settlement, regulatory, accounting, auditing and financial standards,
unfavorable changes in laws or regulations, natural disasters, corruption and military activity.
High-yield investments risk
Securities and other debt
instruments held by the Fund that are rated below investment grade (commonly called "high-yield" or "junk" bonds) and unrated debt instruments of comparable quality expose the Fund to a greater risk of loss of
principal and income than a fund that invests solely or primarily in investment grade debt instruments. In addition, these investments have greater price fluctuations, are less liquid and are more likely to experience
a default than higher-rated debt instruments. High-yield debt instruments are considered to be predominantly speculative with respect to the issuer’s capacity to pay interest and repay principal.
Interest rate risk
Interest rate risk is the risk of
losses attributable to changes in interest rates. In general, if prevailing interest rates rise, the values of debt instruments tend to fall, and if interest rates fall, the values of debt instruments tend to rise.
Actions by governments and central banking authorities can result in increases or decreases in interest rates. Higher periods of inflation could lead such authorities to raise interest rates. Increasing interest rates
may negatively affect the value of debt securities held by the Fund, resulting in a negative impact on the Fund’s performance and net asset value per share. In general, the longer the maturity or duration of a
debt security, the greater its sensitivity to changes in interest rates. The Fund is subject to the risk that the income generated by its investments may not keep pace with inflation.
| 30 | Columbia Variable Portfolio – Emerging Markets Bond Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Liquidity risk
Liquidity risk is the risk
associated with a lack of marketability of investments which may make it difficult to sell the investment at a desirable time or price. Changing regulatory, market or other conditions or environments (for example, the
interest rate or credit environments) may adversely affect the liquidity of the Fund’s investments. The Fund may have to accept a lower selling price for the holding, sell other investments, or forego another,
more appealing investment opportunity. Generally, the less liquid the market at the time the Fund sells a portfolio investment, the greater the risk of loss or decline of value to the Fund. A less liquid market can
lead to an increase in Fund redemptions, which may negatively impact Fund performance and net asset value per share, including, for example, if the Fund is forced to sell securities in a down market.
Market risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
The coronavirus disease 2019 and
its variants (COVID-19) pandemic has resulted in, and may continue to result in, significant global economic and societal disruption and market volatility due to disruptions in market access, resource availability,
facilities operations, imposition of tariffs, export controls and supply chain disruption, among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement
and loss in human and other resources. The uncertainty surrounding the magnitude, duration, reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental
authorities or other third parties, present unknowns that are yet to unfold. The impacts, as well as the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and
pandemics that may arise in the future – could negatively affect global economies and markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in
emerging market countries may be greater due to generally less established healthcare systems, governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing
political, social and economic risks in certain countries or globally. The disruptions caused by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively
impact the Fund’s ability to achieve its investment objectives. Any such event(s) could have a significant adverse impact on the value and risk profile of the Fund.
Non-diversification risk
A non-diversified fund is permitted
to invest a greater percentage of its total assets in fewer issuers than a diversified fund. This increases the risk that a change in the value of any one investment held by the Fund could affect the overall value of
the Fund more than it would affect that of a diversified fund holding a greater number of investments. Accordingly, the Fund’s value will likely be more volatile than the value of a more diversified fund.
Shareholder concentration risk
At December 31, 2021, two
unaffiliated shareholders of record owned 58.2% of the outstanding shares of the Fund in one or more accounts. The Fund has no knowledge about whether any portion of those shares was owned beneficially. Affiliated
shareholders of record owned 38.8% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Fund. In the case of a
| Columbia Variable Portfolio – Emerging Markets Bond Fund | Annual Report 2021 | 31 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
large redemption, the Fund may be forced to sell
investments at inopportune times, including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of less liquid positions. Large redemptions could result in decreased
economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Note 10. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
Note 11. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in
connection with the conduct of their business activities. Ameriprise Financial believes that the Fund is not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject
of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with
the Fund. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (SEC) on legal and regulatory matters that relate to
Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that
these matters, or the adverse publicity associated with them, will not result in increased Fund redemptions, reduced sale of Fund shares or other adverse consequences to the Fund. Further, although we believe
proceedings are not likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines,
penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial or one or more of its affiliates that provides services to
the Fund.
| 32 | Columbia Variable Portfolio – Emerging Markets Bond Fund | Annual Report 2021 |
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees of Columbia
Funds Variable Series Trust II and Shareholders of Columbia Variable Portfolio – Emerging Markets Bond Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of Columbia Variable Portfolio – Emerging Markets Bond Fund (one of the funds constituting Columbia Funds Variable Series Trust II,
referred to hereafter as the "Fund") as of December 31, 2021, the related statement of operations for the year ended December 31, 2021, the statement of changes in net assets for each of the two years in the period
ended December 31, 2021, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2021 (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, 2021, 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, 2021 and the financial highlights for each of the five years in the period ended December 31, 2021 in conformity with accounting principles generally
accepted in the United States of America.
Basis for Opinion
These financial statements are the
responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these
financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2021 by correspondence with the custodian, transfer agent and brokers. We believe that
our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Minneapolis, Minnesota
February 22, 2022
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| Columbia Variable Portfolio – Emerging Markets Bond Fund | Annual Report 2021 | 33 |
Federal Income Tax
Information
(Unaudited)
The Fund hereby designates the
following tax attributes for the fiscal year ended December 31, 2021.
| Foreign taxes paid to foreign countries | Foreign taxes paid per share to foreign countries | Foreign source income | Foreign source income per share |
| $38,996 | $0.0007 | $21,498,628 | $0.40 |
Foreign taxes. The Fund makes the
election to pass through to shareholders the foreign taxes paid. Eligible shareholders may claim a foreign tax credit. These taxes, and the corresponding foreign source income, are provided in the table above.
TRUSTEES AND
OFFICERS
The Board oversees the Fund’s
operations and appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following table provides basic biographical information about the Fund’s Trustees as
of the printing of this report, including their principal occupations during the past five years, although specific titles for individuals may have varied over the period. The year set forth beneath Length of Service
in the table below is the year in which the Trustee was first appointed or elected as Trustee to any Fund currently in the Columbia Funds Complex or a predecessor thereof. Under current Board policy, each Trustee
generally serves until December 31 of the year such Trustee turns seventy-five (75).
Independent trustees
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| George S. Batejan c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1953 | Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 176 | Former Chairman of the Board, NICSA (National Investment Company Services Association) (Executive Committee, Nominating Committee and Governance Committee), 2014-2016; former Director, Intech Investment Management, 2011-2016; former Board Member, Metro Denver Chamber of Commerce, 2015-2016; former Advisory Board Member, University of Colorado Business School, 2015-2018 |
| 34 | Columbia Variable Portfolio – Emerging Markets Bond Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Kathleen Blatz c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2006 | Attorney, specializing in arbitration and mediation; Chief Justice, Minnesota Supreme Court, 1998-2006; Associate Justice, Minnesota Supreme Court, 1996-1998; Fourth Judicial District Court Judge, Hennepin County, 1994-1996; Attorney in private practice and public service, 1984-1993; State Representative, Minnesota House of Representatives, 1979-1993, which included service on the Tax and Financial Institutions and Insurance Committees; Member and Interim Chair, Minnesota Sports Facilities Authority, January 2017-July 2017; Interim President and Chief Executive Officer, Blue Cross Blue Shield of Minnesota (health care insurance), February-July 2018, April-October 2021 | 176 | Former Trustee, Blue Cross Blue Shield of Minnesota, 2009-2021 (Chair of the Business Development Committee, 2014-2017; Chair of the Governance Committee, 2017-2019); former Member and Chair of the Board, Minnesota Sports Facilities Authority, January 2017-July 2017; former Director, Robina Foundation, 2009-2020 (Chair, 2014-2020); Director, Schulze Family Foundation, since 2021 |
| Pamela G. Carlton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2007 | President, Springboard — Partners in Cross Cultural Leadership (consulting company) since 2003; Managing Director of US Equity Research, JP Morgan Chase, 1999-2003; Director of US Equity Research, Chase Asset Management, 1996-1999; Co-Director Latin America Research, 1993-1996, COO Global Research, 1992-1996, Co-Director of US Research, 1991-1992, Investment Banker, Morgan Stanley, 1982-1991, Morgan Stanley; Attorney, Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 176 | Trustee, New York Presbyterian Hospital Board (Executive Committee and Chair of People Committee) since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee); Director, Apollo Commercial Real Estate Finance, Inc. since 2021; the Governing Council of the Independent Directors Council (IDC), since 2021 |
| Janet Langford Carrig c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1957 | Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 174 | Director, EQT Corporation (natural gas producer) since 2019; Director, Whiting Petroleum Corporation (independent oil and gas company) since 2020 |
| J. Kevin Connaughton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2020 | Member, FINRA National Adjudicatory Council since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Consultant to Independent Trustees of CFVIT and CFST I from March 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Managing Director and General Manager of Mutual Fund Products, Columbia Management Investment Advisers, LLC, May 2010-February 2015; President, Columbia Funds, 2008-2015; and senior officer of Columbia Funds and affiliated funds, 2003-2015 | 174 | Former Director, The Autism Project, March 2015-December 2021; former Member of the Investment Committee, St. Michael’s College, November 2015-February 2020; former Trustee, St. Michael’s College, June 2017-September 2019; former Trustee, New Century Portfolios, January 2015-December 2017 |
| Columbia Variable Portfolio – Emerging Markets Bond Fund | Annual Report 2021 | 35 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Olive M. Darragh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since 2020 | Managing Director of Darragh Inc. (strategy and talent management consulting firm) since 2010; Founder and CEO, Zolio, Inc. (investment management talent identification platform) since 2004; Consultant to Independent Trustees of CFVIT and CFST I from June 2019 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 2001-2004 | 174 | Former Director, University of Edinburgh Business School (Member of US Board); former Director, Boston Public Library Foundation |
| Patricia M. Flynn c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1950 | Trustee since 2004 | Trustee Professor of Economics and Management, Bentley University since 1976 (also teaches and conducts research on corporate governance); Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 176 | Trustee, MA Taxpayers Foundation since 1997; Board of Governors, Innovation Institute, MA Technology Collaborative, 2010-2020; former Board of Directors, The MA Business Roundtable, 2003-2019 |
| Brian J. Gallagher c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 176 | Trustee, Catholic Schools Foundation since 2004 |
| Douglas A. Hacker c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1955 | Co-Chair since 2021; Chair of CFST I and CFVIT since 2014; Trustee of CFST I and CFVIT since 1996 and CFST, CFST II, CFVST II, CET I and CET II since 2021 | Independent business executive since May 2006; Executive Vice President – Strategy of United Airlines, December 2002 - May 2006; President of UAL Loyalty Services (airline marketing company), September 2001-December 2002; Executive Vice President and Chief Financial Officer of United Airlines, July 1999-September 2001 | 176 | Director, Spartan Nash Company (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing); former Director, Nash Finch Company (food distributor), 2005-2013; former Director, SeaCube Container Leasing Ltd. (container leasing), 2010-2013; and former Director, Travelport Worldwide Limited (travel information technology), 2014-2019 |
| Nancy T. Lukitsh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1956 | Trustee since 2011 | Senior Vice President, Partner and Director of Marketing, Wellington Management Company, LLP (investment adviser), 1997-2010; Chair, Wellington Management Portfolios (commingled non-U.S. investment pools), 2007 -2010; Director, Wellington Trust Company, NA and other Wellington affiliates, 1997-2010 | 174 | None |
| 36 | Columbia Variable Portfolio – Emerging Markets Bond Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| David M. Moffett c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2011 | Retired; Consultant to Bridgewater and Associates | 174 | Director, CSX Corporation (transportation suppliers); Director, Genworth Financial, Inc. (financial and insurance products and services); Director, PayPal Holdings Inc. (payment and data processing services); Trustee, University of Oklahoma Foundation; former Director, eBay Inc. (online trading community), 2007-2015; and former Director, CIT Bank, CIT Group Inc. (commercial and consumer finance), 2010-2016 |
| Catherine James Paglia c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Co-Chair since 2021; Chair of CFST, CFST II, CFVST II, CET I and CET II since 2020; Trustee of CFST, CFST II and CFVST II since 2004 and CFST I and CFVIT since 2021 | Director, Enterprise Asset Management, Inc. (private real estate and asset management company) since September 1998; Managing Director and Partner, Interlaken Capital, Inc., 1989-1997; Vice President, 1982-1985, Principal, 1985-1987, Managing Director, 1987-1989, Morgan Stanley; Vice President, Investment Banking, 1980-1982, Associate, Investment Banking, 1976-1980, Dean Witter Reynolds, Inc. | 176 | Director, Valmont Industries, Inc. (irrigation systems manufacturer) since 2012; Trustee, Carleton College (on the Investment Committee); Trustee, Carnegie Endowment for International Peace (on the Investment Committee) |
| Minor M. Shaw c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1947 | Trustee since 2003 | President, Micco LLC (private investments) since 2011; President, Micco Corp. (family investment business), 1998-2011 | 176 | Director, Blue Cross Blue Shield of South Carolina (Chair of Compensation Committee) since April 2008; Trustee, Hollingsworth Funds (on the Investment Committee) since 2016 (previously Board Chair from 2016-2019); Former Advisory Board member, Duke Energy Corp., 2016-2020; Chair of the Duke Endowment; Chair of Greenville – Spartanburg Airport Commission; former Trustee, BofA Funds Series Trust (11 funds), 2003-2011; former Director, Piedmont Natural Gas, 2004-2016; former Director, National Association of Corporate Directors, Carolinas Chapter, 2013-2018; Chair, Daniel-Mickel Foundation since 1998 |
| Columbia Variable Portfolio – Emerging Markets Bond Fund | Annual Report 2021 | 37 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Natalie A. Trunow c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1967 | Trustee since 2020 | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services), January 2016-January 2021; Non-executive Member of the Investment Committee and Valuation Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services), August 2018-January 2021; Advisor, Paradigm Asset Management, November 2016-December 2021; Consultant to Independent Trustees of CFVIT and CFST I from September 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Director of Investments/Consultant, Casey Family Programs, April 2016-November 2016; Senior Vice President and Chief Investment Officer, Calvert Investments, August 2008-January 2016; Section Head and Portfolio Manager, General Motors Asset Management, June 1997-August 2008 | 174 | Former Director, Investment Committee, Health Services for Children with Special Needs, Inc., 2012-2019; Director, Chair of Audit Committee, Consumer Credit Counseling Services (formerly Guidewell Financial Solutions), since 2019; Independent Director, Investment Committee and Valuation Committee, Sarona Asset Management, since 2019 |
| Sandra Yeager c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2017 | Retired; President and founder, Hanoverian Capital, LLC (SEC registered investment advisor firm), 2008-2016; Managing Director, DuPont Capital, 2006-2008; Managing Director, Morgan Stanley Investment Management, 2004-2006; Senior Vice President, Alliance Bernstein, 1990-2004 | 176 | Former Director, NAPE Education Foundation, October 2016-October 2020 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Fund Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I (CET I), Columbia ETF Trust II (CET II), Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Beckman, Gallagher and Hacker and Mses. Blatz, Carlton, Flynn, Paglia, Shaw and Yeager serve as Directors of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
Interested trustee affiliated with
Investment Manager*
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during the past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex overseen | Other directorships held by Trustee during the past five years |
| Daniel J. Beckman c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since November 2021(a) | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC (since April 2015); officer of Columbia Funds and affiliated funds since 2020. | 176 | Director, Ameriprise Trust Company, since October 2016; Director, Columbia Management Investment Distributors, Inc. since November 2018; Board of Governors, Columbia Wanger Asset Management, LLC since January 2022 |
| * | Interested person (as defined under the 1940 Act) by reason of being an officer, director, security holder and/or employee of the Investment Manager or Ameriprise Financial. |
| (a) | Mr. Beckman serves as the President and Principal Executive Officer of the Columbia Funds (since 2021). |
The Statement of Additional
Information has additional information about the Fund’s Board members and is available, without charge, upon request by calling 800.345.6611 or contacting your financial intermediary.
| 38 | Columbia Variable Portfolio – Emerging Markets Bond Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. The following table provides basic information about the Officers of the Fund, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Beckman, who is President and Principal Executive Officer, the Fund’s other officers are:
The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. The following table provides basic information about the Officers of the Fund, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Beckman, who is President and Principal Executive Officer, the Fund’s other officers are:
Fund officers
| Columbia Variable Portfolio – Emerging Markets Bond Fund | Annual Report 2021 | 39 |
TRUSTEES AND OFFICERS (continued)
Fund officers (continued)
Fund officers (continued)
| Name, address and year of birth | Position and year first appointed to position for any Fund in the Columbia Funds Complex or a predecessor thereof | Principal occupation(s) during past five years |
| Lyn Kephart-Strong 5228 Ameriprise Financial Center Minneapolis, MN 55474 1960 | Vice President (2015) | President, Columbia Management Investment Services Corp. since October 2014; Vice President & Resolution Officer, Ameriprise Trust Company since August 2009. |
| 40 | Columbia Variable Portfolio – Emerging Markets Bond Fund | Annual Report 2021 |
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For Fund and other investment product prospectuses, which contain this and other important information, contact your
financial advisor or insurance representative. Please read the prospectus carefully before you invest. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved. Columbia Management Investment Distributors, Inc., 290 Congress Street, Boston, MA 02210
© 2022 Columbia Management Investment
Advisers, LLC.
S-6536 AW (2/22)
Columbia Variable
Portfolio – Limited Duration Credit Fund
Please remember that you may not
buy (nor will you own) shares of the Fund directly. The Fund is available through variable annuity contracts and variable life insurance policies offered by the separate accounts of participating insurance companies
as well as qualified pension and retirement plans. Please contact your financial advisor or insurance representative for more information.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
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| 29 |
Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which Columbia Variable Portfolio – Limited Duration Credit Fund (the Fund) holds investments consistent with the procedures as stated in the Statement of Additional
Information (SAI). You may obtain a copy of the SAI without charge by calling 800.345.6611; contacting your financial intermediary or searching the website of the Securities and Exchange Commission (SEC) at sec.gov.
Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge
by visiting columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. The Fund’s Form N-PORT is available on the SEC’s website at sec.gov. The Fund’s complete
schedule of portfolio holdings, as filed on Form N-PORT, can also be obtained without charge, upon request, by calling 800.345.6611.
Additional Fund information
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
290 Congress Street
Boston, MA 02210
Fund distributor
Columbia Management Investment Distributors,
Inc.
290 Congress Street
Boston, MA 02210
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
Columbia Variable Portfolio – Limited
Duration Credit Fund | Annual Report 2021
Fund at a Glance
Investment objective
The Fund
seeks to provide shareholders with a level of current income consistent with preservation of capital.
Portfolio management
Tom Murphy, CFA
Lead Portfolio Manager
Managed Fund since 2010
Royce D. Wilson, CFA
Portfolio Manager
Managed Fund since 2012
John Dawson, CFA
Portfolio Manager
Managed Fund since 2020
Shannon Rinehart
Portfolio Manager
Managed Fund since February 2022
| Columbia Variable Portfolio – Limited Duration Credit Fund | Annual Report 2021 | 3 |
Fund at a Glance (continued)
Performance of a hypothetical $10,000 investment (December 31, 2011 — December 31, 2021)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class 2 shares of Columbia Variable Portfolio – Limited Duration Credit Fund during the stated time period, and does not reflect the deduction of taxes, if any,
that a shareholder may pay on Fund distributions or on the redemption of Fund shares. The returns also do not reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance
policy or qualified pension or retirement plan, if any.
| 4 | Columbia Variable Portfolio – Limited Duration Credit Fund | Annual Report 2021 |
Manager Discussion of Fund Performance
At December 31, 2021,
approximately 89.57% of the Fund’s shares were owned in the aggregate by affiliated funds-of-funds managed by Columbia Management Investment Advisers, LLC (the Investment Manager). As a result of asset
allocation decisions by the Investment Manager, it is possible that the Fund may experience relatively large purchases or redemptions from affiliated funds-of-funds. The Investment Manager seeks to minimize the impact
of these transactions by structuring them over a reasonable period of time. The Fund may also experience increased expenses as it buys and sells securities as a result of purchases or redemptions by affiliated
funds-of-funds.
For the 12-month period ended
December 31, 2021, the Fund’s Class 2 shares returned -0.84%. The Fund underperformed its benchmark, the Bloomberg U.S. 1-5 Year Corporate Index, which returned -0.47% for the same time period.
Market overview
As pandemic-related restrictions
were eased over the period, robust economic growth and corporate earnings supported risk sentiment and credit-oriented segments of the bond market. In addition, both U.S. monetary and fiscal policy were highly
supportive for much of the period. In this vein, Congress approved massive spending packages that included direct payments to citizens and the U.S. Federal Reserve (Fed) maintained its benchmark overnight lending rate
near zero while engaging in bond market purchases to keep longer term borrowing costs low.
The fourth quarter of 2021 saw the
Fed adopt a more hawkish tone in response to persistently high inflation, leading to increased market volatility. The Fed officially tightened policy in November as it began tapering its monthly bond purchases.
December saw the Fed signal the likelihood of three increases in the fed funds rate in 2022.
Bond market returns for the 12
months were muted given the move higher in U.S. Treasury yields. To illustrate, the 10-year Treasury note yield, which entered the year at 0.93%, reached as high as 1.74% at the end of the first quarter before
drifting lower and ending 2021 at 1.52%.
The Fund’s notable
detractors during the period
| • | The Fund’s positioning along the yield curve and stance with respect to duration and corresponding interest rate sensitivity detracted from performance as interest rates finished the period higher. At period-end, the Fund was positioned neutrally with respect to the yield curve and duration. |
The Fund’s notable
contributors during the period
| • | Security selection was the primary positive contributor to the Fund’s performance relative to the benchmark over the period, highlighted by selection within the food & beverage and energy segments. |
| • | More broadly, the Fund’s slightly overweight stance with respect to credit risk contributed to relative performance as credit spreads – the incremental yields offered by lower quality securities – narrowed over the period given the investor search for yield. The Fund maintained a modest overweight to credit at period end. |
Derivative usage
The Fund employed Treasury
futures contracts during the 12-month period to seek to reduce the potentially negative impact of rising interest rates. The use of these derivatives, on a stand-alone basis, contributed to Fund performance during the
period.
The views expressed in this report
reflect the current views of the respective parties who have contributed to this report. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult
to predict, so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective parties
disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Columbia fund are based on numerous factors, may not be relied on as an
indication of trading intent on behalf of any particular Columbia fund. References to specific securities should not be construed as a recommendation or investment advice.
| Columbia Variable Portfolio – Limited Duration Credit Fund | Annual Report 2021 | 5 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur ongoing
costs, which generally include management fees, distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to help you compare these costs with the ongoing costs of investing in other mutual funds.
The information below does not
reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy (collectively, Contracts) or qualified pension and retirement plan (Qualified Plan), if any. The total fees
and expenses you bear may therefore be higher than those shown below.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount invested, to estimate the
expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as redemption or exchange fees, or expenses that apply to the subaccount or the Contract. Therefore, the
hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If the fees and expenses imposed under your Contract or
Qualified Plan, if any, were included, your costs would be higher.
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 365.
Expenses do not include fees and
expenses incurred indirectly by the Fund from its investment in underlying funds, including affiliated and non-affiliated pooled investment vehicles, such as mutual funds and exchange-traded funds.
Had Columbia Management Investment
Advisers, LLC and/or certain of its affiliates not waived/reimbursed certain fees and expenses, account value at the end of the period would have been reduced.
| 6 | Columbia Variable Portfolio – Limited Duration Credit Fund | Annual Report 2021 |
Portfolio of Investments
December 31, 2021
December 31, 2021
(Percentages represent value of
investments compared to net assets)
Investments in securities
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Limited Duration Credit Fund | Annual Report 2021 | 7 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 8 | Columbia Variable Portfolio – Limited Duration Credit Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Limited Duration Credit Fund | Annual Report 2021 | 9 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
| U.S. Treasury Obligations (continued) | ||||
| Issuer | Coupon Rate | Principal Amount ($) | Value ($) | |
| 09/15/2024 | 0.375% | 13,584,700 | 13,393,665 | |
| 10/31/2025 | 0.250% | 12,325,000 | 11,915,771 | |
| Total U.S. Treasury Obligations (Cost $76,241,230) | 75,381,734 | |||
| Money Market Funds 2.6% | ||
| Shares | Value ($) | |
| Columbia Short-Term Cash Fund, 0.085%(d),(e) | 23,482,292 | 23,477,596 |
| Total Money Market Funds (Cost $23,478,452) | 23,477,596 | |
| Total Investments in Securities (Cost: $893,672,401) | 893,375,361 | |
| Other Assets & Liabilities, Net | 5,540,039 | |
| Net Assets | 898,915,400 | |
At December 31, 2021, securities
and/or cash totaling $818,000 were pledged as collateral.
Investments in derivatives
| Long futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| U.S. Treasury 2-Year Note | 554 | 03/2022 | USD | 120,867,219 | — | (234,854) |
| Short futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| U.S. Treasury 10-Year Note | (269) | 03/2022 | USD | (35,096,094) | — | (107,758) |
| U.S. Treasury 5-Year Note | (315) | 03/2022 | USD | (38,107,617) | — | (73,322) |
| Total | — | (181,080) | ||||
Notes to Portfolio of
Investments
| (a) | Represents a variable rate security with a step coupon where the rate adjusts according to a schedule for a series of periods, typically lower for an initial period and then increasing to a higher coupon rate thereafter. The interest rate shown was the current rate as of December 31, 2021. |
| (b) | Represents privately placed and other securities and instruments exempt from Securities and Exchange Commission registration (collectively, private placements), such as Section 4(a)(2) and Rule 144A eligible securities, which are often sold only to qualified institutional buyers. At December 31, 2021, the total value of these securities amounted to $180,980,125, which represents 20.13% of total net assets. |
| (c) | Variable rate security. The interest rate shown was the current rate as of December 31, 2021. |
| (d) | The rate shown is the seven-day current annualized yield at December 31, 2021. |
| (e) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended December 31, 2021 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Realized gain (loss)($) | Dividends($) | End of period shares |
| Columbia Short-Term Cash Fund, 0.085% | ||||||||
| 48,202,884 | 539,304,925 | (564,029,357) | (856) | 23,477,596 | (106) | 34,807 | 23,482,292 | |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 10 | Columbia Variable Portfolio – Limited Duration Credit Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Abbreviation Legend
| LIBOR | London Interbank Offered Rate |
| SOFR | Secured Overnight Financing Rate |
Currency Legend
| USD | US Dollar |
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at December 31, 2021:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Investments in Securities | ||||
| Corporate Bonds & Notes | — | 794,516,031 | — | 794,516,031 |
| U.S. Treasury Obligations | 75,381,734 | — | — | 75,381,734 |
| Money Market Funds | 23,477,596 | — | — | 23,477,596 |
| Total Investments in Securities | 98,859,330 | 794,516,031 | — | 893,375,361 |
| Investments in Derivatives | ||||
| Liability | ||||
| Futures Contracts | (415,934) | — | — | (415,934) |
| Total | 98,443,396 | 794,516,031 | — | 892,959,427 |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The Fund’s assets assigned to
the Level 2 input category are generally valued using the market approach, in which a security’s value is determined through reference to prices and information from market transactions for similar or identical
assets.
Derivative instruments are valued at
unrealized appreciation (depreciation).
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Limited Duration Credit Fund | Annual Report 2021 | 11 |
Statement of Assets and Liabilities
December 31, 2021
December 31, 2021
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $870,193,949) | $869,897,765 |
| Affiliated issuers (cost $23,478,452) | 23,477,596 |
| Margin deposits on: | |
| Futures contracts | 818,000 |
| Receivable for: | |
| Capital shares sold | 14,267 |
| Dividends | 1,005 |
| Interest | 4,982,282 |
| Variation margin for futures contracts | 25,969 |
| Expense reimbursement due from Investment Manager | 314 |
| Prepaid expenses | 12,300 |
| Total assets | 899,229,498 |
| Liabilities | |
| Payable for: | |
| Capital shares purchased | 68,629 |
| Variation margin for futures contracts | 56,044 |
| Management services fees | 11,770 |
| Distribution and/or service fees | 633 |
| Service fees | 7,044 |
| Compensation of board members | 144,917 |
| Compensation of chief compliance officer | 167 |
| Other expenses | 24,894 |
| Total liabilities | 314,098 |
| Net assets applicable to outstanding capital stock | $898,915,400 |
| Represented by | |
| Paid in capital | 892,821,287 |
| Total distributable earnings (loss) | 6,094,113 |
| Total - representing net assets applicable to outstanding capital stock | $898,915,400 |
| Class 1 | |
| Net assets | $806,365,493 |
| Shares outstanding | 81,973,512 |
| Net asset value per share | $9.84 |
| Class 2 | |
| Net assets | $92,549,907 |
| Shares outstanding | 9,452,511 |
| Net asset value per share | $9.79 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 12 | Columbia Variable Portfolio – Limited Duration Credit Fund | Annual Report 2021 |
Statement of Operations
Year Ended December 31, 2021
Year Ended December 31, 2021
| Net investment income | |
| Income: | |
| Dividends — affiliated issuers | $34,807 |
| Interest | 13,827,486 |
| Total income | 13,862,293 |
| Expenses: | |
| Management services fees | 4,231,451 |
| Distribution and/or service fees | |
| Class 2 | 224,413 |
| Service fees | 59,724 |
| Compensation of board members | 51,365 |
| Custodian fees | 7,161 |
| Printing and postage fees | 20,945 |
| Audit fees | 29,500 |
| Legal fees | 18,074 |
| Compensation of chief compliance officer | 153 |
| Other | 10,061 |
| Total expenses | 4,652,847 |
| Fees waived or expenses reimbursed by Investment Manager and its affiliates | (156,499) |
| Total net expenses | 4,496,348 |
| Net investment income | 9,365,945 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 10,416,177 |
| Investments — affiliated issuers | (106) |
| Futures contracts | 3,033,653 |
| Net realized gain | 13,449,724 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | (27,925,697) |
| Investments — affiliated issuers | (856) |
| Futures contracts | (487,057) |
| Net change in unrealized appreciation (depreciation) | (28,413,610) |
| Net realized and unrealized loss | (14,963,886) |
| Net decrease in net assets resulting from operations | $(5,597,941) |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| Columbia Variable Portfolio – Limited Duration Credit Fund | Annual Report 2021 | 13 |
Statement of Changes in Net Assets
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | |
| Operations | ||
| Net investment income | $9,365,945 | $14,003,306 |
| Net realized gain | 13,449,724 | 16,863,637 |
| Net change in unrealized appreciation (depreciation) | (28,413,610) | 10,421,896 |
| Net increase (decrease) in net assets resulting from operations | (5,597,941) | 41,288,839 |
| Distributions to shareholders | ||
| Net investment income and net realized gains | ||
| Class 1 | (12,952,166) | (18,001,043) |
| Class 2 | (1,249,319) | (1,738,011) |
| Total distributions to shareholders | (14,201,485) | (19,739,054) |
| Increase (decrease) in net assets from capital stock activity | 166,992,501 | (9,301,207) |
| Total increase in net assets | 147,193,075 | 12,248,578 |
| Net assets at beginning of year | 751,722,325 | 739,473,747 |
| Net assets at end of year | $898,915,400 | $751,722,325 |
| Year Ended | Year Ended | |||
| December 31, 2021 | December 31, 2020 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class 1 | ||||
| Subscriptions | 17,053,409 | 171,251,440 | 2,661,914 | 26,255,670 |
| Distributions reinvested | 1,304,347 | 12,952,166 | 1,816,452 | 18,001,043 |
| Redemptions | (2,663,232) | (26,594,221) | (8,299,639) | (81,789,763) |
| Net increase (decrease) | 15,694,524 | 157,609,385 | (3,821,273) | (37,533,050) |
| Class 2 | ||||
| Subscriptions | 2,347,402 | 23,320,621 | 3,598,209 | 35,489,396 |
| Distributions reinvested | 126,194 | 1,249,319 | 176,090 | 1,738,011 |
| Redemptions | (1,531,476) | (15,186,824) | (920,005) | (8,995,564) |
| Net increase | 942,120 | 9,383,116 | 2,854,294 | 28,231,843 |
| Total net increase (decrease) | 16,636,644 | 166,992,501 | (966,979) | (9,301,207) |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 14 | Columbia Variable Portfolio – Limited Duration Credit Fund | Annual Report 2021 |
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| Columbia Variable Portfolio – Limited Duration Credit Fund | Annual Report 2021 | 15 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect any fees and expenses imposed under your
Contract and/or Qualified Plan, as applicable; such fees and expenses would reduce the total returns for all periods shown. Total return and portfolio turnover are not annualized for periods of less than one year. The
portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain derivatives, if any. If such transactions were included, the Fund’s portfolio
turnover rate may be higher.
| Net asset value, beginning of period | Net investment income | Net realized and unrealized gain (loss) | Total from investment operations | Distributions from net investment income | Total distributions to shareholders | |
| Class 1 | ||||||
| Year Ended 12/31/2021 | $10.06 | 0.11 | (0.17) | (0.06) | (0.16) | (0.16) |
| Year Ended 12/31/2020 | $9.76 | 0.19 | 0.38 | 0.57 | (0.27) | (0.27) |
| Year Ended 12/31/2019 | $9.28 | 0.25 | 0.46 | 0.71 | (0.23) | (0.23) |
| Year Ended 12/31/2018 | $9.44 | 0.21 | (0.19) | 0.02 | (0.18) | (0.18) |
| Year Ended 12/31/2017 | $9.47 | 0.17 | 0.02 | 0.19 | (0.22) | (0.22) |
| Class 2 | ||||||
| Year Ended 12/31/2021 | $10.01 | 0.08 | (0.16) | (0.08) | (0.14) | (0.14) |
| Year Ended 12/31/2020 | $9.72 | 0.16 | 0.38 | 0.54 | (0.25) | (0.25) |
| Year Ended 12/31/2019 | $9.24 | 0.22 | 0.47 | 0.69 | (0.21) | (0.21) |
| Year Ended 12/31/2018 | $9.40 | 0.19 | (0.19) | 0.00(c) | (0.16) | (0.16) |
| Year Ended 12/31/2017 | $9.43 | 0.15 | 0.02 | 0.17 | (0.20) | (0.20) |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Rounds to zero. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 16 | Columbia Variable Portfolio – Limited Duration Credit Fund | Annual Report 2021 |
Financial Highlights (continued)
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets(a) | Total net expense ratio to average net assets(a),(b) | Net investment income ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Class 1 | |||||||
| Year Ended 12/31/2021 | $9.84 | (0.59%) | 0.50% | 0.48% | 1.08% | 88% | $806,365 |
| Year Ended 12/31/2020 | $10.06 | 5.90% | 0.50% | 0.49% | 1.92% | 92% | $666,530 |
| Year Ended 12/31/2019 | $9.76 | 7.69% | 0.50% | 0.49% | 2.58% | 110% | $684,486 |
| Year Ended 12/31/2018 | $9.28 | 0.24% | 0.50% | 0.50% | 2.30% | 62% | $707,421 |
| Year Ended 12/31/2017 | $9.44 | 2.05% | 0.53% | 0.53% | 1.79% | 104% | $773,190 |
| Class 2 | |||||||
| Year Ended 12/31/2021 | $9.79 | (0.84%) | 0.75% | 0.73% | 0.83% | 88% | $92,550 |
| Year Ended 12/31/2020 | $10.01 | 5.57% | 0.75% | 0.74% | 1.63% | 92% | $85,193 |
| Year Ended 12/31/2019 | $9.72 | 7.47% | 0.75% | 0.74% | 2.32% | 110% | $54,988 |
| Year Ended 12/31/2018 | $9.24 | (0.02%) | 0.75% | 0.75% | 2.06% | 62% | $46,253 |
| Year Ended 12/31/2017 | $9.40 | 1.80% | 0.78% | 0.78% | 1.55% | 104% | $40,342 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Limited Duration Credit Fund | Annual Report 2021 | 17 |
Notes to Financial Statements
December 31, 2021
December 31, 2021
Note 1. Organization
Columbia Variable Portfolio
– Limited Duration Credit Fund (the Fund), a series of Columbia Funds Variable Series Trust II (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended
(the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers Class 1 and Class 2 shares to separate accounts funding variable annuity contracts and variable life insurance policies (collectively, Contracts) issued by
affiliated and unaffiliated life insurance companies (Participating Insurance Companies) as well as qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors (Qualified
Investors) authorized by Columbia Management Investment Distributors, Inc. (the Distributor). You may not buy (nor will you own) shares of the Fund directly. You may invest by participating in a Qualified Plan or by
buying a Contract and making allocations to the Fund. Although all share classes generally have identical voting, dividend and liquidation rights, each share class votes separately when required by the Trust’s
organizational documents or by law. Different share classes pay different net investment income distribution amounts to the extent the expenses of such share classes differ, and distributions in liquidation will be
proportional to the net asset value of each share class. Each share class has its own cost structure and other features.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Debt securities generally are
valued by pricing services approved by the Board of Trustees based upon market transactions for normal, institutional-size trading units of similar securities. The services may use various pricing techniques that take
into account, as applicable, factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data, as well as approved independent broker-dealer quotes. Debt securities for
which quotations are not readily available or not believed to be reflective of market value may also be valued based upon a bid quote from an approved independent broker-dealer. Debt securities maturing in 60 days or
less are valued primarily at amortized market value, unless this method results in a valuation that management believes does not approximate fair value.
Investments in open-end investment
companies (other than exchange-traded funds (ETFs)), are valued at the latest net asset value reported by those companies as of the valuation time.
Futures and options on futures
contracts are valued based upon the settlement price at the close of regular trading on their principal exchanges or, in the absence of a settlement price, at the mean of the latest quoted bid and ask prices.
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
| 18 | Columbia Variable Portfolio – Limited Duration Credit Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Derivative instruments
The Fund invests in certain
derivative instruments, as detailed below, in seeking to meet its investment objectives. Derivatives are instruments whose values depend on, or are derived from, in whole or in part, the value of one or more
securities, currencies, commodities, indices, or other assets or instruments. Derivatives may be used to increase investment flexibility (including to maintain cash reserves while maintaining desired exposure to
certain assets), for risk management (hedging) purposes, to facilitate trading, to reduce transaction costs and to pursue higher investment returns. The Fund may also use derivative instruments to mitigate certain
investment risks, such as foreign currency exchange rate risk, interest rate risk and credit risk. Derivatives may involve various risks, including the potential inability of the counterparty to fulfill its
obligations under the terms of the contract, the potential for an illiquid secondary market (making it difficult for the Fund to sell or terminate, including at favorable prices) and the potential for market movements
which may expose the Fund to gains or losses in excess of the amount shown in the Statement of Assets and Liabilities. The notional amounts of derivative instruments, if applicable, are not recorded in the financial
statements.
A derivative instrument may suffer
a marked-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform its
obligations under the contract. The Fund’s risk of loss from counterparty credit risk on over-the-counter derivatives is generally limited to the aggregate unrealized gain netted against any collateral held by
the Fund and the amount of any variation margin held by the counterparty, plus any replacement costs or related amounts. With exchange-traded or centrally cleared derivatives, there is reduced counterparty credit risk
to the Fund since the clearinghouse or central counterparty (CCP) provides some protection in the case of clearing member default. The clearinghouse or CCP stands between the buyer and the seller of the contract;
therefore, additional counterparty credit risk is failure of the clearinghouse or CCP. However, credit risk still exists in exchange-traded or centrally cleared derivatives with respect to initial and variation margin
that is held in a broker’s customer account. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy
and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients and such shortfall is remedied by the CCP or otherwise, U.S. bankruptcy laws will typically
allocate that shortfall on a pro-rata basis across all the clearing broker’s customers (including the Fund), potentially resulting in losses to the Fund.
In order to better define its
contractual rights and to secure rights that will help the Fund mitigate its counterparty risk, the Fund may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (ISDA Master Agreement)
or similar agreement with its derivatives counterparties. An ISDA Master Agreement is an agreement between the Fund and a counterparty that governs over-the-counter derivatives and foreign exchange forward contracts
and contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset
with the counterparty certain derivative instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically
permit a single net payment in the event of default (close-out netting), including the bankruptcy or insolvency of the counterparty. Note, however, that bankruptcy or insolvency laws of a particular jurisdiction may
impose restrictions on or prohibitions against the right of offset or netting in bankruptcy, insolvency or other events.
Collateral (margin) requirements
differ by type of derivative. Margin requirements are established by the clearinghouse or CCP for exchange-traded and centrally cleared derivatives. Brokers can ask for margin in excess of the minimum in certain
circumstances. Collateral terms for most over-the-counter derivatives are subject to regulatory requirements to exchange variation margin with trading counterparties and may have contract specific margin terms as
well. For over-the-counter derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the marked-to-market amount for each transaction under such agreement and
comparing that amount to the value of any variation margin currently pledged by the Fund and/or the counterparty. Generally, the amount of collateral due from or to a party has to exceed a minimum transfer amount
threshold (e.g., $250,000) before a transfer has to be made. To the extent amounts due to the Fund from its counterparties are not fully collateralized, contractually or otherwise, the Fund bears the risk of loss from
counterparty nonperformance. The Fund may also pay interest expense on cash collateral received from the
| Columbia Variable Portfolio – Limited Duration Credit Fund | Annual Report 2021 | 19 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
broker. Any interest expense paid by the Fund is
shown on the Statement of Operations. The Fund attempts to mitigate counterparty risk by only entering into agreements with counterparties that it believes have the financial resources to honor their obligations and
by monitoring the financial stability of those counterparties.
Certain ISDA Master Agreements
allow counterparties of over-the-counter derivatives transactions to terminate derivatives contracts prior to maturity in the event the Fund’s net asset value declines by a stated percentage over a specified
time period or if the Fund fails to meet certain terms of the ISDA Master Agreement, which would cause the Fund to accelerate payment of any net liability owed to the counterparty. The Fund also has termination
rights if the counterparty fails to meet certain terms of the ISDA Master Agreement. In determining whether to exercise such termination rights, the Fund would consider, in addition to counterparty credit risk,
whether termination would result in a net liability owed from the counterparty.
For financial reporting purposes,
the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statement of Assets and Liabilities.
Futures contracts
Futures contracts are
exchange-traded and represent commitments for the future purchase or sale of an asset at a specified price on a specified date. The Fund bought and sold futures contracts to manage the duration and yield curve
exposure of the Fund versus the benchmark and to manage exposure to movements in interest rates. These instruments may be used for other purposes in future periods. Upon entering into futures contracts, the Fund bears
risks that it may not achieve the anticipated benefits of the futures contracts and may realize a loss. Additional risks include counterparty credit risk, the possibility of an illiquid market, and that a change in
the value of the contract or option may not correlate with changes in the value of the underlying asset.
Upon entering into a futures
contract, the Fund deposits cash or securities with the broker, known as a futures commission merchant (FCM), in an amount sufficient to meet the initial margin requirement. The initial margin deposit must be
maintained at an established level over the life of the contract. Cash deposited as initial margin is recorded in the Statement of Assets and Liabilities as margin deposits. Securities deposited as initial margin are
designated in the Portfolio of Investments. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily change in the contract value and are
recorded as variation margin receivable or payable and are offset in unrealized gains or losses. The Fund generally expects to earn interest income on its margin deposits. The Fund recognizes a realized gain or loss
when the contract is closed or expires. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities.
Effects of derivative transactions in
the financial statements
The following tables are intended
to provide additional information about the effect of derivatives on the financial statements of the Fund, including: the fair value of derivatives by risk category and the location of those fair values in the
Statement of Assets and Liabilities; and the impact of derivative transactions over the period in the Statement of Operations, including realized and unrealized gains (losses). The derivative instrument schedules
following the Portfolio of Investments present additional information regarding derivative instruments outstanding at the end of the period, if any.
The following table is a summary of
the fair value of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) at December 31, 2021:
| * | Includes cumulative appreciation (depreciation) as reported in the tables following the Portfolio of Investments. Only the current day’s variation margin is reported in receivables or payables in the Statement of Assets and Liabilities. |
| 20 | Columbia Variable Portfolio – Limited Duration Credit Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
The following table indicates the
effect of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) in the Statement of Operations for the year ended December 31, 2021:
| Amount of realized gain (loss) on derivatives recognized in income | ||||||
| Risk exposure category | Futures contracts ($) | |||||
| Interest rate risk | 3,033,653 | |||||
| Change in unrealized appreciation (depreciation) on derivatives recognized in income | ||||||
| Risk exposure category | Futures contracts ($) | |||||
| Interest rate risk | (487,057) | |||||
The following table is a summary
of the average outstanding volume by derivative instrument for the year ended December 31, 2021:
| Derivative instrument | Average notional amounts ($)* |
| Futures contracts — long | 148,335,777 |
| Futures contracts — short | 96,818,044 |
| * | Based on the ending quarterly outstanding amounts for the year ended December 31, 2021. |
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
Income recognition
Interest income is recorded on an
accrual basis. Market premiums and discounts, including original issue discounts, are amortized and accreted, respectively, over the expected life of the security on all debt securities, unless otherwise noted.
The Fund may place a debt security
on non-accrual status and reduce related interest income when it becomes probable that the interest will not be collected and the amount of uncollectible interest can be reasonably estimated. A defaulted debt security
is removed from non-accrual status when the issuer resumes interest payments or when collectability of interest is reasonably assured.
Dividend income is recorded on the
ex-dividend date.
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
| Columbia Variable Portfolio – Limited Duration Credit Fund | Annual Report 2021 | 21 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Federal income tax status
The Fund intends to qualify each
year as a regulated investment company under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its investment company taxable income and net capital gain, if any, for its
tax year, and as such will not be subject to federal income taxes. In addition, because the Fund meets the exception under Internal Revenue Code Section 4982(f), the Fund expects not to be subject to federal excise
tax. Therefore, no federal income or excise tax provision is recorded.
Distributions to subaccounts
Distributions to the subaccounts of
Contracts, Qualified Plans and Qualified Investors are recorded at the close of business on the record date and are payable on the first business day following the record date. Dividends from net investment income, if
any, are declared and distributed annually. Capital gain distributions, when available, will be made annually. However, an additional capital gain distribution may be made during the fiscal year in order to comply
with the Internal Revenue Code, as applicable to registered investment companies. Income distributions and capital gain distributions are determined in accordance with federal income tax regulations, which may differ
from GAAP. All dividends and distributions are reinvested in additional shares of the applicable share class of the Fund at the net asset value as of the ex-dividend date of the distribution.
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Under the Management Agreement, the
Investment Manager provides the Fund with investment research and advice, as well as administrative and accounting services. The management services fee is an annual fee that is equal to a percentage of the
Fund’s daily net assets that declines from 0.48% to 0.33% as the Fund’s net assets increase. The effective management services fee rate for the year ended December 31, 2021 was 0.48% of the Fund’s
average daily net assets.
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. Under a Deferred Compensation Plan (the
Deferred Plan), these members of the Board of Trustees may elect to defer payment of up to 100% of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of
certain funds managed by the Investment Manager. The Fund’s liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Deferred Plan. All
amounts payable under the Deferred Plan constitute a general unsecured obligation of the Fund. The expense for the Deferred Plan, which includes Trustees’ fees deferred during the current period as well as any
gains or losses on the Trustees’ deferred compensation balances as a result of market fluctuations, is included in "Compensation of board members" on the Statement of Operations.
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
| 22 | Columbia Variable Portfolio – Limited Duration Credit Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Service fees
The Fund has entered into a
Shareholder Services Agreement with Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial. Under this
agreement, the Fund pays a service fee equal to the payments made by the Transfer Agent to Participating Insurance Companies and other financial intermediaries (together, Participating Organizations) for services each
such Participating Organization provides to its clients, customers and participants that are invested directly or indirectly in the Fund, up to a cap approved by the Board of Trustees from time to time. The effective
service fee rate for the year ended December 31, 2021, was 0.01% of the Fund’s average daily net assets.
The Transfer Agent may retain as
compensation for its services revenues from fees for wire, telephone and redemption orders, account transcripts due the Transfer Agent from Fund shareholders and interest (net of bank charges) earned with respect to
balances in accounts the Transfer Agent maintains in connection with its services to the Fund.
Distribution and/or service fees
The Fund has an agreement with the
Distributor, an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution services. Under a Plan and Agreement of Distribution, the Fund pays a fee at an annual rate
of up to 0.25% of the Fund’s average daily net assets attributable to Class 2 shares. The Fund pays no distribution and service fees for Class 1 shares.
Expenses waived/reimbursed by the
Investment Manager and its affiliates
The Investment Manager and certain
of its affiliates have contractually agreed to waive fees and/or reimburse expenses (excluding certain fees and expenses described below) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, so that the Fund’s net operating expenses, after giving effect to fees waived/expenses reimbursed and any balance credits and/or overdraft charges from the Fund’s
custodian, do not exceed the following annual rate(s) as a percentage of the classes’ average daily net assets:
| May 1, 2021 through April 30, 2022 | Prior to May 1, 2021 | |
| Class 1 | 0.48% | 0.49% |
| Class 2 | 0.73 | 0.74 |
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), expenses associated with investments in affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange-traded funds), transaction costs and
brokerage commissions, costs related to any securities lending program, dividend expenses associated with securities sold short, inverse floater program fees and expenses, transaction charges and interest on borrowed
money, interest, costs associated with certain shareholder meetings, infrequent and/or unusual expenses and any other expenses the exclusion of which is specifically approved by the Board of Trustees. This
agreement may be modified or amended only with approval from the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements
described above are not recoverable by the Investment Manager or its affiliates in future periods.
Note 4. Federal tax
information
The timing and character of
income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP because of temporary or permanent book to tax differences.
At December 31, 2021, these
differences were primarily due to differing treatment for deferral/reversal of wash sale losses, trustees’ deferred compensation, derivative investments, tax straddles, capital loss carryforward and principal
and/or interest of fixed income securities. To the extent these differences were permanent, reclassifications were made among the components of the Fund’s net assets. Temporary differences do not require
reclassifications.
| Columbia Variable Portfolio – Limited Duration Credit Fund | Annual Report 2021 | 23 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
The following reclassifications
were made:
| Undistributed net investment income ($) | Accumulated net realized (loss) ($) | Paid in capital ($) |
| 381,666 | (381,666) | — |
Net investment income (loss) and
net realized gains (losses), as disclosed in the Statement of Operations, and net assets were not affected by this reclassification.
The tax character of distributions
paid during the years indicated was as follows:
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | ||||
| Ordinary income ($) | Long-term capital gains ($) | Total ($) | Ordinary income ($) | Long-term capital gains ($) | Total ($) |
| 14,201,485 | — | 14,201,485 | 19,739,054 | — | 19,739,054 |
Short-term capital gain
distributions, if any, are considered ordinary income distributions for tax purposes.
At December 31, 2021, the
components of distributable earnings on a tax basis were as follows:
| Undistributed ordinary income ($) | Undistributed long-term capital gains ($) | Capital loss carryforwards ($) | Net unrealized (depreciation) ($) |
| 9,459,021 | — | (2,350,051) | (871,060) |
At December 31, 2021, the cost of
all investments for federal income tax purposes along with the aggregate gross unrealized appreciation and depreciation based on that cost was:
| Federal tax cost ($) | Gross unrealized appreciation ($) | Gross unrealized (depreciation) ($) | Net unrealized (depreciation) ($) |
| 893,830,487 | 5,624,406 | (6,495,466) | (871,060) |
Tax cost of investments and
unrealized appreciation/(depreciation) may also include timing differences that do not constitute adjustments to tax basis.
The following capital loss
carryforwards, determined at December 31, 2021, may be available to reduce future net realized gains on investments, if any, to the extent permitted by the Internal Revenue Code. In addition, for the year ended
December 31, 2021, capital loss carryforwards utilized, if any, were as follows:
| No expiration short-term ($) | No expiration long-term ($) | Total ($) | Utilized ($) |
| (2,350,051) | — | (2,350,051) | 12,518,552 |
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Note 5. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $895,984,523 and $725,293,681, respectively, for the year ended December 31, 2021, of which $46,994,485 and
$62,238,483, respectively, were U.S. government securities. The amount of purchase and sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
| 24 | Columbia Variable Portfolio – Limited Duration Credit Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Note 6. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes
referred to as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
Note 7. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund did not borrow or lend
money under the Interfund Program during the year ended December 31, 2021.
Note 8. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to an October 28, 2021 amendment and restatement, the credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment
Manager or an affiliated investment manager, severally and not jointly, permits collective borrowings up to $950 million. Interest is currently charged to each participating fund based on its borrowings at a rate
equal to the higher of (i) the federal funds effective rate, (ii) the secured overnight financing rate plus 0.11448% and (iii) the overnight bank funding rate, plus in each case, 1.00%. Each borrowing under the credit
facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The
commitment fee is included in other expenses in the Statement of Operations. This agreement expires annually in October unless extended or renewed. Prior to the October 28, 2021 amendment and restatement, the Fund had
access to a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. which permitted collective borrowings up to $950 million. Interest was
charged to each participating fund based on its borrowings at a rate equal to the higher of (i) the federal funds effective rate, (ii) the one-month London Interbank Offered Rate (LIBOR) rate and (iii) the overnight
bank funding rate, plus in each case, 1.25%.
The Fund had no borrowings during
the year ended December 31, 2021.
Note 9. Significant
risks
Credit risk
Credit risk is the risk that the
value of debt instruments in the Fund’s portfolio may decline because the issuer defaults or otherwise becomes unable or unwilling, or is perceived to be unable or unwilling, to honor its financial obligations,
such as making payments to the Fund when due. Credit rating agencies assign credit ratings to certain debt instruments to indicate their credit risk. Lower-rated or unrated debt instruments held by the Fund may
present increased credit risk as compared to higher-rated debt instruments.
| Columbia Variable Portfolio – Limited Duration Credit Fund | Annual Report 2021 | 25 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Derivatives risk
Losses involving derivative
instruments may be substantial, because a relatively small movement in the underlying reference (which is generally the price, rate or other economic indicator associated with a security(ies), commodity, currency or
index or other instrument or asset) may result in a substantial loss for the Fund. In addition to the potential for increased losses, the use of derivative instruments may lead to increased volatility within the Fund.
Derivatives will typically increase the Fund’s exposure to principal risks to which it is otherwise exposed, and may expose the Fund to additional risks, including correlation risk, counterparty risk, hedging
risk, leverage risk, liquidity risk and pricing risk.
Interest rate risk
Interest rate risk is the risk of
losses attributable to changes in interest rates. In general, if prevailing interest rates rise, the values of debt instruments tend to fall, and if interest rates fall, the values of debt instruments tend to rise.
Actions by governments and central banking authorities can result in increases or decreases in interest rates. Higher periods of inflation could lead such authorities to raise interest rates. Increasing interest rates
may negatively affect the value of debt securities held by the Fund, resulting in a negative impact on the Fund’s performance and net asset value per share. In general, the longer the maturity or duration of a
debt security, the greater its sensitivity to changes in interest rates. The Fund is subject to the risk that the income generated by its investments may not keep pace with inflation.
Liquidity risk
Liquidity risk is the risk
associated with a lack of marketability of investments which may make it difficult to sell the investment at a desirable time or price. Changing regulatory, market or other conditions or environments (for example, the
interest rate or credit environments) may adversely affect the liquidity of the Fund’s investments. The Fund may have to accept a lower selling price for the holding, sell other investments, or forego another,
more appealing investment opportunity. Generally, the less liquid the market at the time the Fund sells a portfolio investment, the greater the risk of loss or decline of value to the Fund. A less liquid market can
lead to an increase in Fund redemptions, which may negatively impact Fund performance and net asset value per share, including, for example, if the Fund is forced to sell securities in a down market.
Market risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
The coronavirus disease 2019 and
its variants (COVID-19) pandemic has resulted in, and may continue to result in, significant global economic and societal disruption and market volatility due to disruptions in market access, resource availability,
facilities operations, imposition of tariffs, export controls and supply chain disruption, among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement
and loss in human and other resources. The uncertainty surrounding the magnitude, duration, reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental
authorities or other third parties, present unknowns that are yet to unfold. The impacts, as well as the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and
pandemics that may arise in the future – could negatively affect global economies and markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in
emerging market countries may be greater due to generally less established healthcare systems, governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other
pre-existing
| 26 | Columbia Variable Portfolio – Limited Duration Credit Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
political, social and economic risks in certain
countries or globally. The disruptions caused by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively impact the Fund’s ability to achieve its
investment objectives. Any such event(s) could have a significant adverse impact on the value and risk profile of the Fund.
Shareholder concentration risk
At December 31, 2021, affiliated
shareholders of record owned 99.3% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of
less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Note 10. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
Note 11. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in
connection with the conduct of their business activities. Ameriprise Financial believes that the Fund is not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject
of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with
the Fund. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (SEC) on legal and regulatory matters that relate to
Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that
these matters, or the adverse publicity associated with them, will not result in increased Fund redemptions, reduced sale of Fund shares or other adverse consequences to the Fund. Further, although we believe
proceedings are not likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines,
penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial or one or more of its affiliates that provides services to
the Fund.
| Columbia Variable Portfolio – Limited Duration Credit Fund | Annual Report 2021 | 27 |
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees of Columbia
Funds Variable Series Trust II and Shareholders of Columbia Variable Portfolio – Limited Duration Credit Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of Columbia Variable Portfolio – Limited Duration Credit Fund (one of the funds constituting Columbia Funds Variable Series Trust II,
referred to hereafter as the "Fund") as of December 31, 2021, the related statement of operations for the year ended December 31, 2021, the statement of changes in net assets for each of the two years in the period
ended December 31, 2021, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2021 (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, 2021, 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, 2021 and the financial highlights for each of the five years in the period ended December 31, 2021 in conformity with accounting principles generally
accepted in the United States of America.
Basis for Opinion
These financial statements are the
responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these
financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2021 by correspondence with the custodian, transfer agent and brokers. We believe that
our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Minneapolis, Minnesota
February 22, 2022
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| 28 | Columbia Variable Portfolio – Limited Duration Credit Fund | Annual Report 2021 |
TRUSTEES AND
OFFICERS
The Board oversees the
Fund’s operations and appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following table provides basic biographical information about the
Fund’s Trustees as of the printing of this report, including their principal occupations during the past five years, although specific titles for individuals may have varied over the period. The year set forth
beneath Length of Service in the table below is the year in which the Trustee was first appointed or elected as Trustee to any Fund currently in the Columbia Funds Complex or a predecessor thereof. Under current Board
policy, each Trustee generally serves until December 31 of the year such Trustee turns seventy-five (75).
Independent trustees
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| George S. Batejan c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1953 | Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 176 | Former Chairman of the Board, NICSA (National Investment Company Services Association) (Executive Committee, Nominating Committee and Governance Committee), 2014-2016; former Director, Intech Investment Management, 2011-2016; former Board Member, Metro Denver Chamber of Commerce, 2015-2016; former Advisory Board Member, University of Colorado Business School, 2015-2018 |
| Kathleen Blatz c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2006 | Attorney, specializing in arbitration and mediation; Chief Justice, Minnesota Supreme Court, 1998-2006; Associate Justice, Minnesota Supreme Court, 1996-1998; Fourth Judicial District Court Judge, Hennepin County, 1994-1996; Attorney in private practice and public service, 1984-1993; State Representative, Minnesota House of Representatives, 1979-1993, which included service on the Tax and Financial Institutions and Insurance Committees; Member and Interim Chair, Minnesota Sports Facilities Authority, January 2017-July 2017; Interim President and Chief Executive Officer, Blue Cross Blue Shield of Minnesota (health care insurance), February-July 2018, April-October 2021 | 176 | Former Trustee, Blue Cross Blue Shield of Minnesota, 2009-2021 (Chair of the Business Development Committee, 2014-2017; Chair of the Governance Committee, 2017-2019); former Member and Chair of the Board, Minnesota Sports Facilities Authority, January 2017-July 2017; former Director, Robina Foundation, 2009-2020 (Chair, 2014-2020); Director, Schulze Family Foundation, since 2021 |
| Pamela G. Carlton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2007 | President, Springboard — Partners in Cross Cultural Leadership (consulting company) since 2003; Managing Director of US Equity Research, JP Morgan Chase, 1999-2003; Director of US Equity Research, Chase Asset Management, 1996-1999; Co-Director Latin America Research, 1993-1996, COO Global Research, 1992-1996, Co-Director of US Research, 1991-1992, Investment Banker, Morgan Stanley, 1982-1991, Morgan Stanley; Attorney, Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 176 | Trustee, New York Presbyterian Hospital Board (Executive Committee and Chair of People Committee) since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee); Director, Apollo Commercial Real Estate Finance, Inc. since 2021; the Governing Council of the Independent Directors Council (IDC), since 2021 |
| Columbia Variable Portfolio – Limited Duration Credit Fund | Annual Report 2021 | 29 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Janet Langford Carrig c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1957 | Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 174 | Director, EQT Corporation (natural gas producer) since 2019; Director, Whiting Petroleum Corporation (independent oil and gas company) since 2020 |
| J. Kevin Connaughton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2020 | Member, FINRA National Adjudicatory Council since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Consultant to Independent Trustees of CFVIT and CFST I from March 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Managing Director and General Manager of Mutual Fund Products, Columbia Management Investment Advisers, LLC, May 2010-February 2015; President, Columbia Funds, 2008-2015; and senior officer of Columbia Funds and affiliated funds, 2003-2015 | 174 | Former Director, The Autism Project, March 2015-December 2021; former Member of the Investment Committee, St. Michael’s College, November 2015-February 2020; former Trustee, St. Michael’s College, June 2017-September 2019; former Trustee, New Century Portfolios, January 2015-December 2017 |
| Olive M. Darragh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since 2020 | Managing Director of Darragh Inc. (strategy and talent management consulting firm) since 2010; Founder and CEO, Zolio, Inc. (investment management talent identification platform) since 2004; Consultant to Independent Trustees of CFVIT and CFST I from June 2019 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 2001-2004 | 174 | Former Director, University of Edinburgh Business School (Member of US Board); former Director, Boston Public Library Foundation |
| Patricia M. Flynn c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1950 | Trustee since 2004 | Trustee Professor of Economics and Management, Bentley University since 1976 (also teaches and conducts research on corporate governance); Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 176 | Trustee, MA Taxpayers Foundation since 1997; Board of Governors, Innovation Institute, MA Technology Collaborative, 2010-2020; former Board of Directors, The MA Business Roundtable, 2003-2019 |
| Brian J. Gallagher c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 176 | Trustee, Catholic Schools Foundation since 2004 |
| 30 | Columbia Variable Portfolio – Limited Duration Credit Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Douglas A. Hacker c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1955 | Co-Chair since 2021; Chair of CFST I and CFVIT since 2014; Trustee of CFST I and CFVIT since 1996 and CFST, CFST II, CFVST II, CET I and CET II since 2021 | Independent business executive since May 2006; Executive Vice President – Strategy of United Airlines, December 2002 - May 2006; President of UAL Loyalty Services (airline marketing company), September 2001-December 2002; Executive Vice President and Chief Financial Officer of United Airlines, July 1999-September 2001 | 176 | Director, Spartan Nash Company (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing); former Director, Nash Finch Company (food distributor), 2005-2013; former Director, SeaCube Container Leasing Ltd. (container leasing), 2010-2013; and former Director, Travelport Worldwide Limited (travel information technology), 2014-2019 |
| Nancy T. Lukitsh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1956 | Trustee since 2011 | Senior Vice President, Partner and Director of Marketing, Wellington Management Company, LLP (investment adviser), 1997-2010; Chair, Wellington Management Portfolios (commingled non-U.S. investment pools), 2007 -2010; Director, Wellington Trust Company, NA and other Wellington affiliates, 1997-2010 | 174 | None |
| David M. Moffett c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2011 | Retired; Consultant to Bridgewater and Associates | 174 | Director, CSX Corporation (transportation suppliers); Director, Genworth Financial, Inc. (financial and insurance products and services); Director, PayPal Holdings Inc. (payment and data processing services); Trustee, University of Oklahoma Foundation; former Director, eBay Inc. (online trading community), 2007-2015; and former Director, CIT Bank, CIT Group Inc. (commercial and consumer finance), 2010-2016 |
| Catherine James Paglia c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Co-Chair since 2021; Chair of CFST, CFST II, CFVST II, CET I and CET II since 2020; Trustee of CFST, CFST II and CFVST II since 2004 and CFST I and CFVIT since 2021 | Director, Enterprise Asset Management, Inc. (private real estate and asset management company) since September 1998; Managing Director and Partner, Interlaken Capital, Inc., 1989-1997; Vice President, 1982-1985, Principal, 1985-1987, Managing Director, 1987-1989, Morgan Stanley; Vice President, Investment Banking, 1980-1982, Associate, Investment Banking, 1976-1980, Dean Witter Reynolds, Inc. | 176 | Director, Valmont Industries, Inc. (irrigation systems manufacturer) since 2012; Trustee, Carleton College (on the Investment Committee); Trustee, Carnegie Endowment for International Peace (on the Investment Committee) |
| Columbia Variable Portfolio – Limited Duration Credit Fund | Annual Report 2021 | 31 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Minor M. Shaw c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1947 | Trustee since 2003 | President, Micco LLC (private investments) since 2011; President, Micco Corp. (family investment business), 1998-2011 | 176 | Director, Blue Cross Blue Shield of South Carolina (Chair of Compensation Committee) since April 2008; Trustee, Hollingsworth Funds (on the Investment Committee) since 2016 (previously Board Chair from 2016-2019); Former Advisory Board member, Duke Energy Corp., 2016-2020; Chair of the Duke Endowment; Chair of Greenville – Spartanburg Airport Commission; former Trustee, BofA Funds Series Trust (11 funds), 2003-2011; former Director, Piedmont Natural Gas, 2004-2016; former Director, National Association of Corporate Directors, Carolinas Chapter, 2013-2018; Chair, Daniel-Mickel Foundation since 1998 |
| Natalie A. Trunow c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1967 | Trustee since 2020 | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services), January 2016-January 2021; Non-executive Member of the Investment Committee and Valuation Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services), August 2018-January 2021; Advisor, Paradigm Asset Management, November 2016-December 2021; Consultant to Independent Trustees of CFVIT and CFST I from September 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Director of Investments/Consultant, Casey Family Programs, April 2016-November 2016; Senior Vice President and Chief Investment Officer, Calvert Investments, August 2008-January 2016; Section Head and Portfolio Manager, General Motors Asset Management, June 1997-August 2008 | 174 | Former Director, Investment Committee, Health Services for Children with Special Needs, Inc., 2012-2019; Director, Chair of Audit Committee, Consumer Credit Counseling Services (formerly Guidewell Financial Solutions), since 2019; Independent Director, Investment Committee and Valuation Committee, Sarona Asset Management, since 2019 |
| Sandra Yeager c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2017 | Retired; President and founder, Hanoverian Capital, LLC (SEC registered investment advisor firm), 2008-2016; Managing Director, DuPont Capital, 2006-2008; Managing Director, Morgan Stanley Investment Management, 2004-2006; Senior Vice President, Alliance Bernstein, 1990-2004 | 176 | Former Director, NAPE Education Foundation, October 2016-October 2020 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Fund Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I (CET I), Columbia ETF Trust II (CET II), Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Beckman, Gallagher and Hacker and Mses. Blatz, Carlton, Flynn, Paglia, Shaw and Yeager serve as Directors of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
| 32 | Columbia Variable Portfolio – Limited Duration Credit Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Interested trustee affiliated with Investment Manager*
Interested trustee affiliated with Investment Manager*
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during the past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex overseen | Other directorships held by Trustee during the past five years |
| Daniel J. Beckman c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since November 2021(a) | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC (since April 2015); officer of Columbia Funds and affiliated funds since 2020. | 176 | Director, Ameriprise Trust Company, since October 2016; Director, Columbia Management Investment Distributors, Inc. since November 2018; Board of Governors, Columbia Wanger Asset Management, LLC since January 2022 |
| * | Interested person (as defined under the 1940 Act) by reason of being an officer, director, security holder and/or employee of the Investment Manager or Ameriprise Financial. |
| (a) | Mr. Beckman serves as the President and Principal Executive Officer of the Columbia Funds (since 2021). |
The Statement of Additional
Information has additional information about the Fund’s Board members and is available, without charge, upon request by calling 800.345.6611 or contacting your financial intermediary.
The Board has appointed officers
who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. The following table provides basic information about the Officers of the
Fund, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Beckman, who is President and Principal Executive Officer, the
Fund’s other officers are:
TRUSTEES AND
OFFICERS
| Columbia Variable Portfolio – Limited Duration Credit Fund | Annual Report 2021 | 33 |
TRUSTEES AND OFFICERS (continued)
| 34 | Columbia Variable Portfolio – Limited Duration Credit Fund | Annual Report 2021 |
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For Fund and other investment product prospectuses, which contain this and other important information, contact your
financial advisor or insurance representative. Please read the prospectus carefully before you invest. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved. Columbia Management Investment Distributors, Inc., 290 Congress Street, Boston, MA 02210
© 2022 Columbia Management Investment
Advisers, LLC.
S-6679 AW (2/22)
Columbia Variable
Portfolio – Seligman Global Technology Fund
Please remember that you may not
buy (nor will you own) shares of the Fund directly. The Fund is available through variable annuity contracts and variable life insurance policies offered by the separate accounts of participating insurance companies
as well as qualified pension and retirement plans. Please contact your financial advisor or insurance representative for more information.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
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| 27 | |
| 28 | |
| 28 |
Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which Columbia Variable Portfolio – Seligman Global Technology Fund (the Fund) holds investments consistent with the procedures as stated in the Statement of Additional
Information (SAI). You may obtain a copy of the SAI without charge by calling 800.345.6611; contacting your financial intermediary or searching the website of the Securities and Exchange Commission (SEC) at sec.gov.
Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge
by visiting columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. The Fund’s Form N-PORT is available on the SEC’s website at sec.gov. The Fund’s complete
schedule of portfolio holdings, as filed on Form N-PORT, can also be obtained without charge, upon request, by calling 800.345.6611.
Additional Fund information
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
290 Congress Street
Boston, MA 02210
Fund distributor
Columbia Management Investment Distributors,
Inc.
290 Congress Street
Boston, MA 02210
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
Columbia Variable Portfolio – Seligman Global
Technology Fund | Annual Report 2021
Fund at a Glance
Investment objective
The Fund
seeks to provide shareholders with long-term capital appreciation.
Portfolio management
Paul Wick
Lead Portfolio Manager
Managed Fund since 2006
Shekhar Pramanick
Technology Team Member
Managed Fund since 2014
Sanjay Devgan
Technology Team Member
Managed Fund since 2014
Christopher Boova
Technology Team Member
Managed Fund since 2016
Vimal Patel
Technology Team Member
Managed Fund since 2018
Sanjiv Wadhwani
Technology Team Member
Managed Fund since March 2021
| Columbia Variable Portfolio – Seligman Global Technology Fund | Annual Report 2021 | 3 |
Fund at a Glance (continued)
Performance of a hypothetical $10,000 investment (December 31, 2011 — December 31, 2021)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class 2 shares of Columbia Variable Portfolio – Seligman Global Technology Fund during the stated time period, and does not reflect the deduction of taxes, if
any, that a shareholder may pay on Fund distributions or on the redemption of Fund shares. The returns also do not reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance
policy or qualified pension or retirement plan, if any.
| 4 | Columbia Variable Portfolio – Seligman Global Technology Fund | Annual Report 2021 |
Manager Discussion of Fund Performance
For the 12-month period that
ended December 31, 2021, the Fund’s Class 2 shares returned 38.68%. The Fund outperformed its benchmark, the MSCI World Information Technology Index (Net), which returned 29.85% for the same time period.
Market overview
U.S. equities displayed
remarkable resilience during the year, finishing with a solid gain despite a number of potential headwinds. Investors had to contend with the emergence of the Omicron variant of COVID-19, which was contagious enough
to raise concerns that a new wave of lockdowns could be necessary. The markets also faced a major shift in U.S. Federal Reserve (Fed) policy. Whereas the Fed had previously viewed rising inflation as a transitory
development, continued price pressures caused the central bank to announce the tapering of its stimulative quantitative easing program. In addition, it began to prepare the financial markets for the likelihood of
multiple interest rate increases in 2022. The failure of the Build Back Better bill removed a source of anticipated fiscal stimulus. Nevertheless, most major U.S. indices closed the year at or near their all-time
highs on the strength of robust investment inflows and the lack of compelling total return potential in bonds.
In a continuation of a longstanding
trend, mega-cap technology-related stocks were the key drivers of market performance. In contrast, smaller companies managed only narrow gains. While the large-cap Russell 1000 Index rose 26.45% in 2021, the small-cap
Russell 2000 Index advanced 14.82%. The ongoing dominance of technology stocks also led to outperformance for the growth style within the large-cap space. The Russell 1000 Growth Index returned 27.60% for the year,
outpacing the 25.16% gain for the Russell 1000 Value Index. However, this trend did not hold with regard to smaller cap stocks, as the value style outperformed growth by a wide margin, with the Russell 2000 Value
Index returning 28.27% and the Russell 2000 Growth Index returning 2.83% for the year.
Within the benchmark, the
semiconductors & semiconductor equipment, communications equipment and technology hardware, storage & peripherals industries outperformed while the IT services, industrials and electronic equipment instruments
& components lagged for the reporting period.
The Fund’s notable
contributors during the period
| • | Stock selection primarily drove the Fund’s significant outperformance of the benchmark, most notably in the semiconductor & semiconductor equipment, software and technology hardware, storage & peripherals industries. |
| • | Allocations played a secondary role in the Fund’s strong performance, particularly an overweight relative to the benchmark in the strong-performing semiconductor & semiconductor equipment industry, as well as an underweight to the IT services industry, which lagged during the period. |
| • | Internet of Things (IoT) chip company Synaptics, Inc. was a top contributor after executing a turnaround over the past two years under the guidance of CEO Michael Hurlston. The company, once known for touchpads and other interface components for PCs and mobile phones, jettisoned its smartphone centric fingerprint sensor and LCD touch / display driver IC (integrated circuit) businesses while making strategic acquisitions in video and wireless connectivity and PC docking station technology, which significantly boosted margins and profit growth. In 2021, the company consistently beat earnings expectations and the stock responded in kind. |
| • | Top holdings in semi-cap equipment companies Lam Research Corp. and Applied Materials, Inc. contributed meaningfully to returns during the period. The global semiconductor shortage highlights the fact that the industry needed to add capacity to boost supply. Our investments in semiconductor capital equipment companies benefited from this pressing need. |
| • | Within software, cybersecurity holding Fortinet, Inc. and Palo Alto Networks, Inc. benefited from strong demand for protection against hackers and ransomware. |
| • | An out-of-benchmark holding in Google parent Alphabet, Inc. contributed to returns within the communication services sector’s interactive media industry. Alphabet continued to benefit from a recovery in advertising, rising margins, cloud profit improvement and greater capital returns. We believed the company’s Search and YouTube divisions were well-positioned to support an increasingly digital economy. |
| Columbia Variable Portfolio – Seligman Global Technology Fund | Annual Report 2021 | 5 |
Manager Discussion of Fund Performance (continued)
The Fund’s notable
detractors during the period
| • | The Fund’s security selection in the communications equipment industry detracted from relative returns for the period. Plantronics, Inc. experienced strong demand for its video-conferencing products and enterprise headsets, but component shortages were a headwind to revenues and earnings. The company remained profitable, but a levered balance sheet weighed on its valuation. We believed Plantronics remained well positioned if the semiconductor shortage eases. |
| • | Within the communication services sector, an out-of-benchmark position in video game publisher Activision Blizzard, Inc. weighed on Fund results. While the company beat revenue and earnings expectations during the period, guidance was lower than consensus, which sent shares lower. Furthermore, Activision is embroiled in controversy over its CEO’s handling of sexual harassment issues within one of its divisions. |
| • | Microsoft Corp. continued to perform well due to high demand for its cloud-based offering Azure and strength in the company’s Office360 suite of products. Microsoft represented a large weighting in the benchmark and the portfolio’s relative underweight detracted from relative returns. |
| • | In the industrials industry, an out-of-benchmark holding in Bloom Energy Corp. underperformed along with other Alternative Energy stocks, despite having signed a multi-year, $4.5Bn contract to supply SK Group of Korea with fuel cells. We remained convinced that Bloom has the potential to be one of the most dynamic stocks of the coming decade, propelled by the company’s leading position in hydrogen fuel cells and electrolyzers |
| • | Not owning semiconductor companies NVIDIA on valuation concerns detracted from relative performance as the stock rallied on strong results from the company’s gaming business, as customers upgraded to its latest graphics cards. |
The views expressed in this report
reflect the current views of the respective parties who have contributed to this report. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult
to predict, so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective parties
disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Columbia fund are based on numerous factors, may not be relied on as an
indication of trading intent on behalf of any particular Columbia fund. References to specific securities should not be construed as a recommendation or investment advice.
| 6 | Columbia Variable Portfolio – Seligman Global Technology Fund | Annual Report 2021 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur ongoing
costs, which generally include management fees, distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to help you compare these costs with the ongoing costs of investing in other mutual funds.
The information below does not
reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy (collectively, Contracts) or qualified pension and retirement plan (Qualified Plan), if any. The total fees
and expenses you bear may therefore be higher than those shown below.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount invested, to estimate the
expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as redemption or exchange fees, or expenses that apply to the subaccount or the Contract. Therefore, the
hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If the fees and expenses imposed under your Contract or
Qualified Plan, if any, were included, your costs would be higher.
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 365.
Expenses do not include fees and
expenses incurred indirectly by the Fund from its investment in underlying funds, including affiliated and non-affiliated pooled investment vehicles, such as mutual funds and exchange-traded funds.
Had Columbia Management Investment
Advisers, LLC and/or certain of its affiliates not waived/reimbursed certain fees and expenses, account value at the end of the period would have been reduced.
| Columbia Variable Portfolio – Seligman Global Technology Fund | Annual Report 2021 | 7 |
Portfolio of Investments
December 31, 2021
December 31, 2021
(Percentages represent value of
investments compared to net assets)
Investments in securities
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 8 | Columbia Variable Portfolio – Seligman Global Technology Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Notes to Portfolio of
Investments
| (a) | Non-income producing investment. |
| (b) | The rate shown is the seven-day current annualized yield at December 31, 2021. |
| (c) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended December 31, 2021 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Realized gain (loss)($) | Dividends($) | End of period shares |
| Columbia Short-Term Cash Fund, 0.085% | ||||||||
| 1,029,028 | 41,265,728 | (39,312,299) | (55) | 2,982,402 | (403) | 1,162 | 2,982,999 | |
Abbreviation Legend
| ADR | American Depositary Receipt |
Fair value
measurements
The Fund categorizes
its fair value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when
available. Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that
reflect the Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input
that is deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For
example, certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active
market.
Fair value inputs are
summarized in the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in
determining fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable
inputs can vary between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs
will be considered by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date,
which may include periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between
the various levels within the hierarchy.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Seligman Global Technology Fund | Annual Report 2021 | 9 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Fair value measurements (continued)
Foreign equity securities actively traded in markets where there is a significant delay in the local close relative to the New York Stock Exchange are classified as Level 2. The values of these securities may include an adjustment to reflect the impact of market movements following the close of local trading, as described in Note 2 to the financial statements – Security valuation.
Foreign equity securities actively traded in markets where there is a significant delay in the local close relative to the New York Stock Exchange are classified as Level 2. The values of these securities may include an adjustment to reflect the impact of market movements following the close of local trading, as described in Note 2 to the financial statements – Security valuation.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at December 31, 2021:
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The Fund’s assets assigned to
the Level 2 input category are generally valued using the market approach, in which a security’s value is determined through reference to prices and information from market transactions for similar or identical
assets. These assets include certain foreign securities for which a third party statistical pricing service may be employed for purposes of fair market valuation. The model utilized by such third party statistical
pricing service takes into account a security’s correlation to available market data including, but not limited to, intraday index, ADR, and exchange-traded fund movements.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 10 | Columbia Variable Portfolio – Seligman Global Technology Fund | Annual Report 2021 |
Statement of Assets and Liabilities
December 31, 2021
December 31, 2021
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $99,970,069) | $171,030,815 |
| Affiliated issuers (cost $2,982,457) | 2,982,402 |
| Receivable for: | |
| Investments sold | 86,587 |
| Capital shares sold | 101,068 |
| Dividends | 55,305 |
| Foreign tax reclaims | 4,652 |
| Expense reimbursement due from Investment Manager | 529 |
| Prepaid expenses | 7,488 |
| Total assets | 174,268,846 |
| Liabilities | |
| Payable for: | |
| Investments purchased | 294,935 |
| Capital shares purchased | 64,480 |
| Management services fees | 4,369 |
| Distribution and/or service fees | 742 |
| Service fees | 72,592 |
| Compensation of board members | 48,387 |
| Compensation of chief compliance officer | 28 |
| Other expenses | 26,168 |
| Total liabilities | 511,701 |
| Net assets applicable to outstanding capital stock | $173,757,145 |
| Represented by | |
| Paid in capital | 73,377,516 |
| Total distributable earnings (loss) | 100,379,629 |
| Total - representing net assets applicable to outstanding capital stock | $173,757,145 |
| Class 1 | |
| Net assets | $65,802,317 |
| Shares outstanding | 1,673,176 |
| Net asset value per share | $39.33 |
| Class 2 | |
| Net assets | $107,954,828 |
| Shares outstanding | 3,108,177 |
| Net asset value per share | $34.73 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Seligman Global Technology Fund | Annual Report 2021 | 11 |
Statement of Operations
Year Ended December 31, 2021
Year Ended December 31, 2021
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $1,475,313 |
| Dividends — affiliated issuers | 1,162 |
| Foreign taxes withheld | (11,998) |
| Total income | 1,464,477 |
| Expenses: | |
| Management services fees | 1,394,593 |
| Distribution and/or service fees | |
| Class 2 | 225,716 |
| Service fees | 278,163 |
| Compensation of board members | 24,336 |
| Custodian fees | 17,889 |
| Printing and postage fees | 9,647 |
| Audit fees | 30,280 |
| Legal fees | 11,410 |
| Interest on interfund lending | 150 |
| Compensation of chief compliance officer | 30 |
| Other | 14,175 |
| Total expenses | 2,006,389 |
| Fees waived or expenses reimbursed by Investment Manager and its affiliates | (268,756) |
| Total net expenses | 1,737,633 |
| Net investment loss | (273,156) |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 29,981,797 |
| Investments — affiliated issuers | (403) |
| Foreign currency translations | 5,854 |
| Options purchased | 39,471 |
| Options contracts written | 34,994 |
| Net realized gain | 30,061,713 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | 19,501,892 |
| Investments — affiliated issuers | (55) |
| Foreign currency translations | (169) |
| Options purchased | (2,897) |
| Options contracts written | (41,912) |
| Net change in unrealized appreciation (depreciation) | 19,456,859 |
| Net realized and unrealized gain | 49,518,572 |
| Net increase in net assets resulting from operations | $49,245,416 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 12 | Columbia Variable Portfolio – Seligman Global Technology Fund | Annual Report 2021 |
Statement of Changes in Net Assets
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | |
| Operations | ||
| Net investment income (loss) | $(273,156) | $498,646 |
| Net realized gain | 30,061,713 | 16,357,859 |
| Net change in unrealized appreciation (depreciation) | 19,456,859 | 25,161,155 |
| Net increase in net assets resulting from operations | 49,245,416 | 42,017,660 |
| Distributions to shareholders | ||
| Net investment income and net realized gains | ||
| Class 1 | (6,326,232) | (3,579,293) |
| Class 2 | (10,678,214) | (4,986,844) |
| Total distributions to shareholders | (17,004,446) | (8,566,137) |
| Increase in net assets from capital stock activity | 5,738,398 | 738,269 |
| Total increase in net assets | 37,979,368 | 34,189,792 |
| Net assets at beginning of year | 135,777,777 | 101,587,985 |
| Net assets at end of year | $173,757,145 | $135,777,777 |
| Year Ended | Year Ended | |||
| December 31, 2021 | December 31, 2020 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class 1 | ||||
| Subscriptions | 6,303 | 224,752 | 14,117 | 319,910 |
| Distributions reinvested | 183,475 | 6,326,232 | 148,396 | 3,579,292 |
| Redemptions | (374,568) | (13,228,843) | (212,068) | (4,942,112) |
| Net decrease | (184,790) | (6,677,859) | (49,555) | (1,042,910) |
| Class 2 | ||||
| Subscriptions | 947,366 | 30,645,097 | 824,508 | 17,942,880 |
| Distributions reinvested | 350,335 | 10,678,214 | 230,552 | 4,986,844 |
| Redemptions | (920,024) | (28,907,054) | (1,024,118) | (21,148,545) |
| Net increase | 377,677 | 12,416,257 | 30,942 | 1,781,179 |
| Total net increase (decrease) | 192,887 | 5,738,398 | (18,613) | 738,269 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Seligman Global Technology Fund | Annual Report 2021 | 13 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect any fees and expenses imposed under your
Contract and/or Qualified Plan, as applicable; such fees and expenses would reduce the total returns for all periods shown. Total return and portfolio turnover are not annualized for periods of less than one year. The
portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain derivatives, if any. If such transactions were included, the Fund’s portfolio
turnover rate may be higher.
| Net asset value, beginning of period | Net investment income (loss) | Net realized and unrealized gain (loss) | Total from investment operations | Distributions from net investment income | Distributions from net realized gains | Total distributions to shareholders | |
| Class 1 | |||||||
| Year Ended 12/31/2021 | $31.55 | (0.01) | 11.76 | 11.75 | (0.15) | (3.82) | (3.97) |
| Year Ended 12/31/2020 | $23.36 | 0.15 | 10.03 | 10.18 | — | (1.99) | (1.99) |
| Year Ended 12/31/2019 | $17.78 | 0.02 | 9.00 | 9.02 | — | (3.44) | (3.44) |
| Year Ended 12/31/2018 | $21.56 | 0.01 | (1.47) | (1.46) | — | (2.32) | (2.32) |
| Year Ended 12/31/2017 | $21.67 | (0.03) | 6.79 | 6.76 | — | (6.87) | (6.87) |
| Class 2 | |||||||
| Year Ended 12/31/2021 | $28.26 | (0.09) | 10.48 | 10.39 | (0.10) | (3.82) | (3.92) |
| Year Ended 12/31/2020 | $21.12 | 0.08 | 9.00 | 9.08 | — | (1.94) | (1.94) |
| Year Ended 12/31/2019 | $16.33 | (0.03) | 8.20 | 8.17 | — | (3.38) | (3.38) |
| Year Ended 12/31/2018 | $19.99 | (0.04) | (1.35) | (1.39) | — | (2.27) | (2.27) |
| Year Ended 12/31/2017 | $20.50 | (0.08) | 6.38 | 6.30 | — | (6.81) | (6.81) |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Ratios include interfund lending expense which is less than 0.01%. |
| (d) | Ratios include line of credit interest expense which is less than 0.01%. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 14 | Columbia Variable Portfolio – Seligman Global Technology Fund | Annual Report 2021 |
Financial Highlights (continued)
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets(a) | Total net expense ratio to average net assets(a),(b) | Net investment income (loss) ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Class 1 | |||||||
| Year Ended 12/31/2021 | $39.33 | 39.03% | 1.17%(c) | 0.99%(c) | (0.04%) | 35% | $65,802 |
| Year Ended 12/31/2020 | $31.55 | 46.18% | 1.19%(c),(d) | 0.98%(c),(d) | 0.62% | 46% | $58,611 |
| Year Ended 12/31/2019 | $23.36 | 55.31% | 1.18%(c) | 0.97%(c) | 0.09% | 56% | $44,565 |
| Year Ended 12/31/2018 | $17.78 | (8.15%) | 1.09%(c),(d) | 1.03%(c),(d) | 0.05% | 44% | $32,129 |
| Year Ended 12/31/2017 | $21.56 | 35.21% | 1.15%(d) | 1.02%(d) | (0.16%) | 60% | $38,879 |
| Class 2 | |||||||
| Year Ended 12/31/2021 | $34.73 | 38.68% | 1.42%(c) | 1.24%(c) | (0.28%) | 35% | $107,955 |
| Year Ended 12/31/2020 | $28.26 | 45.80% | 1.44%(c),(d) | 1.23%(c),(d) | 0.37% | 46% | $77,167 |
| Year Ended 12/31/2019 | $21.12 | 54.97% | 1.43%(c) | 1.21%(c) | (0.15%) | 56% | $57,023 |
| Year Ended 12/31/2018 | $16.33 | (8.45%) | 1.33%(c),(d) | 1.28%(c),(d) | (0.22%) | 44% | $33,975 |
| Year Ended 12/31/2017 | $19.99 | 34.92% | 1.40%(d) | 1.27%(d) | (0.39%) | 60% | $46,688 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Seligman Global Technology Fund | Annual Report 2021 | 15 |
Notes to Financial Statements
December 31, 2021
December 31, 2021
Note 1. Organization
Columbia Variable Portfolio
– Seligman Global Technology Fund (the Fund), a series of Columbia Funds Variable Series Trust II (the Trust), is a non-diversified fund. The Trust is registered under the Investment Company Act of 1940, as
amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers Class 1 and Class 2 shares to separate accounts funding variable annuity contracts and variable life insurance policies (collectively, Contracts) issued by
affiliated and unaffiliated life insurance companies (Participating Insurance Companies) as well as qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors (Qualified
Investors) authorized by Columbia Management Investment Distributors, Inc. (the Distributor). You may not buy (nor will you own) shares of the Fund directly. You may invest by participating in a Qualified Plan or by
buying a Contract and making allocations to the Fund. Although all share classes generally have identical voting, dividend and liquidation rights, each share class votes separately when required by the Trust’s
organizational documents or by law. Different share classes pay different net investment income distribution amounts to the extent the expenses of such share classes differ, and distributions in liquidation will be
proportional to the net asset value of each share class. Each share class has its own cost structure and other features.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Equity securities listed on an
exchange are valued at the closing price or last trade price on their primary exchange at the close of business of the New York Stock Exchange. Securities with a closing price not readily available or not listed on
any exchange are valued at the mean between the closing bid and ask prices. Listed preferred stocks convertible into common stocks are valued using an evaluated price from a pricing service.
Foreign equity securities are
valued based on the closing price or last trade price on their primary exchange at the close of business of the New York Stock Exchange. If any foreign equity security closing prices are not readily available,
the securities are valued at the mean of the latest quoted bid and ask prices on such exchanges or markets. Foreign currency exchange rates are determined at the scheduled closing time of the New York Stock Exchange.
Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange; therefore, the closing prices for securities in such markets or on such exchanges may not fully reflect
events that occur after such close but before the close of the New York Stock Exchange. In those situations, foreign securities will be fair valued pursuant to a policy adopted by the Board of Trustees. Under the
policy, the Fund may utilize a third-party pricing service to determine these fair values. The third-party pricing service takes into account multiple factors, including, but not limited to, movements in the U.S.
securities markets, certain depositary receipts, futures contracts and foreign exchange rates that have occurred subsequent to the close of the foreign exchange or market, to determine a good faith estimate that
reasonably reflects the current market conditions as of the close of the New York Stock Exchange. The fair value of a security is likely to be different from the quoted or published price, if available.
Investments in open-end investment
companies (other than exchange-traded funds (ETFs)), are valued at the latest net asset value reported by those companies as of the valuation time.
| 16 | Columbia Variable Portfolio – Seligman Global Technology Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Foreign currency transactions and
translations
The values of all assets and
liabilities denominated in foreign currencies are generally translated into U.S. dollars at exchange rates determined at the close of regular trading on the New York Stock Exchange. Net realized and unrealized gains
(losses) on foreign currency transactions and translations include gains (losses) arising from the fluctuation in exchange rates between trade and settlement dates on securities transactions, gains (losses) arising
from the disposition of foreign currency and currency gains (losses) between the accrual and payment dates on dividends, interest income and foreign withholding taxes.
For financial statement purposes,
the Fund does not distinguish that portion of gains (losses) on investments which is due to changes in foreign exchange rates from that which is due to changes in market prices of the investments. Such fluctuations
are included with the net realized and unrealized gains (losses) on investments in the Statement of Operations.
Derivative instruments
The Fund invests in certain
derivative instruments, as detailed below, in seeking to meet its investment objectives. Derivatives are instruments whose values depend on, or are derived from, in whole or in part, the value of one or more
securities, currencies, commodities, indices, or other assets or instruments. Derivatives may be used to increase investment flexibility (including to maintain cash reserves while maintaining desired exposure to
certain assets), for risk management (hedging) purposes, to facilitate trading, to reduce transaction costs and to pursue higher investment returns. The Fund may also use derivative instruments to mitigate certain
investment risks, such as foreign currency exchange rate risk, interest rate risk and credit risk. Derivatives may involve various risks, including the potential inability of the counterparty to fulfill its
obligations under the terms of the contract, the potential for an illiquid secondary market (making it difficult for the Fund to sell or terminate, including at favorable prices) and the potential for market movements
which may expose the Fund to gains or losses in excess of the amount shown in the Statement of Assets and Liabilities. The notional amounts of derivative instruments, if applicable, are not recorded in the financial
statements.
A derivative instrument may suffer
a marked-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform its
obligations under the contract. The Fund’s risk of loss from counterparty credit risk on over-the-counter derivatives is generally limited to the aggregate unrealized gain netted against any collateral held by
the Fund and the amount of any variation margin held by the counterparty, plus any replacement costs or related amounts. With exchange-traded or centrally cleared derivatives, there is reduced counterparty credit risk
to the Fund since the clearinghouse or central counterparty (CCP) provides some protection in the case of clearing member default. The clearinghouse or CCP stands between the buyer and the seller of the contract;
therefore, additional counterparty credit risk is failure of the clearinghouse or CCP. However, credit risk still exists in exchange-traded or centrally cleared derivatives with respect to initial and variation margin
that is held in a broker’s customer account. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy
and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients and such shortfall is remedied by the CCP or otherwise, U.S. bankruptcy laws will typically
allocate that shortfall on a pro-rata basis across all the clearing broker’s customers (including the Fund), potentially resulting in losses to the Fund.
| Columbia Variable Portfolio – Seligman Global Technology Fund | Annual Report 2021 | 17 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
In order to better define its
contractual rights and to secure rights that will help the Fund mitigate its counterparty risk, the Fund may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (ISDA Master Agreement)
or similar agreement with its derivatives counterparties. An ISDA Master Agreement is an agreement between the Fund and a counterparty that governs over-the-counter derivatives and foreign exchange forward contracts
and contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset
with the counterparty certain derivative instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically
permit a single net payment in the event of default (close-out netting), including the bankruptcy or insolvency of the counterparty. Note, however, that bankruptcy or insolvency laws of a particular jurisdiction may
impose restrictions on or prohibitions against the right of offset or netting in bankruptcy, insolvency or other events.
Collateral (margin) requirements
differ by type of derivative. Margin requirements are established by the clearinghouse or CCP for exchange-traded and centrally cleared derivatives. Brokers can ask for margin in excess of the minimum in certain
circumstances. Collateral terms for most over-the-counter derivatives are subject to regulatory requirements to exchange variation margin with trading counterparties and may have contract specific margin terms as
well. For over-the-counter derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the marked-to-market amount for each transaction under such agreement and
comparing that amount to the value of any variation margin currently pledged by the Fund and/or the counterparty. Generally, the amount of collateral due from or to a party has to exceed a minimum transfer amount
threshold (e.g., $250,000) before a transfer has to be made. To the extent amounts due to the Fund from its counterparties are not fully collateralized, contractually or otherwise, the Fund bears the risk of loss from
counterparty nonperformance. The Fund may also pay interest expense on cash collateral received from the broker. Any interest expense paid by the Fund is shown on the Statement of Operations. The Fund attempts to
mitigate counterparty risk by only entering into agreements with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those
counterparties.
Certain ISDA Master Agreements
allow counterparties of over-the-counter derivatives transactions to terminate derivatives contracts prior to maturity in the event the Fund’s net asset value declines by a stated percentage over a specified
time period or if the Fund fails to meet certain terms of the ISDA Master Agreement, which would cause the Fund to accelerate payment of any net liability owed to the counterparty. The Fund also has termination
rights if the counterparty fails to meet certain terms of the ISDA Master Agreement. In determining whether to exercise such termination rights, the Fund would consider, in addition to counterparty credit risk,
whether termination would result in a net liability owed from the counterparty.
For financial reporting purposes,
the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statement of Assets and Liabilities.
Options contracts
Options are contracts which entitle
the holder to purchase or sell securities or other identified assets at a specified price, or in the case of index option contracts, to receive or pay the difference between the index value and the strike price of the
index option contract. Option contracts can be either exchange-traded or over-the-counter. The Fund purchased and wrote option contracts to decrease the Fund’s exposure to equity market risk and to protect
gains. These instruments may be used for other purposes in future periods. Completion of transactions for option contracts traded in the over-the-counter market depends upon the performance of the other party.
Collateral may be collected or posted by the Fund to secure over-the-counter option contract trades. Collateral held or posted by the Fund for such option contract trades must be returned to the broker or the Fund
upon closure, exercise or expiration of the contract.
Options contracts purchased are
recorded as investments. When the Fund writes an options contract, the premium received is recorded as an asset and an amount equivalent to the premium is recorded as a liability in the Statement of Assets and
Liabilities and is subsequently adjusted to reflect the current fair value of the option written. Changes in the fair value of the written option are recorded as unrealized appreciation or depreciation until the
contract is exercised or has expired. The Fund realizes a gain or loss when the option contract is closed or expires. When option contracts are exercised, the proceeds on sales for a written call or purchased put
option contract, or the purchase cost for a written put or purchased call option contract, is adjusted by the amount of premium received or paid.
| 18 | Columbia Variable Portfolio – Seligman Global Technology Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
For over-the-counter options
purchased, the Fund bears the risk of loss of the amount of the premiums paid plus the positive change in market values net of any collateral held by the Fund should the counterparty fail to perform under the
contracts. Option contracts written by the Fund do not typically give rise to significant counterparty credit risk, as options written generally obligate the Fund and not the counterparty to perform. The risk in
writing a call option contract is that the Fund gives up the opportunity for profit if the market price of the security increases above the strike price and the option contract is exercised. The risk in writing a put
option contract is that the Fund may incur a loss if the market price of the security decreases below the strike price and the option contract is exercised. Exercise of a written option could result in the Fund
purchasing or selling a security or foreign currency when it otherwise would not, or at a price different from the current market value. In purchasing and writing options, the Fund bears the risk of an unfavorable
change in the value of the underlying instrument or the risk that the Fund may not be able to enter into a closing transaction due to an illiquid market.
Effects of derivative transactions in
the financial statements
The following tables are intended
to provide additional information about the effect of derivatives on the financial statements of the Fund, including: the fair value of derivatives by risk category and the location of those fair values in the
Statement of Assets and Liabilities; and the impact of derivative transactions over the period in the Statement of Operations, including realized and unrealized gains (losses). The derivative instrument schedules
following the Portfolio of Investments present additional information regarding derivative instruments outstanding at the end of the period, if any.
The following table indicates the
effect of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) in the Statement of Operations for the year ended December 31, 2021:
The following table is a summary
of the average outstanding volume by derivative instrument for the year ended December 31, 2021:
| Derivative instrument | Average value ($)* |
| Options contracts — purchased | 1,945 |
| Options contracts — written | (822) |
| * | Based on the ending daily outstanding amounts for the year ended December 31, 2021. |
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
Income recognition
Corporate actions and dividend
income are generally recorded net of any non-reclaimable tax withholdings, on the ex-dividend date or upon receipt of an ex-dividend notification in the case of certain foreign securities.
| Columbia Variable Portfolio – Seligman Global Technology Fund | Annual Report 2021 | 19 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
The Fund may receive distributions
from holdings in equity securities, business development companies (BDCs), exchange-traded funds (ETFs), limited partnerships (LPs), other regulated investment companies (RICs), and real estate investment trusts
(REITs), which report information as to the tax character of their distributions annually. These distributions are allocated to dividend income, capital gain and return of capital based on actual information reported.
Return of capital is recorded as a reduction of the cost basis of securities held. If the Fund no longer owns the applicable securities, return of capital is recorded as a realized gain. With respect to REITs, to the
extent actual information has not yet been reported, estimates for return of capital are made by Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise
Financial, Inc. (Ameriprise Financial). The Investment Manager’s estimates are subsequently adjusted when the actual character of the distributions is disclosed by the REITs, which could result in a
proportionate change in return of capital to shareholders.
Awards from class action litigation
are recorded as a reduction of cost basis if the Fund still owns the applicable securities on the payment date. If the Fund no longer owns the applicable securities on the payment date, the proceeds are recorded as
realized gains.
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
Federal income tax status
The Fund intends to qualify each
year as a regulated investment company under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its investment company taxable income and net capital gain, if any, for its
tax year, and as such will not be subject to federal income taxes. In addition, because the Fund meets the exception under Internal Revenue Code Section 4982(f), the Fund expects not to be subject to federal excise
tax. Therefore, no federal income or excise tax provision is recorded.
Foreign taxes
The Fund may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries, as applicable, based upon its current interpretation of tax rules
and regulations that exist in the markets in which it invests.
Realized gains in certain countries
may be subject to foreign taxes at the Fund level, based on statutory rates. The Fund accrues for such foreign taxes on realized and unrealized gains at the appropriate rate for each jurisdiction, as applicable. The
amount, if any, is disclosed as a liability on the Statement of Assets and Liabilities.
Distributions to subaccounts
Distributions to the subaccounts of
Contracts, Qualified Plans and Qualified Investors are recorded at the close of business on the record date and are payable on the first business day following the record date. Dividends from net investment income, if
any, are declared and distributed annually. Capital gain distributions, when available, will be made annually. However, an additional capital gain distribution may be made during the fiscal year in order to comply
with the Internal Revenue Code, as applicable to registered investment companies. Income distributions and capital gain distributions are determined in accordance with federal income tax regulations, which may differ
from GAAP. All dividends and distributions are reinvested in additional shares of the applicable share class of the Fund at the net asset value as of the ex-dividend date of the distribution.
| 20 | Columbia Variable Portfolio – Seligman Global Technology Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Under the Management Agreement, the
Investment Manager provides the Fund with investment research and advice, as well as administrative and accounting services. The management services fee is an annual fee that is equal to a percentage of the
Fund’s daily net assets that declines from 0.915% to 0.755% as the Fund’s net assets increase. The effective management services fee rate for the year ended December 31, 2021 was 0.915% of the Fund’s
average daily net assets.
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. Under a Deferred Compensation Plan (the
Deferred Plan), these members of the Board of Trustees may elect to defer payment of up to 100% of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of
certain funds managed by the Investment Manager. The Fund’s liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Deferred Plan. All
amounts payable under the Deferred Plan constitute a general unsecured obligation of the Fund. The expense for the Deferred Plan, which includes Trustees’ fees deferred during the current period as well as any
gains or losses on the Trustees’ deferred compensation balances as a result of market fluctuations, is included in "Compensation of board members" on the Statement of Operations.
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
Service fees
The Fund has entered into a
Shareholder Services Agreement with Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial. Under this
agreement, the Fund pays a service fee equal to the payments made by the Transfer Agent to Participating Insurance Companies and other financial intermediaries (together, Participating Organizations) for services each
such Participating Organization provides to its clients, customers and participants that are invested directly or indirectly in the Fund, up to a cap approved by the Board of Trustees from time to time. The effective
service fee rate for the year ended December 31, 2021, was 0.18% of the Fund’s average daily net assets.
The Transfer Agent may retain as
compensation for its services revenues from fees for wire, telephone and redemption orders, account transcripts due the Transfer Agent from Fund shareholders and interest (net of bank charges) earned with respect to
balances in accounts the Transfer Agent maintains in connection with its services to the Fund.
| Columbia Variable Portfolio – Seligman Global Technology Fund | Annual Report 2021 | 21 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Distribution and/or service fees
The Fund has an agreement with the
Distributor, an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution services. Under a Plan and Agreement of Distribution, the Fund pays a fee at an annual rate
of up to 0.25% of the Fund’s average daily net assets attributable to Class 2 shares. The Fund pays no distribution and service fees for Class 1 shares.
Expenses waived/reimbursed by the
Investment Manager and its affiliates
The Investment Manager and certain
of its affiliates have contractually agreed to waive fees and/or reimburse expenses (excluding certain fees and expenses described below) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, so that the Fund’s net operating expenses, after giving effect to fees waived/expenses reimbursed and any balance credits and/or overdraft charges from the Fund’s
custodian, do not exceed the following annual rate(s) as a percentage of the classes’ average daily net assets:
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), expenses associated with investments in affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange-traded funds), transaction costs and
brokerage commissions, costs related to any securities lending program, dividend expenses associated with securities sold short, inverse floater program fees and expenses, transaction charges and interest on borrowed
money, interest, costs associated with certain shareholder meetings, infrequent and/or unusual expenses and any other expenses the exclusion of which is specifically approved by the Board of Trustees. This
agreement may be modified or amended only with approval from the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements
described above are not recoverable by the Investment Manager or its affiliates in future periods.
Note 4. Federal tax
information
The timing and character of
income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP because of temporary or permanent book to tax differences.
At December 31, 2021, these
differences were primarily due to differing treatment for deferral/reversal of wash sale losses, trustees’ deferred compensation, distribution reclassifications, net operating loss reclassification and foreign
currency transactions. To the extent these differences were permanent, reclassifications were made among the components of the Fund’s net assets. Temporary differences do not require reclassifications.
The following reclassifications
were made:
| Excess of distributions over net investment income ($) | Accumulated net realized gain ($) | Paid in capital ($) |
| 265,872 | (265,872) | — |
Net investment income (loss) and
net realized gains (losses), as disclosed in the Statement of Operations, and net assets were not affected by this reclassification.
| 22 | Columbia Variable Portfolio – Seligman Global Technology Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
The tax character of distributions
paid during the years indicated was as follows:
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | ||||
| Ordinary income ($) | Long-term capital gains ($) | Total ($) | Ordinary income ($) | Long-term capital gains ($) | Total ($) |
| 2,502,622 | 14,501,824 | 17,004,446 | 1,417,814 | 7,148,323 | 8,566,137 |
Short-term capital gain
distributions, if any, are considered ordinary income distributions for tax purposes.
At December 31, 2021, the
components of distributable earnings on a tax basis were as follows:
| Undistributed ordinary income ($) | Undistributed long-term capital gains ($) | Capital loss carryforwards ($) | Net unrealized appreciation ($) |
| 4,022,512 | 25,787,842 | — | 70,616,453 |
At December 31, 2021, the cost of
all investments for federal income tax purposes along with the aggregate gross unrealized appreciation and depreciation based on that cost was:
| Federal tax cost ($) | Gross unrealized appreciation ($) | Gross unrealized (depreciation) ($) | Net unrealized appreciation ($) |
| 103,396,764 | 72,943,463 | (2,327,010) | 70,616,453 |
Tax cost of investments and
unrealized appreciation/(depreciation) may also include timing differences that do not constitute adjustments to tax basis.
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Note 5. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $53,056,664 and $66,117,466, respectively, for the year ended December 31, 2021. The amount of purchase and
sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 6. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes
referred to as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
Note 7. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
| Columbia Variable Portfolio – Seligman Global Technology Fund | Annual Report 2021 | 23 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund’s activity in the
Interfund Program during the year ended December 31, 2021 was as follows:
| Borrower or lender | Average loan balance ($) | Weighted average interest rate (%) | Number of days with outstanding loans |
| Borrower | 877,778 | 0.69 | 9 |
Interest expense incurred by the
Fund is recorded as Interfund lending in the Statement of Operations. The Fund had no outstanding interfund loans at December 31, 2021.
Note 8. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to an October 28, 2021 amendment and restatement, the credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment
Manager or an affiliated investment manager, severally and not jointly, permits collective borrowings up to $950 million. Interest is currently charged to each participating fund based on its borrowings at a rate
equal to the higher of (i) the federal funds effective rate, (ii) the secured overnight financing rate plus 0.11448% and (iii) the overnight bank funding rate, plus in each case, 1.00%. Each borrowing under the credit
facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The
commitment fee is included in other expenses in the Statement of Operations. This agreement expires annually in October unless extended or renewed. Prior to the October 28, 2021 amendment and restatement, the Fund had
access to a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. which permitted collective borrowings up to $950 million. Interest was
charged to each participating fund based on its borrowings at a rate equal to the higher of (i) the federal funds effective rate, (ii) the one-month London Interbank Offered Rate (LIBOR) rate and (iii) the overnight
bank funding rate, plus in each case, 1.25%.
The Fund had no borrowings during
the year ended December 31, 2021.
Note 9. Significant
risks
Information technology sector
risk
The Fund is more susceptible to the
particular risks that may affect companies in the information technology sector than if it were invested in a wider variety of companies in unrelated sectors. Companies in the information technology sector are subject
to certain risks, including the risk that new services, equipment or technologies will not be accepted by consumers and businesses or will become rapidly obsolete. Performance of such companies may be affected by
factors including obtaining and protecting patents (or the failure to do so) and significant competitive pressures, including aggressive pricing of their products or services, new market entrants, competition for
market share and short product cycles due to an accelerated rate of technological developments. Such competitive pressures may lead to limited earnings and/or falling profit margins. As a result, the value of their
securities may fall or fail to rise. In addition, many information technology sector companies have limited operating histories and prices of these companies’ securities historically have been more volatile than
other securities, especially over the short term. Some companies in the information technology sector are facing increased government and regulatory scrutiny and may be subject to adverse government or regulatory
action, which could negatively impact the value of their securities.
Market risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced
| 24 | Columbia Variable Portfolio – Seligman Global Technology Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
liquidity in equity, credit and/or fixed income
markets may negatively affect many issuers, which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions
and operational challenges. Global economies and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different
country, region or financial market. These risks may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies
worldwide. As a result, local, regional or global events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events –
or the potential for such events – could have a significant negative impact on global economic and market conditions.
The coronavirus disease 2019 and
its variants (COVID-19) pandemic has resulted in, and may continue to result in, significant global economic and societal disruption and market volatility due to disruptions in market access, resource availability,
facilities operations, imposition of tariffs, export controls and supply chain disruption, among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement
and loss in human and other resources. The uncertainty surrounding the magnitude, duration, reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental
authorities or other third parties, present unknowns that are yet to unfold. The impacts, as well as the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and
pandemics that may arise in the future – could negatively affect global economies and markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in
emerging market countries may be greater due to generally less established healthcare systems, governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing
political, social and economic risks in certain countries or globally. The disruptions caused by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively
impact the Fund’s ability to achieve its investment objectives. Any such event(s) could have a significant adverse impact on the value and risk profile of the Fund.
Non-diversification risk
A non-diversified fund is permitted
to invest a greater percentage of its total assets in fewer issuers than a diversified fund. This increases the risk that a change in the value of any one investment held by the Fund could affect the overall value of
the Fund more than it would affect that of a diversified fund holding a greater number of investments. Accordingly, the Fund’s value will likely be more volatile than the value of a more diversified fund.
Shareholder concentration risk
At December 31, 2021, two
unaffiliated shareholders of record owned 75.2% of the outstanding shares of the Fund in one or more accounts. The Fund has no knowledge about whether any portion of those shares was owned beneficially. Subscription
and redemption activity by concentrated accounts may have a significant effect on the operations of the Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times,
including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of less liquid positions. Large redemptions could result in decreased economies of scale and increased operating
expenses for non-redeeming Fund shareholders.
Note 10. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
Note 11. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in
connection with the conduct of their business activities. Ameriprise Financial believes that the Fund is not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject
of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates
| Columbia Variable Portfolio – Seligman Global Technology Fund | Annual Report 2021 | 25 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
to perform under their contracts with the Fund.
Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (SEC) on legal and regulatory matters that relate to Ameriprise
Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that
these matters, or the adverse publicity associated with them, will not result in increased Fund redemptions, reduced sale of Fund shares or other adverse consequences to the Fund. Further, although we believe
proceedings are not likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines,
penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial or one or more of its affiliates that provides services to
the Fund.
| 26 | Columbia Variable Portfolio – Seligman Global Technology Fund | Annual Report 2021 |
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees of Columbia
Funds Variable Series Trust II and Shareholders of Columbia Variable Portfolio – Seligman Global Technology Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of Columbia Variable Portfolio – Seligman Global Technology Fund (one of the funds constituting Columbia Funds Variable Series Trust
II, referred to hereafter as the "Fund") as of December 31, 2021, the related statement of operations for the year ended December 31, 2021, the statement of changes in net assets for each of the two years in the
period ended December 31, 2021, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2021 (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, 2021, 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, 2021 and the financial highlights for each of the five years in the period ended December 31, 2021 in conformity with accounting principles generally
accepted in the United States of America.
Basis for Opinion
These financial statements are the
responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these
financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2021 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.
/s/PricewaterhouseCoopers LLP
Minneapolis, Minnesota
February 22, 2022
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| Columbia Variable Portfolio – Seligman Global Technology Fund | Annual Report 2021 | 27 |
Federal Income Tax
Information
(Unaudited)
The Fund hereby designates the
following tax attributes for the fiscal year ended December 31, 2021.
| Dividends received deduction | Capital gain dividend |
| 61.42% | $27,094,485 |
Dividends received deduction. The
percentage of ordinary income distributed during the fiscal year that qualifies for the corporate dividends received deduction.
Capital gain dividend. The Fund
designates as a capital gain dividend the amount reflected above, or if subsequently determined to be different, the net capital gain of such fiscal period.
TRUSTEES AND
OFFICERS
The Board oversees the Fund’s
operations and appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following table provides basic biographical information about the Fund’s Trustees as
of the printing of this report, including their principal occupations during the past five years, although specific titles for individuals may have varied over the period. The year set forth beneath Length of Service
in the table below is the year in which the Trustee was first appointed or elected as Trustee to any Fund currently in the Columbia Funds Complex or a predecessor thereof. Under current Board policy, each Trustee
generally serves until December 31 of the year such Trustee turns seventy-five (75).
Independent trustees
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| George S. Batejan c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1953 | Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 176 | Former Chairman of the Board, NICSA (National Investment Company Services Association) (Executive Committee, Nominating Committee and Governance Committee), 2014-2016; former Director, Intech Investment Management, 2011-2016; former Board Member, Metro Denver Chamber of Commerce, 2015-2016; former Advisory Board Member, University of Colorado Business School, 2015-2018 |
| 28 | Columbia Variable Portfolio – Seligman Global Technology Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Kathleen Blatz c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2006 | Attorney, specializing in arbitration and mediation; Chief Justice, Minnesota Supreme Court, 1998-2006; Associate Justice, Minnesota Supreme Court, 1996-1998; Fourth Judicial District Court Judge, Hennepin County, 1994-1996; Attorney in private practice and public service, 1984-1993; State Representative, Minnesota House of Representatives, 1979-1993, which included service on the Tax and Financial Institutions and Insurance Committees; Member and Interim Chair, Minnesota Sports Facilities Authority, January 2017-July 2017; Interim President and Chief Executive Officer, Blue Cross Blue Shield of Minnesota (health care insurance), February-July 2018, April-October 2021 | 176 | Former Trustee, Blue Cross Blue Shield of Minnesota, 2009-2021 (Chair of the Business Development Committee, 2014-2017; Chair of the Governance Committee, 2017-2019); former Member and Chair of the Board, Minnesota Sports Facilities Authority, January 2017-July 2017; former Director, Robina Foundation, 2009-2020 (Chair, 2014-2020); Director, Schulze Family Foundation, since 2021 |
| Pamela G. Carlton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2007 | President, Springboard — Partners in Cross Cultural Leadership (consulting company) since 2003; Managing Director of US Equity Research, JP Morgan Chase, 1999-2003; Director of US Equity Research, Chase Asset Management, 1996-1999; Co-Director Latin America Research, 1993-1996, COO Global Research, 1992-1996, Co-Director of US Research, 1991-1992, Investment Banker, Morgan Stanley, 1982-1991, Morgan Stanley; Attorney, Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 176 | Trustee, New York Presbyterian Hospital Board (Executive Committee and Chair of People Committee) since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee); Director, Apollo Commercial Real Estate Finance, Inc. since 2021; the Governing Council of the Independent Directors Council (IDC), since 2021 |
| Janet Langford Carrig c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1957 | Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 174 | Director, EQT Corporation (natural gas producer) since 2019; Director, Whiting Petroleum Corporation (independent oil and gas company) since 2020 |
| J. Kevin Connaughton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2020 | Member, FINRA National Adjudicatory Council since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Consultant to Independent Trustees of CFVIT and CFST I from March 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Managing Director and General Manager of Mutual Fund Products, Columbia Management Investment Advisers, LLC, May 2010-February 2015; President, Columbia Funds, 2008-2015; and senior officer of Columbia Funds and affiliated funds, 2003-2015 | 174 | Former Director, The Autism Project, March 2015-December 2021; former Member of the Investment Committee, St. Michael’s College, November 2015-February 2020; former Trustee, St. Michael’s College, June 2017-September 2019; former Trustee, New Century Portfolios, January 2015-December 2017 |
| Columbia Variable Portfolio – Seligman Global Technology Fund | Annual Report 2021 | 29 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Olive M. Darragh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since 2020 | Managing Director of Darragh Inc. (strategy and talent management consulting firm) since 2010; Founder and CEO, Zolio, Inc. (investment management talent identification platform) since 2004; Consultant to Independent Trustees of CFVIT and CFST I from June 2019 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 2001-2004 | 174 | Former Director, University of Edinburgh Business School (Member of US Board); former Director, Boston Public Library Foundation |
| Patricia M. Flynn c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1950 | Trustee since 2004 | Trustee Professor of Economics and Management, Bentley University since 1976 (also teaches and conducts research on corporate governance); Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 176 | Trustee, MA Taxpayers Foundation since 1997; Board of Governors, Innovation Institute, MA Technology Collaborative, 2010-2020; former Board of Directors, The MA Business Roundtable, 2003-2019 |
| Brian J. Gallagher c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 176 | Trustee, Catholic Schools Foundation since 2004 |
| Douglas A. Hacker c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1955 | Co-Chair since 2021; Chair of CFST I and CFVIT since 2014; Trustee of CFST I and CFVIT since 1996 and CFST, CFST II, CFVST II, CET I and CET II since 2021 | Independent business executive since May 2006; Executive Vice President – Strategy of United Airlines, December 2002 - May 2006; President of UAL Loyalty Services (airline marketing company), September 2001-December 2002; Executive Vice President and Chief Financial Officer of United Airlines, July 1999-September 2001 | 176 | Director, Spartan Nash Company (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing); former Director, Nash Finch Company (food distributor), 2005-2013; former Director, SeaCube Container Leasing Ltd. (container leasing), 2010-2013; and former Director, Travelport Worldwide Limited (travel information technology), 2014-2019 |
| Nancy T. Lukitsh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1956 | Trustee since 2011 | Senior Vice President, Partner and Director of Marketing, Wellington Management Company, LLP (investment adviser), 1997-2010; Chair, Wellington Management Portfolios (commingled non-U.S. investment pools), 2007 -2010; Director, Wellington Trust Company, NA and other Wellington affiliates, 1997-2010 | 174 | None |
| 30 | Columbia Variable Portfolio – Seligman Global Technology Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| David M. Moffett c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2011 | Retired; Consultant to Bridgewater and Associates | 174 | Director, CSX Corporation (transportation suppliers); Director, Genworth Financial, Inc. (financial and insurance products and services); Director, PayPal Holdings Inc. (payment and data processing services); Trustee, University of Oklahoma Foundation; former Director, eBay Inc. (online trading community), 2007-2015; and former Director, CIT Bank, CIT Group Inc. (commercial and consumer finance), 2010-2016 |
| Catherine James Paglia c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Co-Chair since 2021; Chair of CFST, CFST II, CFVST II, CET I and CET II since 2020; Trustee of CFST, CFST II and CFVST II since 2004 and CFST I and CFVIT since 2021 | Director, Enterprise Asset Management, Inc. (private real estate and asset management company) since September 1998; Managing Director and Partner, Interlaken Capital, Inc., 1989-1997; Vice President, 1982-1985, Principal, 1985-1987, Managing Director, 1987-1989, Morgan Stanley; Vice President, Investment Banking, 1980-1982, Associate, Investment Banking, 1976-1980, Dean Witter Reynolds, Inc. | 176 | Director, Valmont Industries, Inc. (irrigation systems manufacturer) since 2012; Trustee, Carleton College (on the Investment Committee); Trustee, Carnegie Endowment for International Peace (on the Investment Committee) |
| Minor M. Shaw c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1947 | Trustee since 2003 | President, Micco LLC (private investments) since 2011; President, Micco Corp. (family investment business), 1998-2011 | 176 | Director, Blue Cross Blue Shield of South Carolina (Chair of Compensation Committee) since April 2008; Trustee, Hollingsworth Funds (on the Investment Committee) since 2016 (previously Board Chair from 2016-2019); Former Advisory Board member, Duke Energy Corp., 2016-2020; Chair of the Duke Endowment; Chair of Greenville – Spartanburg Airport Commission; former Trustee, BofA Funds Series Trust (11 funds), 2003-2011; former Director, Piedmont Natural Gas, 2004-2016; former Director, National Association of Corporate Directors, Carolinas Chapter, 2013-2018; Chair, Daniel-Mickel Foundation since 1998 |
| Columbia Variable Portfolio – Seligman Global Technology Fund | Annual Report 2021 | 31 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Natalie A. Trunow c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1967 | Trustee since 2020 | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services), January 2016-January 2021; Non-executive Member of the Investment Committee and Valuation Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services), August 2018-January 2021; Advisor, Paradigm Asset Management, November 2016-December 2021; Consultant to Independent Trustees of CFVIT and CFST I from September 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Director of Investments/Consultant, Casey Family Programs, April 2016-November 2016; Senior Vice President and Chief Investment Officer, Calvert Investments, August 2008-January 2016; Section Head and Portfolio Manager, General Motors Asset Management, June 1997-August 2008 | 174 | Former Director, Investment Committee, Health Services for Children with Special Needs, Inc., 2012-2019; Director, Chair of Audit Committee, Consumer Credit Counseling Services (formerly Guidewell Financial Solutions), since 2019; Independent Director, Investment Committee and Valuation Committee, Sarona Asset Management, since 2019 |
| Sandra Yeager c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2017 | Retired; President and founder, Hanoverian Capital, LLC (SEC registered investment advisor firm), 2008-2016; Managing Director, DuPont Capital, 2006-2008; Managing Director, Morgan Stanley Investment Management, 2004-2006; Senior Vice President, Alliance Bernstein, 1990-2004 | 176 | Former Director, NAPE Education Foundation, October 2016-October 2020 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Fund Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I (CET I), Columbia ETF Trust II (CET II), Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Beckman, Gallagher and Hacker and Mses. Blatz, Carlton, Flynn, Paglia, Shaw and Yeager serve as Directors of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
Interested director affiliated
with Investment Manager*
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during the past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex overseen | Other directorships held by Trustee during the past five years |
| Daniel J. Beckman c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since November 2021(a) | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC (since April 2015); officer of Columbia Funds and affiliated funds since 2020. | 176 | Director, Ameriprise Trust Company, since October 2016; Director, Columbia Management Investment Distributors, Inc. since November 2018; Board of Governors, Columbia Wanger Asset Management, LLC since January 2022 |
| * | Interested person (as defined under the 1940 Act) by reason of being an officer, director, security holder and/or employee of the Investment Manager or Ameriprise Financial. |
| (a) | Mr. Beckman serves as the President and Principal Executive Officer of the Columbia Funds (since 2021). |
The Statement of Additional
Information has additional information about the Fund’s Board members and is available, without charge, upon request by calling 800.345.6611 or contacting your financial intermediary.
| 32 | Columbia Variable Portfolio – Seligman Global Technology Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. The following table provides basic information about the Officers of the Fund, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Beckman, who is President and Principal Executive Officer, the Fund’s other officers are:
The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. The following table provides basic information about the Officers of the Fund, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Beckman, who is President and Principal Executive Officer, the Fund’s other officers are:
Fund officers
| Columbia Variable Portfolio – Seligman Global Technology Fund | Annual Report 2021 | 33 |
TRUSTEES AND OFFICERS (continued)
Fund officers (continued)
Fund officers (continued)
| Name, address and year of birth | Position and year first appointed to position for any Fund in the Columbia Funds Complex or a predecessor thereof | Principal occupation(s) during past five years |
| Lyn Kephart-Strong 5228 Ameriprise Financial Center Minneapolis, MN 55474 1960 | Vice President (2015) | President, Columbia Management Investment Services Corp. since October 2014; Vice President & Resolution Officer, Ameriprise Trust Company since August 2009. |
| 34 | Columbia Variable Portfolio – Seligman Global Technology Fund | Annual Report 2021 |
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For Fund and other investment product prospectuses, which contain this and other important information, contact your
financial advisor or insurance representative. Please read the prospectus carefully before you invest. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved. Columbia Management Investment Distributors, Inc., 290 Congress Street, Boston, MA 02210
© 2022 Columbia Management Investment
Advisers, LLC.
SL 9916 AW (2/22)
Columbia Variable
Portfolio – Select Mid Cap Value Fund
Please remember that you may not
buy (nor will you own) shares of the Fund directly. The Fund is available through variable annuity contracts and variable life insurance policies offered by the separate accounts of participating insurance companies
as well as qualified pension and retirement plans. Please contact your financial advisor or insurance representative for more information.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
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| 16 | |
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| 25 | |
| 26 |
Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which Columbia Variable Portfolio – Select Mid Cap Value Fund (the Fund) holds investments consistent with the procedures as stated in the Statement of Additional
Information (SAI). You may obtain a copy of the SAI without charge by calling 800.345.6611; contacting your financial intermediary or searching the website of the Securities and Exchange Commission (SEC) at sec.gov.
Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge
by visiting columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. The Fund’s Form N-PORT is available on the SEC’s website at sec.gov. The Fund’s complete
schedule of portfolio holdings, as filed on Form N-PORT, can also be obtained without charge, upon request, by calling 800.345.6611.
Additional Fund information
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
290 Congress Street
Boston, MA 02210
Fund distributor
Columbia Management Investment Distributors,
Inc.
290 Congress Street
Boston, MA 02210
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
Columbia Variable Portfolio – Select Mid Cap
Value Fund | Annual Report 2021
Fund at a Glance
Investment objective
The Fund
seeks to provide shareholders with long-term growth of capital.
Portfolio management
Kari Montanus
Lead Portfolio Manager
Managed Fund since 2018
Jonas Patrikson, CFA
Portfolio Manager
Managed Fund since 2014
| Columbia Variable Portfolio – Select Mid Cap Value Fund | Annual Report 2021 | 3 |
Fund at a Glance (continued)
Performance of a hypothetical $10,000 investment (December 31, 2011 — December 31, 2021)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class 2 shares of Columbia Variable Portfolio – Select Mid Cap Value Fund during the stated time period, and does not reflect the deduction of taxes, if any,
that a shareholder may pay on Fund distributions or on the redemption of Fund shares. The returns also do not reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance
policy or qualified pension or retirement plan, if any.
| 4 | Columbia Variable Portfolio – Select Mid Cap Value Fund | Annual Report 2021 |
Manager Discussion of Fund Performance
At December 31, 2021,
approximately 60.30% of the Fund’s shares were owned in the aggregate by affiliated funds-of-funds managed by Columbia Management Investment Advisers, LLC (the Investment Manager). As a result of asset
allocation decisions by the Investment Manager, it is possible that the Fund may experience relatively large purchases or redemptions from affiliated funds-of-funds. The Investment Manager seeks to minimize the impact
of these transactions by structuring them over a reasonable period of time. The Fund may also experience increased expenses as it buys and sells securities as a result of purchases or redemptions by affiliated
funds-of-funds.
For the 12-month period that ended
December 31, 2021, the Fund’s Class 2 shares returned 31.97%. The Fund outperformed its benchmark, the Russell Midcap Value Index, which returned 28.34% for the same time period.
Market overview
U.S. equities posted strong gains
in 2021. As pandemic-related restrictions were eased, robust economic growth and corporate earnings drove gains for stocks. Both U.S. monetary and fiscal policy were highly supportive, as Congress approved massive
spending packages that included direct payments to citizens and the U.S. Federal Reserve (Fed) maintained its benchmark overnight lending rate near zero while engaging in bond market purchases to keep longer term
borrowing costs low. The fourth quarter of 2021 saw the Fed adopt a more hawkish tone in response to persistently high inflation, driven in large part by supply chain constraints and rising commodity prices, which led
to increased market volatility.
All eleven sectors within the
benchmark delivered positive gains for the period. The energy, real estate, financials and materials sectors delivered the strongest gains, outperforming the overall benchmark’s return for the period. The
communication services sector lagged most, followed by health care, utilities and consumer staples.
The Fund’s notable
contributors during the period
| • | The Fund’s outperformance of its benchmark during the period was driven by strong stock selection, particularly within the information technology, energy, communication services and consumer discretionary sectors. |
| • | Devon Energy Corp., an oil exploration and production company, was a strong contributor to overall relative performance. The company reported better-than-expected results during the period, driven by higher production and lower operating costs. The company continues to generate impressive amounts of free cash flow and remains committed to returning cash to shareholders through its pioneering variable dividend. |
| • | Within financials, the Fund’s position in SVB Financial Group was a notable outperformer. Shares in the banking and financial services company benefited from rising rates and a steepening yield curve. The firm has seen continued strong growth through the COVID-19 pandemic, as its primary lending and servicing activities are offered to the technology and life science industries, which have thrived during the pandemic. |
| • | The Fund’s position in semiconductor company ON Semiconductor Corp. performed strongly within technology. Shares climbed after a strong quarterly report that saw earnings and forward guidance above consensus expectations. The beat and raise was driven by significant gross margin expansion. Investors seem to be increasingly recognizing that the strategic measures undertaken by the new CEO to improve profitability at the company are taking hold. |
| • | Freeport-McMoRan, Inc. was a top contributor to performance. Shares in the copper miner climbed as the company has executed well and benefited from a shortage in copper supply relative to demand. |
The Fund’s notable
detractors during the period
| • | Stock selection within the materials sector detracted most from the Fund’s performance versus its benchmark during the period. |
| • | Zimmer Biomet Holdings, Inc., a medical device company that provides orthopedic reconstructive products, declined due to macro-related headwinds. With the emergence of COVID-19 variants and labor shortages at hospitals, surgical procedures such as knee and hip replacements have been canceled or delayed, which weighed on the stock. |
| • | Electric utility company Pinnacle West Capital Corp. declined during the period due to regulatory headwinds in its key market of Arizona. The Fund’s position was eliminated in the fourth quarter. |
| Columbia Variable Portfolio – Select Mid Cap Value Fund | Annual Report 2021 | 5 |
Manager Discussion of Fund Performance (continued)
| • | Within the materials sector, the Fund’s position in specialty metals company Allegheny Technologies, Inc. was a notable detractor from relative results. The company reported lower-than-expected numbers during the third quarter of 2021, as the impact of a workers’ strike at many of their plants weighed on results. However, the company reached a new agreement with the United Steelworkers union to end the strike. The aerospace business, which was slower to recover due to COVID-19, also weighed on sentiment, but we believe that it should recover as the pandemic fades and travel resumes. |
| • | Also detracting from relative performance was the Fund’s position in FMC Corp. Shares in the chemical manufacturing company declined after it reported earnings that were largely in line with revised expectations but issued forward guidance that was well below consensus. Results were impacted by a supply chain disruption due to COVID-19 and some reduced demand in their South American markets. |
| • | The Fund’s position in power generator manufacturing company Bloom Energy Corp. also weighed on Fund performance. The company reported earnings that saw lower-than-expected revenue and gross margin numbers. However, the company maintained its yearly guidance, and we believe the potential for its green hydrogen-powered fuel cells continued to be high. |
The views expressed in this report
reflect the current views of the respective parties who have contributed to this report. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult
to predict, so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective parties
disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Columbia fund are based on numerous factors, may not be relied on as an
indication of trading intent on behalf of any particular Columbia fund. References to specific securities should not be construed as a recommendation or investment advice.
| 6 | Columbia Variable Portfolio – Select Mid Cap Value Fund | Annual Report 2021 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur ongoing
costs, which generally include management fees, distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to help you compare these costs with the ongoing costs of investing in other mutual funds.
The information below does not
reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy (collectively, Contracts) or qualified pension and retirement plan (Qualified Plan), if any. The total fees
and expenses you bear may therefore be higher than those shown below.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount invested, to estimate the
expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as redemption or exchange fees, or expenses that apply to the subaccount or the Contract. Therefore, the
hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If the fees and expenses imposed under your Contract or
Qualified Plan, if any, were included, your costs would be higher.
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 365.
Expenses do not include fees and
expenses incurred indirectly by the Fund from its investment in underlying funds, including affiliated and non-affiliated pooled investment vehicles, such as mutual funds and exchange-traded funds.
Had Columbia Management Investment
Advisers, LLC and/or certain of its affiliates not waived/reimbursed certain fees and expenses, account value at the end of the period would have been reduced.
| Columbia Variable Portfolio – Select Mid Cap Value Fund | Annual Report 2021 | 7 |
Portfolio of Investments
December 31, 2021
December 31, 2021
(Percentages represent value of
investments compared to net assets)
Investments in securities
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 8 | Columbia Variable Portfolio – Select Mid Cap Value Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Select Mid Cap Value Fund | Annual Report 2021 | 9 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Notes to Portfolio of
Investments
| (a) | Non-income producing investment. |
| (b) | The rate shown is the seven-day current annualized yield at December 31, 2021. |
| (c) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended December 31, 2021 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Realized gain (loss)($) | Dividends($) | End of period shares |
| Columbia Short-Term Cash Fund, 0.085% | ||||||||
| 2,709,197 | 49,737,098 | (48,886,511) | (106) | 3,559,678 | (134) | 3,305 | 3,560,390 | |
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at December 31, 2021:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Investments in Securities | ||||
| Common Stocks | ||||
| Communication Services | 18,731,468 | — | — | 18,731,468 |
| Consumer Discretionary | 44,904,141 | — | — | 44,904,141 |
| Consumer Staples | 11,612,376 | — | — | 11,612,376 |
| Energy | 17,583,448 | — | — | 17,583,448 |
| Financials | 54,910,049 | — | — | 54,910,049 |
| Health Care | 33,295,934 | — | — | 33,295,934 |
| Industrials | 52,178,566 | — | — | 52,178,566 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 10 | Columbia Variable Portfolio – Select Mid Cap Value Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Fair value measurements (continued)
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Information Technology | 35,651,789 | — | — | 35,651,789 |
| Materials | 24,443,486 | — | — | 24,443,486 |
| Real Estate | 32,485,174 | — | — | 32,485,174 |
| Utilities | 16,855,980 | — | — | 16,855,980 |
| Total Common Stocks | 342,652,411 | — | — | 342,652,411 |
| Money Market Funds | 3,559,678 | — | — | 3,559,678 |
| Total Investments in Securities | 346,212,089 | — | — | 346,212,089 |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Select Mid Cap Value Fund | Annual Report 2021 | 11 |
Statement of Assets and Liabilities
December 31, 2021
December 31, 2021
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $230,620,258) | $342,652,411 |
| Affiliated issuers (cost $3,559,784) | 3,559,678 |
| Receivable for: | |
| Capital shares sold | 1,784 |
| Dividends | 262,773 |
| Expense reimbursement due from Investment Manager | 356 |
| Prepaid expenses | 8,809 |
| Total assets | 346,485,811 |
| Liabilities | |
| Payable for: | |
| Capital shares purchased | 888,470 |
| Management services fees | 7,777 |
| Distribution and/or service fees | 590 |
| Service fees | 9,819 |
| Compensation of board members | 80,270 |
| Compensation of chief compliance officer | 60 |
| Other expenses | 19,927 |
| Total liabilities | 1,006,913 |
| Net assets applicable to outstanding capital stock | $345,478,898 |
| Represented by | |
| Trust capital | $345,478,898 |
| Total - representing net assets applicable to outstanding capital stock | $345,478,898 |
| Class 1 | |
| Net assets | $222,590,895 |
| Shares outstanding | 6,035,260 |
| Net asset value per share | $36.88 |
| Class 2 | |
| Net assets | $49,497,515 |
| Shares outstanding | 1,378,228 |
| Net asset value per share | $35.91 |
| Class 3 | |
| Net assets | $73,390,488 |
| Shares outstanding | 2,016,907 |
| Net asset value per share | $36.39 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 12 | Columbia Variable Portfolio – Select Mid Cap Value Fund | Annual Report 2021 |
Statement of Operations
Year Ended December 31, 2021
Year Ended December 31, 2021
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $4,986,793 |
| Dividends — affiliated issuers | 3,305 |
| Foreign taxes withheld | (17,678) |
| Total income | 4,972,420 |
| Expenses: | |
| Management services fees | 2,705,000 |
| Distribution and/or service fees | |
| Class 2 | 105,190 |
| Class 3 | 84,351 |
| Service fees | 90,627 |
| Compensation of board members | 32,618 |
| Custodian fees | 6,405 |
| Printing and postage fees | 16,874 |
| Audit fees | 29,500 |
| Legal fees | 13,040 |
| Compensation of chief compliance officer | 64 |
| Other | 13,381 |
| Total expenses | 3,097,050 |
| Fees waived or expenses reimbursed by Investment Manager and its affiliates | (198,281) |
| Total net expenses | 2,898,769 |
| Net investment income | 2,073,651 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 55,160,684 |
| Investments — affiliated issuers | (134) |
| Net realized gain | 55,160,550 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | 35,845,470 |
| Investments — affiliated issuers | (106) |
| Net change in unrealized appreciation (depreciation) | 35,845,364 |
| Net realized and unrealized gain | 91,005,914 |
| Net increase in net assets resulting from operations | $93,079,565 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| Columbia Variable Portfolio – Select Mid Cap Value Fund | Annual Report 2021 | 13 |
Statement of Changes in Net Assets
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | |
| Operations | ||
| Net investment income | $2,073,651 | $2,745,690 |
| Net realized gain (loss) | 55,160,550 | (20,859,820) |
| Net change in unrealized appreciation (depreciation) | 35,845,364 | 41,264,211 |
| Net increase in net assets resulting from operations | 93,079,565 | 23,150,081 |
| Decrease in net assets from capital stock activity | (78,497,952) | (15,765,238) |
| Total increase in net assets | 14,581,613 | 7,384,843 |
| Net assets at beginning of year | 330,897,285 | 323,512,442 |
| Net assets at end of year | $345,478,898 | $330,897,285 |
| Year Ended | Year Ended | |||
| December 31, 2021 | December 31, 2020 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class 1 | ||||
| Subscriptions | 78,463 | 2,413,133 | 342,116 | 6,472,478 |
| Redemptions | (2,556,233) | (80,412,074) | (349,990) | (8,798,038) |
| Net decrease | (2,477,770) | (77,998,941) | (7,874) | (2,325,560) |
| Class 2 | ||||
| Subscriptions | 232,165 | 7,500,960 | 146,302 | 3,315,438 |
| Redemptions | (121,717) | (3,808,407) | (227,979) | (5,265,371) |
| Net increase (decrease) | 110,448 | 3,692,553 | (81,677) | (1,949,933) |
| Class 3 | ||||
| Subscriptions | 93,222 | 2,965,606 | 28,883 | 663,278 |
| Redemptions | (222,676) | (7,157,170) | (548,062) | (12,153,023) |
| Net decrease | (129,454) | (4,191,564) | (519,179) | (11,489,745) |
| Total net decrease | (2,496,776) | (78,497,952) | (608,730) | (15,765,238) |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 14 | Columbia Variable Portfolio – Select Mid Cap Value Fund | Annual Report 2021 |
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| Columbia Variable Portfolio – Select Mid Cap Value Fund | Annual Report 2021 | 15 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect any fees and expenses imposed under your
Contract and/or Qualified Plan, as applicable; such fees and expenses would reduce the total returns for all periods shown. Total return and portfolio turnover are not annualized for periods of less than one year. The
portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain derivatives, if any. If such transactions were included, the Fund’s portfolio
turnover rate may be higher.
| Net asset value, beginning of period | Net investment income | Net realized and unrealized gain (loss) | Total from investment operations | |
| Class 1 | ||||
| Year Ended 12/31/2021 | $27.87 | 0.22 | 8.79 | 9.01 |
| Year Ended 12/31/2020 | $25.93 | 0.23 | 1.71 | 1.94 |
| Year Ended 12/31/2019 | $19.70 | 0.29 | 5.94 | 6.23 |
| Year Ended 12/31/2018 | $22.72 | 0.20 | (3.22) | (3.02) |
| Year Ended 12/31/2017 | $20.01 | 0.25 | 2.46 | 2.71 |
| Class 2 | ||||
| Year Ended 12/31/2021 | $27.21 | 0.14 | 8.56 | 8.70 |
| Year Ended 12/31/2020 | $25.37 | 0.17 | 1.67 | 1.84 |
| Year Ended 12/31/2019 | $19.33 | 0.22 | 5.82 | 6.04 |
| Year Ended 12/31/2018 | $22.35 | 0.14 | (3.16) | (3.02) |
| Year Ended 12/31/2017 | $19.73 | 0.20 | 2.42 | 2.62 |
| Class 3 | ||||
| Year Ended 12/31/2021 | $27.54 | 0.18 | 8.67 | 8.85 |
| Year Ended 12/31/2020 | $25.64 | 0.20 | 1.70 | 1.90 |
| Year Ended 12/31/2019 | $19.51 | 0.25 | 5.88 | 6.13 |
| Year Ended 12/31/2018 | $22.53 | 0.16 | (3.18) | (3.02) |
| Year Ended 12/31/2017 | $19.87 | 0.22 | 2.44 | 2.66 |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 16 | Columbia Variable Portfolio – Select Mid Cap Value Fund | Annual Report 2021 |
Financial Highlights (continued)
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets(a) | Total net expense ratio to average net assets(a),(b) | Net investment income ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Class 1 | |||||||
| Year Ended 12/31/2021 | $36.88 | 32.33% | 0.88% | 0.82% | 0.68% | 32% | $222,591 |
| Year Ended 12/31/2020 | $27.87 | 7.48% | 0.88% | 0.81% | 1.03% | 40% | $237,299 |
| Year Ended 12/31/2019 | $25.93 | 31.62% | 0.88% | 0.82% | 1.22% | 31% | $220,919 |
| Year Ended 12/31/2018 | $19.70 | (13.29%) | 0.89% | 0.85% | 0.87% | 98% | $170,998 |
| Year Ended 12/31/2017 | $22.72 | 13.54% | 0.91% | 0.87% | 1.20% | 72% | $191,281 |
| Class 2 | |||||||
| Year Ended 12/31/2021 | $35.91 | 31.97% | 1.13% | 1.07% | 0.45% | 32% | $49,498 |
| Year Ended 12/31/2020 | $27.21 | 7.25% | 1.13% | 1.06% | 0.78% | 40% | $34,497 |
| Year Ended 12/31/2019 | $25.37 | 31.25% | 1.13% | 1.07% | 0.97% | 31% | $34,239 |
| Year Ended 12/31/2018 | $19.33 | (13.51%) | 1.14% | 1.10% | 0.62% | 98% | $25,687 |
| Year Ended 12/31/2017 | $22.35 | 13.28% | 1.16% | 1.12% | 0.97% | 72% | $28,989 |
| Class 3 | |||||||
| Year Ended 12/31/2021 | $36.39 | 32.14% | 1.01% | 0.95% | 0.57% | 32% | $73,390 |
| Year Ended 12/31/2020 | $27.54 | 7.41% | 1.01% | 0.94% | 0.91% | 40% | $59,101 |
| Year Ended 12/31/2019 | $25.64 | 31.42% | 1.01% | 0.95% | 1.08% | 31% | $68,354 |
| Year Ended 12/31/2018 | $19.51 | (13.40%) | 1.01% | 0.97% | 0.73% | 98% | $61,387 |
| Year Ended 12/31/2017 | $22.53 | 13.39% | 1.04% | 0.99% | 1.05% | 72% | $85,853 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Select Mid Cap Value Fund | Annual Report 2021 | 17 |
Notes to Financial Statements
December 31, 2021
December 31, 2021
Note 1. Organization
Columbia Variable Portfolio
– Select Mid Cap Value Fund (the Fund), a series of Columbia Funds Variable Series Trust II (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended (the
1940 Act), as an open-end management investment company organized as a Massachusetts business trust.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers Class 1, Class 2 and Class 3 shares to separate accounts funding variable annuity contracts and variable life insurance policies (collectively, Contracts) issued
by affiliated and unaffiliated life insurance companies (Participating Insurance Companies) as well as qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors (Qualified
Investors) authorized by Columbia Management Investment Distributors, Inc. (the Distributor). You may not buy (nor will you own) shares of the Fund directly. You may invest by participating in a Qualified Plan or by
buying a Contract and making allocations to the Fund. Although all share classes generally have identical voting, dividend and liquidation rights, each share class votes separately when required by the Trust’s
organizational documents or by law. Different share classes pay different net investment income distribution amounts to the extent the expenses of such share classes differ, and distributions in liquidation will be
proportional to the net asset value of each share class. Each share class has its own cost structure and other features.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Equity securities listed on an
exchange are valued at the closing price or last trade price on their primary exchange at the close of business of the New York Stock Exchange. Securities with a closing price not readily available or not listed on
any exchange are valued at the mean between the closing bid and ask prices. Listed preferred stocks convertible into common stocks are valued using an evaluated price from a pricing service.
Foreign equity securities are
valued based on the closing price or last trade price on their primary exchange at the close of business of the New York Stock Exchange. If any foreign equity security closing prices are not readily available,
the securities are valued at the mean of the latest quoted bid and ask prices on such exchanges or markets. Foreign currency exchange rates are determined at the scheduled closing time of the New York Stock Exchange.
Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange; therefore, the closing prices for securities in such markets or on such exchanges may not fully reflect
events that occur after such close but before the close of the New York Stock Exchange. In those situations, foreign securities will be fair valued pursuant to a policy adopted by the Board of Trustees. Under the
policy, the Fund may utilize a third-party pricing service to determine these fair values. The third-party pricing service takes into account multiple factors, including, but not limited to, movements in the U.S.
securities markets, certain depositary receipts, futures contracts and foreign exchange rates that have occurred subsequent to the close of the foreign exchange or market, to determine a good faith estimate that
reasonably reflects the current market conditions as of the close of the New York Stock Exchange. The fair value of a security is likely to be different from the quoted or published price, if available.
Investments in open-end investment
companies (other than exchange-traded funds (ETFs)), are valued at the latest net asset value reported by those companies as of the valuation time.
| 18 | Columbia Variable Portfolio – Select Mid Cap Value Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
Income recognition
Corporate actions and dividend
income are generally recorded net of any non-reclaimable tax withholdings, on the ex-dividend date or upon receipt of an ex-dividend notification in the case of certain foreign securities.
The Fund may receive distributions
from holdings in equity securities, business development companies (BDCs), exchange-traded funds (ETFs), limited partnerships (LPs), other regulated investment companies (RICs), and real estate investment trusts
(REITs), which report information as to the tax character of their distributions annually. These distributions are allocated to dividend income, capital gain and return of capital based on actual information reported.
Return of capital is recorded as a reduction of the cost basis of securities held. If the Fund no longer owns the applicable securities, return of capital is recorded as a realized gain. With respect to REITs, to the
extent actual information has not yet been reported, estimates for return of capital are made by Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise
Financial, Inc. (Ameriprise Financial). The Investment Manager’s estimates are subsequently adjusted when the actual character of the distributions is disclosed by the REITs, which could result in a
proportionate change in return of capital to shareholders.
Awards from class action litigation
are recorded as a reduction of cost basis if the Fund still owns the applicable securities on the payment date. If the Fund no longer owns the applicable securities on the payment date, the proceeds are recorded as
realized gains.
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
Federal income tax status
The Fund is treated as a
partnership for federal income tax purposes, and the Fund does not expect to make regular distributions. The Fund will not be subject to federal income tax, and therefore, there is no provision for federal income
taxes. The partners of the Fund are subject to tax on their distributive share of the Fund’s income and loss. The components of the Fund’s net assets are reported at the partner-level for federal income
tax purposes, and therefore, are not presented in the Statement of Assets and Liabilities.
| Columbia Variable Portfolio – Select Mid Cap Value Fund | Annual Report 2021 | 19 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Foreign taxes
The Fund may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries, as applicable, based upon its current interpretation of tax rules
and regulations that exist in the markets in which it invests.
Realized gains in certain countries
may be subject to foreign taxes at the Fund level, based on statutory rates. The Fund accrues for such foreign taxes on realized and unrealized gains at the appropriate rate for each jurisdiction, as applicable. The
amount, if any, is disclosed as a liability on the Statement of Assets and Liabilities.
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Under the Management Agreement, the
Investment Manager provides the Fund with investment research and advice, as well as administrative and accounting services. The management services fee is an annual fee that is equal to a percentage of the
Fund’s daily net assets that declines from 0.82% to 0.65% as the Fund’s net assets increase. The effective management services fee rate for the year ended December 31, 2021 was 0.82% of the Fund’s
average daily net assets.
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. Under a Deferred Compensation Plan (the
Deferred Plan), these members of the Board of Trustees may elect to defer payment of up to 100% of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of
certain funds managed by the Investment Manager. The Fund’s liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Deferred Plan. All
amounts payable under the Deferred Plan constitute a general unsecured obligation of the Fund. The expense for the Deferred Plan, which includes Trustees’ fees deferred during the current period as well as any
gains or losses on the Trustees’ deferred compensation balances as a result of market fluctuations, is included in "Compensation of board members" on the Statement of Operations.
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
| 20 | Columbia Variable Portfolio – Select Mid Cap Value Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Transactions with affiliates
The Fund is permitted to engage in
purchase and/or sale transactions with affiliates and/or accounts that have a common investment manager (or affiliated investment managers), common directors/trustees, and/or common officers under specified conditions
outlined in a policy adopted by the Board, pursuant to Rule 17a-7 under the 1940 Act (cross-trades). The Board relies on quarterly written representation from the Fund’s Chief Compliance Officer that
cross-trades complied with approved policy.
For the year ended December 31,
2021, the Fund engaged in cross-trades as follows:
| Purchases ($) | Sales ($) | Net realized gain (loss) ($) |
| — | 6,866,882 | 1,822,901 |
Service fees
The Fund has entered into a
Shareholder Services Agreement with Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial. Under this
agreement, the Fund pays a service fee equal to the payments made by the Transfer Agent to Participating Insurance Companies and other financial intermediaries (together, Participating Organizations) for services each
such Participating Organization provides to its clients, customers and participants that are invested directly or indirectly in the Fund, up to a cap approved by the Board of Trustees from time to time. The effective
service fee rate for the year ended December 31, 2021, was 0.03% of the Fund’s average daily net assets.
The Transfer Agent may retain as
compensation for its services revenues from fees for wire, telephone and redemption orders, account transcripts due the Transfer Agent from Fund shareholders and interest (net of bank charges) earned with respect to
balances in accounts the Transfer Agent maintains in connection with its services to the Fund.
Distribution and/or service fees
The Fund has an agreement with the
Distributor, an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution services. Under a Plan and Agreement of Distribution, the Fund pays a fee at an annual rate
of up to 0.25% of the Fund’s average daily net assets attributable to Class 2 shares and an annual rate of up to 0.125% of the Fund’s average daily net assets attributable to Class 3 shares. The Fund pays
no distribution and service fees for Class 1 shares.
Expenses waived/reimbursed by the
Investment Manager and its affiliates
The Investment Manager and certain
of its affiliates have contractually agreed to waive fees and/or reimburse expenses (excluding certain fees and expenses described below) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, so that the Fund’s net operating expenses, after giving effect to fees waived/expenses reimbursed and any balance credits and/or overdraft charges from the Fund’s
custodian, do not exceed the following annual rate(s) as a percentage of the classes’ average daily net assets:
| Contractual expense cap May 1, 2021 through April 30, 2022 | Voluntary expense cap May 1, 2021 through June 30, 2021 | Contractual expense cap prior to May 1, 2021 | |
| Class 1 | 0.83 | 0.81 | 0.81 |
| Class 2 | 1.08 | 1.06 | 1.06 |
| Class 3 | 0.955 | 0.935 | 0.935 |
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), expenses associated with investments in affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange-traded funds), transaction costs and
brokerage commissions, costs related to any securities lending program, dividend expenses associated with securities sold short,
| Columbia Variable Portfolio – Select Mid Cap Value Fund | Annual Report 2021 | 21 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
inverse floater program fees and expenses,
transaction charges and interest on borrowed money, interest, costs associated with certain shareholder meetings, infrequent and/or unusual expenses and any other expenses the exclusion of which is specifically
approved by the Board of Trustees. This agreement may be modified or amended only with approval from the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the
expense reimbursement arrangements described above are not recoverable by the Investment Manager or its affiliates in future periods.
Note 4. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $103,263,464 and $179,889,088, respectively, for the year ended December 31, 2021. The amount of purchase and
sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 5. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes
referred to as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
Note 6. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund did not borrow or lend
money under the Interfund Program during the year ended December 31, 2021.
Note 7. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to an October 28, 2021 amendment and restatement, the credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment
Manager or an affiliated investment manager, severally and not jointly, permits collective borrowings up to $950 million. Interest is currently charged to each participating fund based on its borrowings at a rate
equal to the higher of (i) the federal funds effective rate, (ii) the secured overnight financing rate plus 0.11448% and (iii) the overnight bank funding rate, plus in each case, 1.00%. Each borrowing under the credit
facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The
commitment fee is included in other expenses in the Statement of Operations. This agreement expires annually in October unless extended or renewed. Prior to the October 28, 2021 amendment and restatement, the Fund had
access to a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. which permitted collective borrowings up to $950 million. Interest was
charged to each participating fund based on its borrowings at a rate equal to the higher of (i) the federal funds effective rate, (ii) the one-month London Interbank Offered Rate (LIBOR) rate and (iii) the overnight
bank funding rate, plus in each case, 1.25%.
The Fund had no borrowings during
the year ended December 31, 2021.
| 22 | Columbia Variable Portfolio – Select Mid Cap Value Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Note 8. Significant
risks
Market risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
The coronavirus disease 2019 and
its variants (COVID-19) pandemic has resulted in, and may continue to result in, significant global economic and societal disruption and market volatility due to disruptions in market access, resource availability,
facilities operations, imposition of tariffs, export controls and supply chain disruption, among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement
and loss in human and other resources. The uncertainty surrounding the magnitude, duration, reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental
authorities or other third parties, present unknowns that are yet to unfold. The impacts, as well as the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and
pandemics that may arise in the future – could negatively affect global economies and markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in
emerging market countries may be greater due to generally less established healthcare systems, governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing
political, social and economic risks in certain countries or globally. The disruptions caused by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively
impact the Fund’s ability to achieve its investment objectives. Any such event(s) could have a significant adverse impact on the value and risk profile of the Fund.
Shareholder concentration risk
At December 31, 2021, affiliated
shareholders of record owned 96.2% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of
less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Small- and mid-cap company risk
Investments in small- and
mid-capitalization companies (small- and mid-cap companies) often involve greater risks than investments in larger, more established companies (larger companies) because small- and mid-cap companies tend to have less
predictable earnings and may lack the management experience, financial resources, product diversification and competitive strengths of larger companies. Securities of small- and mid-cap companies may be less liquid
and more volatile than the securities of larger companies.
Note 9. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
| Columbia Variable Portfolio – Select Mid Cap Value Fund | Annual Report 2021 | 23 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Note 10. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in
connection with the conduct of their business activities. Ameriprise Financial believes that the Fund is not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject
of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with
the Fund. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (SEC) on legal and regulatory matters that relate to
Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that
these matters, or the adverse publicity associated with them, will not result in increased Fund redemptions, reduced sale of Fund shares or other adverse consequences to the Fund. Further, although we believe
proceedings are not likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines,
penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial or one or more of its affiliates that provides services to
the Fund.
| 24 | Columbia Variable Portfolio – Select Mid Cap Value Fund | Annual Report 2021 |
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees of Columbia
Funds Variable Series Trust II and Shareholders of Columbia Variable Portfolio – Select Mid Cap Value Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of Columbia Variable Portfolio – Select Mid Cap Value Fund (one of the funds constituting Columbia Funds Variable Series Trust II,
referred to hereafter as the "Fund") as of December 31, 2021, the related statement of operations for the year ended December 31, 2021, the statement of changes in net assets for each of the two years in the period
ended December 31, 2021, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2021 (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, 2021, 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, 2021 and the financial highlights for each of the five years in the period ended December 31, 2021 in conformity with accounting principles generally
accepted in the United States of America.
Basis for Opinion
These financial statements are the
responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these
financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2021 by correspondence with the custodian and transfer agent. We believe that our
audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Minneapolis, Minnesota
February 18, 2022
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| Columbia Variable Portfolio – Select Mid Cap Value Fund | Annual Report 2021 | 25 |
TRUSTEES AND
OFFICERS
The Board oversees the
Fund’s operations and appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following table provides basic biographical information about the
Fund’s Trustees as of the printing of this report, including their principal occupations during the past five years, although specific titles for individuals may have varied over the period. The year set forth
beneath Length of Service in the table below is the year in which the Trustee was first appointed or elected as Trustee to any Fund currently in the Columbia Funds Complex or a predecessor thereof. Under current Board
policy, each Trustee generally serves until December 31 of the year such Trustee turns seventy-five (75).
Independent trustees
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| George S. Batejan c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1953 | Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 176 | Former Chairman of the Board, NICSA (National Investment Company Services Association) (Executive Committee, Nominating Committee and Governance Committee), 2014-2016; former Director, Intech Investment Management, 2011-2016; former Board Member, Metro Denver Chamber of Commerce, 2015-2016; former Advisory Board Member, University of Colorado Business School, 2015-2018 |
| Kathleen Blatz c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2006 | Attorney, specializing in arbitration and mediation; Chief Justice, Minnesota Supreme Court, 1998-2006; Associate Justice, Minnesota Supreme Court, 1996-1998; Fourth Judicial District Court Judge, Hennepin County, 1994-1996; Attorney in private practice and public service, 1984-1993; State Representative, Minnesota House of Representatives, 1979-1993, which included service on the Tax and Financial Institutions and Insurance Committees; Member and Interim Chair, Minnesota Sports Facilities Authority, January 2017-July 2017; Interim President and Chief Executive Officer, Blue Cross Blue Shield of Minnesota (health care insurance), February-July 2018, April-October 2021 | 176 | Former Trustee, Blue Cross Blue Shield of Minnesota, 2009-2021 (Chair of the Business Development Committee, 2014-2017; Chair of the Governance Committee, 2017-2019); former Member and Chair of the Board, Minnesota Sports Facilities Authority, January 2017-July 2017; former Director, Robina Foundation, 2009-2020 (Chair, 2014-2020); Director, Schulze Family Foundation, since 2021 |
| Pamela G. Carlton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2007 | President, Springboard — Partners in Cross Cultural Leadership (consulting company) since 2003; Managing Director of US Equity Research, JP Morgan Chase, 1999-2003; Director of US Equity Research, Chase Asset Management, 1996-1999; Co-Director Latin America Research, 1993-1996, COO Global Research, 1992-1996, Co-Director of US Research, 1991-1992, Investment Banker, Morgan Stanley, 1982-1991, Morgan Stanley; Attorney, Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 176 | Trustee, New York Presbyterian Hospital Board (Executive Committee and Chair of People Committee) since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee); Director, Apollo Commercial Real Estate Finance, Inc. since 2021; the Governing Council of the Independent Directors Council (IDC), since 2021 |
| 26 | Columbia Variable Portfolio – Select Mid Cap Value Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Janet Langford Carrig c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1957 | Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 174 | Director, EQT Corporation (natural gas producer) since 2019; Director, Whiting Petroleum Corporation (independent oil and gas company) since 2020 |
| J. Kevin Connaughton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2020 | Member, FINRA National Adjudicatory Council since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Consultant to Independent Trustees of CFVIT and CFST I from March 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Managing Director and General Manager of Mutual Fund Products, Columbia Management Investment Advisers, LLC, May 2010-February 2015; President, Columbia Funds, 2008-2015; and senior officer of Columbia Funds and affiliated funds, 2003-2015 | 174 | Former Director, The Autism Project, March 2015-December 2021; former Member of the Investment Committee, St. Michael’s College, November 2015-February 2020; former Trustee, St. Michael’s College, June 2017-September 2019; former Trustee, New Century Portfolios, January 2015-December 2017 |
| Olive M. Darragh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since 2020 | Managing Director of Darragh Inc. (strategy and talent management consulting firm) since 2010; Founder and CEO, Zolio, Inc. (investment management talent identification platform) since 2004; Consultant to Independent Trustees of CFVIT and CFST I from June 2019 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 2001-2004 | 174 | Former Director, University of Edinburgh Business School (Member of US Board); former Director, Boston Public Library Foundation |
| Patricia M. Flynn c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1950 | Trustee since 2004 | Trustee Professor of Economics and Management, Bentley University since 1976 (also teaches and conducts research on corporate governance); Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 176 | Trustee, MA Taxpayers Foundation since 1997; Board of Governors, Innovation Institute, MA Technology Collaborative, 2010-2020; former Board of Directors, The MA Business Roundtable, 2003-2019 |
| Brian J. Gallagher c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 176 | Trustee, Catholic Schools Foundation since 2004 |
| Columbia Variable Portfolio – Select Mid Cap Value Fund | Annual Report 2021 | 27 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Douglas A. Hacker c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1955 | Co-Chair since 2021; Chair of CFST I and CFVIT since 2014; Trustee of CFST I and CFVIT since 1996 and CFST, CFST II, CFVST II, CET I and CET II since 2021 | Independent business executive since May 2006; Executive Vice President – Strategy of United Airlines, December 2002 - May 2006; President of UAL Loyalty Services (airline marketing company), September 2001-December 2002; Executive Vice President and Chief Financial Officer of United Airlines, July 1999-September 2001 | 176 | Director, Spartan Nash Company (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing); former Director, Nash Finch Company (food distributor), 2005-2013; former Director, SeaCube Container Leasing Ltd. (container leasing), 2010-2013; and former Director, Travelport Worldwide Limited (travel information technology), 2014-2019 |
| Nancy T. Lukitsh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1956 | Trustee since 2011 | Senior Vice President, Partner and Director of Marketing, Wellington Management Company, LLP (investment adviser), 1997-2010; Chair, Wellington Management Portfolios (commingled non-U.S. investment pools), 2007 -2010; Director, Wellington Trust Company, NA and other Wellington affiliates, 1997-2010 | 174 | None |
| David M. Moffett c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2011 | Retired; Consultant to Bridgewater and Associates | 174 | Director, CSX Corporation (transportation suppliers); Director, Genworth Financial, Inc. (financial and insurance products and services); Director, PayPal Holdings Inc. (payment and data processing services); Trustee, University of Oklahoma Foundation; former Director, eBay Inc. (online trading community), 2007-2015; and former Director, CIT Bank, CIT Group Inc. (commercial and consumer finance), 2010-2016 |
| Catherine James Paglia c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Co-Chair since 2021; Chair of CFST, CFST II, CFVST II, CET I and CET II since 2020; Trustee of CFST, CFST II and CFVST II since 2004 and CFST I and CFVIT since 2021 | Director, Enterprise Asset Management, Inc. (private real estate and asset management company) since September 1998; Managing Director and Partner, Interlaken Capital, Inc., 1989-1997; Vice President, 1982-1985, Principal, 1985-1987, Managing Director, 1987-1989, Morgan Stanley; Vice President, Investment Banking, 1980-1982, Associate, Investment Banking, 1976-1980, Dean Witter Reynolds, Inc. | 176 | Director, Valmont Industries, Inc. (irrigation systems manufacturer) since 2012; Trustee, Carleton College (on the Investment Committee); Trustee, Carnegie Endowment for International Peace (on the Investment Committee) |
| 28 | Columbia Variable Portfolio – Select Mid Cap Value Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Minor M. Shaw c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1947 | Trustee since 2003 | President, Micco LLC (private investments) since 2011; President, Micco Corp. (family investment business), 1998-2011 | 176 | Director, Blue Cross Blue Shield of South Carolina (Chair of Compensation Committee) since April 2008; Trustee, Hollingsworth Funds (on the Investment Committee) since 2016 (previously Board Chair from 2016-2019); Former Advisory Board member, Duke Energy Corp., 2016-2020; Chair of the Duke Endowment; Chair of Greenville – Spartanburg Airport Commission; former Trustee, BofA Funds Series Trust (11 funds), 2003-2011; former Director, Piedmont Natural Gas, 2004-2016; former Director, National Association of Corporate Directors, Carolinas Chapter, 2013-2018; Chair, Daniel-Mickel Foundation since 1998 |
| Natalie A. Trunow c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1967 | Trustee since 2020 | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services), January 2016-January 2021; Non-executive Member of the Investment Committee and Valuation Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services), August 2018-January 2021; Advisor, Paradigm Asset Management, November 2016-December 2021; Consultant to Independent Trustees of CFVIT and CFST I from September 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Director of Investments/Consultant, Casey Family Programs, April 2016-November 2016; Senior Vice President and Chief Investment Officer, Calvert Investments, August 2008-January 2016; Section Head and Portfolio Manager, General Motors Asset Management, June 1997-August 2008 | 174 | Former Director, Investment Committee, Health Services for Children with Special Needs, Inc., 2012-2019; Director, Chair of Audit Committee, Consumer Credit Counseling Services (formerly Guidewell Financial Solutions), since 2019; Independent Director, Investment Committee and Valuation Committee, Sarona Asset Management, since 2019 |
| Sandra Yeager c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2017 | Retired; President and founder, Hanoverian Capital, LLC (SEC registered investment advisor firm), 2008-2016; Managing Director, DuPont Capital, 2006-2008; Managing Director, Morgan Stanley Investment Management, 2004-2006; Senior Vice President, Alliance Bernstein, 1990-2004 | 176 | Former Director, NAPE Education Foundation, October 2016-October 2020 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Fund Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I (CET I), Columbia ETF Trust II (CET II), Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Beckman, Gallagher and Hacker and Mses. Blatz, Carlton, Flynn, Paglia, Shaw and Yeager serve as Directors of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
| Columbia Variable Portfolio – Select Mid Cap Value Fund | Annual Report 2021 | 29 |
TRUSTEES AND OFFICERS (continued)
Interested trustee affiliated with Investment Manager*
Interested trustee affiliated with Investment Manager*
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during the past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex overseen | Other directorships held by Trustee during the past five years |
| Daniel J. Beckman c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since November 2021(a) | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC (since April 2015); officer of Columbia Funds and affiliated funds since 2020. | 176 | Director, Ameriprise Trust Company, since October 2016; Director, Columbia Management Investment Distributors, Inc. since November 2018; Board of Governors, Columbia Wanger Asset Management, LLC since January 2022 |
| * | Interested person (as defined under the 1940 Act) by reason of being an officer, director, security holder and/or employee of the Investment Manager or Ameriprise Financial. |
| (a) | Mr. Beckman serves as the President and Principal Executive Officer of the Columbia Funds (since 2021). |
The Statement of Additional
Information has additional information about the Fund’s Board members and is available, without charge, upon request by calling 800.345.6611 or contacting your financial intermediary.
The Board has appointed officers
who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. The following table provides basic information about the Officers of the
Fund, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Beckman, who is President and Principal Executive Officer, the
Fund’s other officers are:
Fund officers
| 30 | Columbia Variable Portfolio – Select Mid Cap Value Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Fund officers (continued)
Fund officers (continued)
| Columbia Variable Portfolio – Select Mid Cap Value Fund | Annual Report 2021 | 31 |
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For Fund and other investment product prospectuses, which contain this and other important information, contact your
financial advisor or insurance representative. Please read the prospectus carefully before you invest. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved. Columbia Management Investment Distributors, Inc., 290 Congress Street, Boston, MA 02210
© 2022 Columbia Management Investment
Advisers, LLC.
S-6474 AW (2/22)
Columbia Variable
Portfolio – Income Opportunities Fund
Please remember that you may not
buy (nor will you own) shares of the Fund directly. The Fund is available through variable annuity contracts and variable life insurance policies offered by the separate accounts of participating insurance companies
as well as qualified pension and retirement plans. Please contact your financial advisor or insurance representative for more information.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
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Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which Columbia Variable Portfolio – Income Opportunities Fund (the Fund) holds investments consistent with the procedures as stated in the Statement of Additional
Information (SAI). You may obtain a copy of the SAI without charge by calling 800.345.6611; contacting your financial intermediary or searching the website of the Securities and Exchange Commission (SEC) at sec.gov.
Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge
by visiting columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. The Fund’s Form N-PORT is available on the SEC’s website at sec.gov. The Fund’s complete
schedule of portfolio holdings, as filed on Form N-PORT, can also be obtained without charge, upon request, by calling 800.345.6611.
Additional Fund information
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
290 Congress Street
Boston, MA 02210
Fund distributor
Columbia Management Investment Distributors,
Inc.
290 Congress Street
Boston, MA 02210
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
Columbia Variable Portfolio – Income
Opportunities Fund | Annual Report 2021
Fund at a Glance
Investment objective
The Fund
seeks to provide shareholders with a high total return through current income and capital appreciation.
Portfolio management
Brian Lavin, CFA
Lead Portfolio Manager
Managed Fund since 2004
Daniel DeYoung
Portfolio Manager
Managed Fund since 2019
| Columbia Variable Portfolio – Income Opportunities Fund | Annual Report 2021 | 3 |
Fund at a Glance (continued)
Performance of a hypothetical $10,000 investment (December 31, 2011 — December 31, 2021)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class 2 shares of Columbia Variable Portfolio – Income Opportunities Fund during the stated time period, and does not reflect the deduction of taxes, if any,
that a shareholder may pay on Fund distributions or on the redemption of Fund shares. The returns also do not reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance
policy or qualified pension or retirement plan, if any.
| 4 | Columbia Variable Portfolio – Income Opportunities Fund | Annual Report 2021 |
Manager Discussion of Fund Performance
For the 12-month period ended
December 31, 2021, the Fund’s Class 2 shares returned 4.14%. The Fund’s benchmark, the ICE BofA BB-B US Cash Pay High Yield Constrained Index, returned 4.58% during the same time period.
Market overview
As pandemic-related restrictions
were eased over the period, robust economic growth and corporate earnings supported risk sentiment and credit-oriented segments of the bond market. In addition, both U.S. monetary and fiscal policy were highly
supportive for much of the period. In this vein, Congress approved massive spending packages that included direct payments to citizens and the U.S. Federal Reserve (Fed) maintained its benchmark overnight lending rate
near zero while engaging in bond market purchases to keep longer term borrowing costs low.
The fourth quarter of 2021 saw the
Fed adopt a more hawkish tone in response to persistently high inflation driven by post-pandemic supply chain disruptions and rising commodity prices, leading to increased market volatility. The Fed officially
tightened policy in November as it began tapering its monthly bond purchases. In December, the Fed accelerated the timetable for ending its bond purchase program and signaled the likelihood of three increases in the
federal funds rate in 2022.
Investment-grade bond market
returns for the 12-month period were generally muted given the move higher in U.S. Treasury yields. To illustrate, the 10-year Treasury note yield, which entered the year at 0.93%, reached as high as 1.74% at the end
of the first quarter before drifting lower and ending 2021 at 1.52%. Less interest rate sensitive, high-yield corporate bonds in aggregate posted solid positive returns driven by strong credit fundamentals and higher
energy prices.
The Fund’s notable
detractors during the period
| • | Detractors from relative performance included an overweight allocation to utilities and cable companies, which had positive absolute returns but lagged the overall market rally. |
| • | An underweight allocation to refiners within energy also detracted given the rally in the sector driven by higher commodity prices. |
The Fund’s notable
contributors during the period
| • | Security selection contributed positively to the Fund’s performance relative to the benchmark for the annual period. |
| • | Security selection within energy led positive contributions, most notably selection among exploration & production companies. Specifically, the Fund had overweight positions in select energy issuers that benefited from the improving commodity price environment, some of which exited the BB/B benchmark due to downgrades in 2020 but continued to be held by the Fund. |
| • | Security selection was positive across several additional sectors beyond energy, driven by idiosyncratic factors. In this vein, the Fund’s holdings within the consumer/commercial/lease financing, wireline telecommunication, REITs, gaming and specialty retail segments outperformed the benchmark. |
| • | The Fund averaged a 4.6% allocation to out-of-benchmark CCC-rated issuers over the year, adding to performance as the rating category notably outperformed the BB/B portion of the market. The Fund’s holdings within the CCC quality grouping were predominately composed of issuers downgraded in 2020 in the wake of the pandemic. As a reminder, the Fund is not a forced seller of such downgrades and will continue to hold high conviction names. |
The views expressed in this report
reflect the current views of the respective parties who have contributed to this report. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult
to predict, so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective parties
disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Columbia fund are based on numerous factors, may not be relied on as an
indication of trading intent on behalf of any particular Columbia fund. References to specific securities should not be construed as a recommendation or investment advice.
| Columbia Variable Portfolio – Income Opportunities Fund | Annual Report 2021 | 5 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur ongoing
costs, which generally include management fees, distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to help you compare these costs with the ongoing costs of investing in other mutual funds.
The information below does not
reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy (collectively, Contracts) or qualified pension and retirement plan (Qualified Plan), if any. The total fees
and expenses you bear may therefore be higher than those shown below.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount invested, to estimate the
expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as redemption or exchange fees, or expenses that apply to the subaccount or the Contract. Therefore, the
hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If the fees and expenses imposed under your Contract or
Qualified Plan, if any, were included, your costs would be higher.
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 365.
Expenses do not include fees and
expenses incurred indirectly by the Fund from its investment in underlying funds, including affiliated and non-affiliated pooled investment vehicles, such as mutual funds and exchange-traded funds.
Had Columbia Management Investment
Advisers, LLC and/or certain of its affiliates not waived/reimbursed certain fees and expenses, account value at the end of the period would have been reduced.
| 6 | Columbia Variable Portfolio – Income Opportunities Fund | Annual Report 2021 |
Portfolio of Investments
December 31, 2021
December 31, 2021
(Percentages represent value of
investments compared to net assets)
Investments in securities
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Income Opportunities Fund | Annual Report 2021 | 7 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 8 | Columbia Variable Portfolio – Income Opportunities Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Income Opportunities Fund | Annual Report 2021 | 9 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 10 | Columbia Variable Portfolio – Income Opportunities Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Income Opportunities Fund | Annual Report 2021 | 11 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 12 | Columbia Variable Portfolio – Income Opportunities Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Income Opportunities Fund | Annual Report 2021 | 13 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 14 | Columbia Variable Portfolio – Income Opportunities Fund | Annual Report 2021 |
Notes to Portfolio of
Investments
| (a) | Represents fair value as determined in good faith under procedures approved by the Board of Trustees. At December 31, 2021, the total value of these securities amounted to $6, which represents less than 0.01% of total net assets. |
| (b) | Non-income producing investment. |
| (c) | Valuation based on significant unobservable inputs. |
| (d) | Represents privately placed and other securities and instruments exempt from Securities and Exchange Commission registration (collectively, private placements), such as Section 4(a)(2) and Rule 144A eligible securities, which are often sold only to qualified institutional buyers. At December 31, 2021, the total value of these securities amounted to $126,443,071, which represents 69.87% of total net assets. |
| (e) | Represents a variable rate security with a step coupon where the rate adjusts according to a schedule for a series of periods, typically lower for an initial period and then increasing to a higher coupon rate thereafter. The interest rate shown was the current rate as of December 31, 2021. |
| (f) | Represents securities that have defaulted on payment of interest. The Fund has stopped accruing interest on these securities. At December 31, 2021, the total value of these securities amounted to $675, which represents less than 0.01% of total net assets. |
| (g) | Principal and interest may not be guaranteed by a governmental entity. |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Income Opportunities Fund | Annual Report 2021 | 15 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Notes to Portfolio of Investments (continued)
| (h) | The stated interest rate represents the weighted average interest rate at December 31, 2021 of contracts within the senior loan facility. Interest rates on contracts are primarily determined either weekly, monthly or quarterly by reference to the indicated base lending rate and spread and the reset period. These base lending rates are primarily the LIBOR and other short-term rates. Base lending rates may be subject to a floor or minimum rate. The interest rate for senior loans purchased on a when-issued or delayed delivery basis will be determined upon settlement, therefore no interest rate is disclosed. Senior loans often require prepayments from excess cash flows or permit the borrowers to repay at their election. The degree to which borrowers repay cannot be predicted with accuracy. As a result, remaining maturities of senior loans may be less than the stated maturities. Generally, the Fund is contractually obligated to receive approval from the agent bank and/or borrower prior to the disposition of a senior loan. |
| (i) | Variable rate security. The interest rate shown was the current rate as of December 31, 2021. |
| (j) | Represents a security purchased on a forward commitment basis. |
| (k) | The rate shown is the seven-day current annualized yield at December 31, 2021. |
| (l) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended December 31, 2021 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Realized gain (loss)($) | Dividends($) | End of period shares |
| Columbia Short-Term Cash Fund, 0.085% | ||||||||
| 8,503,952 | 58,983,451 | (63,067,892) | (141) | 4,419,370 | (203) | 3,145 | 4,420,254 | |
Abbreviation Legend
| LIBOR | London Interbank Offered Rate |
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 16 | Columbia Variable Portfolio – Income Opportunities Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Fair value measurements (continued)
The following table is a summary of the inputs used to value the Fund’s investments at December 31, 2021:
The following table is a summary of the inputs used to value the Fund’s investments at December 31, 2021:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Investments in Securities | ||||
| Common Stocks | ||||
| Communication Services | 172 | — | 6 | 178 |
| Consumer Discretionary | 132,456 | — | — | 132,456 |
| Industrials | 5,108 | — | — | 5,108 |
| Utilities | — | — | 0* | 0* |
| Total Common Stocks | 137,736 | — | 6 | 137,742 |
| Convertible Bonds | — | 1,005,239 | — | 1,005,239 |
| Corporate Bonds & Notes | — | 164,357,567 | — | 164,357,567 |
| Foreign Government Obligations | — | 565,246 | — | 565,246 |
| Senior Loans | — | 8,984,191 | — | 8,984,191 |
| Money Market Funds | 4,419,370 | — | — | 4,419,370 |
| Total Investments in Securities | 4,557,106 | 174,912,243 | 6 | 179,469,355 |
| * | Rounds to zero. |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The Fund’s assets assigned to
the Level 2 input category are generally valued using the market approach, in which a security’s value is determined through reference to prices and information from market transactions for similar or identical
assets.
The Fund does not hold any
significant investments (greater than one percent of net assets) categorized as Level 3.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Income Opportunities Fund | Annual Report 2021 | 17 |
Statement of Assets and Liabilities
December 31, 2021
December 31, 2021
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $169,593,663) | $175,049,985 |
| Affiliated issuers (cost $4,419,511) | 4,419,370 |
| Cash | 27,942 |
| Receivable for: | |
| Investments sold | 87,083 |
| Capital shares sold | 187,226 |
| Dividends | 285 |
| Interest | 2,321,512 |
| Foreign tax reclaims | 2,716 |
| Expense reimbursement due from Investment Manager | 566 |
| Prepaid expenses | 7,743 |
| Total assets | 182,104,428 |
| Liabilities | |
| Payable for: | |
| Investments purchased on a delayed delivery basis | 800,975 |
| Capital shares purchased | 91,198 |
| Management services fees | 3,270 |
| Distribution and/or service fees | 676 |
| Service fees | 14,077 |
| Compensation of board members | 203,104 |
| Compensation of chief compliance officer | 34 |
| Other expenses | 21,204 |
| Total liabilities | 1,134,538 |
| Net assets applicable to outstanding capital stock | $180,969,890 |
| Represented by | |
| Paid in capital | 162,250,001 |
| Total distributable earnings (loss) | 18,719,889 |
| Total - representing net assets applicable to outstanding capital stock | $180,969,890 |
| Class 1 | |
| Net assets | $19,891,289 |
| Shares outstanding | 2,713,819 |
| Net asset value per share | $7.33 |
| Class 2 | |
| Net assets | $36,232,236 |
| Shares outstanding | 4,983,090 |
| Net asset value per share | $7.27 |
| Class 3 | |
| Net assets | $124,846,365 |
| Shares outstanding | 16,924,859 |
| Net asset value per share | $7.38 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 18 | Columbia Variable Portfolio – Income Opportunities Fund | Annual Report 2021 |
Statement of Operations
Year Ended December 31, 2021
Year Ended December 31, 2021
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $4,439 |
| Dividends — affiliated issuers | 3,145 |
| Interest | 9,524,728 |
| Foreign taxes withheld | (1,024) |
| Total income | 9,531,288 |
| Expenses: | |
| Management services fees | 1,266,951 |
| Distribution and/or service fees | |
| Class 2 | 89,947 |
| Class 3 | 160,855 |
| Service fees | 126,974 |
| Compensation of board members | 55,541 |
| Custodian fees | 7,928 |
| Printing and postage fees | 16,496 |
| Audit fees | 29,500 |
| Legal fees | 11,700 |
| Compensation of chief compliance officer | 28 |
| Other | 11,489 |
| Total expenses | 1,777,409 |
| Fees waived or expenses reimbursed by Investment Manager and its affiliates | (273,478) |
| Total net expenses | 1,503,931 |
| Net investment income | 8,027,357 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 14,227,680 |
| Investments — affiliated issuers | (203) |
| Net realized gain | 14,227,477 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | (14,291,656) |
| Investments — affiliated issuers | (141) |
| Net change in unrealized appreciation (depreciation) | (14,291,797) |
| Net realized and unrealized loss | (64,320) |
| Net increase in net assets resulting from operations | $7,963,037 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| Columbia Variable Portfolio – Income Opportunities Fund | Annual Report 2021 | 19 |
Statement of Changes in Net Assets
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | |
| Operations | ||
| Net investment income | $8,027,357 | $16,251,128 |
| Net realized gain (loss) | 14,227,477 | (3,028,004) |
| Net change in unrealized appreciation (depreciation) | (14,291,797) | 5,872,844 |
| Net increase in net assets resulting from operations | 7,963,037 | 19,095,968 |
| Distributions to shareholders | ||
| Net investment income and net realized gains | ||
| Class 1 | (1,831,278) | (8,746,859) |
| Class 2 | (3,203,673) | (1,601,289) |
| Class 3 | (11,422,235) | (6,085,477) |
| Total distributions to shareholders | (16,457,186) | (16,433,625) |
| Decrease in net assets from capital stock activity | (173,186,005) | (3,472,413) |
| Total decrease in net assets | (181,680,154) | (810,070) |
| Net assets at beginning of year | 362,650,044 | 363,460,114 |
| Net assets at end of year | $180,969,890 | $362,650,044 |
| Year Ended | Year Ended | |||
| December 31, 2021 | December 31, 2020 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class 1 | ||||
| Subscriptions | 164,755 | 1,245,705 | 1,753,756 | 12,767,421 |
| Distributions reinvested | 253,289 | 1,831,278 | 1,191,670 | 8,746,859 |
| Redemptions | (22,961,477) | (177,027,879) | (1,008,955) | (7,335,937) |
| Net increase (decrease) | (22,543,433) | (173,950,896) | 1,936,471 | 14,178,343 |
| Class 2 | ||||
| Subscriptions | 450,789 | 3,367,312 | 444,049 | 3,237,819 |
| Distributions reinvested | 446,194 | 3,203,673 | 219,355 | 1,601,289 |
| Redemptions | (577,468) | (4,319,689) | (995,085) | (7,181,397) |
| Net increase (decrease) | 319,515 | 2,251,296 | (331,681) | (2,342,289) |
| Class 3 | ||||
| Subscriptions | 339,536 | 2,628,629 | 245,864 | 1,863,772 |
| Distributions reinvested | 1,568,988 | 11,422,235 | 823,475 | 6,085,477 |
| Redemptions | (2,047,398) | (15,537,269) | (3,190,149) | (23,257,716) |
| Net decrease | (138,874) | (1,486,405) | (2,120,810) | (15,308,467) |
| Total net decrease | (22,362,792) | (173,186,005) | (516,020) | (3,472,413) |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 20 | Columbia Variable Portfolio – Income Opportunities Fund | Annual Report 2021 |
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BLANK]
| Columbia Variable Portfolio – Income Opportunities Fund | Annual Report 2021 | 21 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect any fees and expenses imposed under your
Contract and/or Qualified Plan, as applicable; such fees and expenses would reduce the total returns for all periods shown. Total return and portfolio turnover are not annualized for periods of less than one year. The
portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain derivatives, if any. If such transactions were included, the Fund’s portfolio
turnover rate may be higher.
| Net asset value, beginning of period | Net investment income | Net realized and unrealized gain (loss) | Total from investment operations | Distributions from net investment income | Total distributions to shareholders | |
| Class 1 | ||||||
| Year Ended 12/31/2021 | $7.71 | 0.33 | 0.01(c) | 0.34 | (0.72) | (0.72) |
| Year Ended 12/31/2020 | $7.64 | 0.35 | 0.08 | 0.43 | (0.36) | (0.36) |
| Year Ended 12/31/2019 | $6.91 | 0.36 | 0.76 | 1.12 | (0.39) | (0.39) |
| Year Ended 12/31/2018 | $7.56 | 0.37 | (0.65) | (0.28) | (0.37) | (0.37) |
| Year Ended 12/31/2017 | $7.56 | 0.35 | 0.14 | 0.49 | (0.49) | (0.49) |
| Class 2 | ||||||
| Year Ended 12/31/2021 | $7.66 | 0.30 | 0.01(c) | 0.31 | (0.70) | (0.70) |
| Year Ended 12/31/2020 | $7.59 | 0.33 | 0.08 | 0.41 | (0.34) | (0.34) |
| Year Ended 12/31/2019 | $6.87 | 0.34 | 0.75 | 1.09 | (0.37) | (0.37) |
| Year Ended 12/31/2018 | $7.51 | 0.35 | (0.64) | (0.29) | (0.35) | (0.35) |
| Year Ended 12/31/2017 | $7.52 | 0.33 | 0.13 | 0.46 | (0.47) | (0.47) |
| Class 3 | ||||||
| Year Ended 12/31/2021 | $7.75 | 0.32 | 0.02(c) | 0.34 | (0.71) | (0.71) |
| Year Ended 12/31/2020 | $7.68 | 0.34 | 0.08 | 0.42 | (0.35) | (0.35) |
| Year Ended 12/31/2019 | $6.95 | 0.35 | 0.76 | 1.11 | (0.38) | (0.38) |
| Year Ended 12/31/2018 | $7.60 | 0.36 | (0.65) | (0.29) | (0.36) | (0.36) |
| Year Ended 12/31/2017 | $7.60 | 0.35 | 0.13 | 0.48 | (0.48) | (0.48) |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Calculation of the net gain (loss) per share (both realized and unrealized) does not correlate to the aggregate realized and unrealized gain (loss) presented in the Statement of Operations due to the timing of subscriptions and redemptions of Fund shares in relation to fluctuations in the market value of the portfolio. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 22 | Columbia Variable Portfolio – Income Opportunities Fund | Annual Report 2021 |
Financial Highlights (continued)
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets(a) | Total net expense ratio to average net assets(a),(b) | Net investment income ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Class 1 | |||||||
| Year Ended 12/31/2021 | $7.33 | 4.50% | 0.77% | 0.66% | 4.26% | 50% | $19,891 |
| Year Ended 12/31/2020 | $7.71 | 5.90% | 0.73% | 0.67% | 4.74% | 58% | $194,656 |
| Year Ended 12/31/2019 | $7.64 | 16.47% | 0.75% | 0.69% | 4.83% | 58% | $178,149 |
| Year Ended 12/31/2018 | $6.91 | (3.75%) | 0.74% | 0.73% | 5.05% | 42% | $138,357 |
| Year Ended 12/31/2017 | $7.56 | 6.56% | 0.76% | 0.76% | 4.66% | 50% | $132,262 |
| Class 2 | |||||||
| Year Ended 12/31/2021 | $7.27 | 4.14% | 1.05% | 0.90% | 4.07% | 50% | $36,232 |
| Year Ended 12/31/2020 | $7.66 | 5.67% | 0.98% | 0.92% | 4.49% | 58% | $35,700 |
| Year Ended 12/31/2019 | $7.59 | 16.12% | 1.00% | 0.94% | 4.59% | 58% | $37,916 |
| Year Ended 12/31/2018 | $6.87 | (3.90%) | 0.99% | 0.98% | 4.79% | 42% | $32,893 |
| Year Ended 12/31/2017 | $7.51 | 6.20% | 1.01% | 1.01% | 4.41% | 50% | $36,579 |
| Class 3 | |||||||
| Year Ended 12/31/2021 | $7.38 | 4.48% | 0.92% | 0.78% | 4.19% | 50% | $124,846 |
| Year Ended 12/31/2020 | $7.75 | 5.74% | 0.86% | 0.80% | 4.62% | 58% | $132,293 |
| Year Ended 12/31/2019 | $7.68 | 16.23% | 0.87% | 0.81% | 4.72% | 58% | $147,395 |
| Year Ended 12/31/2018 | $6.95 | (3.86%) | 0.87% | 0.85% | 4.90% | 42% | $146,078 |
| Year Ended 12/31/2017 | $7.60 | 6.39% | 0.88% | 0.88% | 4.55% | 50% | $199,852 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Income Opportunities Fund | Annual Report 2021 | 23 |
Notes to Financial Statements
December 31, 2021
December 31, 2021
Note 1. Organization
Columbia Variable Portfolio
– Income Opportunities Fund (the Fund), a series of Columbia Funds Variable Series Trust II (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended (the
1940 Act), as an open-end management investment company organized as a Massachusetts business trust.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers Class 1, Class 2 and Class 3 shares to separate accounts funding variable annuity contracts and variable life insurance policies (collectively, Contracts) issued
by affiliated and unaffiliated life insurance companies (Participating Insurance Companies) as well as qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors (Qualified
Investors) authorized by Columbia Management Investment Distributors, Inc. (the Distributor). You may not buy (nor will you own) shares of the Fund directly. You may invest by participating in a Qualified Plan or by
buying a Contract and making allocations to the Fund. Although all share classes generally have identical voting, dividend and liquidation rights, each share class votes separately when required by the Trust’s
organizational documents or by law. Different share classes pay different net investment income distribution amounts to the extent the expenses of such share classes differ, and distributions in liquidation will be
proportional to the net asset value of each share class. Each share class has its own cost structure and other features.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Equity securities listed on an
exchange are valued at the closing price or last trade price on their primary exchange at the close of business of the New York Stock Exchange. Securities with a closing price not readily available or not listed on
any exchange are valued at the mean between the closing bid and ask prices. Listed preferred stocks convertible into common stocks are valued using an evaluated price from a pricing service.
Debt securities generally are
valued by pricing services approved by the Board of Trustees based upon market transactions for normal, institutional-size trading units of similar securities. The services may use various pricing techniques that take
into account, as applicable, factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data, as well as approved independent broker-dealer quotes. Debt securities for
which quotations are not readily available or not believed to be reflective of market value may also be valued based upon a bid quote from an approved independent broker-dealer. Debt securities maturing in 60 days or
less are valued primarily at amortized market value, unless this method results in a valuation that management believes does not approximate fair value.
Senior loan securities for which
reliable market quotations are readily available are generally valued by pricing services at the average of the bids received.
Foreign equity securities are
valued based on the closing price or last trade price on their primary exchange at the close of business of the New York Stock Exchange. If any foreign equity security closing prices are not readily available,
the securities are valued at the mean of the latest quoted bid and ask prices on such exchanges or markets. Foreign currency exchange rates are determined at the scheduled closing time of the New York Stock Exchange.
Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange; therefore, the closing prices for securities in such markets or on such exchanges may not fully reflect
events that occur after such close but before the close
| 24 | Columbia Variable Portfolio – Income Opportunities Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
of the New York Stock Exchange. In those
situations, foreign securities will be fair valued pursuant to a policy adopted by the Board of Trustees. Under the policy, the Fund may utilize a third-party pricing service to determine these fair values. The
third-party pricing service takes into account multiple factors, including, but not limited to, movements in the U.S. securities markets, certain depositary receipts, futures contracts and foreign exchange rates that
have occurred subsequent to the close of the foreign exchange or market, to determine a good faith estimate that reasonably reflects the current market conditions as of the close of the New York Stock Exchange. The
fair value of a security is likely to be different from the quoted or published price, if available.
Investments in open-end investment
companies (other than exchange-traded funds (ETFs)), are valued at the latest net asset value reported by those companies as of the valuation time.
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Investments in senior loans
The Fund may invest in senior loan
assignments. When the Fund purchases an assignment of a senior loan, the Fund typically has direct rights against the borrower; provided, however, that the Fund’s rights may be more limited than the lender from
which it acquired the assignment and the Fund may be able to enforce its rights only through an administrative agent. Although certain senior loan assignments are secured by collateral, the Fund could experience
delays or limitations in realizing such collateral or have its interest subordinated to other indebtedness of the obligor. In the event that the administrator or collateral agent of a loan becomes insolvent or enters
into receivership or bankruptcy, the Fund may incur costs and delays in realizing payment or may suffer a loss of principal and/or interest. The risk of loss is greater for unsecured or subordinated loans. In
addition, senior loan assignments are vulnerable to market, economic or other conditions or events that may reduce the demand for senior loan assignments and certain senior loan assignments which were liquid when
purchased, may become illiquid.
The Fund may enter into senior loan
assignments where all or a portion of the loan may be unfunded. The Fund is obligated to fund these commitments at the borrower’s discretion. These commitments, if any, are generally traded and priced in the
same manner as other senior loan securities and are disclosed as unfunded senior loan commitments in the Fund’s Portfolio of Investments with a corresponding payable for investments purchased. The Fund
designates cash or liquid securities to cover these commitments.
Delayed delivery securities
The Fund may trade securities on
other than normal settlement terms, including securities purchased or sold on a “when-issued” or "forward commitment" basis. This may increase risk to the Fund since the other party to the transaction may
fail to deliver, which could cause the Fund to subsequently invest at less advantageous prices. The Fund designates cash or liquid securities in an amount equal to the delayed delivery commitment.
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
The trade date for senior loans
purchased in the primary market is the date on which the loan is allocated. The trade date for senior loans purchased in the secondary market is the date on which the transaction is entered into.
| Columbia Variable Portfolio – Income Opportunities Fund | Annual Report 2021 | 25 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Income recognition
Interest income is recorded on an
accrual basis. Market premiums and discounts, including original issue discounts, are amortized and accreted, respectively, over the expected life of the security on all debt securities, unless otherwise noted. For
convertible securities, premiums attributable to the conversion feature are not amortized.
The Fund may place a debt security
on non-accrual status and reduce related interest income when it becomes probable that the interest will not be collected and the amount of uncollectible interest can be reasonably estimated. A defaulted debt security
is removed from non-accrual status when the issuer resumes interest payments or when collectability of interest is reasonably assured.
Corporate actions and dividend
income are generally recorded net of any non-reclaimable tax withholdings, on the ex-dividend date or upon receipt of an ex-dividend notification in the case of certain foreign securities.
The Fund may receive distributions
from holdings in equity securities, business development companies (BDCs), exchange-traded funds (ETFs), limited partnerships (LPs), other regulated investment companies (RICs), and real estate investment trusts
(REITs), which report information as to the tax character of their distributions annually. These distributions are allocated to dividend income, capital gain and return of capital based on actual information reported.
Return of capital is recorded as a reduction of the cost basis of securities held. If the Fund no longer owns the applicable securities, return of capital is recorded as a realized gain. With respect to REITs, to the
extent actual information has not yet been reported, estimates for return of capital are made by Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise
Financial, Inc. (Ameriprise Financial). The Investment Manager’s estimates are subsequently adjusted when the actual character of the distributions is disclosed by the REITs, which could result in a
proportionate change in return of capital to shareholders.
Awards from class action litigation
are recorded as a reduction of cost basis if the Fund still owns the applicable securities on the payment date. If the Fund no longer owns the applicable securities on the payment date, the proceeds are recorded as
realized gains.
The value of additional securities
received as an income payment through a payment in kind, if any, is recorded as interest income and increases the cost basis of such securities.
The Fund may receive other income
from senior loans, including amendment fees, consent fees and commitment fees. These fees are recorded as income when received by the Fund. These amounts are included in Interest Income in the Statement of
Operations.
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
Federal income tax status
The Fund intends to qualify each
year as a regulated investment company under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its investment company taxable income and net capital gain, if any, for its
tax year, and as such will not be subject to federal income taxes. In addition, because the Fund meets the exception under Internal Revenue Code Section 4982(f), the Fund expects not to be subject to federal excise
tax. Therefore, no federal income or excise tax provision is recorded.
| 26 | Columbia Variable Portfolio – Income Opportunities Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Foreign taxes
The Fund may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries, as applicable, based upon its current interpretation of tax rules
and regulations that exist in the markets in which it invests.
Realized gains in certain countries
may be subject to foreign taxes at the Fund level, based on statutory rates. The Fund accrues for such foreign taxes on realized and unrealized gains at the appropriate rate for each jurisdiction, as applicable. The
amount, if any, is disclosed as a liability on the Statement of Assets and Liabilities.
Distributions to subaccounts
Distributions to the subaccounts of
Contracts, Qualified Plans and Qualified Investors are recorded at the close of business on the record date and are payable on the first business day following the record date. Dividends from net investment income, if
any, are declared and distributed annually. Capital gain distributions, when available, will be made annually. However, an additional capital gain distribution may be made during the fiscal year in order to comply
with the Internal Revenue Code, as applicable to registered investment companies. Income distributions and capital gain distributions are determined in accordance with federal income tax regulations, which may differ
from GAAP. All dividends and distributions are reinvested in additional shares of the applicable share class of the Fund at the net asset value as of the ex-dividend date of the distribution.
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Under the Management Agreement, the
Investment Manager provides the Fund with investment research and advice, as well as administrative and accounting services. The management services fee is an annual fee that is equal to a percentage of the
Fund’s daily net assets that declines from 0.66% to 0.40% as the Fund’s net assets increase. The effective management services fee rate for the year ended December 31, 2021 was 0.66% of the Fund’s
average daily net assets.
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. Under a Deferred Compensation Plan (the
Deferred Plan), these members of the Board of Trustees may elect to defer payment of up to 100% of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of
certain funds managed by the Investment Manager. The Fund’s liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Deferred Plan. All
amounts payable under the Deferred Plan constitute a general unsecured obligation of the Fund. The expense for the Deferred Plan, which includes Trustees’ fees deferred during the current period as well as any
gains or losses on the Trustees’ deferred compensation balances as a result of market fluctuations, is included in "Compensation of board members" on the Statement of Operations.
| Columbia Variable Portfolio – Income Opportunities Fund | Annual Report 2021 | 27 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
Service fees
The Fund has entered into a
Shareholder Services Agreement with Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial. Under this
agreement, the Fund pays a service fee equal to the payments made by the Transfer Agent to Participating Insurance Companies and other financial intermediaries (together, Participating Organizations) for services each
such Participating Organization provides to its clients, customers and participants that are invested directly or indirectly in the Fund, up to a cap approved by the Board of Trustees from time to time. The effective
service fee rate for the year ended December 31, 2021, was 0.07% of the Fund’s average daily net assets.
The Transfer Agent may retain as
compensation for its services revenues from fees for wire, telephone and redemption orders, account transcripts due the Transfer Agent from Fund shareholders and interest (net of bank charges) earned with respect to
balances in accounts the Transfer Agent maintains in connection with its services to the Fund.
Distribution and/or service fees
The Fund has an agreement with the
Distributor, an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution services. Under a Plan and Agreement of Distribution, the Fund pays a fee at an annual rate
of up to 0.25% of the Fund’s average daily net assets attributable to Class 2 shares and an annual rate of up to 0.125% of the Fund’s average daily net assets attributable to Class 3 shares. The Fund pays
no distribution and service fees for Class 1 shares.
Expenses waived/reimbursed by the
Investment Manager and its affiliates
The Investment Manager and certain
of its affiliates have contractually agreed to waive fees and/or reimburse expenses (excluding certain fees and expenses described below) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, so that the Fund’s net operating expenses, after giving effect to fees waived/expenses reimbursed and any balance credits and/or overdraft charges from the Fund’s
custodian, do not exceed the following annual rate(s) as a percentage of the classes’ average daily net assets:
| May 1, 2021 through April 30, 2022 | Prior to May 1, 2021 | |
| Class 1 | 0.64% | 0.67% |
| Class 2 | 0.89 | 0.92 |
| Class 3 | 0.765 | 0.795 |
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), expenses associated with investments in affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange-traded funds), transaction costs and
brokerage commissions, costs related to any securities lending program, dividend expenses associated with securities sold short, inverse floater program fees and expenses, transaction charges and interest on borrowed
money, interest, costs associated with certain shareholder meetings, infrequent and/or unusual expenses and any other expenses the exclusion of which is specifically approved by the Board of Trustees. This
agreement may be modified or amended only with approval from the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements
described above are not recoverable by the Investment Manager or its affiliates in future periods.
| 28 | Columbia Variable Portfolio – Income Opportunities Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Note 4. Federal tax
information
The timing and character of
income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP because of temporary or permanent book to tax differences.
At December 31, 2021, these
differences were primarily due to differing treatment for deferral/reversal of wash sale losses, trustees’ deferred compensation and principal and/or interest of fixed income securities. To the extent these
differences were permanent, reclassifications were made among the components of the Fund’s net assets. Temporary differences do not require reclassifications.
The following reclassifications
were made:
| Undistributed net investment income ($) | Accumulated net realized gain ($) | Paid in capital ($) |
| 69,829 | (69,829) | — |
Net investment income (loss) and
net realized gains (losses), as disclosed in the Statement of Operations, and net assets were not affected by this reclassification.
The tax character of distributions
paid during the years indicated was as follows:
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | ||||
| Ordinary income ($) | Long-term capital gains ($) | Total ($) | Ordinary income ($) | Long-term capital gains ($) | Total ($) |
| 16,457,186 | — | 16,457,186 | 16,433,625 | — | 16,433,625 |
Short-term capital gain
distributions, if any, are considered ordinary income distributions for tax purposes.
At December 31, 2021, the
components of distributable earnings on a tax basis were as follows:
| Undistributed ordinary income ($) | Undistributed long-term capital gains ($) | Capital loss carryforwards ($) | Net unrealized appreciation ($) |
| 9,855,891 | 3,718,729 | — | 5,347,294 |
At December 31, 2021, the cost of
all investments for federal income tax purposes along with the aggregate gross unrealized appreciation and depreciation based on that cost was:
| Federal tax cost ($) | Gross unrealized appreciation ($) | Gross unrealized (depreciation) ($) | Net unrealized appreciation ($) |
| 174,122,061 | 6,454,134 | (1,106,840) | 5,347,294 |
Tax cost of investments and
unrealized appreciation/(depreciation) may also include timing differences that do not constitute adjustments to tax basis.
The following capital loss
carryforwards, determined at December 31, 2021, may be available to reduce future net realized gains on investments, if any, to the extent permitted by the Internal Revenue Code. In addition, for the year ended
December 31, 2021, capital loss carryforwards utilized, if any, were as follows:
| No expiration short-term ($) | No expiration long-term ($) | Total ($) | Utilized ($) |
| — | — | — | 8,555,462 |
| Columbia Variable Portfolio – Income Opportunities Fund | Annual Report 2021 | 29 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Note 5. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $97,452,728 and $270,941,218, respectively, for the year ended December 31, 2021. The amount of purchase and
sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 6. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes
referred to as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
Note 7. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund did not borrow or lend
money under the Interfund Program during the year ended December 31, 2021.
Note 8. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to an October 28, 2021 amendment and restatement, the credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment
Manager or an affiliated investment manager, severally and not jointly, permits collective borrowings up to $950 million. Interest is currently charged to each participating fund based on its borrowings at a rate
equal to the higher of (i) the federal funds effective rate, (ii) the secured overnight financing rate plus 0.11448% and (iii) the overnight bank funding rate, plus in each case, 1.00%. Each borrowing under the credit
facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The
commitment fee is included in other expenses in the Statement of Operations. This agreement expires annually in October unless extended or renewed. Prior to the October 28, 2021 amendment and restatement, the Fund had
access to a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. which permitted collective borrowings up to $950 million. Interest was
charged to each participating fund based on its borrowings at a rate equal to the higher of (i) the federal funds effective rate, (ii) the one-month London Interbank Offered Rate (LIBOR) rate and (iii) the overnight
bank funding rate, plus in each case, 1.25%.
The Fund had no borrowings during
the year ended December 31, 2021.
| 30 | Columbia Variable Portfolio – Income Opportunities Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Note 9. Significant
risks
Credit risk
Credit risk is the risk that the
value of debt instruments in the Fund’s portfolio may decline because the issuer defaults or otherwise becomes unable or unwilling, or is perceived to be unable or unwilling, to honor its financial obligations,
such as making payments to the Fund when due. Credit rating agencies assign credit ratings to certain debt instruments to indicate their credit risk. Lower-rated or unrated debt instruments held by the Fund may
present increased credit risk as compared to higher-rated debt instruments.
High-yield investments risk
Securities and other debt
instruments held by the Fund that are rated below investment grade (commonly called "high-yield" or "junk" bonds) and unrated debt instruments of comparable quality expose the Fund to a greater risk of loss of
principal and income than a fund that invests solely or primarily in investment grade debt instruments. In addition, these investments have greater price fluctuations, are less liquid and are more likely to experience
a default than higher-rated debt instruments. High-yield debt instruments are considered to be predominantly speculative with respect to the issuer’s capacity to pay interest and repay principal.
Interest rate risk
Interest rate risk is the risk of
losses attributable to changes in interest rates. In general, if prevailing interest rates rise, the values of debt instruments tend to fall, and if interest rates fall, the values of debt instruments tend to rise.
Actions by governments and central banking authorities can result in increases or decreases in interest rates. Higher periods of inflation could lead such authorities to raise interest rates. Increasing interest rates
may negatively affect the value of debt securities held by the Fund, resulting in a negative impact on the Fund’s performance and net asset value per share. In general, the longer the maturity or duration of a
debt security, the greater its sensitivity to changes in interest rates. The Fund is subject to the risk that the income generated by its investments may not keep pace with inflation.
Liquidity risk
Liquidity risk is the risk
associated with a lack of marketability of investments which may make it difficult to sell the investment at a desirable time or price. Changing regulatory, market or other conditions or environments (for example, the
interest rate or credit environments) may adversely affect the liquidity of the Fund’s investments. The Fund may have to accept a lower selling price for the holding, sell other investments, or forego another,
more appealing investment opportunity. Generally, the less liquid the market at the time the Fund sells a portfolio investment, the greater the risk of loss or decline of value to the Fund. A less liquid market can
lead to an increase in Fund redemptions, which may negatively impact Fund performance and net asset value per share, including, for example, if the Fund is forced to sell securities in a down market.
Market risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
The coronavirus disease 2019 and
its variants (COVID-19) pandemic has resulted in, and may continue to result in, significant global economic and societal disruption and market volatility due to disruptions in market access, resource availability,
facilities operations, imposition of tariffs, export controls and supply chain disruption, among others. Such
| Columbia Variable Portfolio – Income Opportunities Fund | Annual Report 2021 | 31 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
disruptions may be caused, or exacerbated by,
quarantines and travel restrictions, workforce displacement and loss in human and other resources. The uncertainty surrounding the magnitude, duration, reach, costs and effects of the global pandemic, as well as
actions that have been or could be taken by governmental authorities or other third parties, present unknowns that are yet to unfold. The impacts, as well as the uncertainty over impacts to come, of COVID-19 –
and any other infectious illness outbreaks, epidemics and pandemics that may arise in the future – could negatively affect global economies and markets in ways that cannot necessarily be foreseen. In addition,
the impact of infectious illness outbreaks and epidemics in emerging market countries may be greater due to generally less established healthcare systems, governments and financial markets. Public health crises caused
by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic risks in certain countries or globally. The disruptions caused by COVID-19 could prevent the Fund from executing advantageous
investment decisions in a timely manner and negatively impact the Fund’s ability to achieve its investment objectives. Any such event(s) could have a significant adverse impact on the value and risk profile of
the Fund.
Shareholder concentration risk
At December 31, 2021, affiliated
shareholders of record owned 87.8% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of
less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Note 10. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
Note 11. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in
connection with the conduct of their business activities. Ameriprise Financial believes that the Fund is not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject
of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with
the Fund. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (SEC) on legal and regulatory matters that relate to
Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that
these matters, or the adverse publicity associated with them, will not result in increased Fund redemptions, reduced sale of Fund shares or other adverse consequences to the Fund. Further, although we believe
proceedings are not likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines,
penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial or one or more of its affiliates that provides services to
the Fund.
| 32 | Columbia Variable Portfolio – Income Opportunities Fund | Annual Report 2021 |
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees of Columbia
Funds Variable Series Trust II and Shareholders of Columbia Variable Portfolio – Income Opportunities Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of Columbia Variable Portfolio – Income Opportunities Fund (one of the funds constituting Columbia Funds Variable Series Trust II,
referred to hereafter as the "Fund") as of December 31, 2021, the related statement of operations for the year ended December 31, 2021, the statement of changes in net assets for each of the two years in the period
ended December 31, 2021, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2021 (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, 2021, 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, 2021 and the financial highlights for each of the five years in the period ended December 31, 2021 in conformity with accounting principles generally
accepted in the United States of America.
Basis for Opinion
These financial statements are the
responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these
financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2021 by correspondence with the custodian, transfer agent, broker and agent banks. We
believe that our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Minneapolis, Minnesota
February 18, 2022
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| Columbia Variable Portfolio – Income Opportunities Fund | Annual Report 2021 | 33 |
Federal Income Tax
Information
(Unaudited)
The Fund hereby designates the
following tax attributes for the fiscal year ended December 31, 2021.
| Capital gain dividend | |
| $3,904,665 |
Capital gain dividend. The Fund
designates as a capital gain dividend the amount reflected above, or if subsequently determined to be different, the net capital gain of such fiscal period.
TRUSTEES AND
OFFICERS
The Board oversees the Fund’s
operations and appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following table provides basic biographical information about the Fund’s Trustees as
of the printing of this report, including their principal occupations during the past five years, although specific titles for individuals may have varied over the period. The year set forth beneath Length of Service
in the table below is the year in which the Trustee was first appointed or elected as Trustee to any Fund currently in the Columbia Funds Complex or a predecessor thereof. Under current Board policy, each Trustee
generally serves until December 31 of the year such Trustee turns seventy-five (75).
Independent trustees
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| George S. Batejan c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1953 | Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 176 | Former Chairman of the Board, NICSA (National Investment Company Services Association) (Executive Committee, Nominating Committee and Governance Committee), 2014-2016; former Director, Intech Investment Management, 2011-2016; former Board Member, Metro Denver Chamber of Commerce, 2015-2016; former Advisory Board Member, University of Colorado Business School, 2015-2018 |
| 34 | Columbia Variable Portfolio – Income Opportunities Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Kathleen Blatz c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2006 | Attorney, specializing in arbitration and mediation; Chief Justice, Minnesota Supreme Court, 1998-2006; Associate Justice, Minnesota Supreme Court, 1996-1998; Fourth Judicial District Court Judge, Hennepin County, 1994-1996; Attorney in private practice and public service, 1984-1993; State Representative, Minnesota House of Representatives, 1979-1993, which included service on the Tax and Financial Institutions and Insurance Committees; Member and Interim Chair, Minnesota Sports Facilities Authority, January 2017-July 2017; Interim President and Chief Executive Officer, Blue Cross Blue Shield of Minnesota (health care insurance), February-July 2018, April-October 2021 | 176 | Former Trustee, Blue Cross Blue Shield of Minnesota, 2009-2021 (Chair of the Business Development Committee, 2014-2017; Chair of the Governance Committee, 2017-2019); former Member and Chair of the Board, Minnesota Sports Facilities Authority, January 2017-July 2017; former Director, Robina Foundation, 2009-2020 (Chair, 2014-2020); Director, Schulze Family Foundation, since 2021 |
| Pamela G. Carlton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2007 | President, Springboard — Partners in Cross Cultural Leadership (consulting company) since 2003; Managing Director of US Equity Research, JP Morgan Chase, 1999-2003; Director of US Equity Research, Chase Asset Management, 1996-1999; Co-Director Latin America Research, 1993-1996, COO Global Research, 1992-1996, Co-Director of US Research, 1991-1992, Investment Banker, Morgan Stanley, 1982-1991, Morgan Stanley; Attorney, Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 176 | Trustee, New York Presbyterian Hospital Board (Executive Committee and Chair of People Committee) since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee); Director, Apollo Commercial Real Estate Finance, Inc. since 2021; the Governing Council of the Independent Directors Council (IDC), since 2021 |
| Janet Langford Carrig c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1957 | Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 174 | Director, EQT Corporation (natural gas producer) since 2019; Director, Whiting Petroleum Corporation (independent oil and gas company) since 2020 |
| J. Kevin Connaughton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2020 | Member, FINRA National Adjudicatory Council since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Consultant to Independent Trustees of CFVIT and CFST I from March 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Managing Director and General Manager of Mutual Fund Products, Columbia Management Investment Advisers, LLC, May 2010-February 2015; President, Columbia Funds, 2008-2015; and senior officer of Columbia Funds and affiliated funds, 2003-2015 | 174 | Former Director, The Autism Project, March 2015-December 2021; former Member of the Investment Committee, St. Michael’s College, November 2015-February 2020; former Trustee, St. Michael’s College, June 2017-September 2019; former Trustee, New Century Portfolios, January 2015-December 2017 |
| Columbia Variable Portfolio – Income Opportunities Fund | Annual Report 2021 | 35 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Olive M. Darragh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since 2020 | Managing Director of Darragh Inc. (strategy and talent management consulting firm) since 2010; Founder and CEO, Zolio, Inc. (investment management talent identification platform) since 2004; Consultant to Independent Trustees of CFVIT and CFST I from June 2019 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 2001-2004 | 174 | Former Director, University of Edinburgh Business School (Member of US Board); former Director, Boston Public Library Foundation |
| Patricia M. Flynn c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1950 | Trustee since 2004 | Trustee Professor of Economics and Management, Bentley University since 1976 (also teaches and conducts research on corporate governance); Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 176 | Trustee, MA Taxpayers Foundation since 1997; Board of Governors, Innovation Institute, MA Technology Collaborative, 2010-2020; former Board of Directors, The MA Business Roundtable, 2003-2019 |
| Brian J. Gallagher c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 176 | Trustee, Catholic Schools Foundation since 2004 |
| Douglas A. Hacker c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1955 | Co-Chair since 2021; Chair of CFST I and CFVIT since 2014; Trustee of CFST I and CFVIT since 1996 and CFST, CFST II, CFVST II, CET I and CET II since 2021 | Independent business executive since May 2006; Executive Vice President – Strategy of United Airlines, December 2002 - May 2006; President of UAL Loyalty Services (airline marketing company), September 2001-December 2002; Executive Vice President and Chief Financial Officer of United Airlines, July 1999-September 2001 | 176 | Director, Spartan Nash Company (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing); former Director, Nash Finch Company (food distributor), 2005-2013; former Director, SeaCube Container Leasing Ltd. (container leasing), 2010-2013; and former Director, Travelport Worldwide Limited (travel information technology), 2014-2019 |
| Nancy T. Lukitsh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1956 | Trustee since 2011 | Senior Vice President, Partner and Director of Marketing, Wellington Management Company, LLP (investment adviser), 1997-2010; Chair, Wellington Management Portfolios (commingled non-U.S. investment pools), 2007 -2010; Director, Wellington Trust Company, NA and other Wellington affiliates, 1997-2010 | 174 | None |
| 36 | Columbia Variable Portfolio – Income Opportunities Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| David M. Moffett c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2011 | Retired; Consultant to Bridgewater and Associates | 174 | Director, CSX Corporation (transportation suppliers); Director, Genworth Financial, Inc. (financial and insurance products and services); Director, PayPal Holdings Inc. (payment and data processing services); Trustee, University of Oklahoma Foundation; former Director, eBay Inc. (online trading community), 2007-2015; and former Director, CIT Bank, CIT Group Inc. (commercial and consumer finance), 2010-2016 |
| Catherine James Paglia c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Co-Chair since 2021; Chair of CFST, CFST II, CFVST II, CET I and CET II since 2020; Trustee of CFST, CFST II and CFVST II since 2004 and CFST I and CFVIT since 2021 | Director, Enterprise Asset Management, Inc. (private real estate and asset management company) since September 1998; Managing Director and Partner, Interlaken Capital, Inc., 1989-1997; Vice President, 1982-1985, Principal, 1985-1987, Managing Director, 1987-1989, Morgan Stanley; Vice President, Investment Banking, 1980-1982, Associate, Investment Banking, 1976-1980, Dean Witter Reynolds, Inc. | 176 | Director, Valmont Industries, Inc. (irrigation systems manufacturer) since 2012; Trustee, Carleton College (on the Investment Committee); Trustee, Carnegie Endowment for International Peace (on the Investment Committee) |
| Minor M. Shaw c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1947 | Trustee since 2003 | President, Micco LLC (private investments) since 2011; President, Micco Corp. (family investment business), 1998-2011 | 176 | Director, Blue Cross Blue Shield of South Carolina (Chair of Compensation Committee) since April 2008; Trustee, Hollingsworth Funds (on the Investment Committee) since 2016 (previously Board Chair from 2016-2019); Former Advisory Board member, Duke Energy Corp., 2016-2020; Chair of the Duke Endowment; Chair of Greenville – Spartanburg Airport Commission; former Trustee, BofA Funds Series Trust (11 funds), 2003-2011; former Director, Piedmont Natural Gas, 2004-2016; former Director, National Association of Corporate Directors, Carolinas Chapter, 2013-2018; Chair, Daniel-Mickel Foundation since 1998 |
| Columbia Variable Portfolio – Income Opportunities Fund | Annual Report 2021 | 37 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Natalie A. Trunow c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1967 | Trustee since 2020 | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services), January 2016-January 2021; Non-executive Member of the Investment Committee and Valuation Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services), August 2018-January 2021; Advisor, Paradigm Asset Management, November 2016-December 2021; Consultant to Independent Trustees of CFVIT and CFST I from September 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Director of Investments/Consultant, Casey Family Programs, April 2016-November 2016; Senior Vice President and Chief Investment Officer, Calvert Investments, August 2008-January 2016; Section Head and Portfolio Manager, General Motors Asset Management, June 1997-August 2008 | 174 | Former Director, Investment Committee, Health Services for Children with Special Needs, Inc., 2012-2019; Director, Chair of Audit Committee, Consumer Credit Counseling Services (formerly Guidewell Financial Solutions), since 2019; Independent Director, Investment Committee and Valuation Committee, Sarona Asset Management, since 2019 |
| Sandra Yeager c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2017 | Retired; President and founder, Hanoverian Capital, LLC (SEC registered investment advisor firm), 2008-2016; Managing Director, DuPont Capital, 2006-2008; Managing Director, Morgan Stanley Investment Management, 2004-2006; Senior Vice President, Alliance Bernstein, 1990-2004 | 176 | Former Director, NAPE Education Foundation, October 2016-October 2020 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Fund Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I (CET I), Columbia ETF Trust II (CET II), Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Beckman, Gallagher and Hacker and Mses. Blatz, Carlton, Flynn, Paglia, Shaw and Yeager serve as Directors of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
Interested trustee affiliated with
Investment Manager*
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during the past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex overseen | Other directorships held by Trustee during the past five years |
| Daniel J. Beckman c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since November 2021(a) | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC (since April 2015); officer of Columbia Funds and affiliated funds since 2020. | 176 | Director, Ameriprise Trust Company, since October 2016; Director, Columbia Management Investment Distributors, Inc. since November 2018; Board of Governors, Columbia Wanger Asset Management, LLC since January 2022 |
| * | Interested person (as defined under the 1940 Act) by reason of being an officer, director, security holder and/or employee of the Investment Manager or Ameriprise Financial. |
| (a) | Mr. Beckman serves as the President and Principal Executive Officer of the Columbia Funds (since 2021). |
The Statement of Additional
Information has additional information about the Fund’s Board members and is available, without charge, upon request by calling 800.345.6611 or contacting your financial intermediary.
| 38 | Columbia Variable Portfolio – Income Opportunities Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. The following table provides basic information about the Officers of the Fund, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Beckman, who is President and Principal Executive Officer, the Fund’s other officers are:
The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. The following table provides basic information about the Officers of the Fund, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Beckman, who is President and Principal Executive Officer, the Fund’s other officers are:
Fund officers
| Columbia Variable Portfolio – Income Opportunities Fund | Annual Report 2021 | 39 |
TRUSTEES AND OFFICERS (continued)
Fund officers (continued)
Fund officers (continued)
| Name, address and year of birth | Position and year first appointed to position for any Fund in the Columbia Funds Complex or a predecessor thereof | Principal occupation(s) during past five years |
| Lyn Kephart-Strong 5228 Ameriprise Financial Center Minneapolis, MN 55474 1960 | Vice President (2015) | President, Columbia Management Investment Services Corp. since October 2014; Vice President & Resolution Officer, Ameriprise Trust Company since August 2009. |
| 40 | Columbia Variable Portfolio – Income Opportunities Fund | Annual Report 2021 |
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For Fund and other investment product prospectuses, which contain this and other important information, contact your
financial advisor or insurance representative. Please read the prospectus carefully before you invest. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved. Columbia Management Investment Distributors, Inc., 290 Congress Street, Boston, MA 02210
© 2022 Columbia Management Investment
Advisers, LLC.
S-6544 AW (2/22)
Columbia Variable
Portfolio – Core Equity Fund
This Fund is closed to new
investors.
Please remember that you may not
buy (nor will you own) shares of the Fund directly. You invest by owning RiverSource Variable Annuity Fund A or RiverSource Variable Annuity Fund B and allocating your purchase payments to the variable account that
invests in the Fund. Please contact your financial advisor or insurance representative for more information.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
| 3 | |
| 5 | |
| 7 | |
| 8 | |
| 13 | |
| 14 | |
| 15 | |
| 16 | |
| 17 | |
| 26 | |
| 27 |
Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which Columbia Variable Portfolio – Core Equity Fund (the Fund) holds investments consistent with the procedures as stated in the Statement of Additional Information
(SAI). You may obtain a copy of the SAI without charge by calling 800.345.6611; contacting your financial intermediary or searching the website of the Securities and Exchange Commission (SEC) at sec.gov. Information
regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge by visiting
columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. The Fund’s Form N-PORT is available on the SEC’s website at sec.gov. The Fund’s complete
schedule of portfolio holdings, as filed on Form N-PORT, can also be obtained without charge, upon request, by calling 800.345.6611.
Additional Fund information
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
290 Congress Street
Boston, MA 02210
Fund distributor
Columbia Management Investment Distributors,
Inc.
290 Congress Street
Boston, MA 02210
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
Columbia Variable Portfolio – Core Equity
Fund | Annual Report 2021
Fund at a Glance
Investment objective
The Fund
seeks to provide shareholders with long-term growth of capital.
Portfolio management
Raghavendran Sivaraman, Ph.D., CFA
Co-Portfolio Manager
Managed Fund since 2019
Oleg Nusinzon, CFA
Co-Portfolio Manager
Managed Fund since June 2021
| Columbia Variable Portfolio – Core Equity Fund | Annual Report 2021 | 3 |
Fund at a Glance (continued)
Performance of a hypothetical $10,000 investment (December 31, 2011 — December 31, 2021)
The chart above shows the change in
value of a hypothetical $10,000 investment in Columbia Variable Portfolio – Core Equity Fund during the stated time period, and does not reflect the deduction of taxes, if any, that a shareholder may pay on Fund
distributions or on the redemption of Fund shares. The returns also do not reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy or qualified pension or
retirement plan, if any.
| 4 | Columbia Variable Portfolio – Core Equity Fund | Annual Report 2021 |
Manager Discussion of Fund Performance
For the 12-month period that
ended December 31, 2021, the Fund’s shares gained 33.20%. The Fund outperformed its benchmark, the S&P 500 Index, which rose 28.71%.
Market overview
Despite the emergence of new
COVID-19 variants and higher inflation, continued monetary and fiscal stimulus extended the bull market for U.S. equities during the annual period, as company earnings beat investor expectations. Improving earnings
and rising interest rates provided a better backdrop for value stocks during the annual period. In a reversal from calendar year 2020, when growth stocks handily beat value stocks across the capitalization spectrum,
value stocks outperformed growth stocks in the mid-cap and small-cap segments of the U.S. equity market in 2021 and performed relatively in line with each other within the large-cap segment of the U.S. equity market.
The Russell 2000 Value Index returned 28.27% compared to the 2.83% return for the Russell 2000 Growth Index. In large cap, the Russell 1000 Value Index returned 25.16% compared to the 27.60% return of the Russell 1000
Growth Index. As the U.S. economy reopened, investors rotated to bid up stocks with strong fundamentals. Stocks characterized by high operating cash flow-to-price, high earnings before interest, taxes, depreciation
and amortization (EBITDA)-to-enterprise value, and high return on invested capital were in favor during the annual period. Conversely, high cash flow margin volatility and high predicted earnings per share growth
characteristics detracted most during the annual period.
We divide the metrics for our stock
selection model into three broad categories — quality, value and catalyst. We then rank the securities within a sector/industry from “1” (most attractive) to “5” (least attractive) based
upon the metrics within these categories. During the annual period, the stock selection model’s performance was positive overall. This investor focus on fundamentals led to our quality, value and catalyst themes
each performing well during the annual period. Of our 22 industry-specific models, 20 outperformed the S&P 500 Index, with communication services, energy-exploration & production and industrials-transportation
contributing most positively. Energy-equipment & services and information technology-hardware were the only two industry models that detracted during the annual period.
The Fund’s notable
contributors during the period
| • | The Fund maintained a relatively neutral stance on sector allocation, though sector allocation did contribute positively, albeit modestly, to relative performance during the annual period. Stock selection overall contributed most positively to the Fund’s performance relative to the S&P 500 Index. |
| • | Stock selection in the information technology, communication services and consumer staples sectors contributed most positively to the Fund’s relative performance during the annual period. |
| • | Among the Fund’s greatest individual positive contributors was Fortinet, Inc., the leading mid-market vendor in the network security firewall market, which was also a top contributor in the prior annual period. Its shares gained ground after the company’s management reported strong results across its product offerings and geographies and raised guidance driven by Fortinet’s healthy billings and revenue growth. The portfolio’s overweight in Fortinet was driven by our quality and catalyst themes, and the models delivered effective stock selection guidance. |
| • | Alphabet Inc., which is the parent company of search engine giant Google, was an outstanding performer for the Fund, though it should be noted the portfolio owns Alphabet Class A shares only. During the annual period, Alphabet reported solid earnings results with robust growth across several of its businesses, including YouTube, search, cloud and advertising. The company also showed relative resilience in the face of the dramatic impact of the COVID-19 pandemic, as its return on investment remained materially higher versus other forms of media. Further, the company generated an attractive level of free cash flow during the annual period. The portfolio’s overweight in Alphabet (Class A) was based on attractive scores by all three of our themes—value, quality and catalyst, and the models provided positive guidance. |
| • | Advanced Micro Devices, Inc., a semiconductor company, benefited during the annual period from its reports of solid earnings. The company also raised its forward guidance, driven by healthy demand across its businesses, most notably gaming and personal computer demand. As was the case for other chip companies as well, the global semiconductor shortage held customer demand steady. The decision to overweight the portfolio’s position in Advanced Micro Devices was based on its attractive quality, value and catalyst scores. |
| Columbia Variable Portfolio – Core Equity Fund | Annual Report 2021 | 5 |
Manager Discussion of Fund Performance (continued)
The Fund’s notable
detractors during the period
| • | Stock selection in the financials sector detracted most from the Fund’s relative performance during the annual period, followed at some distance by real estate and materials. |
| • | Among the individual stocks detracting most from relative performance was NVIDIA Corp., which designs and develops three-dimensional graphics processors and related software, as the Fund held no position in its strongly performing stock. Boosting the stock’s performance was strong data center demand and the global shortage of semiconductors, which, in turn, drove NVIDIA’s earnings higher. The portfolio’s lack of exposure to NVIDIA was determined based on unattractive scores by all three of our themes—quality, value and catalyst, but the models provided negative stock selection guidance. |
| • | Autodesk, Inc. is an architecture, engineering and construction enterprise software company. Its shares sold off dramatically in the fourth quarter of 2021, erasing gains made earlier in the year after the company missed consensus billings and free cash flow estimates and reduced its forward guidance due to macro events such as supply chain disruptions and labor shortages. The portfolio’s overweight in Autodesk was due to its attractive quality and value theme scores, but the models delivered negative stock selection guidance. |
| • | Capital One Financial Corp. operates as a financial holding company and operates through credit card, consumer banking and commercial banking segments. Like many financials companies, high consumer cash levels, low interest rates and weak loan demand hampered Capital One Financial’s revenues and acted as a headwind to stock appreciation. The portfolio’s overweight to Capital One Financial was established based on strong value and catalyst metrics, but the models provided negative stock selection guidance. |
| • | Notably, having no exposure to Alphabet Inc. (Class C) also proved to be a significant detractor from the Fund’s relative results, as Class C shares performed similarly well to the company’s Class A shares, which the Fund did own during the annual period. |
The views expressed in this report
reflect the current views of the respective parties who have contributed to this report. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult
to predict, so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective parties
disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Columbia fund are based on numerous factors, may not be relied on as an
indication of trading intent on behalf of any particular Columbia fund. References to specific securities should not be construed as a recommendation or investment advice.
| 6 | Columbia Variable Portfolio – Core Equity Fund | Annual Report 2021 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur ongoing
costs, which generally include management fees, distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to help you compare these costs with the ongoing costs of investing in other mutual funds.
The information below does not
reflect fees and expenses imposed under your variable annuity contract (Contract). The total fees and expenses you bear may therefore be higher than those shown below.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in the Fund during the period. The actual and hypothetical information in the table is based on an initial investment of $1,000 at the
beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the “Actual”
column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount invested, to estimate the expenses that you paid over
the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the results by the expenses paid during the period under the “Actual”
column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the Fund’s actual expense
ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or the expenses you paid during
the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as redemption or exchange fees, or expenses that apply to the subaccount or the Contract. Therefore, the
hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If the fees and expenses imposed under your Contract were
included, your costs would be higher.
Expenses paid during the period
are equal to the annualized expense ratio as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal half year and
divided by 365.
Expenses do not include fees and
expenses incurred indirectly by the Fund from its investment in underlying funds, including affiliated and non-affiliated pooled investment vehicles, such as mutual funds and exchange-traded funds.
Had Columbia Management Investment
Advisers, LLC and/or certain of its affiliates not waived/reimbursed certain fees and expenses, account value at the end of the period would have been reduced.
| Columbia Variable Portfolio – Core Equity Fund | Annual Report 2021 | 7 |
Portfolio of Investments
December 31, 2021
December 31, 2021
(Percentages represent value of
investments compared to net assets)
Investments in securities
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 8 | Columbia Variable Portfolio – Core Equity Fund | Annual Report 2021 |
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Core Equity Fund | Annual Report 2021 | 9 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
At December 31, 2021,
securities and/or cash totaling $332,056 were pledged as collateral.
Investments in
derivatives
| Long futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| S&P 500 Index E-mini | 14 | 03/2022 | USD | 3,330,950 | 89,241 | — |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 10 | Columbia Variable Portfolio – Core Equity Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Notes to Portfolio of
Investments
| (a) | Non-income producing investment. |
| (b) | This security or a portion of this security has been pledged as collateral in connection with derivative contracts. |
| (c) | The rate shown is the seven-day current annualized yield at December 31, 2021. |
| (d) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended December 31, 2021 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Realized gain (loss)($) | Dividends($) | End of period shares |
| Columbia Short-Term Cash Fund, 0.085% | ||||||||
| 1,796,325 | 25,450,344 | (24,198,620) | (62) | 3,047,987 | (118) | 1,787 | 3,048,597 | |
Currency Legend
| USD | US Dollar |
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Core Equity Fund | Annual Report 2021 | 11 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Fair value measurements (continued)
The following table is a summary of the inputs used to value the Fund’s investments at December 31, 2021:
The following table is a summary of the inputs used to value the Fund’s investments at December 31, 2021:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Investments in Securities | ||||
| Common Stocks | ||||
| Communication Services | 24,511,461 | — | — | 24,511,461 |
| Consumer Discretionary | 28,797,535 | — | — | 28,797,535 |
| Consumer Staples | 14,406,814 | — | — | 14,406,814 |
| Energy | 5,380,248 | — | — | 5,380,248 |
| Financials | 24,241,811 | — | — | 24,241,811 |
| Health Care | 32,284,829 | — | — | 32,284,829 |
| Industrials | 18,705,130 | — | — | 18,705,130 |
| Information Technology | 69,635,290 | — | — | 69,635,290 |
| Materials | 5,165,932 | — | — | 5,165,932 |
| Real Estate | 7,253,363 | — | — | 7,253,363 |
| Utilities | 4,995,575 | — | — | 4,995,575 |
| Total Common Stocks | 235,377,988 | — | — | 235,377,988 |
| Money Market Funds | 3,047,987 | — | — | 3,047,987 |
| Total Investments in Securities | 238,425,975 | — | — | 238,425,975 |
| Investments in Derivatives | ||||
| Asset | ||||
| Futures Contracts | 89,241 | — | — | 89,241 |
| Total | 238,515,216 | — | — | 238,515,216 |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
Derivative instruments are valued at
unrealized appreciation (depreciation).
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 12 | Columbia Variable Portfolio – Core Equity Fund | Annual Report 2021 |
Statement of Assets and Liabilities
December 31, 2021
December 31, 2021
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $162,215,906) | $235,377,988 |
| Affiliated issuers (cost $3,048,049) | 3,047,987 |
| Receivable for: | |
| Dividends | 140,264 |
| Expense reimbursement due from Investment Manager | 222 |
| Prepaid expenses | 7,893 |
| Total assets | 238,574,354 |
| Liabilities | |
| Payable for: | |
| Capital shares purchased | 208,454 |
| Variation margin for futures contracts | 9,625 |
| Management services fees | 2,619 |
| Compensation of board members | 59,168 |
| Compensation of chief compliance officer | 42 |
| Other expenses | 22,710 |
| Total liabilities | 302,618 |
| Net assets applicable to outstanding capital stock | $238,271,736 |
| Represented by | |
| Trust capital | $238,271,736 |
| Total - representing net assets applicable to outstanding capital stock | $238,271,736 |
| Shares outstanding | 6,312,461 |
| Net asset value per share | 37.75 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Core Equity Fund | Annual Report 2021 | 13 |
Statement of Operations
Year Ended December 31, 2021
Year Ended December 31, 2021
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $3,657,536 |
| Dividends — affiliated issuers | 1,787 |
| Total income | 3,659,323 |
| Expenses: | |
| Management services fees | 889,691 |
| Compensation of board members | 27,222 |
| Custodian fees | 11,644 |
| Printing and postage fees | 12,835 |
| Audit fees | 29,500 |
| Legal fees | 12,036 |
| Compensation of chief compliance officer | 39 |
| Other | 9,068 |
| Total expenses | 992,035 |
| Fees waived or expenses reimbursed by Investment Manager and its affiliates | (101,345) |
| Total net expenses | 890,690 |
| Net investment income | 2,768,633 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 35,277,465 |
| Investments — affiliated issuers | (118) |
| Futures contracts | 839,238 |
| Net realized gain | 36,116,585 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | 24,339,506 |
| Investments — affiliated issuers | (62) |
| Futures contracts | 36,561 |
| Net change in unrealized appreciation (depreciation) | 24,376,005 |
| Net realized and unrealized gain | 60,492,590 |
| Net increase in net assets resulting from operations | $63,261,223 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 14 | Columbia Variable Portfolio – Core Equity Fund | Annual Report 2021 |
Statement of Changes in Net Assets
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | |
| Operations | ||
| Net investment income | $2,768,633 | $2,990,183 |
| Net realized gain | 36,116,585 | 10,230,730 |
| Net change in unrealized appreciation (depreciation) | 24,376,005 | 11,818,018 |
| Net increase in net assets resulting from operations | 63,261,223 | 25,038,931 |
| Decrease in net assets from capital stock activity | (25,991,912) | (20,314,370) |
| Total increase in net assets | 37,269,311 | 4,724,561 |
| Net assets at beginning of year | 201,002,425 | 196,277,864 |
| Net assets at end of year | $238,271,736 | $201,002,425 |
| Year Ended | Year Ended | |||
| December 31, 2021 | December 31, 2020 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Subscriptions | 13,540 | 433,903 | 11,712 | 262,728 |
| Redemptions | (792,952) | (26,425,815) | (848,126) | (20,577,098) |
| Total net decrease | (779,412) | (25,991,912) | (836,414) | (20,314,370) |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Core Equity Fund | Annual Report 2021 | 15 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect any fees and expenses imposed under your
Contract and/or Qualified Plan, as applicable; such fees and expenses would reduce the total returns for all periods shown. Total return and portfolio turnover are not annualized for periods of less than one year. The
portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain derivatives, if any. If such transactions were included, the Fund’s portfolio
turnover rate may be higher.
| Year Ended December 31, | |||||
| 2021 | 2020 | 2019 | 2018 | 2017 | |
| Per share data | |||||
| Net asset value, beginning of period | $28.34 | $24.76 | $19.78 | $20.45 | $16.39 |
| Income from investment operations: | |||||
| Net investment income | 0.41 | 0.40 | 0.38 | 0.36 | 0.38 |
| Net realized and unrealized gain (loss) | 9.00 | 3.18 | 4.60 | (1.03) | 3.68 |
| Total from investment operations | 9.41 | 3.58 | 4.98 | (0.67) | 4.06 |
| Net asset value, end of period | $37.75 | $28.34 | $24.76 | $19.78 | $20.45 |
| Total return | 33.20% | 14.46% | 25.18% | (3.28)% | 24.77% |
| Ratios to average net assets | |||||
| Total gross expenses(a) | 0.45% | 0.45% | 0.45% | 0.44% | 0.45% |
| Total net expenses(a),(b) | 0.40% | 0.40% | 0.40% | 0.40% | 0.40% |
| Net investment income | 1.24% | 1.63% | 1.67% | 1.67% | 2.08% |
| Supplemental data | |||||
| Portfolio turnover | 56% | 72% | 66% | 73% | 66% |
| Net assets, end of period (in thousands) | $238,272 | $201,002 | $196,278 | $178,338 | $211,730 |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 16 | Columbia Variable Portfolio – Core Equity Fund | Annual Report 2021 |
Notes to Financial Statements
December 31, 2021
December 31, 2021
Note 1. Organization
Columbia Variable Portfolio
– Core Equity Fund (the Fund), a series of Columbia Funds Variable Series Trust II (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act),
as an open-end management investment company organized as a Massachusetts business trust.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). You may not buy (nor will you own) shares of the Fund directly. You invest by owning RiverSource Variable Annuity Fund A or RiverSource Variable Annuity Fund B, issued by
RiverSource Life Insurance Company (Participating Insurance Companies), and allocating your purchase payments to the variable account that invests in the Fund. Refer to your variable annuity contract prospectus for
information regarding the investment options available to you. The Fund is closed to new investors.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Equity securities listed on an
exchange are valued at the closing price or last trade price on their primary exchange at the close of business of the New York Stock Exchange. Securities with a closing price not readily available or not listed on
any exchange are valued at the mean between the closing bid and ask prices. Listed preferred stocks convertible into common stocks are valued using an evaluated price from a pricing service.
Foreign equity securities are
valued based on the closing price or last trade price on their primary exchange at the close of business of the New York Stock Exchange. If any foreign equity security closing prices are not readily available,
the securities are valued at the mean of the latest quoted bid and ask prices on such exchanges or markets. Foreign currency exchange rates are determined at the scheduled closing time of the New York Stock Exchange.
Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange; therefore, the closing prices for securities in such markets or on such exchanges may not fully reflect
events that occur after such close but before the close of the New York Stock Exchange. In those situations, foreign securities will be fair valued pursuant to a policy adopted by the Board of Trustees. Under the
policy, the Fund may utilize a third-party pricing service to determine these fair values. The third-party pricing service takes into account multiple factors, including, but not limited to, movements in the U.S.
securities markets, certain depositary receipts, futures contracts and foreign exchange rates that have occurred subsequent to the close of the foreign exchange or market, to determine a good faith estimate that
reasonably reflects the current market conditions as of the close of the New York Stock Exchange. The fair value of a security is likely to be different from the quoted or published price, if available.
Investments in open-end investment
companies (other than exchange-traded funds (ETFs)), are valued at the latest net asset value reported by those companies as of the valuation time.
Futures and options on futures
contracts are valued based upon the settlement price at the close of regular trading on their principal exchanges or, in the absence of a settlement price, at the mean of the latest quoted bid and ask prices.
| Columbia Variable Portfolio – Core Equity Fund | Annual Report 2021 | 17 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Derivative instruments
The Fund invests in certain
derivative instruments, as detailed below, in seeking to meet its investment objectives. Derivatives are instruments whose values depend on, or are derived from, in whole or in part, the value of one or more
securities, currencies, commodities, indices, or other assets or instruments. Derivatives may be used to increase investment flexibility (including to maintain cash reserves while maintaining desired exposure to
certain assets), for risk management (hedging) purposes, to facilitate trading, to reduce transaction costs and to pursue higher investment returns. The Fund may also use derivative instruments to mitigate certain
investment risks, such as foreign currency exchange rate risk, interest rate risk and credit risk. Derivatives may involve various risks, including the potential inability of the counterparty to fulfill its
obligations under the terms of the contract, the potential for an illiquid secondary market (making it difficult for the Fund to sell or terminate, including at favorable prices) and the potential for market movements
which may expose the Fund to gains or losses in excess of the amount shown in the Statement of Assets and Liabilities. The notional amounts of derivative instruments, if applicable, are not recorded in the financial
statements.
A derivative instrument may suffer
a marked-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform its
obligations under the contract. The Fund’s risk of loss from counterparty credit risk on over-the-counter derivatives is generally limited to the aggregate unrealized gain netted against any collateral held by
the Fund and the amount of any variation margin held by the counterparty, plus any replacement costs or related amounts. With exchange-traded or centrally cleared derivatives, there is reduced counterparty credit risk
to the Fund since the clearinghouse or central counterparty (CCP) provides some protection in the case of clearing member default. The clearinghouse or CCP stands between the buyer and the seller of the contract;
therefore, additional counterparty credit risk is failure of the clearinghouse or CCP. However, credit risk still exists in exchange-traded or centrally cleared derivatives with respect to initial and variation margin
that is held in a broker’s customer account. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy
and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients and such shortfall is remedied by the CCP or otherwise, U.S. bankruptcy laws will typically
allocate that shortfall on a pro-rata basis across all the clearing broker’s customers (including the Fund), potentially resulting in losses to the Fund.
In order to better define its
contractual rights and to secure rights that will help the Fund mitigate its counterparty risk, the Fund may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (ISDA Master Agreement)
or similar agreement with its derivatives counterparties. An ISDA Master Agreement is an agreement between the Fund and a counterparty that governs over-the-counter derivatives and foreign exchange forward contracts
and contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset
with the counterparty certain derivative instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically
permit a single net payment in the event of default (close-out netting), including the bankruptcy or insolvency of the counterparty. Note, however, that bankruptcy or insolvency laws of a particular jurisdiction may
impose restrictions on or prohibitions against the right of offset or netting in bankruptcy, insolvency or other events.
| 18 | Columbia Variable Portfolio – Core Equity Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Collateral (margin) requirements
differ by type of derivative. Margin requirements are established by the clearinghouse or CCP for exchange-traded and centrally cleared derivatives. Brokers can ask for margin in excess of the minimum in certain
circumstances. Collateral terms for most over-the-counter derivatives are subject to regulatory requirements to exchange variation margin with trading counterparties and may have contract specific margin terms as
well. For over-the-counter derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the marked-to-market amount for each transaction under such agreement and
comparing that amount to the value of any variation margin currently pledged by the Fund and/or the counterparty. Generally, the amount of collateral due from or to a party has to exceed a minimum transfer amount
threshold (e.g., $250,000) before a transfer has to be made. To the extent amounts due to the Fund from its counterparties are not fully collateralized, contractually or otherwise, the Fund bears the risk of loss from
counterparty nonperformance. The Fund may also pay interest expense on cash collateral received from the broker. Any interest expense paid by the Fund is shown on the Statement of Operations. The Fund attempts to
mitigate counterparty risk by only entering into agreements with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those
counterparties.
Certain ISDA Master Agreements
allow counterparties of over-the-counter derivatives transactions to terminate derivatives contracts prior to maturity in the event the Fund’s net asset value declines by a stated percentage over a specified
time period or if the Fund fails to meet certain terms of the ISDA Master Agreement, which would cause the Fund to accelerate payment of any net liability owed to the counterparty. The Fund also has termination
rights if the counterparty fails to meet certain terms of the ISDA Master Agreement. In determining whether to exercise such termination rights, the Fund would consider, in addition to counterparty credit risk,
whether termination would result in a net liability owed from the counterparty.
For financial reporting purposes,
the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statement of Assets and Liabilities.
Futures contracts
Futures contracts are
exchange-traded and represent commitments for the future purchase or sale of an asset at a specified price on a specified date. The Fund bought and sold futures contracts to maintain appropriate equity market exposure
while keeping sufficient cash to accommodate daily redemptions. These instruments may be used for other purposes in future periods. Upon entering into futures contracts, the Fund bears risks that it may not achieve
the anticipated benefits of the futures contracts and may realize a loss. Additional risks include counterparty credit risk, the possibility of an illiquid market, and that a change in the value of the contract or
option may not correlate with changes in the value of the underlying asset.
Upon entering into a futures
contract, the Fund deposits cash or securities with the broker, known as a futures commission merchant (FCM), in an amount sufficient to meet the initial margin requirement. The initial margin deposit must be
maintained at an established level over the life of the contract. Cash deposited as initial margin is recorded in the Statement of Assets and Liabilities as margin deposits. Securities deposited as initial margin are
designated in the Portfolio of Investments. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily change in the contract value and are
recorded as variation margin receivable or payable and are offset in unrealized gains or losses. The Fund generally expects to earn interest income on its margin deposits. The Fund recognizes a realized gain or loss
when the contract is closed or expires. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities.
Effects of derivative transactions in
the financial statements
The following tables are intended
to provide additional information about the effect of derivatives on the financial statements of the Fund, including: the fair value of derivatives by risk category and the location of those fair values in the
Statement of Assets and Liabilities; and the impact of derivative transactions over the period in the Statement of Operations, including realized and unrealized gains (losses). The derivative instrument schedules
following the Portfolio of Investments present additional information regarding derivative instruments outstanding at the end of the period, if any.
| Columbia Variable Portfolio – Core Equity Fund | Annual Report 2021 | 19 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
The following table is a summary of
the fair value of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) at December 31, 2021:
| Asset derivatives | ||
| Risk exposure category | Statement of assets and liabilities location | Fair value ($) |
| Equity risk | Component of trust capital — unrealized appreciation on futures contracts | 89,241* |
| * | Includes cumulative appreciation (depreciation) as reported in the tables following the Portfolio of Investments. Only the current day’s variation margin is reported in receivables or payables in the Statement of Assets and Liabilities. |
The following table indicates the
effect of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) in the Statement of Operations for the year ended December 31, 2021:
The following table is a summary
of the average outstanding volume by derivative instrument for the year ended December 31, 2021:
| Derivative instrument | Average notional amounts ($)* |
| Futures contracts — long | 2,959,862 |
| * | Based on the ending quarterly outstanding amounts for the year ended December 31, 2021. |
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
Income recognition
Corporate actions and dividend
income are generally recorded net of any non-reclaimable tax withholdings, on the ex-dividend date or upon receipt of an ex-dividend notification in the case of certain foreign securities.
The Fund may receive distributions
from holdings in equity securities, business development companies (BDCs), exchange-traded funds (ETFs), limited partnerships (LPs), other regulated investment companies (RICs), and real estate investment trusts
(REITs), which report information as to the tax character of their distributions annually. These distributions are allocated to dividend income, capital gain and return of capital based on actual information reported.
Return of capital is recorded as a reduction of the cost basis of securities held. If the Fund no longer owns the applicable securities, return of capital is recorded as a realized gain. With respect to REITs, to the
extent actual information has not yet been reported, estimates for return of capital are made by Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise
Financial, Inc. (Ameriprise Financial). The Investment Manager’s estimates are subsequently adjusted when the actual character of the distributions is disclosed by the REITs, which could result in a
proportionate change in return of capital to shareholders.
| 20 | Columbia Variable Portfolio – Core Equity Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Awards from class action litigation
are recorded as a reduction of cost basis if the Fund still owns the applicable securities on the payment date. If the Fund no longer owns the applicable securities on the payment date, the proceeds are recorded as
realized gains.
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund.
Determination of net asset value
The NAV per share of the Fund is
computed by dividing the value of the net assets of the Fund by the total number of outstanding shares of that Fund, rounded to the nearest cent, at the close of regular trading (ordinarily 4:00 p.m. Eastern Time)
every day the New York Stock Exchange is open.
Federal income tax status
The Fund is a disregarded entity
for federal income tax purposes and does not expect to make regular distributions to shareholders. The Fund will not be subject to federal income tax, and therefore, there is no provision for federal income taxes. The
shareholder is subject to tax on its distributive share of the Fund’s income and losses. The components of the Fund’s net assets are reported at the shareholder level for tax purposes, and therefore, are
not presented in the Statement of Assets and Liabilities.
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Under the Management Agreement, the
Investment Manager provides the Fund with investment research and advice, as well as administrative and accounting services. The management services fee is an annual fee that is equal to 0.40% of the Fund’s
daily net assets.
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. Under a Deferred Compensation Plan (the
Deferred Plan), these members of the Board of Trustees may elect to defer payment of up to 100% of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of
certain funds managed by the Investment Manager. The Fund’s liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Deferred Plan. All
amounts payable under the Deferred Plan constitute a general unsecured obligation of the Fund. The expense for the Deferred Plan, which includes Trustees’ fees deferred during the current period as well as any
gains or losses on the Trustees’ deferred compensation balances as a result of market fluctuations, is included in "Compensation of board members" on the Statement of Operations.
| Columbia Variable Portfolio – Core Equity Fund | Annual Report 2021 | 21 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
Service fees
The Fund has entered into a
Shareholder Services Agreement with Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, under which the
Fund did not pay any fees to the Transfer Agent during the reporting period.
The Transfer Agent may retain as
compensation for its services revenues from fees for wire, telephone and redemption orders, account transcripts due the Transfer Agent from Fund shareholders and interest (net of bank charges) earned with respect to
balances in accounts the Transfer Agent maintains in connection with its services to the Fund.
Expenses waived/reimbursed by the
Investment Manager and its affiliates
The Investment Manager and certain
of its affiliates have contractually agreed to waive fees and/or reimburse expenses (excluding certain fees and expenses described below as well as any reorganization costs allocated to the Fund) indefinitely, unless
sooner terminated at the sole discretion of the Board of Trustees, so that the Fund’s net operating expenses, after giving effect to fees waived/expenses reimbursed and any balance credits and/or overdraft
charges from the Fund’s custodian, do not exceed the annual rate of 0.40% of the Fund’s average daily net assets.
Under the agreement governing this
fee waiver and/or expense reimbursement arrangement, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes (including
foreign transaction taxes), expenses associated with investments in affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange-traded funds), transaction costs and brokerage
commissions, costs related to any securities lending program, dividend expenses associated with securities sold short, inverse floater program fees and expenses, transaction charges and interest on borrowed money,
interest, costs associated with certain shareholder meetings, infrequent and/or unusual expenses and any other expenses the exclusion of which is specifically approved by the Board of Trustees. This agreement may
be modified or amended only with approval from the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements described above
are not recoverable by the Investment Manager or its affiliates in future periods.
Note 4. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $121,904,377 and $145,124,363, respectively, for the year ended December 31, 2021. The amount of purchase and
sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 5. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes
referred to as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
| 22 | Columbia Variable Portfolio – Core Equity Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Note 6. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund did not borrow or lend
money under the Interfund Program during the year ended December 31, 2021.
Note 7. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to an October 28, 2021 amendment and restatement, the credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment
Manager or an affiliated investment manager, severally and not jointly, permits collective borrowings up to $950 million. Interest is currently charged to each participating fund based on its borrowings at a rate
equal to the higher of (i) the federal funds effective rate, (ii) the secured overnight financing rate plus 0.11448% and (iii) the overnight bank funding rate, plus in each case, 1.00%. Each borrowing under the credit
facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The
commitment fee is included in other expenses in the Statement of Operations. This agreement expires annually in October unless extended or renewed. Prior to the October 28, 2021 amendment and restatement, the Fund had
access to a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. which permitted collective borrowings up to $950 million. Interest was
charged to each participating fund based on its borrowings at a rate equal to the higher of (i) the federal funds effective rate, (ii) the one-month London Interbank Offered Rate (LIBOR) rate and (iii) the overnight
bank funding rate, plus in each case, 1.25%.
The Fund had no borrowings during
the year ended December 31, 2021.
Note 8. Significant
risks
Information technology sector
risk
The Fund is more susceptible to the
particular risks that may affect companies in the information technology sector than if it were invested in a wider variety of companies in unrelated sectors. Companies in the information technology sector are subject
to certain risks, including the risk that new services, equipment or technologies will not be accepted by consumers and businesses or will become rapidly obsolete. Performance of such companies may be affected by
factors including obtaining and protecting patents (or the failure to do so) and significant competitive pressures, including aggressive pricing of their products or services, new market entrants, competition for
market share and short product cycles due to an accelerated rate of technological developments. Such competitive pressures may lead to limited earnings and/or falling profit margins. As a result, the value of their
securities may fall or fail to rise. In addition, many information technology sector companies have limited operating histories and prices of these companies’ securities historically have been more volatile than
other securities, especially over the short term. Some companies in the information technology sector are facing increased government and regulatory scrutiny and may be subject to adverse government or regulatory
action, which could negatively impact the value of their securities.
Market risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced
| Columbia Variable Portfolio – Core Equity Fund | Annual Report 2021 | 23 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
liquidity in equity, credit and/or fixed income
markets may negatively affect many issuers, which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions
and operational challenges. Global economies and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different
country, region or financial market. These risks may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies
worldwide. As a result, local, regional or global events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events –
or the potential for such events – could have a significant negative impact on global economic and market conditions.
The coronavirus disease 2019 and
its variants (COVID-19) pandemic has resulted in, and may continue to result in, significant global economic and societal disruption and market volatility due to disruptions in market access, resource availability,
facilities operations, imposition of tariffs, export controls and supply chain disruption, among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement
and loss in human and other resources. The uncertainty surrounding the magnitude, duration, reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental
authorities or other third parties, present unknowns that are yet to unfold. The impacts, as well as the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and
pandemics that may arise in the future – could negatively affect global economies and markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in
emerging market countries may be greater due to generally less established healthcare systems, governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing
political, social and economic risks in certain countries or globally. The disruptions caused by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively
impact the Fund’s ability to achieve its investment objectives. Any such event(s) could have a significant adverse impact on the value and risk profile of the Fund.
Shareholder concentration risk
At December 31, 2021, affiliated
shareholders of record owned 100.0% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of
less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Note 9. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
Note 10. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in
connection with the conduct of their business activities. Ameriprise Financial believes that the Fund is not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject
of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with
the Fund. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (SEC) on legal and regulatory matters that relate to
Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that
these matters, or the adverse publicity associated with them, will not result in increased Fund redemptions, reduced sale of Fund shares or other adverse consequences to the Fund. Further, although we believe
proceedings are not likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund, these proceedings are subject to
uncertainties and, as such, we are unable to
| 24 | Columbia Variable Portfolio – Core Equity Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
estimate the possible loss or range of loss that
may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines, penalties or other relief that could have a material adverse effect on the consolidated
financial condition or results of operations of Ameriprise Financial or one or more of its affiliates that provides services to the Fund.
| Columbia Variable Portfolio – Core Equity Fund | Annual Report 2021 | 25 |
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees of Columbia
Funds Variable Series Trust II and Shareholders of Columbia Variable Portfolio – Core Equity Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of Columbia Variable Portfolio – Core Equity Fund (one of the funds constituting Columbia Funds Variable Series Trust II, referred to
hereafter as the "Fund") as of December 31, 2021, the related statement of operations for the year ended December 31, 2021, the statement of changes in net assets for each of the two years in the period ended December
31, 2021, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2021 (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, 2021, 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, 2021 and the financial highlights for each of the five years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in the
United States of America.
Basis for Opinion
These financial statements are the
responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these
financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2021 by correspondence with the custodian, transfer agent and broker. We believe that
our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Minneapolis, Minnesota
February 22, 2022
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| 26 | Columbia Variable Portfolio – Core Equity Fund | Annual Report 2021 |
TRUSTEES AND
OFFICERS
The Board oversees the
Fund’s operations and appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following table provides basic biographical information about the
Fund’s Trustees as of the printing of this report, including their principal occupations during the past five years, although specific titles for individuals may have varied over the period. The year set forth
beneath Length of Service in the table below is the year in which the Trustee was first appointed or elected as Trustee to any Fund currently in the Columbia Funds Complex or a predecessor thereof. Under current Board
policy, each Trustee generally serves until December 31 of the year such Trustee turns seventy-five (75).
Independent trustees
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| George S. Batejan c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1953 | Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 176 | Former Chairman of the Board, NICSA (National Investment Company Services Association) (Executive Committee, Nominating Committee and Governance Committee), 2014-2016; former Director, Intech Investment Management, 2011-2016; former Board Member, Metro Denver Chamber of Commerce, 2015-2016; former Advisory Board Member, University of Colorado Business School, 2015-2018 |
| Kathleen Blatz c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2006 | Attorney, specializing in arbitration and mediation; Chief Justice, Minnesota Supreme Court, 1998-2006; Associate Justice, Minnesota Supreme Court, 1996-1998; Fourth Judicial District Court Judge, Hennepin County, 1994-1996; Attorney in private practice and public service, 1984-1993; State Representative, Minnesota House of Representatives, 1979-1993, which included service on the Tax and Financial Institutions and Insurance Committees; Member and Interim Chair, Minnesota Sports Facilities Authority, January 2017-July 2017; Interim President and Chief Executive Officer, Blue Cross Blue Shield of Minnesota (health care insurance), February-July 2018, April-October 2021 | 176 | Former Trustee, Blue Cross Blue Shield of Minnesota, 2009-2021 (Chair of the Business Development Committee, 2014-2017; Chair of the Governance Committee, 2017-2019); former Member and Chair of the Board, Minnesota Sports Facilities Authority, January 2017-July 2017; former Director, Robina Foundation, 2009-2020 (Chair, 2014-2020); Director, Schulze Family Foundation, since 2021 |
| Pamela G. Carlton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2007 | President, Springboard — Partners in Cross Cultural Leadership (consulting company) since 2003; Managing Director of US Equity Research, JP Morgan Chase, 1999-2003; Director of US Equity Research, Chase Asset Management, 1996-1999; Co-Director Latin America Research, 1993-1996, COO Global Research, 1992-1996, Co-Director of US Research, 1991-1992, Investment Banker, Morgan Stanley, 1982-1991, Morgan Stanley; Attorney, Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 176 | Trustee, New York Presbyterian Hospital Board (Executive Committee and Chair of People Committee) since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee); Director, Apollo Commercial Real Estate Finance, Inc. since 2021; the Governing Council of the Independent Directors Council (IDC), since 2021 |
| Columbia Variable Portfolio – Core Equity Fund | Annual Report 2021 | 27 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Janet Langford Carrig c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1957 | Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 174 | Director, EQT Corporation (natural gas producer) since 2019; Director, Whiting Petroleum Corporation (independent oil and gas company) since 2020 |
| J. Kevin Connaughton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2020 | Member, FINRA National Adjudicatory Council since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Consultant to Independent Trustees of CFVIT and CFST I from March 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Managing Director and General Manager of Mutual Fund Products, Columbia Management Investment Advisers, LLC, May 2010-February 2015; President, Columbia Funds, 2008-2015; and senior officer of Columbia Funds and affiliated funds, 2003-2015 | 174 | Former Director, The Autism Project, March 2015-December 2021; former Member of the Investment Committee, St. Michael’s College, November 2015-February 2020; former Trustee, St. Michael’s College, June 2017-September 2019; former Trustee, New Century Portfolios, January 2015-December 2017 |
| Olive M. Darragh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since 2020 | Managing Director of Darragh Inc. (strategy and talent management consulting firm) since 2010; Founder and CEO, Zolio, Inc. (investment management talent identification platform) since 2004; Consultant to Independent Trustees of CFVIT and CFST I from June 2019 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 2001-2004 | 174 | Former Director, University of Edinburgh Business School (Member of US Board); former Director, Boston Public Library Foundation |
| Patricia M. Flynn c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1950 | Trustee since 2004 | Trustee Professor of Economics and Management, Bentley University since 1976 (also teaches and conducts research on corporate governance); Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 176 | Trustee, MA Taxpayers Foundation since 1997; Board of Governors, Innovation Institute, MA Technology Collaborative, 2010-2020; former Board of Directors, The MA Business Roundtable, 2003-2019 |
| Brian J. Gallagher c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 176 | Trustee, Catholic Schools Foundation since 2004 |
| 28 | Columbia Variable Portfolio – Core Equity Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Douglas A. Hacker c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1955 | Co-Chair since 2021; Chair of CFST I and CFVIT since 2014; Trustee of CFST I and CFVIT since 1996 and CFST, CFST II, CFVST II, CET I and CET II since 2021 | Independent business executive since May 2006; Executive Vice President – Strategy of United Airlines, December 2002 - May 2006; President of UAL Loyalty Services (airline marketing company), September 2001-December 2002; Executive Vice President and Chief Financial Officer of United Airlines, July 1999-September 2001 | 176 | Director, Spartan Nash Company (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing); former Director, Nash Finch Company (food distributor), 2005-2013; former Director, SeaCube Container Leasing Ltd. (container leasing), 2010-2013; and former Director, Travelport Worldwide Limited (travel information technology), 2014-2019 |
| Nancy T. Lukitsh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1956 | Trustee since 2011 | Senior Vice President, Partner and Director of Marketing, Wellington Management Company, LLP (investment adviser), 1997-2010; Chair, Wellington Management Portfolios (commingled non-U.S. investment pools), 2007 -2010; Director, Wellington Trust Company, NA and other Wellington affiliates, 1997-2010 | 174 | None |
| David M. Moffett c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2011 | Retired; Consultant to Bridgewater and Associates | 174 | Director, CSX Corporation (transportation suppliers); Director, Genworth Financial, Inc. (financial and insurance products and services); Director, PayPal Holdings Inc. (payment and data processing services); Trustee, University of Oklahoma Foundation; former Director, eBay Inc. (online trading community), 2007-2015; and former Director, CIT Bank, CIT Group Inc. (commercial and consumer finance), 2010-2016 |
| Catherine James Paglia c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Co-Chair since 2021; Chair of CFST, CFST II, CFVST II, CET I and CET II since 2020; Trustee of CFST, CFST II and CFVST II since 2004 and CFST I and CFVIT since 2021 | Director, Enterprise Asset Management, Inc. (private real estate and asset management company) since September 1998; Managing Director and Partner, Interlaken Capital, Inc., 1989-1997; Vice President, 1982-1985, Principal, 1985-1987, Managing Director, 1987-1989, Morgan Stanley; Vice President, Investment Banking, 1980-1982, Associate, Investment Banking, 1976-1980, Dean Witter Reynolds, Inc. | 176 | Director, Valmont Industries, Inc. (irrigation systems manufacturer) since 2012; Trustee, Carleton College (on the Investment Committee); Trustee, Carnegie Endowment for International Peace (on the Investment Committee) |
| Columbia Variable Portfolio – Core Equity Fund | Annual Report 2021 | 29 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Minor M. Shaw c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1947 | Trustee since 2003 | President, Micco LLC (private investments) since 2011; President, Micco Corp. (family investment business), 1998-2011 | 176 | Director, Blue Cross Blue Shield of South Carolina (Chair of Compensation Committee) since April 2008; Trustee, Hollingsworth Funds (on the Investment Committee) since 2016 (previously Board Chair from 2016-2019); Former Advisory Board member, Duke Energy Corp., 2016-2020; Chair of the Duke Endowment; Chair of Greenville – Spartanburg Airport Commission; former Trustee, BofA Funds Series Trust (11 funds), 2003-2011; former Director, Piedmont Natural Gas, 2004-2016; former Director, National Association of Corporate Directors, Carolinas Chapter, 2013-2018; Chair, Daniel-Mickel Foundation since 1998 |
| Natalie A. Trunow c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1967 | Trustee since 2020 | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services), January 2016-January 2021; Non-executive Member of the Investment Committee and Valuation Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services), August 2018-January 2021; Advisor, Paradigm Asset Management, November 2016-December 2021; Consultant to Independent Trustees of CFVIT and CFST I from September 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Director of Investments/Consultant, Casey Family Programs, April 2016-November 2016; Senior Vice President and Chief Investment Officer, Calvert Investments, August 2008-January 2016; Section Head and Portfolio Manager, General Motors Asset Management, June 1997-August 2008 | 174 | Former Director, Investment Committee, Health Services for Children with Special Needs, Inc., 2012-2019; Director, Chair of Audit Committee, Consumer Credit Counseling Services (formerly Guidewell Financial Solutions), since 2019; Independent Director, Investment Committee and Valuation Committee, Sarona Asset Management, since 2019 |
| Sandra Yeager c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2017 | Retired; President and founder, Hanoverian Capital, LLC (SEC registered investment advisor firm), 2008-2016; Managing Director, DuPont Capital, 2006-2008; Managing Director, Morgan Stanley Investment Management, 2004-2006; Senior Vice President, Alliance Bernstein, 1990-2004 | 176 | Former Director, NAPE Education Foundation, October 2016-October 2020 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Fund Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I (CET I), Columbia ETF Trust II (CET II), Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Beckman, Gallagher and Hacker and Mses. Blatz, Carlton, Flynn, Paglia, Shaw and Yeager serve as Directors of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
| 30 | Columbia Variable Portfolio – Core Equity Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Interested trustee affiliated with Investment Manager*
Interested trustee affiliated with Investment Manager*
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during the past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex overseen | Other directorships held by Trustee during the past five years |
| Daniel J. Beckman c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since November 2021(a) | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC (since April 2015); officer of Columbia Funds and affiliated funds since 2020. | 176 | Director, Ameriprise Trust Company, since October 2016; Director, Columbia Management Investment Distributors, Inc. since November 2018; Board of Governors, Columbia Wanger Asset Management, LLC since January 2022 |
| * | Interested person (as defined under the 1940 Act) by reason of being an officer, director, security holder and/or employee of the Investment Manager or Ameriprise Financial. |
| (a) | Mr. Beckman serves as the President and Principal Executive Officer of the Columbia Funds (since 2021). |
The Statement of Additional
Information has additional information about the Fund’s Board members and is available, without charge, upon request by calling 800.345.6611 or contacting your financial intermediary.
The Board has appointed officers
who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. The following table provides basic information about the Officers of the
Fund, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Beckman, who is President and Principal Executive Officer, the
Fund’s other officers are:
Fund officers
| Columbia Variable Portfolio – Core Equity Fund | Annual Report 2021 | 31 |
TRUSTEES AND OFFICERS (continued)
Fund officers (continued)
Fund officers (continued)
| 32 | Columbia Variable Portfolio – Core Equity Fund | Annual Report 2021 |
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For Fund and other investment product prospectuses, which contain this and other important information, contact your
financial advisor or insurance representative. Please read the prospectus carefully before you invest. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved. Columbia Management Investment Distributors, Inc., 290 Congress Street, Boston, MA 02210
© 2022 Columbia Management Investment
Advisers, LLC.
S-6347 AW (2/22)
Columbia Variable
Portfolio – Select Large Cap Value Fund
Please remember that you may not
buy (nor will you own) shares of the Fund directly. The Fund is available through variable annuity contracts and variable life insurance policies offered by the separate accounts of participating insurance companies
as well as qualified pension and retirement plans. Please contact your financial advisor or insurance representative for more information.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
| 3 | |
| 5 | |
| 7 | |
| 8 | |
| 11 | |
| 12 | |
| 13 | |
| 14 | |
| 16 | |
| 23 | |
| 24 |
Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which Columbia Variable Portfolio – Select Large Cap Value Fund (the Fund) holds investments consistent with the procedures as stated in the Statement of Additional
Information (SAI). You may obtain a copy of the SAI without charge by calling 800.345.6611; contacting your financial intermediary or searching the website of the Securities and Exchange Commission (SEC) at sec.gov.
Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge
by visiting columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. The Fund’s Form N-PORT is available on the SEC’s website at sec.gov. The Fund’s complete
schedule of portfolio holdings, as filed on Form N-PORT, can also be obtained without charge, upon request, by calling 800.345.6611.
Additional Fund information
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
290 Congress Street
Boston, MA 02210
Fund distributor
Columbia Management Investment Distributors,
Inc.
290 Congress Street
Boston, MA 02210
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
Columbia Variable Portfolio – Select Large
Cap Value Fund | Annual Report 2021
Fund at a Glance
Investment objective
The Fund
seeks to provide shareholders with long-term growth of capital.
Portfolio management
Richard Rosen
Lead Portfolio Manager
Managed Fund since 2008
Richard Taft
Portfolio Manager
Managed Fund since 2016
| Columbia Variable Portfolio – Select Large Cap Value Fund | Annual Report 2021 | 3 |
Fund at a Glance (continued)
Performance of a hypothetical $10,000 investment (December 31, 2011 — December 31, 2021)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class 2 shares of Columbia Variable Portfolio – Select Large Cap Value Fund during the stated time period, and does not reflect the deduction of taxes, if any,
that a shareholder may pay on Fund distributions or on the redemption of Fund shares. The returns also do not reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance
policy or qualified pension or retirement plan, if any.
| 4 | Columbia Variable Portfolio – Select Large Cap Value Fund | Annual Report 2021 |
Manager Discussion of Fund Performance
At December 31, 2021,
approximately 92.83% of the Fund’s shares were owned in the aggregate by affiliated funds-of-funds managed by Columbia Management Investment Advisers, LLC (the Investment Manager). As a result of asset
allocation decisions by the Investment Manager, it is possible that the Fund may experience relatively large purchases or redemptions from affiliated funds-of-funds. The Investment Manager seeks to minimize the impact
of these transactions by structuring them over a reasonable period of time. The Fund may also experience increased expenses as it buys and sells securities as a result of purchases or redemptions by affiliated
funds-of-funds.
For the 12-month period that ended
December 31, 2021, the Fund’s Class 2 shares returned 25.98%. The Fund outperformed its benchmark, the Russell 1000 Value Index, which returned 25.16% for the same time period. During the same time, the
broad equity market, as measured by the S&P 500 Index, returned 28.71%.
Market overview
U.S. equities accelerated to 70
record highs throughout the period, capping a third consecutive year of robust gains. All 11 economic sectors, as measured by constituents of the S&P 500 Index, delivered double-digit gains for the year, led
by energy’s return of more than 50%.
In a nutshell, the buoyant stock
market was driven by strong earnings, liquidity effects from continued quantitative easing ($120 billion per month of bond purchases by the U.S. Federal Reserve) and expectations for government spending (two bills
totaling nearly $3 trillion). This stimulus likely resulted in nominal GDP well above 10%, which we think will prove to be the peak for the cycle. History has shown that stocks are driven by earnings, and
earnings in turn are driven not by real GDP, but nominal GDP. It should be pointed out that the concomitant surge in inflation had only a minor impact on stocks, and neither the bond market nor the U.S. dollar
seemed to reflect worries about profligate spending or a rising cost of living. Equally noteworthy was the generally muted reaction to the Omicron variant of COVID-19 – except for a brief selloff in equity
markets around Thanksgiving and day-to-day choppiness afterward, emergence of the hyper-contagious COVID variant seemed to have minimal effect on equity markets.
The Fund’s notable
contributors during the period
| • | Strong broad-based stock selection, especially in the information technology, financials and utilities sectors, was the key driver of outperformance during the quarter, more than offsetting weaker relative results in health care and materials. |
| • | An overweight to energy and an underweight to communication services helped relative results (sector exposures are a byproduct of the portfolio’s longstanding bottom-up investment process). |
| • | Two technology holdings were particularly strong contributors — data analytics provider Teradata and semiconductor equipment maker Applied Materials. |
| ○ | Shares of Teradata rose steadily through most of period as investors focused on the company’s new cloud-based business model. |
| ○ | Similarly, Applied Materials appreciated as investors saw growth in the company’s less-cyclical services component and also gained conviction in an increasingly positive overall business environment for semiconductors. |
| • | Major banks Wells Fargo and Bank of America, along with insurer American International Group (AIG), were standout performers among the Fund’s financials holdings. Each benefited in general from expectations for rising interest rates as well as company-specific factors. |
| ○ | Wells Fargo pleased investors with progress toward resolving longstanding regulatory issues as well as showing growth in its commercial and investment banking businesses. |
| ○ | Bank of America benefited from reserve releases, improvements in core operating metrics and loan growth, particularly in its card business. |
| Columbia Variable Portfolio – Select Large Cap Value Fund | Annual Report 2021 | 5 |
Manager Discussion of Fund Performance (continued)
| ○ | For insurer AIG, 2021 was marked by tangible results in a multi-year turnaround story, highlighted by a plan to divest the company’s life and retirement businesses as well as the announcement of a large stock repurchase plan. |
| • | Within utilities, Ohio-based FirstEnergy was the Fund’s top performer, reflecting growing investor confidence in the company’s ability to overcome regulatory hurdles related to prior management malfeasance. Investors also appreciated the sale of distribution assets for a huge multiple and avoiding costly financing. |
The Fund’s notable
detractors during the period
| • | Security selection in health care and materials was a key detractor for the year. |
| • | Within health care, two of our holdings in the managed-care segment, Humana and Cigna, were significant detractors due to COVID-19-related cost uncertainties and potential political worries that overshadowed generally strong results. |
| • | Similarly, two holdings in the materials sector were key detractors: agricultural chemicals maker FMC and miner Barrick Gold. |
| ○ | Despite rebounding sharply near year-end, FMC suffered for most of the period from investor worries about cost headwinds and pricing amid the global supply-chain crunch. |
| ○ | Shares of Barrick Gold fell primarily as a result of the company missing production and cost forecasts during the period. |
The views expressed in this report
reflect the current views of the respective parties who have contributed to this report. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult
to predict, so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective parties
disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Columbia fund are based on numerous factors, may not be relied on as an
indication of trading intent on behalf of any particular Columbia fund. References to specific securities should not be construed as a recommendation or investment advice.
| 6 | Columbia Variable Portfolio – Select Large Cap Value Fund | Annual Report 2021 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur ongoing
costs, which generally include management fees, distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to help you compare these costs with the ongoing costs of investing in other mutual funds.
The information below does not
reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy (collectively, Contracts) or qualified pension and retirement plan (Qualified Plan), if any. The total fees
and expenses you bear may therefore be higher than those shown below.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount invested, to estimate the
expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as redemption or exchange fees, or expenses that apply to the subaccount or the Contract. Therefore, the
hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If the fees and expenses imposed under your Contract or
Qualified Plan, if any, were included, your costs would be higher.
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 365.
Expenses do not include fees and
expenses incurred indirectly by the Fund from its investment in underlying funds, including affiliated and non-affiliated pooled investment vehicles, such as mutual funds and exchange-traded funds.
| Columbia Variable Portfolio – Select Large Cap Value Fund | Annual Report 2021 | 7 |
Portfolio of Investments
December 31, 2021
December 31, 2021
(Percentages represent value of
investments compared to net assets)
Investments in securities
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 8 | Columbia Variable Portfolio – Select Large Cap Value Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Notes to Portfolio of
Investments
| (a) | Non-income producing investment. |
| (b) | The rate shown is the seven-day current annualized yield at December 31, 2021. |
| (c) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended December 31, 2021 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Realized gain (loss)($) | Dividends($) | End of period shares |
| Columbia Short-Term Cash Fund, 0.085% | ||||||||
| 24,910,450 | 494,920,149 | (474,720,889) | (1,730) | 45,107,980 | (1,677) | 40,543 | 45,117,004 | |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Select Large Cap Value Fund | Annual Report 2021 | 9 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at December 31, 2021:
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 10 | Columbia Variable Portfolio – Select Large Cap Value Fund | Annual Report 2021 |
Statement of Assets and Liabilities
December 31, 2021
December 31, 2021
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $1,865,707,877) | $2,579,599,510 |
| Affiliated issuers (cost $45,109,710) | 45,107,980 |
| Receivable for: | |
| Capital shares sold | 23,395 |
| Dividends | 2,086,129 |
| Prepaid expenses | 22,310 |
| Total assets | 2,626,839,324 |
| Liabilities | |
| Payable for: | |
| Investments purchased | 6,935,437 |
| Capital shares purchased | 4,454,347 |
| Management services fees | 47,673 |
| Distribution and/or service fees | 768 |
| Service fees | 23,255 |
| Compensation of board members | 102,488 |
| Compensation of chief compliance officer | 478 |
| Other expenses | 25,481 |
| Total liabilities | 11,589,927 |
| Net assets applicable to outstanding capital stock | $2,615,249,397 |
| Represented by | |
| Trust capital | $2,615,249,397 |
| Total - representing net assets applicable to outstanding capital stock | $2,615,249,397 |
| Class 1 | |
| Net assets | $2,461,727,189 |
| Shares outstanding | 65,792,935 |
| Net asset value per share | $37.42 |
| Class 2 | |
| Net assets | $70,688,986 |
| Shares outstanding | 1,943,581 |
| Net asset value per share | $36.37 |
| Class 3 | |
| Net assets | $82,833,222 |
| Shares outstanding | 2,247,402 |
| Net asset value per share | $36.86 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Select Large Cap Value Fund | Annual Report 2021 | 11 |
Statement of Operations
Year Ended December 31, 2021
Year Ended December 31, 2021
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $58,103,094 |
| Dividends — affiliated issuers | 40,543 |
| Interfund lending | 255 |
| Non-cash dividends - unaffiliated issuers | 13,058,402 |
| Foreign taxes withheld | (201,356) |
| Total income | 71,000,938 |
| Expenses: | |
| Management services fees | 16,876,386 |
| Distribution and/or service fees | |
| Class 2 | 133,856 |
| Class 3 | 91,730 |
| Service fees | 130,710 |
| Compensation of board members | 61,364 |
| Custodian fees | 14,366 |
| Printing and postage fees | 13,920 |
| Audit fees | 30,280 |
| Legal fees | 33,479 |
| Compensation of chief compliance officer | 489 |
| Other | 30,143 |
| Total expenses | 17,416,723 |
| Net investment income | 53,584,215 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 180,146,851 |
| Investments — affiliated issuers | (1,677) |
| Net realized gain | 180,145,174 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | 333,858,671 |
| Investments — affiliated issuers | (1,730) |
| Net change in unrealized appreciation (depreciation) | 333,856,941 |
| Net realized and unrealized gain | 514,002,115 |
| Net increase in net assets resulting from operations | $567,586,330 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 12 | Columbia Variable Portfolio – Select Large Cap Value Fund | Annual Report 2021 |
Statement of Changes in Net Assets
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | |
| Operations | ||
| Net investment income | $53,584,215 | $41,555,370 |
| Net realized gain | 180,145,174 | 77,974,656 |
| Net change in unrealized appreciation (depreciation) | 333,856,941 | 13,720,146 |
| Net increase in net assets resulting from operations | 567,586,330 | 133,250,172 |
| Increase in net assets from capital stock activity | 46,923,953 | 535,888,605 |
| Total increase in net assets | 614,510,283 | 669,138,777 |
| Net assets at beginning of year | 2,000,739,114 | 1,331,600,337 |
| Net assets at end of year | $2,615,249,397 | $2,000,739,114 |
| Year Ended | Year Ended | |||
| December 31, 2021 | December 31, 2020 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class 1 | ||||
| Subscriptions | 14,676,863 | 471,764,199 | 30,035,699 | 807,449,628 |
| Redemptions | (13,484,829) | (466,074,224) | (10,319,758) | (264,310,442) |
| Net increase | 1,192,034 | 5,689,975 | 19,715,941 | 543,139,186 |
| Class 2 | ||||
| Subscriptions | 851,603 | 29,232,738 | 147,439 | 3,614,311 |
| Redemptions | (86,334) | (2,917,352) | (183,270) | (4,360,325) |
| Net increase (decrease) | 765,269 | 26,315,386 | (35,831) | (746,014) |
| Class 3 | ||||
| Subscriptions | 552,863 | 18,697,162 | 190,749 | 4,916,385 |
| Redemptions | (109,634) | (3,778,570) | (471,351) | (11,420,952) |
| Net increase (decrease) | 443,229 | 14,918,592 | (280,602) | (6,504,567) |
| Total net increase | 2,400,532 | 46,923,953 | 19,399,508 | 535,888,605 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Select Large Cap Value Fund | Annual Report 2021 | 13 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect any fees and expenses imposed under your
Contract and/or Qualified Plan, as applicable; such fees and expenses would reduce the total returns for all periods shown. Total return and portfolio turnover are not annualized for periods of less than one year. The
portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain derivatives, if any. If such transactions were included, the Fund’s portfolio
turnover rate may be higher.
| Net asset value, beginning of period | Net investment income | Net realized and unrealized gain (loss) | Total from investment operations | |
| Class 1 | ||||
| Year Ended 12/31/2021 | $29.63 | 0.74 | 7.05 | 7.79 |
| Year Ended 12/31/2020 | $27.67 | 0.64 | 1.32 | 1.96 |
| Year Ended 12/31/2019 | $21.83 | 0.43 | 5.41 | 5.84 |
| Year Ended 12/31/2018 | $24.87 | 0.40 | (3.44) | (3.04) |
| Year Ended 12/31/2017 | $20.56 | 0.30 | 4.01 | 4.31 |
| Class 2 | ||||
| Year Ended 12/31/2021 | $28.87 | 0.66 | 6.84 | 7.50 |
| Year Ended 12/31/2020 | $27.03 | 0.56 | 1.28 | 1.84 |
| Year Ended 12/31/2019 | $21.38 | 0.36 | 5.29 | 5.65 |
| Year Ended 12/31/2018 | $24.42 | 0.33 | (3.37) | (3.04) |
| Year Ended 12/31/2017 | $20.23 | 0.24 | 3.95 | 4.19 |
| Class 3 | ||||
| Year Ended 12/31/2021 | $29.22 | 0.71 | 6.93 | 7.64 |
| Year Ended 12/31/2020 | $27.32 | 0.59 | 1.31 | 1.90 |
| Year Ended 12/31/2019 | $21.59 | 0.39 | 5.34 | 5.73 |
| Year Ended 12/31/2018 | $24.62 | 0.36 | (3.39) | (3.03) |
| Year Ended 12/31/2017 | $20.38 | 0.27 | 3.97 | 4.24 |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Ratios include interfund lending expense which is less than 0.01%. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 14 | Columbia Variable Portfolio – Select Large Cap Value Fund | Annual Report 2021 |
Financial Highlights (continued)
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets(a) | Total net expense ratio to average net assets(a),(b) | Net investment income ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Class 1 | |||||||
| Year Ended 12/31/2021 | $37.42 | 26.29% | 0.68% | 0.68% | 2.12% | 21% | $2,461,727 |
| Year Ended 12/31/2020 | $29.63 | 7.08% | 0.71%(c) | 0.71%(c) | 2.59% | 29% | $1,913,998 |
| Year Ended 12/31/2019 | $27.67 | 26.75% | 0.73%(c) | 0.73%(c) | 1.73% | 11% | $1,241,829 |
| Year Ended 12/31/2018 | $21.83 | (12.22%) | 0.73% | 0.73% | 1.60% | 16% | $1,102,434 |
| Year Ended 12/31/2017 | $24.87 | 20.96% | 0.76% | 0.75% | 1.35% | 8% | $1,322,918 |
| Class 2 | |||||||
| Year Ended 12/31/2021 | $36.37 | 25.98% | 0.93% | 0.93% | 1.93% | 21% | $70,689 |
| Year Ended 12/31/2020 | $28.87 | 6.81% | 0.96%(c) | 0.96%(c) | 2.32% | 29% | $34,020 |
| Year Ended 12/31/2019 | $27.03 | 26.43% | 0.98%(c) | 0.98%(c) | 1.48% | 11% | $32,815 |
| Year Ended 12/31/2018 | $21.38 | (12.45%) | 0.98% | 0.98% | 1.36% | 16% | $24,610 |
| Year Ended 12/31/2017 | $24.42 | 20.71% | 1.01% | 1.00% | 1.10% | 8% | $22,501 |
| Class 3 | |||||||
| Year Ended 12/31/2021 | $36.86 | 26.15% | 0.80% | 0.80% | 2.04% | 21% | $82,833 |
| Year Ended 12/31/2020 | $29.22 | 6.95% | 0.83%(c) | 0.83%(c) | 2.40% | 29% | $52,721 |
| Year Ended 12/31/2019 | $27.32 | 26.54% | 0.86%(c) | 0.86%(c) | 1.61% | 11% | $56,957 |
| Year Ended 12/31/2018 | $21.59 | (12.31%) | 0.85% | 0.85% | 1.48% | 16% | $48,804 |
| Year Ended 12/31/2017 | $24.62 | 20.81% | 0.89% | 0.88% | 1.22% | 8% | $56,053 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Select Large Cap Value Fund | Annual Report 2021 | 15 |
Notes to Financial Statements
December 31, 2021
December 31, 2021
Note 1. Organization
Columbia Variable Portfolio
– Select Large Cap Value Fund (the Fund), a series of Columbia Funds Variable Series Trust II (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended (the
1940 Act), as an open-end management investment company organized as a Massachusetts business trust.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers Class 1, Class 2 and Class 3 shares to separate accounts funding variable annuity contracts and variable life insurance policies (collectively, Contracts) issued
by affiliated and unaffiliated life insurance companies (Participating Insurance Companies) as well as qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors (Qualified
Investors) authorized by Columbia Management Investment Distributors, Inc. (the Distributor). You may not buy (nor will you own) shares of the Fund directly. You may invest by participating in a Qualified Plan or by
buying a Contract and making allocations to the Fund. Although all share classes generally have identical voting, dividend and liquidation rights, each share class votes separately when required by the Trust’s
organizational documents or by law. Different share classes pay different net investment income distribution amounts to the extent the expenses of such share classes differ, and distributions in liquidation will be
proportional to the net asset value of each share class. Each share class has its own cost structure and other features.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Equity securities listed on an
exchange are valued at the closing price or last trade price on their primary exchange at the close of business of the New York Stock Exchange. Securities with a closing price not readily available or not listed on
any exchange are valued at the mean between the closing bid and ask prices. Listed preferred stocks convertible into common stocks are valued using an evaluated price from a pricing service.
Foreign equity securities are
valued based on the closing price or last trade price on their primary exchange at the close of business of the New York Stock Exchange. If any foreign equity security closing prices are not readily available,
the securities are valued at the mean of the latest quoted bid and ask prices on such exchanges or markets. Foreign currency exchange rates are determined at the scheduled closing time of the New York Stock Exchange.
Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange; therefore, the closing prices for securities in such markets or on such exchanges may not fully reflect
events that occur after such close but before the close of the New York Stock Exchange. In those situations, foreign securities will be fair valued pursuant to a policy adopted by the Board of Trustees. Under the
policy, the Fund may utilize a third-party pricing service to determine these fair values. The third-party pricing service takes into account multiple factors, including, but not limited to, movements in the U.S.
securities markets, certain depositary receipts, futures contracts and foreign exchange rates that have occurred subsequent to the close of the foreign exchange or market, to determine a good faith estimate that
reasonably reflects the current market conditions as of the close of the New York Stock Exchange. The fair value of a security is likely to be different from the quoted or published price, if available.
Investments in open-end investment
companies (other than exchange-traded funds (ETFs)), are valued at the latest net asset value reported by those companies as of the valuation time.
| 16 | Columbia Variable Portfolio – Select Large Cap Value Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
Income recognition
Corporate actions and dividend
income are generally recorded net of any non-reclaimable tax withholdings, on the ex-dividend date or upon receipt of an ex-dividend notification in the case of certain foreign securities.
Non-cash dividends received in the
form of stock are recorded as dividend income at fair value.
The Fund may receive distributions
from holdings in equity securities, business development companies (BDCs), exchange-traded funds (ETFs), limited partnerships (LPs), other regulated investment companies (RICs), and real estate investment trusts
(REITs), which report information as to the tax character of their distributions annually. These distributions are allocated to dividend income, capital gain and return of capital based on actual information reported.
Return of capital is recorded as a reduction of the cost basis of securities held. If the Fund no longer owns the applicable securities, return of capital is recorded as a realized gain. With respect to REITs, to the
extent actual information has not yet been reported, estimates for return of capital are made by Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise
Financial, Inc. (Ameriprise Financial). The Investment Manager’s estimates are subsequently adjusted when the actual character of the distributions is disclosed by the REITs, which could result in a
proportionate change in return of capital to shareholders.
Awards from class action litigation
are recorded as a reduction of cost basis if the Fund still owns the applicable securities on the payment date. If the Fund no longer owns the applicable securities on the payment date, the proceeds are recorded as
realized gains.
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
| Columbia Variable Portfolio – Select Large Cap Value Fund | Annual Report 2021 | 17 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Federal income tax status
The Fund is treated as a
partnership for federal income tax purposes, and the Fund does not expect to make regular distributions. The Fund will not be subject to federal income tax, and therefore, there is no provision for federal income
taxes. The partners of the Fund are subject to tax on their distributive share of the Fund’s income and loss. The components of the Fund’s net assets are reported at the partner-level for federal income
tax purposes, and therefore, are not presented in the Statement of Assets and Liabilities.
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Foreign taxes
The Fund may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries, as applicable, based upon its current interpretation of tax rules
and regulations that exist in the markets in which it invests.
Realized gains in certain countries
may be subject to foreign taxes at the Fund level, based on statutory rates. The Fund accrues for such foreign taxes on realized and unrealized gains at the appropriate rate for each jurisdiction, as applicable. The
amount, if any, is disclosed as a liability on the Statement of Assets and Liabilities.
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Under the Management Agreement, the
Investment Manager provides the Fund with investment research and advice, as well as administrative and accounting services. The management services fee is an annual fee that is equal to a percentage of the
Fund’s daily net assets that declines from 0.77% to 0.57% as the Fund’s net assets increase. The effective management services fee rate for the year ended December 31, 2021 was 0.67% of the Fund’s
average daily net assets.
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. Under a Deferred Compensation Plan (the
Deferred Plan), these members of the Board of Trustees may elect to defer payment of up to 100% of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of
certain funds managed by the Investment Manager. The Fund’s liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Deferred Plan. All
amounts payable under the Deferred Plan constitute a general unsecured obligation of the Fund. The expense for the Deferred Plan, which includes Trustees’ fees deferred during the current period as well as any
gains or losses on the Trustees’ deferred compensation balances as a result of market fluctuations, is included in "Compensation of board members" on the Statement of Operations.
| 18 | Columbia Variable Portfolio – Select Large Cap Value Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
Transactions with affiliates
The Fund is permitted to engage in
purchase and/or sale transactions with affiliates and/or accounts that have a common investment manager (or affiliated investment managers), common directors/trustees, and/or common officers under specified conditions
outlined in a policy adopted by the Board, pursuant to Rule 17a-7 under the 1940 Act (cross-trades). The Board relies on quarterly written representation from the Fund’s Chief Compliance Officer that
cross-trades complied with approved policy.
For the year ended December 31,
2021, the Fund engaged in cross-trades as follows:
| Purchases ($) | Sales ($) | Net realized gain (loss) ($) |
| 78,651,380 | 29,104,492 | 11,480,626 |
Service fees
The Fund has entered into a
Shareholder Services Agreement with Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial. Under this
agreement, the Fund pays a service fee equal to the payments made by the Transfer Agent to Participating Insurance Companies and other financial intermediaries (together, Participating Organizations) for services each
such Participating Organization provides to its clients, customers and participants that are invested directly or indirectly in the Fund, up to a cap approved by the Board of Trustees from time to time. The effective
service fee rate for the year ended December 31, 2021, was 0.01% of the Fund’s average daily net assets.
The Transfer Agent may retain as
compensation for its services revenues from fees for wire, telephone and redemption orders, account transcripts due the Transfer Agent from Fund shareholders and interest (net of bank charges) earned with respect to
balances in accounts the Transfer Agent maintains in connection with its services to the Fund.
Distribution and/or service fees
The Fund has an agreement with the
Distributor, an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution services. Under a Plan and Agreement of Distribution, the Fund pays a fee at an annual rate
of up to 0.25% of the Fund’s average daily net assets attributable to Class 2 shares and an annual rate of up to 0.125% of the Fund’s average daily net assets attributable to Class 3 shares. The Fund pays
no distribution and service fees for Class 1 shares.
Expenses waived/reimbursed by the
Investment Manager and its affiliates
The Investment Manager and certain
of its affiliates have contractually agreed to waive fees and/or reimburse expenses (excluding certain fees and expenses described below) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, so that the Fund’s net operating expenses, after giving effect to fees waived/expenses reimbursed and any balance credits and/or overdraft charges from the Fund’s
custodian, do not exceed the following annual rate(s) as a percentage of the classes’ average daily net assets:
| Columbia Variable Portfolio – Select Large Cap Value Fund | Annual Report 2021 | 19 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), expenses associated with investments in affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange-traded funds), transaction costs and
brokerage commissions, costs related to any securities lending program, dividend expenses associated with securities sold short, inverse floater program fees and expenses, transaction charges and interest on borrowed
money, interest, costs associated with certain shareholder meetings, infrequent and/or unusual expenses and any other expenses the exclusion of which is specifically approved by the Board of Trustees. This
agreement may be modified or amended only with approval from the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements
described above are not recoverable by the Investment Manager or its affiliates in future periods.
Note 4. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $598,316,257 and $502,999,357, respectively, for the year ended December 31, 2021. The amount of purchase and
sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 5. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes
referred to as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
Note 6. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund’s activity in the
Interfund Program during the year ended December 31, 2021 was as follows:
| Borrower or lender | Average loan balance ($) | Weighted average interest rate (%) | Number of days with outstanding loans |
| Lender | 2,166,667 | 0.70 | 6 |
Interest income earned by the Fund
is recorded as Interfund lending in the Statement of Operations. The Fund had no outstanding interfund loans at December 31, 2021.
Note 7. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to an October 28, 2021 amendment and restatement, the credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment
Manager or an affiliated investment manager, severally and not jointly, permits collective borrowings up to $950 million. Interest is currently charged
| 20 | Columbia Variable Portfolio – Select Large Cap Value Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
to each participating fund based on its borrowings
at a rate equal to the higher of (i) the federal funds effective rate, (ii) the secured overnight financing rate plus 0.11448% and (iii) the overnight bank funding rate, plus in each case, 1.00%. Each borrowing under
the credit facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum.
The commitment fee is included in other expenses in the Statement of Operations. This agreement expires annually in October unless extended or renewed. Prior to the October 28, 2021 amendment and restatement, the Fund
had access to a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. which permitted collective borrowings up to $950 million. Interest was
charged to each participating fund based on its borrowings at a rate equal to the higher of (i) the federal funds effective rate, (ii) the one-month London Interbank Offered Rate (LIBOR) rate and (iii) the overnight
bank funding rate, plus in each case, 1.25%.
The Fund had no borrowings during
the year ended December 31, 2021.
Note 8. Significant
risks
Financial sector risk
The Fund is more susceptible to the
particular risks that may affect companies in the financial services sector than if it were invested in a wider variety of companies in unrelated sectors. Companies in the financial services sector are subject to
certain risks, including the risk of regulatory change, decreased liquidity in credit markets and unstable interest rates. Such companies may have concentrated portfolios, such as a high level of loans to one or more
industries or sectors, which makes them vulnerable to economic conditions that affect such industries or sectors. Performance of such companies may be affected by competitive pressures and exposure to investments,
agreements and counterparties, including credit products that, under certain circumstances, may lead to losses (e.g., subprime loans). Companies in the financial services sector are subject to extensive governmental
regulation that may limit the amount and types of loans and other financial commitments they can make, and interest rates and fees that they may charge. In addition, profitability of such companies is largely
dependent upon the availability and the cost of capital.
Market risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
The coronavirus disease 2019 and
its variants (COVID-19) pandemic has resulted in, and may continue to result in, significant global economic and societal disruption and market volatility due to disruptions in market access, resource availability,
facilities operations, imposition of tariffs, export controls and supply chain disruption, among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement
and loss in human and other resources. The uncertainty surrounding the magnitude, duration, reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental
authorities or other third parties, present unknowns that are yet to unfold. The impacts, as well as the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and
pandemics that may arise in the future – could negatively affect global economies and markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in
emerging market countries may be greater due to generally less established healthcare systems, governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other
pre-existing
| Columbia Variable Portfolio – Select Large Cap Value Fund | Annual Report 2021 | 21 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
political, social and economic risks in certain
countries or globally. The disruptions caused by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively impact the Fund’s ability to achieve its
investment objectives. Any such event(s) could have a significant adverse impact on the value and risk profile of the Fund.
Shareholder concentration risk
At December 31, 2021, affiliated
shareholders of record owned 98.6% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of
less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Note 9. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
Note 10. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in
connection with the conduct of their business activities. Ameriprise Financial believes that the Fund is not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject
of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with
the Fund. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (SEC) on legal and regulatory matters that relate to
Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that
these matters, or the adverse publicity associated with them, will not result in increased Fund redemptions, reduced sale of Fund shares or other adverse consequences to the Fund. Further, although we believe
proceedings are not likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines,
penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial or one or more of its affiliates that provides services to
the Fund.
| 22 | Columbia Variable Portfolio – Select Large Cap Value Fund | Annual Report 2021 |
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees of Columbia
Funds Variable Series Trust II and Shareholders of Columbia Variable Portfolio – Select Large Cap Value Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of Columbia Variable Portfolio – Select Large Cap Value Fund (one of the funds constituting Columbia Funds Variable Series Trust II,
referred to hereafter as the "Fund") as of December 31, 2021, the related statement of operations for the year ended December 31, 2021, the statement of changes in net assets for each of the two years in the period
ended December 31, 2021, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2021 (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, 2021, 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, 2021 and the financial highlights for each of the five years in the period ended December 31, 2021 in conformity with accounting principles generally
accepted in the United States of America.
Basis for Opinion
These financial statements are the
responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these
financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2021 by correspondence with the custodian, transfer agent and broker. We believe that
our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Minneapolis, Minnesota
February 18, 2022
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| Columbia Variable Portfolio – Select Large Cap Value Fund | Annual Report 2021 | 23 |
TRUSTEES AND
OFFICERS
The Board oversees the
Fund’s operations and appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following table provides basic biographical information about the
Fund’s Trustees as of the printing of this report, including their principal occupations during the past five years, although specific titles for individuals may have varied over the period. The year set forth
beneath Length of Service in the table below is the year in which the Trustee was first appointed or elected as Trustee to any Fund currently in the Columbia Funds Complex or a predecessor thereof. Under current Board
policy, each Trustee generally serves until December 31 of the year such Trustee turns seventy-five (75).
Independent trustees
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| George S. Batejan c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1953 | Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 176 | Former Chairman of the Board, NICSA (National Investment Company Services Association) (Executive Committee, Nominating Committee and Governance Committee), 2014-2016; former Director, Intech Investment Management, 2011-2016; former Board Member, Metro Denver Chamber of Commerce, 2015-2016; former Advisory Board Member, University of Colorado Business School, 2015-2018 |
| Kathleen Blatz c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2006 | Attorney, specializing in arbitration and mediation; Chief Justice, Minnesota Supreme Court, 1998-2006; Associate Justice, Minnesota Supreme Court, 1996-1998; Fourth Judicial District Court Judge, Hennepin County, 1994-1996; Attorney in private practice and public service, 1984-1993; State Representative, Minnesota House of Representatives, 1979-1993, which included service on the Tax and Financial Institutions and Insurance Committees; Member and Interim Chair, Minnesota Sports Facilities Authority, January 2017-July 2017; Interim President and Chief Executive Officer, Blue Cross Blue Shield of Minnesota (health care insurance), February-July 2018, April-October 2021 | 176 | Former Trustee, Blue Cross Blue Shield of Minnesota, 2009-2021 (Chair of the Business Development Committee, 2014-2017; Chair of the Governance Committee, 2017-2019); former Member and Chair of the Board, Minnesota Sports Facilities Authority, January 2017-July 2017; former Director, Robina Foundation, 2009-2020 (Chair, 2014-2020); Director, Schulze Family Foundation, since 2021 |
| Pamela G. Carlton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2007 | President, Springboard — Partners in Cross Cultural Leadership (consulting company) since 2003; Managing Director of US Equity Research, JP Morgan Chase, 1999-2003; Director of US Equity Research, Chase Asset Management, 1996-1999; Co-Director Latin America Research, 1993-1996, COO Global Research, 1992-1996, Co-Director of US Research, 1991-1992, Investment Banker, Morgan Stanley, 1982-1991, Morgan Stanley; Attorney, Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 176 | Trustee, New York Presbyterian Hospital Board (Executive Committee and Chair of People Committee) since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee); Director, Apollo Commercial Real Estate Finance, Inc. since 2021; the Governing Council of the Independent Directors Council (IDC), since 2021 |
| 24 | Columbia Variable Portfolio – Select Large Cap Value Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Janet Langford Carrig c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1957 | Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 174 | Director, EQT Corporation (natural gas producer) since 2019; Director, Whiting Petroleum Corporation (independent oil and gas company) since 2020 |
| J. Kevin Connaughton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2020 | Member, FINRA National Adjudicatory Council since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Consultant to Independent Trustees of CFVIT and CFST I from March 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Managing Director and General Manager of Mutual Fund Products, Columbia Management Investment Advisers, LLC, May 2010-February 2015; President, Columbia Funds, 2008-2015; and senior officer of Columbia Funds and affiliated funds, 2003-2015 | 174 | Former Director, The Autism Project, March 2015-December 2021; former Member of the Investment Committee, St. Michael’s College, November 2015-February 2020; former Trustee, St. Michael’s College, June 2017-September 2019; former Trustee, New Century Portfolios, January 2015-December 2017 |
| Olive M. Darragh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since 2020 | Managing Director of Darragh Inc. (strategy and talent management consulting firm) since 2010; Founder and CEO, Zolio, Inc. (investment management talent identification platform) since 2004; Consultant to Independent Trustees of CFVIT and CFST I from June 2019 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 2001-2004 | 174 | Former Director, University of Edinburgh Business School (Member of US Board); former Director, Boston Public Library Foundation |
| Patricia M. Flynn c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1950 | Trustee since 2004 | Trustee Professor of Economics and Management, Bentley University since 1976 (also teaches and conducts research on corporate governance); Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 176 | Trustee, MA Taxpayers Foundation since 1997; Board of Governors, Innovation Institute, MA Technology Collaborative, 2010-2020; former Board of Directors, The MA Business Roundtable, 2003-2019 |
| Brian J. Gallagher c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 176 | Trustee, Catholic Schools Foundation since 2004 |
| Columbia Variable Portfolio – Select Large Cap Value Fund | Annual Report 2021 | 25 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Douglas A. Hacker c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1955 | Co-Chair since 2021; Chair of CFST I and CFVIT since 2014; Trustee of CFST I and CFVIT since 1996 and CFST, CFST II, CFVST II, CET I and CET II since 2021 | Independent business executive since May 2006; Executive Vice President – Strategy of United Airlines, December 2002 - May 2006; President of UAL Loyalty Services (airline marketing company), September 2001-December 2002; Executive Vice President and Chief Financial Officer of United Airlines, July 1999-September 2001 | 176 | Director, Spartan Nash Company (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing); former Director, Nash Finch Company (food distributor), 2005-2013; former Director, SeaCube Container Leasing Ltd. (container leasing), 2010-2013; and former Director, Travelport Worldwide Limited (travel information technology), 2014-2019 |
| Nancy T. Lukitsh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1956 | Trustee since 2011 | Senior Vice President, Partner and Director of Marketing, Wellington Management Company, LLP (investment adviser), 1997-2010; Chair, Wellington Management Portfolios (commingled non-U.S. investment pools), 2007 -2010; Director, Wellington Trust Company, NA and other Wellington affiliates, 1997-2010 | 174 | None |
| David M. Moffett c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2011 | Retired; Consultant to Bridgewater and Associates | 174 | Director, CSX Corporation (transportation suppliers); Director, Genworth Financial, Inc. (financial and insurance products and services); Director, PayPal Holdings Inc. (payment and data processing services); Trustee, University of Oklahoma Foundation; former Director, eBay Inc. (online trading community), 2007-2015; and former Director, CIT Bank, CIT Group Inc. (commercial and consumer finance), 2010-2016 |
| Catherine James Paglia c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Co-Chair since 2021; Chair of CFST, CFST II, CFVST II, CET I and CET II since 2020; Trustee of CFST, CFST II and CFVST II since 2004 and CFST I and CFVIT since 2021 | Director, Enterprise Asset Management, Inc. (private real estate and asset management company) since September 1998; Managing Director and Partner, Interlaken Capital, Inc., 1989-1997; Vice President, 1982-1985, Principal, 1985-1987, Managing Director, 1987-1989, Morgan Stanley; Vice President, Investment Banking, 1980-1982, Associate, Investment Banking, 1976-1980, Dean Witter Reynolds, Inc. | 176 | Director, Valmont Industries, Inc. (irrigation systems manufacturer) since 2012; Trustee, Carleton College (on the Investment Committee); Trustee, Carnegie Endowment for International Peace (on the Investment Committee) |
| 26 | Columbia Variable Portfolio – Select Large Cap Value Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Minor M. Shaw c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1947 | Trustee since 2003 | President, Micco LLC (private investments) since 2011; President, Micco Corp. (family investment business), 1998-2011 | 176 | Director, Blue Cross Blue Shield of South Carolina (Chair of Compensation Committee) since April 2008; Trustee, Hollingsworth Funds (on the Investment Committee) since 2016 (previously Board Chair from 2016-2019); Former Advisory Board member, Duke Energy Corp., 2016-2020; Chair of the Duke Endowment; Chair of Greenville – Spartanburg Airport Commission; former Trustee, BofA Funds Series Trust (11 funds), 2003-2011; former Director, Piedmont Natural Gas, 2004-2016; former Director, National Association of Corporate Directors, Carolinas Chapter, 2013-2018; Chair, Daniel-Mickel Foundation since 1998 |
| Natalie A. Trunow c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1967 | Trustee since 2020 | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services), January 2016-January 2021; Non-executive Member of the Investment Committee and Valuation Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services), August 2018-January 2021; Advisor, Paradigm Asset Management, November 2016-December 2021; Consultant to Independent Trustees of CFVIT and CFST I from September 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Director of Investments/Consultant, Casey Family Programs, April 2016-November 2016; Senior Vice President and Chief Investment Officer, Calvert Investments, August 2008-January 2016; Section Head and Portfolio Manager, General Motors Asset Management, June 1997-August 2008 | 174 | Former Director, Investment Committee, Health Services for Children with Special Needs, Inc., 2012-2019; Director, Chair of Audit Committee, Consumer Credit Counseling Services (formerly Guidewell Financial Solutions), since 2019; Independent Director, Investment Committee and Valuation Committee, Sarona Asset Management, since 2019 |
| Sandra Yeager c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2017 | Retired; President and founder, Hanoverian Capital, LLC (SEC registered investment advisor firm), 2008-2016; Managing Director, DuPont Capital, 2006-2008; Managing Director, Morgan Stanley Investment Management, 2004-2006; Senior Vice President, Alliance Bernstein, 1990-2004 | 176 | Former Director, NAPE Education Foundation, October 2016-October 2020 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Fund Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I (CET I), Columbia ETF Trust II (CET II), Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Beckman, Gallagher and Hacker and Mses. Blatz, Carlton, Flynn, Paglia, Shaw and Yeager serve as Directors of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
| Columbia Variable Portfolio – Select Large Cap Value Fund | Annual Report 2021 | 27 |
TRUSTEES AND OFFICERS (continued)
Interested trustee affiliated with Investment Manager*
Interested trustee affiliated with Investment Manager*
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during the past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex overseen | Other directorships held by Trustee during the past five years |
| Daniel J. Beckman c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since November 2021(a) | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC (since April 2015); officer of Columbia Funds and affiliated funds since 2020. | 176 | Director, Ameriprise Trust Company, since October 2016; Director, Columbia Management Investment Distributors, Inc. since November 2018; Board of Governors, Columbia Wanger Asset Management, LLC since January 2022 |
| * | Interested person (as defined under the 1940 Act) by reason of being an officer, director, security holder and/or employee of the Investment Manager or Ameriprise Financial. |
| (a) | Mr. Beckman serves as the President and Principal Executive Officer of the Columbia Funds (since 2021). |
The Statement of Additional
Information has additional information about the Fund’s Board members and is available, without charge, upon request by calling 800.345.6611 or contacting your financial intermediary.
The Board has appointed officers
who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. The following table provides basic information about the Officers of the
Fund, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Beckman, who is President and Principal Executive Officer, the
Fund’s other officers are:
Fund officers
| 28 | Columbia Variable Portfolio – Select Large Cap Value Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Fund officers (continued)
Fund officers (continued)
| Columbia Variable Portfolio – Select Large Cap Value Fund | Annual Report 2021 | 29 |
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For Fund and other investment product prospectuses, which contain this and other important information, contact your
financial advisor or insurance representative. Please read the prospectus carefully before you invest. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved. Columbia Management Investment Distributors, Inc., 290 Congress Street, Boston, MA 02210
© 2022 Columbia Management Investment
Advisers, LLC.
S-6472 AW (2/22)
Columbia Variable
Portfolio – Mid Cap Growth Fund
(to be renamed Columbia
Variable Portfolio - Select Mid Cap Growth Fund, effective May 1, 2022)
Please remember that you may not
buy (nor will you own) shares of the Fund directly. The Fund is available through variable annuity contracts and variable life insurance policies offered by the separate accounts of participating insurance companies
as well as qualified pension and retirement plans. Please contact your financial advisor or insurance representative for more information.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
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| 8 | |
| 11 | |
| 12 | |
| 13 | |
| 14 | |
| 16 | |
| 23 | |
| 24 |
Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which Columbia Variable Portfolio – Mid Cap Growth Fund (the Fund) holds investments consistent with the procedures as stated in the Statement of Additional Information
(SAI). You may obtain a copy of the SAI without charge by calling 800.345.6611; contacting your financial intermediary or searching the website of the Securities and Exchange Commission (SEC) at sec.gov. Information
regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge by visiting
columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. The Fund’s Form N-PORT is available on the SEC’s website at sec.gov. The Fund’s complete
schedule of portfolio holdings, as filed on Form N-PORT, can also be obtained without charge, upon request, by calling 800.345.6611.
Additional Fund information
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
290 Congress Street
Boston, MA 02210
Fund distributor
Columbia Management Investment Distributors,
Inc.
290 Congress Street
Boston, MA 02210
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
Columbia Variable Portfolio – Mid Cap Growth
Fund | Annual Report 2021
Fund at a Glance
Investment objective
The Fund
seeks to provide shareholders with growth of capital.
Portfolio management
Daniel Cole, CFA
Co-Portfolio Manager
Managed Fund since April 2021
Erika Maschmeyer, CFA
Co-Portfolio Manager
Managed Fund since 2018
John Emerson, CFA
Co-Portfolio Manager
Managed Fund since 2018
| Columbia Variable Portfolio – Mid Cap Growth Fund | Annual Report 2021 | 3 |
Fund at a Glance (continued)
Performance of a hypothetical $10,000 investment (December 31, 2011 — December 31, 2021)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class 2 shares of Columbia Variable Portfolio – Mid Cap Growth Fund during the stated time period, and does not reflect the deduction of taxes, if any, that a
shareholder may pay on Fund distributions or on the redemption of Fund shares. The returns also do not reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy or
qualified pension or retirement plan, if any.
| 4 | Columbia Variable Portfolio – Mid Cap Growth Fund | Annual Report 2021 |
Manager Discussion of Fund Performance
At December 31, 2021,
approximately 31.49% of the Fund’s shares were owned in the aggregate by affiliated funds-of-funds managed by Columbia Management Investment Advisers, LLC (the Investment Manager). As a result of asset
allocation decisions by the Investment Manager, it is possible that the Fund may experience relatively large purchases or redemptions from affiliated funds-of-funds. The Investment Manager seeks to minimize the impact
of these transactions by structuring them over a reasonable period of time. The Fund may also experience increased expenses as it buys and sells securities as a result of purchases or redemptions by affiliated
funds-of-funds.
For the 12-month period that ended
December 31, 2021, Class 2 shares of the Fund returned 16.27%. The Fund outperformed its benchmark, the Russell Midcap Growth Index, which returned 12.73% for the same time period.
Market overview
U.S. equities performed very well
in 2021, with most aspects of the macroeconomic environment providing a tailwind for risk assets. Although COVID-19 remained persistent due to the emergence of new variants throughout the year, the rollout of multiple
vaccines enabled a gradual restoration of normal business conditions. Economic growth surged as a result, leading to favorable comparisons versus the depressed levels of 2020. Corporate earnings rose in kind, with
results tracking ahead of expectations in each of the year’s four quarters. Monetary and fiscal policy was also highly supportive, fueling a steady appetite for risk among investors.
Despite these positive
developments, mid-cap growth stocks trailed most other segments of the U.S. equity market in 2021. After performing reasonably well through mid-November, the asset class experienced considerable underperformance in
the final six weeks of the year. The indication by the U.S. Federal Reserve (Fed) of its intent to begin raising short-term interest rates in 2022 appeared to be the primary cause for the downturn in this time. The
prospect of higher rates is typically a headwind for mid-sized growth stocks since it reduces the value of their expected future earnings when measured in current dollars.
The resulting sell-off represented
one of the largest pullbacks in secular growth companies that we have witnessed in many years. Believing this created some very attractive long-term opportunities, we remained on a sharp lookout for stocks that have
been unjustifiably beaten down by larger trends. As always, we stayed focused on investing in growing companies with outstanding business models and competitive advantages that should strengthen over time.
The Fund’s broader investment
strategy was an important reason for its outperformance in 2021. Lower quality companies, particularly those without current profits, lagged considerably during the downturn late in the year. On the other hand, the
types of higher quality, profitable growers we seek held up much better than the overall small- and mid-cap category. We believe this helps illustrate the merits of emphasizing bottom-up company research rather than
trying to predict macroeconomic developments such as inflation or the direction of Fed policy.
The Fund’s notable
contributors during the period
| • | Our process generated the best relative performance in the financials sector, led by Upstart Holdings. The company operates an artificial intelligence (AI)-based lending platform primarily serving the personal and auto loan market. The shares jumped as the company grew more quickly than expected since its December 2020 initial public offering. We sold the stock on the basis of valuation prior to its downturn late in the year. |
| • | Information technology was another area of strength for the Fund in the annual period. |
| ○ | Epam Systems, an IT Services provider specializing in helping companies digitally transform their businesses, was a top contributor in the sector. Its growth accelerated during in 2020 as companies shifted their focus online during the pandemic, and the company continued to grow in 2021 even as business conditions normalized. |
| ○ | Trade Desk operates a self-service cloud-based platform that facilitates the creation, management, and optimization of data-driven digital advertising campaigns. We believe that the platform is innovative and easy to use, making it a compelling option for ad buyers and, once adopted, it has high switching costs that creates stable, profitable revenue streams. |
| Columbia Variable Portfolio – Mid Cap Growth Fund | Annual Report 2021 | 5 |
Manager Discussion of Fund Performance (continued)
| ○ | Zscaler, which helps protect companies from malicious hacking attempts using cloud-based technologies, was another top performer. The company’s products provide security that is both more effective and less costly than traditional firewalls, which contributed to its sales growth. |
| • | Our stock picks in communication services also outperformed the corresponding benchmark components by a healthy margin. Roblox, which operates an online gaming platform, was a prominent contributor. The company has developed a multi-sided network that makes it easier for developers to create new games and for young people to interact with both those games and each other. The resulting network effects have allowed Roblox to generate impressive growth, boosting its shares. |
The Fund’s notable
detractors during the period
| • | Although the Fund’s holdings in health care posted a gain in absolute terms, weakness in a few select positions caused us to underperform in the sector. |
| ○ | Shares of Amedisys, a home health care and hospice service provider, declined as the firm saw incrementally lower average length of patient stays. The downturn occurred despite positive trends in Amedisys’ core business segments and the broader backdrop of the aging U.S. population. |
| ○ | Sarepta Therapeutics is a biotechnology company that suffered a failed clinical trial for a key drug. We closed the position in the stock, as its path to long-term profitability became much less clear. |
| • | Our stock picks in consumer discretionary also experienced some modest underperformance, with two positions standing out as detractors. |
| ○ | Chegg, a provider of online education-related content and support, was the largest detractor in the consumer discretionary sector and the Fund as a whole. Its growth rate moderated more than we expected following its pandemic-assisted gains in 2020. Still, we believe the company continues to offer the world’s leading online learning platform. |
| ○ | Vroom, an e-commerce platform for buying and selling new and used cars, also hurt relative performance in consumer discretionary. Vroom has a leading market position in this small but fast-growing area, but its stock lagged due in part to its announcement that it was increasing its investment in infrastructure. |
The views expressed in this report
reflect the current views of the respective parties who have contributed to this report. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult
to predict, so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective parties
disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Columbia fund are based on numerous factors, may not be relied on as an
indication of trading intent on behalf of any particular Columbia fund. References to specific securities should not be construed as a recommendation or investment advice.
| 6 | Columbia Variable Portfolio – Mid Cap Growth Fund | Annual Report 2021 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur ongoing
costs, which generally include management fees, distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to help you compare these costs with the ongoing costs of investing in other mutual funds.
The information below does not
reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy (collectively, Contracts) or qualified pension and retirement plan (Qualified Plan), if any. The total fees
and expenses you bear may therefore be higher than those shown below.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount invested, to estimate the
expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as redemption or exchange fees, or expenses that apply to the subaccount or the Contract. Therefore, the
hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If the fees and expenses imposed under your Contract or
Qualified Plan, if any, were included, your costs would be higher.
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 365.
Expenses do not include fees and
expenses incurred indirectly by the Fund from its investment in underlying funds, including affiliated and non-affiliated pooled investment vehicles, such as mutual funds and exchange-traded funds.
Had Columbia Management Investment
Advisers, LLC and/or certain of its affiliates not waived/reimbursed certain fees and expenses, account value at the end of the period would have been reduced.
| Columbia Variable Portfolio – Mid Cap Growth Fund | Annual Report 2021 | 7 |
Portfolio of Investments
December 31, 2021
December 31, 2021
(Percentages represent value of
investments compared to net assets)
Investments in securities
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 8 | Columbia Variable Portfolio – Mid Cap Growth Fund | Annual Report 2021 |
Notes to Portfolio of
Investments
| (a) | Non-income producing investment. |
| (b) | The rate shown is the seven-day current annualized yield at December 31, 2021. |
| (c) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended December 31, 2021 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Realized gain (loss)($) | Dividends($) | End of period shares |
| Columbia Short-Term Cash Fund, 0.085% | ||||||||
| 3,620,107 | 245,826,849 | (229,654,341) | — | 19,792,615 | (460) | 7,893 | 19,796,575 | |
Abbreviation Legend
| ADR | American Depositary Receipt |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Mid Cap Growth Fund | Annual Report 2021 | 9 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at December 31, 2021:
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 10 | Columbia Variable Portfolio – Mid Cap Growth Fund | Annual Report 2021 |
Statement of Assets and Liabilities
December 31, 2021
December 31, 2021
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $461,557,324) | $589,719,680 |
| Affiliated issuers (cost $19,792,615) | 19,792,615 |
| Receivable for: | |
| Capital shares sold | 3,746 |
| Dividends | 88,544 |
| Expense reimbursement due from Investment Manager | 408 |
| Prepaid expenses | 10,755 |
| Total assets | 609,615,748 |
| Liabilities | |
| Payable for: | |
| Capital shares purchased | 342,702 |
| Management services fees | 13,590 |
| Distribution and/or service fees | 1,525 |
| Service fees | 22,247 |
| Compensation of board members | 130,584 |
| Compensation of chief compliance officer | 114 |
| Other expenses | 22,538 |
| Total liabilities | 533,300 |
| Net assets applicable to outstanding capital stock | $609,082,448 |
| Represented by | |
| Trust capital | $609,082,448 |
| Total - representing net assets applicable to outstanding capital stock | $609,082,448 |
| Class 1 | |
| Net assets | $215,521,490 |
| Shares outstanding | 4,112,131 |
| Net asset value per share | $52.41 |
| Class 2 | |
| Net assets | $49,778,494 |
| Shares outstanding | 977,102 |
| Net asset value per share | $50.95 |
| Class 3 | |
| Net assets | $343,782,464 |
| Shares outstanding | 6,655,625 |
| Net asset value per share | $51.65 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Mid Cap Growth Fund | Annual Report 2021 | 11 |
Statement of Operations
Year Ended December 31, 2021
Year Ended December 31, 2021
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $1,700,825 |
| Dividends — affiliated issuers | 7,893 |
| Interfund lending | 94 |
| Total income | 1,708,812 |
| Expenses: | |
| Management services fees | 4,975,043 |
| Distribution and/or service fees | |
| Class 2 | 115,421 |
| Class 3 | 430,708 |
| Service fees | 243,545 |
| Compensation of board members | 46,063 |
| Custodian fees | 8,128 |
| Printing and postage fees | 30,575 |
| Audit fees | 29,500 |
| Legal fees | 15,559 |
| Compensation of chief compliance officer | 115 |
| Other | 26,547 |
| Total expenses | 5,921,204 |
| Fees waived or expenses reimbursed by Investment Manager and its affiliates | (356,331) |
| Total net expenses | 5,564,873 |
| Net investment loss | (3,856,061) |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 132,463,251 |
| Investments — affiliated issuers | (460) |
| Net realized gain | 132,462,791 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | (34,316,298) |
| Net change in unrealized appreciation (depreciation) | (34,316,298) |
| Net realized and unrealized gain | 98,146,493 |
| Net increase in net assets resulting from operations | $94,290,432 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 12 | Columbia Variable Portfolio – Mid Cap Growth Fund | Annual Report 2021 |
Statement of Changes in Net Assets
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | |
| Operations | ||
| Net investment loss | $(3,856,061) | $(2,125,289) |
| Net realized gain | 132,462,791 | 97,157,618 |
| Net change in unrealized appreciation (depreciation) | (34,316,298) | 71,893,227 |
| Net increase in net assets resulting from operations | 94,290,432 | 166,925,556 |
| Decrease in net assets from capital stock activity | (99,809,027) | (81,136,540) |
| Total increase (decrease) in net assets | (5,518,595) | 85,789,016 |
| Net assets at beginning of year | 614,601,043 | 528,812,027 |
| Net assets at end of year | $609,082,448 | $614,601,043 |
| Year Ended | Year Ended | |||
| December 31, 2021 | December 31, 2020 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class 1 | ||||
| Subscriptions | 59,863 | 3,034,482 | 59,932 | 1,899,968 |
| Redemptions | (1,402,981) | (68,652,519) | (1,576,110) | (58,120,810) |
| Net decrease | (1,343,118) | (65,618,037) | (1,516,178) | (56,220,842) |
| Class 2 | ||||
| Subscriptions | 191,146 | 9,305,333 | 156,164 | 5,690,315 |
| Redemptions | (144,156) | (6,877,414) | (94,507) | (3,238,612) |
| Net increase | 46,990 | 2,427,919 | 61,657 | 2,451,703 |
| Class 3 | ||||
| Subscriptions | 15,003 | 734,550 | 67,362 | 2,410,701 |
| Redemptions | (764,385) | (37,353,459) | (867,742) | (29,778,102) |
| Net decrease | (749,382) | (36,618,909) | (800,380) | (27,367,401) |
| Total net decrease | (2,045,510) | (99,809,027) | (2,254,901) | (81,136,540) |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Mid Cap Growth Fund | Annual Report 2021 | 13 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect any fees and expenses imposed under your
Contract and/or Qualified Plan, as applicable; such fees and expenses would reduce the total returns for all periods shown. Total return and portfolio turnover are not annualized for periods of less than one year. The
portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain derivatives, if any. If such transactions were included, the Fund’s portfolio
turnover rate may be higher.
| Net asset value, beginning of period | Net investment income (loss) | Net realized and unrealized gain (loss) | Total from investment operations | |
| Class 1 | ||||
| Year Ended 12/31/2021 | $44.96 | (0.27) | 7.72 | 7.45 |
| Year Ended 12/31/2020 | $33.20 | (0.11) | 11.87 | 11.76 |
| Year Ended 12/31/2019 | $24.56 | 0.02 | 8.62 | 8.64 |
| Year Ended 12/31/2018 | $25.79 | 0.03 | (1.26) | (1.23) |
| Year Ended 12/31/2017 | $20.97 | 0.03 | 4.79 | 4.82 |
| Class 2 | ||||
| Year Ended 12/31/2021 | $43.82 | (0.38) | 7.51 | 7.13 |
| Year Ended 12/31/2020 | $32.44 | (0.20) | 11.58 | 11.38 |
| Year Ended 12/31/2019 | $24.06 | (0.06) | 8.44 | 8.38 |
| Year Ended 12/31/2018 | $25.32 | (0.03) | (1.23) | (1.26) |
| Year Ended 12/31/2017 | $20.64 | (0.03) | 4.71 | 4.68 |
| Class 3 | ||||
| Year Ended 12/31/2021 | $44.37 | (0.33) | 7.61 | 7.28 |
| Year Ended 12/31/2020 | $32.80 | (0.16) | 11.73 | 11.57 |
| Year Ended 12/31/2019 | $24.30 | (0.02) | 8.52 | 8.50 |
| Year Ended 12/31/2018 | $25.54 | (0.00)(d) | (1.24) | (1.24) |
| Year Ended 12/31/2017 | $20.80 | 0.00(d) | 4.74 | 4.74 |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Ratios include interfund lending expense which is less than 0.01%. |
| (d) | Rounds to zero. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 14 | Columbia Variable Portfolio – Mid Cap Growth Fund | Annual Report 2021 |
Financial Highlights (continued)
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets(a) | Total net expense ratio to average net assets(a),(b) | Net investment income (loss) ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Class 1 | |||||||
| Year Ended 12/31/2021 | $52.41 | 16.57% | 0.88% | 0.82% | (0.54%) | 75% | $215,521 |
| Year Ended 12/31/2020 | $44.96 | 35.42% | 0.88%(c) | 0.77%(c) | (0.32%) | 84% | $245,292 |
| Year Ended 12/31/2019 | $33.20 | 35.18% | 0.88% | 0.73% | 0.06% | 70% | $231,471 |
| Year Ended 12/31/2018 | $24.56 | (4.77%) | 0.89% | 0.74% | 0.12% | 150% | $183,546 |
| Year Ended 12/31/2017 | $25.79 | 22.98% | 0.91% | 0.74% | 0.14% | 115% | $198,617 |
| Class 2 | |||||||
| Year Ended 12/31/2021 | $50.95 | 16.27% | 1.13% | 1.07% | (0.79%) | 75% | $49,778 |
| Year Ended 12/31/2020 | $43.82 | 35.08% | 1.13%(c) | 1.02%(c) | (0.58%) | 84% | $40,754 |
| Year Ended 12/31/2019 | $32.44 | 34.83% | 1.13% | 0.98% | (0.19%) | 70% | $28,169 |
| Year Ended 12/31/2018 | $24.06 | (4.98%) | 1.14% | 0.99% | (0.12%) | 150% | $19,966 |
| Year Ended 12/31/2017 | $25.32 | 22.68% | 1.16% | 0.99% | (0.11%) | 115% | $18,148 |
| Class 3 | |||||||
| Year Ended 12/31/2021 | $51.65 | 16.41% | 1.00% | 0.94% | (0.66%) | 75% | $343,782 |
| Year Ended 12/31/2020 | $44.37 | 35.28% | 1.01%(c) | 0.90%(c) | (0.45%) | 84% | $328,556 |
| Year Ended 12/31/2019 | $32.80 | 34.98% | 1.01% | 0.85% | (0.07%) | 70% | $269,172 |
| Year Ended 12/31/2018 | $24.30 | (4.86%) | 1.01% | 0.86% | (0.01%) | 150% | $227,630 |
| Year Ended 12/31/2017 | $25.54 | 22.79% | 1.03% | 0.86% | 0.01% | 115% | $268,941 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Mid Cap Growth Fund | Annual Report 2021 | 15 |
Notes to Financial Statements
December 31, 2021
December 31, 2021
Note 1. Organization
Columbia Variable Portfolio
– Mid Cap Growth Fund (the Fund), a series of Columbia Funds Variable Series Trust II (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940
Act), as an open-end management investment company organized as a Massachusetts business trust.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers Class 1, Class 2 and Class 3 shares to separate accounts funding variable annuity contracts and variable life insurance policies (collectively, Contracts) issued
by affiliated and unaffiliated life insurance companies (Participating Insurance Companies) as well as qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors (Qualified
Investors) authorized by Columbia Management Investment Distributors, Inc. (the Distributor). You may not buy (nor will you own) shares of the Fund directly. You may invest by participating in a Qualified Plan or by
buying a Contract and making allocations to the Fund. Although all share classes generally have identical voting, dividend and liquidation rights, each share class votes separately when required by the Trust’s
organizational documents or by law. Different share classes pay different net investment income distribution amounts to the extent the expenses of such share classes differ, and distributions in liquidation will be
proportional to the net asset value of each share class. Each share class has its own cost structure and other features.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Equity securities listed on an
exchange are valued at the closing price or last trade price on their primary exchange at the close of business of the New York Stock Exchange. Securities with a closing price not readily available or not listed on
any exchange are valued at the mean between the closing bid and ask prices. Listed preferred stocks convertible into common stocks are valued using an evaluated price from a pricing service.
Foreign equity securities are
valued based on the closing price or last trade price on their primary exchange at the close of business of the New York Stock Exchange. If any foreign equity security closing prices are not readily available,
the securities are valued at the mean of the latest quoted bid and ask prices on such exchanges or markets. Foreign currency exchange rates are determined at the scheduled closing time of the New York Stock Exchange.
Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange; therefore, the closing prices for securities in such markets or on such exchanges may not fully reflect
events that occur after such close but before the close of the New York Stock Exchange. In those situations, foreign securities will be fair valued pursuant to a policy adopted by the Board of Trustees. Under the
policy, the Fund may utilize a third-party pricing service to determine these fair values. The third-party pricing service takes into account multiple factors, including, but not limited to, movements in the U.S.
securities markets, certain depositary receipts, futures contracts and foreign exchange rates that have occurred subsequent to the close of the foreign exchange or market, to determine a good faith estimate that
reasonably reflects the current market conditions as of the close of the New York Stock Exchange. The fair value of a security is likely to be different from the quoted or published price, if available.
Investments in open-end investment
companies (other than exchange-traded funds (ETFs)), are valued at the latest net asset value reported by those companies as of the valuation time.
| 16 | Columbia Variable Portfolio – Mid Cap Growth Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
Income recognition
Corporate actions and dividend
income are generally recorded net of any non-reclaimable tax withholdings, on the ex-dividend date or upon receipt of an ex-dividend notification in the case of certain foreign securities.
The Fund may receive distributions
from holdings in equity securities, business development companies (BDCs), exchange-traded funds (ETFs), limited partnerships (LPs), other regulated investment companies (RICs), and real estate investment trusts
(REITs), which report information as to the tax character of their distributions annually. These distributions are allocated to dividend income, capital gain and return of capital based on actual information reported.
Return of capital is recorded as a reduction of the cost basis of securities held. If the Fund no longer owns the applicable securities, return of capital is recorded as a realized gain. With respect to REITs, to the
extent actual information has not yet been reported, estimates for return of capital are made by Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise
Financial, Inc. (Ameriprise Financial). The Investment Manager’s estimates are subsequently adjusted when the actual character of the distributions is disclosed by the REITs, which could result in a
proportionate change in return of capital to shareholders.
Awards from class action litigation
are recorded as a reduction of cost basis if the Fund still owns the applicable securities on the payment date. If the Fund no longer owns the applicable securities on the payment date, the proceeds are recorded as
realized gains.
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
Federal income tax status
The Fund is treated as a
partnership for federal income tax purposes, and the Fund does not expect to make regular distributions. The Fund will not be subject to federal income tax, and therefore, there is no provision for federal income
taxes. The partners of the Fund are subject to tax on their distributive share of the Fund’s income and loss. The components of the Fund’s net assets are reported at the partner-level for federal income
tax purposes, and therefore, are not presented in the Statement of Assets and Liabilities.
| Columbia Variable Portfolio – Mid Cap Growth Fund | Annual Report 2021 | 17 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Under the Management Agreement, the
Investment Manager provides the Fund with investment research and advice, as well as administrative and accounting services. The management services fee is an annual fee that is equal to a percentage of the
Fund’s daily net assets that declines from 0.82% to 0.65% as the Fund’s net assets increase. The effective management services fee rate for the year ended December 31, 2021 was 0.81% of the Fund’s
average daily net assets.
Participating Affiliates
The Investment Manager and its
investment advisory affiliates (Affiliates) may coordinate in providing services to their clients. From time to time, the Investment Manager may engage its Affiliates to provide a variety of services such as
investment research, investment monitoring, trading and discretionary investment management (including portfolio management) to certain accounts managed by the Investment Manager, including the Fund. These Affiliates
provide services to the Investment Manager pursuant to personnel-sharing agreements or other inter-company arrangements and the Fund pays no additional fees and expenses as a result of any such arrangements.
These Affiliates, like the
Investment Manager, are direct or indirect subsidiaries of Ameriprise Financial and are registered with the appropriate respective regulators and, where required, the Securities and Exchange Commission and the
Commodity Futures Trading Commission in the United States. Pursuant to such arrangements, employees of Affiliates may serve as “associated persons” of the Investment Manager and, in this capacity, may
provide such services to the Fund on behalf of the Investment Manager subject to the oversight and supervision of the Investment Manager and consistent with the investment objectives, policies and limitations set
forth in the Fund’s prospectus and SAI, and the Investment Manager’s and the Funds’ compliance policies and procedures.
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. Under a Deferred Compensation Plan (the
Deferred Plan), these members of the Board of Trustees may elect to defer payment of up to 100% of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of
certain funds managed by the Investment Manager. The Fund’s liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Deferred Plan. All
amounts payable under the Deferred Plan constitute a general unsecured obligation of the Fund. The expense for the Deferred Plan, which includes Trustees’ fees deferred during the current period as well as any
gains or losses on the Trustees’ deferred compensation balances as a result of market fluctuations, is included in "Compensation of board members" on the Statement of Operations.
| 18 | Columbia Variable Portfolio – Mid Cap Growth Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
Service fees
The Fund has entered into a
Shareholder Services Agreement with Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial. Under this
agreement, the Fund pays a service fee equal to the payments made by the Transfer Agent to Participating Insurance Companies and other financial intermediaries (together, Participating Organizations) for services each
such Participating Organization provides to its clients, customers and participants that are invested directly or indirectly in the Fund, up to a cap approved by the Board of Trustees from time to time. The effective
service fee rate for the year ended December 31, 2021, was 0.04% of the Fund’s average daily net assets.
The Transfer Agent may retain as
compensation for its services revenues from fees for wire, telephone and redemption orders, account transcripts due the Transfer Agent from Fund shareholders and interest (net of bank charges) earned with respect to
balances in accounts the Transfer Agent maintains in connection with its services to the Fund.
Distribution and/or service fees
The Fund has an agreement with the
Distributor, an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution services. Under a Plan and Agreement of Distribution, the Fund pays a fee at an annual rate
of up to 0.25% of the Fund’s average daily net assets attributable to Class 2 shares and an annual rate of up to 0.125% of the Fund’s average daily net assets attributable to Class 3 shares. The Fund pays
no distribution and service fees for Class 1 shares.
Expenses waived/reimbursed by the
Investment Manager and its affiliates
The Investment Manager and certain
of its affiliates have contractually agreed to waive fees and/or reimburse expenses (excluding certain fees and expenses described below) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, so that the Fund’s net operating expenses, after giving effect to fees waived/expenses reimbursed and any balance credits and/or overdraft charges from the Fund’s
custodian, do not exceed the following annual rate(s) as a percentage of the classes’ average daily net assets:
| Contractual expense cap May 1, 2021 through April 30, 2022 | Voluntary expense cap May 1, 2021 through June 30, 2021 | Contractual expense cap prior to May 1, 2021 | |
| Class 1 | 0.84% | 0.79% | 0.79% |
| Class 2 | 1.09 | 1.04 | 1.04 |
| Class 3 | 0.965 | 0.915 | 0.915 |
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), expenses associated with investments in affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange-traded funds), transaction costs and
brokerage commissions, costs related to any securities lending program, dividend expenses associated with securities sold short, inverse floater program fees and expenses, transaction charges and interest on borrowed
money, interest, costs associated with certain shareholder meetings, infrequent and/or unusual expenses and any other expenses the exclusion of which is specifically approved by the Board of Trustees. This
agreement may be modified or amended only with approval from the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements
described above are not recoverable by the Investment Manager or its affiliates in future periods.
| Columbia Variable Portfolio – Mid Cap Growth Fund | Annual Report 2021 | 19 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Note 4. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $451,388,456 and $571,497,573, respectively, for the year ended December 31, 2021. The amount of purchase and
sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 5. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes
referred to as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
Note 6. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund’s activity in the
Interfund Program during the year ended December 31, 2021 was as follows:
| Borrower or lender | Average loan balance ($) | Weighted average interest rate (%) | Number of days with outstanding loans |
| Lender | 816,667 | 0.67 | 6 |
Interest income earned by the Fund
is recorded as Interfund lending in the Statement of Operations. The Fund had no outstanding interfund loans at December 31, 2021.
Note 7. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to an October 28, 2021 amendment and restatement, the credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment
Manager or an affiliated investment manager, severally and not jointly, permits collective borrowings up to $950 million. Interest is currently charged to each participating fund based on its borrowings at a rate
equal to the higher of (i) the federal funds effective rate, (ii) the secured overnight financing rate plus 0.11448% and (iii) the overnight bank funding rate, plus in each case, 1.00%. Each borrowing under the credit
facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The
commitment fee is included in other expenses in the Statement of Operations. This agreement expires annually in October unless extended or renewed. Prior to the October 28, 2021 amendment and restatement, the Fund had
access to a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. which permitted collective borrowings up to $950 million. Interest was
charged to each participating fund based on its borrowings at a rate equal to the higher of (i) the federal funds effective rate, (ii) the one-month London Interbank Offered Rate (LIBOR) rate and (iii) the overnight
bank funding rate, plus in each case, 1.25%.
The Fund had no borrowings during
the year ended December 31, 2021.
| 20 | Columbia Variable Portfolio – Mid Cap Growth Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Note 8. Significant
risks
Health care sector risk
The Fund is more susceptible to the
particular risks that may affect companies in the health care sector than if it were invested in a wider variety of companies in unrelated sectors. Companies in the health care sector are subject to certain risks,
including restrictions on government reimbursement for medical expenses, government approval of medical products and services, competitive pricing pressures, and the rising cost of medical products and services
(especially for companies dependent upon a relatively limited number of products or services). Performance of such companies may be affected by factors including, government regulation, obtaining and protecting
patents (or the failure to do so), product liability and other similar litigation as well as product obsolescence.
Information technology sector risk
The Fund is more susceptible to the
particular risks that may affect companies in the information technology sector than if it were invested in a wider variety of companies in unrelated sectors. Companies in the information technology sector are subject
to certain risks, including the risk that new services, equipment or technologies will not be accepted by consumers and businesses or will become rapidly obsolete. Performance of such companies may be affected by
factors including obtaining and protecting patents (or the failure to do so) and significant competitive pressures, including aggressive pricing of their products or services, new market entrants, competition for
market share and short product cycles due to an accelerated rate of technological developments. Such competitive pressures may lead to limited earnings and/or falling profit margins. As a result, the value of their
securities may fall or fail to rise. In addition, many information technology sector companies have limited operating histories and prices of these companies’ securities historically have been more volatile than
other securities, especially over the short term. Some companies in the information technology sector are facing increased government and regulatory scrutiny and may be subject to adverse government or regulatory
action, which could negatively impact the value of their securities.
Market risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
The coronavirus disease 2019 and
its variants (COVID-19) pandemic has resulted in, and may continue to result in, significant global economic and societal disruption and market volatility due to disruptions in market access, resource availability,
facilities operations, imposition of tariffs, export controls and supply chain disruption, among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement
and loss in human and other resources. The uncertainty surrounding the magnitude, duration, reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental
authorities or other third parties, present unknowns that are yet to unfold. The impacts, as well as the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and
pandemics that may arise in the future – could negatively affect global economies and markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in
emerging market countries may be greater due to generally less established healthcare systems, governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other
pre-existing
| Columbia Variable Portfolio – Mid Cap Growth Fund | Annual Report 2021 | 21 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
political, social and economic risks in certain
countries or globally. The disruptions caused by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively impact the Fund’s ability to achieve its
investment objectives. Any such event(s) could have a significant adverse impact on the value and risk profile of the Fund.
Shareholder concentration risk
At December 31, 2021, affiliated
shareholders of record owned 96.1% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of
less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Small- and mid-cap company risk
Investments in small- and
mid-capitalization companies (small- and mid-cap companies) often involve greater risks than investments in larger, more established companies (larger companies) because small- and mid-cap companies tend to have less
predictable earnings and may lack the management experience, financial resources, product diversification and competitive strengths of larger companies. Securities of small- and mid-cap companies may be less liquid
and more volatile than the securities of larger companies.
Note 9. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
Note 10. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in
connection with the conduct of their business activities. Ameriprise Financial believes that the Fund is not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject
of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with
the Fund. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (SEC) on legal and regulatory matters that relate to
Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that
these matters, or the adverse publicity associated with them, will not result in increased Fund redemptions, reduced sale of Fund shares or other adverse consequences to the Fund. Further, although we believe
proceedings are not likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines,
penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial or one or more of its affiliates that provides services to
the Fund.
| 22 | Columbia Variable Portfolio – Mid Cap Growth Fund | Annual Report 2021 |
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees of Columbia
Funds Variable Series Trust II and Shareholders of Columbia Variable Portfolio – Mid Cap Growth Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of Columbia Variable Portfolio – Mid Cap Growth Fund (one of the funds constituting Columbia Funds Variable Series Trust II, referred
to hereafter as the "Fund") as of December 31, 2021, the related statement of operations for the year ended December 31, 2021, the statement of changes in net assets for each of the two years in the period ended
December 31, 2021, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2021 (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, 2021, 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, 2021 and the financial highlights for each of the five years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in
the United States of America.
Basis for Opinion
These financial statements are the
responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these
financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2021 by correspondence with the custodian and transfer agent. We believe that our
audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Minneapolis, Minnesota
February 18, 2022
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| Columbia Variable Portfolio – Mid Cap Growth Fund | Annual Report 2021 | 23 |
TRUSTEES AND
OFFICERS
The Board oversees the
Fund’s operations and appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following table provides basic biographical information about the
Fund’s Trustees as of the printing of this report, including their principal occupations during the past five years, although specific titles for individuals may have varied over the period. The year set forth
beneath Length of Service in the table below is the year in which the Trustee was first appointed or elected as Trustee to any Fund currently in the Columbia Funds Complex or a predecessor thereof. Under current Board
policy, each Trustee generally serves until December 31 of the year such Trustee turns seventy-five (75).
Independent trustees
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| George S. Batejan c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1953 | Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 176 | Former Chairman of the Board, NICSA (National Investment Company Services Association) (Executive Committee, Nominating Committee and Governance Committee), 2014-2016; former Director, Intech Investment Management, 2011-2016; former Board Member, Metro Denver Chamber of Commerce, 2015-2016; former Advisory Board Member, University of Colorado Business School, 2015-2018 |
| Kathleen Blatz c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2006 | Attorney, specializing in arbitration and mediation; Chief Justice, Minnesota Supreme Court, 1998-2006; Associate Justice, Minnesota Supreme Court, 1996-1998; Fourth Judicial District Court Judge, Hennepin County, 1994-1996; Attorney in private practice and public service, 1984-1993; State Representative, Minnesota House of Representatives, 1979-1993, which included service on the Tax and Financial Institutions and Insurance Committees; Member and Interim Chair, Minnesota Sports Facilities Authority, January 2017-July 2017; Interim President and Chief Executive Officer, Blue Cross Blue Shield of Minnesota (health care insurance), February-July 2018, April-October 2021 | 176 | Former Trustee, Blue Cross Blue Shield of Minnesota, 2009-2021 (Chair of the Business Development Committee, 2014-2017; Chair of the Governance Committee, 2017-2019); former Member and Chair of the Board, Minnesota Sports Facilities Authority, January 2017-July 2017; former Director, Robina Foundation, 2009-2020 (Chair, 2014-2020); Director, Schulze Family Foundation, since 2021 |
| Pamela G. Carlton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2007 | President, Springboard — Partners in Cross Cultural Leadership (consulting company) since 2003; Managing Director of US Equity Research, JP Morgan Chase, 1999-2003; Director of US Equity Research, Chase Asset Management, 1996-1999; Co-Director Latin America Research, 1993-1996, COO Global Research, 1992-1996, Co-Director of US Research, 1991-1992, Investment Banker, Morgan Stanley, 1982-1991, Morgan Stanley; Attorney, Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 176 | Trustee, New York Presbyterian Hospital Board (Executive Committee and Chair of People Committee) since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee); Director, Apollo Commercial Real Estate Finance, Inc. since 2021; the Governing Council of the Independent Directors Council (IDC), since 2021 |
| 24 | Columbia Variable Portfolio – Mid Cap Growth Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Janet Langford Carrig c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1957 | Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 174 | Director, EQT Corporation (natural gas producer) since 2019; Director, Whiting Petroleum Corporation (independent oil and gas company) since 2020 |
| J. Kevin Connaughton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2020 | Member, FINRA National Adjudicatory Council since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Consultant to Independent Trustees of CFVIT and CFST I from March 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Managing Director and General Manager of Mutual Fund Products, Columbia Management Investment Advisers, LLC, May 2010-February 2015; President, Columbia Funds, 2008-2015; and senior officer of Columbia Funds and affiliated funds, 2003-2015 | 174 | Former Director, The Autism Project, March 2015-December 2021; former Member of the Investment Committee, St. Michael’s College, November 2015-February 2020; former Trustee, St. Michael’s College, June 2017-September 2019; former Trustee, New Century Portfolios, January 2015-December 2017 |
| Olive M. Darragh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since 2020 | Managing Director of Darragh Inc. (strategy and talent management consulting firm) since 2010; Founder and CEO, Zolio, Inc. (investment management talent identification platform) since 2004; Consultant to Independent Trustees of CFVIT and CFST I from June 2019 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 2001-2004 | 174 | Former Director, University of Edinburgh Business School (Member of US Board); former Director, Boston Public Library Foundation |
| Patricia M. Flynn c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1950 | Trustee since 2004 | Trustee Professor of Economics and Management, Bentley University since 1976 (also teaches and conducts research on corporate governance); Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 176 | Trustee, MA Taxpayers Foundation since 1997; Board of Governors, Innovation Institute, MA Technology Collaborative, 2010-2020; former Board of Directors, The MA Business Roundtable, 2003-2019 |
| Brian J. Gallagher c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 176 | Trustee, Catholic Schools Foundation since 2004 |
| Columbia Variable Portfolio – Mid Cap Growth Fund | Annual Report 2021 | 25 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Douglas A. Hacker c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1955 | Co-Chair since 2021; Chair of CFST I and CFVIT since 2014; Trustee of CFST I and CFVIT since 1996 and CFST, CFST II, CFVST II, CET I and CET II since 2021 | Independent business executive since May 2006; Executive Vice President – Strategy of United Airlines, December 2002 - May 2006; President of UAL Loyalty Services (airline marketing company), September 2001-December 2002; Executive Vice President and Chief Financial Officer of United Airlines, July 1999-September 2001 | 176 | Director, Spartan Nash Company (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing); former Director, Nash Finch Company (food distributor), 2005-2013; former Director, SeaCube Container Leasing Ltd. (container leasing), 2010-2013; and former Director, Travelport Worldwide Limited (travel information technology), 2014-2019 |
| Nancy T. Lukitsh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1956 | Trustee since 2011 | Senior Vice President, Partner and Director of Marketing, Wellington Management Company, LLP (investment adviser), 1997-2010; Chair, Wellington Management Portfolios (commingled non-U.S. investment pools), 2007 -2010; Director, Wellington Trust Company, NA and other Wellington affiliates, 1997-2010 | 174 | None |
| David M. Moffett c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2011 | Retired; Consultant to Bridgewater and Associates | 174 | Director, CSX Corporation (transportation suppliers); Director, Genworth Financial, Inc. (financial and insurance products and services); Director, PayPal Holdings Inc. (payment and data processing services); Trustee, University of Oklahoma Foundation; former Director, eBay Inc. (online trading community), 2007-2015; and former Director, CIT Bank, CIT Group Inc. (commercial and consumer finance), 2010-2016 |
| Catherine James Paglia c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Co-Chair since 2021; Chair of CFST, CFST II, CFVST II, CET I and CET II since 2020; Trustee of CFST, CFST II and CFVST II since 2004 and CFST I and CFVIT since 2021 | Director, Enterprise Asset Management, Inc. (private real estate and asset management company) since September 1998; Managing Director and Partner, Interlaken Capital, Inc., 1989-1997; Vice President, 1982-1985, Principal, 1985-1987, Managing Director, 1987-1989, Morgan Stanley; Vice President, Investment Banking, 1980-1982, Associate, Investment Banking, 1976-1980, Dean Witter Reynolds, Inc. | 176 | Director, Valmont Industries, Inc. (irrigation systems manufacturer) since 2012; Trustee, Carleton College (on the Investment Committee); Trustee, Carnegie Endowment for International Peace (on the Investment Committee) |
| 26 | Columbia Variable Portfolio – Mid Cap Growth Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Minor M. Shaw c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1947 | Trustee since 2003 | President, Micco LLC (private investments) since 2011; President, Micco Corp. (family investment business), 1998-2011 | 176 | Director, Blue Cross Blue Shield of South Carolina (Chair of Compensation Committee) since April 2008; Trustee, Hollingsworth Funds (on the Investment Committee) since 2016 (previously Board Chair from 2016-2019); Former Advisory Board member, Duke Energy Corp., 2016-2020; Chair of the Duke Endowment; Chair of Greenville – Spartanburg Airport Commission; former Trustee, BofA Funds Series Trust (11 funds), 2003-2011; former Director, Piedmont Natural Gas, 2004-2016; former Director, National Association of Corporate Directors, Carolinas Chapter, 2013-2018; Chair, Daniel-Mickel Foundation since 1998 |
| Natalie A. Trunow c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1967 | Trustee since 2020 | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services), January 2016-January 2021; Non-executive Member of the Investment Committee and Valuation Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services), August 2018-January 2021; Advisor, Paradigm Asset Management, November 2016-December 2021; Consultant to Independent Trustees of CFVIT and CFST I from September 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Director of Investments/Consultant, Casey Family Programs, April 2016-November 2016; Senior Vice President and Chief Investment Officer, Calvert Investments, August 2008-January 2016; Section Head and Portfolio Manager, General Motors Asset Management, June 1997-August 2008 | 174 | Former Director, Investment Committee, Health Services for Children with Special Needs, Inc., 2012-2019; Director, Chair of Audit Committee, Consumer Credit Counseling Services (formerly Guidewell Financial Solutions), since 2019; Independent Director, Investment Committee and Valuation Committee, Sarona Asset Management, since 2019 |
| Sandra Yeager c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2017 | Retired; President and founder, Hanoverian Capital, LLC (SEC registered investment advisor firm), 2008-2016; Managing Director, DuPont Capital, 2006-2008; Managing Director, Morgan Stanley Investment Management, 2004-2006; Senior Vice President, Alliance Bernstein, 1990-2004 | 176 | Former Director, NAPE Education Foundation, October 2016-October 2020 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Fund Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I (CET I), Columbia ETF Trust II (CET II), Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Beckman, Gallagher and Hacker and Mses. Blatz, Carlton, Flynn, Paglia, Shaw and Yeager serve as Directors of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
| Columbia Variable Portfolio – Mid Cap Growth Fund | Annual Report 2021 | 27 |
TRUSTEES AND OFFICERS (continued)
Interested trustee affiliated with Investment Manager*
Interested trustee affiliated with Investment Manager*
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during the past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex overseen | Other directorships held by Trustee during the past five years |
| Daniel J. Beckman c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since November 2021(a) | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC (since April 2015); officer of Columbia Funds and affiliated funds since 2020. | 176 | Director, Ameriprise Trust Company, since October 2016; Director, Columbia Management Investment Distributors, Inc. since November 2018; Board of Governors, Columbia Wanger Asset Management, LLC since January 2022 |
| * | Interested person (as defined under the 1940 Act) by reason of being an officer, director, security holder and/or employee of the Investment Manager or Ameriprise Financial. |
| (a) | Mr. Beckman serves as the President and Principal Executive Officer of the Columbia Funds (since 2021). |
The Statement of Additional
Information has additional information about the Fund’s Board members and is available, without charge, upon request by calling 800.345.6611 or contacting your financial intermediary.
The Board has appointed officers
who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. The following table provides basic information about the Officers of the
Fund, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Beckman, who is President and Principal Executive Officer, the
Fund’s other officers are:
Fund officers
| 28 | Columbia Variable Portfolio – Mid Cap Growth Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Fund officers (continued)
Fund officers (continued)
| Columbia Variable Portfolio – Mid Cap Growth Fund | Annual Report 2021 | 29 |
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For Fund and other investment product prospectuses, which contain this and other important information, contact your
financial advisor or insurance representative. Please read the prospectus carefully before you invest. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved. Columbia Management Investment Distributors, Inc., 290 Congress Street, Boston, MA 02210
© 2022 Columbia Management Investment
Advisers, LLC.
S-6651 AW (2/22)
Columbia Variable
Portfolio – Large Cap Index Fund
Please remember that you may not
buy (nor will you own) shares of the Fund directly. The Fund is available through variable annuity contracts and variable life insurance policies offered by the separate accounts of participating insurance companies
as well as qualified pension and retirement plans. Please contact your financial advisor or insurance representative for more information.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
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| 33 | |
| 34 |
Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which Columbia Variable Portfolio – Large Cap Index Fund (the Fund) holds investments consistent with the procedures as stated in the Statement of Additional
Information (SAI). You may obtain a copy of the SAI without charge by calling 800.345.6611; contacting your financial intermediary or searching the website of the Securities and Exchange Commission (SEC) at sec.gov.
Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge
by visiting columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. The Fund’s Form N-PORT is available on the SEC’s website at sec.gov. The Fund’s complete
schedule of portfolio holdings, as filed on Form N-PORT, can also be obtained without charge, upon request, by calling 800.345.6611.
Additional Fund information
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
290 Congress Street
Boston, MA 02210
Fund distributor
Columbia Management Investment Distributors,
Inc.
290 Congress Street
Boston, MA 02210
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
Columbia Variable Portfolio – Large Cap Index
Fund | Annual Report 2021
Fund at a Glance
Investment objective
The Fund
seeks to provide shareholders with long-term capital appreciation.
Portfolio management
Christopher Lo, CFA
Lead Portfolio Manager
Managed Fund since 2014
Kaiyu Zhao
Portfolio Manager
Managed Fund since 2020
Christopher Rowe
Portfolio Manager
Managed Fund since 2020
| Columbia Variable Portfolio – Large Cap Index Fund | Annual Report 2021 | 3 |
Fund at a Glance (continued)
Performance of a hypothetical $10,000 investment (December 31, 2011 — December 31, 2021)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class 2 shares of Columbia Variable Portfolio – Large Cap Index Fund during the stated time period, and does not reflect the deduction of taxes, if any, that a
shareholder may pay on Fund distributions or on the redemption of Fund shares. The returns also do not reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy or
qualified pension or retirement plan, if any. Class 2 share performance is shown in the chart because Class 2 shares have at least ten years of performance and Class 2 shares are the most common share class
offered to qualifying participants.
| 4 | Columbia Variable Portfolio – Large Cap Index Fund | Annual Report 2021 |
Manager Discussion of Fund Performance
At December 31, 2021,
approximately 49.68% of the Fund’s shares were owned in the aggregate by affiliated funds-of-funds managed by Columbia Management Investment Advisers, LLC (the Investment Manager). As a result of asset
allocation decisions by the Investment Manager, it is possible that the Fund may experience relatively large purchases or redemptions from affiliated funds-of-funds. The Investment Manager seeks to minimize the impact
of these transactions by structuring them over a reasonable period of time. The Fund may experience increased expenses as it buys and sells securities as a result of purchases or redemptions by affiliated
funds-of-funds.
For the 12-month period that ended
December 31, 2021, the Fund’s Class 2 shares returned 28.07%. The Fund slightly underperformed its benchmark, the unmanaged S&P 500 Index, which returned 28.71% for the same period. Mutual funds, unlike
unmanaged indices, incur operating expenses.
Market overview
COVID-19 vaccinations allowed for
greater economic reopening during the annual period, which, in turn, led to the U.S. equity market, as measured by the S&P 500 Index, closing 2021 near its all-time high and marking its third consecutive year of
double-digit gains. Still, there was volatility.
Despite concerns about rising
inflation and trading anomalies in certain heavily shorted stocks, U.S. equities produced a healthy gain in the first months of 2021, supported by investor confidence the U.S. Federal Reserve (Fed) would maintain its
highly accommodative monetary policy for an extended period. Also, the rollout of multiple COVID-19 vaccines and the passage of a fiscal stimulus package provided much-welcomed boosts to the economic outlook. Stocks
were then well supported during the second calendar quarter by the combination of strong economic growth, the gradual rollback of the COVID-19 lockdowns and robust corporate earnings. Although concerns about rising
inflation led to a brief stretch of volatility mid-way through the quarter, the Fed reassured the markets that monetary policy would remain accommodative for an extended period. As a result, most major U.S. equity
indices finished June 2021 at or near their then-all-time highs.
U.S. equities posted mixed results
in the third quarter, reflecting an increasingly challenging environment. The market performed reasonably well in July and August, during which the prospects of improving economic growth and rising corporate profits
outweighed concerns about the COVID-19 Delta variant. The backdrop became less favorable in September, however, fueling a downturn that erased almost all of the advance of the prior two months. The markets had to
contend with several new risk factors, including a persistent increase in inflation, worsening supply-chain bottlenecks and instability in China’s property market. In addition, the Fed indicated it was likely to
announce a tapering of its quantitative easing program before year end.
In the fourth quarter, U.S.
equities displayed remarkable resilience despite potential headwinds. Investors had to contend with the emergence of the COVID-19 Omicron variant, which was contagious enough to raise concerns that a new wave of
lockdowns could be necessary. The markets also faced a major shift in Fed policy. Whereas the Fed had previously viewed rising inflation as “transitory,” continued price pressures caused the central bank
to announce the tapering of its stimulative quantitative easing program. In addition, it began to prepare the financial markets for the likelihood of multiple interest rate increases in 2022. The failure of the Build
Back Better bill removed a source of anticipated fiscal stimulus. Nevertheless, the S&P 500 Index finished the calendar year with a solid gain on the strength of robust investment inflows and the lack of
compelling total return potential in bonds.
For the annual period overall, all
capitalization segments within the U.S. equity market posted double-digit positive returns, led by large-cap stocks, followed closely by mid-cap stocks and then small-cap stocks. From a style perspective,
growth-oriented stocks modestly outpaced value-oriented stocks within the large-cap segment of the U.S. equity market. However, value-oriented stocks significantly outperformed growth-oriented stocks within the
mid-cap and small-cap segments of the U.S. equity market.
The Fund’s notable
contributors during the period
| • | All 11 sectors of the S&P 500 Index posted positive double-digit gains during the 12 months ended December 31, 2021. |
| • | In terms of total return, energy, real estate and financials were the best relative performers. |
| Columbia Variable Portfolio – Large Cap Index Fund | Annual Report 2021 | 5 |
Manager Discussion of Fund Performance (continued)
| • | On the basis of impact, which takes weightings and total returns into account, information technology, financials and health care contributed most to the S&P 500 Index returns. |
| • | The top performing industries for the annual period were real estate management & development; construction & engineering; oil, gas & consumable fuels; distributors; and automobiles. |
| • | The top individual contributors within the S&P 500 Index were software behemoth Microsoft Corp., information technology hardware giant Apple Inc., three-dimensional graphics processors and related software developer NVIDIA Corp., and Google parent company Alphabet Inc., Classes A and C. |
| • | Information technology remained the largest sector by weighting in the S&P 500 Index as of December 31, 2021, with a weighting of 29.17%. |
| • | As always, each sector and stock in the S&P 500 Index was represented in the Fund with approximately the same weighting as in the Index and therefore had a similar effect. |
The Fund’s notable
detractors during the period
| • | Utilities, consumer staples and industrials were the weakest sectors from a total return perspective. |
| • | On the basis of impact, utilities, materials and real estate contributed the least to the S&P 500 Index return. |
| • | The worst performing industries for the annual period were wireless telecommunication services; diversified telecommunication services; entertainment; airlines; and media. |
| • | Top individual detractors from the S&P 500 Index were diversified media and entertainment company The Walt Disney Co., online payment firm PayPal Holdings Inc., clinical stage biotechnology company Moderna Inc., electronic transaction processing and information systems provider Global Payments Inc. and interactive entertainment software developer and distributor Activision Blizzard Inc. |
The views expressed in this report
reflect the current views of the respective parties who have contributed to this report. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult
to predict, so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective parties
disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Columbia fund are based on numerous factors, may not be relied on as an
indication of trading intent on behalf of any particular Columbia fund. References to specific securities should not be construed as a recommendation or investment advice.
| 6 | Columbia Variable Portfolio – Large Cap Index Fund | Annual Report 2021 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur ongoing
costs, which generally include management fees, distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to help you compare these costs with the ongoing costs of investing in other mutual funds.
The information below does not
reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy (collectively, Contracts) or qualified pension and retirement plan (Qualified Plan), if any. The total fees
and expenses you bear may therefore be higher than those shown below.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount invested, to estimate the
expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as redemption or exchange fees, or expenses that apply to the subaccount or the Contract. Therefore, the
hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If the fees and expenses imposed under your Contract or
Qualified Plan, if any, were included, your costs would be higher.
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 365.
Expenses do not include fees and
expenses incurred indirectly by the Fund from its investment in underlying funds, including affiliated and non-affiliated pooled investment vehicles, such as mutual funds and exchange-traded funds.
| Columbia Variable Portfolio – Large Cap Index Fund | Annual Report 2021 | 7 |
Portfolio of Investments
December 31, 2021
December 31, 2021
(Percentages represent value of
investments compared to net assets)
Investments in securities
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 8 | Columbia Variable Portfolio – Large Cap Index Fund | Annual Report 2021 |
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Large Cap Index Fund | Annual Report 2021 | 9 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 10 | Columbia Variable Portfolio – Large Cap Index Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Large Cap Index Fund | Annual Report 2021 | 11 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 12 | Columbia Variable Portfolio – Large Cap Index Fund | Annual Report 2021 |
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Large Cap Index Fund | Annual Report 2021 | 13 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 14 | Columbia Variable Portfolio – Large Cap Index Fund | Annual Report 2021 |
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Large Cap Index Fund | Annual Report 2021 | 15 |
At December 31, 2021,
securities and/or cash totaling $1,811,214 were pledged as collateral.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 16 | Columbia Variable Portfolio – Large Cap Index Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Investments in derivatives
| Long futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| S&P 500 Index E-mini | 80 | 03/2022 | USD | 19,034,000 | 395,601 | — |
| S&P 500 Index E-mini | 10 | 03/2022 | USD | 2,379,250 | — | (15,087) |
| Total | 395,601 | (15,087) | ||||
Notes to Portfolio of
Investments
| (a) | Non-income producing investment. |
| (b) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended December 31, 2021 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Realized gain (loss)($) | Dividends($) | End of period shares |
| Ameriprise Financial, Inc. | ||||||||
| 1,032,476 | 37,284 | (12,629) | 473,793 | 1,530,924 | 92,679 | 23,412 | 5,075 | |
| Columbia Short-Term Cash Fund, 0.085% | ||||||||
| 18,585,793 | 133,202,705 | (131,533,107) | (1,519) | 20,253,872 | (1,305) | 14,296 | 20,257,924 | |
| Total | 19,618,269 | 472,274 | 21,784,796 | 91,374 | 37,708 | |||
| (c) | This security or a portion of this security has been pledged as collateral in connection with derivative contracts. |
| (d) | The rate shown is the seven-day current annualized yield at December 31, 2021. |
Currency Legend
| USD | US Dollar |
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Large Cap Index Fund | Annual Report 2021 | 17 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Fair value measurements (continued)
The Committee meets at least monthly to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The Committee meets at least monthly to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at December 31, 2021:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Investments in Securities | ||||
| Common Stocks | ||||
| Communication Services | 185,922,409 | — | — | 185,922,409 |
| Consumer Discretionary | 229,588,679 | — | — | 229,588,679 |
| Consumer Staples | 107,570,747 | — | — | 107,570,747 |
| Energy | 48,898,625 | — | — | 48,898,625 |
| Financials | 195,638,895 | — | — | 195,638,895 |
| Health Care | 243,181,409 | — | — | 243,181,409 |
| Industrials | 142,406,705 | — | — | 142,406,705 |
| Information Technology | 533,903,487 | — | — | 533,903,487 |
| Materials | 46,925,032 | — | — | 46,925,032 |
| Real Estate | 50,697,818 | — | — | 50,697,818 |
| Utilities | 45,679,980 | — | — | 45,679,980 |
| Total Common Stocks | 1,830,413,786 | — | — | 1,830,413,786 |
| Money Market Funds | 20,253,872 | — | — | 20,253,872 |
| Total Investments in Securities | 1,850,667,658 | — | — | 1,850,667,658 |
| Investments in Derivatives | ||||
| Asset | ||||
| Futures Contracts | 395,601 | — | — | 395,601 |
| Liability | ||||
| Futures Contracts | (15,087) | — | — | (15,087) |
| Total | 1,851,048,172 | — | — | 1,851,048,172 |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
Derivative instruments are valued at
unrealized appreciation (depreciation).
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 18 | Columbia Variable Portfolio – Large Cap Index Fund | Annual Report 2021 |
Statement of Assets and Liabilities
December 31, 2021
December 31, 2021
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $933,389,715) | $1,828,882,862 |
| Affiliated issuers (cost $20,811,089) | 21,784,796 |
| Receivable for: | |
| Capital shares sold | 22,438 |
| Dividends | 1,083,649 |
| Foreign tax reclaims | 16,666 |
| Prepaid expenses | 16,594 |
| Total assets | 1,851,807,005 |
| Liabilities | |
| Due to custodian | 1,575 |
| Payable for: | |
| Capital shares purchased | 1,593,658 |
| Variation margin for futures contracts | 61,875 |
| Management services fees | 10,172 |
| Distribution and/or service fees | 3,249 |
| Service fees | 45,879 |
| Compensation of board members | 83,102 |
| Compensation of chief compliance officer | 318 |
| Other expenses | 69,399 |
| Total liabilities | 1,869,227 |
| Net assets applicable to outstanding capital stock | $1,849,937,778 |
| Represented by | |
| Trust capital | $1,849,937,778 |
| Total - representing net assets applicable to outstanding capital stock | $1,849,937,778 |
| Class 1 | |
| Net assets | $947,972,597 |
| Shares outstanding | 24,155,005 |
| Net asset value per share | $39.25 |
| Class 2 | |
| Net assets | $43,194,814 |
| Shares outstanding | 1,129,670 |
| Net asset value per share | $38.24 |
| Class 3 | |
| Net assets | $858,770,367 |
| Shares outstanding | 22,157,266 |
| Net asset value per share | $38.76 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Large Cap Index Fund | Annual Report 2021 | 19 |
Statement of Operations
Year Ended December 31, 2021
Year Ended December 31, 2021
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $23,096,677 |
| Dividends — affiliated issuers | 37,708 |
| Foreign taxes withheld | (3,121) |
| Total income | 23,131,264 |
| Expenses: | |
| Management services fees | 3,327,106 |
| Distribution and/or service fees | |
| Class 2 | 50,734 |
| Class 3 | 974,485 |
| Service fees | 491,165 |
| Compensation of board members | 47,929 |
| Custodian fees | 23,171 |
| Printing and postage fees | 42,351 |
| Licensing fees and expenses | 165,895 |
| Audit fees | 29,500 |
| Legal fees | 24,996 |
| Interest on collateral | 522 |
| Compensation of chief compliance officer | 309 |
| Other | 28,243 |
| Total expenses | 5,206,406 |
| Net investment income | 17,924,858 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 50,857,852 |
| Investments — affiliated issuers | 91,374 |
| Futures contracts | 5,022,510 |
| Net realized gain | 55,971,736 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | 339,024,689 |
| Investments — affiliated issuers | 472,274 |
| Futures contracts | (48,251) |
| Net change in unrealized appreciation (depreciation) | 339,448,712 |
| Net realized and unrealized gain | 395,420,448 |
| Net increase in net assets resulting from operations | $413,345,306 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 20 | Columbia Variable Portfolio – Large Cap Index Fund | Annual Report 2021 |
Statement of Changes in Net Assets
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | |
| Operations | ||
| Net investment income | $17,924,858 | $20,793,670 |
| Net realized gain | 55,971,736 | 69,647,702 |
| Net change in unrealized appreciation (depreciation) | 339,448,712 | 146,722,303 |
| Net increase in net assets resulting from operations | 413,345,306 | 237,163,675 |
| Decrease in net assets from capital stock activity | (7,697,181) | (3,562,504) |
| Total increase in net assets | 405,648,125 | 233,601,171 |
| Net assets at beginning of year | 1,444,289,653 | 1,210,688,482 |
| Net assets at end of year | $1,849,937,778 | $1,444,289,653 |
| Year Ended | Year Ended | |||
| December 31, 2021 | December 31, 2020 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class 1 | ||||
| Subscriptions | 2,105,624 | 67,315,819 | 3,901,274 | 87,901,283 |
| Redemptions | (2,253,317) | (77,945,667) | (2,746,167) | (73,946,809) |
| Net increase (decrease) | (147,693) | (10,629,848) | 1,155,107 | 13,954,474 |
| Class 2 | ||||
| Subscriptions | 809,905 | 29,060,982 | 20,808 | 489,359 |
| Redemptions | (60,643) | (2,064,383) | (88,062) | (2,307,261) |
| Net increase (decrease) | 749,262 | 26,996,599 | (67,254) | (1,817,902) |
| Class 3 | ||||
| Subscriptions | 1,028,836 | 34,349,923 | 1,355,612 | 33,876,193 |
| Redemptions | (1,695,529) | (58,413,855) | (1,918,241) | (49,575,269) |
| Net decrease | (666,693) | (24,063,932) | (562,629) | (15,699,076) |
| Total net increase (decrease) | (65,124) | (7,697,181) | 525,224 | (3,562,504) |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Large Cap Index Fund | Annual Report 2021 | 21 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect any fees and expenses imposed under your
Contract and/or Qualified Plan, as applicable; such fees and expenses would reduce the total returns for all periods shown. Total return and portfolio turnover are not annualized for periods of less than one year. The
portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain derivatives, if any. If such transactions were included, the Fund’s portfolio
turnover rate may be higher.
| Net asset value, beginning of period | Net investment income | Net realized and unrealized gain (loss) | Total from investment operations | |
| Class 1 | ||||
| Year Ended 12/31/2021 | $30.57 | 0.40 | 8.28 | 8.68 |
| Year Ended 12/31/2020 | $25.90 | 0.45 | 4.22 | 4.67 |
| Year Ended 12/31/2019 | $19.75 | 0.44 | 5.71 | 6.15 |
| Year Ended 12/31/2018 | $20.72 | 0.42 | (1.39) | (0.97) |
| Year Ended 12/31/2017 | $17.06 | 0.33 | 3.33 | 3.66 |
| Class 2 | ||||
| Year Ended 12/31/2021 | $29.86 | 0.31 | 8.07 | 8.38 |
| Year Ended 12/31/2020 | $25.36 | 0.37 | 4.13 | 4.50 |
| Year Ended 12/31/2019 | $19.39 | 0.37 | 5.60 | 5.97 |
| Year Ended 12/31/2018 | $20.40 | 0.34 | (1.35) | (1.01) |
| Year Ended 12/31/2017 | $16.83 | 0.28 | 3.29 | 3.57 |
| Class 3 | ||||
| Year Ended 12/31/2021 | $30.23 | 0.35 | 8.18 | 8.53 |
| Year Ended 12/31/2020 | $25.65 | 0.41 | 4.17 | 4.58 |
| Year Ended 12/31/2019 | $19.58 | 0.40 | 5.67 | 6.07 |
| Year Ended 12/31/2018 | $20.57 | 0.37 | (1.36) | (0.99) |
| Year Ended 12/31/2017 | $16.96 | 0.30 | 3.31 | 3.61 |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Ratios include interest on collateral expense which is less than 0.01%. |
| (d) | Ratios include interfund lending expense which is less than 0.01%. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 22 | Columbia Variable Portfolio – Large Cap Index Fund | Annual Report 2021 |
Financial Highlights (continued)
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets(a) | Total net expense ratio to average net assets(a),(b) | Net investment income ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Class 1 | |||||||
| Year Ended 12/31/2021 | $39.25 | 28.39% | 0.25%(c) | 0.25%(c) | 1.14% | 5% | $947,973 |
| Year Ended 12/31/2020 | $30.57 | 18.03% | 0.26%(d) | 0.26%(d) | 1.72% | 9% | $742,971 |
| Year Ended 12/31/2019 | $25.90 | 31.14% | 0.26% | 0.26% | 1.91% | 2% | $599,584 |
| Year Ended 12/31/2018 | $19.75 | (4.68%) | 0.28% | 0.28% | 1.94% | 3% | $332,816 |
| Year Ended 12/31/2017 | $20.72 | 21.45% | 0.29% | 0.29% | 1.75% | 2% | $203,887 |
| Class 2 | |||||||
| Year Ended 12/31/2021 | $38.24 | 28.07% | 0.50%(c) | 0.50%(c) | 0.89% | 5% | $43,195 |
| Year Ended 12/31/2020 | $29.86 | 17.74% | 0.51%(d) | 0.51%(d) | 1.48% | 9% | $11,359 |
| Year Ended 12/31/2019 | $25.36 | 30.79% | 0.51% | 0.51% | 1.63% | 2% | $11,354 |
| Year Ended 12/31/2018 | $19.39 | (4.95%) | 0.53% | 0.53% | 1.61% | 3% | $10,146 |
| Year Ended 12/31/2017 | $20.40 | 21.21% | 0.55% | 0.55% | 1.50% | 2% | $11,777 |
| Class 3 | |||||||
| Year Ended 12/31/2021 | $38.76 | 28.22% | 0.38%(c) | 0.38%(c) | 1.01% | 5% | $858,770 |
| Year Ended 12/31/2020 | $30.23 | 17.85% | 0.38%(d) | 0.38%(d) | 1.59% | 9% | $689,960 |
| Year Ended 12/31/2019 | $25.65 | 31.00% | 0.39% | 0.39% | 1.76% | 2% | $599,751 |
| Year Ended 12/31/2018 | $19.58 | (4.81%) | 0.40% | 0.40% | 1.75% | 3% | $442,813 |
| Year Ended 12/31/2017 | $20.57 | 21.28% | 0.42% | 0.42% | 1.62% | 2% | $452,967 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Large Cap Index Fund | Annual Report 2021 | 23 |
Notes to Financial Statements
December 31, 2021
December 31, 2021
Note 1. Organization
Columbia Variable Portfolio
– Large Cap Index Fund (the Fund), a series of Columbia Funds Variable Series Trust II (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940
Act), as an open-end management investment company organized as a Massachusetts business trust.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers Class 1, Class 2 and Class 3 shares to separate accounts funding variable annuity contracts and variable life insurance policies (collectively, Contracts) issued
by affiliated and unaffiliated life insurance companies (Participating Insurance Companies) as well as qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors (Qualified
Investors) authorized by Columbia Management Investment Distributors, Inc. (the Distributor). You may not buy (nor will you own) shares of the Fund directly. You may invest by participating in a Qualified Plan or by
buying a Contract and making allocations to the Fund. Although all share classes generally have identical voting, dividend and liquidation rights, each share class votes separately when required by the Trust’s
organizational documents or by law. Different share classes pay different net investment income distribution amounts to the extent the expenses of such share classes differ, and distributions in liquidation will be
proportional to the net asset value of each share class. Each share class has its own cost structure and other features.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Equity securities listed on an
exchange are valued at the closing price or last trade price on their primary exchange at the close of business of the New York Stock Exchange. Securities with a closing price not readily available or not listed on
any exchange are valued at the mean between the closing bid and ask prices. Listed preferred stocks convertible into common stocks are valued using an evaluated price from a pricing service.
Foreign equity securities are
valued based on the closing price or last trade price on their primary exchange at the close of business of the New York Stock Exchange. If any foreign equity security closing prices are not readily available,
the securities are valued at the mean of the latest quoted bid and ask prices on such exchanges or markets. Foreign currency exchange rates are determined at the scheduled closing time of the New York Stock Exchange.
Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange; therefore, the closing prices for securities in such markets or on such exchanges may not fully reflect
events that occur after such close but before the close of the New York Stock Exchange. In those situations, foreign securities will be fair valued pursuant to a policy adopted by the Board of Trustees. Under the
policy, the Fund may utilize a third-party pricing service to determine these fair values. The third-party pricing service takes into account multiple factors, including, but not limited to, movements in the U.S.
securities markets, certain depositary receipts, futures contracts and foreign exchange rates that have occurred subsequent to the close of the foreign exchange or market, to determine a good faith estimate that
reasonably reflects the current market conditions as of the close of the New York Stock Exchange. The fair value of a security is likely to be different from the quoted or published price, if available.
Investments in open-end investment
companies (other than exchange-traded funds (ETFs)), are valued at the latest net asset value reported by those companies as of the valuation time.
| 24 | Columbia Variable Portfolio – Large Cap Index Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Futures and options on futures
contracts are valued based upon the settlement price at the close of regular trading on their principal exchanges or, in the absence of a settlement price, at the mean of the latest quoted bid and ask prices.
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Derivative instruments
The Fund invests in certain
derivative instruments, as detailed below, in seeking to meet its investment objectives. Derivatives are instruments whose values depend on, or are derived from, in whole or in part, the value of one or more
securities, currencies, commodities, indices, or other assets or instruments. Derivatives may be used to increase investment flexibility (including to maintain cash reserves while maintaining desired exposure to
certain assets), for risk management (hedging) purposes, to facilitate trading, to reduce transaction costs and to pursue higher investment returns. The Fund may also use derivative instruments to mitigate certain
investment risks, such as foreign currency exchange rate risk, interest rate risk and credit risk. Derivatives may involve various risks, including the potential inability of the counterparty to fulfill its
obligations under the terms of the contract, the potential for an illiquid secondary market (making it difficult for the Fund to sell or terminate, including at favorable prices) and the potential for market movements
which may expose the Fund to gains or losses in excess of the amount shown in the Statement of Assets and Liabilities. The notional amounts of derivative instruments, if applicable, are not recorded in the financial
statements.
A derivative instrument may suffer
a marked-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform its
obligations under the contract. The Fund’s risk of loss from counterparty credit risk on over-the-counter derivatives is generally limited to the aggregate unrealized gain netted against any collateral held by
the Fund and the amount of any variation margin held by the counterparty, plus any replacement costs or related amounts. With exchange-traded or centrally cleared derivatives, there is reduced counterparty credit risk
to the Fund since the clearinghouse or central counterparty (CCP) provides some protection in the case of clearing member default. The clearinghouse or CCP stands between the buyer and the seller of the contract;
therefore, additional counterparty credit risk is failure of the clearinghouse or CCP. However, credit risk still exists in exchange-traded or centrally cleared derivatives with respect to initial and variation margin
that is held in a broker’s customer account. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy
and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients and such shortfall is remedied by the CCP or otherwise, U.S. bankruptcy laws will typically
allocate that shortfall on a pro-rata basis across all the clearing broker’s customers (including the Fund), potentially resulting in losses to the Fund.
In order to better define its
contractual rights and to secure rights that will help the Fund mitigate its counterparty risk, the Fund may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (ISDA Master Agreement)
or similar agreement with its derivatives counterparties. An ISDA Master Agreement is an agreement between the Fund and a counterparty that governs over-the-counter derivatives and foreign exchange forward contracts
and contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset
with the counterparty certain derivative instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically
permit a single net payment in the event of default (close-out netting), including the bankruptcy or insolvency of the counterparty. Note, however, that bankruptcy or insolvency laws of a particular jurisdiction may
impose restrictions on or prohibitions against the right of offset or netting in bankruptcy, insolvency or other events.
| Columbia Variable Portfolio – Large Cap Index Fund | Annual Report 2021 | 25 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Collateral (margin) requirements
differ by type of derivative. Margin requirements are established by the clearinghouse or CCP for exchange-traded and centrally cleared derivatives. Brokers can ask for margin in excess of the minimum in certain
circumstances. Collateral terms for most over-the-counter derivatives are subject to regulatory requirements to exchange variation margin with trading counterparties and may have contract specific margin terms as
well. For over-the-counter derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the marked-to-market amount for each transaction under such agreement and
comparing that amount to the value of any variation margin currently pledged by the Fund and/or the counterparty. Generally, the amount of collateral due from or to a party has to exceed a minimum transfer amount
threshold (e.g., $250,000) before a transfer has to be made. To the extent amounts due to the Fund from its counterparties are not fully collateralized, contractually or otherwise, the Fund bears the risk of loss from
counterparty nonperformance. The Fund may also pay interest expense on cash collateral received from the broker. Any interest expense paid by the Fund is shown on the Statement of Operations. The Fund attempts to
mitigate counterparty risk by only entering into agreements with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those
counterparties.
Certain ISDA Master Agreements
allow counterparties of over-the-counter derivatives transactions to terminate derivatives contracts prior to maturity in the event the Fund’s net asset value declines by a stated percentage over a specified
time period or if the Fund fails to meet certain terms of the ISDA Master Agreement, which would cause the Fund to accelerate payment of any net liability owed to the counterparty. The Fund also has termination
rights if the counterparty fails to meet certain terms of the ISDA Master Agreement. In determining whether to exercise such termination rights, the Fund would consider, in addition to counterparty credit risk,
whether termination would result in a net liability owed from the counterparty.
For financial reporting purposes,
the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statement of Assets and Liabilities.
Futures contracts
Futures contracts are
exchange-traded and represent commitments for the future purchase or sale of an asset at a specified price on a specified date. The Fund bought and sold futures contracts to maintain appropriate equity market exposure
while keeping sufficient cash to accommodate daily redemptions. These instruments may be used for other purposes in future periods. Upon entering into futures contracts, the Fund bears risks that it may not achieve
the anticipated benefits of the futures contracts and may realize a loss. Additional risks include counterparty credit risk, the possibility of an illiquid market, and that a change in the value of the contract or
option may not correlate with changes in the value of the underlying asset.
Upon entering into a futures
contract, the Fund deposits cash or securities with the broker, known as a futures commission merchant (FCM), in an amount sufficient to meet the initial margin requirement. The initial margin deposit must be
maintained at an established level over the life of the contract. Cash deposited as initial margin is recorded in the Statement of Assets and Liabilities as margin deposits. Securities deposited as initial margin are
designated in the Portfolio of Investments. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily change in the contract value and are
recorded as variation margin receivable or payable and are offset in unrealized gains or losses. The Fund generally expects to earn interest income on its margin deposits. The Fund recognizes a realized gain or loss
when the contract is closed or expires. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities.
Effects of derivative transactions in
the financial statements
The following tables are intended
to provide additional information about the effect of derivatives on the financial statements of the Fund, including: the fair value of derivatives by risk category and the location of those fair values in the
Statement of Assets and Liabilities; and the impact of derivative transactions over the period in the Statement of Operations, including realized and unrealized gains (losses). The derivative instrument schedules
following the Portfolio of Investments present additional information regarding derivative instruments outstanding at the end of the period, if any.
| 26 | Columbia Variable Portfolio – Large Cap Index Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
The following table is a summary of
the fair value of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) at December 31, 2021:
| Asset derivatives | ||
| Risk exposure category | Statement of assets and liabilities location | Fair value ($) |
| Equity risk | Component of trust capital — unrealized appreciation on futures contracts | 395,601* |
| Liability derivatives | ||
| Risk exposure category | Statement of assets and liabilities location | Fair value ($) |
| Equity risk | Component of trust capital - unrealized depreciation on futures contracts | 15,087* |
| * | Includes cumulative appreciation (depreciation) as reported in the tables following the Portfolio of Investments. Only the current day’s variation margin is reported in receivables or payables in the Statement of Assets and Liabilities. |
The following table indicates the
effect of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) in the Statement of Operations for the year ended December 31, 2021:
The following table is a summary
of the average outstanding volume by derivative instrument for the year ended December 31, 2021:
| Derivative instrument | Average notional amounts ($)* |
| Futures contracts — long | 20,627,885 |
| * | Based on the ending quarterly outstanding amounts for the year ended December 31, 2021. |
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
Income recognition
Corporate actions and dividend
income are generally recorded net of any non-reclaimable tax withholdings, on the ex-dividend date or upon receipt of an ex-dividend notification in the case of certain foreign securities.
The Fund may receive distributions
from holdings in equity securities, business development companies (BDCs), exchange-traded funds (ETFs), limited partnerships (LPs), other regulated investment companies (RICs), and real estate investment trusts
(REITs), which report information as to the tax character of their distributions annually. These distributions are allocated to dividend income, capital gain and return of capital based on actual information reported.
Return of capital is recorded as a reduction of the cost basis of securities held. If the Fund no longer owns the applicable securities, return of capital is recorded as a realized gain. With respect to REITs, to the
extent actual information has not yet been reported, estimates for return of capital are made by Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise
Financial, Inc. (Ameriprise Financial). The Investment Manager’s estimates are
| Columbia Variable Portfolio – Large Cap Index Fund | Annual Report 2021 | 27 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
subsequently adjusted when the actual character of
the distributions is disclosed by the REITs, which could result in a proportionate change in return of capital to shareholders.
Awards from class action litigation
are recorded as a reduction of cost basis if the Fund still owns the applicable securities on the payment date. If the Fund no longer owns the applicable securities on the payment date, the proceeds are recorded as
realized gains.
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
Federal income tax status
The Fund is treated as a
partnership for federal income tax purposes, and the Fund does not expect to make regular distributions. The Fund will not be subject to federal income tax, and therefore, there is no provision for federal income
taxes. The partners of the Fund are subject to tax on their distributive share of the Fund’s income and loss. The components of the Fund’s net assets are reported at the partner-level for federal income
tax purposes, and therefore, are not presented in the Statement of Assets and Liabilities.
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Foreign taxes
The Fund may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries, as applicable, based upon its current interpretation of tax rules
and regulations that exist in the markets in which it invests.
Realized gains in certain countries
may be subject to foreign taxes at the Fund level, based on statutory rates. The Fund accrues for such foreign taxes on realized and unrealized gains at the appropriate rate for each jurisdiction, as applicable. The
amount, if any, is disclosed as a liability on the Statement of Assets and Liabilities.
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
| 28 | Columbia Variable Portfolio – Large Cap Index Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Note 3. Fees and other
transactions with affiliates
Management services fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Under the Management Agreement, the
Investment Manager provides the Fund with investment research and advice, as well as administrative and accounting services. The management services fee is an annual fee that is equal to 0.20% of the Fund’s
daily net assets.
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. Under a Deferred Compensation Plan (the
Deferred Plan), these members of the Board of Trustees may elect to defer payment of up to 100% of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of
certain funds managed by the Investment Manager. The Fund’s liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Deferred Plan. All
amounts payable under the Deferred Plan constitute a general unsecured obligation of the Fund. The expense for the Deferred Plan, which includes Trustees’ fees deferred during the current period as well as any
gains or losses on the Trustees’ deferred compensation balances as a result of market fluctuations, is included in "Compensation of board members" on the Statement of Operations.
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
Service fees
The Fund has entered into a
Shareholder Services Agreement with Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial. Under this
agreement, the Fund pays a service fee equal to the payments made by the Transfer Agent to Participating Insurance Companies and other financial intermediaries (together, Participating Organizations) for services each
such Participating Organization provides to its clients, customers and participants that are invested directly or indirectly in the Fund, up to a cap approved by the Board of Trustees from time to time. The effective
service fee rate for the year ended December 31, 2021, was 0.03% of the Fund’s average daily net assets.
The Transfer Agent may retain as
compensation for its services revenues from fees for wire, telephone and redemption orders, account transcripts due the Transfer Agent from Fund shareholders and interest (net of bank charges) earned with respect to
balances in accounts the Transfer Agent maintains in connection with its services to the Fund.
Distribution and/or service fees
The Fund has an agreement with the
Distributor, an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution services. Under a Plan and Agreement of Distribution, the Fund pays a fee at an annual rate
of up to 0.25% of the Fund’s average daily net assets attributable to Class 2 shares and an annual rate of up to 0.125% of the Fund’s average daily net assets attributable to Class 3 shares. The Fund pays
no distribution and service fees for Class 1 shares.
| Columbia Variable Portfolio – Large Cap Index Fund | Annual Report 2021 | 29 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Expenses waived/reimbursed by the
Investment Manager and its affiliates
The Investment Manager and certain
of its affiliates have contractually agreed to waive fees and/or reimburse expenses (excluding certain fees and expenses described below) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, so that the Fund’s net operating expenses, after giving effect to fees waived/expenses reimbursed and any balance credits and/or overdraft charges from the Fund’s
custodian, do not exceed the following annual rate(s) as a percentage of the classes’ average daily net assets:
| May 1, 2021 through April 30, 2022 | Prior to May 1, 2021 | |
| Class 1 | 0.26% | 0.29% |
| Class 2 | 0.51 | 0.54 |
| Class 3 | 0.385 | 0.415 |
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), expenses associated with investments in affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange-traded funds), transaction costs and
brokerage commissions, costs related to any securities lending program, dividend expenses associated with securities sold short, inverse floater program fees and expenses, transaction charges and interest on borrowed
money, interest, costs associated with certain shareholder meetings, infrequent and/or unusual expenses and any other expenses the exclusion of which is specifically approved by the Board of Trustees. This
agreement may be modified or amended only with approval from the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements
described above are not recoverable by the Investment Manager or its affiliates in future periods.
Note 4. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $95,413,431 and $80,838,016, respectively, for the year ended December 31, 2021. The amount of purchase and
sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 5. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes
referred to as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
Note 6. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund did not borrow or lend
money under the Interfund Program during the year ended December 31, 2021.
| 30 | Columbia Variable Portfolio – Large Cap Index Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Note 7. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to an October 28, 2021 amendment and restatement, the credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment
Manager or an affiliated investment manager, severally and not jointly, permits collective borrowings up to $950 million. Interest is currently charged to each participating fund based on its borrowings at a rate
equal to the higher of (i) the federal funds effective rate, (ii) the secured overnight financing rate plus 0.11448% and (iii) the overnight bank funding rate, plus in each case, 1.00%. Each borrowing under the credit
facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The
commitment fee is included in other expenses in the Statement of Operations. This agreement expires annually in October unless extended or renewed. Prior to the October 28, 2021 amendment and restatement, the Fund had
access to a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. which permitted collective borrowings up to $950 million. Interest was
charged to each participating fund based on its borrowings at a rate equal to the higher of (i) the federal funds effective rate, (ii) the one-month London Interbank Offered Rate (LIBOR) rate and (iii) the overnight
bank funding rate, plus in each case, 1.25%.
The Fund had no borrowings during
the year ended December 31, 2021.
Note 8. Significant
risks
Information technology sector
risk
The Fund is more susceptible to the
particular risks that may affect companies in the information technology sector than if it were invested in a wider variety of companies in unrelated sectors. Companies in the information technology sector are subject
to certain risks, including the risk that new services, equipment or technologies will not be accepted by consumers and businesses or will become rapidly obsolete. Performance of such companies may be affected by
factors including obtaining and protecting patents (or the failure to do so) and significant competitive pressures, including aggressive pricing of their products or services, new market entrants, competition for
market share and short product cycles due to an accelerated rate of technological developments. Such competitive pressures may lead to limited earnings and/or falling profit margins. As a result, the value of their
securities may fall or fail to rise. In addition, many information technology sector companies have limited operating histories and prices of these companies’ securities historically have been more volatile than
other securities, especially over the short term. Some companies in the information technology sector are facing increased government and regulatory scrutiny and may be subject to adverse government or regulatory
action, which could negatively impact the value of their securities.
Market risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
The coronavirus disease 2019 and
its variants (COVID-19) pandemic has resulted in, and may continue to result in, significant global economic and societal disruption and market volatility due to disruptions in market access, resource availability,
facilities operations, imposition of tariffs, export controls and supply chain disruption, among others. Such
| Columbia Variable Portfolio – Large Cap Index Fund | Annual Report 2021 | 31 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
disruptions may be caused, or exacerbated by,
quarantines and travel restrictions, workforce displacement and loss in human and other resources. The uncertainty surrounding the magnitude, duration, reach, costs and effects of the global pandemic, as well as
actions that have been or could be taken by governmental authorities or other third parties, present unknowns that are yet to unfold. The impacts, as well as the uncertainty over impacts to come, of COVID-19 –
and any other infectious illness outbreaks, epidemics and pandemics that may arise in the future – could negatively affect global economies and markets in ways that cannot necessarily be foreseen. In addition,
the impact of infectious illness outbreaks and epidemics in emerging market countries may be greater due to generally less established healthcare systems, governments and financial markets. Public health crises caused
by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic risks in certain countries or globally. The disruptions caused by COVID-19 could prevent the Fund from executing advantageous
investment decisions in a timely manner and negatively impact the Fund’s ability to achieve its investment objectives. Any such event(s) could have a significant adverse impact on the value and risk profile of
the Fund.
Passive investment risk
The Fund is not
“actively” managed and may be affected by a general decline in market segments related to its tracking index. The Fund invests in securities or instruments included in, or believed by the Investment
Manager to be representative of, its tracking index, regardless of their investment merits. The Fund does not seek temporary defensive positions when markets decline or appear overvalued. The decision of whether to
remove a security from the tracking index is made by an independent index provider who is not affiliated with the Fund or the Investment Manager.
Shareholder concentration risk
At December 31, 2021, affiliated
shareholders of record owned 99.3% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of
less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Note 9. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
Note 10. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in
connection with the conduct of their business activities. Ameriprise Financial believes that the Fund is not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject
of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with
the Fund. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (SEC) on legal and regulatory matters that relate to
Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that
these matters, or the adverse publicity associated with them, will not result in increased Fund redemptions, reduced sale of Fund shares or other adverse consequences to the Fund. Further, although we believe
proceedings are not likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines,
penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial or one or more of its affiliates that provides services to
the Fund.
| 32 | Columbia Variable Portfolio – Large Cap Index Fund | Annual Report 2021 |
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees of Columbia
Funds Variable Series Trust II and Shareholders of Columbia Variable Portfolio – Large Cap Index Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of Columbia Variable Portfolio – Large Cap Index Fund (one of the funds constituting Columbia Funds Variable Series Trust II, referred
to hereafter as the "Fund") as of December 31, 2021, the related statement of operations for the year ended December 31, 2021, the statement of changes in net assets for each of the two years in the period ended
December 31, 2021, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2021 (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, 2021, 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, 2021 and the financial highlights for each of the five years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in
the United States of America.
Basis for Opinion
These financial statements are the
responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these
financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2021 by correspondence with the custodian, transfer agent and broker. We believe that
our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Minneapolis, Minnesota
February 18, 2022
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| Columbia Variable Portfolio – Large Cap Index Fund | Annual Report 2021 | 33 |
TRUSTEES AND
OFFICERS
The Board oversees the
Fund’s operations and appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following table provides basic biographical information about the
Fund’s Trustees as of the printing of this report, including their principal occupations during the past five years, although specific titles for individuals may have varied over the period. The year set forth
beneath Length of Service in the table below is the year in which the Trustee was first appointed or elected as Trustee to any Fund currently in the Columbia Funds Complex or a predecessor thereof. Under current Board
policy, each Trustee generally serves until December 31 of the year such Trustee turns seventy-five (75).
Independent trustees
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| George S. Batejan c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1953 | Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 176 | Former Chairman of the Board, NICSA (National Investment Company Services Association) (Executive Committee, Nominating Committee and Governance Committee), 2014-2016; former Director, Intech Investment Management, 2011-2016; former Board Member, Metro Denver Chamber of Commerce, 2015-2016; former Advisory Board Member, University of Colorado Business School, 2015-2018 |
| Kathleen Blatz c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2006 | Attorney, specializing in arbitration and mediation; Chief Justice, Minnesota Supreme Court, 1998-2006; Associate Justice, Minnesota Supreme Court, 1996-1998; Fourth Judicial District Court Judge, Hennepin County, 1994-1996; Attorney in private practice and public service, 1984-1993; State Representative, Minnesota House of Representatives, 1979-1993, which included service on the Tax and Financial Institutions and Insurance Committees; Member and Interim Chair, Minnesota Sports Facilities Authority, January 2017-July 2017; Interim President and Chief Executive Officer, Blue Cross Blue Shield of Minnesota (health care insurance), February-July 2018, April-October 2021 | 176 | Former Trustee, Blue Cross Blue Shield of Minnesota, 2009-2021 (Chair of the Business Development Committee, 2014-2017; Chair of the Governance Committee, 2017-2019); former Member and Chair of the Board, Minnesota Sports Facilities Authority, January 2017-July 2017; former Director, Robina Foundation, 2009-2020 (Chair, 2014-2020); Director, Schulze Family Foundation, since 2021 |
| Pamela G. Carlton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2007 | President, Springboard — Partners in Cross Cultural Leadership (consulting company) since 2003; Managing Director of US Equity Research, JP Morgan Chase, 1999-2003; Director of US Equity Research, Chase Asset Management, 1996-1999; Co-Director Latin America Research, 1993-1996, COO Global Research, 1992-1996, Co-Director of US Research, 1991-1992, Investment Banker, Morgan Stanley, 1982-1991, Morgan Stanley; Attorney, Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 176 | Trustee, New York Presbyterian Hospital Board (Executive Committee and Chair of People Committee) since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee); Director, Apollo Commercial Real Estate Finance, Inc. since 2021; the Governing Council of the Independent Directors Council (IDC), since 2021 |
| 34 | Columbia Variable Portfolio – Large Cap Index Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Janet Langford Carrig c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1957 | Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 174 | Director, EQT Corporation (natural gas producer) since 2019; Director, Whiting Petroleum Corporation (independent oil and gas company) since 2020 |
| J. Kevin Connaughton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2020 | Member, FINRA National Adjudicatory Council since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Consultant to Independent Trustees of CFVIT and CFST I from March 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Managing Director and General Manager of Mutual Fund Products, Columbia Management Investment Advisers, LLC, May 2010-February 2015; President, Columbia Funds, 2008-2015; and senior officer of Columbia Funds and affiliated funds, 2003-2015 | 174 | Former Director, The Autism Project, March 2015-December 2021; former Member of the Investment Committee, St. Michael’s College, November 2015-February 2020; former Trustee, St. Michael’s College, June 2017-September 2019; former Trustee, New Century Portfolios, January 2015-December 2017 |
| Olive M. Darragh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since 2020 | Managing Director of Darragh Inc. (strategy and talent management consulting firm) since 2010; Founder and CEO, Zolio, Inc. (investment management talent identification platform) since 2004; Consultant to Independent Trustees of CFVIT and CFST I from June 2019 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 2001-2004 | 174 | Former Director, University of Edinburgh Business School (Member of US Board); former Director, Boston Public Library Foundation |
| Patricia M. Flynn c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1950 | Trustee since 2004 | Trustee Professor of Economics and Management, Bentley University since 1976 (also teaches and conducts research on corporate governance); Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 176 | Trustee, MA Taxpayers Foundation since 1997; Board of Governors, Innovation Institute, MA Technology Collaborative, 2010-2020; former Board of Directors, The MA Business Roundtable, 2003-2019 |
| Brian J. Gallagher c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 176 | Trustee, Catholic Schools Foundation since 2004 |
| Columbia Variable Portfolio – Large Cap Index Fund | Annual Report 2021 | 35 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Douglas A. Hacker c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1955 | Co-Chair since 2021; Chair of CFST I and CFVIT since 2014; Trustee of CFST I and CFVIT since 1996 and CFST, CFST II, CFVST II, CET I and CET II since 2021 | Independent business executive since May 2006; Executive Vice President – Strategy of United Airlines, December 2002 - May 2006; President of UAL Loyalty Services (airline marketing company), September 2001-December 2002; Executive Vice President and Chief Financial Officer of United Airlines, July 1999-September 2001 | 176 | Director, Spartan Nash Company (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing); former Director, Nash Finch Company (food distributor), 2005-2013; former Director, SeaCube Container Leasing Ltd. (container leasing), 2010-2013; and former Director, Travelport Worldwide Limited (travel information technology), 2014-2019 |
| Nancy T. Lukitsh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1956 | Trustee since 2011 | Senior Vice President, Partner and Director of Marketing, Wellington Management Company, LLP (investment adviser), 1997-2010; Chair, Wellington Management Portfolios (commingled non-U.S. investment pools), 2007 -2010; Director, Wellington Trust Company, NA and other Wellington affiliates, 1997-2010 | 174 | None |
| David M. Moffett c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2011 | Retired; Consultant to Bridgewater and Associates | 174 | Director, CSX Corporation (transportation suppliers); Director, Genworth Financial, Inc. (financial and insurance products and services); Director, PayPal Holdings Inc. (payment and data processing services); Trustee, University of Oklahoma Foundation; former Director, eBay Inc. (online trading community), 2007-2015; and former Director, CIT Bank, CIT Group Inc. (commercial and consumer finance), 2010-2016 |
| Catherine James Paglia c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Co-Chair since 2021; Chair of CFST, CFST II, CFVST II, CET I and CET II since 2020; Trustee of CFST, CFST II and CFVST II since 2004 and CFST I and CFVIT since 2021 | Director, Enterprise Asset Management, Inc. (private real estate and asset management company) since September 1998; Managing Director and Partner, Interlaken Capital, Inc., 1989-1997; Vice President, 1982-1985, Principal, 1985-1987, Managing Director, 1987-1989, Morgan Stanley; Vice President, Investment Banking, 1980-1982, Associate, Investment Banking, 1976-1980, Dean Witter Reynolds, Inc. | 176 | Director, Valmont Industries, Inc. (irrigation systems manufacturer) since 2012; Trustee, Carleton College (on the Investment Committee); Trustee, Carnegie Endowment for International Peace (on the Investment Committee) |
| 36 | Columbia Variable Portfolio – Large Cap Index Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Minor M. Shaw c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1947 | Trustee since 2003 | President, Micco LLC (private investments) since 2011; President, Micco Corp. (family investment business), 1998-2011 | 176 | Director, Blue Cross Blue Shield of South Carolina (Chair of Compensation Committee) since April 2008; Trustee, Hollingsworth Funds (on the Investment Committee) since 2016 (previously Board Chair from 2016-2019); Former Advisory Board member, Duke Energy Corp., 2016-2020; Chair of the Duke Endowment; Chair of Greenville – Spartanburg Airport Commission; former Trustee, BofA Funds Series Trust (11 funds), 2003-2011; former Director, Piedmont Natural Gas, 2004-2016; former Director, National Association of Corporate Directors, Carolinas Chapter, 2013-2018; Chair, Daniel-Mickel Foundation since 1998 |
| Natalie A. Trunow c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1967 | Trustee since 2020 | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services), January 2016-January 2021; Non-executive Member of the Investment Committee and Valuation Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services), August 2018-January 2021; Advisor, Paradigm Asset Management, November 2016-December 2021; Consultant to Independent Trustees of CFVIT and CFST I from September 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Director of Investments/Consultant, Casey Family Programs, April 2016-November 2016; Senior Vice President and Chief Investment Officer, Calvert Investments, August 2008-January 2016; Section Head and Portfolio Manager, General Motors Asset Management, June 1997-August 2008 | 174 | Former Director, Investment Committee, Health Services for Children with Special Needs, Inc., 2012-2019; Director, Chair of Audit Committee, Consumer Credit Counseling Services (formerly Guidewell Financial Solutions), since 2019; Independent Director, Investment Committee and Valuation Committee, Sarona Asset Management, since 2019 |
| Sandra Yeager c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2017 | Retired; President and founder, Hanoverian Capital, LLC (SEC registered investment advisor firm), 2008-2016; Managing Director, DuPont Capital, 2006-2008; Managing Director, Morgan Stanley Investment Management, 2004-2006; Senior Vice President, Alliance Bernstein, 1990-2004 | 176 | Former Director, NAPE Education Foundation, October 2016-October 2020 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Fund Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I (CET I), Columbia ETF Trust II (CET II), Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Beckman, Gallagher and Hacker and Mses. Blatz, Carlton, Flynn, Paglia, Shaw and Yeager serve as Directors of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
| Columbia Variable Portfolio – Large Cap Index Fund | Annual Report 2021 | 37 |
TRUSTEES AND OFFICERS (continued)
Interested trustee affiliated with Investment Manager*
Interested trustee affiliated with Investment Manager*
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during the past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex overseen | Other directorships held by Trustee during the past five years |
| Daniel J. Beckman c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since November 2021(a) | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC (since April 2015); officer of Columbia Funds and affiliated funds since 2020. | 176 | Director, Ameriprise Trust Company, since October 2016; Director, Columbia Management Investment Distributors, Inc. since November 2018; Board of Governors, Columbia Wanger Asset Management, LLC since January 2022 |
| * | Interested person (as defined under the 1940 Act) by reason of being an officer, director, security holder and/or employee of the Investment Manager or Ameriprise Financial. |
| (a) | Mr. Beckman serves as the President and Principal Executive Officer of the Columbia Funds (since 2021). |
The Statement of Additional
Information has additional information about the Fund’s Board members and is available, without charge, upon request by calling 800.345.6611 or contacting your financial intermediary.
The Board has appointed officers
who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. The following table provides basic information about the Officers of the
Fund, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Beckman, who is President and Principal Executive Officer, the
Fund’s other officers are:
Fund officers
| 38 | Columbia Variable Portfolio – Large Cap Index Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Fund officers (continued)
Fund officers (continued)
| Columbia Variable Portfolio – Large Cap Index Fund | Annual Report 2021 | 39 |
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For Fund and other investment product prospectuses, which contain this and other important information, contact your
financial advisor or insurance representative. Please read the prospectus carefully before you invest. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved. Columbia Management Investment Distributors, Inc., 290 Congress Street, Boston, MA 02210
© 2022 Columbia Management Investment
Advisers, LLC.
S-6461 AW (2/22)
Columbia Variable
Portfolio – U.S. Government Mortgage Fund
Please remember that you may not
buy (nor will you own) shares of the Fund directly. The Fund is available through variable annuity contracts and variable life insurance policies offered by the separate accounts of participating insurance companies
as well as qualified pension and retirement plans. Please contact your financial advisor or insurance representative for more information.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
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| 40 | |
| 41 |
Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which Columbia Variable Portfolio – U.S. Government Mortgage Fund (the Fund) holds investments consistent with the procedures as stated in the Statement of Additional
Information (SAI). You may obtain a copy of the SAI without charge by calling 800.345.6611; contacting your financial intermediary or searching the website of the Securities and Exchange Commission (SEC) at sec.gov.
Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge
by visiting columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. The Fund’s Form N-PORT is available on the SEC’s website at sec.gov. The Fund’s complete
schedule of portfolio holdings, as filed on Form N-PORT, can also be obtained without charge, upon request, by calling 800.345.6611.
Additional Fund information
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
290 Congress Street
Boston, MA 02210
Fund distributor
Columbia Management Investment Distributors,
Inc.
290 Congress Street
Boston, MA 02210
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
Columbia Variable Portfolio – U.S. Government
Mortgage Fund | Annual Report 2021
Fund at a Glance
Investment objective
The Fund
seeks to provide shareholders with current income as its primary objective and, as its secondary objective, preservation of capital.
Portfolio management
Jason Callan
Co-Portfolio Manager
Managed Fund since 2012
Tom Heuer, CFA
Co-Portfolio Manager
Managed Fund since 2012
Ryan Osborn, CFA
Co-Portfolio Manager
Managed Fund since 2019
| Columbia Variable Portfolio – U.S. Government Mortgage Fund | Annual Report 2021 | 3 |
Fund at a Glance (continued)
Performance of a hypothetical $10,000 investment (December 31, 2011 — December 31, 2021)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class 2 shares of Columbia Variable Portfolio – U.S. Government Mortgage Fund during the stated time period, and does not reflect the deduction of taxes, if
any, that a shareholder may pay on Fund distributions or on the redemption of Fund shares. The returns also do not reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance
policy or qualified pension or retirement plan, if any.
| 4 | Columbia Variable Portfolio – U.S. Government Mortgage Fund | Annual Report 2021 |
Manager Discussion of Fund Performance
At December 31, 2021,
approximately 88.73% of the Fund’s shares were owned in the aggregate by affiliated funds-of-funds managed by Columbia Management Investment Advisers, LLC (the Investment Manager). As a result of asset
allocation decisions by the Investment Manager, it is possible that the Fund may experience relatively large purchases or redemptions from affiliated funds-of-funds. The Investment Manager seeks to minimize the impact
of these transactions by structuring them over a reasonable period of time. The Fund may also experience increased expenses as it buys and sells securities as a result of purchases or redemptions by affiliated
funds-of-funds.
For the 12-month period ended
December 31, 2021, Class 2 shares of the Fund returned -1.20%. The Fund slightly underperformed its benchmark, the Bloomberg U.S. Mortgage-Backed Securities Index, which returned -1.04% during the same time period.
Market overview
As pandemic-related restrictions
were eased over the period, robust economic growth and corporate earnings supported risk sentiment and credit-oriented segments of the bond market. In addition, both U.S. monetary and fiscal policy were highly
supportive for much of the period. In this vein, Congress approved massive spending packages that included direct payments to citizens and the U.S. Federal Reserve (Fed) maintained its benchmark overnight lending rate
near zero while engaging in bond market purchases to keep longer term borrowing costs low.
The fourth quarter of 2021 saw the
Fed adopt a more hawkish tone in response to persistently high inflation driven by post-pandemic supply chain disruptions and rising commodity prices, leading to increased market volatility. The Fed officially
tightened policy in November as it began tapering its monthly bond purchases. In December, the Fed accelerated the timetable for ending its bond purchase program and signaled the likelihood of three increases in the
federal funds rate in 2022.
Returns for mortgage-backed
securities (MBS) were negative and lagged those for comparable duration Treasuries as elevated prepayments impacted the segment.
The Fund’s notable
detractors during the period
| • | The Fund’s exposure to collateralized mortgage obligations (CMOs) was the principal detractor from relative performance for the 12 months. The CMO positions held by the Fund were negatively impacted as prepayments surprised to the upside against a backdrop of streamlined refinancing programs and eased credit standards. |
| • | The Fund’s tactical positioning over the period with respect to interest rates detracted modestly from relative performance. Specifically, the Fund was overweight the front end of the yield curve which rose as the market anticipated hikes in the Fed’s benchmark overnight lending rate. |
The Fund’s notable
contributors during the period
| • | The Fund’s allocation to off-benchmark, credit-oriented securitized assets including non-agency MBS, commercial mortgage-backed securities (CMBS) and asset-backed securities (ABS) added to relative performance for the 12 months. Securitized sectors were well-supported during the period by positive consumer credit fundamentals given the high levels of fiscal stimulus and a robust housing market. |
| • | The Fund’s performance relative to the benchmark was also helped by its positioning within agency MBS. Specifically, the Fund was underweight Government National Mortgage Association (“Ginne Mae”) issues which were most impacted by elevated prepayments, while focusing purchases on the lower coupon “to-be-announced” pools for which performance was supported by the Fed’s bond buying program. |
Derivative positions
During the annual period, the
Fund utilized options on interest rate swaps (or “swaptions”) to manage yield curve exposures. In addition, the Fund used Treasury futures contracts to manage interest rate risk in the portfolio. We also
used index credit default swaps as a hedge against long cash positions to reduce the Fund’s overall credit exposure. In aggregate, on a stand-alone basis, the Fund’s use of derivatives had a positive
impact on performance.
| Columbia Variable Portfolio – U.S. Government Mortgage Fund | Annual Report 2021 | 5 |
Manager Discussion of Fund Performance (continued)
The views expressed in this report
reflect the current views of the respective parties who have contributed to this report. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult
to predict, so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective parties
disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Columbia fund are based on numerous factors, may not be relied on as an
indication of trading intent on behalf of any particular Columbia fund. References to specific securities should not be construed as a recommendation or investment advice.
| 6 | Columbia Variable Portfolio – U.S. Government Mortgage Fund | Annual Report 2021 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur ongoing
costs, which generally include management fees, distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to help you compare these costs with the ongoing costs of investing in other mutual funds.
The information below does not
reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy (collectively, Contracts) or qualified pension and retirement plan (Qualified Plan), if any. The total fees
and expenses you bear may therefore be higher than those shown below.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount invested, to estimate the
expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as redemption or exchange fees, or expenses that apply to the subaccount or the Contract. Therefore, the
hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If the fees and expenses imposed under your Contract or
Qualified Plan, if any, were included, your costs would be higher.
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 365.
Expenses do not include fees and
expenses incurred indirectly by the Fund from its investment in underlying funds, including affiliated and non-affiliated pooled investment vehicles, such as mutual funds and exchange-traded funds.
| Columbia Variable Portfolio – U.S. Government Mortgage Fund | Annual Report 2021 | 7 |
Portfolio of Investments
December 31, 2021
December 31, 2021
(Percentages represent value of
investments compared to net assets)
Investments in securities
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 8 | Columbia Variable Portfolio – U.S. Government Mortgage Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – U.S. Government Mortgage Fund | Annual Report 2021 | 9 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 10 | Columbia Variable Portfolio – U.S. Government Mortgage Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – U.S. Government Mortgage Fund | Annual Report 2021 | 11 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 12 | Columbia Variable Portfolio – U.S. Government Mortgage Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – U.S. Government Mortgage Fund | Annual Report 2021 | 13 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 14 | Columbia Variable Portfolio – U.S. Government Mortgage Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
At December 31, 2021, securities
and/or cash totaling $3,289,719 were pledged as collateral.
Investments in derivatives
| Long futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| U.S. Treasury 10-Year Note | 935 | 03/2022 | USD | 121,988,281 | 691,306 | — |
| U.S. Treasury 2-Year Note | 9 | 03/2022 | USD | 1,963,547 | — | (3,956) |
| U.S. Treasury 5-Year Note | 33 | 03/2022 | USD | 3,992,227 | — | (2,387) |
| Total | 691,306 | (6,343) | ||||
| Short futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| U.S. Long Bond | (13) | 03/2022 | USD | (2,085,688) | — | (2,568) |
| Call option contracts purchased | ||||||||
| Description | Counterparty | Trading currency | Notional amount | Number of contracts | Exercise price/Rate | Expiration date | Cost ($) | Value ($) |
| 10-Year OTC interest rate swap with Citi to receive exercise rate and pay 3-Month USD LIBOR BBA | Citi | USD | 67,800,000 | 67,800,000 | 1.00 | 01/21/2022 | 576,300 | 969 |
| 10-Year OTC interest rate swap with Citi to receive exercise rate and pay 3-Month USD LIBOR BBA | Citi | USD | 28,750,000 | 28,750,000 | 1.00 | 07/08/2022 | 293,250 | 101,163 |
| 10-Year OTC interest rate swap with Morgan Stanley to receive exercise rate and pay 3-Month USD LIBOR BBA | Morgan Stanley | USD | 70,000,000 | 70,000,000 | 1.00 | 01/20/2022 | 661,500 | 735 |
| 10-Year OTC interest rate swap with Morgan Stanley to receive exercise rate and pay 3-Month USD LIBOR BBA | Morgan Stanley | USD | 48,800,000 | 48,800,000 | 1.10 | 01/24/2022 | 497,760 | 3,577 |
| Total | 2,028,810 | 106,444 | ||||||
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – U.S. Government Mortgage Fund | Annual Report 2021 | 15 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
| Credit default swap contracts - sell protection | |||||||||||||
| Reference entity | Counterparty | Maturity date | Receive fixed rate (%) | Payment frequency | Implied credit spread (%)* | Notional currency | Notional amount | Value ($) | Periodic payments receivable (payable) ($) | Upfront payments ($) | Upfront receipts ($) | Unrealized appreciation ($) | Unrealized depreciation ($) |
| Markit CMBX North America Index, Series 10 BBB- | Citi | 11/17/2059 | 3.000 | Monthly | 5.156 | USD | 5,000,000 | (446,094) | 2,917 | — | (942,457) | 499,280 | — |
| Markit CMBX North America Index, Series 10 BBB- | JPMorgan | 11/17/2059 | 3.000 | Monthly | 5.156 | USD | 5,000,000 | (446,095) | 2,917 | — | (869,032) | 425,854 | — |
| Markit CMBX North America Index, Series 11 BBB- | JPMorgan | 11/18/2054 | 3.000 | Monthly | 3.952 | USD | 1,300,000 | (61,547) | 758 | — | (195,309) | 134,520 | — |
| Markit CMBX North America Index, Series 10 BBB- | Morgan Stanley | 11/17/2059 | 3.000 | Monthly | 5.156 | USD | 3,000,000 | (267,656) | 1,750 | — | (684,926) | 419,020 | — |
| Markit CMBX North America Index, Series 10 BBB- | Morgan Stanley | 11/17/2059 | 3.000 | Monthly | 5.156 | USD | 2,500,000 | (223,046) | 1,458 | — | (413,811) | 192,223 | — |
| Markit CMBX North America Index, Series 11 BBB- | Morgan Stanley | 11/18/2054 | 3.000 | Monthly | 3.952 | USD | 10,000,000 | (473,439) | 5,834 | — | (1,936,379) | 1,468,774 | — |
| Markit CMBX North America Index, Series 7 BBB- | Morgan Stanley | 01/17/2047 | 3.000 | Monthly | 16.154 | USD | 2,500,000 | (501,562) | 1,458 | — | (139,178) | — | (360,926) |
| Total | (2,419,439) | 17,092 | — | (5,181,092) | 3,139,671 | (360,926) | |||||||
| * | Implied credit spreads, represented in absolute terms, utilized in determining the market value of credit default swap agreements on corporate or sovereign issues as of period end serve as an indicator of the current status of the payment/performance risk and represent the likelihood or risk of default for the credit derivative. The implied credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Wider credit spreads represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement. |
Notes to Portfolio of
Investments
| (a) | Represents privately placed and other securities and instruments exempt from Securities and Exchange Commission registration (collectively, private placements), such as Section 4(a)(2) and Rule 144A eligible securities, which are often sold only to qualified institutional buyers. At December 31, 2021, the total value of these securities amounted to $211,025,868, which represents 19.07% of total net assets. |
| (b) | Variable rate security. The interest rate shown was the current rate as of December 31, 2021. |
| (c) | Represents fair value as determined in good faith under procedures approved by the Board of Trustees. At December 31, 2021, the total value of these securities amounted to $25,642,009, which represents 2.32% of total net assets. |
| (d) | Valuation based on significant unobservable inputs. |
| (e) | Variable or floating rate security, the interest rate of which adjusts periodically based on changes in current interest rates and prepayments on the underlying pool of assets. The interest rate shown was the current rate as of December 31, 2021. |
| (f) | Represents interest only securities which have the right to receive the monthly interest payments on an underlying pool of mortgage loans. |
| (g) | This security or a portion of this security has been pledged as collateral in connection with derivative contracts. |
| (h) | Represents a security purchased on a when-issued basis. |
| (i) | The rate shown is the seven-day current annualized yield at December 31, 2021. |
| (j) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended December 31, 2021 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Realized gain (loss)($) | Dividends($) | End of period shares |
| Columbia Short-Term Cash Fund, 0.085% | ||||||||
| 67,708,216 | 511,629,590 | (497,668,026) | (5,341) | 81,664,439 | (2,919) | 38,995 | 81,680,775 | |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 16 | Columbia Variable Portfolio – U.S. Government Mortgage Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Abbreviation Legend
| CMO | Collateralized Mortgage Obligation |
| LIBOR | London Interbank Offered Rate |
| SOFR | Secured Overnight Financing Rate |
| STRIPS | Separate Trading of Registered Interest and Principal Securities |
| TBA | To Be Announced |
Currency Legend
| USD | US Dollar |
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at December 31, 2021:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Investments in Securities | ||||
| Asset-Backed Securities — Non-Agency | — | 44,915,322 | 4,506,003 | 49,421,325 |
| Commercial Mortgage-Backed Securities - Agency | — | 55,669,775 | — | 55,669,775 |
| Commercial Mortgage-Backed Securities - Non-Agency | — | 67,394,759 | — | 67,394,759 |
| Residential Mortgage-Backed Securities - Agency | — | 987,100,357 | 2,138,935 | 989,239,292 |
| Residential Mortgage-Backed Securities - Non-Agency | — | 79,763,262 | 21,136,006 | 100,899,268 |
| Options Purchased Calls | — | 106,444 | — | 106,444 |
| Options Purchased Puts | — | 2,160,101 | — | 2,160,101 |
| Money Market Funds | 81,664,439 | — | — | 81,664,439 |
| Total Investments in Securities | 81,664,439 | 1,237,110,020 | 27,780,944 | 1,346,555,403 |
| Investments in Derivatives |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – U.S. Government Mortgage Fund | Annual Report 2021 | 17 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Fair value measurements (continued)
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Asset | ||||
| Futures Contracts | 691,306 | — | — | 691,306 |
| Swap Contracts | — | 3,139,671 | — | 3,139,671 |
| Liability | ||||
| Futures Contracts | (8,911) | — | — | (8,911) |
| Options Contracts Written | — | (518,401) | — | (518,401) |
| Swap Contracts | — | (360,926) | — | (360,926) |
| Total | 82,346,834 | 1,239,370,364 | 27,780,944 | 1,349,498,142 |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The Fund’s assets assigned to
the Level 2 input category are generally valued using the market approach, in which a security’s value is determined through reference to prices and information from market transactions for similar or identical
assets.
Futures contracts and swap contracts
are valued at unrealized appreciation (depreciation).
The following table is a
reconciliation of Level 3 assets for which significant observable and unobservable inputs were used to determine fair value:
| Balance as of 12/31/2020 ($) | Increase (decrease) in accrued discounts/ premiums ($) | Realized gain (loss) ($) | Change in unrealized appreciation (depreciation)(a) ($) | Purchases ($) | Sales ($) | Transfers into Level 3 ($) | Transfers out of Level 3 ($) | Balance as of 12/31/2021 ($) | |
| Asset-Backed Securities — Non-Agency | — | — | — | 6,003 | 4,500,000 | — | — | — | 4,506,003 |
| Residential Mortgage-Backed Securities — Agency | — | (1,088) | — | (3,807) | 2,143,830 | — | — | — | 2,138,935 |
| Residential Mortgage-Backed Securities — Non-Agency | 31 | (11) | — | 93,338 | 21,042,677 | (29) | — | — | 21,136,006 |
| Total | 31 | (1,099) | — | 95,534 | 27,686,507 | (29) | — | — | 27,780,944 |
(a) Change in unrealized
appreciation (depreciation) relating to securities held at December 31, 2021 was $95,534, which is comprised of Asset-Backed Securities - Non-Agency of $6,003, Residential Mortgage-Backed Securities - Agency of 3,807
and Residential Mortgage-Backed Securities - Non-Agency of $93,338.
The Fund’s assets assigned to
the Level 3 category are valued utilizing the valuation technique deemed the most appropriate in the circumstances. Certain residential mortgage backed securities and asset backed securities classified as Level 3
securities are valued using the market approach. To determine fair value for these securities, management considered various factors which may have included, but were not limited to, estimated cash flows of the
securities, single market quotations, observable transactions for identical or similar assets in the market and the distressed nature of the security. The appropriateness of fair values for these securities is
monitored on an ongoing basis which may include results of back testing, manual price reviews and other control procedures. Significant increases (decreases) to any of these inputs would have resulted in a
significantly higher (lower) fair value measurement.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 18 | Columbia Variable Portfolio – U.S. Government Mortgage Fund | Annual Report 2021 |
Statement of Assets and Liabilities
December 31, 2021
December 31, 2021
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $1,269,885,970) | $1,262,624,419 |
| Affiliated issuers (cost $81,669,780) | 81,664,439 |
| Options purchased (cost $4,292,640) | 2,266,545 |
| Cash collateral held at broker for: | |
| Swap contracts | 1,090,000 |
| TBA | 165,000 |
| Unrealized appreciation on swap contracts | 3,139,671 |
| Receivable for: | |
| Investments sold | 100,407 |
| Capital shares sold | 19,237 |
| Dividends | 5,390 |
| Interest | 3,932,709 |
| Variation margin for futures contracts | 61,180 |
| Prepaid expenses | 13,958 |
| Total assets | 1,355,082,955 |
| Liabilities | |
| Option contracts written, at value (premiums received $1,017,960) | 518,401 |
| Due to custodian | 254,125 |
| Unrealized depreciation on swap contracts | 360,926 |
| Upfront receipts on swap contracts | 5,181,092 |
| Payable for: | |
| Investments purchased on a delayed delivery basis | 241,657,733 |
| Capital shares purchased | 50,408 |
| Variation margin for futures contracts | 7,313 |
| Management services fees | 12,917 |
| Distribution and/or service fees | 501 |
| Service fees | 9,663 |
| Compensation of board members | 136,859 |
| Compensation of chief compliance officer | 208 |
| Other expenses | 32,857 |
| Total liabilities | 248,223,003 |
| Net assets applicable to outstanding capital stock | $1,106,859,952 |
| Represented by | |
| Paid in capital | 1,103,569,583 |
| Total distributable earnings (loss) | 3,290,369 |
| Total - representing net assets applicable to outstanding capital stock | $1,106,859,952 |
| Class 1 | |
| Net assets | $989,682,573 |
| Shares outstanding | 95,729,213 |
| Net asset value per share | $10.34 |
| Class 2 | |
| Net assets | $29,149,929 |
| Shares outstanding | 2,828,139 |
| Net asset value per share | $10.31 |
| Class 3 | |
| Net assets | $88,027,450 |
| Shares outstanding | 8,515,752 |
| Net asset value per share | $10.34 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – U.S. Government Mortgage Fund | Annual Report 2021 | 19 |
Statement of Operations
Year Ended December 31, 2021
Year Ended December 31, 2021
| Net investment income | |
| Income: | |
| Dividends — affiliated issuers | $38,995 |
| Interest | 26,133,002 |
| Total income | 26,171,997 |
| Expenses: | |
| Management services fees | 4,793,567 |
| Distribution and/or service fees | |
| Class 2 | 75,202 |
| Class 3 | 117,663 |
| Service fees | 104,648 |
| Compensation of board members | 52,652 |
| Custodian fees | 29,746 |
| Printing and postage fees | 16,606 |
| Audit fees | 39,500 |
| Legal fees | 20,244 |
| Interest on collateral | 11,469 |
| Compensation of chief compliance officer | 189 |
| Other | 15,241 |
| Total expenses | 5,276,727 |
| Net investment income | 20,895,270 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | (6,407,231) |
| Investments — affiliated issuers | (2,919) |
| Futures contracts | (4,610,472) |
| Options purchased | 6,046,700 |
| Options contracts written | 146,885 |
| Swap contracts | (327,278) |
| Net realized loss | (5,154,315) |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | (27,394,717) |
| Investments — affiliated issuers | (5,341) |
| Futures contracts | 443,706 |
| Options purchased | (1,698,124) |
| Options contracts written | 499,559 |
| Swap contracts | 745,179 |
| Net change in unrealized appreciation (depreciation) | (27,409,738) |
| Net realized and unrealized loss | (32,564,053) |
| Net decrease in net assets resulting from operations | $(11,668,783) |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 20 | Columbia Variable Portfolio – U.S. Government Mortgage Fund | Annual Report 2021 |
Statement of Changes in Net Assets
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | |
| Operations | ||
| Net investment income | $20,895,270 | $23,495,706 |
| Net realized gain (loss) | (5,154,315) | 8,759,290 |
| Net change in unrealized appreciation (depreciation) | (27,409,738) | 18,541,850 |
| Net increase (decrease) in net assets resulting from operations | (11,668,783) | 50,796,846 |
| Distributions to shareholders | ||
| Net investment income and net realized gains | ||
| Class 1 | (36,370,983) | (26,573,424) |
| Class 2 | (1,010,883) | (732,421) |
| Class 3 | (3,261,776) | (2,745,187) |
| Total distributions to shareholders | (40,643,642) | (30,051,032) |
| Increase in net assets from capital stock activity | 128,396,410 | 1,490,849 |
| Total increase in net assets | 76,083,985 | 22,236,663 |
| Net assets at beginning of year | 1,030,775,967 | 1,008,539,304 |
| Net assets at end of year | $1,106,859,952 | $1,030,775,967 |
| Year Ended | Year Ended | |||
| December 31, 2021 | December 31, 2020 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class 1 | ||||
| Subscriptions | 11,577,438 | 125,938,508 | 4,808,744 | 51,824,479 |
| Distributions reinvested | 3,454,035 | 36,370,983 | 2,492,816 | 26,573,424 |
| Redemptions | (2,905,221) | (31,442,584) | (7,345,291) | (79,205,170) |
| Net increase (decrease) | 12,126,252 | 130,866,907 | (43,731) | (807,267) |
| Class 2 | ||||
| Subscriptions | 860,971 | 9,250,188 | 834,331 | 8,974,325 |
| Distributions reinvested | 96,183 | 1,010,883 | 68,837 | 732,421 |
| Redemptions | (736,889) | (7,881,802) | (714,926) | (7,671,895) |
| Net increase | 220,265 | 2,379,269 | 188,242 | 2,034,851 |
| Class 3 | ||||
| Subscriptions | 476,822 | 5,134,602 | 698,721 | 7,530,480 |
| Distributions reinvested | 309,760 | 3,261,776 | 257,281 | 2,745,187 |
| Redemptions | (1,234,747) | (13,246,144) | (929,572) | (10,012,402) |
| Net increase (decrease) | (448,165) | (4,849,766) | 26,430 | 263,265 |
| Total net increase | 11,898,352 | 128,396,410 | 170,941 | 1,490,849 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – U.S. Government Mortgage Fund | Annual Report 2021 | 21 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect any fees and expenses imposed under your
Contract and/or Qualified Plan, as applicable; such fees and expenses would reduce the total returns for all periods shown. Total return and portfolio turnover are not annualized for periods of less than one year. The
portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain derivatives, if any. If such transactions were included, the Fund’s portfolio
turnover rate may be higher.
| Net asset value, beginning of period | Net investment income | Net realized and unrealized gain (loss) | Total from investment operations | Distributions from net investment income | Distributions from net realized gains | Total distributions to shareholders | |
| Class 1 | |||||||
| Year Ended 12/31/2021 | $10.83 | 0.20 | (0.30) | (0.10) | (0.22) | (0.17) | (0.39) |
| Year Ended 12/31/2020 | $10.62 | 0.25 | 0.29 | 0.54 | (0.29) | (0.04) | (0.33) |
| Year Ended 12/31/2019 | $10.23 | 0.30 | 0.38 | 0.68 | (0.29) | — | (0.29) |
| Year Ended 12/31/2018 | $10.35 | 0.30 | (0.11) | 0.19 | (0.30) | (0.01) | (0.31) |
| Year Ended 12/31/2017 | $10.32 | 0.29 | 0.05 | 0.34 | (0.30) | (0.01) | (0.31) |
| Class 2 | |||||||
| Year Ended 12/31/2021 | $10.80 | 0.17 | (0.29) | (0.12) | (0.20) | (0.17) | (0.37) |
| Year Ended 12/31/2020 | $10.59 | 0.22 | 0.29 | 0.51 | (0.26) | (0.04) | (0.30) |
| Year Ended 12/31/2019 | $10.20 | 0.27 | 0.39 | 0.66 | (0.27) | — | (0.27) |
| Year Ended 12/31/2018 | $10.32 | 0.27 | (0.11) | 0.16 | (0.27) | (0.01) | (0.28) |
| Year Ended 12/31/2017 | $10.30 | 0.26 | 0.05 | 0.31 | (0.28) | (0.01) | (0.29) |
| Class 3 | |||||||
| Year Ended 12/31/2021 | $10.83 | 0.19 | (0.30) | (0.11) | (0.21) | (0.17) | (0.38) |
| Year Ended 12/31/2020 | $10.62 | 0.24 | 0.28 | 0.52 | (0.27) | (0.04) | (0.31) |
| Year Ended 12/31/2019 | $10.23 | 0.28 | 0.39 | 0.67 | (0.28) | — | (0.28) |
| Year Ended 12/31/2018 | $10.35 | 0.28 | (0.11) | 0.17 | (0.28) | (0.01) | (0.29) |
| Year Ended 12/31/2017 | $10.32 | 0.27 | 0.06 | 0.33 | (0.29) | (0.01) | (0.30) |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Ratios include interest on collateral expense. For the periods indicated below, if interest on collateral expense had been excluded, expenses would have been lower by: |
| Class | 12/31/2021 | 12/31/2020 | 12/31/2019 | 12/31/2018 |
| Class 1 | less than 0.01% | less than 0.01% | 0.01% | less than 0.01% |
| Class 2 | less than 0.01% | less than 0.01% | 0.01% | less than 0.01% |
| Class 3 | less than 0.01% | less than 0.01% | 0.01% | less than 0.01% |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 22 | Columbia Variable Portfolio – U.S. Government Mortgage Fund | Annual Report 2021 |
Financial Highlights (continued)
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets(a) | Total net expense ratio to average net assets(a),(b) | Net investment income ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Class 1 | |||||||
| Year Ended 12/31/2021 | $10.34 | (0.95%) | 0.45%(c) | 0.45%(c) | 1.88% | 302% | $989,683 |
| Year Ended 12/31/2020 | $10.83 | 5.09% | 0.46%(c) | 0.46%(c) | 2.32% | 332% | $905,531 |
| Year Ended 12/31/2019 | $10.62 | 6.73% | 0.46%(c) | 0.46%(c) | 2.83% | 335% | $888,047 |
| Year Ended 12/31/2018 | $10.23 | 1.85% | 0.46%(c) | 0.46%(c) | 2.91% | 286% | $847,752 |
| Year Ended 12/31/2017 | $10.35 | 3.34% | 0.48% | 0.48% | 2.77% | 320% | $898,922 |
| Class 2 | |||||||
| Year Ended 12/31/2021 | $10.31 | (1.20%) | 0.70%(c) | 0.70%(c) | 1.62% | 302% | $29,150 |
| Year Ended 12/31/2020 | $10.80 | 4.85% | 0.71%(c) | 0.71%(c) | 2.07% | 332% | $28,163 |
| Year Ended 12/31/2019 | $10.59 | 6.50% | 0.71%(c) | 0.71%(c) | 2.57% | 335% | $25,616 |
| Year Ended 12/31/2018 | $10.20 | 1.60% | 0.71%(c) | 0.71%(c) | 2.66% | 286% | $22,932 |
| Year Ended 12/31/2017 | $10.32 | 2.99% | 0.73% | 0.73% | 2.52% | 320% | $24,782 |
| Class 3 | |||||||
| Year Ended 12/31/2021 | $10.34 | (1.07%) | 0.58%(c) | 0.58%(c) | 1.74% | 302% | $88,027 |
| Year Ended 12/31/2020 | $10.83 | 4.96% | 0.58%(c) | 0.58%(c) | 2.20% | 332% | $97,082 |
| Year Ended 12/31/2019 | $10.62 | 6.61% | 0.59%(c) | 0.59%(c) | 2.71% | 335% | $94,876 |
| Year Ended 12/31/2018 | $10.23 | 1.72% | 0.58%(c) | 0.58%(c) | 2.78% | 286% | $99,204 |
| Year Ended 12/31/2017 | $10.35 | 3.22% | 0.61% | 0.61% | 2.65% | 320% | $120,079 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – U.S. Government Mortgage Fund | Annual Report 2021 | 23 |
Notes to Financial Statements
December 31, 2021
December 31, 2021
Note 1. Organization
Columbia Variable Portfolio
– U.S. Government Mortgage Fund (the Fund), a series of Columbia Funds Variable Series Trust II (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended
(the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers Class 1, Class 2 and Class 3 shares to separate accounts funding variable annuity contracts and variable life insurance policies (collectively, Contracts) issued
by affiliated and unaffiliated life insurance companies (Participating Insurance Companies) as well as qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors (Qualified
Investors) authorized by Columbia Management Investment Distributors, Inc. (the Distributor). You may not buy (nor will you own) shares of the Fund directly. You may invest by participating in a Qualified Plan or by
buying a Contract and making allocations to the Fund. Although all share classes generally have identical voting, dividend and liquidation rights, each share class votes separately when required by the Trust’s
organizational documents or by law. Different share classes pay different net investment income distribution amounts to the extent the expenses of such share classes differ, and distributions in liquidation will be
proportional to the net asset value of each share class. Each share class has its own cost structure and other features.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Asset- and mortgage-backed
securities are generally valued by pricing services, which utilize pricing models that incorporate the securities’ cash flow and loan performance data. These models also take into account available market data,
including trades, market quotations, and benchmark yield curves for identical or similar securities. Factors used to identify similar securities may include, but are not limited to, issuer, collateral type, vintage,
prepayment speeds, collateral performance, credit ratings, credit enhancement and expected life. Asset-backed securities for which quotations are readily available may also be valued based upon an over-the-counter or
exchange bid quote from an approved independent broker-dealer. Debt securities maturing in 60 days or less are valued primarily at amortized market value, unless this method results in a valuation that management
believes does not approximate fair value.
Investments in open-end investment
companies (other than exchange-traded funds (ETFs)), are valued at the latest net asset value reported by those companies as of the valuation time.
Futures and options on futures
contracts are valued based upon the settlement price at the close of regular trading on their principal exchanges or, in the absence of a settlement price, at the mean of the latest quoted bid and ask prices.
Option contracts are valued at the
mean of the latest quoted bid and ask prices on their primary exchanges. Option contracts, including over-the-counter option contracts, with no readily available market quotations are valued using mid-market
evaluations from independent third-party vendors.
Swap transactions are valued
through an independent pricing service or broker, or if neither is available, through an internal model based upon observable inputs.
| 24 | Columbia Variable Portfolio – U.S. Government Mortgage Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Derivative instruments
The Fund invests in certain
derivative instruments, as detailed below, in seeking to meet its investment objectives. Derivatives are instruments whose values depend on, or are derived from, in whole or in part, the value of one or more
securities, currencies, commodities, indices, or other assets or instruments. Derivatives may be used to increase investment flexibility (including to maintain cash reserves while maintaining desired exposure to
certain assets), for risk management (hedging) purposes, to facilitate trading, to reduce transaction costs and to pursue higher investment returns. The Fund may also use derivative instruments to mitigate certain
investment risks, such as foreign currency exchange rate risk, interest rate risk and credit risk. Derivatives may involve various risks, including the potential inability of the counterparty to fulfill its
obligations under the terms of the contract, the potential for an illiquid secondary market (making it difficult for the Fund to sell or terminate, including at favorable prices) and the potential for market movements
which may expose the Fund to gains or losses in excess of the amount shown in the Statement of Assets and Liabilities. The notional amounts of derivative instruments, if applicable, are not recorded in the financial
statements.
A derivative instrument may suffer
a marked-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform its
obligations under the contract. The Fund’s risk of loss from counterparty credit risk on over-the-counter derivatives is generally limited to the aggregate unrealized gain netted against any collateral held by
the Fund and the amount of any variation margin held by the counterparty, plus any replacement costs or related amounts. With exchange-traded or centrally cleared derivatives, there is reduced counterparty credit risk
to the Fund since the clearinghouse or central counterparty (CCP) provides some protection in the case of clearing member default. The clearinghouse or CCP stands between the buyer and the seller of the contract;
therefore, additional counterparty credit risk is failure of the clearinghouse or CCP. However, credit risk still exists in exchange-traded or centrally cleared derivatives with respect to initial and variation margin
that is held in a broker’s customer account. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy
and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients and such shortfall is remedied by the CCP or otherwise, U.S. bankruptcy laws will typically
allocate that shortfall on a pro-rata basis across all the clearing broker’s customers (including the Fund), potentially resulting in losses to the Fund.
In order to better define its
contractual rights and to secure rights that will help the Fund mitigate its counterparty risk, the Fund may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (ISDA Master Agreement)
or similar agreement with its derivatives counterparties. An ISDA Master Agreement is an agreement between the Fund and a counterparty that governs over-the-counter derivatives and foreign exchange forward contracts
and contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset
with the counterparty certain derivative instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically
permit a single net payment in the event of default (close-out netting), including the bankruptcy or insolvency of the counterparty. Note, however, that bankruptcy or insolvency laws of a particular jurisdiction may
impose restrictions on or prohibitions against the right of offset or netting in bankruptcy, insolvency or other events.
| Columbia Variable Portfolio – U.S. Government Mortgage Fund | Annual Report 2021 | 25 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Collateral (margin) requirements
differ by type of derivative. Margin requirements are established by the clearinghouse or CCP for exchange-traded and centrally cleared derivatives. Brokers can ask for margin in excess of the minimum in certain
circumstances. Collateral terms for most over-the-counter derivatives are subject to regulatory requirements to exchange variation margin with trading counterparties and may have contract specific margin terms as
well. For over-the-counter derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the marked-to-market amount for each transaction under such agreement and
comparing that amount to the value of any variation margin currently pledged by the Fund and/or the counterparty. Generally, the amount of collateral due from or to a party has to exceed a minimum transfer amount
threshold (e.g., $250,000) before a transfer has to be made. To the extent amounts due to the Fund from its counterparties are not fully collateralized, contractually or otherwise, the Fund bears the risk of loss from
counterparty nonperformance. The Fund may also pay interest expense on cash collateral received from the broker. Any interest expense paid by the Fund is shown on the Statement of Operations. The Fund attempts to
mitigate counterparty risk by only entering into agreements with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those
counterparties.
Certain ISDA Master Agreements
allow counterparties of over-the-counter derivatives transactions to terminate derivatives contracts prior to maturity in the event the Fund’s net asset value declines by a stated percentage over a specified
time period or if the Fund fails to meet certain terms of the ISDA Master Agreement, which would cause the Fund to accelerate payment of any net liability owed to the counterparty. The Fund also has termination
rights if the counterparty fails to meet certain terms of the ISDA Master Agreement. In determining whether to exercise such termination rights, the Fund would consider, in addition to counterparty credit risk,
whether termination would result in a net liability owed from the counterparty.
For financial reporting purposes,
the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statement of Assets and Liabilities.
Futures contracts
Futures contracts are
exchange-traded and represent commitments for the future purchase or sale of an asset at a specified price on a specified date. The Fund bought and sold futures contracts to manage the duration and yield curve
exposure of the Fund versus the benchmark and to manage exposure to movements in interest rates. These instruments may be used for other purposes in future periods. Upon entering into futures contracts, the Fund bears
risks that it may not achieve the anticipated benefits of the futures contracts and may realize a loss. Additional risks include counterparty credit risk, the possibility of an illiquid market, and that a change in
the value of the contract or option may not correlate with changes in the value of the underlying asset.
Upon entering into a futures
contract, the Fund deposits cash or securities with the broker, known as a futures commission merchant (FCM), in an amount sufficient to meet the initial margin requirement. The initial margin deposit must be
maintained at an established level over the life of the contract. Cash deposited as initial margin is recorded in the Statement of Assets and Liabilities as margin deposits. Securities deposited as initial margin are
designated in the Portfolio of Investments. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily change in the contract value and are
recorded as variation margin receivable or payable and are offset in unrealized gains or losses. The Fund generally expects to earn interest income on its margin deposits. The Fund recognizes a realized gain or loss
when the contract is closed or expires. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities.
Options contracts
Options are contracts which entitle
the holder to purchase or sell securities or other identified assets at a specified price, or in the case of index option contracts, to receive or pay the difference between the index value and the strike price of the
index option contract. Option contracts can be either exchange-traded or over-the-counter. The Fund purchased and has written option contracts to manage exposure to fluctuations in interest rates and to hedge the fair
value of the Fund’s investments. These instruments may be used for other purposes in future periods. Completion of transactions for option contracts traded in the over-the-counter market depends upon the
performance of the other party. Collateral may be collected or posted by the Fund to secure over-the-counter option contract trades. Collateral held or posted by the Fund for such option contract trades must be
returned to the broker or the Fund upon closure, exercise or expiration of the contract.
| 26 | Columbia Variable Portfolio – U.S. Government Mortgage Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Options contracts purchased are
recorded as investments. When the Fund writes an options contract, the premium received is recorded as an asset and an amount equivalent to the premium is recorded as a liability in the Statement of Assets and
Liabilities and is subsequently adjusted to reflect the current fair value of the option written. Changes in the fair value of the written option are recorded as unrealized appreciation or depreciation until the
contract is exercised or has expired. The Fund realizes a gain or loss when the option contract is closed or expires. When option contracts are exercised, the proceeds on sales for a written call or purchased put
option contract, or the purchase cost for a written put or purchased call option contract, is adjusted by the amount of premium received or paid.
For over-the-counter options
purchased, the Fund bears the risk of loss of the amount of the premiums paid plus the positive change in market values net of any collateral held by the Fund should the counterparty fail to perform under the
contracts. Option contracts written by the Fund do not typically give rise to significant counterparty credit risk, as options written generally obligate the Fund and not the counterparty to perform. The risk in
writing a call option contract is that the Fund gives up the opportunity for profit if the market price of the security increases above the strike price and the option contract is exercised. The risk in writing a put
option contract is that the Fund may incur a loss if the market price of the security decreases below the strike price and the option contract is exercised. Exercise of a written option could result in the Fund
purchasing or selling a security or foreign currency when it otherwise would not, or at a price different from the current market value. In purchasing and writing options, the Fund bears the risk of an unfavorable
change in the value of the underlying instrument or the risk that the Fund may not be able to enter into a closing transaction due to an illiquid market.
Interest rate swaption contracts
Interest rate swaption contracts
entered into by the Fund typically represent an option that gives the purchaser the right, but not the obligation, to enter into an interest rate swap contract on a future date. Each interest rate swaption contract
will specify if the buyer is entitled to receive the fixed or floating rate if the interest rate is exercised. Changes in the value of a purchased interest rate swaption contracts are reported as unrealized
appreciation or depreciation on options in the Statement of Assets and Liabilities. Gain or loss is recognized in the Statement of Operations when the interest rate swaption contract is closed or expires.
When the Fund writes an interest
rate swaption contract, the premium received is recorded as an asset and an amount equivalent to the premium is recorded as a liability in the Statement of Assets and Liabilities and is subsequently adjusted to
reflect the current fair value of the interest rate swaption contract written. Premiums received from writing interest rate swaption contracts that expire unexercised are recorded by the Fund on the expiration date as
realized gains from options written in the Statement of Operations. The difference between the premium and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also recorded
as realized gain, or if the premium is less than the amount paid for the closing purchase, as realized loss. These amounts are reflected as net realized gain (loss) on options written in the Statement of
Operations.
Swap contracts
Swap contracts are negotiated in
the over-the-counter market and may be entered into as a bilateral contract or centrally cleared (centrally cleared swap contract). In a centrally cleared swap contract, immediately following execution of the swap
contract with a broker, the swap contract is novated to a central counterparty (the CCP) and the CCP becomes the Fund’s counterparty to the centrally cleared swap contract. The Fund is required to deposit
initial margin with the futures commission merchant (FCM), which pledges it through to the CCP in the form of cash or securities in an amount that varies depending on the size and risk profile of the particular swap
contract. Securities deposited as initial margin are designated in the Portfolio of Investments and cash deposited is recorded in the Statement of Assets and Liabilities as margin deposits. For a bilateral swap
contract, the Fund has credit exposure to the broker, but exchanges daily variation margin with the broker based on the mark-to-market value of the swap contract to minimize that exposure. For centrally cleared swap
contracts, the Fund has minimal credit exposure to the FCM because the CCP stands between the Fund and the relevant buyer/seller on the other side of the contract. Swap contracts are marked-to-market daily and changes
in value are recorded as unrealized appreciation (depreciation). The daily change in valuation of centrally cleared swap contracts, if any, is recorded as a receivable or payable for variation margin in the Statement
of Assets and Liabilities.
| Columbia Variable Portfolio – U.S. Government Mortgage Fund | Annual Report 2021 | 27 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Entering into these contracts
involves, to varying degrees, elements of interest, liquidity and counterparty credit risk in excess of the amounts recognized in the Statement of Assets and Liabilities. Such risks involve the possibility that there
may be unfavorable changes in interest rates, market conditions or other conditions, that it may be difficult to initiate a swap transaction or liquidate a position at an advantageous time or price which may result in
significant losses, and that the FCM or CCP may not fulfill its obligation under the contract.
Credit default swap contracts
The Fund entered into credit
default swap contracts to increase or decrease its credit exposure to an index and to manage credit risk exposure. These instruments may be used for other purposes in future periods. Credit default swap contracts are
transactions in which one party pays fixed periodic payments to a counterparty in consideration for an agreement from the counterparty to make a specific payment should a specified credit event(s) take place. Although
specified credit events are contract specific, credit events are typically bankruptcy, failure to pay, restructuring, obligation acceleration, obligation default, or repudiation/moratorium.
As the purchaser of a credit
default swap contract, the Fund purchases protection by paying a periodic interest rate on the notional amount to the counterparty. The interest amount is accrued daily as a component of unrealized appreciation
(depreciation) and is recorded as a realized loss upon payment. If a credit event as specified in the contract occurs, the Fund may have the option either to deliver the reference obligation to the seller in exchange
for a cash payment of its par amount, or to receive a net cash settlement equal to the par amount less an agreed-upon value of the reference obligation as of the date of the credit event. The difference between the
value of the obligation or cash delivered and the notional amount received will be recorded as a realized gain (loss).
As the seller of a credit default
swap contract, the Fund sells protection to a buyer and will generally receive a periodic interest rate on a notional amount. The interest amount is accrued daily as a component of unrealized appreciation
(depreciation) and is recorded as a realized gain upon receipt of the payment. If a credit event as specified in the contract with the counterparty occurs, the Fund may either be required to accept the reference
obligation from the buyer in exchange for a cash payment of its notional amount, or to pay the buyer a net cash settlement equal to the notional amount less an agreed-upon value of the reference obligation (recovery
value) as of the date of the credit event. The difference between the value of the obligation or cash received and the notional amount paid will be recorded as a realized gain (loss). The maximum potential amount of
undiscounted future payments the Fund could be required to make as the seller of protection under a credit default swap contract is equal to the notional amount of the reference obligation. These potential amounts may
be partially offset by any recovery values of the respective reference obligations or upfront receipts upon entering into the agreement. The notional amounts and market values of all credit default swap contracts in
which the Fund is the seller of protection, if any, are disclosed in the Credit Default Swap Contracts Outstanding schedule following the Portfolio of Investments.
As a protection seller, the Fund
bears the risk of loss from the credit events specified in the contract with the counterparty. For credit default swap contracts on credit indices, quoted market prices and resulting market values serve as an
indicator of the current status of the payment/performance risk. Increasing market values, in absolute terms when compared to the notional amount of the swap, represent a deterioration of the reference entity’s
credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the contract.
Any upfront payment or receipt by
the Fund upon entering into a credit default swap contract is recorded as an asset or liability, respectively, and amortized daily as a component of realized gain (loss) in the Statement of Operations. Credit default
swap contracts are valued daily, and the change in value is recorded as unrealized appreciation (depreciation) until the termination of the swap, at which time a realized gain (loss) is recorded.
Credit default swap contracts can
involve greater risks than if a fund had invested in the reference obligation directly since, in addition to general market risks, credit default swaps are subject to counterparty credit risk, leverage risk, hedging
risk, correlation risk and liquidity risk.
| 28 | Columbia Variable Portfolio – U.S. Government Mortgage Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Interest rate and inflation
rate swap contracts
The Fund entered into interest rate
swap transactions and/or inflation rate swap contracts to manage interest rate risk. These instruments may be used for other purposes in future periods. An interest rate swap or inflation rate swap, as applicable, is
an agreement between two parties where there are two flows and payments are made between the two counterparties and the payments are dependent upon changes in an interest rate, inflation rate or inflation index
calculated on a nominal amount. Interest rate swaps are agreements between two parties that involve the exchange of one type of interest rate for another type of interest rate cash flow on specified dates in the
future, based on a predetermined, specified notional amount. Certain interest rate swaps are considered forward-starting, whereby the accrual for the exchange of cash flows does not begin until a specified date in the
future. The net cash flow for a standard interest rate swap transaction is generally the difference between a floating market interest rate versus a fixed interest rate.
Interest rate swaps are valued
daily and unrealized appreciation (depreciation) is recorded. Certain interest rate swaps may accrue periodic interest on a daily basis as a component of unrealized appreciation (depreciation); the Fund will realize a
gain or loss upon the payment or receipt of accrued interest. The Fund will realize a gain or a loss when the interest rate swap is terminated.
Effects of derivative transactions in
the financial statements
The following tables are intended
to provide additional information about the effect of derivatives on the financial statements of the Fund, including: the fair value of derivatives by risk category and the location of those fair values in the
Statement of Assets and Liabilities; and the impact of derivative transactions over the period in the Statement of Operations, including realized and unrealized gains (losses). The derivative instrument schedules
following the Portfolio of Investments present additional information regarding derivative instruments outstanding at the end of the period, if any.
The following table is a summary of
the fair value of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) at December 31, 2021:
| Asset derivatives | ||
| Risk exposure category | Statement of assets and liabilities location | Fair value ($) |
| Credit risk | Component of total distributable earnings (loss) — unrealized appreciation on swap contracts | 3,139,671* |
| Interest rate risk | Component of total distributable earnings (loss) — unrealized appreciation on futures contracts | 691,306* |
| Interest rate risk | Investments, at value — Options purchased | 2,266,545 |
| Total | 6,097,522 |
| Liability derivatives | ||
| Risk exposure category | Statement of assets and liabilities location | Fair value ($) |
| Credit risk | Component of total distributable earnings (loss) — unrealized depreciation on swap contracts | 360,926* |
| Credit risk | Upfront receipts on swap contracts | 5,181,092 |
| Interest rate risk | Component of total distributable earnings (loss) — unrealized depreciation on futures contracts | 8,911* |
| Interest rate risk | Options contracts written, at value | 518,401 |
| Total | 6,069,330 |
| * | Includes cumulative appreciation (depreciation) as reported in the tables following the Portfolio of Investments. Only the current day’s variation margin is reported in receivables or payables in the Statement of Assets and Liabilities. |
| Columbia Variable Portfolio – U.S. Government Mortgage Fund | Annual Report 2021 | 29 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
The following table indicates the
effect of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) in the Statement of Operations for the year ended December 31, 2021:
| Amount of realized gain (loss) on derivatives recognized in income | |||||
| Risk exposure category | Futures contracts ($) | Options contracts written ($) | Options contracts purchased ($) | Swap contracts ($) | Total ($) |
| Credit risk | — | — | — | 1,031,712 | 1,031,712 |
| Interest rate risk | (4,610,472) | 146,885 | 6,046,700 | (1,358,990) | 224,123 |
| Total | (4,610,472) | 146,885 | 6,046,700 | (327,278) | 1,255,835 |
| Change in unrealized appreciation (depreciation) on derivatives recognized in income | |||||
| Risk exposure category | Futures contracts ($) | Options contracts written ($) | Options contracts purchased ($) | Swap contracts ($) | Total ($) |
| Credit risk | — | — | — | 745,179 | 745,179 |
| Interest rate risk | 443,706 | 499,559 | (1,698,124) | — | (754,859) |
| Total | 443,706 | 499,559 | (1,698,124) | 745,179 | (9,680) |
The following table is a summary
of the average outstanding volume by derivative instrument for the year ended December 31, 2021:
| Derivative instrument | Average notional amounts ($)* |
| Futures contracts — long | 260,704,620 |
| Futures contracts — short | 2,063,751 |
| Credit default swap contracts — sell protection | 29,300,000 |
| Derivative instrument | Average value ($)* |
| Options contracts — purchased | 12,698,576 |
| Options contracts — written | (596,142) |
| Derivative instrument | Average unrealized appreciation ($)** | Average unrealized depreciation ($)** |
| Interest rate swap contracts | 20,073 | (174,690) |
| * | Based on the ending quarterly outstanding amounts for the year ended December 31, 2021. |
| ** | Based on the ending daily outstanding amounts for the year ended December 31, 2021. |
Asset- and mortgage-backed
securities
The Fund may invest in asset-backed
and mortgage-backed securities. The maturity dates shown represent the original maturity of the underlying obligation. Actual maturity may vary based upon prepayment activity on these obligations. All, or a portion,
of the obligation may be prepaid at any time because the underlying asset may be prepaid. As a result, decreasing market interest rates could result in an increased level of prepayment. An increased prepayment rate
will have the effect of shortening the maturity of the security. Unless otherwise noted, the coupon rates presented are fixed rates.
Delayed delivery securities
The Fund may trade securities on
other than normal settlement terms, including securities purchased or sold on a “when-issued” or "forward commitment" basis. This may increase risk to the Fund since the other party to the transaction may
fail to deliver, which could cause the Fund to subsequently invest at less advantageous prices. The Fund designates cash or liquid securities in an amount equal to the delayed delivery commitment.
| 30 | Columbia Variable Portfolio – U.S. Government Mortgage Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
To be announced securities
The Fund may trade securities on a
To Be Announced (TBA) basis. As with other delayed-delivery transactions, a seller agrees to issue a TBA security at a future date. However, the seller does not specify the particular securities to be delivered.
Instead, the Fund agrees to accept any security that meets specified terms.
In some cases, Master Securities
Forward Transaction Agreements (MSFTAs) may be used to govern transactions of certain forward-settling agency mortgage-backed securities, such as delayed-delivery and TBAs, between the Fund and counterparty. The MSFTA
maintains provisions for, among other things, initiation and confirmation, payment and transfer, events of default, termination, and maintenance of collateral relating to such transactions.
Mortgage dollar roll transactions
The Fund may enter into mortgage
“dollar rolls” in which the Fund sells securities for delivery in the current month and simultaneously contracts with the same counterparty to repurchase similar but not identical securities (same type,
coupon and maturity) on a specified future date. During the roll period, the Fund loses the right to receive principal and interest paid on the securities sold. However, the Fund may benefit because it receives
negotiated amounts in the form of reductions of the purchase price for the future purchase plus the interest earned on the cash proceeds of the securities sold until the settlement date of the forward purchase. The
Fund records the incremental difference between the forward purchase and sale of each forward roll as a realized gain or loss. Unless any realized gains exceed the income, capital appreciation, and gain or loss due to
mortgage prepayments that would have been realized on the securities sold as part of the mortgage dollar roll, the use of this technique may diminish the investment performance of the Fund compared to what the
performance would have been without the use of mortgage dollar rolls. All cash proceeds will be invested in instruments that are permissible investments for the Fund. The Fund identifies cash or liquid securities in
an amount equal to the forward purchase price.
For financial reporting and tax
purposes, the Fund treats “to be announced” mortgage dollar rolls as two separate transactions, one involving the purchase of a security and a separate transaction involving a sale. These transactions may
increase the Fund’s portfolio turnover rate. The Fund does not currently enter into mortgage dollar rolls that are accounted for as financing transactions.
Mortgage dollar rolls involve the
risk that the market value of the securities the Fund is obligated to repurchase may decline below the repurchase price, or that the counterparty may default on its obligations.
Interest only and principal only
securities
The Fund may invest in Interest
Only (IO) or Principal Only (PO) securities. IOs are stripped securities entitled to receive all of the security’s interest, but none of its principal. IOs are particularly sensitive to changes in interest rates
and therefore subject to greater fluctuations in price than typical interest bearing debt securities. IOs are also subject to credit risk because the Fund may not receive all or part of the interest payments if the
issuer, obligor, guarantor or counterparty defaults on its obligation. Payments received for IOs are included in interest income on the Statement of Operations. Because no principal will be received at the maturity of
an IO, adjustments are made to the cost of the security on a monthly basis until maturity. These adjustments are included in interest income on the Statement of Operations. POs are stripped securities entitled to
receive the principal from the underlying obligation, but not the interest. POs are particularly sensitive to changes in interest rates and therefore are subject to fluctuations in price. POs are also subject to
credit risk because the Fund may not receive all or part of its principal if the issuer, obligor, guarantor or counterparty defaults on its obligation. The Fund may also invest in IO or PO stripped mortgage-backed
securities. Payments received for POs are treated as reductions to the cost and par value of the securities.
| Columbia Variable Portfolio – U.S. Government Mortgage Fund | Annual Report 2021 | 31 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Offsetting of assets and
liabilities
The following table presents the
Fund’s gross and net amount of assets and liabilities available for offset under netting arrangements as well as any related collateral received or pledged by the Fund as of December 31, 2021:
| Citi ($)(a) | Citi ($)(a) | JPMorgan ($) | Morgan Stanley ($) | Total ($) | |
| Assets | |||||
| Options purchased calls | 102,132 | - | - | 4,312 | 106,444 |
| Options purchased puts | - | - | - | 2,160,101 | 2,160,101 |
| OTC credit default swap contracts (b) | - | 499,280 | 560,374 | 2,080,017 | 3,139,671 |
| Total assets | 102,132 | 499,280 | 560,374 | 4,244,430 | 5,406,216 |
| Liabilities | |||||
| Options contracts written | 367,680 | - | - | 150,721 | 518,401 |
| OTC credit default swap contracts (b) | - | 942,457 | 1,064,341 | 3,535,220 | 5,542,018 |
| Total liabilities | 367,680 | 942,457 | 1,064,341 | 3,685,941 | 6,060,419 |
| Total financial and derivative net assets | (265,548) | (443,177) | (503,967) | 558,489 | (654,203) |
| Total collateral received (pledged) (c) | - | (443,177) | (503,967) | 558,489 | (388,655) |
| Net amount (d) | (265,548) | - | - | - | (265,548) |
| (a) | Exposure can only be netted across transactions governed under the same master agreement with the same legal entity. |
| (b) | Over-the-Counter (OTC) swap contracts are presented at market value plus periodic payments receivable (payable), which is comprised of unrealized appreciation, unrealized depreciation, upfront payments and upfront receipts. |
| (c) | In some instances, the actual collateral received and/or pledged may be more than the amount shown due to overcollateralization. |
| (d) | Represents the net amount due from/(to) counterparties in the event of default. |
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
Income recognition
Interest income is recorded on an
accrual basis. Market premiums and discounts, including original issue discounts, are amortized and accreted, respectively, over the expected life of the security on all debt securities, unless otherwise noted. The
Fund classifies gains and losses realized on prepayments received on mortgage-backed securities as adjustments to interest income.
The Fund may place a debt security
on non-accrual status and reduce related interest income when it becomes probable that the interest will not be collected and the amount of uncollectible interest can be reasonably estimated. A defaulted debt security
is removed from non-accrual status when the issuer resumes interest payments or when collectability of interest is reasonably assured.
Dividend income is recorded on the
ex-dividend date.
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
| 32 | Columbia Variable Portfolio – U.S. Government Mortgage Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Federal income tax status
The Fund intends to qualify each
year as a regulated investment company under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its investment company taxable income and net capital gain, if any, for its
tax year, and as such will not be subject to federal income taxes. In addition, because the Fund meets the exception under Internal Revenue Code Section 4982(f), the Fund expects not to be subject to federal excise
tax. Therefore, no federal income or excise tax provision is recorded.
Distributions to subaccounts
Distributions to the subaccounts of
Contracts, Qualified Plans and Qualified Investors are recorded at the close of business on the record date and are payable on the first business day following the record date. Dividends from net investment income, if
any, are declared and distributed annually. Capital gain distributions, when available, will be made annually. However, an additional capital gain distribution may be made during the fiscal year in order to comply
with the Internal Revenue Code, as applicable to registered investment companies. Income distributions and capital gain distributions are determined in accordance with federal income tax regulations, which may differ
from GAAP. All dividends and distributions are reinvested in additional shares of the applicable share class of the Fund at the net asset value as of the ex-dividend date of the distribution.
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Under the Management Agreement, the
Investment Manager provides the Fund with investment research and advice, as well as administrative and accounting services. The management services fee is an annual fee that is equal to a percentage of the
Fund’s daily net assets that declines from 0.43% to 0.28% as the Fund’s net assets increase. The effective management services fee rate for the year ended December 31, 2021 was 0.43% of the Fund’s
average daily net assets.
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. Under a Deferred Compensation Plan (the
Deferred Plan), these members of the Board of Trustees may elect to defer payment of up to 100% of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of
certain funds managed by the Investment Manager. The Fund’s liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Deferred Plan. All
amounts payable under the Deferred Plan constitute a general unsecured obligation of the Fund. The expense for the Deferred Plan, which includes Trustees’ fees deferred during the current period as well as any
gains or losses on the Trustees’ deferred compensation balances as a result of market fluctuations, is included in "Compensation of board members" on the Statement of Operations.
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
| Columbia Variable Portfolio – U.S. Government Mortgage Fund | Annual Report 2021 | 33 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Service fees
The Fund has entered into a
Shareholder Services Agreement with Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial. Under this
agreement, the Fund pays a service fee equal to the payments made by the Transfer Agent to Participating Insurance Companies and other financial intermediaries (together, Participating Organizations) for services each
such Participating Organization provides to its clients, customers and participants that are invested directly or indirectly in the Fund, up to a cap approved by the Board of Trustees from time to time. The effective
service fee rate for the year ended December 31, 2021, was 0.01% of the Fund’s average daily net assets.
The Transfer Agent may retain as
compensation for its services revenues from fees for wire, telephone and redemption orders, account transcripts due the Transfer Agent from Fund shareholders and interest (net of bank charges) earned with respect to
balances in accounts the Transfer Agent maintains in connection with its services to the Fund.
Distribution and/or service fees
The Fund has an agreement with the
Distributor, an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution services. Under a Plan and Agreement of Distribution, the Fund pays a fee at an annual rate
of up to 0.25% of the Fund’s average daily net assets attributable to Class 2 shares and an annual rate of up to 0.125% of the Fund’s average daily net assets attributable to Class 3 shares. The Fund pays
no distribution and service fees for Class 1 shares.
Expenses waived/reimbursed by the
Investment Manager and its affiliates
The Investment Manager and certain
of its affiliates have contractually agreed to waive fees and/or reimburse expenses (excluding certain fees and expenses described below) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, so that the Fund’s net operating expenses, after giving effect to fees waived/expenses reimbursed and any balance credits and/or overdraft charges from the Fund’s
custodian, do not exceed the following annual rate(s) as a percentage of the classes’ average daily net assets:
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), expenses associated with investments in affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange-traded funds), transaction costs and
brokerage commissions, costs related to any securities lending program, dividend expenses associated with securities sold short, inverse floater program fees and expenses, transaction charges and interest on borrowed
money, interest, costs associated with certain shareholder meetings, infrequent and/or unusual expenses and any other expenses the exclusion of which is specifically approved by the Board of Trustees. This
agreement may be modified or amended only with approval from the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements
described above are not recoverable by the Investment Manager or its affiliates in future periods.
Note 4. Federal tax
information
The timing and character of
income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP because of temporary or permanent book to tax differences.
| 34 | Columbia Variable Portfolio – U.S. Government Mortgage Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
At December 31, 2021, these
differences were primarily due to differing treatment for trustees’ deferred compensation, derivative investments, tax straddles, capital loss carryforward, re-characterization of distributions for investments,
swap investments, principal and/or interest of fixed income securities and distribution reclassifications. To the extent these differences were permanent, reclassifications were made among the components of the
Fund’s net assets. Temporary differences do not require reclassifications.
The following reclassifications
were made:
| Undistributed net investment income ($) | Accumulated net realized (loss) ($) | Paid in capital ($) |
| (348,688) | 348,688 | — |
Net investment income (loss) and
net realized gains (losses), as disclosed in the Statement of Operations, and net assets were not affected by this reclassification.
The tax character of distributions
paid during the years indicated was as follows:
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | ||||
| Ordinary income ($) | Long-term capital gains ($) | Total ($) | Ordinary income ($) | Long-term capital gains ($) | Total ($) |
| 38,957,952 | 1,685,690 | 40,643,642 | 30,051,032 | — | 30,051,032 |
Short-term capital gain
distributions, if any, are considered ordinary income distributions for tax purposes.
At December 31, 2021, the
components of distributable earnings on a tax basis were as follows:
| Undistributed ordinary income ($) | Undistributed long-term capital gains ($) | Capital loss carryforwards ($) | Net unrealized (depreciation) ($) |
| 20,258,083 | — | (7,535,407) | (9,296,580) |
At December 31, 2021, the cost of
all investments for federal income tax purposes along with the aggregate gross unrealized appreciation and depreciation based on that cost was:
| Federal tax cost ($) | Gross unrealized appreciation ($) | Gross unrealized (depreciation) ($) | Net unrealized (depreciation) ($) |
| 1,353,613,630 | 22,068,170 | (31,364,750) | (9,296,580) |
Tax cost of investments and
unrealized appreciation/(depreciation) may also include timing differences that do not constitute adjustments to tax basis.
The following capital loss
carryforwards, determined at December 31, 2021, may be available to reduce future net realized gains on investments, if any, to the extent permitted by the Internal Revenue Code. In addition, for the year ended
December 31, 2021, capital loss carryforwards utilized, if any, were as follows:
| No expiration short-term ($) | No expiration long-term ($) | Total ($) | Utilized ($) |
| — | (7,535,407) | (7,535,407) | — |
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
| Columbia Variable Portfolio – U.S. Government Mortgage Fund | Annual Report 2021 | 35 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Note 5. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $4,061,268,157 and $4,018,807,329, respectively, for the year ended December 31, 2021, of which $3,866,934,942
and $3,866,392,749, respectively, were U.S. government securities. The amount of purchase and sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 6. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes
referred to as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
Note 7. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund did not borrow or lend
money under the Interfund Program during the year ended December 31, 2021.
Note 8. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to an October 28, 2021 amendment and restatement, the credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment
Manager or an affiliated investment manager, severally and not jointly, permits collective borrowings up to $950 million. Interest is currently charged to each participating fund based on its borrowings at a rate
equal to the higher of (i) the federal funds effective rate, (ii) the secured overnight financing rate plus 0.11448% and (iii) the overnight bank funding rate, plus in each case, 1.00%. Each borrowing under the credit
facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The
commitment fee is included in other expenses in the Statement of Operations. This agreement expires annually in October unless extended or renewed. Prior to the October 28, 2021 amendment and restatement, the Fund had
access to a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. which permitted collective borrowings up to $950 million. Interest was
charged to each participating fund based on its borrowings at a rate equal to the higher of (i) the federal funds effective rate, (ii) the one-month London Interbank Offered Rate (LIBOR) rate and (iii) the overnight
bank funding rate, plus in each case, 1.25%.
The Fund had no borrowings during
the year ended December 31, 2021.
| 36 | Columbia Variable Portfolio – U.S. Government Mortgage Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Note 9. Significant
risks
Credit risk
Credit risk is the risk that the
value of debt instruments in the Fund’s portfolio may decline because the issuer defaults or otherwise becomes unable or unwilling, or is perceived to be unable or unwilling, to honor its financial obligations,
such as making payments to the Fund when due. Credit rating agencies assign credit ratings to certain debt instruments to indicate their credit risk. Lower-rated or unrated debt instruments held by the Fund may
present increased credit risk as compared to higher-rated debt instruments.
Derivatives risk
Losses involving derivative
instruments may be substantial, because a relatively small movement in the underlying reference (which is generally the price, rate or other economic indicator associated with a security(ies), commodity, currency or
index or other instrument or asset) may result in a substantial loss for the Fund. In addition to the potential for increased losses, the use of derivative instruments may lead to increased volatility within the Fund.
Derivatives will typically increase the Fund’s exposure to principal risks to which it is otherwise exposed, and may expose the Fund to additional risks, including correlation risk, counterparty risk, hedging
risk, leverage risk, liquidity risk and pricing risk.
Interest rate risk
Interest rate risk is the risk of
losses attributable to changes in interest rates. In general, if prevailing interest rates rise, the values of debt instruments tend to fall, and if interest rates fall, the values of debt instruments tend to rise.
Actions by governments and central banking authorities can result in increases or decreases in interest rates. Higher periods of inflation could lead such authorities to raise interest rates. Increasing interest rates
may negatively affect the value of debt securities held by the Fund, resulting in a negative impact on the Fund’s performance and net asset value per share. In general, the longer the maturity or duration of a
debt security, the greater its sensitivity to changes in interest rates. The Fund is subject to the risk that the income generated by its investments may not keep pace with inflation.
LIBOR replacement risk
The elimination of London
Inter-Bank Offered Rate (LIBOR), among other "inter-bank offered" reference rates, may adversely affect the interest rates on, and value of, certain Fund investments for which the value is tied to LIBOR. The U.K.
Financial Conduct Authority and the ICE Benchmark Administration have announced that most LIBOR settings will no longer be published after December 31, 2021 and a majority of U.S. dollar LIBOR settings will cease
publication after June 30, 2023. It is possible that a subset of LIBOR settings will be published after these dates on a “synthetic” basis, but any such publications would be considered non-representative
of the underlying market. Markets are slowly developing in response to these new reference rates. Uncertainty related to the liquidity impact of the change in rates, and how to appropriately adjust these rates at the
time of transition, poses risks for the Fund. These risks are likely to persist until new reference rates and fallbacks for both legacy and new instruments and contracts are commercially accepted and market practices
become settled. Alternatives to LIBOR have been established or are in development in most major currencies, including the Secured Overnight Financing Rate (SOFR) that is intended to replace U.S. dollar LIBOR.
Liquidity risk
Liquidity risk is the risk
associated with a lack of marketability of investments which may make it difficult to sell the investment at a desirable time or price. Changing regulatory, market or other conditions or environments (for example, the
interest rate or credit environments) may adversely affect the liquidity of the Fund’s investments. The Fund may have to accept a lower selling price for the holding, sell other investments, or forego another,
more appealing investment opportunity. Generally, the less liquid the market at the time the Fund sells a portfolio investment, the greater the risk of loss or decline of value to the Fund. A less liquid market can
lead to an increase in Fund redemptions, which may negatively impact Fund performance and net asset value per share, including, for example, if the Fund is forced to sell securities in a down market.
| Columbia Variable Portfolio – U.S. Government Mortgage Fund | Annual Report 2021 | 37 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Market risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
The coronavirus disease 2019 and
its variants (COVID-19) pandemic has resulted in, and may continue to result in, significant global economic and societal disruption and market volatility due to disruptions in market access, resource availability,
facilities operations, imposition of tariffs, export controls and supply chain disruption, among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement
and loss in human and other resources. The uncertainty surrounding the magnitude, duration, reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental
authorities or other third parties, present unknowns that are yet to unfold. The impacts, as well as the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and
pandemics that may arise in the future – could negatively affect global economies and markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in
emerging market countries may be greater due to generally less established healthcare systems, governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing
political, social and economic risks in certain countries or globally. The disruptions caused by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively
impact the Fund’s ability to achieve its investment objectives. Any such event(s) could have a significant adverse impact on the value and risk profile of the Fund.
Mortgage- and other asset-backed
securities risk
The value of any mortgage-backed
and other asset-backed securities including collateralized debt obligations, if any, held by the Fund may be affected by, among other things, changes or perceived changes in: interest rates; factors concerning the
interests in and structure of the issuer or the originator of the mortgages or other assets; the creditworthiness of the entities that provide any supporting letters of credit, surety bonds or other credit enhancements;
or the market’s assessment of the quality of underlying assets. Payment of principal and interest on some mortgage-backed securities (but not the market value of the securities themselves) may be guaranteed by
the full faith and credit of a particular U.S. Government agency, authority, enterprise or instrumentality, and some, but not all, are also insured or guaranteed by the U.S. Government. Mortgage-backed securities
issued by non-governmental issuers (such as commercial banks, savings and loan institutions, private mortgage insurance companies, mortgage bankers and other secondary market issuers) may entail greater risk than
obligations guaranteed by the U.S. Government. Mortgage- and other asset-backed securities are subject to liquidity risk and prepayment risk. A decline or flattening of housing values may cause delinquencies in
mortgages (especially sub-prime or non-prime mortgages) underlying mortgage-backed securities and thereby adversely affect the ability of the mortgage-backed securities issuer to make principal and/or interest
payments to mortgage-backed securities holders, including the Fund. Rising or high interest rates tend to extend the duration of mortgage- and other asset-backed securities, making their prices more volatile and more
sensitive to changes in interest rates.
Shareholder concentration risk
At December 31, 2021, affiliated
shareholders of record owned 98.5% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its
| 38 | Columbia Variable Portfolio – U.S. Government Mortgage Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
liquid positions, which may result in Fund losses
and the Fund holding a higher percentage of less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Note 10. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
Note 11. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in
connection with the conduct of their business activities. Ameriprise Financial believes that the Fund is not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject
of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with
the Fund. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (SEC) on legal and regulatory matters that relate to
Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that
these matters, or the adverse publicity associated with them, will not result in increased Fund redemptions, reduced sale of Fund shares or other adverse consequences to the Fund. Further, although we believe
proceedings are not likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines,
penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial or one or more of its affiliates that provides services to
the Fund.
| Columbia Variable Portfolio – U.S. Government Mortgage Fund | Annual Report 2021 | 39 |
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees of Columbia
Funds Variable Series Trust II and Shareholders of Columbia Variable Portfolio – U.S. Government Mortgage Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of Columbia Variable Portfolio – U.S. Government Mortgage Fund (one of the funds constituting Columbia Funds Variable Series Trust II,
referred to hereafter as the "Fund") as of December 31, 2021, the related statement of operations for the year ended December 31, 2021, the statement of changes in net assets for each of the two years in the period
ended December 31, 2021, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2021 (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, 2021, 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, 2021 and the financial highlights for each of the five years in the period ended December 31, 2021 in conformity with accounting principles generally
accepted in the United States of America.
Basis for Opinion
These financial statements are the
responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these
financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2021 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.
/s/PricewaterhouseCoopers LLP
Minneapolis, Minnesota
February 22, 2022
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| 40 | Columbia Variable Portfolio – U.S. Government Mortgage Fund | Annual Report 2021 |
TRUSTEES AND
OFFICERS
The Board oversees the
Fund’s operations and appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following table provides basic biographical information about the
Fund’s Trustees as of the printing of this report, including their principal occupations during the past five years, although specific titles for individuals may have varied over the period. The year set forth
beneath Length of Service in the table below is the year in which the Trustee was first appointed or elected as Trustee to any Fund currently in the Columbia Funds Complex or a predecessor thereof. Under current Board
policy, each Trustee generally serves until December 31 of the year such Trustee turns seventy-five (75).
Independent trustees
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| George S. Batejan c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1953 | Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 176 | Former Chairman of the Board, NICSA (National Investment Company Services Association) (Executive Committee, Nominating Committee and Governance Committee), 2014-2016; former Director, Intech Investment Management, 2011-2016; former Board Member, Metro Denver Chamber of Commerce, 2015-2016; former Advisory Board Member, University of Colorado Business School, 2015-2018 |
| Kathleen Blatz c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2006 | Attorney, specializing in arbitration and mediation; Chief Justice, Minnesota Supreme Court, 1998-2006; Associate Justice, Minnesota Supreme Court, 1996-1998; Fourth Judicial District Court Judge, Hennepin County, 1994-1996; Attorney in private practice and public service, 1984-1993; State Representative, Minnesota House of Representatives, 1979-1993, which included service on the Tax and Financial Institutions and Insurance Committees; Member and Interim Chair, Minnesota Sports Facilities Authority, January 2017-July 2017; Interim President and Chief Executive Officer, Blue Cross Blue Shield of Minnesota (health care insurance), February-July 2018, April-October 2021 | 176 | Former Trustee, Blue Cross Blue Shield of Minnesota, 2009-2021 (Chair of the Business Development Committee, 2014-2017; Chair of the Governance Committee, 2017-2019); former Member and Chair of the Board, Minnesota Sports Facilities Authority, January 2017-July 2017; former Director, Robina Foundation, 2009-2020 (Chair, 2014-2020); Director, Schulze Family Foundation, since 2021 |
| Pamela G. Carlton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2007 | President, Springboard — Partners in Cross Cultural Leadership (consulting company) since 2003; Managing Director of US Equity Research, JP Morgan Chase, 1999-2003; Director of US Equity Research, Chase Asset Management, 1996-1999; Co-Director Latin America Research, 1993-1996, COO Global Research, 1992-1996, Co-Director of US Research, 1991-1992, Investment Banker, Morgan Stanley, 1982-1991, Morgan Stanley; Attorney, Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 176 | Trustee, New York Presbyterian Hospital Board (Executive Committee and Chair of People Committee) since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee); Director, Apollo Commercial Real Estate Finance, Inc. since 2021; the Governing Council of the Independent Directors Council (IDC), since 2021 |
| Columbia Variable Portfolio – U.S. Government Mortgage Fund | Annual Report 2021 | 41 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Janet Langford Carrig c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1957 | Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 174 | Director, EQT Corporation (natural gas producer) since 2019; Director, Whiting Petroleum Corporation (independent oil and gas company) since 2020 |
| J. Kevin Connaughton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2020 | Member, FINRA National Adjudicatory Council since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Consultant to Independent Trustees of CFVIT and CFST I from March 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Managing Director and General Manager of Mutual Fund Products, Columbia Management Investment Advisers, LLC, May 2010-February 2015; President, Columbia Funds, 2008-2015; and senior officer of Columbia Funds and affiliated funds, 2003-2015 | 174 | Former Director, The Autism Project, March 2015-December 2021; former Member of the Investment Committee, St. Michael’s College, November 2015-February 2020; former Trustee, St. Michael’s College, June 2017-September 2019; former Trustee, New Century Portfolios, January 2015-December 2017 |
| Olive M. Darragh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since 2020 | Managing Director of Darragh Inc. (strategy and talent management consulting firm) since 2010; Founder and CEO, Zolio, Inc. (investment management talent identification platform) since 2004; Consultant to Independent Trustees of CFVIT and CFST I from June 2019 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 2001-2004 | 174 | Former Director, University of Edinburgh Business School (Member of US Board); former Director, Boston Public Library Foundation |
| Patricia M. Flynn c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1950 | Trustee since 2004 | Trustee Professor of Economics and Management, Bentley University since 1976 (also teaches and conducts research on corporate governance); Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 176 | Trustee, MA Taxpayers Foundation since 1997; Board of Governors, Innovation Institute, MA Technology Collaborative, 2010-2020; former Board of Directors, The MA Business Roundtable, 2003-2019 |
| Brian J. Gallagher c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 176 | Trustee, Catholic Schools Foundation since 2004 |
| 42 | Columbia Variable Portfolio – U.S. Government Mortgage Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Douglas A. Hacker c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1955 | Co-Chair since 2021; Chair of CFST I and CFVIT since 2014; Trustee of CFST I and CFVIT since 1996 and CFST, CFST II, CFVST II, CET I and CET II since 2021 | Independent business executive since May 2006; Executive Vice President – Strategy of United Airlines, December 2002 - May 2006; President of UAL Loyalty Services (airline marketing company), September 2001-December 2002; Executive Vice President and Chief Financial Officer of United Airlines, July 1999-September 2001 | 176 | Director, Spartan Nash Company (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing); former Director, Nash Finch Company (food distributor), 2005-2013; former Director, SeaCube Container Leasing Ltd. (container leasing), 2010-2013; and former Director, Travelport Worldwide Limited (travel information technology), 2014-2019 |
| Nancy T. Lukitsh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1956 | Trustee since 2011 | Senior Vice President, Partner and Director of Marketing, Wellington Management Company, LLP (investment adviser), 1997-2010; Chair, Wellington Management Portfolios (commingled non-U.S. investment pools), 2007 -2010; Director, Wellington Trust Company, NA and other Wellington affiliates, 1997-2010 | 174 | None |
| David M. Moffett c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2011 | Retired; Consultant to Bridgewater and Associates | 174 | Director, CSX Corporation (transportation suppliers); Director, Genworth Financial, Inc. (financial and insurance products and services); Director, PayPal Holdings Inc. (payment and data processing services); Trustee, University of Oklahoma Foundation; former Director, eBay Inc. (online trading community), 2007-2015; and former Director, CIT Bank, CIT Group Inc. (commercial and consumer finance), 2010-2016 |
| Catherine James Paglia c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Co-Chair since 2021; Chair of CFST, CFST II, CFVST II, CET I and CET II since 2020; Trustee of CFST, CFST II and CFVST II since 2004 and CFST I and CFVIT since 2021 | Director, Enterprise Asset Management, Inc. (private real estate and asset management company) since September 1998; Managing Director and Partner, Interlaken Capital, Inc., 1989-1997; Vice President, 1982-1985, Principal, 1985-1987, Managing Director, 1987-1989, Morgan Stanley; Vice President, Investment Banking, 1980-1982, Associate, Investment Banking, 1976-1980, Dean Witter Reynolds, Inc. | 176 | Director, Valmont Industries, Inc. (irrigation systems manufacturer) since 2012; Trustee, Carleton College (on the Investment Committee); Trustee, Carnegie Endowment for International Peace (on the Investment Committee) |
| Columbia Variable Portfolio – U.S. Government Mortgage Fund | Annual Report 2021 | 43 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Minor M. Shaw c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1947 | Trustee since 2003 | President, Micco LLC (private investments) since 2011; President, Micco Corp. (family investment business), 1998-2011 | 176 | Director, Blue Cross Blue Shield of South Carolina (Chair of Compensation Committee) since April 2008; Trustee, Hollingsworth Funds (on the Investment Committee) since 2016 (previously Board Chair from 2016-2019); Former Advisory Board member, Duke Energy Corp., 2016-2020; Chair of the Duke Endowment; Chair of Greenville – Spartanburg Airport Commission; former Trustee, BofA Funds Series Trust (11 funds), 2003-2011; former Director, Piedmont Natural Gas, 2004-2016; former Director, National Association of Corporate Directors, Carolinas Chapter, 2013-2018; Chair, Daniel-Mickel Foundation since 1998 |
| Natalie A. Trunow c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1967 | Trustee since 2020 | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services), January 2016-January 2021; Non-executive Member of the Investment Committee and Valuation Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services), August 2018-January 2021; Advisor, Paradigm Asset Management, November 2016-December 2021; Consultant to Independent Trustees of CFVIT and CFST I from September 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Director of Investments/Consultant, Casey Family Programs, April 2016-November 2016; Senior Vice President and Chief Investment Officer, Calvert Investments, August 2008-January 2016; Section Head and Portfolio Manager, General Motors Asset Management, June 1997-August 2008 | 174 | Former Director, Investment Committee, Health Services for Children with Special Needs, Inc., 2012-2019; Director, Chair of Audit Committee, Consumer Credit Counseling Services (formerly Guidewell Financial Solutions), since 2019; Independent Director, Investment Committee and Valuation Committee, Sarona Asset Management, since 2019 |
| Sandra Yeager c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2017 | Retired; President and founder, Hanoverian Capital, LLC (SEC registered investment advisor firm), 2008-2016; Managing Director, DuPont Capital, 2006-2008; Managing Director, Morgan Stanley Investment Management, 2004-2006; Senior Vice President, Alliance Bernstein, 1990-2004 | 176 | Former Director, NAPE Education Foundation, October 2016-October 2020 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Fund Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I (CET I), Columbia ETF Trust II (CET II), Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Beckman, Gallagher and Hacker and Mses. Blatz, Carlton, Flynn, Paglia, Shaw and Yeager serve as Directors of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
| 44 | Columbia Variable Portfolio – U.S. Government Mortgage Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Interested trustee affiliated with Investment Manager*
Interested trustee affiliated with Investment Manager*
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during the past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex overseen | Other directorships held by Trustee during the past five years |
| Daniel J. Beckman c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since November 2021(a) | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC (since April 2015); officer of Columbia Funds and affiliated funds since 2020. | 176 | Director, Ameriprise Trust Company, since October 2016; Director, Columbia Management Investment Distributors, Inc. since November 2018; Board of Governors, Columbia Wanger Asset Management, LLC since January 2022 |
| * | Interested person (as defined under the 1940 Act) by reason of being an officer, director, security holder and/or employee of the Investment Manager or Ameriprise Financial. |
| (a) | Mr. Beckman serves as the President and Principal Executive Officer of the Columbia Funds (since 2021). |
The Statement of Additional
Information has additional information about the Fund’s Board members and is available, without charge, upon request by calling 800.345.6611 or contacting your financial intermediary.
The Board has appointed officers
who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. The following table provides basic information about the Officers of the
Fund, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Beckman, who is President and Principal Executive Officer, the
Fund’s other officers are:
Fund officers
| Columbia Variable Portfolio – U.S. Government Mortgage Fund | Annual Report 2021 | 45 |
TRUSTEES AND OFFICERS (continued)
Fund officers (continued)
Fund officers (continued)
| 46 | Columbia Variable Portfolio – U.S. Government Mortgage Fund | Annual Report 2021 |
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For Fund and other investment product prospectuses, which contain this and other important information, contact your
financial advisor or insurance representative. Please read the prospectus carefully before you invest. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved. Columbia Management Investment Distributors, Inc., 290 Congress Street, Boston, MA 02210
© 2022 Columbia Management Investment
Advisers, LLC.
S-6489 AW (2/22)
Columbia Variable
Portfolio – Dividend Opportunity Fund
Please remember that you may not
buy (nor will you own) shares of the Fund directly. The Fund is available through variable annuity contracts and variable life insurance policies offered by the separate accounts of participating insurance companies
as well as qualified pension and retirement plans. Please contact your financial advisor or insurance representative for more information.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
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| 15 | |
| 16 | |
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| 25 | |
| 26 |
Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which Columbia Variable Portfolio – Dividend Opportunity Fund (the Fund) holds investments consistent with the procedures as stated in the Statement of Additional
Information (SAI). You may obtain a copy of the SAI without charge by calling 800.345.6611; contacting your financial intermediary or searching the website of the Securities and Exchange Commission (SEC) at sec.gov.
Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge
by visiting columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. The Fund’s Form N-PORT is available on the SEC’s website at sec.gov. The Fund’s complete
schedule of portfolio holdings, as filed on Form N-PORT, can also be obtained without charge, upon request, by calling 800.345.6611.
Additional Fund information
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
290 Congress Street
Boston, MA 02210
Fund distributor
Columbia Management Investment Distributors,
Inc.
290 Congress Street
Boston, MA 02210
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
Columbia Variable Portfolio – Dividend
Opportunity Fund | Annual Report 2021
Fund at a Glance
Investment objective
The Fund
seeks to provide shareholders with a high level of current income and, as a secondary objective, steady growth of capital.
Portfolio management
David King, CFA
Lead Portfolio Manager
Managed Fund since 2018
Yan Jin
Portfolio Manager
Managed Fund since 2018
Grace Lee. CAIA
Portfolio Manager
Managed Fund since 2020
| Columbia Variable Portfolio – Dividend Opportunity Fund | Annual Report 2021 | 3 |
Fund at a Glance (continued)
Performance of a hypothetical $10,000 investment (December 31, 2011 — December 31, 2021)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class 2 shares of Columbia Variable Portfolio – Dividend Opportunity Fund during the stated time period, and does not reflect the deduction of taxes, if any,
that a shareholder may pay on Fund distributions or on the redemption of Fund shares. The returns also do not reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance
policy or qualified pension or retirement plan, if any.
| 4 | Columbia Variable Portfolio – Dividend Opportunity Fund | Annual Report 2021 |
Manager Discussion of Fund Performance
For the 12-month period that
ended December 31, 2021, Class 2 shares of the Fund returned 25.89%. The Fund outperformed the 20.86% return of its primary benchmark, the MSCI USA High Dividend Yield Index (Net), and the 25.16% gain for its
secondary benchmark, the Russell 1000 Value Index.
Market overview
U.S. equities delivered
impressive gains in 2021, as the rollout of COVID-19 vaccines allowed for a gradual resumption of normal business conditions. Economic growth and corporate earnings both came in well above expectations as a result,
fueling investors’ appetite for risk and propelling the market higher. U.S. Federal Reserve policy was also supportive for most of the year, with ultra-low interest rates and the continuation of stimulative
quantitative easing programs.
Although market leadership changed
frequently throughout the course of the year, the value style underperformed growth for the full 12 months. In addition, the types of stable companies that typically pay above-average dividends trailed the broader
market in the “risk-on” environment. We were able to overcome both of these potential headwinds on the strength of favorable individual stock selection, helping the Fund outperform the MSCI USA High
Dividend Yield Index (Net) in each of the year’s four calendar quarters.
The Fund’s notable
contributors during the period
| • | The Fund gained a significant benefit from its overweight positions in the financials and energy sectors, as well as from the outperformance of its specific holdings in each area. We added to the portfolio’s weightings in these sectors in mid-2020 when they were lagging the broader market in the initial stages of the recovery from the sell-off earlier that year. At the time, a number of energy and financial stocks featured dividend yields that were well above the historical averages. Among these were Exxon Mobil Corp. and Chevron Corp. in energy, as well as JP Morgan Chase & Co. and Bank of America Corp. in financials. These and other Fund holdings in the two sectors performed very well in 2021 as the economy reopened, and they were the key factors in our outperformance. |
| • | Our strength in energy and financials illustrates the potential benefits of our approach, which strives to own what we see as the best dividend-paying stocks in the market regardless of their benchmark weightings. Coming into the year, we identified the most compelling opportunities in more cyclical areas such as energy and financials, as well as in the deeper-value segments of our investment universe. As a result, the Fund was positioned to capitalize on the reopening in a way that the primary benchmark couldn’t due to its lower economic sensitivity. We believe this underscores the importance of a flexible strategy that isn’t tied to a particular benchmark. |
| • | The Fund’s holdings in real estate, including the mall operator Simon Property Group, Inc., also contributed to results. We first bought the stock in early 2021, when its exposure to the bricks-and-mortar retail business had caused it to fall deeply out of favor. It has rebounded over the past two years as the economy has reopened, benefiting the Fund. Life Storage Inc., a newer holding, also registered gains. Demand for self-storage capacity increased considerably in 2021 as COVID-19 prompted people to move or rearrange their living spaces. |
| • | Technology was another area of strength. The value segment of tech didn’t provide competitive returns in 2020, but this trend began to improve over the past year. We capitalized on this shift through positions in companies such as Broadcom, Inc., which benefited from rising sales and the overall strength in the semiconductor sector, and Seagate Technology Holdings PLC, a data-storage company that successfully transitioned its business to faster-growth areas. We bought Seagate on weakness in 2020, and it has since risen considerably due to its shift to the data-center business and its decision to boost its dividend. |
The Fund’s notable
detractors during the period
| • | At a time of positive returns for the index and favorable results for the Fund, few holdings stood out as meaningful underperformers. The majority of the detractors from relative performance were either underweights or zero weightings in strong-performing index constituents, such as Home Depot, Inc. and Qualcomm, Inc. |
| • | We also lost some ground in the consumer discretionary sector from positions in Gap Inc. and Best Buy Co. Inc. Retail, in general, came under pressure in the second half of the year due to the worries about the potential effects of supply chain disruptions. |
| Columbia Variable Portfolio – Dividend Opportunity Fund | Annual Report 2021 | 5 |
Manager Discussion of Fund Performance (continued)
The views expressed in this report
reflect the current views of the respective parties who have contributed to this report. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult
to predict, so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective parties
disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Columbia fund are based on numerous factors, may not be relied on as an
indication of trading intent on behalf of any particular Columbia fund. References to specific securities should not be construed as a recommendation or investment advice.
| 6 | Columbia Variable Portfolio – Dividend Opportunity Fund | Annual Report 2021 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur ongoing
costs, which generally include management fees, distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to help you compare these costs with the ongoing costs of investing in other mutual funds.
The information below does not
reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy (collectively, Contracts) or qualified pension and retirement plan (Qualified Plan), if any. The total fees
and expenses you bear may therefore be higher than those shown below.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount invested, to estimate the
expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as redemption or exchange fees, or expenses that apply to the subaccount or the Contract. Therefore, the
hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If the fees and expenses imposed under your Contract or
Qualified Plan, if any, were included, your costs would be higher.
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 365.
Expenses do not include fees and
expenses incurred indirectly by the Fund from its investment in underlying funds, including affiliated and non-affiliated pooled investment vehicles, such as mutual funds and exchange-traded funds.
Had Columbia Management Investment
Advisers, LLC and/or certain of its affiliates not waived/reimbursed certain fees and expenses, account value at the end of the period would have been reduced.
| Columbia Variable Portfolio – Dividend Opportunity Fund | Annual Report 2021 | 7 |
Portfolio of Investments
December 31, 2021
December 31, 2021
(Percentages represent value of
investments compared to net assets)
Investments in securities
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 8 | Columbia Variable Portfolio – Dividend Opportunity Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Dividend Opportunity Fund | Annual Report 2021 | 9 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Notes to Portfolio of
Investments
| (a) | Non-income producing investment. |
| (b) | Represents privately placed and other securities and instruments exempt from Securities and Exchange Commission registration (collectively, private placements), such as Section 4(a)(2) and Rule 144A eligible securities, which are often sold only to qualified institutional buyers. At December 31, 2021, the total value of these securities amounted to $4,066,569, which represents 0.42% of total net assets. |
| (c) | The rate shown is the seven-day current annualized yield at December 31, 2021. |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 10 | Columbia Variable Portfolio – Dividend Opportunity Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Notes to Portfolio of Investments (continued)
| (d) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended December 31, 2021 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Realized gain (loss)($) | Dividends($) | End of period shares |
| Columbia Short-Term Cash Fund, 0.085% | ||||||||
| 3,014,973 | 217,632,526 | (216,542,972) | — | 4,104,527 | (355) | 3,493 | 4,105,348 | |
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at December 31, 2021:
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Dividend Opportunity Fund | Annual Report 2021 | 11 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Fair value measurements (continued)
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Real Estate | 62,454,950 | — | — | 62,454,950 |
| Utilities | 22,310,800 | — | — | 22,310,800 |
| Total Common Stocks | 872,955,430 | — | — | 872,955,430 |
| Convertible Preferred Stocks | ||||
| Communication Services | — | 4,066,569 | — | 4,066,569 |
| Consumer Discretionary | — | 6,915,000 | — | 6,915,000 |
| Financials | — | 4,676,000 | — | 4,676,000 |
| Health Care | — | 11,957,750 | — | 11,957,750 |
| Industrials | — | 12,349,975 | — | 12,349,975 |
| Utilities | — | 40,953,684 | — | 40,953,684 |
| Total Convertible Preferred Stocks | — | 80,918,978 | — | 80,918,978 |
| Money Market Funds | 4,104,527 | — | — | 4,104,527 |
| Total Investments in Securities | 877,059,957 | 80,918,978 | — | 957,978,935 |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The Fund’s assets assigned to
the Level 2 input category are generally valued using the market approach, in which a security’s value is determined through reference to prices and information from market transactions for similar or identical
assets.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 12 | Columbia Variable Portfolio – Dividend Opportunity Fund | Annual Report 2021 |
Statement of Assets and Liabilities
December 31, 2021
December 31, 2021
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $777,021,617) | $953,874,408 |
| Affiliated issuers (cost $4,104,527) | 4,104,527 |
| Receivable for: | |
| Investments sold | 5,048,746 |
| Capital shares sold | 1,160 |
| Dividends | 1,634,928 |
| Foreign tax reclaims | 174,491 |
| Expense reimbursement due from Investment Manager | 2,875 |
| Prepaid expenses | 14,160 |
| Total assets | 964,855,295 |
| Liabilities | |
| Due to custodian | 3,097 |
| Payable for: | |
| Investments purchased | 5,546,434 |
| Capital shares purchased | 1,020,462 |
| Management services fees | 18,274 |
| Distribution and/or service fees | 3,458 |
| Service fees | 57,670 |
| Compensation of board members | 303,372 |
| Compensation of chief compliance officer | 171 |
| Other expenses | 24,732 |
| Total liabilities | 6,977,670 |
| Net assets applicable to outstanding capital stock | $957,877,625 |
| Represented by | |
| Trust capital | $957,877,625 |
| Total - representing net assets applicable to outstanding capital stock | $957,877,625 |
| Class 1 | |
| Net assets | $51,329,403 |
| Shares outstanding | 1,359,186 |
| Net asset value per share | $37.76 |
| Class 2 | |
| Net assets | $102,723,679 |
| Shares outstanding | 2,802,253 |
| Net asset value per share | $36.66 |
| Class 3 | |
| Net assets | $803,824,543 |
| Shares outstanding | 21,605,622 |
| Net asset value per share | $37.20 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Dividend Opportunity Fund | Annual Report 2021 | 13 |
Statement of Operations
Year Ended December 31, 2021
Year Ended December 31, 2021
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $34,517,683 |
| Dividends — affiliated issuers | 3,493 |
| Foreign taxes withheld | (155,751) |
| Total income | 34,365,425 |
| Expenses: | |
| Management services fees | 6,624,102 |
| Distribution and/or service fees | |
| Class 2 | 226,932 |
| Class 3 | 964,998 |
| Service fees | 603,536 |
| Compensation of board members | 83,868 |
| Custodian fees | 11,057 |
| Printing and postage fees | 56,454 |
| Audit fees | 63,137 |
| Legal fees | 18,503 |
| Interest on interfund lending | 4 |
| Compensation of chief compliance officer | 161 |
| Other | 44,492 |
| Total expenses | 8,697,244 |
| Fees waived or expenses reimbursed by Investment Manager and its affiliates | (895,959) |
| Total net expenses | 7,801,285 |
| Net investment income | 26,564,140 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 169,830,485 |
| Investments — affiliated issuers | (355) |
| Foreign currency translations | 2,990 |
| Net realized gain | 169,833,120 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | 26,535,530 |
| Foreign currency translations | (20,957) |
| Net change in unrealized appreciation (depreciation) | 26,514,573 |
| Net realized and unrealized gain | 196,347,693 |
| Net increase in net assets resulting from operations | $222,911,833 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 14 | Columbia Variable Portfolio – Dividend Opportunity Fund | Annual Report 2021 |
Statement of Changes in Net Assets
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | |
| Operations | ||
| Net investment income | $26,564,140 | $50,638,993 |
| Net realized gain (loss) | 169,833,120 | (38,627,084) |
| Net change in unrealized appreciation (depreciation) | 26,514,573 | (6,046,579) |
| Net increase in net assets resulting from operations | 222,911,833 | 5,965,330 |
| Decrease in net assets from capital stock activity | (689,576,334) | (106,400,279) |
| Total decrease in net assets | (466,664,501) | (100,434,949) |
| Net assets at beginning of year | 1,424,542,126 | 1,524,977,075 |
| Net assets at end of year | $957,877,625 | $1,424,542,126 |
| Year Ended | Year Ended | |||
| December 31, 2021 | December 31, 2020 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class 1 | ||||
| Subscriptions | 112,523 | 3,955,037 | 686,686 | 17,956,960 |
| Redemptions | (19,847,962) | (609,516,543) | (984,410) | (27,953,799) |
| Net decrease | (19,735,439) | (605,561,506) | (297,724) | (9,996,839) |
| Class 2 | ||||
| Subscriptions | 349,447 | 11,713,774 | 226,949 | 5,924,093 |
| Redemptions | (204,566) | (6,771,182) | (393,845) | (10,053,952) |
| Net increase (decrease) | 144,881 | 4,942,592 | (166,896) | (4,129,859) |
| Class 3 | ||||
| Subscriptions | 19,959 | 681,359 | 61,989 | 1,565,540 |
| Redemptions | (2,663,937) | (89,638,779) | (3,556,897) | (93,839,121) |
| Net decrease | (2,643,978) | (88,957,420) | (3,494,908) | (92,273,581) |
| Total net decrease | (22,234,536) | (689,576,334) | (3,959,528) | (106,400,279) |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Dividend Opportunity Fund | Annual Report 2021 | 15 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect any fees and expenses imposed under your
Contract and/or Qualified Plan, as applicable; such fees and expenses would reduce the total returns for all periods shown. Total return and portfolio turnover are not annualized for periods of less than one year. The
portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain derivatives, if any. If such transactions were included, the Fund’s portfolio
turnover rate may be higher.
| Net asset value, beginning of period | Net investment income | Net realized and unrealized gain (loss) | Total from investment operations | |
| Class 1 | ||||
| Year Ended 12/31/2021 | $29.93 | 0.97 | 6.86 | 7.83 |
| Year Ended 12/31/2020 | $29.59 | 1.04 | (0.70) | 0.34 |
| Year Ended 12/31/2019 | $23.85 | 0.85 | 4.89 | 5.74 |
| Year Ended 12/31/2018 | $25.30 | 0.85 | (2.30) | (1.45) |
| Year Ended 12/31/2017 | $22.12 | 0.89 | 2.29 | 3.18 |
| Class 2 | ||||
| Year Ended 12/31/2021 | $29.12 | 0.89 | 6.65 | 7.54 |
| Year Ended 12/31/2020 | $28.86 | 0.95 | (0.69) | 0.26 |
| Year Ended 12/31/2019 | $23.32 | 0.77 | 4.77 | 5.54 |
| Year Ended 12/31/2018 | $24.81 | 0.75 | (2.24) | (1.49) |
| Year Ended 12/31/2017 | $21.74 | 0.82 | 2.25 | 3.07 |
| Class 3 | ||||
| Year Ended 12/31/2021 | $29.52 | 0.94 | 6.74 | 7.68 |
| Year Ended 12/31/2020 | $29.22 | 1.00 | (0.70) | 0.30 |
| Year Ended 12/31/2019 | $23.58 | 0.81 | 4.83 | 5.64 |
| Year Ended 12/31/2018 | $25.05 | 0.79 | (2.26) | (1.47) |
| Year Ended 12/31/2017 | $21.92 | 0.86 | 2.27 | 3.13 |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Ratios include interfund lending expense which is less than 0.01%. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 16 | Columbia Variable Portfolio – Dividend Opportunity Fund | Annual Report 2021 |
Financial Highlights (continued)
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets(a) | Total net expense ratio to average net assets(a),(b) | Net investment income ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Class 1 | |||||||
| Year Ended 12/31/2021 | $37.76 | 26.16% | 0.76%(c) | 0.71%(c) | 2.92% | 38% | $51,329 |
| Year Ended 12/31/2020 | $29.93 | 1.15% | 0.74% | 0.73% | 3.88% | 54% | $631,347 |
| Year Ended 12/31/2019 | $29.59 | 24.07% | 0.74% | 0.72% | 3.13% | 46% | $632,898 |
| Year Ended 12/31/2018 | $23.85 | (5.73%) | 0.72% | 0.72% | 3.31% | 87% | $537,062 |
| Year Ended 12/31/2017 | $25.30 | 14.38% | 0.73% | 0.73% | 3.82% | 62% | $832,599 |
| Class 2 | |||||||
| Year Ended 12/31/2021 | $36.66 | 25.89% | 1.04%(c) | 0.94%(c) | 2.66% | 38% | $102,724 |
| Year Ended 12/31/2020 | $29.12 | 0.90% | 0.99% | 0.98% | 3.64% | 54% | $77,386 |
| Year Ended 12/31/2019 | $28.86 | 23.76% | 0.99% | 0.97% | 2.88% | 46% | $81,504 |
| Year Ended 12/31/2018 | $23.32 | (6.01%) | 0.97% | 0.97% | 2.99% | 87% | $61,764 |
| Year Ended 12/31/2017 | $24.81 | 14.12% | 0.98% | 0.98% | 3.58% | 62% | $69,367 |
| Class 3 | |||||||
| Year Ended 12/31/2021 | $37.20 | 26.02% | 0.92%(c) | 0.82%(c) | 2.78% | 38% | $803,825 |
| Year Ended 12/31/2020 | $29.52 | 1.03% | 0.86% | 0.85% | 3.77% | 54% | $715,809 |
| Year Ended 12/31/2019 | $29.22 | 23.92% | 0.86% | 0.84% | 3.00% | 46% | $810,575 |
| Year Ended 12/31/2018 | $23.58 | (5.87%) | 0.85% | 0.84% | 3.11% | 87% | $749,273 |
| Year Ended 12/31/2017 | $25.05 | 14.28% | 0.86% | 0.86% | 3.71% | 62% | $939,770 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Dividend Opportunity Fund | Annual Report 2021 | 17 |
Notes to Financial Statements
December 31, 2021
December 31, 2021
Note 1. Organization
Columbia Variable Portfolio
– Dividend Opportunity Fund (the Fund), a series of Columbia Funds Variable Series Trust II (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended (the
1940 Act), as an open-end management investment company organized as a Massachusetts business trust.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers Class 1, Class 2 and Class 3 shares to separate accounts funding variable annuity contracts and variable life insurance policies (collectively, Contracts) issued
by affiliated and unaffiliated life insurance companies (Participating Insurance Companies) as well as qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors (Qualified
Investors) authorized by Columbia Management Investment Distributors, Inc. (the Distributor). You may not buy (nor will you own) shares of the Fund directly. You may invest by participating in a Qualified Plan or by
buying a Contract and making allocations to the Fund. Although all share classes generally have identical voting, dividend and liquidation rights, each share class votes separately when required by the Trust’s
organizational documents or by law. Different share classes pay different net investment income distribution amounts to the extent the expenses of such share classes differ, and distributions in liquidation will be
proportional to the net asset value of each share class. Each share class has its own cost structure and other features.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Equity securities listed on an
exchange are valued at the closing price or last trade price on their primary exchange at the close of business of the New York Stock Exchange. Securities with a closing price not readily available or not listed on
any exchange are valued at the mean between the closing bid and ask prices. Listed preferred stocks convertible into common stocks are valued using an evaluated price from a pricing service.
Foreign equity securities are
valued based on the closing price or last trade price on their primary exchange at the close of business of the New York Stock Exchange. If any foreign equity security closing prices are not readily available,
the securities are valued at the mean of the latest quoted bid and ask prices on such exchanges or markets. Foreign currency exchange rates are determined at the scheduled closing time of the New York Stock Exchange.
Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange; therefore, the closing prices for securities in such markets or on such exchanges may not fully reflect
events that occur after such close but before the close of the New York Stock Exchange. In those situations, foreign securities will be fair valued pursuant to a policy adopted by the Board of Trustees. Under the
policy, the Fund may utilize a third-party pricing service to determine these fair values. The third-party pricing service takes into account multiple factors, including, but not limited to, movements in the U.S.
securities markets, certain depositary receipts, futures contracts and foreign exchange rates that have occurred subsequent to the close of the foreign exchange or market, to determine a good faith estimate that
reasonably reflects the current market conditions as of the close of the New York Stock Exchange. The fair value of a security is likely to be different from the quoted or published price, if available.
Investments in open-end investment
companies (other than exchange-traded funds (ETFs)), are valued at the latest net asset value reported by those companies as of the valuation time.
| 18 | Columbia Variable Portfolio – Dividend Opportunity Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Foreign currency transactions and
translations
The values of all assets and
liabilities denominated in foreign currencies are generally translated into U.S. dollars at exchange rates determined at the close of regular trading on the New York Stock Exchange. Net realized and unrealized gains
(losses) on foreign currency transactions and translations include gains (losses) arising from the fluctuation in exchange rates between trade and settlement dates on securities transactions, gains (losses) arising
from the disposition of foreign currency and currency gains (losses) between the accrual and payment dates on dividends, interest income and foreign withholding taxes.
For financial statement purposes,
the Fund does not distinguish that portion of gains (losses) on investments which is due to changes in foreign exchange rates from that which is due to changes in market prices of the investments. Such fluctuations
are included with the net realized and unrealized gains (losses) on investments in the Statement of Operations.
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
Income recognition
Corporate actions and dividend
income are generally recorded net of any non-reclaimable tax withholdings, on the ex-dividend date or upon receipt of an ex-dividend notification in the case of certain foreign securities.
The Fund may receive distributions
from holdings in equity securities, business development companies (BDCs), exchange-traded funds (ETFs), limited partnerships (LPs), other regulated investment companies (RICs), and real estate investment trusts
(REITs), which report information as to the tax character of their distributions annually. These distributions are allocated to dividend income, capital gain and return of capital based on actual information reported.
Return of capital is recorded as a reduction of the cost basis of securities held. If the Fund no longer owns the applicable securities, return of capital is recorded as a realized gain. With respect to REITs, to the
extent actual information has not yet been reported, estimates for return of capital are made by Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise
Financial, Inc. (Ameriprise Financial). The Investment Manager’s estimates are subsequently adjusted when the actual character of the distributions is disclosed by the REITs, which could result in a
proportionate change in return of capital to shareholders.
Awards from class action litigation
are recorded as a reduction of cost basis if the Fund still owns the applicable securities on the payment date. If the Fund no longer owns the applicable securities on the payment date, the proceeds are recorded as
realized gains.
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
| Columbia Variable Portfolio – Dividend Opportunity Fund | Annual Report 2021 | 19 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
Federal income tax status
The Fund is treated as a
partnership for federal income tax purposes, and the Fund does not expect to make regular distributions. The Fund will not be subject to federal income tax, and therefore, there is no provision for federal income
taxes. The partners of the Fund are subject to tax on their distributive share of the Fund’s income and loss. The components of the Fund’s net assets are reported at the partner-level for federal income
tax purposes, and therefore, are not presented in the Statement of Assets and Liabilities.
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Foreign taxes
The Fund may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries, as applicable, based upon its current interpretation of tax rules
and regulations that exist in the markets in which it invests.
Realized gains in certain countries
may be subject to foreign taxes at the Fund level, based on statutory rates. The Fund accrues for such foreign taxes on realized and unrealized gains at the appropriate rate for each jurisdiction, as applicable. The
amount, if any, is disclosed as a liability on the Statement of Assets and Liabilities.
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Under the Management Agreement, the
Investment Manager provides the Fund with investment research and advice, as well as administrative and accounting services. The management services fee is an annual fee that is equal to a percentage of the
Fund’s daily net assets that declines from 0.72% to 0.52% as the Fund’s net assets increase. The effective management services fee rate for the year ended December 31, 2021 was 0.69% of the Fund’s
average daily net assets.
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. Under a Deferred Compensation Plan (the
Deferred Plan), these members of the Board of Trustees may elect to defer payment of up to 100% of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of
certain funds managed by the Investment Manager. The Fund’s liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Deferred Plan. All
amounts payable under the Deferred Plan
| 20 | Columbia Variable Portfolio – Dividend Opportunity Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
constitute a general unsecured obligation of the
Fund. The expense for the Deferred Plan, which includes Trustees’ fees deferred during the current period as well as any gains or losses on the Trustees’ deferred compensation balances as a result of
market fluctuations, is included in "Compensation of board members" on the Statement of Operations.
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
Transactions with affiliates
The Fund is permitted to engage in
purchase and/or sale transactions with affiliates and/or accounts that have a common investment manager (or affiliated investment managers), common directors/trustees, and/or common officers under specified conditions
outlined in a policy adopted by the Board, pursuant to Rule 17a-7 under the 1940 Act (cross-trades). The Board relies on quarterly written representation from the Fund’s Chief Compliance Officer that
cross-trades complied with approved policy.
For the year ended December 31,
2021, the Fund engaged in cross-trades as follows:
| Purchases ($) | Sales ($) | Net realized gain (loss) ($) |
| — | 167,142,434 | 25,812,834 |
Service fees
The Fund has entered into a
Shareholder Services Agreement with Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial. Under this
agreement, the Fund pays a service fee equal to the payments made by the Transfer Agent to Participating Insurance Companies and other financial intermediaries (together, Participating Organizations) for services each
such Participating Organization provides to its clients, customers and participants that are invested directly or indirectly in the Fund, up to a cap approved by the Board of Trustees from time to time. The effective
service fee rate for the year ended December 31, 2021, was 0.06% of the Fund’s average daily net assets.
The Transfer Agent may retain as
compensation for its services revenues from fees for wire, telephone and redemption orders, account transcripts due the Transfer Agent from Fund shareholders and interest (net of bank charges) earned with respect to
balances in accounts the Transfer Agent maintains in connection with its services to the Fund.
Distribution and/or service fees
The Fund has an agreement with the
Distributor, an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution services. Under a Plan and Agreement of Distribution, the Fund pays a fee at an annual rate
of up to 0.25% of the Fund’s average daily net assets attributable to Class 2 shares and an annual rate of up to 0.125% of the Fund’s average daily net assets attributable to Class 3 shares. The Fund pays
no distribution and service fees for Class 1 shares.
| Columbia Variable Portfolio – Dividend Opportunity Fund | Annual Report 2021 | 21 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Expenses waived/reimbursed by the
Investment Manager and its affiliates
The Investment Manager and certain
of its affiliates have contractually agreed to waive fees and/or reimburse expenses (excluding certain fees and expenses described below) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, so that the Fund’s net operating expenses, after giving effect to fees waived/expenses reimbursed and any balance credits and/or overdraft charges from the Fund’s
custodian, do not exceed the following annual rate(s) as a percentage of the classes’ average daily net assets:
| May 1, 2021 through April 30, 2022 | Prior to May 1, 2021 | |
| Class 1 | 0.67% | 0.73% |
| Class 2 | 0.92 | 0.98 |
| Class 3 | 0.795 | 0.855 |
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), expenses associated with investments in affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange-traded funds), transaction costs and
brokerage commissions, costs related to any securities lending program, dividend expenses associated with securities sold short, inverse floater program fees and expenses, transaction charges and interest on borrowed
money, interest, costs associated with certain shareholder meetings, infrequent and/or unusual expenses and any other expenses the exclusion of which is specifically approved by the Board of Trustees. This
agreement may be modified or amended only with approval from the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements
described above are not recoverable by the Investment Manager or its affiliates in future periods.
Note 4. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $360,341,644 and $1,027,539,987, respectively, for the year ended December 31, 2021. The amount of purchase
and sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 5. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes
referred to as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
Note 6. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
| 22 | Columbia Variable Portfolio – Dividend Opportunity Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
The Fund’s activity in the
Interfund Program during the year ended December 31, 2021 was as follows:
| Borrower or lender | Average loan balance ($) | Weighted average interest rate (%) | Number of days with outstanding loans |
| Borrower | 200,000 | 0.69 | 1 |
Interest expense incurred by the
Fund is recorded as Interfund lending in the Statement of Operations. The Fund had no outstanding interfund loans at December 31, 2021.
Note 7. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to an October 28, 2021 amendment and restatement, the credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment
Manager or an affiliated investment manager, severally and not jointly, permits collective borrowings up to $950 million. Interest is currently charged to each participating fund based on its borrowings at a rate
equal to the higher of (i) the federal funds effective rate, (ii) the secured overnight financing rate plus 0.11448% and (iii) the overnight bank funding rate, plus in each case, 1.00%. Each borrowing under the credit
facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The
commitment fee is included in other expenses in the Statement of Operations. This agreement expires annually in October unless extended or renewed. Prior to the October 28, 2021 amendment and restatement, the Fund had
access to a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. which permitted collective borrowings up to $950 million. Interest was
charged to each participating fund based on its borrowings at a rate equal to the higher of (i) the federal funds effective rate, (ii) the one-month London Interbank Offered Rate (LIBOR) rate and (iii) the overnight
bank funding rate, plus in each case, 1.25%.
The Fund had no borrowings during
the year ended December 31, 2021.
Note 8. Significant
risks
Market risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
The coronavirus disease 2019 and
its variants (COVID-19) pandemic has resulted in, and may continue to result in, significant global economic and societal disruption and market volatility due to disruptions in market access, resource availability,
facilities operations, imposition of tariffs, export controls and supply chain disruption, among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement
and loss in human and other resources. The uncertainty surrounding the magnitude, duration, reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental
authorities or other third parties, present unknowns that are yet to unfold. The impacts, as well as the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and
pandemics that may arise in the future – could negatively affect global economies and markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks
| Columbia Variable Portfolio – Dividend Opportunity Fund | Annual Report 2021 | 23 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
and epidemics in emerging market countries may be
greater due to generally less established healthcare systems, governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic
risks in certain countries or globally. The disruptions caused by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively impact the Fund’s ability to
achieve its investment objectives. Any such event(s) could have a significant adverse impact on the value and risk profile of the Fund.
Shareholder concentration risk
At December 31, 2021, affiliated
shareholders of record owned 93.6% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of
less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Note 9. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
Note 10. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in
connection with the conduct of their business activities. Ameriprise Financial believes that the Fund is not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject
of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with
the Fund. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (SEC) on legal and regulatory matters that relate to
Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that
these matters, or the adverse publicity associated with them, will not result in increased Fund redemptions, reduced sale of Fund shares or other adverse consequences to the Fund. Further, although we believe
proceedings are not likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines,
penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial or one or more of its affiliates that provides services to
the Fund.
| 24 | Columbia Variable Portfolio – Dividend Opportunity Fund | Annual Report 2021 |
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees of Columbia
Funds Variable Series Trust II and Shareholders of Columbia Variable Portfolio – Dividend Opportunity Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of Columbia Variable Portfolio – Dividend Opportunity Fund (one of the funds constituting Columbia Funds Variable Series Trust II,
referred to hereafter as the "Fund") as of December 31, 2021, the related statement of operations for the year ended December 31, 2021, the statement of changes in net assets for each of the two years in the period
ended December 31, 2021, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2021 (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, 2021, 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, 2021 and the financial highlights for each of the five years in the period ended December 31, 2021 in conformity with accounting principles generally
accepted in the United States of America.
Basis for Opinion
These financial statements are the
responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these
financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2021 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.
/s/PricewaterhouseCoopers LLP
Minneapolis, Minnesota
February 18, 2022
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| Columbia Variable Portfolio – Dividend Opportunity Fund | Annual Report 2021 | 25 |
TRUSTEES AND
OFFICERS
The Board oversees the
Fund’s operations and appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following table provides basic biographical information about the
Fund’s Trustees as of the printing of this report, including their principal occupations during the past five years, although specific titles for individuals may have varied over the period. The year set forth
beneath Length of Service in the table below is the year in which the Trustee was first appointed or elected as Trustee to any Fund currently in the Columbia Funds Complex or a predecessor thereof. Under current Board
policy, each Trustee generally serves until December 31 of the year such Trustee turns seventy-five (75).
Independent trustees
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| George S. Batejan c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1953 | Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 176 | Former Chairman of the Board, NICSA (National Investment Company Services Association) (Executive Committee, Nominating Committee and Governance Committee), 2014-2016; former Director, Intech Investment Management, 2011-2016; former Board Member, Metro Denver Chamber of Commerce, 2015-2016; former Advisory Board Member, University of Colorado Business School, 2015-2018 |
| Kathleen Blatz c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2006 | Attorney, specializing in arbitration and mediation; Chief Justice, Minnesota Supreme Court, 1998-2006; Associate Justice, Minnesota Supreme Court, 1996-1998; Fourth Judicial District Court Judge, Hennepin County, 1994-1996; Attorney in private practice and public service, 1984-1993; State Representative, Minnesota House of Representatives, 1979-1993, which included service on the Tax and Financial Institutions and Insurance Committees; Member and Interim Chair, Minnesota Sports Facilities Authority, January 2017-July 2017; Interim President and Chief Executive Officer, Blue Cross Blue Shield of Minnesota (health care insurance), February-July 2018, April-October 2021 | 176 | Former Trustee, Blue Cross Blue Shield of Minnesota, 2009-2021 (Chair of the Business Development Committee, 2014-2017; Chair of the Governance Committee, 2017-2019); former Member and Chair of the Board, Minnesota Sports Facilities Authority, January 2017-July 2017; former Director, Robina Foundation, 2009-2020 (Chair, 2014-2020); Director, Schulze Family Foundation, since 2021 |
| Pamela G. Carlton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2007 | President, Springboard — Partners in Cross Cultural Leadership (consulting company) since 2003; Managing Director of US Equity Research, JP Morgan Chase, 1999-2003; Director of US Equity Research, Chase Asset Management, 1996-1999; Co-Director Latin America Research, 1993-1996, COO Global Research, 1992-1996, Co-Director of US Research, 1991-1992, Investment Banker, Morgan Stanley, 1982-1991, Morgan Stanley; Attorney, Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 176 | Trustee, New York Presbyterian Hospital Board (Executive Committee and Chair of People Committee) since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee); Director, Apollo Commercial Real Estate Finance, Inc. since 2021; the Governing Council of the Independent Directors Council (IDC), since 2021 |
| 26 | Columbia Variable Portfolio – Dividend Opportunity Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Janet Langford Carrig c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1957 | Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 174 | Director, EQT Corporation (natural gas producer) since 2019; Director, Whiting Petroleum Corporation (independent oil and gas company) since 2020 |
| J. Kevin Connaughton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2020 | Member, FINRA National Adjudicatory Council since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Consultant to Independent Trustees of CFVIT and CFST I from March 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Managing Director and General Manager of Mutual Fund Products, Columbia Management Investment Advisers, LLC, May 2010-February 2015; President, Columbia Funds, 2008-2015; and senior officer of Columbia Funds and affiliated funds, 2003-2015 | 174 | Former Director, The Autism Project, March 2015-December 2021; former Member of the Investment Committee, St. Michael’s College, November 2015-February 2020; former Trustee, St. Michael’s College, June 2017-September 2019; former Trustee, New Century Portfolios, January 2015-December 2017 |
| Olive M. Darragh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since 2020 | Managing Director of Darragh Inc. (strategy and talent management consulting firm) since 2010; Founder and CEO, Zolio, Inc. (investment management talent identification platform) since 2004; Consultant to Independent Trustees of CFVIT and CFST I from June 2019 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 2001-2004 | 174 | Former Director, University of Edinburgh Business School (Member of US Board); former Director, Boston Public Library Foundation |
| Patricia M. Flynn c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1950 | Trustee since 2004 | Trustee Professor of Economics and Management, Bentley University since 1976 (also teaches and conducts research on corporate governance); Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 176 | Trustee, MA Taxpayers Foundation since 1997; Board of Governors, Innovation Institute, MA Technology Collaborative, 2010-2020; former Board of Directors, The MA Business Roundtable, 2003-2019 |
| Brian J. Gallagher c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 176 | Trustee, Catholic Schools Foundation since 2004 |
| Columbia Variable Portfolio – Dividend Opportunity Fund | Annual Report 2021 | 27 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Douglas A. Hacker c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1955 | Co-Chair since 2021; Chair of CFST I and CFVIT since 2014; Trustee of CFST I and CFVIT since 1996 and CFST, CFST II, CFVST II, CET I and CET II since 2021 | Independent business executive since May 2006; Executive Vice President – Strategy of United Airlines, December 2002 - May 2006; President of UAL Loyalty Services (airline marketing company), September 2001-December 2002; Executive Vice President and Chief Financial Officer of United Airlines, July 1999-September 2001 | 176 | Director, Spartan Nash Company (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing); former Director, Nash Finch Company (food distributor), 2005-2013; former Director, SeaCube Container Leasing Ltd. (container leasing), 2010-2013; and former Director, Travelport Worldwide Limited (travel information technology), 2014-2019 |
| Nancy T. Lukitsh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1956 | Trustee since 2011 | Senior Vice President, Partner and Director of Marketing, Wellington Management Company, LLP (investment adviser), 1997-2010; Chair, Wellington Management Portfolios (commingled non-U.S. investment pools), 2007 -2010; Director, Wellington Trust Company, NA and other Wellington affiliates, 1997-2010 | 174 | None |
| David M. Moffett c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2011 | Retired; Consultant to Bridgewater and Associates | 174 | Director, CSX Corporation (transportation suppliers); Director, Genworth Financial, Inc. (financial and insurance products and services); Director, PayPal Holdings Inc. (payment and data processing services); Trustee, University of Oklahoma Foundation; former Director, eBay Inc. (online trading community), 2007-2015; and former Director, CIT Bank, CIT Group Inc. (commercial and consumer finance), 2010-2016 |
| Catherine James Paglia c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Co-Chair since 2021; Chair of CFST, CFST II, CFVST II, CET I and CET II since 2020; Trustee of CFST, CFST II and CFVST II since 2004 and CFST I and CFVIT since 2021 | Director, Enterprise Asset Management, Inc. (private real estate and asset management company) since September 1998; Managing Director and Partner, Interlaken Capital, Inc., 1989-1997; Vice President, 1982-1985, Principal, 1985-1987, Managing Director, 1987-1989, Morgan Stanley; Vice President, Investment Banking, 1980-1982, Associate, Investment Banking, 1976-1980, Dean Witter Reynolds, Inc. | 176 | Director, Valmont Industries, Inc. (irrigation systems manufacturer) since 2012; Trustee, Carleton College (on the Investment Committee); Trustee, Carnegie Endowment for International Peace (on the Investment Committee) |
| 28 | Columbia Variable Portfolio – Dividend Opportunity Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Minor M. Shaw c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1947 | Trustee since 2003 | President, Micco LLC (private investments) since 2011; President, Micco Corp. (family investment business), 1998-2011 | 176 | Director, Blue Cross Blue Shield of South Carolina (Chair of Compensation Committee) since April 2008; Trustee, Hollingsworth Funds (on the Investment Committee) since 2016 (previously Board Chair from 2016-2019); Former Advisory Board member, Duke Energy Corp., 2016-2020; Chair of the Duke Endowment; Chair of Greenville – Spartanburg Airport Commission; former Trustee, BofA Funds Series Trust (11 funds), 2003-2011; former Director, Piedmont Natural Gas, 2004-2016; former Director, National Association of Corporate Directors, Carolinas Chapter, 2013-2018; Chair, Daniel-Mickel Foundation since 1998 |
| Natalie A. Trunow c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1967 | Trustee since 2020 | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services), January 2016-January 2021; Non-executive Member of the Investment Committee and Valuation Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services), August 2018-January 2021; Advisor, Paradigm Asset Management, November 2016-December 2021; Consultant to Independent Trustees of CFVIT and CFST I from September 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Director of Investments/Consultant, Casey Family Programs, April 2016-November 2016; Senior Vice President and Chief Investment Officer, Calvert Investments, August 2008-January 2016; Section Head and Portfolio Manager, General Motors Asset Management, June 1997-August 2008 | 174 | Former Director, Investment Committee, Health Services for Children with Special Needs, Inc., 2012-2019; Director, Chair of Audit Committee, Consumer Credit Counseling Services (formerly Guidewell Financial Solutions), since 2019; Independent Director, Investment Committee and Valuation Committee, Sarona Asset Management, since 2019 |
| Sandra Yeager c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2017 | Retired; President and founder, Hanoverian Capital, LLC (SEC registered investment advisor firm), 2008-2016; Managing Director, DuPont Capital, 2006-2008; Managing Director, Morgan Stanley Investment Management, 2004-2006; Senior Vice President, Alliance Bernstein, 1990-2004 | 176 | Former Director, NAPE Education Foundation, October 2016-October 2020 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Fund Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I (CET I), Columbia ETF Trust II (CET II), Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Beckman, Gallagher and Hacker and Mses. Blatz, Carlton, Flynn, Paglia, Shaw and Yeager serve as Directors of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
| Columbia Variable Portfolio – Dividend Opportunity Fund | Annual Report 2021 | 29 |
TRUSTEES AND OFFICERS (continued)
Interested trustee affiliated with Investment Manager*
Interested trustee affiliated with Investment Manager*
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during the past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex overseen | Other directorships held by Trustee during the past five years |
| Daniel J. Beckman c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since November 2021(a) | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC (since April 2015); officer of Columbia Funds and affiliated funds since 2020. | 176 | Director, Ameriprise Trust Company, since October 2016; Director, Columbia Management Investment Distributors, Inc. since November 2018; Board of Governors, Columbia Wanger Asset Management, LLC since January 2022 |
| * | Interested person (as defined under the 1940 Act) by reason of being an officer, director, security holder and/or employee of the Investment Manager or Ameriprise Financial. |
| (a) | Mr. Beckman serves as the President and Principal Executive Officer of the Columbia Funds (since 2021). |
The Statement of Additional
Information has additional information about the Fund’s Board members and is available, without charge, upon request by calling 800.345.6611 or contacting your financial intermediary.
The Board has appointed officers
who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. The following table provides basic information about the Officers of the
Fund, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Beckman, who is President and Principal Executive Officer, the
Fund’s other officers are:
Fund officers
| 30 | Columbia Variable Portfolio – Dividend Opportunity Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Fund officers (continued)
Fund officers (continued)
| Columbia Variable Portfolio – Dividend Opportunity Fund | Annual Report 2021 | 31 |
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For Fund and other investment product prospectuses, which contain this and other important information, contact your
financial advisor or insurance representative. Please read the prospectus carefully before you invest. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved. Columbia Management Investment Distributors, Inc., 290 Congress Street, Boston, MA 02210
© 2022 Columbia Management Investment
Advisers, LLC.
S-6468 AW (2/22)
Columbia Variable
Portfolio – Large Cap Growth Fund
Please remember that you may not
buy (nor will you own) shares of the Fund directly. The Fund is available through variable annuity contracts and variable life insurance policies offered by the separate accounts of participating insurance companies
as well as qualified pension and retirement plans. Please contact your financial advisor or insurance representative for more information.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
| 3 | |
| 5 | |
| 7 | |
| 8 | |
| 11 | |
| 12 | |
| 13 | |
| 14 | |
| 16 | |
| 23 | |
| 24 |
Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which Columbia Variable Portfolio – Large Cap Growth Fund (the Fund) holds investments consistent with the procedures as stated in the Statement of Additional
Information (SAI). You may obtain a copy of the SAI without charge by calling 800.345.6611; contacting your financial intermediary or searching the website of the Securities and Exchange Commission (SEC) at sec.gov.
Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge
by visiting columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. The Fund’s Form N-PORT is available on the SEC’s website at sec.gov. The Fund’s complete
schedule of portfolio holdings, as filed on Form N-PORT, can also be obtained without charge, upon request, by calling 800.345.6611.
Additional Fund information
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
290 Congress Street
Boston, MA 02210
Fund distributor
Columbia Management Investment Distributors,
Inc.
290 Congress Street
Boston, MA 02210
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
Columbia Variable Portfolio – Large Cap
Growth Fund | Annual Report 2021
Fund at a Glance
Investment objective
The Fund
seeks to provide shareholders with long-term capital growth.
Portfolio management
Melda Mergen, CFA, CAIA
Co-Portfolio Manager
Managed Fund since 2019
Tiffany Wade
Co-Portfolio Manager
Managed Fund since March 2021
| Columbia Variable Portfolio – Large Cap Growth Fund | Annual Report 2021 | 3 |
Fund at a Glance (continued)
Performance of a hypothetical $10,000 investment (December 31, 2011 — December 31, 2021)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class 2 shares of Columbia Variable Portfolio – Large Cap Growth Fund during the stated time period, and does not reflect the deduction of taxes, if any, that a
shareholder may pay on Fund distributions or on the redemption of Fund shares. The returns also do not reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy or
qualified pension or retirement plan, if any.
| 4 | Columbia Variable Portfolio – Large Cap Growth Fund | Annual Report 2021 |
Manager Discussion of Fund Performance
At December 31, 2021,
approximately 74.25% of the Fund’s shares were owned in the aggregate by affiliated funds-of-funds managed by Columbia Management Investment Advisers, LLC (the Investment Manager). As a result of asset
allocation decisions by the Investment Manager, it is possible that the Fund may experience relatively large purchases or redemptions from affiliated funds-of-funds. The Investment Manager seeks to minimize the impact
of these transactions by structuring them over a reasonable period of time. The Fund may also experience increased expenses as it buys and sells securities as a result of purchases or redemptions by affiliated
funds-of-funds.
For the 12-month period that ended
December 31, 2021, Class 2 shares of the Fund returned 28.35%. The Fund outperformed its benchmark, the Russell 1000 Growth Index, which returned 27.60% for the same period.
Market overview
U.S. equities, including
large-cap growth stocks, posted strong gains in 2021. As pandemic-related restrictions were eased, robust economic growth and corporate earnings drove gains for stocks. Both U.S. monetary and fiscal policy were highly
supportive, as Congress approved massive spending packages that included direct payments to citizens, and the U.S. Federal Reserve (Fed) maintained its benchmark overnight lending rate near zero while engaging in bond
market purchases to keep longer term borrowing costs low. The fourth quarter of 2021 saw the Fed adopt a more hawkish tone in response to high inflation, leading to increased market volatility. Nonetheless, the major
large-cap indexes ended the year at or near all-time highs, with information technology and communication services stocks as the key drivers of market performance.
The Fund’s notable
contributors during the period
| • | Selections within information technology, industrials and health care led positive contributions to the Fund’s performance. |
| • | Within information technology positive contributors included NVIDIA Corp., Broadcom, Inc., Micron Technology, Inc. and Applied Materials, Inc., which have all benefited from a very strong semiconductor demand backdrop. |
| ○ | NVIDIA is a leader in developing chips for the gaming, automotive and mobile segments. |
| ○ | Broadcom is dominant in the data center and networking end markets. |
| ○ | Micron Technology is a leading designer and manufacturer of memory chips. |
| ○ | Supply chain constraints have pushed out chip delivery times and elongated the positive cycle for the broader semiconductor segment. |
| ○ | Several large chip manufacturers announced higher capital spending plans to increase production capacity which especially benefits semiconductor equipment manufacturer Applied Materials. |
| ○ | Financial services and accounting software firm Intuit, Inc. reported strong results throughout the year, demonstrating accelerating revenue growth and good margin expansion. Recent acquisitions of CreditKarma and MailChimp add to the company’s platform offerings and we believe should continue to deliver upside to estimates. |
| ○ | Finally, IT workflow company Atlassian Corp. PLC displayed strong growth driven by customer conversions to its cloud-based platform. |
| • | Within industrials, HVAC (heating, ventilation, and air conditioning) company Trane Technologies PLC benefited from a recovery in non-residential construction throughout the year. In addition, an increasing focus on air quality and energy efficiency has led to a recovery in organic growth and a strong backlog of business heading into 2022. We expect these trends to continue to be tailwinds for Trane for several years to come as investors and corporations increasingly focus on emissions reductions and sustainability. |
| • | Positive contributions within health care were highlighted by Eli Lily & Co. Sentiment with respect to the stock was boosted by the accelerated approval of a competitor’s Alzheimer’s drug, which paved the way for Eli Lily’s own donanemab treatment to gain breakthrough therapy status later in 2021, and it is on its way to accelerated approval. We believed donanemab would prove to be a superior product to its competitor’s product, and that Eli Lily continued to have one of the best R&D pipelines among pharmaceutical companies. |
| Columbia Variable Portfolio – Large Cap Growth Fund | Annual Report 2021 | 5 |
Manager Discussion of Fund Performance (continued)
| • | Contract research organization IQVIA Holdings, Inc. experienced a rebound in clinical trial work after a COVID-19 related pause in 2020. IQVIA continued to be differentiated from competitors based on its leading data and analytics services, and we believe a strong industry drug pipeline may support significant revenue growth going forward. |
The Fund’s notable
detractors during the period
| • | Stock selection within consumer discretionary weighed most heavily on return during the period. |
| • | Within the consumer discretionary sector, shares of VF Corp., owner of such well-known footwear and apparel brands as Vans and North Face, suffered as the retailer’s in-store sales have been slow to recover from the COVID-19-induced setback. VF has been subject to the concerns weighing on the broader retail sector around supply chains and higher costs. |
| • | Shares of Amazon.com, Inc. lagged relative to the strong overall market performance seen in the year. After a very strong 2020 for both the retail and cloud businesses, the company faced tough comparisons. In addition, this year Amazon has been investing heavily to meet the surge in demand, which has weighed on margins. As with prior investment cycles, we expected Amazon’s elevated investment would leave the company even better positioned to continue to grow and take market share. |
| • | Finally, an underweight to electric vehicle manufacturer Tesla Motors, Inc. also detracted, as the company has managed supply chain constraints better than most other auto manufacturers and reported gross margins that were well above expectations. |
The views expressed in this report
reflect the current views of the respective parties who have contributed to this report. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult
to predict, so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective parties
disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Columbia fund are based on numerous factors, may not be relied on as an
indication of trading intent on behalf of any particular Columbia fund. References to specific securities should not be construed as a recommendation or investment advice.
| 6 | Columbia Variable Portfolio – Large Cap Growth Fund | Annual Report 2021 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur ongoing
costs, which generally include management fees, distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to help you compare these costs with the ongoing costs of investing in other mutual funds.
The information below does not
reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy (collectively, Contracts) or qualified pension and retirement plan (Qualified Plan), if any. The total fees
and expenses you bear may therefore be higher than those shown below.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount invested, to estimate the
expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as redemption or exchange fees, or expenses that apply to the subaccount or the Contract. Therefore, the
hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If the fees and expenses imposed under your Contract or
Qualified Plan, if any, were included, your costs would be higher.
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 365.
Expenses do not include fees and
expenses incurred indirectly by the Fund from its investment in underlying funds, including affiliated and non-affiliated pooled investment vehicles, such as mutual funds and exchange-traded funds.
| Columbia Variable Portfolio – Large Cap Growth Fund | Annual Report 2021 | 7 |
Portfolio of Investments
December 31, 2021
December 31, 2021
(Percentages represent value of
investments compared to net assets)
Investments in securities
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 8 | Columbia Variable Portfolio – Large Cap Growth Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Notes to Portfolio of
Investments
| (a) | Non-income producing investment. |
| (b) | The rate shown is the seven-day current annualized yield at December 31, 2021. |
| (c) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended December 31, 2021 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Realized gain (loss)($) | Dividends($) | End of period shares |
| Columbia Short-Term Cash Fund, 0.085% | ||||||||
| 28,352,567 | 512,436,537 | (528,997,690) | — | 11,791,414 | (612) | 18,537 | 11,793,773 | |
Fair value
measurements
The Fund categorizes
its fair value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when
available. Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that
reflect the Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input
that is deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For
example, certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active
market.
Fair value inputs are
summarized in the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Large Cap Growth Fund | Annual Report 2021 | 9 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Fair value measurements (continued)
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at December 31, 2021:
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 10 | Columbia Variable Portfolio – Large Cap Growth Fund | Annual Report 2021 |
Statement of Assets and Liabilities
December 31, 2021
December 31, 2021
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $1,493,046,034) | $2,727,169,665 |
| Affiliated issuers (cost $11,791,414) | 11,791,414 |
| Receivable for: | |
| Capital shares sold | 24,718 |
| Dividends | 264,730 |
| Foreign tax reclaims | 65,975 |
| Prepaid expenses | 22,648 |
| Total assets | 2,739,339,150 |
| Liabilities | |
| Due to custodian | 28,513 |
| Payable for: | |
| Capital shares purchased | 4,050,948 |
| Management services fees | 50,941 |
| Distribution and/or service fees | 2,518 |
| Service fees | 74,573 |
| Compensation of board members | 289,774 |
| Compensation of chief compliance officer | 495 |
| Other expenses | 29,613 |
| Total liabilities | 4,527,375 |
| Net assets applicable to outstanding capital stock | $2,734,811,775 |
| Represented by | |
| Trust capital | $2,734,811,775 |
| Total - representing net assets applicable to outstanding capital stock | $2,734,811,775 |
| Class 1 | |
| Net assets | $2,205,624,141 |
| Shares outstanding | 58,121,850 |
| Net asset value per share | $37.95 |
| Class 2 | |
| Net assets | $201,389,120 |
| Shares outstanding | 5,464,553 |
| Net asset value per share | $36.85 |
| Class 3 | |
| Net assets | $327,798,514 |
| Shares outstanding | 8,756,632 |
| Net asset value per share | $37.43 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Large Cap Growth Fund | Annual Report 2021 | 11 |
Statement of Operations
Year Ended December 31, 2021
Year Ended December 31, 2021
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $19,865,575 |
| Dividends — affiliated issuers | 18,537 |
| Interfund lending | 60 |
| Foreign taxes withheld | (37,767) |
| Total income | 19,846,405 |
| Expenses: | |
| Management services fees | 18,126,572 |
| Distribution and/or service fees | |
| Class 2 | 459,608 |
| Class 3 | 388,874 |
| Service fees | 629,978 |
| Compensation of board members | 100,710 |
| Custodian fees | 19,376 |
| Printing and postage fees | 39,464 |
| Audit fees | 30,280 |
| Legal fees | 34,195 |
| Interest on interfund lending | 32 |
| Compensation of chief compliance officer | 477 |
| Other | 44,346 |
| Total expenses | 19,873,912 |
| Net investment loss | (27,507) |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 408,555,330 |
| Investments — affiliated issuers | (612) |
| Net realized gain | 408,554,718 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | 271,550,109 |
| Net change in unrealized appreciation (depreciation) | 271,550,109 |
| Net realized and unrealized gain | 680,104,827 |
| Net increase in net assets resulting from operations | $680,077,320 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 12 | Columbia Variable Portfolio – Large Cap Growth Fund | Annual Report 2021 |
Statement of Changes in Net Assets
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | |
| Operations | ||
| Net investment income (loss) | $(27,507) | $4,893,639 |
| Net realized gain | 408,554,718 | 348,328,282 |
| Net change in unrealized appreciation (depreciation) | 271,550,109 | 292,133,949 |
| Net increase in net assets resulting from operations | 680,077,320 | 645,355,870 |
| Decrease in net assets from capital stock activity | (335,520,007) | (317,258,835) |
| Total increase in net assets | 344,557,313 | 328,097,035 |
| Net assets at beginning of year | 2,390,254,462 | 2,062,157,427 |
| Net assets at end of year | $2,734,811,775 | $2,390,254,462 |
| Year Ended | Year Ended | |||
| December 31, 2021 | December 31, 2020 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class 1 | ||||
| Subscriptions | 3,662,272 | 110,089,652 | 2,118,172 | 47,842,154 |
| Redemptions | (11,469,683) | (405,470,939) | (13,889,012) | (332,789,308) |
| Net decrease | (7,807,411) | (295,381,287) | (11,770,840) | (284,947,154) |
| Class 2 | ||||
| Subscriptions | 729,388 | 24,141,618 | 851,450 | 20,261,963 |
| Redemptions | (896,164) | (29,713,741) | (1,360,300) | (31,836,271) |
| Net decrease | (166,776) | (5,572,123) | (508,850) | (11,574,308) |
| Class 3 | ||||
| Subscriptions | 79,093 | 2,449,173 | 219,840 | 5,293,376 |
| Redemptions | (1,100,569) | (37,015,770) | (1,110,053) | (26,030,749) |
| Net decrease | (1,021,476) | (34,566,597) | (890,213) | (20,737,373) |
| Total net decrease | (8,995,663) | (335,520,007) | (13,169,903) | (317,258,835) |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Large Cap Growth Fund | Annual Report 2021 | 13 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect any fees and expenses imposed under your
Contract and/or Qualified Plan, as applicable; such fees and expenses would reduce the total returns for all periods shown. Total return and portfolio turnover are not annualized for periods of less than one year. The
portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain derivatives, if any. If such transactions were included, the Fund’s portfolio
turnover rate may be higher.
| Net asset value, beginning of period | Net investment income (loss) | Net realized and unrealized gain (loss) | Total from investment operations | |
| Class 1 | ||||
| Year Ended 12/31/2021 | $29.48 | 0.01 | 8.46 | 8.47 |
| Year Ended 12/31/2020 | $21.88 | 0.06 | 7.54 | 7.60 |
| Year Ended 12/31/2019 | $16.10 | 0.04 | 5.74 | 5.78 |
| Year Ended 12/31/2018 | $16.76 | 0.03 | (0.69) | (0.66) |
| Year Ended 12/31/2017 | $13.08 | 0.05 | 3.63 | 3.68 |
| Class 2 | ||||
| Year Ended 12/31/2021 | $28.71 | (0.07) | 8.21 | 8.14 |
| Year Ended 12/31/2020 | $21.36 | 0.00(d) | 7.35 | 7.35 |
| Year Ended 12/31/2019 | $15.76 | (0.01) | 5.61 | 5.60 |
| Year Ended 12/31/2018 | $16.44 | (0.02) | (0.66) | (0.68) |
| Year Ended 12/31/2017 | $12.86 | 0.02 | 3.56 | 3.58 |
| Class 3 | ||||
| Year Ended 12/31/2021 | $29.12 | (0.03) | 8.34 | 8.31 |
| Year Ended 12/31/2020 | $21.64 | 0.03 | 7.45 | 7.48 |
| Year Ended 12/31/2019 | $15.94 | 0.01 | 5.69 | 5.70 |
| Year Ended 12/31/2018 | $16.62 | 0.01 | (0.69) | (0.68) |
| Year Ended 12/31/2017 | $12.99 | 0.04 | 3.59 | 3.63 |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Ratios include interfund lending expense which is less than 0.01%. |
| (d) | Rounds to zero. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 14 | Columbia Variable Portfolio – Large Cap Growth Fund | Annual Report 2021 |
Financial Highlights (continued)
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets(a) | Total net expense ratio to average net assets(a),(b) | Net investment income (loss) ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Class 1 | |||||||
| Year Ended 12/31/2021 | $37.95 | 28.73% | 0.71%(c) | 0.71%(c) | 0.03% | 46% | $2,205,624 |
| Year Ended 12/31/2020 | $29.48 | 34.74% | 0.73% | 0.73% | 0.26% | 57% | $1,943,859 |
| Year Ended 12/31/2019 | $21.88 | 35.90% | 0.73% | 0.73% | 0.19% | 39% | $1,700,174 |
| Year Ended 12/31/2018 | $16.10 | (3.94%) | 0.74% | 0.74% | 0.16% | 27% | $1,312,513 |
| Year Ended 12/31/2017 | $16.76 | 28.14% | 0.77% | 0.76% | 0.36% | 35% | $1,408,054 |
| Class 2 | |||||||
| Year Ended 12/31/2021 | $36.85 | 28.35% | 0.96%(c) | 0.96%(c) | (0.21%) | 46% | $201,389 |
| Year Ended 12/31/2020 | $28.71 | 34.41% | 0.98% | 0.98% | 0.02% | 57% | $161,648 |
| Year Ended 12/31/2019 | $21.36 | 35.53% | 0.98% | 0.98% | (0.06%) | 39% | $131,133 |
| Year Ended 12/31/2018 | $15.76 | (4.14%) | 0.99% | 0.99% | (0.09%) | 27% | $108,782 |
| Year Ended 12/31/2017 | $16.44 | 27.84% | 1.02% | 1.01% | 0.11% | 35% | $121,608 |
| Class 3 | |||||||
| Year Ended 12/31/2021 | $37.43 | 28.54% | 0.83%(c) | 0.83%(c) | (0.09%) | 46% | $327,799 |
| Year Ended 12/31/2020 | $29.12 | 34.57% | 0.85% | 0.85% | 0.14% | 57% | $284,747 |
| Year Ended 12/31/2019 | $21.64 | 35.76% | 0.86% | 0.86% | 0.06% | 39% | $230,850 |
| Year Ended 12/31/2018 | $15.94 | (4.09%) | 0.86% | 0.86% | 0.04% | 27% | $196,874 |
| Year Ended 12/31/2017 | $16.62 | 27.94% | 0.89% | 0.88% | 0.23% | 35% | $232,010 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Large Cap Growth Fund | Annual Report 2021 | 15 |
Notes to Financial Statements
December 31, 2021
December 31, 2021
Note 1. Organization
Columbia Variable Portfolio
– Large Cap Growth Fund (the Fund), a series of Columbia Funds Variable Series Trust II (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940
Act), as an open-end management investment company organized as a Massachusetts business trust.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers Class 1, Class 2 and Class 3 shares to separate accounts funding variable annuity contracts and variable life insurance policies (collectively, Contracts) issued
by affiliated and unaffiliated life insurance companies (Participating Insurance Companies) as well as qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors (Qualified
Investors) authorized by Columbia Management Investment Distributors, Inc. (the Distributor). You may not buy (nor will you own) shares of the Fund directly. You may invest by participating in a Qualified Plan or by
buying a Contract and making allocations to the Fund. Although all share classes generally have identical voting, dividend and liquidation rights, each share class votes separately when required by the Trust’s
organizational documents or by law. Different share classes pay different net investment income distribution amounts to the extent the expenses of such share classes differ, and distributions in liquidation will be
proportional to the net asset value of each share class. Each share class has its own cost structure and other features.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Equity securities listed on an
exchange are valued at the closing price or last trade price on their primary exchange at the close of business of the New York Stock Exchange. Securities with a closing price not readily available or not listed on
any exchange are valued at the mean between the closing bid and ask prices. Listed preferred stocks convertible into common stocks are valued using an evaluated price from a pricing service.
Foreign equity securities are
valued based on the closing price or last trade price on their primary exchange at the close of business of the New York Stock Exchange. If any foreign equity security closing prices are not readily available,
the securities are valued at the mean of the latest quoted bid and ask prices on such exchanges or markets. Foreign currency exchange rates are determined at the scheduled closing time of the New York Stock Exchange.
Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange; therefore, the closing prices for securities in such markets or on such exchanges may not fully reflect
events that occur after such close but before the close of the New York Stock Exchange. In those situations, foreign securities will be fair valued pursuant to a policy adopted by the Board of Trustees. Under the
policy, the Fund may utilize a third-party pricing service to determine these fair values. The third-party pricing service takes into account multiple factors, including, but not limited to, movements in the U.S.
securities markets, certain depositary receipts, futures contracts and foreign exchange rates that have occurred subsequent to the close of the foreign exchange or market, to determine a good faith estimate that
reasonably reflects the current market conditions as of the close of the New York Stock Exchange. The fair value of a security is likely to be different from the quoted or published price, if available.
Investments in open-end investment
companies (other than exchange-traded funds (ETFs)), are valued at the latest net asset value reported by those companies as of the valuation time.
| 16 | Columbia Variable Portfolio – Large Cap Growth Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
Income recognition
Corporate actions and dividend
income are generally recorded net of any non-reclaimable tax withholdings, on the ex-dividend date or upon receipt of an ex-dividend notification in the case of certain foreign securities.
The Fund may receive distributions
from holdings in equity securities, business development companies (BDCs), exchange-traded funds (ETFs), limited partnerships (LPs), other regulated investment companies (RICs), and real estate investment trusts
(REITs), which report information as to the tax character of their distributions annually. These distributions are allocated to dividend income, capital gain and return of capital based on actual information reported.
Return of capital is recorded as a reduction of the cost basis of securities held. If the Fund no longer owns the applicable securities, return of capital is recorded as a realized gain. With respect to REITs, to the
extent actual information has not yet been reported, estimates for return of capital are made by Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise
Financial, Inc. (Ameriprise Financial). The Investment Manager’s estimates are subsequently adjusted when the actual character of the distributions is disclosed by the REITs, which could result in a
proportionate change in return of capital to shareholders.
Awards from class action litigation
are recorded as a reduction of cost basis if the Fund still owns the applicable securities on the payment date. If the Fund no longer owns the applicable securities on the payment date, the proceeds are recorded as
realized gains.
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
Federal income tax status
The Fund is treated as a
partnership for federal income tax purposes, and the Fund does not expect to make regular distributions. The Fund will not be subject to federal income tax, and therefore, there is no provision for federal income
taxes. The partners of the Fund are subject to tax on their distributive share of the Fund’s income and loss. The components of the Fund’s net assets are reported at the partner-level for federal income
tax purposes, and therefore, are not presented in the Statement of Assets and Liabilities.
| Columbia Variable Portfolio – Large Cap Growth Fund | Annual Report 2021 | 17 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Foreign taxes
The Fund may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries, as applicable, based upon its current interpretation of tax rules
and regulations that exist in the markets in which it invests.
Realized gains in certain countries
may be subject to foreign taxes at the Fund level, based on statutory rates. The Fund accrues for such foreign taxes on realized and unrealized gains at the appropriate rate for each jurisdiction, as applicable. The
amount, if any, is disclosed as a liability on the Statement of Assets and Liabilities.
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Under the Management Agreement, the
Investment Manager provides the Fund with investment research and advice, as well as administrative and accounting services. The management services fee is an annual fee that is equal to a percentage of the
Fund’s daily net assets that declines from 0.77% to 0.57% as the Fund’s net assets increase. The effective management services fee rate for the year ended December 31, 2021 was 0.68% of the Fund’s
average daily net assets.
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. Under a Deferred Compensation Plan (the
Deferred Plan), these members of the Board of Trustees may elect to defer payment of up to 100% of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of
certain funds managed by the Investment Manager. The Fund’s liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Deferred Plan. All
amounts payable under the Deferred Plan constitute a general unsecured obligation of the Fund. The expense for the Deferred Plan, which includes Trustees’ fees deferred during the current period as well as any
gains or losses on the Trustees’ deferred compensation balances as a result of market fluctuations, is included in "Compensation of board members" on the Statement of Operations.
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
| 18 | Columbia Variable Portfolio – Large Cap Growth Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Transactions with affiliates
The Fund is permitted to engage in
purchase and/or sale transactions with affiliates and/or accounts that have a common investment manager (or affiliated investment managers), common directors/trustees, and/or common officers under specified conditions
outlined in a policy adopted by the Board, pursuant to Rule 17a-7 under the 1940 Act (cross-trades). The Board relies on quarterly written representation from the Fund’s Chief Compliance Officer that
cross-trades complied with approved policy.
For the year ended December 31,
2021, the Fund engaged in cross-trades as follows:
| Purchases ($) | Sales ($) | Net realized gain (loss) ($) |
| 25,043,751 | — | — |
Service fees
The Fund has entered into a
Shareholder Services Agreement with Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial. Under this
agreement, the Fund pays a service fee equal to the payments made by the Transfer Agent to Participating Insurance Companies and other financial intermediaries (together, Participating Organizations) for services each
such Participating Organization provides to its clients, customers and participants that are invested directly or indirectly in the Fund, up to a cap approved by the Board of Trustees from time to time. The effective
service fee rate for the year ended December 31, 2021, was 0.02% of the Fund’s average daily net assets.
The Transfer Agent may retain as
compensation for its services revenues from fees for wire, telephone and redemption orders, account transcripts due the Transfer Agent from Fund shareholders and interest (net of bank charges) earned with respect to
balances in accounts the Transfer Agent maintains in connection with its services to the Fund.
Distribution and/or service fees
The Fund has an agreement with the
Distributor, an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution services. Under a Plan and Agreement of Distribution, the Fund pays a fee at an annual rate
of up to 0.25% of the Fund’s average daily net assets attributable to Class 2 shares and an annual rate of up to 0.125% of the Fund’s average daily net assets attributable to Class 3 shares. The Fund pays
no distribution and service fees for Class 1 shares.
Expenses waived/reimbursed by the
Investment Manager and its affiliates
The Investment Manager and certain
of its affiliates have contractually agreed to waive fees and/or reimburse expenses (excluding certain fees and expenses described below) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, so that the Fund’s net operating expenses, after giving effect to fees waived/expenses reimbursed and any balance credits and/or overdraft charges from the Fund’s
custodian, do not exceed the following annual rate(s) as a percentage of the classes’ average daily net assets:
| Contractual expense cap July 1, 2021 through April 30, 2022 | Voluntary expense cap May 1, 2021 through June 30, 2021 | Contractual expense cap prior to May 1, 2021 | |
| Class 1 | 0.75% | 0.75% | 0.75% |
| Class 2 | 1.00 | 1.00 | 1.00 |
| Class 3 | 0.875 | 0.875 | 0.875 |
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), expenses associated with investments in affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange-traded funds), transaction costs and
brokerage commissions, costs related to any securities lending program, dividend expenses associated with securities sold short,
| Columbia Variable Portfolio – Large Cap Growth Fund | Annual Report 2021 | 19 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
inverse floater program fees and expenses,
transaction charges and interest on borrowed money, interest, costs associated with certain shareholder meetings, infrequent and/or unusual expenses and any other expenses the exclusion of which is specifically
approved by the Board of Trustees. This agreement may be modified or amended only with approval from the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the
expense reimbursement arrangements described above are not recoverable by the Investment Manager or its affiliates in future periods.
Note 4. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $1,213,962,024 and $1,525,537,712, respectively, for the year ended December 31, 2021. The amount of purchase
and sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 5. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes
referred to as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
Note 6. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund’s activity in the
Interfund Program during the year ended December 31, 2021 was as follows:
| Borrower or lender | Average loan balance ($) | Weighted average interest rate (%) | Number of days with outstanding loans |
| Borrower | 1,900,000 | 0.61 | 1 |
| Lender | 1,550,000 | 0.69 | 2 |
Interest income earned and
interest expense incurred by the Fund is recorded as Interfund lending in the Statement of Operations. The Fund had no outstanding interfund loans at December 31, 2021.
Note 7. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to an October 28, 2021 amendment and restatement, the credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment
Manager or an affiliated investment manager, severally and not jointly, permits collective borrowings up to $950 million. Interest is currently charged to each participating fund based on its borrowings at a rate
equal to the higher of (i) the federal funds effective rate, (ii) the secured overnight financing rate plus 0.11448% and (iii) the overnight bank funding rate, plus in each case, 1.00%. Each borrowing under the credit
facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The
| 20 | Columbia Variable Portfolio – Large Cap Growth Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
commitment fee is included in other expenses in
the Statement of Operations. This agreement expires annually in October unless extended or renewed. Prior to the October 28, 2021 amendment and restatement, the Fund had access to a revolving credit facility with a
syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. which permitted collective borrowings up to $950 million. Interest was charged to each participating fund based on its
borrowings at a rate equal to the higher of (i) the federal funds effective rate, (ii) the one-month London Interbank Offered Rate (LIBOR) rate and (iii) the overnight bank funding rate, plus in each case, 1.25%.
The Fund had no borrowings during
the year ended December 31, 2021.
Note 8. Significant
risks
Information technology sector
risk
The Fund is more susceptible to the
particular risks that may affect companies in the information technology sector than if it were invested in a wider variety of companies in unrelated sectors. Companies in the information technology sector are subject
to certain risks, including the risk that new services, equipment or technologies will not be accepted by consumers and businesses or will become rapidly obsolete. Performance of such companies may be affected by
factors including obtaining and protecting patents (or the failure to do so) and significant competitive pressures, including aggressive pricing of their products or services, new market entrants, competition for
market share and short product cycles due to an accelerated rate of technological developments. Such competitive pressures may lead to limited earnings and/or falling profit margins. As a result, the value of their
securities may fall or fail to rise. In addition, many information technology sector companies have limited operating histories and prices of these companies’ securities historically have been more volatile than
other securities, especially over the short term. Some companies in the information technology sector are facing increased government and regulatory scrutiny and may be subject to adverse government or regulatory
action, which could negatively impact the value of their securities.
Market risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
The coronavirus disease 2019 and
its variants (COVID-19) pandemic has resulted in, and may continue to result in, significant global economic and societal disruption and market volatility due to disruptions in market access, resource availability,
facilities operations, imposition of tariffs, export controls and supply chain disruption, among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement
and loss in human and other resources. The uncertainty surrounding the magnitude, duration, reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental
authorities or other third parties, present unknowns that are yet to unfold. The impacts, as well as the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and
pandemics that may arise in the future – could negatively affect global economies and markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in
emerging market countries may be greater due to generally less established healthcare systems, governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other
pre-existing
| Columbia Variable Portfolio – Large Cap Growth Fund | Annual Report 2021 | 21 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
political, social and economic risks in certain
countries or globally. The disruptions caused by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively impact the Fund’s ability to achieve its
investment objectives. Any such event(s) could have a significant adverse impact on the value and risk profile of the Fund.
Shareholder concentration risk
At December 31, 2021, affiliated
shareholders of record owned 91.4% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of
less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Note 9. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
Note 10. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in
connection with the conduct of their business activities. Ameriprise Financial believes that the Fund is not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject
of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with
the Fund. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (SEC) on legal and regulatory matters that relate to
Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that
these matters, or the adverse publicity associated with them, will not result in increased Fund redemptions, reduced sale of Fund shares or other adverse consequences to the Fund. Further, although we believe
proceedings are not likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines,
penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial or one or more of its affiliates that provides services to
the Fund.
| 22 | Columbia Variable Portfolio – Large Cap Growth Fund | Annual Report 2021 |
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees of Columbia
Funds Variable Series Trust II and Shareholders of Columbia Variable Portfolio – Large Cap Growth Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of Columbia Variable Portfolio – Large Cap Growth Fund (one of the funds constituting Columbia Funds Variable Series Trust II,
referred to hereafter as the "Fund") as of December 31, 2021, the related statement of operations for the year ended December 31, 2021, the statement of changes in net assets for each of the two years in the period
ended December 31, 2021, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2021 (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, 2021, 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, 2021 and the financial highlights for each of the five years in the period ended December 31, 2021 in conformity with accounting principles generally
accepted in the United States of America.
Basis for Opinion
These financial statements are the
responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these
financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2021 by correspondence with the custodian and transfer agent. We believe that our
audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Minneapolis, Minnesota
February 22, 2022
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| Columbia Variable Portfolio – Large Cap Growth Fund | Annual Report 2021 | 23 |
TRUSTEES AND
OFFICERS
The Board oversees the
Fund’s operations and appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following table provides basic biographical information about the
Fund’s Trustees as of the printing of this report, including their principal occupations during the past five years, although specific titles for individuals may have varied over the period. The year set forth
beneath Length of Service in the table below is the year in which the Trustee was first appointed or elected as Trustee to any Fund currently in the Columbia Funds Complex or a predecessor thereof. Under current Board
policy, each Trustee generally serves until December 31 of the year such Trustee turns seventy-five (75).
Independent trustees
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| George S. Batejan c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1953 | Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 176 | Former Chairman of the Board, NICSA (National Investment Company Services Association) (Executive Committee, Nominating Committee and Governance Committee), 2014-2016; former Director, Intech Investment Management, 2011-2016; former Board Member, Metro Denver Chamber of Commerce, 2015-2016; former Advisory Board Member, University of Colorado Business School, 2015-2018 |
| Kathleen Blatz c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2006 | Attorney, specializing in arbitration and mediation; Chief Justice, Minnesota Supreme Court, 1998-2006; Associate Justice, Minnesota Supreme Court, 1996-1998; Fourth Judicial District Court Judge, Hennepin County, 1994-1996; Attorney in private practice and public service, 1984-1993; State Representative, Minnesota House of Representatives, 1979-1993, which included service on the Tax and Financial Institutions and Insurance Committees; Member and Interim Chair, Minnesota Sports Facilities Authority, January 2017-July 2017; Interim President and Chief Executive Officer, Blue Cross Blue Shield of Minnesota (health care insurance), February-July 2018, April-October 2021 | 176 | Former Trustee, Blue Cross Blue Shield of Minnesota, 2009-2021 (Chair of the Business Development Committee, 2014-2017; Chair of the Governance Committee, 2017-2019); former Member and Chair of the Board, Minnesota Sports Facilities Authority, January 2017-July 2017; former Director, Robina Foundation, 2009-2020 (Chair, 2014-2020); Director, Schulze Family Foundation, since 2021 |
| Pamela G. Carlton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2007 | President, Springboard — Partners in Cross Cultural Leadership (consulting company) since 2003; Managing Director of US Equity Research, JP Morgan Chase, 1999-2003; Director of US Equity Research, Chase Asset Management, 1996-1999; Co-Director Latin America Research, 1993-1996, COO Global Research, 1992-1996, Co-Director of US Research, 1991-1992, Investment Banker, Morgan Stanley, 1982-1991, Morgan Stanley; Attorney, Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 176 | Trustee, New York Presbyterian Hospital Board (Executive Committee and Chair of People Committee) since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee); Director, Apollo Commercial Real Estate Finance, Inc. since 2021; the Governing Council of the Independent Directors Council (IDC), since 2021 |
| 24 | Columbia Variable Portfolio – Large Cap Growth Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Janet Langford Carrig c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1957 | Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 174 | Director, EQT Corporation (natural gas producer) since 2019; Director, Whiting Petroleum Corporation (independent oil and gas company) since 2020 |
| J. Kevin Connaughton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2020 | Member, FINRA National Adjudicatory Council since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Consultant to Independent Trustees of CFVIT and CFST I from March 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Managing Director and General Manager of Mutual Fund Products, Columbia Management Investment Advisers, LLC, May 2010-February 2015; President, Columbia Funds, 2008-2015; and senior officer of Columbia Funds and affiliated funds, 2003-2015 | 174 | Former Director, The Autism Project, March 2015-December 2021; former Member of the Investment Committee, St. Michael’s College, November 2015-February 2020; former Trustee, St. Michael’s College, June 2017-September 2019; former Trustee, New Century Portfolios, January 2015-December 2017 |
| Olive M. Darragh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since 2020 | Managing Director of Darragh Inc. (strategy and talent management consulting firm) since 2010; Founder and CEO, Zolio, Inc. (investment management talent identification platform) since 2004; Consultant to Independent Trustees of CFVIT and CFST I from June 2019 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 2001-2004 | 174 | Former Director, University of Edinburgh Business School (Member of US Board); former Director, Boston Public Library Foundation |
| Patricia M. Flynn c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1950 | Trustee since 2004 | Trustee Professor of Economics and Management, Bentley University since 1976 (also teaches and conducts research on corporate governance); Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 176 | Trustee, MA Taxpayers Foundation since 1997; Board of Governors, Innovation Institute, MA Technology Collaborative, 2010-2020; former Board of Directors, The MA Business Roundtable, 2003-2019 |
| Brian J. Gallagher c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 176 | Trustee, Catholic Schools Foundation since 2004 |
| Columbia Variable Portfolio – Large Cap Growth Fund | Annual Report 2021 | 25 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Douglas A. Hacker c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1955 | Co-Chair since 2021; Chair of CFST I and CFVIT since 2014; Trustee of CFST I and CFVIT since 1996 and CFST, CFST II, CFVST II, CET I and CET II since 2021 | Independent business executive since May 2006; Executive Vice President – Strategy of United Airlines, December 2002 - May 2006; President of UAL Loyalty Services (airline marketing company), September 2001-December 2002; Executive Vice President and Chief Financial Officer of United Airlines, July 1999-September 2001 | 176 | Director, Spartan Nash Company (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing); former Director, Nash Finch Company (food distributor), 2005-2013; former Director, SeaCube Container Leasing Ltd. (container leasing), 2010-2013; and former Director, Travelport Worldwide Limited (travel information technology), 2014-2019 |
| Nancy T. Lukitsh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1956 | Trustee since 2011 | Senior Vice President, Partner and Director of Marketing, Wellington Management Company, LLP (investment adviser), 1997-2010; Chair, Wellington Management Portfolios (commingled non-U.S. investment pools), 2007 -2010; Director, Wellington Trust Company, NA and other Wellington affiliates, 1997-2010 | 174 | None |
| David M. Moffett c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2011 | Retired; Consultant to Bridgewater and Associates | 174 | Director, CSX Corporation (transportation suppliers); Director, Genworth Financial, Inc. (financial and insurance products and services); Director, PayPal Holdings Inc. (payment and data processing services); Trustee, University of Oklahoma Foundation; former Director, eBay Inc. (online trading community), 2007-2015; and former Director, CIT Bank, CIT Group Inc. (commercial and consumer finance), 2010-2016 |
| Catherine James Paglia c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Co-Chair since 2021; Chair of CFST, CFST II, CFVST II, CET I and CET II since 2020; Trustee of CFST, CFST II and CFVST II since 2004 and CFST I and CFVIT since 2021 | Director, Enterprise Asset Management, Inc. (private real estate and asset management company) since September 1998; Managing Director and Partner, Interlaken Capital, Inc., 1989-1997; Vice President, 1982-1985, Principal, 1985-1987, Managing Director, 1987-1989, Morgan Stanley; Vice President, Investment Banking, 1980-1982, Associate, Investment Banking, 1976-1980, Dean Witter Reynolds, Inc. | 176 | Director, Valmont Industries, Inc. (irrigation systems manufacturer) since 2012; Trustee, Carleton College (on the Investment Committee); Trustee, Carnegie Endowment for International Peace (on the Investment Committee) |
| 26 | Columbia Variable Portfolio – Large Cap Growth Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Minor M. Shaw c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1947 | Trustee since 2003 | President, Micco LLC (private investments) since 2011; President, Micco Corp. (family investment business), 1998-2011 | 176 | Director, Blue Cross Blue Shield of South Carolina (Chair of Compensation Committee) since April 2008; Trustee, Hollingsworth Funds (on the Investment Committee) since 2016 (previously Board Chair from 2016-2019); Former Advisory Board member, Duke Energy Corp., 2016-2020; Chair of the Duke Endowment; Chair of Greenville – Spartanburg Airport Commission; former Trustee, BofA Funds Series Trust (11 funds), 2003-2011; former Director, Piedmont Natural Gas, 2004-2016; former Director, National Association of Corporate Directors, Carolinas Chapter, 2013-2018; Chair, Daniel-Mickel Foundation since 1998 |
| Natalie A. Trunow c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1967 | Trustee since 2020 | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services), January 2016-January 2021; Non-executive Member of the Investment Committee and Valuation Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services), August 2018-January 2021; Advisor, Paradigm Asset Management, November 2016-December 2021; Consultant to Independent Trustees of CFVIT and CFST I from September 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Director of Investments/Consultant, Casey Family Programs, April 2016-November 2016; Senior Vice President and Chief Investment Officer, Calvert Investments, August 2008-January 2016; Section Head and Portfolio Manager, General Motors Asset Management, June 1997-August 2008 | 174 | Former Director, Investment Committee, Health Services for Children with Special Needs, Inc., 2012-2019; Director, Chair of Audit Committee, Consumer Credit Counseling Services (formerly Guidewell Financial Solutions), since 2019; Independent Director, Investment Committee and Valuation Committee, Sarona Asset Management, since 2019 |
| Sandra Yeager c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2017 | Retired; President and founder, Hanoverian Capital, LLC (SEC registered investment advisor firm), 2008-2016; Managing Director, DuPont Capital, 2006-2008; Managing Director, Morgan Stanley Investment Management, 2004-2006; Senior Vice President, Alliance Bernstein, 1990-2004 | 176 | Former Director, NAPE Education Foundation, October 2016-October 2020 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Fund Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I (CET I), Columbia ETF Trust II (CET II), Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Beckman, Gallagher and Hacker and Mses. Blatz, Carlton, Flynn, Paglia, Shaw and Yeager serve as Directors of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
| Columbia Variable Portfolio – Large Cap Growth Fund | Annual Report 2021 | 27 |
TRUSTEES AND OFFICERS (continued)
Interested trustee affiliated with Investment Manager*
Interested trustee affiliated with Investment Manager*
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during the past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex overseen | Other directorships held by Trustee during the past five years |
| Daniel J. Beckman c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since November 2021(a) | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC (since April 2015); officer of Columbia Funds and affiliated funds since 2020. | 176 | Director, Ameriprise Trust Company, since October 2016; Director, Columbia Management Investment Distributors, Inc. since November 2018; Board of Governors, Columbia Wanger Asset Management, LLC since January 2022 |
| * | Interested person (as defined under the 1940 Act) by reason of being an officer, director, security holder and/or employee of the Investment Manager or Ameriprise Financial. |
| (a) | Mr. Beckman serves as the President and Principal Executive Officer of the Columbia Funds (since 2021). |
The Statement of Additional
Information has additional information about the Fund’s Board members and is available, without charge, upon request by calling 800.345.6611 or contacting your financial intermediary.
The Board has appointed officers
who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. The following table provides basic information about the Officers of the
Fund, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Beckman, who is President and Principal Executive Officer, the
Fund’s other officers are:
Fund officers
| 28 | Columbia Variable Portfolio – Large Cap Growth Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Fund officers (continued)
Fund officers (continued)
| Columbia Variable Portfolio – Large Cap Growth Fund | Annual Report 2021 | 29 |
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For Fund and other investment product prospectuses, which contain this and other important information, contact your
financial advisor or insurance representative. Please read the prospectus carefully before you invest. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved. Columbia Management Investment Distributors, Inc., 290 Congress Street, Boston, MA 02210
© 2022 Columbia Management Investment
Advisers, LLC.
S-6464 AW (2/22)
Columbia Variable
Portfolio – High Yield Bond Fund
Please remember that you may not
buy (nor will you own) shares of the Fund directly. The Fund is available through variable annuity contracts and variable life insurance policies offered by the separate accounts of participating insurance companies
as well as qualified pension and retirement plans. Please contact your financial advisor or insurance representative for more information.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
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| 5 | |
| 6 | |
| 7 | |
| 19 | |
| 20 | |
| 21 | |
| 22 | |
| 24 | |
| 33 | |
| 34 | |
| 34 |
Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which Columbia Variable Portfolio – High Yield Bond Fund (the Fund) holds investments consistent with the procedures as stated in the Statement of Additional
Information (SAI). You may obtain a copy of the SAI without charge by calling 800.345.6611; contacting your financial intermediary or searching the website of the Securities and Exchange Commission (SEC) at sec.gov.
Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge
by visiting columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. The Fund’s Form N-PORT is available on the SEC’s website at sec.gov. The Fund’s complete
schedule of portfolio holdings, as filed on Form N-PORT, can also be obtained without charge, upon request, by calling 800.345.6611.
Additional Fund information
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
290 Congress Street
Boston, MA 02210
Fund distributor
Columbia Management Investment Distributors,
Inc.
290 Congress Street
Boston, MA 02210
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
Columbia Variable Portfolio – High Yield Bond
Fund | Annual Report 2021
Fund at a Glance
Investment objective
The Fund
seeks to provide shareholders with high current income as its primary objective and, as its secondary objective, capital growth.
Portfolio management
Brian Lavin, CFA
Lead Portfolio Manager
Managed Fund since 2010
Daniel DeYoung
Portfolio Manager
Managed Fund since 2019
| Columbia Variable Portfolio – High Yield Bond Fund | Annual Report 2021 | 3 |
Fund at a Glance (continued)
Performance of a hypothetical $10,000 investment (December 31, 2011 — December 31, 2021)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class 2 shares of Columbia Variable Portfolio – High Yield Bond Fund during the stated time period, and does not reflect the deduction of taxes, if any, that a
shareholder may pay on Fund distributions or on the redemption of Fund shares. The returns also do not reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy or
qualified pension or retirement plan, if any.
| 4 | Columbia Variable Portfolio – High Yield Bond Fund | Annual Report 2021 |
Manager Discussion of Fund Performance
For the 12-month period ended
December 31, 2021, the Fund’s Class 2 shares returned 4.79%. The Fund underperformed its benchmark, the ICE BofA US Cash Pay High Yield Constrained Index, which returned 5.27% during the same time period.
Market overview
As pandemic-related restrictions
were eased over the period, robust economic growth and corporate earnings supported risk sentiment and credit-oriented segments of the bond market. In addition, both U.S. monetary and fiscal policy were highly
supportive for much of the period. In this vein, Congress approved massive spending packages that included direct payments to citizens and the U.S. Federal Reserve (Fed) maintained its benchmark overnight lending rate
near zero while engaging in bond market purchases to keep longer-term borrowing costs low.
The fourth quarter of 2021 saw the
Fed adopt a more hawkish tone in response to persistently high inflation driven by post-pandemic supply chain disruptions and rising commodity prices, leading to increased market volatility. The Fed officially
tightened policy in November as it began tapering its monthly bond purchases. In December, the Fed accelerated the timetable for ending its bond purchase program and signaled the likelihood of three increases in the
fed funds rate in 2022.
Investment-grade bond market
returns for the 12 months were generally muted given the move higher in U.S. Treasury yields. To illustrate, the 10-year Treasury note yield, which entered the year at 0.93%, reached as high as 1.74% at the end of the
first quarter before drifting lower and ending 2021 at 1.52%. Less interest rate sensitive, high-yield corporate bonds in aggregate posted solid positive returns driven by strong credit fundamentals and higher energy
prices.
The Fund’s notable
detractors during the period
| • | Detractors from the Fund’s relative performance included an overweight allocation to utilities and cable companies, which had positive absolute returns but lagged the overall market rally. |
| • | Defensive positioning within oil field equipment & services also detracted given the rally in the energy sector supported by higher commodity prices. |
The Fund’s notable
contributors during the period
| • | Security selection and industry allocation both contributed positively to the Fund’s performance relative to the benchmark for the annual period. |
| • | Security selection within energy led to positive contributions, most notably selection among exploration & production companies. Specifically, the Fund had overweight positions in select energy issuers that benefited from the improving commodity price environment. |
| • | Security selection was positive across several additional sectors beyond energy, driven by idiosyncratic factors. In this vein, the Fund’s holdings within the consumer/commercial/lease financing, media content, specialty retail and wireline telecommunication segments outperformed. |
| • | In terms of sector allocation, underweight exposures to managed care and integrated electric utilities proved additive. |
The views expressed in this report
reflect the current views of the respective parties who have contributed to this report. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult
to predict, so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective parties
disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Columbia fund are based on numerous factors, may not be relied on as an
indication of trading intent on behalf of any particular Columbia fund. References to specific securities should not be construed as a recommendation or investment advice.
| Columbia Variable Portfolio – High Yield Bond Fund | Annual Report 2021 | 5 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur ongoing
costs, which generally include management fees, distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to help you compare these costs with the ongoing costs of investing in other mutual funds.
The information below does not
reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy (collectively, Contracts) or qualified pension and retirement plan (Qualified Plan), if any. The total fees
and expenses you bear may therefore be higher than those shown below.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount invested, to estimate the
expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as redemption or exchange fees, or expenses that apply to the subaccount or the Contract. Therefore, the
hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If the fees and expenses imposed under your Contract or
Qualified Plan, if any, were included, your costs would be higher.
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 365.
Expenses do not include fees and
expenses incurred indirectly by the Fund from its investment in underlying funds, including affiliated and non-affiliated pooled investment vehicles, such as mutual funds and exchange-traded funds.
Had Columbia Management Investment
Advisers, LLC and/or certain of its affiliates not waived/reimbursed certain fees and expenses, account value at the end of the period would have been reduced.
| 6 | Columbia Variable Portfolio – High Yield Bond Fund | Annual Report 2021 |
Portfolio of Investments
December 31, 2021
December 31, 2021
(Percentages represent value of
investments compared to net assets)
Investments in securities
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – High Yield Bond Fund | Annual Report 2021 | 7 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 8 | Columbia Variable Portfolio – High Yield Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – High Yield Bond Fund | Annual Report 2021 | 9 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 10 | Columbia Variable Portfolio – High Yield Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – High Yield Bond Fund | Annual Report 2021 | 11 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 12 | Columbia Variable Portfolio – High Yield Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – High Yield Bond Fund | Annual Report 2021 | 13 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 14 | Columbia Variable Portfolio – High Yield Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – High Yield Bond Fund | Annual Report 2021 | 15 |
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 16 | Columbia Variable Portfolio – High Yield Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
| Money Market Funds 2.6% | ||
| Shares | Value ($) | |
| Columbia Short-Term Cash Fund, 0.085%(i),(j) | 8,640,235 | 8,638,506 |
| Total Money Market Funds (Cost $8,638,916) | 8,638,506 | |
| Total Investments in Securities (Cost: $317,561,003) | 327,710,990 | |
| Other Assets & Liabilities, Net | 3,278,056 | |
| Net Assets | 330,989,046 | |
Notes to Portfolio of
Investments
| (a) | Represents privately placed and other securities and instruments exempt from Securities and Exchange Commission registration (collectively, private placements), such as Section 4(a)(2) and Rule 144A eligible securities, which are often sold only to qualified institutional buyers. At December 31, 2021, the total value of these securities amounted to $241,216,072, which represents 72.88% of total net assets. |
| (b) | Payment-in-kind security. Interest can be paid by issuing additional par of the security or in cash. |
| (c) | Represents a variable rate security with a step coupon where the rate adjusts according to a schedule for a series of periods, typically lower for an initial period and then increasing to a higher coupon rate thereafter. The interest rate shown was the current rate as of December 31, 2021. |
| (d) | Principal and interest may not be guaranteed by a governmental entity. |
| (e) | The stated interest rate represents the weighted average interest rate at December 31, 2021 of contracts within the senior loan facility. Interest rates on contracts are primarily determined either weekly, monthly or quarterly by reference to the indicated base lending rate and spread and the reset period. These base lending rates are primarily the LIBOR and other short-term rates. Base lending rates may be subject to a floor or minimum rate. The interest rate for senior loans purchased on a when-issued or delayed delivery basis will be determined upon settlement, therefore no interest rate is disclosed. Senior loans often require prepayments from excess cash flows or permit the borrowers to repay at their election. The degree to which borrowers repay cannot be predicted with accuracy. As a result, remaining maturities of senior loans may be less than the stated maturities. Generally, the Fund is contractually obligated to receive approval from the agent bank and/or borrower prior to the disposition of a senior loan. |
| (f) | Variable rate security. The interest rate shown was the current rate as of December 31, 2021. |
| (g) | Valuation based on significant unobservable inputs. |
| (h) | Represents a security purchased on a forward commitment basis. |
| (i) | The rate shown is the seven-day current annualized yield at December 31, 2021. |
| (j) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended December 31, 2021 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Realized gain (loss)($) | Dividends($) | End of period shares |
| Columbia Short-Term Cash Fund, 0.085% | ||||||||
| 5,498,191 | 104,410,356 | (101,269,631) | (410) | 8,638,506 | (358) | 4,598 | 8,640,235 | |
Abbreviation Legend
| LIBOR | London Interbank Offered Rate |
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – High Yield Bond Fund | Annual Report 2021 | 17 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Fair value measurements (continued)
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at December 31, 2021:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Investments in Securities | ||||
| Convertible Bonds | — | 1,831,580 | — | 1,831,580 |
| Corporate Bonds & Notes | — | 305,866,452 | — | 305,866,452 |
| Foreign Government Obligations | — | 804,142 | — | 804,142 |
| Senior Loans | — | 9,855,022 | 715,288 | 10,570,310 |
| Money Market Funds | 8,638,506 | — | — | 8,638,506 |
| Total Investments in Securities | 8,638,506 | 318,357,196 | 715,288 | 327,710,990 |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The Fund’s assets assigned to
the Level 2 input category are generally valued using the market approach, in which a security’s value is determined through reference to prices and information from market transactions for similar or identical
assets.
The Fund does not hold any
significant investments (greater than one percent of net assets) categorized as Level 3.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 18 | Columbia Variable Portfolio – High Yield Bond Fund | Annual Report 2021 |
Statement of Assets and Liabilities
December 31, 2021
December 31, 2021
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $308,922,087) | $319,072,484 |
| Affiliated issuers (cost $8,638,916) | 8,638,506 |
| Cash | 95,706 |
| Receivable for: | |
| Capital shares sold | 10,259 |
| Dividends | 563 |
| Interest | 4,478,581 |
| Foreign tax reclaims | 8,004 |
| Expense reimbursement due from Investment Manager | 757 |
| Prepaid expenses | 8,672 |
| Total assets | 332,313,532 |
| Liabilities | |
| Payable for: | |
| Investments purchased on a delayed delivery basis | 1,013,040 |
| Capital shares purchased | 160,352 |
| Management services fees | 5,955 |
| Distribution and/or service fees | 1,424 |
| Service fees | 28,075 |
| Compensation of board members | 91,717 |
| Compensation of chief compliance officer | 62 |
| Other expenses | 23,861 |
| Total liabilities | 1,324,486 |
| Net assets applicable to outstanding capital stock | $330,989,046 |
| Represented by | |
| Paid in capital | 304,685,929 |
| Total distributable earnings (loss) | 26,303,117 |
| Total - representing net assets applicable to outstanding capital stock | $330,989,046 |
| Class 1 | |
| Net assets | $1,349,267 |
| Shares outstanding | 197,003 |
| Net asset value per share | $6.85 |
| Class 2 | |
| Net assets | $85,990,360 |
| Shares outstanding | 12,698,301 |
| Net asset value per share | $6.77 |
| Class 3 | |
| Net assets | $243,649,419 |
| Shares outstanding | 35,685,684 |
| Net asset value per share | $6.83 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – High Yield Bond Fund | Annual Report 2021 | 19 |
Statement of Operations
Year Ended December 31, 2021
Year Ended December 31, 2021
| Net investment income | |
| Income: | |
| Dividends — affiliated issuers | $4,598 |
| Interest | 17,195,304 |
| Total income | 17,199,902 |
| Expenses: | |
| Management services fees | 2,166,277 |
| Distribution and/or service fees | |
| Class 2 | 201,132 |
| Class 3 | 310,925 |
| Service fees | 229,845 |
| Compensation of board members | 34,812 |
| Custodian fees | 9,672 |
| Printing and postage fees | 26,506 |
| Audit fees | 39,500 |
| Legal fees | 13,020 |
| Compensation of chief compliance officer | 56 |
| Other | 18,587 |
| Total expenses | 3,050,332 |
| Fees waived or expenses reimbursed by Investment Manager and its affiliates | (318,280) |
| Total net expenses | 2,732,052 |
| Net investment income | 14,467,850 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 9,024,966 |
| Investments — affiliated issuers | (358) |
| Net realized gain | 9,024,608 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | (7,795,507) |
| Investments — affiliated issuers | (410) |
| Net change in unrealized appreciation (depreciation) | (7,795,917) |
| Net realized and unrealized gain | 1,228,691 |
| Net increase in net assets resulting from operations | $15,696,541 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 20 | Columbia Variable Portfolio – High Yield Bond Fund | Annual Report 2021 |
Statement of Changes in Net Assets
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | |
| Operations | ||
| Net investment income | $14,467,850 | $15,967,787 |
| Net realized gain (loss) | 9,024,608 | (2,287,401) |
| Net change in unrealized appreciation (depreciation) | (7,795,917) | 3,653,412 |
| Net increase in net assets resulting from operations | 15,696,541 | 17,333,798 |
| Distributions to shareholders | ||
| Net investment income and net realized gains | ||
| Class 1 | (43,812) | (19,972) |
| Class 2 | (3,984,203) | (3,668,308) |
| Class 3 | (12,275,701) | (14,222,912) |
| Total distributions to shareholders | (16,303,716) | (17,911,192) |
| Increase (decrease) in net assets from capital stock activity | 5,203,256 | (28,895,489) |
| Total increase (decrease) in net assets | 4,596,081 | (29,472,883) |
| Net assets at beginning of year | 326,392,965 | 355,865,848 |
| Net assets at end of year | $330,989,046 | $326,392,965 |
| Year Ended | Year Ended | |||
| December 31, 2021 | December 31, 2020 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class 1 | ||||
| Subscriptions | 123,916 | 849,744 | 52,405 | 350,112 |
| Distributions reinvested | 6,491 | 43,812 | 3,068 | 19,972 |
| Redemptions | (15,366) | (106,146) | (6,769) | (43,509) |
| Net increase | 115,041 | 787,410 | 48,704 | 326,575 |
| Class 2 | ||||
| Subscriptions | 3,193,456 | 21,722,428 | 3,842,980 | 25,047,611 |
| Distributions reinvested | 596,437 | 3,984,203 | 569,613 | 3,668,308 |
| Redemptions | (1,688,700) | (11,489,599) | (4,876,865) | (31,503,873) |
| Net increase (decrease) | 2,101,193 | 14,217,032 | (464,272) | (2,787,954) |
| Class 3 | ||||
| Subscriptions | 364,124 | 2,504,478 | 170,863 | 1,137,467 |
| Distributions reinvested | 1,821,321 | 12,275,701 | 2,191,512 | 14,222,912 |
| Redemptions | (3,582,683) | (24,581,365) | (6,494,536) | (41,794,489) |
| Net decrease | (1,397,238) | (9,801,186) | (4,132,161) | (26,434,110) |
| Total net increase (decrease) | 818,996 | 5,203,256 | (4,547,729) | (28,895,489) |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – High Yield Bond Fund | Annual Report 2021 | 21 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect any fees and expenses imposed under your
Contract and/or Qualified Plan, as applicable; such fees and expenses would reduce the total returns for all periods shown. Total return and portfolio turnover are not annualized for periods of less than one year. The
portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain derivatives, if any. If such transactions were included, the Fund’s portfolio
turnover rate may be higher.
| Net asset value, beginning of period | Net investment income | Net realized and unrealized gain (loss) | Total from investment operations | Distributions from net investment income | Total distributions to shareholders | |
| Class 1 | ||||||
| Year Ended 12/31/2021 | $6.87 | 0.31 | 0.03 | 0.34 | (0.36) | (0.36) |
| Year Ended 12/31/2020 | $6.83 | 0.34 | 0.09 | 0.43 | (0.39) | (0.39) |
| Year Ended 12/31/2019 | $6.20 | 0.34 | 0.70 | 1.04 | (0.41) | (0.41) |
| Year Ended 12/31/2018 | $6.84 | 0.35 | (0.60) | (0.25) | (0.39) | (0.39) |
| Year Ended 12/31/2017 | $6.79 | 0.36 | 0.08 | 0.44 | (0.39) | (0.39) |
| Class 2 | ||||||
| Year Ended 12/31/2021 | $6.79 | 0.29 | 0.03 | 0.32 | (0.34) | (0.34) |
| Year Ended 12/31/2020 | $6.76 | 0.32 | 0.09 | 0.41 | (0.38) | (0.38) |
| Year Ended 12/31/2019 | $6.15 | 0.33 | 0.67 | 1.00 | (0.39) | (0.39) |
| Year Ended 12/31/2018 | $6.78 | 0.33 | (0.59) | (0.26) | (0.37) | (0.37) |
| Year Ended 12/31/2017 | $6.74 | 0.32 | 0.09 | 0.41 | (0.37) | (0.37) |
| Class 3 | ||||||
| Year Ended 12/31/2021 | $6.85 | 0.30 | 0.03 | 0.33 | (0.35) | (0.35) |
| Year Ended 12/31/2020 | $6.81 | 0.33 | 0.09 | 0.42 | (0.38) | (0.38) |
| Year Ended 12/31/2019 | $6.19 | 0.34 | 0.68 | 1.02 | (0.40) | (0.40) |
| Year Ended 12/31/2018 | $6.83 | 0.34 | (0.60) | (0.26) | (0.38) | (0.38) |
| Year Ended 12/31/2017 | $6.78 | 0.34 | 0.09 | 0.43 | (0.38) | (0.38) |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 22 | Columbia Variable Portfolio – High Yield Bond Fund | Annual Report 2021 |
Financial Highlights (continued)
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets(a) | Total net expense ratio to average net assets(a),(b) | Net investment income ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Class 1 | |||||||
| Year Ended 12/31/2021 | $6.85 | 4.98% | 0.77% | 0.67% | 4.52% | 60% | $1,349 |
| Year Ended 12/31/2020 | $6.87 | 6.67% | 0.78% | 0.67% | 5.17% | 59% | $563 |
| Year Ended 12/31/2019 | $6.83 | 17.00% | 0.80% | 0.67% | 5.21% | 49% | $227 |
| Year Ended 12/31/2018 | $6.20 | (3.86%) | 0.77% | 0.73% | 5.31% | 39% | $11 |
| Year Ended 12/31/2017 | $6.84 | 6.53% | 0.75% | 0.75% | 5.12% | 51% | $12 |
| Class 2 | |||||||
| Year Ended 12/31/2021 | $6.77 | 4.79% | 1.02% | 0.92% | 4.28% | 60% | $85,990 |
| Year Ended 12/31/2020 | $6.79 | 6.31% | 1.02% | 0.92% | 4.89% | 59% | $71,989 |
| Year Ended 12/31/2019 | $6.76 | 16.52% | 1.02% | 0.94% | 5.04% | 49% | $74,825 |
| Year Ended 12/31/2018 | $6.15 | (4.00%) | 1.01% | 0.98% | 5.06% | 39% | $54,532 |
| Year Ended 12/31/2017 | $6.78 | 6.17% | 1.01% | 1.01% | 4.76% | 51% | $59,098 |
| Class 3 | |||||||
| Year Ended 12/31/2021 | $6.83 | 4.86% | 0.89% | 0.80% | 4.42% | 60% | $243,649 |
| Year Ended 12/31/2020 | $6.85 | 6.55% | 0.89% | 0.80% | 5.03% | 59% | $253,841 |
| Year Ended 12/31/2019 | $6.81 | 16.72% | 0.89% | 0.81% | 5.18% | 49% | $280,814 |
| Year Ended 12/31/2018 | $6.19 | (4.00%) | 0.89% | 0.86% | 5.18% | 39% | $279,157 |
| Year Ended 12/31/2017 | $6.83 | 6.41% | 0.89% | 0.89% | 4.89% | 51% | $364,733 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – High Yield Bond Fund | Annual Report 2021 | 23 |
Notes to Financial Statements
December 31, 2021
December 31, 2021
Note 1. Organization
Columbia Variable Portfolio
– High Yield Bond Fund (the Fund), a series of Columbia Funds Variable Series Trust II (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940
Act), as an open-end management investment company organized as a Massachusetts business trust.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers Class 1, Class 2 and Class 3 shares to separate accounts funding variable annuity contracts and variable life insurance policies (collectively, Contracts) issued
by affiliated and unaffiliated life insurance companies (Participating Insurance Companies) as well as qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors (Qualified
Investors) authorized by Columbia Management Investment Distributors, Inc. (the Distributor). You may not buy (nor will you own) shares of the Fund directly. You may invest by participating in a Qualified Plan or by
buying a Contract and making allocations to the Fund. Although all share classes generally have identical voting, dividend and liquidation rights, each share class votes separately when required by the Trust’s
organizational documents or by law. Different share classes pay different net investment income distribution amounts to the extent the expenses of such share classes differ, and distributions in liquidation will be
proportional to the net asset value of each share class. Each share class has its own cost structure and other features.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Debt securities generally are
valued by pricing services approved by the Board of Trustees based upon market transactions for normal, institutional-size trading units of similar securities. The services may use various pricing techniques that take
into account, as applicable, factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data, as well as approved independent broker-dealer quotes. Debt securities for
which quotations are not readily available or not believed to be reflective of market value may also be valued based upon a bid quote from an approved independent broker-dealer. Debt securities maturing in 60 days or
less are valued primarily at amortized market value, unless this method results in a valuation that management believes does not approximate fair value.
Senior loan securities for which
reliable market quotations are readily available are generally valued by pricing services at the average of the bids received.
Investments in open-end investment
companies (other than exchange-traded funds (ETFs)), are valued at the latest net asset value reported by those companies as of the valuation time.
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
| 24 | Columbia Variable Portfolio – High Yield Bond Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Investments in senior loans
The Fund may invest in senior loan
assignments. When the Fund purchases an assignment of a senior loan, the Fund typically has direct rights against the borrower; provided, however, that the Fund’s rights may be more limited than the lender from
which it acquired the assignment and the Fund may be able to enforce its rights only through an administrative agent. Although certain senior loan assignments are secured by collateral, the Fund could experience
delays or limitations in realizing such collateral or have its interest subordinated to other indebtedness of the obligor. In the event that the administrator or collateral agent of a loan becomes insolvent or enters
into receivership or bankruptcy, the Fund may incur costs and delays in realizing payment or may suffer a loss of principal and/or interest. The risk of loss is greater for unsecured or subordinated loans. In
addition, senior loan assignments are vulnerable to market, economic or other conditions or events that may reduce the demand for senior loan assignments and certain senior loan assignments which were liquid when
purchased, may become illiquid.
The Fund may enter into senior loan
assignments where all or a portion of the loan may be unfunded. The Fund is obligated to fund these commitments at the borrower’s discretion. These commitments, if any, are generally traded and priced in the
same manner as other senior loan securities and are disclosed as unfunded senior loan commitments in the Fund’s Portfolio of Investments with a corresponding payable for investments purchased. The Fund
designates cash or liquid securities to cover these commitments.
Delayed delivery securities
The Fund may trade securities on
other than normal settlement terms, including securities purchased or sold on a “when-issued” or "forward commitment" basis. This may increase risk to the Fund since the other party to the transaction may
fail to deliver, which could cause the Fund to subsequently invest at less advantageous prices. The Fund designates cash or liquid securities in an amount equal to the delayed delivery commitment.
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
The trade date for senior loans
purchased in the primary market is the date on which the loan is allocated. The trade date for senior loans purchased in the secondary market is the date on which the transaction is entered into.
Income recognition
Interest income is recorded on an
accrual basis. Market premiums and discounts, including original issue discounts, are amortized and accreted, respectively, over the expected life of the security on all debt securities, unless otherwise noted. For
convertible securities, premiums attributable to the conversion feature are not amortized.
The Fund may place a debt security
on non-accrual status and reduce related interest income when it becomes probable that the interest will not be collected and the amount of uncollectible interest can be reasonably estimated. A defaulted debt security
is removed from non-accrual status when the issuer resumes interest payments or when collectability of interest is reasonably assured.
Dividend income is recorded on the
ex-dividend date.
The value of additional securities
received as an income payment through a payment in kind, if any, is recorded as interest income and increases the cost basis of such securities.
The Fund may receive other income
from senior loans, including amendment fees, consent fees and commitment fees. These fees are recorded as income when received by the Fund. These amounts are included in Interest Income in the Statement of
Operations.
| Columbia Variable Portfolio – High Yield Bond Fund | Annual Report 2021 | 25 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
Federal income tax status
The Fund intends to qualify each
year as a regulated investment company under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its investment company taxable income and net capital gain, if any, for its
tax year, and as such will not be subject to federal income taxes. In addition, because the Fund meets the exception under Internal Revenue Code Section 4982(f), the Fund expects not to be subject to federal excise
tax. Therefore, no federal income or excise tax provision is recorded.
Foreign taxes
The Fund may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries, as applicable, based upon its current interpretation of tax rules
and regulations that exist in the markets in which it invests.
Realized gains in certain countries
may be subject to foreign taxes at the Fund level, based on statutory rates. The Fund accrues for such foreign taxes on realized and unrealized gains at the appropriate rate for each jurisdiction, as applicable. The
amount, if any, is disclosed as a liability on the Statement of Assets and Liabilities.
Distributions to subaccounts
Distributions to the subaccounts of
Contracts, Qualified Plans and Qualified Investors are recorded at the close of business on the record date and are payable on the first business day following the record date. Dividends from net investment income, if
any, are declared and distributed annually. Capital gain distributions, when available, will be made annually. However, an additional capital gain distribution may be made during the fiscal year in order to comply
with the Internal Revenue Code, as applicable to registered investment companies. Income distributions and capital gain distributions are determined in accordance with federal income tax regulations, which may differ
from GAAP. All dividends and distributions are reinvested in additional shares of the applicable share class of the Fund at the net asset value as of the ex-dividend date of the distribution.
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Under the Management Agreement, the
Investment Manager provides the Fund with investment research and advice, as well as administrative and accounting
| 26 | Columbia Variable Portfolio – High Yield Bond Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
services. The management services fee is an annual
fee that is equal to a percentage of the Fund’s daily net assets that declines from 0.66% to 0.40% as the Fund’s net assets increase. The effective management services fee rate for the year ended December
31, 2021 was 0.66% of the Fund’s average daily net assets.
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. Under a Deferred Compensation Plan (the
Deferred Plan), these members of the Board of Trustees may elect to defer payment of up to 100% of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of
certain funds managed by the Investment Manager. The Fund’s liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Deferred Plan. All
amounts payable under the Deferred Plan constitute a general unsecured obligation of the Fund. The expense for the Deferred Plan, which includes Trustees’ fees deferred during the current period as well as any
gains or losses on the Trustees’ deferred compensation balances as a result of market fluctuations, is included in "Compensation of board members" on the Statement of Operations.
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
Service fees
The Fund has entered into a
Shareholder Services Agreement with Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial. Under this
agreement, the Fund pays a service fee equal to the payments made by the Transfer Agent to Participating Insurance Companies and other financial intermediaries (together, Participating Organizations) for services each
such Participating Organization provides to its clients, customers and participants that are invested directly or indirectly in the Fund, up to a cap approved by the Board of Trustees from time to time. The effective
service fee rate for the year ended December 31, 2021, was 0.07% of the Fund’s average daily net assets.
The Transfer Agent may retain as
compensation for its services revenues from fees for wire, telephone and redemption orders, account transcripts due the Transfer Agent from Fund shareholders and interest (net of bank charges) earned with respect to
balances in accounts the Transfer Agent maintains in connection with its services to the Fund.
Distribution and/or service fees
The Fund has an agreement with the
Distributor, an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution services. Under a Plan and Agreement of Distribution, the Fund pays a fee at an annual rate
of up to 0.25% of the Fund’s average daily net assets attributable to Class 2 shares and an annual rate of up to 0.125% of the Fund’s average daily net assets attributable to Class 3 shares. The Fund pays
no distribution and service fees for Class 1 shares.
| Columbia Variable Portfolio – High Yield Bond Fund | Annual Report 2021 | 27 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Expenses waived/reimbursed by the
Investment Manager and its affiliates
The Investment Manager and certain
of its affiliates have contractually agreed to waive fees and/or reimburse expenses (excluding certain fees and expenses described below) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, so that the Fund’s net operating expenses, after giving effect to fees waived/expenses reimbursed and any balance credits and/or overdraft charges from the Fund’s
custodian, do not exceed the following annual rate(s) as a percentage of the classes’ average daily net assets:
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), expenses associated with investments in affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange-traded funds), transaction costs and
brokerage commissions, costs related to any securities lending program, dividend expenses associated with securities sold short, inverse floater program fees and expenses, transaction charges and interest on borrowed
money, interest, costs associated with certain shareholder meetings, infrequent and/or unusual expenses and any other expenses the exclusion of which is specifically approved by the Board of Trustees. This
agreement may be modified or amended only with approval from the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements
described above are not recoverable by the Investment Manager or its affiliates in future periods.
Note 4. Federal tax
information
The timing and character of
income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP because of temporary or permanent book to tax differences.
At December 31, 2021, these
differences were primarily due to differing treatment for deferral/reversal of wash sale losses, trustees’ deferred compensation and principal and/or interest of fixed income securities. To the extent these
differences were permanent, reclassifications were made among the components of the Fund’s net assets. Temporary differences do not require reclassifications.
The following reclassifications
were made:
| Undistributed net investment income ($) | Accumulated net realized gain ($) | Paid in capital ($) |
| 162,844 | (162,844) | — |
Net investment income (loss) and
net realized gains (losses), as disclosed in the Statement of Operations, and net assets were not affected by this reclassification.
The tax character of distributions
paid during the years indicated was as follows:
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | ||||
| Ordinary income ($) | Long-term capital gains ($) | Total ($) | Ordinary income ($) | Long-term capital gains ($) | Total ($) |
| 16,303,716 | — | 16,303,716 | 17,911,192 | — | 17,911,192 |
Short-term capital gain
distributions, if any, are considered ordinary income distributions for tax purposes.
| 28 | Columbia Variable Portfolio – High Yield Bond Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
At December 31, 2021, the
components of distributable earnings on a tax basis were as follows:
| Undistributed ordinary income ($) | Undistributed long-term capital gains ($) | Capital loss carryforwards ($) | Net unrealized appreciation ($) |
| 14,498,330 | 1,972,670 | — | 9,922,746 |
At December 31, 2021, the cost of
all investments for federal income tax purposes along with the aggregate gross unrealized appreciation and depreciation based on that cost was:
| Federal tax cost ($) | Gross unrealized appreciation ($) | Gross unrealized (depreciation) ($) | Net unrealized appreciation ($) |
| 317,788,244 | 11,369,013 | (1,446,267) | 9,922,746 |
Tax cost of investments and
unrealized appreciation/(depreciation) may also include timing differences that do not constitute adjustments to tax basis.
The following capital loss
carryforwards, determined at December 31, 2021, may be available to reduce future net realized gains on investments, if any, to the extent permitted by the Internal Revenue Code. In addition, for the year ended
December 31, 2021, capital loss carryforwards utilized, if any, were as follows:
| No expiration short-term ($) | No expiration long-term ($) | Total ($) | Utilized ($) |
| — | — | — | 6,948,243 |
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Note 5. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $193,692,359 and $192,811,602, respectively, for the year ended December 31, 2021. The amount of purchase and
sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 6. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes
referred to as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
Note 7. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
| Columbia Variable Portfolio – High Yield Bond Fund | Annual Report 2021 | 29 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund did not borrow or lend
money under the Interfund Program during the year ended December 31, 2021.
Note 8. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to an October 28, 2021 amendment and restatement, the credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment
Manager or an affiliated investment manager, severally and not jointly, permits collective borrowings up to $950 million. Interest is currently charged to each participating fund based on its borrowings at a rate
equal to the higher of (i) the federal funds effective rate, (ii) the secured overnight financing rate plus 0.11448% and (iii) the overnight bank funding rate, plus in each case, 1.00%. Each borrowing under the credit
facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The
commitment fee is included in other expenses in the Statement of Operations. This agreement expires annually in October unless extended or renewed. Prior to the October 28, 2021 amendment and restatement, the Fund had
access to a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. which permitted collective borrowings up to $950 million. Interest was
charged to each participating fund based on its borrowings at a rate equal to the higher of (i) the federal funds effective rate, (ii) the one-month London Interbank Offered Rate (LIBOR) rate and (iii) the overnight
bank funding rate, plus in each case, 1.25%.
The Fund had no borrowings during
the year ended December 31, 2021.
Note 9. Significant
risks
Credit risk
Credit risk is the risk that the
value of debt instruments in the Fund’s portfolio may decline because the issuer defaults or otherwise becomes unable or unwilling, or is perceived to be unable or unwilling, to honor its financial obligations,
such as making payments to the Fund when due. Credit rating agencies assign credit ratings to certain debt instruments to indicate their credit risk. Lower-rated or unrated debt instruments held by the Fund may
present increased credit risk as compared to higher-rated debt instruments.
High-yield investments risk
Securities and other debt
instruments held by the Fund that are rated below investment grade (commonly called "high-yield" or "junk" bonds) and unrated debt instruments of comparable quality expose the Fund to a greater risk of loss of
principal and income than a fund that invests solely or primarily in investment grade debt instruments. In addition, these investments have greater price fluctuations, are less liquid and are more likely to experience
a default than higher-rated debt instruments. High-yield debt instruments are considered to be predominantly speculative with respect to the issuer’s capacity to pay interest and repay principal.
Interest rate risk
Interest rate risk is the risk of
losses attributable to changes in interest rates. In general, if prevailing interest rates rise, the values of debt instruments tend to fall, and if interest rates fall, the values of debt instruments tend to rise.
Actions by governments and central banking authorities can result in increases or decreases in interest rates. Higher periods of inflation could lead such authorities to raise interest rates. Increasing interest rates
may negatively affect the value of debt securities held by the Fund, resulting in a negative impact on the Fund’s performance and net asset value per share. In general, the longer the maturity or duration of a
debt security, the greater its sensitivity to changes in interest rates. The Fund is subject to the risk that the income generated by its investments may not keep pace with inflation.
| 30 | Columbia Variable Portfolio – High Yield Bond Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Liquidity risk
Liquidity risk is the risk
associated with a lack of marketability of investments which may make it difficult to sell the investment at a desirable time or price. Changing regulatory, market or other conditions or environments (for example, the
interest rate or credit environments) may adversely affect the liquidity of the Fund’s investments. The Fund may have to accept a lower selling price for the holding, sell other investments, or forego another,
more appealing investment opportunity. Generally, the less liquid the market at the time the Fund sells a portfolio investment, the greater the risk of loss or decline of value to the Fund. A less liquid market can
lead to an increase in Fund redemptions, which may negatively impact Fund performance and net asset value per share, including, for example, if the Fund is forced to sell securities in a down market.
Market risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
The coronavirus disease 2019 and
its variants (COVID-19) pandemic has resulted in, and may continue to result in, significant global economic and societal disruption and market volatility due to disruptions in market access, resource availability,
facilities operations, imposition of tariffs, export controls and supply chain disruption, among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement
and loss in human and other resources. The uncertainty surrounding the magnitude, duration, reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental
authorities or other third parties, present unknowns that are yet to unfold. The impacts, as well as the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and
pandemics that may arise in the future – could negatively affect global economies and markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in
emerging market countries may be greater due to generally less established healthcare systems, governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing
political, social and economic risks in certain countries or globally. The disruptions caused by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively
impact the Fund’s ability to achieve its investment objectives. Any such event(s) could have a significant adverse impact on the value and risk profile of the Fund.
Shareholder concentration risk
At December 31, 2021, affiliated
shareholders of record owned 92.4% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of
less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Note 10. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
| Columbia Variable Portfolio – High Yield Bond Fund | Annual Report 2021 | 31 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Note 11. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in
connection with the conduct of their business activities. Ameriprise Financial believes that the Fund is not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject
of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with
the Fund. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (SEC) on legal and regulatory matters that relate to
Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that
these matters, or the adverse publicity associated with them, will not result in increased Fund redemptions, reduced sale of Fund shares or other adverse consequences to the Fund. Further, although we believe
proceedings are not likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines,
penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial or one or more of its affiliates that provides services to
the Fund.
| 32 | Columbia Variable Portfolio – High Yield Bond Fund | Annual Report 2021 |
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees of Columbia
Funds Variable Series Trust II and Shareholders of Columbia Variable Portfolio – High Yield Bond Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of Columbia Variable Portfolio – High Yield Bond Fund (one of the funds constituting Columbia Funds Variable Series Trust II, referred
to hereafter as the "Fund") as of December 31, 2021, the related statement of operations for the year ended December 31, 2021, the statement of changes in net assets for each of the two years in the period ended
December 31, 2021, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2021 (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, 2021, 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, 2021 and the financial highlights for each of the five years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in
the United States of America.
Basis for Opinion
These financial statements are the
responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these
financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2021 by correspondence with the custodian, transfer agent, brokers and agent banks;
when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Minneapolis, Minnesota
February 22, 2022
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| Columbia Variable Portfolio – High Yield Bond Fund | Annual Report 2021 | 33 |
Federal Income Tax
Information
(Unaudited)
The Fund hereby designates the
following tax attributes for the fiscal year ended December 31, 2021.
| Capital gain dividend | |
| $2,071,304 |
Capital gain dividend. The Fund
designates as a capital gain dividend the amount reflected above, or if subsequently determined to be different, the net capital gain of such fiscal period.
TRUSTEES AND
OFFICERS
The Board oversees the Fund’s
operations and appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following table provides basic biographical information about the Fund’s Trustees as
of the printing of this report, including their principal occupations during the past five years, although specific titles for individuals may have varied over the period. The year set forth beneath Length of Service
in the table below is the year in which the Trustee was first appointed or elected as Trustee to any Fund currently in the Columbia Funds Complex or a predecessor thereof. Under current Board policy, each Trustee
generally serves until December 31 of the year such Trustee turns seventy-five (75).
Independent trustees
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| George S. Batejan c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1953 | Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 176 | Former Chairman of the Board, NICSA (National Investment Company Services Association) (Executive Committee, Nominating Committee and Governance Committee), 2014-2016; former Director, Intech Investment Management, 2011-2016; former Board Member, Metro Denver Chamber of Commerce, 2015-2016; former Advisory Board Member, University of Colorado Business School, 2015-2018 |
| 34 | Columbia Variable Portfolio – High Yield Bond Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Kathleen Blatz c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2006 | Attorney, specializing in arbitration and mediation; Chief Justice, Minnesota Supreme Court, 1998-2006; Associate Justice, Minnesota Supreme Court, 1996-1998; Fourth Judicial District Court Judge, Hennepin County, 1994-1996; Attorney in private practice and public service, 1984-1993; State Representative, Minnesota House of Representatives, 1979-1993, which included service on the Tax and Financial Institutions and Insurance Committees; Member and Interim Chair, Minnesota Sports Facilities Authority, January 2017-July 2017; Interim President and Chief Executive Officer, Blue Cross Blue Shield of Minnesota (health care insurance), February-July 2018, April-October 2021 | 176 | Former Trustee, Blue Cross Blue Shield of Minnesota, 2009-2021 (Chair of the Business Development Committee, 2014-2017; Chair of the Governance Committee, 2017-2019); former Member and Chair of the Board, Minnesota Sports Facilities Authority, January 2017-July 2017; former Director, Robina Foundation, 2009-2020 (Chair, 2014-2020); Director, Schulze Family Foundation, since 2021 |
| Pamela G. Carlton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2007 | President, Springboard — Partners in Cross Cultural Leadership (consulting company) since 2003; Managing Director of US Equity Research, JP Morgan Chase, 1999-2003; Director of US Equity Research, Chase Asset Management, 1996-1999; Co-Director Latin America Research, 1993-1996, COO Global Research, 1992-1996, Co-Director of US Research, 1991-1992, Investment Banker, Morgan Stanley, 1982-1991, Morgan Stanley; Attorney, Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 176 | Trustee, New York Presbyterian Hospital Board (Executive Committee and Chair of People Committee) since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee); Director, Apollo Commercial Real Estate Finance, Inc. since 2021; the Governing Council of the Independent Directors Council (IDC), since 2021 |
| Janet Langford Carrig c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1957 | Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 174 | Director, EQT Corporation (natural gas producer) since 2019; Director, Whiting Petroleum Corporation (independent oil and gas company) since 2020 |
| J. Kevin Connaughton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2020 | Member, FINRA National Adjudicatory Council since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Consultant to Independent Trustees of CFVIT and CFST I from March 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Managing Director and General Manager of Mutual Fund Products, Columbia Management Investment Advisers, LLC, May 2010-February 2015; President, Columbia Funds, 2008-2015; and senior officer of Columbia Funds and affiliated funds, 2003-2015 | 174 | Former Director, The Autism Project, March 2015-December 2021; former Member of the Investment Committee, St. Michael’s College, November 2015-February 2020; former Trustee, St. Michael’s College, June 2017-September 2019; former Trustee, New Century Portfolios, January 2015-December 2017 |
| Columbia Variable Portfolio – High Yield Bond Fund | Annual Report 2021 | 35 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Olive M. Darragh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since 2020 | Managing Director of Darragh Inc. (strategy and talent management consulting firm) since 2010; Founder and CEO, Zolio, Inc. (investment management talent identification platform) since 2004; Consultant to Independent Trustees of CFVIT and CFST I from June 2019 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 2001-2004 | 174 | Former Director, University of Edinburgh Business School (Member of US Board); former Director, Boston Public Library Foundation |
| Patricia M. Flynn c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1950 | Trustee since 2004 | Trustee Professor of Economics and Management, Bentley University since 1976 (also teaches and conducts research on corporate governance); Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 176 | Trustee, MA Taxpayers Foundation since 1997; Board of Governors, Innovation Institute, MA Technology Collaborative, 2010-2020; former Board of Directors, The MA Business Roundtable, 2003-2019 |
| Brian J. Gallagher c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 176 | Trustee, Catholic Schools Foundation since 2004 |
| Douglas A. Hacker c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1955 | Co-Chair since 2021; Chair of CFST I and CFVIT since 2014; Trustee of CFST I and CFVIT since 1996 and CFST, CFST II, CFVST II, CET I and CET II since 2021 | Independent business executive since May 2006; Executive Vice President – Strategy of United Airlines, December 2002 - May 2006; President of UAL Loyalty Services (airline marketing company), September 2001-December 2002; Executive Vice President and Chief Financial Officer of United Airlines, July 1999-September 2001 | 176 | Director, Spartan Nash Company (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing); former Director, Nash Finch Company (food distributor), 2005-2013; former Director, SeaCube Container Leasing Ltd. (container leasing), 2010-2013; and former Director, Travelport Worldwide Limited (travel information technology), 2014-2019 |
| Nancy T. Lukitsh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1956 | Trustee since 2011 | Senior Vice President, Partner and Director of Marketing, Wellington Management Company, LLP (investment adviser), 1997-2010; Chair, Wellington Management Portfolios (commingled non-U.S. investment pools), 2007 -2010; Director, Wellington Trust Company, NA and other Wellington affiliates, 1997-2010 | 174 | None |
| 36 | Columbia Variable Portfolio – High Yield Bond Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| David M. Moffett c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2011 | Retired; Consultant to Bridgewater and Associates | 174 | Director, CSX Corporation (transportation suppliers); Director, Genworth Financial, Inc. (financial and insurance products and services); Director, PayPal Holdings Inc. (payment and data processing services); Trustee, University of Oklahoma Foundation; former Director, eBay Inc. (online trading community), 2007-2015; and former Director, CIT Bank, CIT Group Inc. (commercial and consumer finance), 2010-2016 |
| Catherine James Paglia c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Co-Chair since 2021; Chair of CFST, CFST II, CFVST II, CET I and CET II since 2020; Trustee of CFST, CFST II and CFVST II since 2004 and CFST I and CFVIT since 2021 | Director, Enterprise Asset Management, Inc. (private real estate and asset management company) since September 1998; Managing Director and Partner, Interlaken Capital, Inc., 1989-1997; Vice President, 1982-1985, Principal, 1985-1987, Managing Director, 1987-1989, Morgan Stanley; Vice President, Investment Banking, 1980-1982, Associate, Investment Banking, 1976-1980, Dean Witter Reynolds, Inc. | 176 | Director, Valmont Industries, Inc. (irrigation systems manufacturer) since 2012; Trustee, Carleton College (on the Investment Committee); Trustee, Carnegie Endowment for International Peace (on the Investment Committee) |
| Minor M. Shaw c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1947 | Trustee since 2003 | President, Micco LLC (private investments) since 2011; President, Micco Corp. (family investment business), 1998-2011 | 176 | Director, Blue Cross Blue Shield of South Carolina (Chair of Compensation Committee) since April 2008; Trustee, Hollingsworth Funds (on the Investment Committee) since 2016 (previously Board Chair from 2016-2019); Former Advisory Board member, Duke Energy Corp., 2016-2020; Chair of the Duke Endowment; Chair of Greenville – Spartanburg Airport Commission; former Trustee, BofA Funds Series Trust (11 funds), 2003-2011; former Director, Piedmont Natural Gas, 2004-2016; former Director, National Association of Corporate Directors, Carolinas Chapter, 2013-2018; Chair, Daniel-Mickel Foundation since 1998 |
| Columbia Variable Portfolio – High Yield Bond Fund | Annual Report 2021 | 37 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Natalie A. Trunow c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1967 | Trustee since 2020 | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services), January 2016-January 2021; Non-executive Member of the Investment Committee and Valuation Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services), August 2018-January 2021; Advisor, Paradigm Asset Management, November 2016-December 2021; Consultant to Independent Trustees of CFVIT and CFST I from September 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Director of Investments/Consultant, Casey Family Programs, April 2016-November 2016; Senior Vice President and Chief Investment Officer, Calvert Investments, August 2008-January 2016; Section Head and Portfolio Manager, General Motors Asset Management, June 1997-August 2008 | 174 | Former Director, Investment Committee, Health Services for Children with Special Needs, Inc., 2012-2019; Director, Chair of Audit Committee, Consumer Credit Counseling Services (formerly Guidewell Financial Solutions), since 2019; Independent Director, Investment Committee and Valuation Committee, Sarona Asset Management, since 2019 |
| Sandra Yeager c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2017 | Retired; President and founder, Hanoverian Capital, LLC (SEC registered investment advisor firm), 2008-2016; Managing Director, DuPont Capital, 2006-2008; Managing Director, Morgan Stanley Investment Management, 2004-2006; Senior Vice President, Alliance Bernstein, 1990-2004 | 176 | Former Director, NAPE Education Foundation, October 2016-October 2020 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Fund Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I (CET I), Columbia ETF Trust II (CET II), Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Beckman, Gallagher and Hacker and Mses. Blatz, Carlton, Flynn, Paglia, Shaw and Yeager serve as Directors of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
Interested trustee affiliated with
Investment Manager*
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during the past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex overseen | Other directorships held by Trustee during the past five years |
| Daniel J. Beckman c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since November 2021(a) | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC (since April 2015); officer of Columbia Funds and affiliated funds since 2020. | 176 | Director, Ameriprise Trust Company, since October 2016; Director, Columbia Management Investment Distributors, Inc. since November 2018; Board of Governors, Columbia Wanger Asset Management, LLC since January 2022 |
| * | Interested person (as defined under the 1940 Act) by reason of being an officer, director, security holder and/or employee of the Investment Manager or Ameriprise Financial. |
| (a) | Mr. Beckman serves as the President and Principal Executive Officer of the Columbia Funds (since 2021). |
The Statement of Additional
Information has additional information about the Fund’s Board members and is available, without charge, upon request by calling 800.345.6611 or contacting your financial intermediary.
| 38 | Columbia Variable Portfolio – High Yield Bond Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. The following table provides basic information about the Officers of the Fund, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Beckman, who is President and Principal Executive Officer, the Fund’s other officers are:
The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. The following table provides basic information about the Officers of the Fund, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Beckman, who is President and Principal Executive Officer, the Fund’s other officers are:
Fund officers
| Columbia Variable Portfolio – High Yield Bond Fund | Annual Report 2021 | 39 |
TRUSTEES AND OFFICERS (continued)
Fund officers (continued)
Fund officers (continued)
| Name, address and year of birth | Position and year first appointed to position for any Fund in the Columbia Funds Complex or a predecessor thereof | Principal occupation(s) during past five years |
| Lyn Kephart-Strong 5228 Ameriprise Financial Center Minneapolis, MN 55474 1960 | Vice President (2015) | President, Columbia Management Investment Services Corp. since October 2014; Vice President & Resolution Officer, Ameriprise Trust Company since August 2009. |
| 40 | Columbia Variable Portfolio – High Yield Bond Fund | Annual Report 2021 |
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For Fund and other investment product prospectuses, which contain this and other important information, contact your
financial advisor or insurance representative. Please read the prospectus carefully before you invest. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved. Columbia Management Investment Distributors, Inc., 290 Congress Street, Boston, MA 02210
© 2022 Columbia Management Investment
Advisers, LLC.
S-6670 AW (2/22)
Columbia Variable
Portfolio – Overseas Core Fund
Please remember that you may not
buy (nor will you own) shares of the Fund directly. The Fund is available through variable annuity contracts and variable life insurance policies offered by the separate accounts of participating insurance companies
as well as qualified pension and retirement plans. Please contact your financial advisor or insurance representative for more information.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
| 3 | |
| 5 | |
| 7 | |
| 8 | |
| 13 | |
| 14 | |
| 15 | |
| 16 | |
| 18 | |
| 31 | |
| 32 | |
| 32 |
Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which Columbia Variable Portfolio – Overseas Core Fund (the Fund) holds investments consistent with the procedures as stated in the Statement of Additional Information
(SAI). You may obtain a copy of the SAI without charge by calling 800.345.6611; contacting your financial intermediary or searching the website of the Securities and Exchange Commission (SEC) at sec.gov. Information
regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge by visiting
columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. The Fund’s Form N-PORT is available on the SEC’s website at sec.gov. The Fund’s complete
schedule of portfolio holdings, as filed on Form N-PORT, can also be obtained without charge, upon request, by calling 800.345.6611.
Additional Fund information
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
290 Congress Street
Boston, MA 02210
Fund distributor
Columbia Management Investment Distributors,
Inc.
290 Congress Street
Boston, MA 02210
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
Columbia Variable Portfolio – Overseas Core
Fund | Annual Report 2021
Fund at a Glance
Investment objective
The Fund
seeks to provide shareholders with capital appreciation.
Portfolio management
Fred Copper, CFA
Co-Portfolio Manager
Managed Fund since 2018
Daisuke Nomoto, CMA (SAAJ)
Co-Portfolio Manager
Managed Fund since 2018
| Columbia Variable Portfolio – Overseas Core Fund | Annual Report 2021 | 3 |
Fund at a Glance (continued)
Performance of a hypothetical $10,000 investment (December 31, 2011 — December 31, 2021)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class 2 shares of Columbia Variable Portfolio – Overseas Core Fund during the stated time period, and does not reflect the deduction of taxes, if any, that a
shareholder may pay on Fund distributions or on the redemption of Fund shares. The returns also do not reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy or
qualified pension or retirement plan, if any.
| 4 | Columbia Variable Portfolio – Overseas Core Fund | Annual Report 2021 |
Manager Discussion of Fund Performance
At December 31, 2021,
approximately 92.03% of the Fund’s shares were owned in the aggregate by affiliated funds-of-funds managed by Columbia Management Investment Advisers, LLC (the Investment Manager). As a result of asset
allocation decisions by the Investment Manager, it is possible that the Fund may experience relatively large purchases or redemptions from affiliated funds-of-funds. The Investment Manager seeks to minimize the impact
of these transactions by structuring them over a reasonable period of time. The Fund may also experience increased expenses as it buys and sells securities as a result of purchases or redemptions by affiliated
funds-of-funds.
For the 12-month period that ended
December 31, 2021, the Fund’s Class 2 shares returned 9.74%, compared with an 11.26% return for the Fund’s benchmark, the MSCI EAFE Index (Net).
Market overview
International equity markets
delivered solid results during the period, with the MSCI EAFE Index (Net) finishing up more than 11% in U.S. dollar terms. Most of the upside came during the first half of the year, as the gradual, though
globally uneven, reopening of the world economy continued to boost sentiment, activity and stock prices. Positive momentum, which also was driven to some degree by highly speculative behavior among retail
investors, stalled somewhat midway through the period, triggered largely by more hawkish policy expectations from the U.S. Federal Reserve in June 2021 that weighed on cyclical parts of the market. Concerns over
the emergence of the Delta and Omicron COVID-19 variants added to market choppiness, as did worries over strained U.S.-China trade relations. Problems in China’s property sector added to global equity
market consternation, most notably symbolized by the credit crisis at Evergrande, a systemically important property developer in China with significant amounts of outstanding debt. Additional headwinds included
inflation, which reached almost 7% in the U.S. and caused a further hawkish turn as the Federal Reserve announced a plan to taper the pace of quantitative easing and signaled the likelihood of three interest rate
hikes in 2022. Central banks in other parts of the world tightened monetary policy as well, particularly in emerging markets.
The Fund’s notable
contributors during the period
| • | Strong stock selection across a variety of sectors and industries, including financials, real estate and communication services, semiconductors and segments of the energy sector, helped absolute and relative results but proved insufficient in offsetting detractors. |
| • | Other positives during the period included an overweight to energy stocks, based on a belief that oil prices will rise given inventory shortages and a lack of new exploration. |
| • | Top individual contributors included: |
| ○ | Swedish real estate developer Samhällsbyggnadsbolaget i Norden AB grew earnings and dividends dramatically via solid execution and a number of acquisitions within their niche market of Nordic social infrastructure. |
| ○ | Taiwanese property and casualty insurer Fubon Financial Holding Co., Ltd. delivered very strong earnings momentum over the course of the year. |
| ○ | Taiwanese semiconductor maker Parade Technologies Ltd. recorded strong results, issued upbeat guidance and announced a share buyback. |
| ○ | Tokyo-based IT consultant BayCurrent Consulting, Inc., which is tied to key long-term digital investment themes, rose on expectations for strong sales and earnings growth. |
| ○ | Canadian uranium miner Cameco Corp. rose steadily throughout the period as the market increasingly focused on the role nuclear energy will play in electrification and decarbonization. |
The Fund’s notable
detractors during the period
| • | Weak stock selection, particularly in a number of large European countries as well as in the information technology sector, dominated results and drove the Fund’s underperformance. |
| • | German internet software provider TeamViewer dropped sharply during the final quarter of the year after surprising investors with a profit warning and a downward adjustment in outlook. |
| Columbia Variable Portfolio – Overseas Core Fund | Annual Report 2021 | 5 |
Manager Discussion of Fund Performance (continued)
| • | Japanese investment banking consultant Nihon M&A Center, Inc. lagged toward year-end on news of an investigation into the possibility that a number of sales had been recorded improperly. |
| • | French cloud and big data provider AtoS dropped in the period on reports of accounting inconsistencies. |
| • | Japanese engineering and construction firm COMSYS Holdings Corp. fell on expectations for reduced mobile telecom construction orders and sales. |
| • | Canadian miner Yamana Gold, Inc. declined as it reported weaker profits on COVID-19 restrictions that forced a reduction in gold production. |
The views expressed in this report
reflect the current views of the respective parties who have contributed to this report. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult
to predict, so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective parties
disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Columbia fund are based on numerous factors, may not be relied on as an
indication of trading intent on behalf of any particular Columbia fund. References to specific securities should not be construed as a recommendation or investment advice.
| 6 | Columbia Variable Portfolio – Overseas Core Fund | Annual Report 2021 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur ongoing
costs, which generally include management fees, distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to help you compare these costs with the ongoing costs of investing in other mutual funds.
The information below does not
reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy (collectively, Contracts) or qualified pension and retirement plan (Qualified Plan), if any. The total fees
and expenses you bear may therefore be higher than those shown below.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount invested, to estimate the
expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as redemption or exchange fees, or expenses that apply to the subaccount or the Contract. Therefore, the
hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If the fees and expenses imposed under your Contract or
Qualified Plan, if any, were included, your costs would be higher.
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 365.
Expenses do not include fees and
expenses incurred indirectly by the Fund from its investment in underlying funds, including affiliated and non-affiliated pooled investment vehicles, such as mutual funds and exchange-traded funds.
| Columbia Variable Portfolio – Overseas Core Fund | Annual Report 2021 | 7 |
Portfolio of Investments
December 31, 2021
December 31, 2021
(Percentages represent value of
investments compared to net assets)
Investments in securities
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 8 | Columbia Variable Portfolio – Overseas Core Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Overseas Core Fund | Annual Report 2021 | 9 |
At December 31, 2021,
securities and/or cash totaling $220,000 were pledged as collateral.
Investments in
derivatives
| Forward foreign currency exchange contracts | |||||
| Currency to be sold | Currency to be purchased | Counterparty | Settlement date | Unrealized appreciation ($) | Unrealized depreciation ($) |
| 138,847,000 CAD | 107,535,801 USD | State Street | 02/17/2022 | — | (2,222,301) |
| 43,716,000 GBP | 58,287,854 USD | State Street | 02/17/2022 | — | (874,466) |
| 65,438,000 ILS | 20,684,663 USD | State Street | 02/17/2022 | — | (368,730) |
| 6,584,229,000 JPY | 57,691,365 USD | State Street | 02/17/2022 | 432,632 | — |
| 123,285,947,000 KRW | 103,440,825 USD | State Street | 02/17/2022 | — | (112,960) |
| 371,569,000 NOK | 41,753,548 USD | State Street | 02/17/2022 | — | (404,977) |
| 16,928,000 SGD | 12,405,773 USD | State Street | 02/17/2022 | — | (152,432) |
| 5,498,686,000 TWD | 198,587,381 USD | State Street | 02/17/2022 | — | (382,363) |
| 116,313,499 USD | 162,184,000 AUD | State Street | 02/17/2022 | 1,697,093 | — |
| 115,859,404 USD | 106,732,000 CHF | State Street | 02/17/2022 | 1,406,359 | — |
| 45,626,825 USD | 299,652,000 DKK | State Street | 02/17/2022 | 289,135 | — |
| 199,035,921 USD | 175,792,000 EUR | State Street | 02/17/2022 | 1,280,586 | — |
| 79,110,167 USD | 718,526,000 SEK | State Street | 02/17/2022 | 433,548 | — |
| Total | 5,539,353 | (4,518,229) | |||
Notes to Portfolio of
Investments
| (a) | Non-income producing investment. |
| (b) | The rate shown is the seven-day current annualized yield at December 31, 2021. |
| (c) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended December 31, 2021 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Realized gain (loss)($) | Dividends($) | End of period shares |
| Columbia Short-Term Cash Fund, 0.085% | ||||||||
| 37,782,573 | 1,448,715,855 | (1,463,767,341) | — | 22,731,087 | (2,602) | 21,922 | 22,735,634 | |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 10 | Columbia Variable Portfolio – Overseas Core Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Abbreviation Legend
| ADR | American Depositary Receipt |
Currency Legend
| AUD | Australian Dollar |
| CAD | Canada Dollar |
| CHF | Swiss Franc |
| DKK | Danish Krone |
| EUR | Euro |
| GBP | British Pound |
| ILS | Israeli Shekel |
| JPY | Japanese Yen |
| KRW | South Korean Won |
| NOK | Norwegian Krone |
| SEK | Swedish Krona |
| SGD | Singapore Dollar |
| TWD | New Taiwan Dollar |
| USD | US Dollar |
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
Foreign equity securities actively
traded in markets where there is a significant delay in the local close relative to the New York Stock Exchange are classified as Level 2. The values of these securities may include an adjustment to reflect the impact
of market movements following the close of local trading, as described in Note 2 to the financial statements – Security valuation.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Overseas Core Fund | Annual Report 2021 | 11 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Fair value measurements (continued)
The following table is a summary of the inputs used to value the Fund’s investments at December 31, 2021:
The following table is a summary of the inputs used to value the Fund’s investments at December 31, 2021:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Investments in Securities | ||||
| Common Stocks | ||||
| Australia | — | 90,908,946 | — | 90,908,946 |
| Canada | 238,660,583 | — | — | 238,660,583 |
| China | — | 57,089,266 | — | 57,089,266 |
| Denmark | — | 37,977,378 | — | 37,977,378 |
| Finland | — | 82,062,432 | — | 82,062,432 |
| France | 1,105,014 | 222,178,749 | — | 223,283,763 |
| Germany | — | 248,904,504 | — | 248,904,504 |
| Hong Kong | — | 64,723,541 | — | 64,723,541 |
| Ireland | 1,745,495 | 61,374,261 | — | 63,119,756 |
| Israel | 24,585,535 | 45,601,758 | — | 70,187,293 |
| Italy | — | 13,865,760 | — | 13,865,760 |
| Japan | — | 960,518,019 | — | 960,518,019 |
| Netherlands | — | 262,149,845 | — | 262,149,845 |
| Norway | — | 97,496,443 | — | 97,496,443 |
| Pakistan | — | 7,320,572 | — | 7,320,572 |
| Russian Federation | — | 26,254,939 | — | 26,254,939 |
| Singapore | — | 76,883,188 | — | 76,883,188 |
| South Africa | — | 18,001,308 | — | 18,001,308 |
| South Korea | — | 113,760,533 | — | 113,760,533 |
| Spain | — | 41,060,551 | — | 41,060,551 |
| Sweden | — | 98,178,418 | — | 98,178,418 |
| Switzerland | — | 199,295,006 | — | 199,295,006 |
| Taiwan | — | 207,198,404 | — | 207,198,404 |
| United Kingdom | 219,852,595 | 527,206,236 | — | 747,058,831 |
| United States | 188,483,452 | — | — | 188,483,452 |
| Total Common Stocks | 674,432,674 | 3,560,010,057 | — | 4,234,442,731 |
| Exchange-Traded Equity Funds | 10,997,340 | — | — | 10,997,340 |
| Preferred Stocks | ||||
| Germany | — | 33,227,560 | — | 33,227,560 |
| Total Preferred Stocks | — | 33,227,560 | — | 33,227,560 |
| Money Market Funds | 22,731,087 | — | — | 22,731,087 |
| Total Investments in Securities | 708,161,101 | 3,593,237,617 | — | 4,301,398,718 |
| Investments in Derivatives | ||||
| Asset | ||||
| Forward Foreign Currency Exchange Contracts | — | 5,539,353 | — | 5,539,353 |
| Liability | ||||
| Forward Foreign Currency Exchange Contracts | — | (4,518,229) | — | (4,518,229) |
| Total | 708,161,101 | 3,594,258,741 | — | 4,302,419,842 |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The Fund’s assets assigned to
the Level 2 input category are generally valued using the market approach, in which a security’s value is determined through reference to prices and information from market transactions for similar or identical
assets. These assets include certain foreign securities for which a third party statistical pricing service may be employed for purposes of fair market valuation. The model utilized by such third party statistical
pricing service takes into account a security’s correlation to available market data including, but not limited to, intraday index, ADR, and exchange-traded fund movements.
Forward foreign currency exchange
contracts are valued at unrealized appreciation (depreciation).
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 12 | Columbia Variable Portfolio – Overseas Core Fund | Annual Report 2021 |
Statement of Assets and Liabilities
December 31, 2021
December 31, 2021
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $4,065,328,352) | $4,278,667,631 |
| Affiliated issuers (cost $22,731,087) | 22,731,087 |
| Cash | 223 |
| Cash collateral held at broker for: | |
| Forward foreign currency exchange contracts | 220,000 |
| Unrealized appreciation on forward foreign currency exchange contracts | 5,539,353 |
| Receivable for: | |
| Investments sold | 4,274,208 |
| Capital shares sold | 37,340 |
| Dividends | 6,356,731 |
| Foreign tax reclaims | 6,290,947 |
| Prepaid expenses | 25,324 |
| Total assets | 4,324,142,844 |
| Liabilities | |
| Unrealized depreciation on forward foreign currency exchange contracts | 4,518,229 |
| Payable for: | |
| Investments purchased | 4,397,808 |
| Capital shares purchased | 364,048 |
| Management services fees | 88,196 |
| Distribution and/or service fees | 1,443 |
| Service fees | 34,416 |
| Compensation of board members | 198,970 |
| Compensation of chief compliance officer | 808 |
| Other expenses | 207,396 |
| Total liabilities | 9,811,314 |
| Net assets applicable to outstanding capital stock | $4,314,331,530 |
| Represented by | |
| Paid in capital | 3,823,213,182 |
| Total distributable earnings (loss) | 491,118,348 |
| Total - representing net assets applicable to outstanding capital stock | $4,314,331,530 |
| Class 1 | |
| Net assets | $3,982,053,481 |
| Shares outstanding | 263,989,169 |
| Net asset value per share | $15.08 |
| Class 2 | |
| Net assets | $89,464,696 |
| Shares outstanding | 5,973,131 |
| Net asset value per share | $14.98 |
| Class 3 | |
| Net assets | $242,813,353 |
| Shares outstanding | 16,134,332 |
| Net asset value per share | $15.05 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Overseas Core Fund | Annual Report 2021 | 13 |
Statement of Operations
Year Ended December 31, 2021
Year Ended December 31, 2021
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $122,540,060 |
| Dividends — affiliated issuers | 21,922 |
| Foreign taxes withheld | (14,092,089) |
| Total income | 108,469,893 |
| Expenses: | |
| Management services fees | 30,323,683 |
| Distribution and/or service fees | |
| Class 2 | 192,608 |
| Class 3 | 313,383 |
| Service fees | 253,307 |
| Compensation of board members | 96,067 |
| Custodian fees | 562,038 |
| Printing and postage fees | 33,979 |
| Audit fees | 48,800 |
| Legal fees | 47,345 |
| Interest on collateral | 14 |
| Compensation of chief compliance officer | 846 |
| Other | 221,662 |
| Total expenses | 32,093,732 |
| Net investment income | 76,376,161 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 264,635,600 |
| Investments — affiliated issuers | (2,602) |
| Foreign currency translations | (536,797) |
| Forward foreign currency exchange contracts | (11,512,573) |
| Futures contracts | 7,576,383 |
| Options purchased | (5,675,267) |
| Options contracts written | 3,347,164 |
| Net realized gain | 257,831,908 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | (569,765) |
| Foreign currency translations | (282,036) |
| Forward foreign currency exchange contracts | 621,025 |
| Options contracts written | (48,733) |
| Foreign capital gains tax | 96,006 |
| Net change in unrealized appreciation (depreciation) | (183,503) |
| Net realized and unrealized gain | 257,648,405 |
| Net increase in net assets resulting from operations | $334,024,566 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 14 | Columbia Variable Portfolio – Overseas Core Fund | Annual Report 2021 |
Statement of Changes in Net Assets
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | |
| Operations | ||
| Net investment income | $76,376,161 | $27,094,183 |
| Net realized gain | 257,831,908 | 83,855,582 |
| Net change in unrealized appreciation (depreciation) | (183,503) | 216,011,538 |
| Net increase in net assets resulting from operations | 334,024,566 | 326,961,303 |
| Distributions to shareholders | ||
| Net investment income and net realized gains | ||
| Class 1 | (128,172,640) | (48,703,188) |
| Class 2 | (2,236,696) | (1,446,557) |
| Class 3 | (8,105,983) | (6,047,522) |
| Total distributions to shareholders | (138,515,319) | (56,197,267) |
| Increase in net assets from capital stock activity | 1,340,753,040 | 1,248,702,527 |
| Total increase in net assets | 1,536,262,287 | 1,519,466,563 |
| Net assets at beginning of year | 2,778,069,243 | 1,258,602,680 |
| Net assets at end of year | $4,314,331,530 | $2,778,069,243 |
| Year Ended | Year Ended | |||
| December 31, 2021 | December 31, 2020 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class 1 | ||||
| Subscriptions | 89,123,190 | 1,331,060,455 | 102,737,149 | 1,260,248,100 |
| Distributions reinvested | 8,495,689 | 128,172,640 | 4,114,382 | 48,703,188 |
| Redemptions | (8,246,594) | (129,386,621) | (2,987,261) | (37,014,586) |
| Net increase | 89,372,285 | 1,329,846,474 | 103,864,270 | 1,271,936,702 |
| Class 2 | ||||
| Subscriptions | 2,178,116 | 32,619,525 | 539,510 | 6,181,423 |
| Distributions reinvested | 149,237 | 2,236,696 | 127,071 | 1,446,557 |
| Redemptions | (678,738) | (10,282,727) | (826,356) | (10,221,605) |
| Net increase (decrease) | 1,648,615 | 24,573,494 | (159,775) | (2,593,625) |
| Class 3 | ||||
| Subscriptions | 43,097 | 656,261 | 21,804 | 275,273 |
| Distributions reinvested | 538,351 | 8,105,983 | 527,294 | 6,047,522 |
| Redemptions | (1,484,276) | (22,429,172) | (2,231,967) | (26,963,345) |
| Net decrease | (902,828) | (13,666,928) | (1,682,869) | (20,640,550) |
| Total net increase | 90,118,072 | 1,340,753,040 | 102,021,626 | 1,248,702,527 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Overseas Core Fund | Annual Report 2021 | 15 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect any fees and expenses imposed under your
Contract and/or Qualified Plan, as applicable; such fees and expenses would reduce the total returns for all periods shown. Total return and portfolio turnover are not annualized for periods of less than one year. The
portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain derivatives, if any. If such transactions were included, the Fund’s portfolio
turnover rate may be higher.
| Net asset value, beginning of period | Net investment income | Net realized and unrealized gain (loss) | Total from investment operations | Distributions from net investment income | Distributions from net realized gains | Total distributions to shareholders | |
| Class 1 | |||||||
| Year Ended 12/31/2021 | $14.18 | 0.29 | 1.12 | 1.41 | (0.19) | (0.32) | (0.51) |
| Year Ended 12/31/2020 | $13.40 | 0.19 | 0.95 | 1.14 | (0.21) | (0.15) | (0.36) |
| Year Ended 12/31/2019 | $12.74 | 0.29 | 2.71 | 3.00 | (0.29) | (2.05) | (2.34) |
| Year Ended 12/31/2018 | $15.71 | 0.29 | (2.84) | (2.55) | (0.42) | — | (0.42) |
| Year Ended 12/31/2017 | $12.58 | 0.19 | 3.23 | 3.42 | (0.29) | — | (0.29) |
| Class 2 | |||||||
| Year Ended 12/31/2021 | $14.09 | 0.23 | 1.14 | 1.37 | (0.16) | (0.32) | (0.48) |
| Year Ended 12/31/2020 | $13.32 | 0.17 | 0.93 | 1.10 | (0.18) | (0.15) | (0.33) |
| Year Ended 12/31/2019 | $12.67 | 0.26 | 2.69 | 2.95 | (0.25) | (2.05) | (2.30) |
| Year Ended 12/31/2018 | $15.62 | 0.26 | (2.83) | (2.57) | (0.38) | — | (0.38) |
| Year Ended 12/31/2017 | $12.52 | 0.16 | 3.20 | 3.36 | (0.26) | — | (0.26) |
| Class 3 | |||||||
| Year Ended 12/31/2021 | $14.15 | 0.26 | 1.14 | 1.40 | (0.18) | (0.32) | (0.50) |
| Year Ended 12/31/2020 | $13.38 | 0.18 | 0.93 | 1.11 | (0.19) | (0.15) | (0.34) |
| Year Ended 12/31/2019 | $12.72 | 0.28 | 2.70 | 2.98 | (0.27) | (2.05) | (2.32) |
| Year Ended 12/31/2018 | $15.68 | 0.28 | (2.84) | (2.56) | (0.40) | — | (0.40) |
| Year Ended 12/31/2017 | $12.56 | 0.18 | 3.22 | 3.40 | (0.28) | — | (0.28) |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Ratios include interest on collateral expense which is less than 0.01%. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 16 | Columbia Variable Portfolio – Overseas Core Fund | Annual Report 2021 |
Financial Highlights (continued)
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets(a) | Total net expense ratio to average net assets(a),(b) | Net investment income ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Class 1 | |||||||
| Year Ended 12/31/2021 | $15.08 | 9.96% | 0.78%(c) | 0.78%(c) | 1.91% | 29% | $3,982,053 |
| Year Ended 12/31/2020 | $14.18 | 9.12% | 0.84% | 0.84% | 1.56% | 26% | $2,476,011 |
| Year Ended 12/31/2019 | $13.40 | 25.47% | 0.89% | 0.89% | 2.21% | 39% | $948,377 |
| Year Ended 12/31/2018 | $12.74 | (16.63%) | 0.89%(c) | 0.89%(c) | 1.96% | 113% | $706,469 |
| Year Ended 12/31/2017 | $15.71 | 27.52% | 0.91% | 0.90% | 1.38% | 41% | $792,289 |
| Class 2 | |||||||
| Year Ended 12/31/2021 | $14.98 | 9.74% | 1.03%(c) | 1.03%(c) | 1.55% | 29% | $89,465 |
| Year Ended 12/31/2020 | $14.09 | 8.83% | 1.10% | 1.10% | 1.39% | 26% | $60,936 |
| Year Ended 12/31/2019 | $13.32 | 25.15% | 1.14% | 1.14% | 1.95% | 39% | $59,746 |
| Year Ended 12/31/2018 | $12.67 | (16.81%) | 1.14%(c) | 1.14%(c) | 1.75% | 113% | $51,287 |
| Year Ended 12/31/2017 | $15.62 | 27.18% | 1.16% | 1.15% | 1.13% | 41% | $67,097 |
| Class 3 | |||||||
| Year Ended 12/31/2021 | $15.05 | 9.88% | 0.91%(c) | 0.91%(c) | 1.72% | 29% | $242,813 |
| Year Ended 12/31/2020 | $14.15 | 8.92% | 0.97% | 0.97% | 1.50% | 26% | $241,122 |
| Year Ended 12/31/2019 | $13.38 | 25.32% | 1.01% | 1.01% | 2.09% | 39% | $250,480 |
| Year Ended 12/31/2018 | $12.72 | (16.70%) | 1.02%(c) | 1.02%(c) | 1.88% | 113% | $228,786 |
| Year Ended 12/31/2017 | $15.68 | 27.37% | 1.04% | 1.03% | 1.26% | 41% | $312,588 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Overseas Core Fund | Annual Report 2021 | 17 |
Notes to Financial Statements
December 31, 2021
December 31, 2021
Note 1. Organization
Columbia Variable Portfolio
– Overseas Core Fund (the Fund), a series of Columbia Funds Variable Series Trust II (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940
Act), as an open-end management investment company organized as a Massachusetts business trust.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers Class 1, Class 2 and Class 3 shares to separate accounts funding variable annuity contracts and variable life insurance policies (collectively, Contracts) issued
by affiliated and unaffiliated life insurance companies (Participating Insurance Companies) as well as qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors (Qualified
Investors) authorized by Columbia Management Investment Distributors, Inc. (the Distributor). You may not buy (nor will you own) shares of the Fund directly. You may invest by participating in a Qualified Plan or by
buying a Contract and making allocations to the Fund. Although all share classes generally have identical voting, dividend and liquidation rights, each share class votes separately when required by the Trust’s
organizational documents or by law. Different share classes pay different net investment income distribution amounts to the extent the expenses of such share classes differ, and distributions in liquidation will be
proportional to the net asset value of each share class. Each share class has its own cost structure and other features.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Equity securities listed on an
exchange are valued at the closing price or last trade price on their primary exchange at the close of business of the New York Stock Exchange. Securities with a closing price not readily available or not listed on
any exchange are valued at the mean between the closing bid and ask prices. Listed preferred stocks convertible into common stocks are valued using an evaluated price from a pricing service.
Foreign equity securities are
valued based on the closing price or last trade price on their primary exchange at the close of business of the New York Stock Exchange. If any foreign equity security closing prices are not readily available,
the securities are valued at the mean of the latest quoted bid and ask prices on such exchanges or markets. Foreign currency exchange rates are determined at the scheduled closing time of the New York Stock Exchange.
Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange; therefore, the closing prices for securities in such markets or on such exchanges may not fully reflect
events that occur after such close but before the close of the New York Stock Exchange. In those situations, foreign securities will be fair valued pursuant to a policy adopted by the Board of Trustees. Under the
policy, the Fund may utilize a third-party pricing service to determine these fair values. The third-party pricing service takes into account multiple factors, including, but not limited to, movements in the U.S.
securities markets, certain depositary receipts, futures contracts and foreign exchange rates that have occurred subsequent to the close of the foreign exchange or market, to determine a good faith estimate that
reasonably reflects the current market conditions as of the close of the New York Stock Exchange. The fair value of a security is likely to be different from the quoted or published price, if available.
Investments in open-end investment
companies (other than exchange-traded funds (ETFs)), are valued at the latest net asset value reported by those companies as of the valuation time.
| 18 | Columbia Variable Portfolio – Overseas Core Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Forward foreign currency exchange
contracts are marked-to-market based upon foreign currency exchange rates provided by a pricing service.
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Foreign currency transactions and
translations
The values of all assets and
liabilities denominated in foreign currencies are generally translated into U.S. dollars at exchange rates determined at the close of regular trading on the New York Stock Exchange. Net realized and unrealized gains
(losses) on foreign currency transactions and translations include gains (losses) arising from the fluctuation in exchange rates between trade and settlement dates on securities transactions, gains (losses) arising
from the disposition of foreign currency and currency gains (losses) between the accrual and payment dates on dividends, interest income and foreign withholding taxes.
For financial statement purposes,
the Fund does not distinguish that portion of gains (losses) on investments which is due to changes in foreign exchange rates from that which is due to changes in market prices of the investments. Such fluctuations
are included with the net realized and unrealized gains (losses) on investments in the Statement of Operations.
Derivative instruments
The Fund invests in certain
derivative instruments, as detailed below, in seeking to meet its investment objectives. Derivatives are instruments whose values depend on, or are derived from, in whole or in part, the value of one or more
securities, currencies, commodities, indices, or other assets or instruments. Derivatives may be used to increase investment flexibility (including to maintain cash reserves while maintaining desired exposure to
certain assets), for risk management (hedging) purposes, to facilitate trading, to reduce transaction costs and to pursue higher investment returns. The Fund may also use derivative instruments to mitigate certain
investment risks, such as foreign currency exchange rate risk, interest rate risk and credit risk. Derivatives may involve various risks, including the potential inability of the counterparty to fulfill its
obligations under the terms of the contract, the potential for an illiquid secondary market (making it difficult for the Fund to sell or terminate, including at favorable prices) and the potential for market movements
which may expose the Fund to gains or losses in excess of the amount shown in the Statement of Assets and Liabilities. The notional amounts of derivative instruments, if applicable, are not recorded in the financial
statements.
A derivative instrument may suffer
a marked-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform its
obligations under the contract. The Fund’s risk of loss from counterparty credit risk on over-the-counter derivatives is generally limited to the aggregate unrealized gain netted against any collateral held by
the Fund and the amount of any variation margin held by the counterparty, plus any replacement costs or related amounts. With exchange-traded or centrally cleared derivatives, there is reduced counterparty credit risk
to the Fund since the clearinghouse or central counterparty (CCP) provides some protection in the case of clearing member default. The clearinghouse or CCP stands between the buyer and the seller of the contract;
therefore, additional counterparty credit risk is failure of the clearinghouse or CCP. However, credit risk still exists in exchange-traded or centrally cleared derivatives with respect to initial and variation margin
that is held in a broker’s customer account. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy
and at that time there is a shortfall in the
| Columbia Variable Portfolio – Overseas Core Fund | Annual Report 2021 | 19 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
aggregate amount of margin held by the clearing
broker for all its clients and such shortfall is remedied by the CCP or otherwise, U.S. bankruptcy laws will typically allocate that shortfall on a pro-rata basis across all the clearing broker’s customers
(including the Fund), potentially resulting in losses to the Fund.
In order to better define its
contractual rights and to secure rights that will help the Fund mitigate its counterparty risk, the Fund may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (ISDA Master Agreement)
or similar agreement with its derivatives counterparties. An ISDA Master Agreement is an agreement between the Fund and a counterparty that governs over-the-counter derivatives and foreign exchange forward contracts
and contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset
with the counterparty certain derivative instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically
permit a single net payment in the event of default (close-out netting), including the bankruptcy or insolvency of the counterparty. Note, however, that bankruptcy or insolvency laws of a particular jurisdiction may
impose restrictions on or prohibitions against the right of offset or netting in bankruptcy, insolvency or other events.
Collateral (margin) requirements
differ by type of derivative. Margin requirements are established by the clearinghouse or CCP for exchange-traded and centrally cleared derivatives. Brokers can ask for margin in excess of the minimum in certain
circumstances. Collateral terms for most over-the-counter derivatives are subject to regulatory requirements to exchange variation margin with trading counterparties and may have contract specific margin terms as
well. For over-the-counter derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the marked-to-market amount for each transaction under such agreement and
comparing that amount to the value of any variation margin currently pledged by the Fund and/or the counterparty. Generally, the amount of collateral due from or to a party has to exceed a minimum transfer amount
threshold (e.g., $250,000) before a transfer has to be made. To the extent amounts due to the Fund from its counterparties are not fully collateralized, contractually or otherwise, the Fund bears the risk of loss from
counterparty nonperformance. The Fund may also pay interest expense on cash collateral received from the broker. Any interest expense paid by the Fund is shown on the Statement of Operations. The Fund attempts to
mitigate counterparty risk by only entering into agreements with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those
counterparties.
Certain ISDA Master Agreements
allow counterparties of over-the-counter derivatives transactions to terminate derivatives contracts prior to maturity in the event the Fund’s net asset value declines by a stated percentage over a specified
time period or if the Fund fails to meet certain terms of the ISDA Master Agreement, which would cause the Fund to accelerate payment of any net liability owed to the counterparty. The Fund also has termination
rights if the counterparty fails to meet certain terms of the ISDA Master Agreement. In determining whether to exercise such termination rights, the Fund would consider, in addition to counterparty credit risk,
whether termination would result in a net liability owed from the counterparty.
For financial reporting purposes,
the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statement of Assets and Liabilities.
Forward foreign currency exchange
contracts
Forward foreign currency exchange
contracts are over-the-counter agreements between two parties to buy and sell a currency at a set price on a future date. The Fund utilized forward foreign currency exchange contracts to hedge the currency exposure
associated with some or all of the Fund’s securities, to shift investment exposure from one currency to another and to shift U.S. dollar exposure to achieve a representative weighted mix of major currencies in
its benchmark. These instruments may be used for other purposes in future periods.
The values of forward foreign
currency exchange contracts fluctuate daily with changes in foreign currency exchange rates. Changes in the value of these contracts are recorded as unrealized appreciation or depreciation until the contract is
exercised or has expired. The Fund will realize a gain or loss when the forward foreign currency exchange contract is closed or expires. Non-deliverable forward foreign currency exchange contracts are settled with the
counterparty in U.S. dollars without delivery of foreign currency.
| 20 | Columbia Variable Portfolio – Overseas Core Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
The use of forward foreign currency
exchange contracts does not eliminate fluctuations in the prices of the Fund’s portfolio securities. The risks of forward foreign currency exchange contracts include movement in the values of the foreign
currencies relative to the U.S. dollar (or other foreign currencies) and the possibility that counterparties will not complete their contractual obligations, which may be in excess of the amount reflected, if any, in
the Statement of Assets and Liabilities.
Futures contracts
Futures contracts are
exchange-traded and represent commitments for the future purchase or sale of an asset at a specified price on a specified date. The Fund bought and sold futures contracts to maintain appropriate equity market exposure
while keeping sufficient cash to accommodate daily redemptions. These instruments may be used for other purposes in future periods. Upon entering into futures contracts, the Fund bears risks that it may not achieve
the anticipated benefits of the futures contracts and may realize a loss. Additional risks include counterparty credit risk, the possibility of an illiquid market, and that a change in the value of the contract or
option may not correlate with changes in the value of the underlying asset.
Upon entering into a futures
contract, the Fund deposits cash or securities with the broker, known as a futures commission merchant (FCM), in an amount sufficient to meet the initial margin requirement. The initial margin deposit must be
maintained at an established level over the life of the contract. Cash deposited as initial margin is recorded in the Statement of Assets and Liabilities as margin deposits. Securities deposited as initial margin are
designated in the Portfolio of Investments. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily change in the contract value and are
recorded as variation margin receivable or payable and are offset in unrealized gains or losses. The Fund generally expects to earn interest income on its margin deposits. The Fund recognizes a realized gain or loss
when the contract is closed or expires. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities.
Options contracts
Options are contracts which entitle
the holder to purchase or sell securities or other identified assets at a specified price, or in the case of index option contracts, to receive or pay the difference between the index value and the strike price of the
index option contract. Option contracts can be either exchange-traded or over-the-counter. The Fund purchased and has written option contracts to decrease the Fund’s exposure to equity market risk and to
facilitate buying and selling of securities for investments. These instruments may be used for other purposes in future periods. Completion of transactions for option contracts traded in the over-the-counter market
depends upon the performance of the other party. Collateral may be collected or posted by the Fund to secure over-the-counter option contract trades. Collateral held or posted by the Fund for such option contract
trades must be returned to the broker or the Fund upon closure, exercise or expiration of the contract.
Options contracts purchased are
recorded as investments. When the Fund writes an options contract, the premium received is recorded as an asset and an amount equivalent to the premium is recorded as a liability in the Statement of Assets and
Liabilities and is subsequently adjusted to reflect the current fair value of the option written. Changes in the fair value of the written option are recorded as unrealized appreciation or depreciation until the
contract is exercised or has expired. The Fund realizes a gain or loss when the option contract is closed or expires. When option contracts are exercised, the proceeds on sales for a written call or purchased put
option contract, or the purchase cost for a written put or purchased call option contract, is adjusted by the amount of premium received or paid.
For over-the-counter options
purchased, the Fund bears the risk of loss of the amount of the premiums paid plus the positive change in market values net of any collateral held by the Fund should the counterparty fail to perform under the
contracts. Option contracts written by the Fund do not typically give rise to significant counterparty credit risk, as options written generally obligate the Fund and not the counterparty to perform. The risk in
writing a call option contract is that the Fund gives up the opportunity for profit if the market price of the security increases above the strike price and the option contract is exercised. The risk in writing a put
option contract is that the Fund may incur a loss if the market price of the security decreases below the strike price and the option contract is exercised. Exercise of a written option could result in the Fund
purchasing or selling a security or foreign currency when it otherwise would not, or at a price different from the current market value. In purchasing and writing options, the Fund bears the risk of an unfavorable
change in the value of the underlying instrument or the risk that the Fund may not be able to enter into a closing transaction due to an illiquid market.
| Columbia Variable Portfolio – Overseas Core Fund | Annual Report 2021 | 21 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Effects of derivative transactions in
the financial statements
The following tables are intended
to provide additional information about the effect of derivatives on the financial statements of the Fund, including: the fair value of derivatives by risk category and the location of those fair values in the
Statement of Assets and Liabilities; and the impact of derivative transactions over the period in the Statement of Operations, including realized and unrealized gains (losses). The derivative instrument schedules
following the Portfolio of Investments present additional information regarding derivative instruments outstanding at the end of the period, if any.
The following table is a summary of
the fair value of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) at December 31, 2021:
The following table indicates the
effect of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) in the Statement of Operations for the year ended December 31, 2021:
The following table is a summary
of the average outstanding volume by derivative instrument for the year ended December 31, 2021:
| Derivative instrument | Average notional amounts ($)* |
| Futures contracts — short | — |
| 22 | Columbia Variable Portfolio – Overseas Core Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
| Derivative instrument | Average value ($) |
| Options contracts — purchased | 378,166** |
| Options contracts — written | (69,681)*** |
| Derivative instrument | Average unrealized appreciation ($)*** | Average unrealized depreciation ($)*** |
| Forward foreign currency exchange contracts | 3,988,163 | (6,101,234) |
| * | There were no ending daily outstanding amounts for the year ended December 31, 2021. The average notional amount of futures contracts opened (and closed) during the period was $128,572,273. |
| ** | Based on the ending daily outstanding amounts for the year ended December 31, 2021. |
| *** | Based on the ending quarterly outstanding amounts for the year ended December 31, 2021. |
Offsetting of assets and
liabilities
The following table presents the
Fund’s gross and net amount of assets and liabilities available for offset under netting arrangements as well as any related collateral received or pledged by the Fund as of December 31, 2021:
| State Street ($) | |
| Assets | |
| Forward foreign currency exchange contracts | 5,539,353 |
| Liabilities | |
| Forward foreign currency exchange contracts | 4,518,229 |
| Total financial and derivative net assets | 1,021,124 |
| Total collateral received (pledged) (a) | - |
| Net amount (b) | 1,021,124 |
| (a) | In some instances, the actual collateral received and/or pledged may be more than the amount shown due to overcollateralization. |
| (b) | Represents the net amount due from/(to) counterparties in the event of default. |
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
Income recognition
Corporate actions and dividend
income are generally recorded net of any non-reclaimable tax withholdings, on the ex-dividend date or upon receipt of an ex-dividend notification in the case of certain foreign securities.
The Fund may receive distributions
from holdings in equity securities, business development companies (BDCs), exchange-traded funds (ETFs), limited partnerships (LPs), other regulated investment companies (RICs), and real estate investment trusts
(REITs), which report information as to the tax character of their distributions annually. These distributions are allocated to dividend income, capital gain and return of capital based on actual information reported.
Return of capital is recorded as a reduction of the cost basis of securities held. If the Fund no longer owns the applicable securities, return of capital is recorded as a realized gain. With respect to REITs, to the
extent actual information has not yet been reported, estimates for return of capital are made by Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise
Financial, Inc. (Ameriprise Financial). The Investment Manager’s estimates are subsequently adjusted when the actual character of the distributions is disclosed by the REITs, which could result in a
proportionate change in return of capital to shareholders.
Awards from class action litigation
are recorded as a reduction of cost basis if the Fund still owns the applicable securities on the payment date. If the Fund no longer owns the applicable securities on the payment date, the proceeds are recorded as
realized gains.
| Columbia Variable Portfolio – Overseas Core Fund | Annual Report 2021 | 23 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
Federal income tax status
The Fund intends to qualify each
year as a regulated investment company under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its investment company taxable income and net capital gain, if any, for its
tax year, and as such will not be subject to federal income taxes. In addition, because the Fund meets the exception under Internal Revenue Code Section 4982(f), the Fund expects not to be subject to federal excise
tax. Therefore, no federal income or excise tax provision is recorded.
Foreign taxes
The Fund may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries, as applicable, based upon its current interpretation of tax rules
and regulations that exist in the markets in which it invests.
Realized gains in certain countries
may be subject to foreign taxes at the Fund level, based on statutory rates. The Fund accrues for such foreign taxes on realized and unrealized gains at the appropriate rate for each jurisdiction, as applicable. The
amount, if any, is disclosed as a liability on the Statement of Assets and Liabilities.
Distributions to subaccounts
Distributions to the subaccounts of
Contracts, Qualified Plans and Qualified Investors are recorded at the close of business on the record date and are payable on the first business day following the record date. Dividends from net investment income, if
any, are declared and distributed quarterly. Capital gain distributions, when available, will be made annually. However, an additional capital gain distribution may be made during the fiscal year in order to comply
with the Internal Revenue Code, as applicable to registered investment companies. Income distributions and capital gain distributions are determined in accordance with federal income tax regulations, which may differ
from GAAP. All dividends and distributions are reinvested in additional shares of the applicable share class of the Fund at the net asset value as of the ex-dividend date of the distribution.
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Under the Management Agreement, the
Investment Manager provides the Fund with investment research and advice, as well as administrative and accounting
| 24 | Columbia Variable Portfolio – Overseas Core Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
services. The management services fee is an annual
fee that is equal to a percentage of the Fund’s daily net assets that declines from 0.88% to 0.62% as the Fund’s net assets increase. The effective management services fee rate for the year ended December
31, 2021 was 0.75% of the Fund’s average daily net assets.
Subadvisory agreement
The Fund’s Board of Trustees
has approved a Subadvisory Agreement between the Investment Manager and Threadneedle International Limited (Threadneedle), an affiliate of the Investment Manager and an indirect wholly-owned subsidiary of Ameriprise
Financial. As of December 31, 2021, Threadneedle is not providing services to the Fund pursuant to the Subadvisory Agreement.
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. Under a Deferred Compensation Plan (the
Deferred Plan), these members of the Board of Trustees may elect to defer payment of up to 100% of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of
certain funds managed by the Investment Manager. The Fund’s liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Deferred Plan. All
amounts payable under the Deferred Plan constitute a general unsecured obligation of the Fund. The expense for the Deferred Plan, which includes Trustees’ fees deferred during the current period as well as any
gains or losses on the Trustees’ deferred compensation balances as a result of market fluctuations, is included in "Compensation of board members" on the Statement of Operations.
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
Transactions with affiliates
The Fund is permitted to engage in
purchase and/or sale transactions with affiliates and/or accounts that have a common investment manager (or affiliated investment managers), common directors/trustees, and/or common officers under specified conditions
outlined in a policy adopted by the Board, pursuant to Rule 17a-7 under the 1940 Act (cross-trades). The Board relies on quarterly written representation from the Fund’s Chief Compliance Officer that
cross-trades complied with approved policy.
For the year ended December 31,
2021, the Fund engaged in cross-trades as follows:
| Purchases ($) | Sales ($) | Net realized gain (loss) ($) |
| 6,043,727 | — | — |
Service fees
The Fund has entered into a
Shareholder Services Agreement with Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial. Under this
agreement, the Fund pays a service fee equal to the payments made by the Transfer Agent to Participating Insurance Companies and other financial intermediaries (together, Participating Organizations) for services each
such Participating Organization provides to its clients, customers and participants that are invested directly or indirectly in the Fund, up to a cap approved by the Board of Trustees from time to time. The effective
service fee rate for the year ended December 31, 2021, was 0.01% of the Fund’s average daily net assets.
The Transfer Agent may retain as
compensation for its services revenues from fees for wire, telephone and redemption orders, account transcripts due the Transfer Agent from Fund shareholders and interest (net of bank charges) earned with respect to
balances in accounts the Transfer Agent maintains in connection with its services to the Fund.
| Columbia Variable Portfolio – Overseas Core Fund | Annual Report 2021 | 25 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Distribution and/or service fees
The Fund has an agreement with the
Distributor, an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution services. Under a Plan and Agreement of Distribution, the Fund pays a fee at an annual rate
of up to 0.25% of the Fund’s average daily net assets attributable to Class 2 shares and an annual rate of up to 0.125% of the Fund’s average daily net assets attributable to Class 3 shares. The Fund pays
no distribution and service fees for Class 1 shares.
Expenses waived/reimbursed by the
Investment Manager and its affiliates
The Investment Manager and certain
of its affiliates have contractually agreed to waive fees and/or reimburse expenses (excluding certain fees and expenses described below) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, so that the Fund’s net operating expenses, after giving effect to fees waived/expenses reimbursed and any balance credits and/or overdraft charges from the Fund’s
custodian, do not exceed the following annual rate(s) as a percentage of the classes’ average daily net assets:
| May 1, 2021 through April 30, 2022 | Prior to May 1, 2021 | |
| Class 1 | 0.89% | 0.90% |
| Class 2 | 1.14 | 1.15 |
| Class 3 | 1.015 | 1.025 |
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), expenses associated with investments in affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange-traded funds), transaction costs and
brokerage commissions, costs related to any securities lending program, dividend expenses associated with securities sold short, inverse floater program fees and expenses, transaction charges and interest on borrowed
money, interest, costs associated with certain shareholder meetings, infrequent and/or unusual expenses and any other expenses the exclusion of which is specifically approved by the Board of Trustees. This
agreement may be modified or amended only with approval from the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements
described above are not recoverable by the Investment Manager or its affiliates in future periods.
Note 4. Federal tax
information
The timing and character of
income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP because of temporary or permanent book to tax differences.
At December 31, 2021, these
differences were primarily due to differing treatment for deferral/reversal of wash sale losses, trustees’ deferred compensation, derivative investments, former PFIC holdings, foreign capital gains tax, foreign
currency transactions and passive foreign investment company (PFIC) holdings. To the extent these differences were permanent, reclassifications were made among the components of the Fund’s net assets. Temporary
differences do not require reclassifications.
The following reclassifications
were made:
| Undistributed net investment income ($) | Accumulated net realized gain ($) | Paid in capital ($) |
| (11,799,975) | 11,799,975 | — |
Net investment income (loss) and
net realized gains (losses), as disclosed in the Statement of Operations, and net assets were not affected by this reclassification.
| 26 | Columbia Variable Portfolio – Overseas Core Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
The tax character of distributions
paid during the years indicated was as follows:
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | ||||
| Ordinary income ($) | Long-term capital gains ($) | Total ($) | Ordinary income ($) | Long-term capital gains ($) | Total ($) |
| 79,757,775 | 58,757,544 | 138,515,319 | 46,145,755 | 10,051,513 | 56,197,268 |
Short-term capital gain
distributions, if any, are considered ordinary income distributions for tax purposes.
At December 31, 2021, the
components of distributable earnings on a tax basis were as follows:
| Undistributed ordinary income ($) | Undistributed long-term capital gains ($) | Capital loss carryforwards ($) | Net unrealized appreciation ($) |
| 172,057,740 | 127,548,339 | — | 191,799,894 |
At December 31, 2021, the cost of
all investments for federal income tax purposes along with the aggregate gross unrealized appreciation and depreciation based on that cost was:
| Federal tax cost ($) | Gross unrealized appreciation ($) | Gross unrealized (depreciation) ($) | Net unrealized appreciation ($) |
| 4,110,619,947 | 508,406,143 | (316,606,249) | 191,799,894 |
Tax cost of investments and
unrealized appreciation/(depreciation) may also include timing differences that do not constitute adjustments to tax basis.
Under current tax rules, regulated
investment companies can elect to treat certain late-year ordinary losses incurred and post-October capital losses (capital losses realized after October 31) as arising on the first day of the following taxable year.
As of December 31, 2021, the Fund will elect to treat the following late-year ordinary losses and post-October capital losses as arising on January 1, 2022.
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Note 5. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $2,428,361,371 and $1,153,958,174, respectively, for the year ended December 31, 2021. The amount of purchase
and sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 6. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes
referred to as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
| Columbia Variable Portfolio – Overseas Core Fund | Annual Report 2021 | 27 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Note 7. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund did not borrow or lend
money under the Interfund Program during the year ended December 31, 2021.
Note 8. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to an October 28, 2021 amendment and restatement, the credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment
Manager or an affiliated investment manager, severally and not jointly, permits collective borrowings up to $950 million. Interest is currently charged to each participating fund based on its borrowings at a rate
equal to the higher of (i) the federal funds effective rate, (ii) the secured overnight financing rate plus 0.11448% and (iii) the overnight bank funding rate, plus in each case, 1.00%. Each borrowing under the credit
facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The
commitment fee is included in other expenses in the Statement of Operations. This agreement expires annually in October unless extended or renewed. Prior to the October 28, 2021 amendment and restatement, the Fund had
access to a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. which permitted collective borrowings up to $950 million. Interest was
charged to each participating fund based on its borrowings at a rate equal to the higher of (i) the federal funds effective rate, (ii) the one-month London Interbank Offered Rate (LIBOR) rate and (iii) the overnight
bank funding rate, plus in each case, 1.25%.
The Fund had no borrowings during
the year ended December 31, 2021.
Note 9. Significant
risks
Foreign securities and emerging
market countries risk
Investing in foreign securities may
involve certain risks not typically associated with investing in U.S. securities, such as increased currency volatility and risks associated with political, regulatory, economic, social, diplomatic and other
conditions or events occurring in the country or region, which may result in significant market volatility. In addition, certain foreign securities may not be as liquid as U.S. securities. Investing in emerging
markets may increase these risks and expose the Fund to elevated risks associated with increased inflation, deflation or currency devaluation. To the extent that the Fund concentrates its investment exposure to any
one or a few specific countries, the Fund will be particularly susceptible to the risks associated with the conditions, events or other factors impacting those countries or regions and may, therefore, have a greater
risk than that of a fund that is more geographically diversified.
Geographic focus risk
The Fund may be particularly
susceptible to economic, political, regulatory or other events or conditions affecting issuers and countries within the specific geographic regions in which the Fund invests. The Fund’s NAV may be more volatile
than the NAV of a more geographically diversified fund.
Asia Pacific Region. The Fund is particularly susceptible to economic, political, regulatory or other events or conditions affecting issuers and countries in the Asia Pacific region. Many of the countries in
the region are considered underdeveloped or developing, including from a political, economic and/or social perspective, and may have relatively unstable governments
| 28 | Columbia Variable Portfolio – Overseas Core Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
and economies based on limited business,
industries and/or natural resources or commodities. Events in any one country within the region may impact other countries in the region or the region as a whole. As a result, events in the region will generally have
a greater effect on the Fund than if the Fund were more geographically diversified. This could result in increased volatility in the value of the Fund’s investments and losses for the Fund. Also, securities of
some companies in the region can be less liquid than U.S. or other foreign securities, potentially making it difficult for the Fund to sell such securities at a desirable time and price.
Europe. The Fund is particularly susceptible to economic, political, regulatory or other events or conditions affecting issuers and countries in Europe which are often closely connected and
interdependent, and events in one European country can have an adverse impact on other European countries. In addition, the private and public sectors’ debt problems of a single European Union (EU) country can
pose significant economic risks to the EU as a whole. As a result, the Fund’s NAV may be more volatile than the NAV of a more geographically diversified fund. If securities of issuers in Europe fall out of
favor, it may cause the Fund to underperform other funds that do not focus their investments in this region of the world. The UK’s departure from the EU single market became effective January 1, 2021 with the
end of the Brexit transition period and the post-Brexit trade deal between the UK and EU taking effect on December 31, 2020. The impact of Brexit on the UK and European economies and the broader global economy could
be significant, resulting in negative impacts on currency and financial markets generally, such as increased volatility and illiquidity, and potentially lower economic growth in markets in Europe, which may adversely
affect the value of your investment in the Fund.
Japan. The Fund is particularly susceptible to the social, political, economic, regulatory and other conditions or events that may affect Japan’s economy. The Japanese economy is heavily
dependent upon international trade, including, among other things, the export of finished goods and the import of oil and other commodities and raw materials. Because of its trade dependence, the Japanese economy is
particularly exposed to the risks of currency fluctuation, foreign trade policy and regional and global economic disruption, including the risk of increased tariffs, embargoes, and other trade limitations or factors.
Strained relationships between Japan and its neighboring countries, including China, South Korea and North Korea, based on historical grievances, territorial disputes, and defense concerns, may also cause uncertainty
in Japanese markets. As a result, additional tariffs, other trade barriers, or boycotts may have an adverse impact on the Japanese economy. Japanese government policy has been characterized by economic regulation,
intervention, protectionism and large government deficits. The Japanese economy is also challenged by an unstable financial services sector, highly leveraged corporate balance sheets and extensive cross-ownership
among major corporations. Structural social and labor market changes, including an aging workforce, population decline and traditional aversion to labor mobility may adversely affect Japan’s economic
competitiveness and growth potential. The potential for natural disasters, such as earthquakes, volcanic eruptions, typhoons and tsunamis, could also have significant negative effects on Japan’s economy. As a
result of the Fund’s investment in Japanese securities, the Fund’s NAV may be more volatile than the NAV of a more geographically diversified fund. If securities of issuers in Japan fall out of favor, it
may cause the Fund to underperform other funds that do not focus their investments in Japan.
Market risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
| Columbia Variable Portfolio – Overseas Core Fund | Annual Report 2021 | 29 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
The coronavirus disease 2019 and
its variants (COVID-19) pandemic has resulted in, and may continue to result in, significant global economic and societal disruption and market volatility due to disruptions in market access, resource availability,
facilities operations, imposition of tariffs, export controls and supply chain disruption, among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement
and loss in human and other resources. The uncertainty surrounding the magnitude, duration, reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental
authorities or other third parties, present unknowns that are yet to unfold. The impacts, as well as the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and
pandemics that may arise in the future – could negatively affect global economies and markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in
emerging market countries may be greater due to generally less established healthcare systems, governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing
political, social and economic risks in certain countries or globally. The disruptions caused by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively
impact the Fund’s ability to achieve its investment objectives. Any such event(s) could have a significant adverse impact on the value and risk profile of the Fund.
Shareholder concentration risk
At December 31, 2021, affiliated
shareholders of record owned 98.7% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of
less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Note 10. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
Note 11. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in
connection with the conduct of their business activities. Ameriprise Financial believes that the Fund is not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject
of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with
the Fund. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (SEC) on legal and regulatory matters that relate to
Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that
these matters, or the adverse publicity associated with them, will not result in increased Fund redemptions, reduced sale of Fund shares or other adverse consequences to the Fund. Further, although we believe
proceedings are not likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines,
penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial or one or more of its affiliates that provides services to
the Fund.
| 30 | Columbia Variable Portfolio – Overseas Core Fund | Annual Report 2021 |
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees of Columbia
Funds Variable Series Trust II and Shareholders of Columbia Variable Portfolio – Overseas Core Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of Columbia Variable Portfolio – Overseas Core Fund (one of the funds constituting Columbia Funds Variable Series Trust II, referred
to hereafter as the "Fund") as of December 31, 2021, the related statement of operations for the year ended December 31, 2021, the statement of changes in net assets for each of the two years in the period ended
December 31, 2021, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2021 (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, 2021, 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, 2021 and the financial highlights for each of the five years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in
the United States of America.
Basis for Opinion
These financial statements are the
responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these
financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2021 by correspondence with the custodian, transfer agent and brokers. We believe that
our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Minneapolis, Minnesota
February 22, 2022
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| Columbia Variable Portfolio – Overseas Core Fund | Annual Report 2021 | 31 |
Federal Income Tax
Information
(Unaudited)
The Fund hereby designates the
following tax attributes for the fiscal year ended December 31, 2021.
| Dividends received deduction | Capital gain dividend | Foreign taxes paid to foreign countries | Foreign taxes paid per share to foreign countries | Foreign source income | Foreign source income per share |
| 0.83% | $134,451,388 | $13,937,246 | $0.05 | $120,742,515 | $0.42 |
Dividends received deduction. The
percentage of ordinary income distributed during the fiscal year that qualifies for the corporate dividends received deduction.
Capital gain dividend. The Fund
designates as a capital gain dividend the amount reflected above, or if subsequently determined to be different, the net capital gain of such fiscal period.
Foreign taxes. The Fund makes the
election to pass through to shareholders the foreign taxes paid. Eligible shareholders may claim a foreign tax credit. These taxes, and the corresponding foreign source income, are provided in the table above.
Foreign taxes are deemed to be
passed through to shareholders with dividends paid after the close of the taxable year, on the next regularly scheduled distribution date of March 30, 2022.
TRUSTEES AND
OFFICERS
The Board oversees the Fund’s
operations and appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following table provides basic biographical information about the Fund’s Trustees as
of the printing of this report, including their principal occupations during the past five years, although specific titles for individuals may have varied over the period. The year set forth beneath Length of Service
in the table below is the year in which the Trustee was first appointed or elected as Trustee to any Fund currently in the Columbia Funds Complex or a predecessor thereof. Under current Board policy, each Trustee
generally serves until December 31 of the year such Trustee turns seventy-five (75).
Independent trustees
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| George S. Batejan c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1953 | Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 176 | Former Chairman of the Board, NICSA (National Investment Company Services Association) (Executive Committee, Nominating Committee and Governance Committee), 2014-2016; former Director, Intech Investment Management, 2011-2016; former Board Member, Metro Denver Chamber of Commerce, 2015-2016; former Advisory Board Member, University of Colorado Business School, 2015-2018 |
| 32 | Columbia Variable Portfolio – Overseas Core Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Kathleen Blatz c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2006 | Attorney, specializing in arbitration and mediation; Chief Justice, Minnesota Supreme Court, 1998-2006; Associate Justice, Minnesota Supreme Court, 1996-1998; Fourth Judicial District Court Judge, Hennepin County, 1994-1996; Attorney in private practice and public service, 1984-1993; State Representative, Minnesota House of Representatives, 1979-1993, which included service on the Tax and Financial Institutions and Insurance Committees; Member and Interim Chair, Minnesota Sports Facilities Authority, January 2017-July 2017; Interim President and Chief Executive Officer, Blue Cross Blue Shield of Minnesota (health care insurance), February-July 2018, April-October 2021 | 176 | Former Trustee, Blue Cross Blue Shield of Minnesota, 2009-2021 (Chair of the Business Development Committee, 2014-2017; Chair of the Governance Committee, 2017-2019); former Member and Chair of the Board, Minnesota Sports Facilities Authority, January 2017-July 2017; former Director, Robina Foundation, 2009-2020 (Chair, 2014-2020); Director, Schulze Family Foundation, since 2021 |
| Pamela G. Carlton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2007 | President, Springboard — Partners in Cross Cultural Leadership (consulting company) since 2003; Managing Director of US Equity Research, JP Morgan Chase, 1999-2003; Director of US Equity Research, Chase Asset Management, 1996-1999; Co-Director Latin America Research, 1993-1996, COO Global Research, 1992-1996, Co-Director of US Research, 1991-1992, Investment Banker, Morgan Stanley, 1982-1991, Morgan Stanley; Attorney, Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 176 | Trustee, New York Presbyterian Hospital Board (Executive Committee and Chair of People Committee) since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee); Director, Apollo Commercial Real Estate Finance, Inc. since 2021; the Governing Council of the Independent Directors Council (IDC), since 2021 |
| Janet Langford Carrig c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1957 | Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 174 | Director, EQT Corporation (natural gas producer) since 2019; Director, Whiting Petroleum Corporation (independent oil and gas company) since 2020 |
| J. Kevin Connaughton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2020 | Member, FINRA National Adjudicatory Council since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Consultant to Independent Trustees of CFVIT and CFST I from March 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Managing Director and General Manager of Mutual Fund Products, Columbia Management Investment Advisers, LLC, May 2010-February 2015; President, Columbia Funds, 2008-2015; and senior officer of Columbia Funds and affiliated funds, 2003-2015 | 174 | Former Director, The Autism Project, March 2015-December 2021; former Member of the Investment Committee, St. Michael’s College, November 2015-February 2020; former Trustee, St. Michael’s College, June 2017-September 2019; former Trustee, New Century Portfolios, January 2015-December 2017 |
| Columbia Variable Portfolio – Overseas Core Fund | Annual Report 2021 | 33 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Olive M. Darragh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since 2020 | Managing Director of Darragh Inc. (strategy and talent management consulting firm) since 2010; Founder and CEO, Zolio, Inc. (investment management talent identification platform) since 2004; Consultant to Independent Trustees of CFVIT and CFST I from June 2019 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 2001-2004 | 174 | Former Director, University of Edinburgh Business School (Member of US Board); former Director, Boston Public Library Foundation |
| Patricia M. Flynn c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1950 | Trustee since 2004 | Trustee Professor of Economics and Management, Bentley University since 1976 (also teaches and conducts research on corporate governance); Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 176 | Trustee, MA Taxpayers Foundation since 1997; Board of Governors, Innovation Institute, MA Technology Collaborative, 2010-2020; former Board of Directors, The MA Business Roundtable, 2003-2019 |
| Brian J. Gallagher c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 176 | Trustee, Catholic Schools Foundation since 2004 |
| Douglas A. Hacker c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1955 | Co-Chair since 2021; Chair of CFST I and CFVIT since 2014; Trustee of CFST I and CFVIT since 1996 and CFST, CFST II, CFVST II, CET I and CET II since 2021 | Independent business executive since May 2006; Executive Vice President – Strategy of United Airlines, December 2002 - May 2006; President of UAL Loyalty Services (airline marketing company), September 2001-December 2002; Executive Vice President and Chief Financial Officer of United Airlines, July 1999-September 2001 | 176 | Director, Spartan Nash Company (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing); former Director, Nash Finch Company (food distributor), 2005-2013; former Director, SeaCube Container Leasing Ltd. (container leasing), 2010-2013; and former Director, Travelport Worldwide Limited (travel information technology), 2014-2019 |
| Nancy T. Lukitsh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1956 | Trustee since 2011 | Senior Vice President, Partner and Director of Marketing, Wellington Management Company, LLP (investment adviser), 1997-2010; Chair, Wellington Management Portfolios (commingled non-U.S. investment pools), 2007 -2010; Director, Wellington Trust Company, NA and other Wellington affiliates, 1997-2010 | 174 | None |
| 34 | Columbia Variable Portfolio – Overseas Core Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| David M. Moffett c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2011 | Retired; Consultant to Bridgewater and Associates | 174 | Director, CSX Corporation (transportation suppliers); Director, Genworth Financial, Inc. (financial and insurance products and services); Director, PayPal Holdings Inc. (payment and data processing services); Trustee, University of Oklahoma Foundation; former Director, eBay Inc. (online trading community), 2007-2015; and former Director, CIT Bank, CIT Group Inc. (commercial and consumer finance), 2010-2016 |
| Catherine James Paglia c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Co-Chair since 2021; Chair of CFST, CFST II, CFVST II, CET I and CET II since 2020; Trustee of CFST, CFST II and CFVST II since 2004 and CFST I and CFVIT since 2021 | Director, Enterprise Asset Management, Inc. (private real estate and asset management company) since September 1998; Managing Director and Partner, Interlaken Capital, Inc., 1989-1997; Vice President, 1982-1985, Principal, 1985-1987, Managing Director, 1987-1989, Morgan Stanley; Vice President, Investment Banking, 1980-1982, Associate, Investment Banking, 1976-1980, Dean Witter Reynolds, Inc. | 176 | Director, Valmont Industries, Inc. (irrigation systems manufacturer) since 2012; Trustee, Carleton College (on the Investment Committee); Trustee, Carnegie Endowment for International Peace (on the Investment Committee) |
| Minor M. Shaw c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1947 | Trustee since 2003 | President, Micco LLC (private investments) since 2011; President, Micco Corp. (family investment business), 1998-2011 | 176 | Director, Blue Cross Blue Shield of South Carolina (Chair of Compensation Committee) since April 2008; Trustee, Hollingsworth Funds (on the Investment Committee) since 2016 (previously Board Chair from 2016-2019); Former Advisory Board member, Duke Energy Corp., 2016-2020; Chair of the Duke Endowment; Chair of Greenville – Spartanburg Airport Commission; former Trustee, BofA Funds Series Trust (11 funds), 2003-2011; former Director, Piedmont Natural Gas, 2004-2016; former Director, National Association of Corporate Directors, Carolinas Chapter, 2013-2018; Chair, Daniel-Mickel Foundation since 1998 |
| Columbia Variable Portfolio – Overseas Core Fund | Annual Report 2021 | 35 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Natalie A. Trunow c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1967 | Trustee since 2020 | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services), January 2016-January 2021; Non-executive Member of the Investment Committee and Valuation Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services), August 2018-January 2021; Advisor, Paradigm Asset Management, November 2016-December 2021; Consultant to Independent Trustees of CFVIT and CFST I from September 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Director of Investments/Consultant, Casey Family Programs, April 2016-November 2016; Senior Vice President and Chief Investment Officer, Calvert Investments, August 2008-January 2016; Section Head and Portfolio Manager, General Motors Asset Management, June 1997-August 2008 | 174 | Former Director, Investment Committee, Health Services for Children with Special Needs, Inc., 2012-2019; Director, Chair of Audit Committee, Consumer Credit Counseling Services (formerly Guidewell Financial Solutions), since 2019; Independent Director, Investment Committee and Valuation Committee, Sarona Asset Management, since 2019 |
| Sandra Yeager c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2017 | Retired; President and founder, Hanoverian Capital, LLC (SEC registered investment advisor firm), 2008-2016; Managing Director, DuPont Capital, 2006-2008; Managing Director, Morgan Stanley Investment Management, 2004-2006; Senior Vice President, Alliance Bernstein, 1990-2004 | 176 | Former Director, NAPE Education Foundation, October 2016-October 2020 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Fund Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I (CET I), Columbia ETF Trust II (CET II), Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Beckman, Gallagher and Hacker and Mses. Blatz, Carlton, Flynn, Paglia, Shaw and Yeager serve as Directors of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
Interested trustee affiliated with
Investment Manager*
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during the past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex overseen | Other directorships held by Trustee during the past five years |
| Daniel J. Beckman c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since November 2021(a) | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC (since April 2015); officer of Columbia Funds and affiliated funds since 2020. | 176 | Director, Ameriprise Trust Company, since October 2016; Director, Columbia Management Investment Distributors, Inc. since November 2018; Board of Governors, Columbia Wanger Asset Management, LLC since January 2022 |
| * | Interested person (as defined under the 1940 Act) by reason of being an officer, director, security holder and/or employee of the Investment Manager or Ameriprise Financial. |
| (a) | Mr. Beckman serves as the President and Principal Executive Officer of the Columbia Funds (since 2021). |
The Statement of Additional
Information has additional information about the Fund’s Board members and is available, without charge, upon request by calling 800.345.6611 or contacting your financial intermediary.
| 36 | Columbia Variable Portfolio – Overseas Core Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. The following table provides basic information about the Officers of the Fund, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Beckman, who is President and Principal Executive Officer, the Fund’s other officers are:
The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. The following table provides basic information about the Officers of the Fund, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Beckman, who is President and Principal Executive Officer, the Fund’s other officers are:
Fund officers
| Columbia Variable Portfolio – Overseas Core Fund | Annual Report 2021 | 37 |
TRUSTEES AND OFFICERS (continued)
Fund officers (continued)
Fund officers (continued)
| Name, address and year of birth | Position and year first appointed to position for any Fund in the Columbia Funds Complex or a predecessor thereof | Principal occupation(s) during past five years |
| Lyn Kephart-Strong 5228 Ameriprise Financial Center Minneapolis, MN 55474 1960 | Vice President (2015) | President, Columbia Management Investment Services Corp. since October 2014; Vice President & Resolution Officer, Ameriprise Trust Company since August 2009. |
| 38 | Columbia Variable Portfolio – Overseas Core Fund | Annual Report 2021 |
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For Fund and other investment product prospectuses, which contain this and other important information, contact your
financial advisor or insurance representative. Please read the prospectus carefully before you invest. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved. Columbia Management Investment Distributors, Inc., 290 Congress Street, Boston, MA 02210
© 2022 Columbia Management Investment
Advisers, LLC.
S-6493 AW (2/22)
Columbia Variable
Portfolio - Government Money Market Fund
Please remember that you may not
buy (nor will you own) shares of the Fund directly. The Fund is available through variable annuity contracts and variable life insurance policies offered by the separate accounts of participating insurance companies
as well as qualified pension and retirement plans. Please contact your financial advisor or insurance representative for more information.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
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| 12 | |
| 14 | |
| 22 | |
| 23 | |
| 23 |
Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which Columbia Variable Portfolio - Government Money Market Fund (the Fund) holds investments consistent with the procedures as stated in the Statement of Additional
Information (SAI). You may obtain a copy of the SAI without charge by calling 800.345.6611; contacting your financial intermediary or searching the website of the Securities and Exchange Commission (SEC) at sec.gov.
Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge
by visiting columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Monthly portfolio holdings
The Fund filed a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q for periods ended prior to and including March 31, 2019. The Fund’s Form N-Qs are available on the SEC’s
website at sec.gov. The Fund’s complete schedule of portfolio holdings, as filed on Form N-Q, can also be obtained without charge, upon request, by calling 800.345.6611.
The Fund’s portfolio holdings
since March 31, 2019 are filed with the SEC monthly on Form N-MFP. The Fund’s Form N-MFPs are available on the SEC’s website at sec.gov and can be obtained without a charge, upon request, by calling
800.345.6611.
Additional Fund information
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
290 Congress Street
Boston, MA 02210
Fund distributor
Columbia Management Investment Distributors,
Inc.
290 Congress Street
Boston, MA 02210
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
Columbia Variable Portfolio - Government Money
Market Fund | Annual Report 2021
Fund at a Glance
Investment objective
The Fund
seeks to provide shareholders with maximum current income consistent with liquidity and stability of principal.
| Columbia Variable Portfolio - Government Money Market Fund | Annual Report 2021 | 3 |
Fund at a Glance (continued)
| Portfolio breakdown (%) (at December 31, 2021) | |
| Repurchase Agreements | 12.9 |
| Treasury Bills | 9.8 |
| U.S. Government & Agency Obligations | 72.4 |
| U.S. Treasury Obligations | 4.9 |
| Total | 100.0 |
Percentages indicated are based
upon total investments excluding investments in derivatives, if any. The Fund’s portfolio composition is subject to change.
| 4 | Columbia Variable Portfolio - Government Money Market Fund | Annual Report 2021 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur ongoing
costs, which generally include management fees, distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to help you compare these costs with the ongoing costs of investing in other mutual funds.
The information below does not
reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy (collectively, Contracts) or qualified pension and retirement plan (Qualified Plan), if any. The total fees
and expenses you bear may therefore be higher than those shown below.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount invested, to estimate the
expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as redemption or exchange fees, or expenses that apply to the subaccount or the Contract. Therefore, the
hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If the fees and expenses imposed under your Contract or
Qualified Plan, if any, were included, your costs would be higher.
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 365.
Had Columbia Management Investment
Advisers, LLC and/or certain of its affiliates not waived/reimbursed certain fees and expenses, account value at the end of the period would have been reduced.
From time to time, the Investment
Manager and its affiliates may limit the expenses of the Fund for the purpose of increasing the yield. This expense limitation policy may be revised or terminated at any time without notice. Had the Investment Manager
and its affiliates not limited the expenses of the Fund during the six months ended December 31, 2021, the annualized expense ratios would have been 0.45% for all classes. The actual expenses paid would have been
$2.27 for all classes. The hypothetical expenses paid would have been $2.29 for all classes.
| Columbia Variable Portfolio - Government Money Market Fund | Annual Report 2021 | 5 |
Portfolio of Investments
December 31, 2021
December 31, 2021
(Percentages represent value of
investments compared to net assets)
Investments in securities
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 6 | Columbia Variable Portfolio - Government Money Market Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Notes to Portfolio of
Investments
| (a) | Variable rate security. The interest rate shown was the current rate as of December 31, 2021. |
Abbreviation Legend
| SOFR | Secured Overnight Financing Rate |
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
Short-term securities are valued
using amortized cost, as permitted under Rule 2a-7 of the Investment Company Act of 1940, as amended. Generally, amortized cost approximates the current fair value of these securities, but because the value is not
obtained from a quoted price in an active market, such securities are reflected as Level 2.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at December 31, 2021:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Investments in Securities | ||||
| Repurchase Agreements | — | 50,000,000 | — | 50,000,000 |
| Treasury Bills | — | 37,998,539 | — | 37,998,539 |
| U.S. Government & Agency Obligations | — | 280,418,368 | — | 280,418,368 |
| U.S. Treasury Obligations | — | 18,750,610 | — | 18,750,610 |
| Total Investments in Securities | — | 387,167,517 | — | 387,167,517 |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The Fund’s assets assigned to
the Level 2 input category represent certain short-term obligations which are valued using amortized cost, an income approach which converts future cash flows to a present value based upon the discount or premium at
purchase.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio - Government Money Market Fund | Annual Report 2021 | 7 |
Statement of Assets and Liabilities
December 31, 2021
December 31, 2021
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $337,167,517) | $337,167,517 |
| Repurchase agreements (cost $50,000,000) | 50,000,000 |
| Cash | 9,501,851 |
| Receivable for: | |
| Capital shares sold | 336 |
| Interest | 11,177 |
| Expense reimbursement due from Investment Manager | 4,556 |
| Prepaid expenses | 9,399 |
| Trustees’ deferred compensation plan | 886 |
| Total assets | 396,695,722 |
| Liabilities | |
| Payable for: | |
| Capital shares purchased | 553,472 |
| Distributions to shareholders | 109 |
| Management services fees | 4,236 |
| Service fees | 23,368 |
| Compensation of board members | 102,569 |
| Compensation of chief compliance officer | 76 |
| Other expenses | 21,171 |
| Trustees’ deferred compensation plan | 886 |
| Total liabilities | 705,887 |
| Net assets applicable to outstanding capital stock | $395,989,835 |
| Represented by | |
| Paid in capital | 396,067,079 |
| Total distributable earnings (loss) | (77,244) |
| Total - representing net assets applicable to outstanding capital stock | $395,989,835 |
| Class 1 | |
| Net assets | $88,116,991 |
| Shares outstanding | 88,038,873 |
| Net asset value per share | $1.00 |
| Class 2 | |
| Net assets | $109,160,223 |
| Shares outstanding | 109,182,261 |
| Net asset value per share | $1.00 |
| Class 3 | |
| Net assets | $198,712,621 |
| Shares outstanding | 198,618,827 |
| Net asset value per share | $1.00 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 8 | Columbia Variable Portfolio - Government Money Market Fund | Annual Report 2021 |
Statement of Operations
Year Ended December 31, 2021
Year Ended December 31, 2021
| Net investment income | |
| Income: | |
| Interest | $231,217 |
| Total income | 231,217 |
| Expenses: | |
| Management services fees | 1,642,056 |
| Distribution and/or service fees | |
| Class 2 | 282,880 |
| Class 3 | 270,495 |
| Service fees | 263,831 |
| Compensation of board members | 38,068 |
| Custodian fees | 8,792 |
| Printing and postage fees | 24,624 |
| Audit fees | 29,500 |
| Legal fees | 13,837 |
| Compensation of chief compliance officer | 68 |
| Other | 10,751 |
| Total expenses | 2,584,902 |
| Fees waived or expenses reimbursed by Investment Manager and its affiliates | (1,842,385) |
| Fees waived by distributor | |
| Class 2 | (282,880) |
| Class 3 | (270,495) |
| Total net expenses | 189,142 |
| Net investment income | 42,075 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 666 |
| Net realized gain | 666 |
| Net realized and unrealized gain | 666 |
| Net increase in net assets resulting from operations | $42,741 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| Columbia Variable Portfolio - Government Money Market Fund | Annual Report 2021 | 9 |
Statement of Changes in Net Assets
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | |
| Operations | ||
| Net investment income | $42,075 | $798,555 |
| Net realized gain | 666 | 46,243 |
| Net increase in net assets resulting from operations | 42,741 | 844,798 |
| Distributions to shareholders | ||
| Net investment income and net realized gains | ||
| Class 1 | (18,204) | (288,123) |
| Class 2 | (23,376) | (171,344) |
| Class 3 | (43,000) | (531,580) |
| Total distributions to shareholders | (84,580) | (991,047) |
| Increase (decrease) in net assets from capital stock activity | (44,067,138) | 110,351,572 |
| Total increase (decrease) in net assets | (44,108,977) | 110,205,323 |
| Net assets at beginning of year | 440,098,812 | 329,893,489 |
| Net assets at end of year | $395,989,835 | $440,098,812 |
| Year Ended | Year Ended | |||
| December 31, 2021 | December 31, 2020 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class 1 | ||||
| Subscriptions | 19,294,070 | 19,294,070 | 63,016,150 | 63,016,151 |
| Distributions reinvested | 18,178 | 18,178 | 290,976 | 290,976 |
| Redemptions | (26,248,081) | (26,248,081) | (55,043,740) | (55,043,740) |
| Net increase (decrease) | (6,935,833) | (6,935,833) | 8,263,386 | 8,263,387 |
| Class 2 | ||||
| Subscriptions | 48,743,078 | 48,743,078 | 89,423,203 | 89,423,203 |
| Distributions reinvested | 23,376 | 23,376 | 173,027 | 173,027 |
| Redemptions | (46,839,328) | (46,839,328) | (43,399,111) | (43,399,111) |
| Net increase | 1,927,126 | 1,927,126 | 46,197,119 | 46,197,119 |
| Class 3 | ||||
| Subscriptions | 22,252,578 | 22,252,578 | 107,706,330 | 107,706,329 |
| Distributions reinvested | 43,010 | 43,010 | 537,237 | 537,237 |
| Redemptions | (61,354,019) | (61,354,019) | (52,352,500) | (52,352,500) |
| Net increase (decrease) | (39,058,431) | (39,058,431) | 55,891,067 | 55,891,066 |
| Total net increase (decrease) | (44,067,138) | (44,067,138) | 110,351,572 | 110,351,572 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 10 | Columbia Variable Portfolio - Government Money Market Fund | Annual Report 2021 |
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| Columbia Variable Portfolio - Government Money Market Fund | Annual Report 2021 | 11 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect any fees and expenses imposed under your
Contract and/or Qualified Plan, as applicable; such fees and expenses would reduce the total returns for all periods shown. Total return is not annualized for periods of less than one year.
| Net asset value, beginning of period | Net investment income | Net realized and unrealized gain | Total from investment operations | Distributions from net investment income | Distributions from net realized gains | Total distributions to shareholders | |
| Class 1 | |||||||
| Year Ended 12/31/2021 | $1.00 | 0.00(b) | 0.00(b) | 0.00(b) | (0.00)(b) | (0.00)(b) | (0.00)(b) |
| Year Ended 12/31/2020 | $1.00 | 0.00(b) | 0.00(b) | 0.00(b) | (0.00)(b) | (0.00)(b) | (0.00)(b) |
| Year Ended 12/31/2019 | $1.00 | 0.02 | 0.00(b) | 0.02 | (0.02) | (0.00)(b) | (0.02) |
| Year Ended 12/31/2018 | $1.00 | 0.02 | 0.00(b) | 0.02 | (0.02) | — | (0.02) |
| Year Ended 12/31/2017 | $1.00 | 0.00(b) | 0.00 | 0.00(b) | (0.00)(b) | — | (0.00)(b) |
| Class 2 | |||||||
| Year Ended 12/31/2021 | $1.00 | 0.00(b) | 0.00(b) | 0.00(b) | (0.00)(b) | (0.00)(b) | (0.00)(b) |
| Year Ended 12/31/2020 | $1.00 | 0.00(b) | 0.00(b) | 0.00(b) | (0.00)(b) | (0.00)(b) | (0.00)(b) |
| Year Ended 12/31/2019 | $1.00 | 0.02 | 0.00(b) | 0.02 | (0.02) | (0.00)(b) | (0.02) |
| Year Ended 12/31/2018 | $1.00 | 0.01 | 0.00(b) | 0.01 | (0.01) | — | (0.01) |
| Year Ended 12/31/2017 | $1.00 | 0.00(b) | 0.00 | 0.00(b) | (0.00)(b) | — | (0.00)(b) |
| Class 3 | |||||||
| Year Ended 12/31/2021 | $1.00 | 0.00(b) | 0.00(b) | 0.00(b) | (0.00)(b) | (0.00)(b) | (0.00)(b) |
| Year Ended 12/31/2020 | $1.00 | 0.00(b) | 0.00(b) | 0.00(b) | (0.00)(b) | (0.00)(b) | (0.00)(b) |
| Year Ended 12/31/2019 | $1.00 | 0.02 | 0.00(b) | 0.02 | (0.02) | (0.00)(b) | (0.02) |
| Year Ended 12/31/2018 | $1.00 | 0.01 | 0.00(b) | 0.01 | (0.01) | — | (0.01) |
| Year Ended 12/31/2017 | $1.00 | 0.00(b) | 0.00 | 0.00(b) | (0.00)(b) | — | (0.00)(b) |
| Notes to Financial Highlights | |
| (a) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (b) | Rounds to zero. |
| (c) | Ratios include the impact of voluntary waivers paid by the Investment Manager. For the periods indicated below, if the Investment Manager had not paid these voluntary waivers, the Fund’s net expense ratio would increase by: |
| Class | 12/31/2021 | 12/31/2020 |
| Class 1 | 0.40% | 0.23% |
| Class 2 | 0.66% | 0.46% |
| Class 3 | 0.53% | 0.33% |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 12 | Columbia Variable Portfolio - Government Money Market Fund | Annual Report 2021 |
Financial Highlights (continued)
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets | Total net expense ratio to average net assets(a) | Net investment income ratio to average net assets | Net assets, end of period (000’s) | |
| Class 1 | ||||||
| Year Ended 12/31/2021 | $1.00 | 0.02% | 0.48% | 0.05%(c) | 0.01% | $88,117 |
| Year Ended 12/31/2020 | $1.00 | 0.31% | 0.49% | 0.21%(c) | 0.23% | $95,062 |
| Year Ended 12/31/2019 | $1.00 | 1.89% | 0.47% | 0.36% | 1.87% | $86,841 |
| Year Ended 12/31/2018 | $1.00 | 1.51% | 0.46% | 0.32% | 1.77% | $301,167 |
| Year Ended 12/31/2017 | $1.00 | 0.43% | 0.50% | 0.45% | 0.42% | $44,578 |
| Class 2 | ||||||
| Year Ended 12/31/2021 | $1.00 | 0.02% | 0.73% | 0.04%(c) | 0.01% | $109,160 |
| Year Ended 12/31/2020 | $1.00 | 0.24% | 0.74% | 0.23%(c) | 0.13% | $107,245 |
| Year Ended 12/31/2019 | $1.00 | 1.64% | 0.72% | 0.62% | 1.60% | $61,083 |
| Year Ended 12/31/2018 | $1.00 | 1.26% | 0.72% | 0.59% | 1.36% | $67,341 |
| Year Ended 12/31/2017 | $1.00 | 0.18% | 0.75% | 0.70% | 0.17% | $32,860 |
| Class 3 | ||||||
| Year Ended 12/31/2021 | $1.00 | 0.02% | 0.61% | 0.05%(c) | 0.01% | $198,713 |
| Year Ended 12/31/2020 | $1.00 | 0.28% | 0.61% | 0.23%(c) | 0.20% | $237,792 |
| Year Ended 12/31/2019 | $1.00 | 1.77% | 0.60% | 0.49% | 1.72% | $181,970 |
| Year Ended 12/31/2018 | $1.00 | 1.38% | 0.60% | 0.48% | 1.36% | $209,931 |
| Year Ended 12/31/2017 | $1.00 | 0.30% | 0.62% | 0.57% | 0.29% | $224,799 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio - Government Money Market Fund | Annual Report 2021 | 13 |
Notes to Financial Statements
December 31, 2021
December 31, 2021
Note 1. Organization
Columbia Variable Portfolio -
Government Money Market Fund (the Fund), a series of Columbia Funds Variable Series Trust II (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940
Act), as an open-end management investment company organized as a Massachusetts business trust.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers Class 1, Class 2 and Class 3 shares to separate accounts funding variable annuity contracts and variable life insurance policies (collectively, Contracts) issued
by affiliated and unaffiliated life insurance companies (Participating Insurance Companies) as well as qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors (Qualified
Investors) authorized by Columbia Management Investment Distributors, Inc. (the Distributor). You may not buy (nor will you own) shares of the Fund directly. You may invest by participating in a Qualified Plan or by
buying a Contract and making allocations to the Fund. Although all share classes generally have identical voting, dividend and liquidation rights, each share class votes separately when required by the Trust’s
organizational documents or by law. Different share classes pay different net investment income distribution amounts to the extent the expenses of such share classes differ, and distributions in liquidation will be
proportional to the net asset value of each share class. Each share class has its own cost structure and other features.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Certain securities in the Fund are
valued utilizing the amortized cost valuation method permitted in accordance with Rule 2a-7 under the 1940 Act provided certain conditions are met, including that the Board of Trustees continues to believe that the
amortized cost valuation method fairly reflects the market-based net asset value per share of the Fund. This method involves valuing a portfolio security initially at its cost and thereafter assuming a constant
accretion or amortization to maturity of any discount or premium, respectively. The Board of Trustees has established procedures intended to stabilize the Fund’s net asset value for purposes of purchases and
redemptions of Fund shares at $1.00 per share. These procedures include determinations, at such intervals as the Board of Trustees deems appropriate and reasonable in light of current market conditions, of the extent,
if any, to which the Fund’s market-based net asset value deviates from $1.00 per share. In the event such deviation exceeds 1/2 of 1%, the Board of Trustees will promptly consider what action, if any, should be
initiated.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Repurchase agreements
The Fund may invest in repurchase
agreement transactions with institutions that management has determined are creditworthy. The Fund, through the custodian, receives delivery of the underlying securities collateralizing a repurchase agreement.
Management is responsible for determining that the collateral is at least equal, at all times, to the value of the repurchase obligation including interest. A repurchase agreement transaction involves certain risks in
the event of default or
| 14 | Columbia Variable Portfolio - Government Money Market Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
insolvency of the counterparty. These risks
include possible delays in or restrictions on the Fund’s ability to dispose of the underlying securities and a possible decline in the value of the underlying securities during the period while the Fund seeks to
assert its rights.
Offsetting of assets and
liabilities
The following table presents the
Fund’s gross and net amount of assets and liabilities available for offset under netting arrangements as well as any related collateral received or pledged by the Fund as of December 31, 2021:
| RBC Dominion Securities ($) | TD Securities ($) | Total ($) | |
| Assets | |||
| Repurchase agreements | 20,000,000 | 30,000,000 | 50,000,000 |
| Total financial and derivative net assets | 20,000,000 | 30,000,000 | 50,000,000 |
| Total collateral received (pledged) (a) | 20,000,000 | 30,000,000 | 50,000,000 |
| Net amount (b) | - | - | - |
| (a) | In some instances, the actual collateral received and/or pledged may be more than the amount shown due to overcollateralization. |
| (b) | Represents the net amount due from/(to) counterparties in the event of default. |
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
Income recognition
Interest income, including
amortization of premium and discount, is recognized daily.
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
Federal income tax status
The Fund intends to qualify each
year as a regulated investment company under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its investment company taxable income and net capital gain, if any, for its
tax year, and as such will not be subject to federal income taxes. In addition, because the Fund meets the exception under Internal Revenue Code Section 4982(f), the Fund expects not to be subject to federal excise
tax. Therefore, no federal income or excise tax provision is recorded.
Distributions to subaccounts
Distributions to the subaccounts of
Contracts, Qualified Plans and Qualified Investors are recorded at the close of business on the record date and are payable on the first business day following the record date. Dividends from net investment income, if
any, are declared daily and distributed quarterly. Capital gain distributions, when available, will be made annually. However, an additional capital gain distribution may be made during the fiscal year to seek to
maintain a net asset value of $1.00 per share, unless such capital gains are offset by any available capital loss carryforward. Income distributions and capital gain distributions are determined in accordance with
federal income tax regulations, which may differ from GAAP. All dividends and distributions are reinvested in additional shares of the applicable share class of the Fund at the net asset value as of the ex-dividend
date of the distribution.
| Columbia Variable Portfolio - Government Money Market Fund | Annual Report 2021 | 15 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Under the Management Agreement, the
Investment Manager provides the Fund with investment research and advice, as well as administrative and accounting services. The management services fee is an annual fee that is equal to a percentage of the
Fund’s daily net assets that declines from 0.39% to 0.18% as the Fund’s net assets increase. The effective management services fee rate for the year ended December 31, 2021 was 0.39% of the Fund’s
average daily net assets.
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. Under a Deferred Compensation Plan (the
Deferred Plan), these members of the Board of Trustees may elect to defer payment of up to 100% of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of
certain funds managed by the Investment Manager. The Fund’s liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Deferred Plan. All
amounts payable under the Deferred Plan constitute a general unsecured obligation of the Fund. The expense for the Deferred Plan, which includes Trustees’ fees deferred during the current period as well as any
gains or losses on the Trustees’ deferred compensation balances as a result of market fluctuations, is included in "Compensation of board members" on the Statement of Operations.
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
Service fees
The Fund has entered into a
Shareholder Services Agreement with Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial. Under this
agreement, the Fund pays a service fee equal to the payments made by the Transfer Agent to Participating Insurance Companies and other financial intermediaries (together, Participating Organizations) for services each
such Participating Organization provides to its clients, customers and participants that are invested directly or indirectly in the Fund, up to a cap approved by the Board of Trustees from time to time. The effective
service fee rate for the year ended December 31, 2021, was 0.06% of the Fund’s average daily net assets.
The Transfer Agent may retain as
compensation for its services revenues from fees for wire, telephone and redemption orders, account transcripts due the Transfer Agent from Fund shareholders and interest (net of bank charges) earned with respect to
balances in accounts the Transfer Agent maintains in connection with its services to the Fund.
| 16 | Columbia Variable Portfolio - Government Money Market Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Distribution and/or service fees
The Fund has an agreement with the
Distributor, an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution services. Under a Plan and Agreement of Distribution, the Fund pays a fee at an annual rate
of up to 0.25% of the Fund’s average daily net assets attributable to Class 2 shares and an annual rate of up to 0.125% of the Fund’s average daily net assets attributable to Class 3 shares. The Fund pays
no distribution and service fees for Class 1 shares.
The Distributor has voluntarily
agreed to waive the distribution fees for Class 2 and Class 3 shares, so that the Fund will not pay distribution fees for these share classes. This arrangement may be modified or terminated by the Distributor at any
time.
Expenses waived/reimbursed by the
Investment Manager and its affiliates
The Investment Manager and certain
of its affiliates have contractually agreed to waive fees and/or reimburse expenses (excluding certain fees and expenses described below) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, so that the Fund’s net operating expenses, after giving effect to fees waived/expenses reimbursed and any balance credits and/or overdraft charges from the Fund’s
custodian, do not exceed the following annual rate(s) as a percentage of the classes’ average daily net assets:
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), expenses associated with investments in affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange-traded funds), transaction costs and
brokerage commissions, costs related to any securities lending program, dividend expenses associated with securities sold short, inverse floater program fees and expenses, transaction charges and interest on borrowed
money, interest, costs associated with certain shareholder meetings, infrequent and/or unusual expenses and any other expenses the exclusion of which is specifically approved by the Board of Trustees. This
agreement may be modified or amended only with approval from the Investment Manager, certain of its affiliates and the Fund. In addition, from time to time, the Investment Manager and its affiliates may waive or
absorb expenses of the Fund with the intent of allowing the Fund to avoid a negative net yield or to increase the Fund’s positive net yield. The Fund’s yield would be negative if Fund expenses exceed Fund
income. Any such expense limitation is voluntary and may be revised or terminated at any time without notice to shareholders and, accordingly, any positive net yield resulting therefrom will cease. Any fees waived
and/or expenses reimbursed under the expense reimbursement arrangements described above are not recoverable by the Investment Manager or its affiliates in future periods. Class 2 and Class 3 distribution fees waived
by the Distributor, as discussed above, are in addition to the waiver/reimbursement commitment under the agreement.
Note 4. Federal tax
information
The timing and character of
income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP because of temporary or permanent book to tax differences.
At December 31, 2021, these
differences were primarily due to differing treatment for trustees’ deferred compensation, distributions, and distribution reclassifications. To the extent these differences were permanent, reclassifications
were made among the components of the Fund’s net assets. Temporary differences do not require reclassifications.
The following reclassifications
were made:
| Columbia Variable Portfolio - Government Money Market Fund | Annual Report 2021 | 17 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
| Excess of distributions over net investment income ($) | Accumulated net realized gain ($) | Paid in capital ($) |
| 709 | (709) | — |
Net investment income (loss) and
net realized gains (losses), as disclosed in the Statement of Operations, and net assets were not affected by this reclassification.
The tax character of distributions
paid during the years indicated was as follows:
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | ||||
| Ordinary income ($) | Long-term capital gains ($) | Total ($) | Ordinary income ($) | Long-term capital gains ($) | Total ($) |
| 83,871 | 709 | 84,580 | 991,047 | — | 991,047 |
Short-term capital gain
distributions, if any, are considered ordinary income distributions for tax purposes.
At December 31, 2021, the
components of distributable earnings on a tax basis were as follows:
| Undistributed ordinary income ($) | Undistributed long-term capital gains ($) | Capital loss carryforwards ($) | Net unrealized appreciation ($) |
| 25,050 | — | — | — |
At December 31, 2021, the cost of
all investments for federal income tax purposes was $387,167,517. Tax cost of investments may also include timing differences that do not constitute adjustments to tax basis.
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Note 5. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
As noted above, the Fund may only
participate in the Interfund Program as a lending fund. The Fund did not lend money under the Interfund Program during the year ended December 31, 2021.
Note 6. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to an October 28, 2021 amendment and restatement, the credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment
Manager or an affiliated investment manager, severally and not jointly, permits collective borrowings up to $950 million. Interest is currently charged to each participating fund based on its borrowings at a rate
equal to the higher of (i) the federal funds effective rate, (ii) the secured overnight financing rate plus 0.11448% and (iii) the overnight bank funding rate, plus in each case, 1.00%. Each
| 18 | Columbia Variable Portfolio - Government Money Market Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
borrowing under the credit facility matures no
later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The commitment fee is included
in other expenses in the Statement of Operations. This agreement expires annually in October unless extended or renewed. Prior to the October 28, 2021 amendment and restatement, the Fund had access to a revolving
credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. which permitted collective borrowings up to $950 million. Interest was charged to each
participating fund based on its borrowings at a rate equal to the higher of (i) the federal funds effective rate, (ii) the one-month London Interbank Offered Rate (LIBOR) rate and (iii) the overnight bank funding
rate, plus in each case, 1.25%.
The Fund had no borrowings during
the year ended December 31, 2021.
Note 7. Significant
risks
Credit risk
Credit risk is the risk that the
value of debt instruments in the Fund’s portfolio may decline because the issuer defaults or otherwise becomes unable or unwilling, or is perceived to be unable or unwilling, to honor its financial obligations,
such as making payments to the Fund when due. Credit rating agencies assign credit ratings to certain debt instruments to indicate their credit risk. Lower-rated or unrated debt instruments held by the Fund may
present increased credit risk as compared to higher-rated debt instruments.
Government money market fund risk
Although government money market
funds (such as the Fund) may seek to preserve the value of shareholders’ investment at $1.00 per share, the net asset values of such money market fund shares can fall, and in infrequent cases in the past have
fallen, below $1.00 per share, potentially causing shareholders who redeem their shares at such net asset values to lose money from their original investment.
At times of (i) significant
redemption activity by shareholders, including, for example, when a single investor or a few large investors make a significant redemption of Fund shares, (ii) insufficient levels of cash in the Fund’s portfolio
to satisfy redemption activity, and (iii) disruption in the normal operation of the markets in which the Fund buys and sells portfolio securities, the Fund could be forced to sell portfolio securities at unfavorable
prices in order to generate sufficient cash to pay redeeming shareholders. Sales of portfolio securities at such times could result in losses to the Fund and cause the net asset value of Fund shares to fall below
$1.00 per share. Additionally, in some cases, the default of a single portfolio security could cause the net asset value of Fund shares to fall below $1.00 per share. In addition, neither the Investment Manager nor
any of its affiliates has a legal obligation to provide financial support to the Fund, and you should not expect that they or any person will provide financial support to the Fund at any time. The Fund may suspend
redemptions or the payment of redemption proceeds when permitted by applicable regulations.
It is possible that, during periods
of low prevailing interest rates or otherwise, the income from portfolio securities may be less than the amount needed to pay ongoing Fund operating expenses and may prevent payment of any dividends or distributions
to Fund shareholders or cause the net asset value of Fund shares to fall below $1.00 per share. In such cases, the Fund may reduce or eliminate the payment of such dividends or distributions or seek to reduce certain
of its operating expenses. There is no guarantee that such actions would enable the Fund to maintain a constant net asset value of $1.00 per share.
Interest rate risk
Interest rate risk is the risk of
losses attributable to changes in interest rates. In general, if prevailing interest rates rise, the values of debt instruments tend to fall, and if interest rates fall, the values of debt instruments tend to rise.
Actions by governments and central banking authorities can result in increases or decreases in interest rates. Higher periods of inflation could lead such authorities to raise interest rates. Increasing interest rates
may negatively affect the value of debt securities held by the Fund, resulting in a negative impact on the Fund’s performance and net asset value per share. In general, the longer the maturity or duration of a
debt security, the greater its sensitivity to changes in interest rates. The Fund is subject to the risk that the income generated by its investments may not keep pace with inflation.
| Columbia Variable Portfolio - Government Money Market Fund | Annual Report 2021 | 19 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Market risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
The coronavirus disease 2019 and
its variants (COVID-19) pandemic has resulted in, and may continue to result in, significant global economic and societal disruption and market volatility due to disruptions in market access, resource availability,
facilities operations, imposition of tariffs, export controls and supply chain disruption, among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement
and loss in human and other resources. The uncertainty surrounding the magnitude, duration, reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental
authorities or other third parties, present unknowns that are yet to unfold. The impacts, as well as the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and
pandemics that may arise in the future – could negatively affect global economies and markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in
emerging market countries may be greater due to generally less established healthcare systems, governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing
political, social and economic risks in certain countries or globally. The disruptions caused by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively
impact the Fund’s ability to achieve its investment objectives. Any such event(s) could have a significant adverse impact on the value and risk profile of the Fund.
Shareholder concentration risk
At December 31, 2021, one
unaffiliated shareholder of record owned 10.5% of the outstanding shares of the Fund in one or more accounts. The Fund has no knowledge about whether any portion of those shares was owned beneficially. Affiliated
shareholders of record owned 86.4% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of
less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Note 8. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
Note 9. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in
connection with the conduct of their business activities. Ameriprise Financial believes that the Fund is not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject
of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates
| 20 | Columbia Variable Portfolio - Government Money Market Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
to perform under their contracts with the Fund.
Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (SEC) on legal and regulatory matters that relate to Ameriprise
Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that
these matters, or the adverse publicity associated with them, will not result in increased Fund redemptions, reduced sale of Fund shares or other adverse consequences to the Fund. Further, although we believe
proceedings are not likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines,
penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial or one or more of its affiliates that provides services to
the Fund.
| Columbia Variable Portfolio - Government Money Market Fund | Annual Report 2021 | 21 |
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees of Columbia
Funds Variable Series Trust II and Shareholders of Columbia Variable Portfolio - Government Money Market Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of Columbia Variable Portfolio - Government Money Market Fund (one of the funds constituting Columbia Funds Variable Series Trust II,
referred to hereafter as the "Fund") as of December 31, 2021, the related statement of operations for the year ended December 31, 2021, the statement of changes in net assets for each of the two years in the period
ended December 31, 2021, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2021 (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, 2021, 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, 2021 and the financial highlights for each of the five years in the period ended December 31, 2021 in conformity with accounting principles generally
accepted in the United States of America.
Basis for Opinion
These financial statements are the
responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these
financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2021 by correspondence with the custodian and brokers; when replies were not received
from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Minneapolis, Minnesota
February 22, 2022
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| 22 | Columbia Variable Portfolio - Government Money Market Fund | Annual Report 2021 |
Federal Income Tax
Information
(Unaudited)
The Fund hereby designates the
following tax attributes for the fiscal year ended December 31, 2021.
| Section 163(j) Interest Dividends | |
| 66.71% |
Section 163(j) Interest Dividends.
The percentage of ordinary income distributed during the fiscal year that shareholders may treat as interest income for purposes of IRC Section 163(j), subject to holding period requirements and other limitations.
TRUSTEES AND
OFFICERS
The Board oversees the Fund’s
operations and appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following table provides basic biographical information about the Fund’s Trustees as
of the printing of this report, including their principal occupations during the past five years, although specific titles for individuals may have varied over the period. The year set forth beneath Length of Service
in the table below is the year in which the Trustee was first appointed or elected as Trustee to any Fund currently in the Columbia Funds Complex or a predecessor thereof. Under current Board policy, each Trustee
generally serves until December 31 of the year such Trustee turns seventy-five (75).
Independent trustees
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| George S. Batejan c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1953 | Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 176 | Former Chairman of the Board, NICSA (National Investment Company Services Association) (Executive Committee, Nominating Committee and Governance Committee), 2014-2016; former Director, Intech Investment Management, 2011-2016; former Board Member, Metro Denver Chamber of Commerce, 2015-2016; former Advisory Board Member, University of Colorado Business School, 2015-2018 |
| Columbia Variable Portfolio - Government Money Market Fund | Annual Report 2021 | 23 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Kathleen Blatz c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2006 | Attorney, specializing in arbitration and mediation; Chief Justice, Minnesota Supreme Court, 1998-2006; Associate Justice, Minnesota Supreme Court, 1996-1998; Fourth Judicial District Court Judge, Hennepin County, 1994-1996; Attorney in private practice and public service, 1984-1993; State Representative, Minnesota House of Representatives, 1979-1993, which included service on the Tax and Financial Institutions and Insurance Committees; Member and Interim Chair, Minnesota Sports Facilities Authority, January 2017-July 2017; Interim President and Chief Executive Officer, Blue Cross Blue Shield of Minnesota (health care insurance), February-July 2018, April-October 2021 | 176 | Former Trustee, Blue Cross Blue Shield of Minnesota, 2009-2021 (Chair of the Business Development Committee, 2014-2017; Chair of the Governance Committee, 2017-2019); former Member and Chair of the Board, Minnesota Sports Facilities Authority, January 2017-July 2017; former Director, Robina Foundation, 2009-2020 (Chair, 2014-2020); Director, Schulze Family Foundation, since 2021 |
| Pamela G. Carlton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2007 | President, Springboard — Partners in Cross Cultural Leadership (consulting company) since 2003; Managing Director of US Equity Research, JP Morgan Chase, 1999-2003; Director of US Equity Research, Chase Asset Management, 1996-1999; Co-Director Latin America Research, 1993-1996, COO Global Research, 1992-1996, Co-Director of US Research, 1991-1992, Investment Banker, Morgan Stanley, 1982-1991, Morgan Stanley; Attorney, Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 176 | Trustee, New York Presbyterian Hospital Board (Executive Committee and Chair of People Committee) since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee); Director, Apollo Commercial Real Estate Finance, Inc. since 2021; the Governing Council of the Independent Directors Council (IDC), since 2021 |
| Janet Langford Carrig c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1957 | Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 174 | Director, EQT Corporation (natural gas producer) since 2019; Director, Whiting Petroleum Corporation (independent oil and gas company) since 2020 |
| J. Kevin Connaughton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2020 | Member, FINRA National Adjudicatory Council since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Consultant to Independent Trustees of CFVIT and CFST I from March 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Managing Director and General Manager of Mutual Fund Products, Columbia Management Investment Advisers, LLC, May 2010-February 2015; President, Columbia Funds, 2008-2015; and senior officer of Columbia Funds and affiliated funds, 2003-2015 | 174 | Former Director, The Autism Project, March 2015-December 2021; former Member of the Investment Committee, St. Michael’s College, November 2015-February 2020; former Trustee, St. Michael’s College, June 2017-September 2019; former Trustee, New Century Portfolios, January 2015-December 2017 |
| 24 | Columbia Variable Portfolio - Government Money Market Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Olive M. Darragh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since 2020 | Managing Director of Darragh Inc. (strategy and talent management consulting firm) since 2010; Founder and CEO, Zolio, Inc. (investment management talent identification platform) since 2004; Consultant to Independent Trustees of CFVIT and CFST I from June 2019 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 2001-2004 | 174 | Former Director, University of Edinburgh Business School (Member of US Board); former Director, Boston Public Library Foundation |
| Patricia M. Flynn c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1950 | Trustee since 2004 | Trustee Professor of Economics and Management, Bentley University since 1976 (also teaches and conducts research on corporate governance); Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 176 | Trustee, MA Taxpayers Foundation since 1997; Board of Governors, Innovation Institute, MA Technology Collaborative, 2010-2020; former Board of Directors, The MA Business Roundtable, 2003-2019 |
| Brian J. Gallagher c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 176 | Trustee, Catholic Schools Foundation since 2004 |
| Douglas A. Hacker c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1955 | Co-Chair since 2021; Chair of CFST I and CFVIT since 2014; Trustee of CFST I and CFVIT since 1996 and CFST, CFST II, CFVST II, CET I and CET II since 2021 | Independent business executive since May 2006; Executive Vice President – Strategy of United Airlines, December 2002 - May 2006; President of UAL Loyalty Services (airline marketing company), September 2001-December 2002; Executive Vice President and Chief Financial Officer of United Airlines, July 1999-September 2001 | 176 | Director, Spartan Nash Company (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing); former Director, Nash Finch Company (food distributor), 2005-2013; former Director, SeaCube Container Leasing Ltd. (container leasing), 2010-2013; and former Director, Travelport Worldwide Limited (travel information technology), 2014-2019 |
| Nancy T. Lukitsh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1956 | Trustee since 2011 | Senior Vice President, Partner and Director of Marketing, Wellington Management Company, LLP (investment adviser), 1997-2010; Chair, Wellington Management Portfolios (commingled non-U.S. investment pools), 2007 -2010; Director, Wellington Trust Company, NA and other Wellington affiliates, 1997-2010 | 174 | None |
| Columbia Variable Portfolio - Government Money Market Fund | Annual Report 2021 | 25 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| David M. Moffett c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2011 | Retired; Consultant to Bridgewater and Associates | 174 | Director, CSX Corporation (transportation suppliers); Director, Genworth Financial, Inc. (financial and insurance products and services); Director, PayPal Holdings Inc. (payment and data processing services); Trustee, University of Oklahoma Foundation; former Director, eBay Inc. (online trading community), 2007-2015; and former Director, CIT Bank, CIT Group Inc. (commercial and consumer finance), 2010-2016 |
| Catherine James Paglia c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Co-Chair since 2021; Chair of CFST, CFST II, CFVST II, CET I and CET II since 2020; Trustee of CFST, CFST II and CFVST II since 2004 and CFST I and CFVIT since 2021 | Director, Enterprise Asset Management, Inc. (private real estate and asset management company) since September 1998; Managing Director and Partner, Interlaken Capital, Inc., 1989-1997; Vice President, 1982-1985, Principal, 1985-1987, Managing Director, 1987-1989, Morgan Stanley; Vice President, Investment Banking, 1980-1982, Associate, Investment Banking, 1976-1980, Dean Witter Reynolds, Inc. | 176 | Director, Valmont Industries, Inc. (irrigation systems manufacturer) since 2012; Trustee, Carleton College (on the Investment Committee); Trustee, Carnegie Endowment for International Peace (on the Investment Committee) |
| Minor M. Shaw c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1947 | Trustee since 2003 | President, Micco LLC (private investments) since 2011; President, Micco Corp. (family investment business), 1998-2011 | 176 | Director, Blue Cross Blue Shield of South Carolina (Chair of Compensation Committee) since April 2008; Trustee, Hollingsworth Funds (on the Investment Committee) since 2016 (previously Board Chair from 2016-2019); Former Advisory Board member, Duke Energy Corp., 2016-2020; Chair of the Duke Endowment; Chair of Greenville – Spartanburg Airport Commission; former Trustee, BofA Funds Series Trust (11 funds), 2003-2011; former Director, Piedmont Natural Gas, 2004-2016; former Director, National Association of Corporate Directors, Carolinas Chapter, 2013-2018; Chair, Daniel-Mickel Foundation since 1998 |
| 26 | Columbia Variable Portfolio - Government Money Market Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Natalie A. Trunow c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1967 | Trustee since 2020 | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services), January 2016-January 2021; Non-executive Member of the Investment Committee and Valuation Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services), August 2018-January 2021; Advisor, Paradigm Asset Management, November 2016-December 2021; Consultant to Independent Trustees of CFVIT and CFST I from September 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Director of Investments/Consultant, Casey Family Programs, April 2016-November 2016; Senior Vice President and Chief Investment Officer, Calvert Investments, August 2008-January 2016; Section Head and Portfolio Manager, General Motors Asset Management, June 1997-August 2008 | 174 | Former Director, Investment Committee, Health Services for Children with Special Needs, Inc., 2012-2019; Director, Chair of Audit Committee, Consumer Credit Counseling Services (formerly Guidewell Financial Solutions), since 2019; Independent Director, Investment Committee and Valuation Committee, Sarona Asset Management, since 2019 |
| Sandra Yeager c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2017 | Retired; President and founder, Hanoverian Capital, LLC (SEC registered investment advisor firm), 2008-2016; Managing Director, DuPont Capital, 2006-2008; Managing Director, Morgan Stanley Investment Management, 2004-2006; Senior Vice President, Alliance Bernstein, 1990-2004 | 176 | Former Director, NAPE Education Foundation, October 2016-October 2020 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Fund Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I (CET I), Columbia ETF Trust II (CET II), Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Beckman, Gallagher and Hacker and Mses. Blatz, Carlton, Flynn, Paglia, Shaw and Yeager serve as Directors of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
Interested trustee affiliated with
Investment Manager*
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during the past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex overseen | Other directorships held by Trustee during the past five years |
| Daniel J. Beckman c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since November 2021(a) | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC (since April 2015); officer of Columbia Funds and affiliated funds since 2020. | 176 | Director, Ameriprise Trust Company, since October 2016; Director, Columbia Management Investment Distributors, Inc. since November 2018; Board of Governors, Columbia Wanger Asset Management, LLC since January 2022 |
| * | Interested person (as defined under the 1940 Act) by reason of being an officer, director, security holder and/or employee of the Investment Manager or Ameriprise Financial. |
| (a) | Mr. Beckman serves as the President and Principal Executive Officer of the Columbia Funds (since 2021). |
The Statement of Additional
Information has additional information about the Fund’s Board members and is available, without charge, upon request by calling 800.345.6611 or contacting your financial intermediary.
| Columbia Variable Portfolio - Government Money Market Fund | Annual Report 2021 | 27 |
TRUSTEES AND OFFICERS (continued)
The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. The following table provides basic information about the Officers of the Fund, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Beckman, who is President and Principal Executive Officer, the Fund’s other officers are:
The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. The following table provides basic information about the Officers of the Fund, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Beckman, who is President and Principal Executive Officer, the Fund’s other officers are:
Fund officers
| 28 | Columbia Variable Portfolio - Government Money Market Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Fund officers (continued)
Fund officers (continued)
| Name, address and year of birth | Position and year first appointed to position for any Fund in the Columbia Funds Complex or a predecessor thereof | Principal occupation(s) during past five years |
| Lyn Kephart-Strong 5228 Ameriprise Financial Center Minneapolis, MN 55474 1960 | Vice President (2015) | President, Columbia Management Investment Services Corp. since October 2014; Vice President & Resolution Officer, Ameriprise Trust Company since August 2009. |
| Columbia Variable Portfolio - Government Money Market Fund | Annual Report 2021 | 29 |
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For Fund and other investment product prospectuses, which contain this and other important information, contact your
financial advisor or insurance representative. Please read the prospectus carefully before you invest. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved. Columbia Management Investment Distributors, Inc., 290 Congress Street, Boston, MA 02210
© 2022 Columbia Management Investment
Advisers, LLC.
S-6637 AW (2/22)
CTIVP® –
Loomis Sayles Growth Fund
Please remember that you may not
buy (nor will you own) shares of the Fund directly. The Fund is available through variable annuity contracts and variable life insurance policies offered by the separate accounts of participating insurance companies
as well as qualified pension and retirement plans. Please contact your financial advisor or insurance representative for more information.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
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| 8 | |
| 11 | |
| 12 | |
| 13 | |
| 14 | |
| 16 | |
| 23 | |
| 24 |
Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which CTIVP® – Loomis Sayles Growth Fund (the Fund) holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI).
You may obtain a copy of the SAI without charge by calling 800.345.6611; contacting your financial intermediary or searching the website of the Securities and Exchange Commission (SEC) at sec.gov. Information
regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge by visiting
columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. The Fund’s Form N-PORT is available on the SEC’s website at sec.gov. The Fund’s complete
schedule of portfolio holdings, as filed on Form N-PORT, can also be obtained without charge, upon request, by calling 800.345.6611.
Additional Fund information
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
290 Congress Street
Boston, MA 02210
Fund distributor
Columbia Management Investment Distributors,
Inc.
290 Congress Street
Boston, MA 02210
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
CTIVP® – Loomis Sayles Growth
Fund | Annual Report 2021
Fund at a Glance
Investment objective
The Fund
seeks to provide shareholders with long-term capital growth.
| CTIVP® – Loomis Sayles Growth Fund | Annual Report 2021 | 3 |
Fund at a Glance (continued)
Performance of a hypothetical $10,000 investment (December 31, 2011 — December 31, 2021)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class 2 shares of CTIVP® – Loomis Sayles Growth Fund during the stated time period, and does not reflect the deduction of taxes, if any, that a shareholder
may pay on Fund distributions or on the redemption of Fund shares. The returns also do not reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy or qualified
pension or retirement plan, if any.
| 4 | CTIVP® – Loomis Sayles Growth Fund | Annual Report 2021 |
Manager Discussion of Fund Performance
At December 31, 2021,
approximately 88.38% of the Fund’s shares were owned in the aggregate by affiliated funds-of-funds managed by Columbia Management Investment Advisers, LLC (the Investment Manager). As a result of asset
allocation decisions by the Investment Manager, it is possible that the Fund may experience relatively large purchases or redemptions from affiliated funds-of-funds. The Investment Manager seeks to minimize the impact
of these transactions by structuring them over a reasonable period of time. The Fund may also experience increased expenses as it buys and sells securities as a result of purchases or redemptions by affiliated
funds-of-funds.
For the 12-month period that ended
December 31, 2021, the Fund’s Class 2 shares returned 18.28%. The Fund underperformed its benchmark, the Russell 1000 Growth Index, which returned 27.60% over the same time period.
Market overview
U.S. stocks faced a myriad of
issues during the period, many related to the ongoing COVID-19 pandemic, including the emergence of the Delta variant, persistent supply chain interruptions, and rising input costs. Complicating matters was a
consistent stream of news out of China impacting U.S. markets, ranging from increased regulation of gaming and leisure to banning trading in cryptocurrencies and, lastly, the Evergrande liquidity scare, which roiled
markets for a period. On the policy front, the U.S. Federal Reserve (Fed) began telegraphing plans for tapering of bond purchases, while additional stimulus measures and a bipartisan infrastructure bill continued to
be debated in Congress. The second half of the year saw the resumption of quality market leadership with earnings power driving stock performance more than speculative hype. U.S. stocks ended the year near all-time
highs, despite a tumultuous final month in which the Omicron variant swept across the globe with eye-popping speed. In addition to inflation hitting multi-decade highs, along with the Fed’s pivot to tackle
inflationary pressures, persistent labor shortages and supply chain disruptions were central to the 2021 storyline.
The Fund’s most notable
detractors during the period:
| • | The consumer discretionary, health care and consumer staples sectors detracted most from the Fund’s performance on a relative basis. Consumer discretionary was underweight relative to the benchmark and health care and consumer staples were overweight. Stock selection detracted in all three sectors. |
| • | Among individual stocks, Alibaba Group Holding Ltd., Autodesk, Inc. and The Walt Disney Co. were among the largest relative detractors during the period. |
| ○ | Alibaba shares have been under pressure since late 2020 due to investor concern regarding increasing regulatory intervention by the Chinese government. More recently, we have observed increasing competitive pressure in two of the company’s smaller but faster growing e-commerce businesses.We continue to believe that Alibaba is a high-quality company that remains well positioned to benefit from secular growth in China e-commerce and trades at a discount to intrinsic value. However, given our most recent analysis, we trimmed the position and allocated the proceeds to other holdings. |
| ○ | Disney reported financial results during the period that continue to be significantly impacted by COVID-19, but were largely in line with consensus expectations for revenues and profitability. However, shares responded negatively to news that subscriptions to Disney+ were below elevated investor expectations. We believe the market continues to underappreciate the long-term opportunity for subscriber growth, pricing increases, and margin expansion in its streaming platform. We believe the shares still trade at a substantial discount to our estimate of intrinsic value and offer a compelling reward-to-risk opportunity. |
| ○ | Autodesk shares declined following the company’s financial report in which billings growth decelerated and was below management expectations. Management attributed the slower growth rate in part to supply chain disruptions as well as weakness in China’s architecture, engineering, and construction industry. We believe these issues are temporary and do not impact our assessment of Autodesk as a high-quality business with durable structural growth drivers and which trades at a substantial discount to our estimate of intrinsic value. |
The Fund’s most notable
contributors during the period:
| • | Energy was the only contributing sector to the Fund on a relative basis as the sector provided positive absolute returns. We were overweight in energy relative to the benchmark. |
| CTIVP® – Loomis Sayles Growth Fund | Annual Report 2021 | 5 |
Manager Discussion of Fund Performance (continued)
| • | Among individual stocks, NVIDIA Corp., Alphabet, Inc. and Microsoft Corp. were among the largest relative contributors during the period. |
| ○ | NVIDIA is the world leader in graphic processing units (GPUs), which enable computers to produce and utilize highly realistic 3D graphic imagery and models. The company reported better-than-expected financial results that included quarterly revenue records in its gaming, data center, and professional visualization segments in the second half of the year. |
| ○ | Alphabet is a holding company that owns a collection of businesses — the largest of which is Google, the global leader in online search and advertising, which also offers online cloud solutions to businesses and consumers. The company’s financial results during the period reflected a strong recovery in advertising spending, which had been depressed due to COVID-19, while revenue growth accelerated and adjusted operating margins expanded. |
| ○ | Microsoft, the world’s largest software company, reported financial results that were above management and consensus expectations on all key metrics, including revenue growth of approximately 20%, expanding operating margins, and strong double-digit growth in both operating income and free cash flow. The company also continued to show strong commercial cloud growth, with revenue rising approximately 30% year over year. |
| • | We believe the shares of all three contributors continue to trade at a discount to our estimates of intrinsic value and offer compelling reward-to-risk opportunities. |
The views expressed in this report
reflect the current views of the respective parties who have contributed to this report. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult
to predict, so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective parties
disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Columbia fund are based on numerous factors, may not be relied on as an
indication of trading intent on behalf of any particular Columbia fund. References to specific securities should not be construed as a recommendation or investment advice.
| 6 | CTIVP® – Loomis Sayles Growth Fund | Annual Report 2021 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur ongoing
costs, which generally include management fees, distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to help you compare these costs with the ongoing costs of investing in other mutual funds.
The information below does not
reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy (collectively, Contracts) or qualified pension and retirement plan (Qualified Plan), if any. The total fees
and expenses you bear may therefore be higher than those shown below.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount invested, to estimate the
expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as redemption or exchange fees, or expenses that apply to the subaccount or the Contract. Therefore, the
hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If the fees and expenses imposed under your Contract or
Qualified Plan, if any, were included, your costs would be higher.
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 365.
Expenses do not include fees and
expenses incurred indirectly by the Fund from its investment in underlying funds, including affiliated and non-affiliated pooled investment vehicles, such as mutual funds and exchange-traded funds.
| CTIVP® – Loomis Sayles Growth Fund | Annual Report 2021 | 7 |
Portfolio of Investments
December 31, 2021
December 31, 2021
(Percentages represent value of
investments compared to net assets)
Investments in securities
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 8 | CTIVP® – Loomis Sayles Growth Fund | Annual Report 2021 |
Notes to Portfolio of
Investments
| (a) | Non-income producing investment. |
| (b) | The rate shown is the seven-day current annualized yield at December 31, 2021. |
| (c) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended December 31, 2021 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Realized gain (loss)($) | Dividends($) | End of period shares |
| Columbia Short-Term Cash Fund, 0.085% | ||||||||
| 16,948,187 | 384,508,990 | (352,819,840) | (1,350) | 48,635,987 | (1,803) | 16,351 | 48,645,716 | |
Abbreviation Legend
| ADR | American Depositary Receipt |
Fair value
measurements
The Fund categorizes
its fair value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when
available. Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that
reflect the Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input
that is deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For
example, certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active
market.
Fair value inputs are
summarized in the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in
determining fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable
inputs can vary between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs
will be considered by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date,
which may include periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between
the various levels within the hierarchy.
Foreign equity securities
actively traded in markets where there is a significant delay in the local close relative to the New York Stock Exchange are classified as Level 2. The values of these securities may include an adjustment to reflect
the impact of market movements following the close of local trading, as described in Note 2 to the financial statements – Security valuation.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| CTIVP® – Loomis Sayles Growth Fund | Annual Report 2021 | 9 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Fair value measurements (continued)
Investments falling into the Level 3 category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and estimated cash flows, and comparable company data.
Investments falling into the Level 3 category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at December 31, 2021:
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The Fund’s assets assigned to
the Level 2 input category are generally valued using the market approach, in which a security’s value is determined through reference to prices and information from market transactions for similar or identical
assets. These assets include certain foreign securities for which a third party statistical pricing service may be employed for purposes of fair market valuation. The model utilized by such third party statistical
pricing service takes into account a security’s correlation to available market data including, but not limited to, intraday index, ADR, and exchange-traded fund movements.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 10 | CTIVP® – Loomis Sayles Growth Fund | Annual Report 2021 |
Statement of Assets and Liabilities
December 31, 2021
December 31, 2021
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $1,150,773,018) | $2,432,506,271 |
| Affiliated issuers (cost $48,637,337) | 48,635,987 |
| Receivable for: | |
| Capital shares sold | 9,211 |
| Dividends | 622,220 |
| Foreign tax reclaims | 17,790 |
| Prepaid expenses | 23,429 |
| Total assets | 2,481,814,908 |
| Liabilities | |
| Payable for: | |
| Capital shares purchased | 1,127,583 |
| Management services fees | 44,689 |
| Distribution and/or service fees | 529 |
| Service fees | 32,712 |
| Compensation of board members | 260,598 |
| Compensation of chief compliance officer | 452 |
| Other expenses | 39,033 |
| Total liabilities | 1,505,596 |
| Net assets applicable to outstanding capital stock | $2,480,309,312 |
| Represented by | |
| Trust capital | $2,480,309,312 |
| Total - representing net assets applicable to outstanding capital stock | $2,480,309,312 |
| Class 1 | |
| Net assets | $2,403,744,632 |
| Shares outstanding | 40,921,372 |
| Net asset value per share | $58.74 |
| Class 2 | |
| Net assets | $76,564,680 |
| Shares outstanding | 1,341,343 |
| Net asset value per share | $57.08 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| CTIVP® – Loomis Sayles Growth Fund | Annual Report 2021 | 11 |
Statement of Operations
Year Ended December 31, 2021
Year Ended December 31, 2021
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $16,702,812 |
| Dividends — affiliated issuers | 16,351 |
| Foreign taxes withheld | (1,699,200) |
| Total income | 15,019,963 |
| Expenses: | |
| Management services fees | 16,570,860 |
| Distribution and/or service fees | |
| Class 2 | 184,454 |
| Service fees | 363,659 |
| Compensation of board members | 93,832 |
| Custodian fees | 16,453 |
| Printing and postage fees | 38,766 |
| Audit fees | 29,500 |
| Legal fees | 32,916 |
| Interest on interfund lending | 1,554 |
| Compensation of chief compliance officer | 425 |
| Other | 123,750 |
| Total expenses | 17,456,169 |
| Net investment loss | (2,436,206) |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 395,442,110 |
| Investments — affiliated issuers | (1,803) |
| Net realized gain | 395,440,307 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | 46,714,572 |
| Investments — affiliated issuers | (1,350) |
| Net change in unrealized appreciation (depreciation) | 46,713,222 |
| Net realized and unrealized gain | 442,153,529 |
| Net increase in net assets resulting from operations | $439,717,323 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 12 | CTIVP® – Loomis Sayles Growth Fund | Annual Report 2021 |
Statement of Changes in Net Assets
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | |
| Operations | ||
| Net investment income (loss) | $(2,436,206) | $1,890,297 |
| Net realized gain | 395,440,307 | 441,506,183 |
| Net change in unrealized appreciation (depreciation) | 46,713,222 | 207,899,363 |
| Net increase in net assets resulting from operations | 439,717,323 | 651,295,843 |
| Decrease in net assets from capital stock activity | (507,045,549) | (663,811,930) |
| Total decrease in net assets | (67,328,226) | (12,516,087) |
| Net assets at beginning of year | 2,547,637,538 | 2,560,153,625 |
| Net assets at end of year | $2,480,309,312 | $2,547,637,538 |
| Year Ended | Year Ended | |||
| December 31, 2021 | December 31, 2020 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class 1 | ||||
| Subscriptions | 2,327,217 | 115,966,646 | 3,031,060 | 124,647,713 |
| Redemptions | (11,463,880) | (619,559,044) | (19,681,393) | (784,712,667) |
| Net decrease | (9,136,663) | (503,592,398) | (16,650,333) | (660,064,954) |
| Class 2 | ||||
| Subscriptions | 111,996 | 5,940,036 | 163,611 | 6,799,662 |
| Redemptions | (175,391) | (9,393,187) | (264,248) | (10,546,638) |
| Net decrease | (63,395) | (3,453,151) | (100,637) | (3,746,976) |
| Total net decrease | (9,200,058) | (507,045,549) | (16,750,970) | (663,811,930) |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| CTIVP® – Loomis Sayles Growth Fund | Annual Report 2021 | 13 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect any fees and expenses imposed under your
Contract and/or Qualified Plan, as applicable; such fees and expenses would reduce the total returns for all periods shown. Total return and portfolio turnover are not annualized for periods of less than one year. The
portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain derivatives, if any. If such transactions were included, the Fund’s portfolio
turnover rate may be higher.
| Net asset value, beginning of period | Net investment income (loss) | Net realized and unrealized gain (loss) | Total from investment operations | |
| Class 1 | ||||
| Year Ended 12/31/2021 | $49.54 | (0.05) | 9.25 | 9.20 |
| Year Ended 12/31/2020 | $37.55 | 0.04 | 11.95 | 11.99 |
| Year Ended 12/31/2019 | $28.50 | 0.17 | 8.88 | 9.05 |
| Year Ended 12/31/2018 | $29.20 | 0.17 | (0.87) | (0.70) |
| Year Ended 12/31/2017 | $21.95 | 0.10 | 7.15 | 7.25 |
| Class 2 | ||||
| Year Ended 12/31/2021 | $48.26 | (0.19) | 9.01 | 8.82 |
| Year Ended 12/31/2020 | $36.67 | (0.07) | 11.66 | 11.59 |
| Year Ended 12/31/2019 | $27.90 | 0.08 | 8.69 | 8.77 |
| Year Ended 12/31/2018 | $28.66 | 0.10 | (0.86) | (0.76) |
| Year Ended 12/31/2017 | $21.60 | 0.03 | 7.03 | 7.06 |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Ratios include interfund lending expense which is less than 0.01%. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 14 | CTIVP® – Loomis Sayles Growth Fund | Annual Report 2021 |
Financial Highlights (continued)
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets(a) | Total net expense ratio to average net assets(a),(b) | Net investment income (loss) ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Class 1 | |||||||
| Year Ended 12/31/2021 | $58.74 | 18.57% | 0.68%(c) | 0.68%(c) | (0.09%) | 6% | $2,403,745 |
| Year Ended 12/31/2020 | $49.54 | 31.93% | 0.69% | 0.69% | 0.09% | 22% | $2,479,845 |
| Year Ended 12/31/2019 | $37.55 | 31.76% | 0.69% | 0.69% | 0.50% | 7% | $2,504,948 |
| Year Ended 12/31/2018 | $28.50 | (2.40%) | 0.70% | 0.70% | 0.57% | 8% | $1,929,781 |
| Year Ended 12/31/2017 | $29.20 | 33.03% | 0.72% | 0.72% | 0.39% | 5% | $1,989,749 |
| Class 2 | |||||||
| Year Ended 12/31/2021 | $57.08 | 18.28% | 0.93%(c) | 0.93%(c) | (0.35%) | 6% | $76,565 |
| Year Ended 12/31/2020 | $48.26 | 31.61% | 0.94% | 0.94% | (0.16%) | 22% | $67,793 |
| Year Ended 12/31/2019 | $36.67 | 31.43% | 0.94% | 0.94% | 0.25% | 7% | $55,206 |
| Year Ended 12/31/2018 | $27.90 | (2.65%) | 0.95% | 0.95% | 0.32% | 8% | $44,937 |
| Year Ended 12/31/2017 | $28.66 | 32.68% | 0.97% | 0.97% | 0.10% | 5% | $45,101 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| CTIVP® – Loomis Sayles Growth Fund | Annual Report 2021 | 15 |
Notes to Financial Statements
December 31, 2021
December 31, 2021
Note 1. Organization
CTIVP® – Loomis Sayles
Growth Fund (the Fund), a series of Columbia Funds Variable Series Trust II (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an
open-end management investment company organized as a Massachusetts business trust.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers Class 1 and Class 2 shares to separate accounts funding variable annuity contracts and variable life insurance policies (collectively, Contracts) issued by
affiliated and unaffiliated life insurance companies (Participating Insurance Companies) as well as qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors (Qualified
Investors) authorized by Columbia Management Investment Distributors, Inc. (the Distributor). You may not buy (nor will you own) shares of the Fund directly. You may invest by participating in a Qualified Plan or by
buying a Contract and making allocations to the Fund. Although all share classes generally have identical voting, dividend and liquidation rights, each share class votes separately when required by the Trust’s
organizational documents or by law. Different share classes pay different net investment income distribution amounts to the extent the expenses of such share classes differ, and distributions in liquidation will be
proportional to the net asset value of each share class. Each share class has its own cost structure and other features.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Equity securities listed on an
exchange are valued at the closing price or last trade price on their primary exchange at the close of business of the New York Stock Exchange. Securities with a closing price not readily available or not listed on
any exchange are valued at the mean between the closing bid and ask prices. Listed preferred stocks convertible into common stocks are valued using an evaluated price from a pricing service.
Foreign equity securities are
valued based on the closing price or last trade price on their primary exchange at the close of business of the New York Stock Exchange. If any foreign equity security closing prices are not readily available,
the securities are valued at the mean of the latest quoted bid and ask prices on such exchanges or markets. Foreign currency exchange rates are determined at the scheduled closing time of the New York Stock Exchange.
Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange; therefore, the closing prices for securities in such markets or on such exchanges may not fully reflect
events that occur after such close but before the close of the New York Stock Exchange. In those situations, foreign securities will be fair valued pursuant to a policy adopted by the Board of Trustees. Under the
policy, the Fund may utilize a third-party pricing service to determine these fair values. The third-party pricing service takes into account multiple factors, including, but not limited to, movements in the U.S.
securities markets, certain depositary receipts, futures contracts and foreign exchange rates that have occurred subsequent to the close of the foreign exchange or market, to determine a good faith estimate that
reasonably reflects the current market conditions as of the close of the New York Stock Exchange. The fair value of a security is likely to be different from the quoted or published price, if available.
Investments in open-end investment
companies (other than exchange-traded funds (ETFs)), are valued at the latest net asset value reported by those companies as of the valuation time.
| 16 | CTIVP® – Loomis Sayles Growth Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
Income recognition
Corporate actions and dividend
income are generally recorded net of any non-reclaimable tax withholdings, on the ex-dividend date or upon receipt of an ex-dividend notification in the case of certain foreign securities.
The Fund may receive distributions
from holdings in equity securities, business development companies (BDCs), exchange-traded funds (ETFs), limited partnerships (LPs), other regulated investment companies (RICs), and real estate investment trusts
(REITs), which report information as to the tax character of their distributions annually. These distributions are allocated to dividend income, capital gain and return of capital based on actual information reported.
Return of capital is recorded as a reduction of the cost basis of securities held. If the Fund no longer owns the applicable securities, return of capital is recorded as a realized gain. With respect to REITs, to the
extent actual information has not yet been reported, estimates for return of capital are made by Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise
Financial, Inc. (Ameriprise Financial). The Investment Manager’s estimates are subsequently adjusted when the actual character of the distributions is disclosed by the REITs, which could result in a
proportionate change in return of capital to shareholders.
Awards from class action litigation
are recorded as a reduction of cost basis if the Fund still owns the applicable securities on the payment date. If the Fund no longer owns the applicable securities on the payment date, the proceeds are recorded as
realized gains.
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
Federal income tax status
The Fund is treated as a
partnership for federal income tax purposes, and the Fund does not expect to make regular distributions. The Fund will not be subject to federal income tax, and therefore, there is no provision for federal income
taxes. The partners of the Fund are subject to tax on their distributive share of the Fund’s income and loss. The components of the Fund’s net assets are reported at the partner-level for federal income
tax purposes, and therefore, are not presented in the Statement of Assets and Liabilities.
| CTIVP® – Loomis Sayles Growth Fund | Annual Report 2021 | 17 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Foreign taxes
The Fund may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries, as applicable, based upon its current interpretation of tax rules
and regulations that exist in the markets in which it invests.
Realized gains in certain countries
may be subject to foreign taxes at the Fund level, based on statutory rates. The Fund accrues for such foreign taxes on realized and unrealized gains at the appropriate rate for each jurisdiction, as applicable. The
amount, if any, is disclosed as a liability on the Statement of Assets and Liabilities.
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Under the Management Agreement, the
Investment Manager provides the Fund with investment research and advice, as well as administrative and accounting services. The Investment Manager is responsible for the ultimate oversight of investments made by the
Fund. The Fund’s subadviser (see Subadvisory agreement below) has the primary responsibility for the day-to-day portfolio management of the Fund. The management services fee is an annual fee that is equal to a
percentage of the Fund’s daily net assets that declines from 0.71% to 0.53% as the Fund’s net assets increase. The effective management services fee rate for the year ended December 31, 2021 was 0.65% of
the Fund’s average daily net assets.
Subadvisory agreement
The Investment Manager has entered
into a Subadvisory Agreement with Loomis, Sayles & Company, L.P. to serve as the subadviser to the Fund. The Investment Manager compensates the subadviser to manage the investment of the Fund’s assets.
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. Under a Deferred Compensation Plan (the
Deferred Plan), these members of the Board of Trustees may elect to defer payment of up to 100% of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of
certain funds managed by the Investment Manager. The Fund’s liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Deferred Plan. All
amounts payable under the Deferred Plan constitute a general unsecured obligation of the Fund. The expense for the Deferred Plan, which includes Trustees’ fees deferred during the current period as well as any
gains or losses on the Trustees’ deferred compensation balances as a result of market fluctuations, is included in "Compensation of board members" on the Statement of Operations.
| 18 | CTIVP® – Loomis Sayles Growth Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
Service fees
The Fund has entered into a
Shareholder Services Agreement with Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial. Under this
agreement, the Fund pays a service fee equal to the payments made by the Transfer Agent to Participating Insurance Companies and other financial intermediaries (together, Participating Organizations) for services each
such Participating Organization provides to its clients, customers and participants that are invested directly or indirectly in the Fund, up to a cap approved by the Board of Trustees from time to time. The effective
service fee rate for the year ended December 31, 2021, was 0.01% of the Fund’s average daily net assets.
The Transfer Agent may retain as
compensation for its services revenues from fees for wire, telephone and redemption orders, account transcripts due the Transfer Agent from Fund shareholders and interest (net of bank charges) earned with respect to
balances in accounts the Transfer Agent maintains in connection with its services to the Fund.
Distribution and/or service fees
The Fund has an agreement with the
Distributor, an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution services. Under a Plan and Agreement of Distribution, the Fund pays a fee at an annual rate
of up to 0.25% of the Fund’s average daily net assets attributable to Class 2 shares. The Fund pays no distribution and service fees for Class 1 shares.
Expenses waived/reimbursed by the
Investment Manager and its affiliates
The Investment Manager and certain
of its affiliates have contractually agreed to waive fees and/or reimburse expenses (excluding certain fees and expenses described below) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, so that the Fund’s net operating expenses, after giving effect to fees waived/expenses reimbursed and any balance credits and/or overdraft charges from the Fund’s
custodian, do not exceed the following annual rate(s) as a percentage of the classes’ average daily net assets:
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), expenses associated with investments in affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange-traded funds), transaction costs and
brokerage commissions, costs related to any securities lending program, dividend expenses associated with securities sold short, inverse floater program fees and expenses, transaction charges and interest on borrowed
money, interest, costs associated with certain shareholder meetings, infrequent and/or unusual expenses and any other expenses the exclusion of which is specifically approved by the Board of Trustees. This
agreement may be modified or amended only with approval from the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements
described above are not recoverable by the Investment Manager or its affiliates in future periods.
| CTIVP® – Loomis Sayles Growth Fund | Annual Report 2021 | 19 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Note 4. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $151,734,489 and $691,972,820, respectively, for the year ended December 31, 2021. The amount of purchase and
sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 5. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes
referred to as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
Note 6. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund’s activity in the
Interfund Program during the year ended December 31, 2021 was as follows:
| Borrower or lender | Average loan balance ($) | Weighted average interest rate (%) | Number of days with outstanding loans |
| Borrower | 79,900,000 | 0.70 | 1 |
Interest expense incurred by the
Fund is recorded as Interfund lending in the Statement of Operations. The Fund had no outstanding interfund loans at December 31, 2021.
Note 7. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to an October 28, 2021 amendment and restatement, the credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment
Manager or an affiliated investment manager, severally and not jointly, permits collective borrowings up to $950 million. Interest is currently charged to each participating fund based on its borrowings at a rate
equal to the higher of (i) the federal funds effective rate, (ii) the secured overnight financing rate plus 0.11448% and (iii) the overnight bank funding rate, plus in each case, 1.00%. Each borrowing under the credit
facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The
commitment fee is included in other expenses in the Statement of Operations. This agreement expires annually in October unless extended or renewed. Prior to the October 28, 2021 amendment and restatement, the Fund had
access to a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. which permitted collective borrowings up to $950 million. Interest was
charged to each participating fund based on its borrowings at a rate equal to the higher of (i) the federal funds effective rate, (ii) the one-month London Interbank Offered Rate (LIBOR) rate and (iii) the overnight
bank funding rate, plus in each case, 1.25%.
The Fund had no borrowings during
the year ended December 31, 2021.
| 20 | CTIVP® – Loomis Sayles Growth Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Note 8. Significant
risks
Information technology sector
risk
The Fund is more susceptible to the
particular risks that may affect companies in the information technology sector than if it were invested in a wider variety of companies in unrelated sectors. Companies in the information technology sector are subject
to certain risks, including the risk that new services, equipment or technologies will not be accepted by consumers and businesses or will become rapidly obsolete. Performance of such companies may be affected by
factors including obtaining and protecting patents (or the failure to do so) and significant competitive pressures, including aggressive pricing of their products or services, new market entrants, competition for
market share and short product cycles due to an accelerated rate of technological developments. Such competitive pressures may lead to limited earnings and/or falling profit margins. As a result, the value of their
securities may fall or fail to rise. In addition, many information technology sector companies have limited operating histories and prices of these companies’ securities historically have been more volatile than
other securities, especially over the short term. Some companies in the information technology sector are facing increased government and regulatory scrutiny and may be subject to adverse government or regulatory
action, which could negatively impact the value of their securities.
Market risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
The coronavirus disease 2019 and
its variants (COVID-19) pandemic has resulted in, and may continue to result in, significant global economic and societal disruption and market volatility due to disruptions in market access, resource availability,
facilities operations, imposition of tariffs, export controls and supply chain disruption, among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement
and loss in human and other resources. The uncertainty surrounding the magnitude, duration, reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental
authorities or other third parties, present unknowns that are yet to unfold. The impacts, as well as the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and
pandemics that may arise in the future – could negatively affect global economies and markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in
emerging market countries may be greater due to generally less established healthcare systems, governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing
political, social and economic risks in certain countries or globally. The disruptions caused by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively
impact the Fund’s ability to achieve its investment objectives. Any such event(s) could have a significant adverse impact on the value and risk profile of the Fund.
Shareholder concentration risk
At December 31, 2021, affiliated
shareholders of record owned 97.0% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its
| CTIVP® – Loomis Sayles Growth Fund | Annual Report 2021 | 21 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
liquid positions, which may result in Fund losses
and the Fund holding a higher percentage of less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Note 9. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
Note 10. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in
connection with the conduct of their business activities. Ameriprise Financial believes that the Fund is not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject
of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with
the Fund. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (SEC) on legal and regulatory matters that relate to
Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that
these matters, or the adverse publicity associated with them, will not result in increased Fund redemptions, reduced sale of Fund shares or other adverse consequences to the Fund. Further, although we believe
proceedings are not likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines,
penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial or one or more of its affiliates that provides services to
the Fund.
| 22 | CTIVP® – Loomis Sayles Growth Fund | Annual Report 2021 |
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees of Columbia
Funds Variable Series Trust II and Shareholders of CTIVP® – Loomis Sayles Growth Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of CTIVP® – Loomis Sayles Growth Fund (one of the funds constituting Columbia Funds Variable Series Trust II, referred to
hereafter as the "Fund") as of December 31, 2021, the related statement of operations for the year ended December 31, 2021, the statement of changes in net assets for each of the two years in the period ended December
31, 2021, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2021 (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, 2021, 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, 2021 and the financial highlights for each of the five years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in the
United States of America.
Basis for Opinion
These financial statements are the
responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these
financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2021 by correspondence with the custodian and transfer agent. We believe that our
audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Minneapolis, Minnesota
February 22, 2022
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| CTIVP® – Loomis Sayles Growth Fund | Annual Report 2021 | 23 |
TRUSTEES AND
OFFICERS
The Board oversees the
Fund’s operations and appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following table provides basic biographical information about the
Fund’s Trustees as of the printing of this report, including their principal occupations during the past five years, although specific titles for individuals may have varied over the period. The year set forth
beneath Length of Service in the table below is the year in which the Trustee was first appointed or elected as Trustee to any Fund currently in the Columbia Funds Complex or a predecessor thereof. Under current Board
policy, each Trustee generally serves until December 31 of the year such Trustee turns seventy-five (75).
Independent trustees
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| George S. Batejan c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1953 | Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 176 | Former Chairman of the Board, NICSA (National Investment Company Services Association) (Executive Committee, Nominating Committee and Governance Committee), 2014-2016; former Director, Intech Investment Management, 2011-2016; former Board Member, Metro Denver Chamber of Commerce, 2015-2016; former Advisory Board Member, University of Colorado Business School, 2015-2018 |
| Kathleen Blatz c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2006 | Attorney, specializing in arbitration and mediation; Chief Justice, Minnesota Supreme Court, 1998-2006; Associate Justice, Minnesota Supreme Court, 1996-1998; Fourth Judicial District Court Judge, Hennepin County, 1994-1996; Attorney in private practice and public service, 1984-1993; State Representative, Minnesota House of Representatives, 1979-1993, which included service on the Tax and Financial Institutions and Insurance Committees; Member and Interim Chair, Minnesota Sports Facilities Authority, January 2017-July 2017; Interim President and Chief Executive Officer, Blue Cross Blue Shield of Minnesota (health care insurance), February-July 2018, April-October 2021 | 176 | Former Trustee, Blue Cross Blue Shield of Minnesota, 2009-2021 (Chair of the Business Development Committee, 2014-2017; Chair of the Governance Committee, 2017-2019); former Member and Chair of the Board, Minnesota Sports Facilities Authority, January 2017-July 2017; former Director, Robina Foundation, 2009-2020 (Chair, 2014-2020); Director, Schulze Family Foundation, since 2021 |
| Pamela G. Carlton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2007 | President, Springboard — Partners in Cross Cultural Leadership (consulting company) since 2003; Managing Director of US Equity Research, JP Morgan Chase, 1999-2003; Director of US Equity Research, Chase Asset Management, 1996-1999; Co-Director Latin America Research, 1993-1996, COO Global Research, 1992-1996, Co-Director of US Research, 1991-1992, Investment Banker, Morgan Stanley, 1982-1991, Morgan Stanley; Attorney, Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 176 | Trustee, New York Presbyterian Hospital Board (Executive Committee and Chair of People Committee) since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee); Director, Apollo Commercial Real Estate Finance, Inc. since 2021; the Governing Council of the Independent Directors Council (IDC), since 2021 |
| 24 | CTIVP® – Loomis Sayles Growth Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Janet Langford Carrig c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1957 | Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 174 | Director, EQT Corporation (natural gas producer) since 2019; Director, Whiting Petroleum Corporation (independent oil and gas company) since 2020 |
| J. Kevin Connaughton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2020 | Member, FINRA National Adjudicatory Council since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Consultant to Independent Trustees of CFVIT and CFST I from March 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Managing Director and General Manager of Mutual Fund Products, Columbia Management Investment Advisers, LLC, May 2010-February 2015; President, Columbia Funds, 2008-2015; and senior officer of Columbia Funds and affiliated funds, 2003-2015 | 174 | Former Director, The Autism Project, March 2015-December 2021; former Member of the Investment Committee, St. Michael’s College, November 2015-February 2020; former Trustee, St. Michael’s College, June 2017-September 2019; former Trustee, New Century Portfolios, January 2015-December 2017 |
| Olive M. Darragh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since 2020 | Managing Director of Darragh Inc. (strategy and talent management consulting firm) since 2010; Founder and CEO, Zolio, Inc. (investment management talent identification platform) since 2004; Consultant to Independent Trustees of CFVIT and CFST I from June 2019 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 2001-2004 | 174 | Former Director, University of Edinburgh Business School (Member of US Board); former Director, Boston Public Library Foundation |
| Patricia M. Flynn c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1950 | Trustee since 2004 | Trustee Professor of Economics and Management, Bentley University since 1976 (also teaches and conducts research on corporate governance); Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 176 | Trustee, MA Taxpayers Foundation since 1997; Board of Governors, Innovation Institute, MA Technology Collaborative, 2010-2020; former Board of Directors, The MA Business Roundtable, 2003-2019 |
| Brian J. Gallagher c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 176 | Trustee, Catholic Schools Foundation since 2004 |
| CTIVP® – Loomis Sayles Growth Fund | Annual Report 2021 | 25 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Douglas A. Hacker c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1955 | Co-Chair since 2021; Chair of CFST I and CFVIT since 2014; Trustee of CFST I and CFVIT since 1996 and CFST, CFST II, CFVST II, CET I and CET II since 2021 | Independent business executive since May 2006; Executive Vice President – Strategy of United Airlines, December 2002 - May 2006; President of UAL Loyalty Services (airline marketing company), September 2001-December 2002; Executive Vice President and Chief Financial Officer of United Airlines, July 1999-September 2001 | 176 | Director, Spartan Nash Company (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing); former Director, Nash Finch Company (food distributor), 2005-2013; former Director, SeaCube Container Leasing Ltd. (container leasing), 2010-2013; and former Director, Travelport Worldwide Limited (travel information technology), 2014-2019 |
| Nancy T. Lukitsh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1956 | Trustee since 2011 | Senior Vice President, Partner and Director of Marketing, Wellington Management Company, LLP (investment adviser), 1997-2010; Chair, Wellington Management Portfolios (commingled non-U.S. investment pools), 2007 -2010; Director, Wellington Trust Company, NA and other Wellington affiliates, 1997-2010 | 174 | None |
| David M. Moffett c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2011 | Retired; Consultant to Bridgewater and Associates | 174 | Director, CSX Corporation (transportation suppliers); Director, Genworth Financial, Inc. (financial and insurance products and services); Director, PayPal Holdings Inc. (payment and data processing services); Trustee, University of Oklahoma Foundation; former Director, eBay Inc. (online trading community), 2007-2015; and former Director, CIT Bank, CIT Group Inc. (commercial and consumer finance), 2010-2016 |
| Catherine James Paglia c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Co-Chair since 2021; Chair of CFST, CFST II, CFVST II, CET I and CET II since 2020; Trustee of CFST, CFST II and CFVST II since 2004 and CFST I and CFVIT since 2021 | Director, Enterprise Asset Management, Inc. (private real estate and asset management company) since September 1998; Managing Director and Partner, Interlaken Capital, Inc., 1989-1997; Vice President, 1982-1985, Principal, 1985-1987, Managing Director, 1987-1989, Morgan Stanley; Vice President, Investment Banking, 1980-1982, Associate, Investment Banking, 1976-1980, Dean Witter Reynolds, Inc. | 176 | Director, Valmont Industries, Inc. (irrigation systems manufacturer) since 2012; Trustee, Carleton College (on the Investment Committee); Trustee, Carnegie Endowment for International Peace (on the Investment Committee) |
| 26 | CTIVP® – Loomis Sayles Growth Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Minor M. Shaw c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1947 | Trustee since 2003 | President, Micco LLC (private investments) since 2011; President, Micco Corp. (family investment business), 1998-2011 | 176 | Director, Blue Cross Blue Shield of South Carolina (Chair of Compensation Committee) since April 2008; Trustee, Hollingsworth Funds (on the Investment Committee) since 2016 (previously Board Chair from 2016-2019); Former Advisory Board member, Duke Energy Corp., 2016-2020; Chair of the Duke Endowment; Chair of Greenville – Spartanburg Airport Commission; former Trustee, BofA Funds Series Trust (11 funds), 2003-2011; former Director, Piedmont Natural Gas, 2004-2016; former Director, National Association of Corporate Directors, Carolinas Chapter, 2013-2018; Chair, Daniel-Mickel Foundation since 1998 |
| Natalie A. Trunow c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1967 | Trustee since 2020 | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services), January 2016-January 2021; Non-executive Member of the Investment Committee and Valuation Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services), August 2018-January 2021; Advisor, Paradigm Asset Management, November 2016-December 2021; Consultant to Independent Trustees of CFVIT and CFST I from September 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Director of Investments/Consultant, Casey Family Programs, April 2016-November 2016; Senior Vice President and Chief Investment Officer, Calvert Investments, August 2008-January 2016; Section Head and Portfolio Manager, General Motors Asset Management, June 1997-August 2008 | 174 | Former Director, Investment Committee, Health Services for Children with Special Needs, Inc., 2012-2019; Director, Chair of Audit Committee, Consumer Credit Counseling Services (formerly Guidewell Financial Solutions), since 2019; Independent Director, Investment Committee and Valuation Committee, Sarona Asset Management, since 2019 |
| Sandra Yeager c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2017 | Retired; President and founder, Hanoverian Capital, LLC (SEC registered investment advisor firm), 2008-2016; Managing Director, DuPont Capital, 2006-2008; Managing Director, Morgan Stanley Investment Management, 2004-2006; Senior Vice President, Alliance Bernstein, 1990-2004 | 176 | Former Director, NAPE Education Foundation, October 2016-October 2020 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Fund Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I (CET I), Columbia ETF Trust II (CET II), Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Beckman, Gallagher and Hacker and Mses. Blatz, Carlton, Flynn, Paglia, Shaw and Yeager serve as Directors of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
| CTIVP® – Loomis Sayles Growth Fund | Annual Report 2021 | 27 |
TRUSTEES AND OFFICERS (continued)
Interested trustee affiliated with Investment Manager*
Interested trustee affiliated with Investment Manager*
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during the past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex overseen | Other directorships held by Trustee during the past five years |
| Daniel J. Beckman c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since November 2021(a) | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC (since April 2015); officer of Columbia Funds and affiliated funds since 2020. | 176 | Director, Ameriprise Trust Company, since October 2016; Director, Columbia Management Investment Distributors, Inc. since November 2018; Board of Governors, Columbia Wanger Asset Management, LLC since January 2022 |
| * | Interested person (as defined under the 1940 Act) by reason of being an officer, director, security holder and/or employee of the Investment Manager or Ameriprise Financial. |
| (a) | Mr. Beckman serves as the President and Principal Executive Officer of the Columbia Funds (since 2021). |
The Statement of Additional
Information has additional information about the Fund’s Board members and is available, without charge, upon request by calling 800.345.6611 or contacting your financial intermediary.
The Board has appointed officers
who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. The following table provides basic information about the Officers of the
Fund, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Beckman, who is President and Principal Executive Officer, the
Fund’s other officers are:
Fund officers
| 28 | CTIVP® – Loomis Sayles Growth Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Fund officers (continued)
Fund officers (continued)
| CTIVP® – Loomis Sayles Growth Fund | Annual Report 2021 | 29 |
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For Fund and other investment product prospectuses, which contain this and other important information, contact your
financial advisor or insurance representative. Please read the prospectus carefully before you invest. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved. Columbia Management Investment Distributors, Inc., 290 Congress Street, Boston, MA 02210
© 2022 Columbia Management Investment
Advisers, LLC.
S-2010 AW (2/22)
Portfolio Navigator
Funds
References to
“Fund” throughout this annual report refer to the following individual funds, singularly or collectively as the context requires:
Variable Portfolio
— Conservative Portfolio
Variable Portfolio
— Moderately Conservative Portfolio
Variable Portfolio
— Moderate Portfolio
Variable Portfolio
— Moderately Aggressive Portfolio
Variable Portfolio
— Aggressive Portfolio
Please remember that you may not buy (nor will you
own) shares of the Fund directly. Each Fund is available through variable annuity contracts and variable life insurance policies offered by the separate accounts of participating insurance companies. Please contact
your financial advisor or insurance representative for more information.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
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| 5 | |
| 7 | |
| 9 | |
| 11 | |
| 13 | |
| 15 | |
| 17 | |
| 42 | |
| 44 | |
| 46 | |
| 50 | |
| 60 | |
| 76 | |
| 77 | |
| 83 |
Portfolio Navigator
Funds | Annual Report 2021
Fund at a Glance
Variable Portfolio – Conservative Portfolio
Variable Portfolio – Conservative Portfolio
Investment objective
Variable
Portfolio — Conservative Portfolio (the Fund) seeks to provide a high level of total return that is consistent with a conservative level of risk.
Portfolio management
Anwiti Bahuguna, Ph.D.
Lead Portfolio Manager
Managed Fund since 2015
Brian Virginia
Portfolio Manager
Managed Fund since 2015
David Weiss, CFA
Portfolio Manager
Managed Fund since 2016
Joshua Kutin, CFA
Portfolio Manager
Managed Fund since 2018
| Portfolio Navigator Funds | Annual Report 2021 | 3 |
Fund at a Glance (continued)
Variable Portfolio – Conservative Portfolio
Variable Portfolio – Conservative Portfolio
Performance of a hypothetical $10,000 investment (December 31, 2011 — December 31, 2021)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class 2 shares of Variable Portfolio – Conservative Portfolio during the stated time period, and does not reflect the deduction of taxes, if any, that a
shareholder may pay on Fund distributions or on the redemption of Fund shares. The returns also do not reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy or
qualified pension or retirement plan, if any.
| Portfolio breakdown (%) (at December 31, 2021) | |
| Alternative Strategies Funds | 0.1 |
| Equity Funds | 19.8 |
| Fixed Income Funds | 73.3 |
| Money Market Funds | 6.8 |
| Total | 100.0 |
Percentages indicated are based
upon total investments excluding investments in derivatives, if any. The Fund’s portfolio composition is subject to change.
| 4 | Portfolio Navigator Funds | Annual Report 2021 |
Fund at a Glance
Variable Portfolio – Moderately Conservative Portfolio
Variable Portfolio – Moderately Conservative Portfolio
Investment objective
Variable
Portfolio — Moderately Conservative Portfolio (the Fund) seeks to provide a high level of total return that is consistent with a moderately conservative level of risk.
Portfolio management
Anwiti Bahuguna, Ph.D.
Lead Portfolio Manager
Managed Fund since 2015
Brian Virginia
Portfolio Manager
Managed Fund since 2015
David Weiss, CFA
Portfolio Manager
Managed Fund since 2016
Joshua Kutin, CFA
Portfolio Manager
Managed Fund since 2018
| Portfolio Navigator Funds | Annual Report 2021 | 5 |
Fund at a Glance (continued)
Variable Portfolio – Moderately Conservative Portfolio
Variable Portfolio – Moderately Conservative Portfolio
Performance of a hypothetical $10,000 investment (December 31, 2011 — December 31, 2021)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class 2 shares of Variable Portfolio – Moderately Conservative Portfolio during the stated time period, and does not reflect the deduction of taxes, if any,
that a shareholder may pay on Fund distributions or on the redemption of Fund shares. The returns also do not reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance
policy or qualified pension or retirement plan, if any.
| Portfolio breakdown (%) (at December 31, 2021) | |
| Alternative Strategies Funds | 0.2 |
| Equity Funds | 34.6 |
| Fixed Income Funds | 61.2 |
| Money Market Funds | 4.0 |
| Total | 100.0 |
Percentages indicated are based
upon total investments excluding investments in derivatives, if any. The Fund’s portfolio composition is subject to change.
| 6 | Portfolio Navigator Funds | Annual Report 2021 |
Fund at a Glance
Variable Portfolio – Moderate Portfolio
Variable Portfolio – Moderate Portfolio
Investment objective
Variable
Portfolio — Moderate Portfolio (the Fund) seeks to provide a high level of total return that is consistent with a moderate level of risk.
Portfolio management
Anwiti Bahuguna, Ph.D.
Lead Portfolio Manager
Managed Fund since 2015
Brian Virginia
Portfolio Manager
Managed Fund since 2015
David Weiss, CFA
Portfolio Manager
Managed Fund since 2016
Joshua Kutin, CFA
Portfolio Manager
Managed Fund since 2018
| Portfolio Navigator Funds | Annual Report 2021 | 7 |
Fund at a Glance (continued)
Variable Portfolio – Moderate Portfolio
Variable Portfolio – Moderate Portfolio
Performance of a hypothetical $10,000 investment (December 31, 2011 — December 31, 2021)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class 2 shares of Variable Portfolio – Moderate Portfolio during the stated time period, and does not reflect the deduction of taxes, if any, that a shareholder
may pay on Fund distributions or on the redemption of Fund shares. The returns also do not reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy or qualified
pension or retirement plan, if any.
| Portfolio breakdown (%) (at December 31, 2021) | |
| Alternative Strategies Funds | 0.3 |
| Equity Funds | 48.9 |
| Fixed Income Funds | 45.1 |
| Money Market Funds | 5.7 |
| Total | 100.0 |
Percentages indicated are based
upon total investments excluding investments in derivatives, if any. The Fund’s portfolio composition is subject to change.
| 8 | Portfolio Navigator Funds | Annual Report 2021 |
Fund at a Glance
Variable Portfolio – Moderately Aggressive Portfolio
Variable Portfolio – Moderately Aggressive Portfolio
Investment objective
Variable
Portfolio — Moderately Aggressive Portfolio (the Fund) seeks to provide a high level of total return that is consistent with a moderately aggressive level of risk.
Portfolio management
Anwiti Bahuguna, Ph.D.
Lead Portfolio Manager
Managed Fund since 2015
Brian Virginia
Portfolio Manager
Managed Fund since 2015
David Weiss, CFA
Portfolio Manager
Managed Fund since 2016
Joshua Kutin, CFA
Portfolio Manager
Managed Fund since 2018
| Portfolio Navigator Funds | Annual Report 2021 | 9 |
Fund at a Glance (continued)
Variable Portfolio – Moderately Aggressive Portfolio
Variable Portfolio – Moderately Aggressive Portfolio
Performance of a hypothetical $10,000 investment (December 31, 2011 — December 31, 2021)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class 2 shares of Variable Portfolio – Moderately Aggressive Portfolio during the stated time period, and does not reflect the deduction of taxes, if any, that
a shareholder may pay on Fund distributions or on the redemption of Fund shares. The returns also do not reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy or
qualified pension or retirement plan, if any.
| Portfolio breakdown (%) (at December 31, 2021) | |
| Alternative Strategies Funds | 0.3 |
| Equity Funds | 63.7 |
| Fixed Income Funds | 29.4 |
| Money Market Funds | 6.6 |
| Total | 100.0 |
Percentages indicated are based
upon total investments excluding investments in derivatives, if any. The Fund’s portfolio composition is subject to change.
| 10 | Portfolio Navigator Funds | Annual Report 2021 |
Fund at a Glance
Variable Portfolio – Aggressive Portfolio
Variable Portfolio – Aggressive Portfolio
Investment objective
Variable
Portfolio – Aggressive Portfolio (the Fund) seeks to provide a high level of total return that is consistent with an aggressive level of risk.
Portfolio management
Anwiti Bahuguna, Ph.D.
Lead Portfolio Manager
Managed Fund since 2015
Brian Virginia
Portfolio Manager
Managed Fund since 2015
David Weiss, CFA
Portfolio Manager
Managed Fund since 2016
Joshua Kutin, CFA
Portfolio Manager
Managed Fund since 2018
| Portfolio Navigator Funds | Annual Report 2021 | 11 |
Fund at a Glance (continued)
Variable Portfolio – Aggressive Portfolio
Variable Portfolio – Aggressive Portfolio
Performance of a hypothetical $10,000 investment (December 31, 2011 — December 31, 2021)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class 2 shares of Variable Portfolio – Aggressive Portfolio during the stated time period, and does not reflect the deduction of taxes, if any, that a
shareholder may pay on Fund distributions or on the redemption of Fund shares. The returns also do not reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy or
qualified pension or retirement plan, if any.
| Portfolio breakdown (%) (at December 31, 2021) | |
| Alternative Strategies Funds | 0.5 |
| Equity Funds | 79.2 |
| Fixed Income Funds | 15.8 |
| Money Market Funds | 4.5 |
| Total | 100.0 |
Percentages indicated are based
upon total investments excluding investments in derivatives, if any. The Fund’s portfolio composition is subject to change.
| 12 | Portfolio Navigator Funds | Annual Report 2021 |
MANAGER DISCUSSION OF FUND PERFORMANCE
During the period, the
Funds’ bond benchmark, the Bloomberg U.S. Aggregate Bond Index, returned -1.54%; the Funds’ domestic equity benchmark, the Russell 3000 Index, returned 25.66%; and the Funds’ international equity
benchmark, the MSCI EAFE Index (Net), returned 11.26%. While these individual benchmark returns are informative, we believe that the Blended Benchmarks, which are comprised of these individual indices in varying
percentages, serve as a more relevant performance comparison for each of the Funds.
| • | Variable Portfolio – Conservative Portfolio Class 2 shares returned 2.82%, outperforming its Blended Benchmark, which returned 2.75%. |
| • | Variable Portfolio – Moderately Conservative Portfolio Class 2 shares returned 5.74%, underperforming its Blended Benchmark, which returned 5.98%. |
| • | Variable Portfolio – Moderate Portfolio Class 2 shares returned 9.00%, underperforming its Blended Benchmark, which returned 9.43%. |
| • | Variable Portfolio – Moderately Aggressive Portfolio Class 2 shares returned 12.31%, underperforming its Blended Benchmark, which returned 12.95%. |
| • | Variable Portfolio – Aggressive Portfolio Class 2 shares returned 15.76%, underperforming its Blended Benchmark, which returned 16.41%. |
Market overview
As pandemic-related restrictions
were eased, robust economic growth and corporate earnings drove gains for stocks. Both U.S. monetary and fiscal policy were highly supportive, as Congress approved massive spending packages that included direct
payments to citizens and the U.S. Federal Reserve (Fed) maintained its benchmark overnight lending rate near zero while engaging in bond market purchases to keep longer term borrowing costs low.
The fourth quarter of 2021 saw the
Fed adopt a more hawkish tone in response to persistently high inflation, driven in large part by supply chain constraints and rising commodity prices, which led to increased market volatility. Nonetheless, the major
large-cap indexes ended the year at or near all-time highs, with technology and communication services stocks being the key drivers of market performance.
For the full year, most major
equity asset classes generated strong positive returns. U.S. equities continued to outperform international equities. Large-cap stocks outperformed mid- to small-cap stocks, but the dominance of growth over value
faded, with value stocks outperforming growth in the small- to mid-cap space for the year. Bond market returns for the 12-month period were muted, given that U.S. Treasury yields increased. U.S. high yield corporate
bonds delivered the strongest gains while U.S. investment-grade corporate bonds delivered negative returns for the period.
The Funds’ most notable
contributors during the period
| • | An overweight to U.S. equity and an underweight to fixed income in each of the Funds were meaningful contributors during the period. |
| • | Allocations to underlying U.S. large cap core equity funds also contributed. |
| • | Underlying manager performance in core fixed-income funds also supported performance in each of the Funds. |
The Funds’ most notable
detractors during the period
| • | Underlying manager performance, on average, across U.S. equity funds detracted from performance in each of the Funds. |
| • | An international core equity manager detracted from performance. |
| • | Tactical positions with long-dated synthetic U.S. treasuries positions and investment-grade credit exposures detracted from performance within the fixed-income portion of the portfolios. |
| Portfolio Navigator Funds | Annual Report 2021 | 13 |
MANAGER DISCUSSION OF FUND PERFORMANCE (continued)
The views expressed in this report
reflect the current views of the respective partieswho have contributed to this report. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult
to predict, so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective parties
disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Columbia fund are based on numerous factors, may not be relied on as an
indication of trading intent on behalf of any particular Columbia fund. References to specific securities should not be construed as a recommendation or investment advice.
| 14 | Portfolio Navigator Funds | Annual Report 2021 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur ongoing
costs, which generally include management fees, distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to help you compare these costs with the ongoing costs of investing in other mutual funds.
The information below does not
reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy (collectively, Contracts) or qualified pension and retirement plan (Qualified Plan), if any. The total fees
and expenses you bear may therefore be higher than those shown below.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount invested, to estimate the
expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
In addition to the ongoing expenses
which the Fund bears directly, the Fund’s shareholders indirectly bear the Fund’s allocable share of the costs and expenses of each underlying fund in which the Fund invests. You can also estimate the
effective expenses paid during the period, which includes the indirect fees associated with investing in the underlying funds, by using the amounts listed in the "Effective expenses paid during the period" column.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as redemption or exchange fees, or expenses that apply to the subaccount or the Contract. Therefore, the
hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If the fees and expenses imposed under your Contract or
Qualified Plan, if any, were included, your costs would be higher.
| July 1, 2021 — December 31, 2021 | ||||||||||
| Account value at the beginning of the period ($) | Account value at the end of the period ($) | Expenses paid during the period ($) | Fund’s annualized expense ratio (%) | Effective expenses paid during the period ($) | Fund’s effective annualized expense ratio (%) | |||||
| Actual | Hypothetical | Actual | Hypothetical | Actual | Hypothetical | Actual | Actual | Hypothetical | Actual | |
| Variable Portfolio – Conservative Portfolio | ||||||||||
| Class 1 | 1,000.00 | 1,000.00 | 1,010.80 | 1,024.55 | 0.66 | 0.66 | 0.13 | 3.24 | 3.27 | 0.64 |
| Class 2 | 1,000.00 | 1,000.00 | 1,010.20 | 1,023.34 | 1.87 | 1.89 | 0.37 | 4.46 | 4.49 | 0.88 |
| Class 4 | 1,000.00 | 1,000.00 | 1,009.60 | 1,023.34 | 1.87 | 1.89 | 0.37 | 4.46 | 4.49 | 0.88 |
| Variable Portfolio – Moderately Conservative Portfolio | ||||||||||
| Class 1 | 1,000.00 | 1,000.00 | 1,018.10 | 1,024.60 | 0.61 | 0.61 | 0.12 | 3.41 | 3.42 | 0.67 |
| Class 2 | 1,000.00 | 1,000.00 | 1,016.70 | 1,023.34 | 1.88 | 1.89 | 0.37 | 4.68 | 4.69 | 0.92 |
| Class 4 | 1,000.00 | 1,000.00 | 1,016.60 | 1,023.34 | 1.88 | 1.89 | 0.37 | 4.68 | 4.69 | 0.92 |
| Portfolio Navigator Funds | Annual Report 2021 | 15 |
Understanding Your Fund’s
Expenses (continued)
(Unaudited)
(Unaudited)
| July 1, 2021 — December 31, 2021 | ||||||||||
| Account value at the beginning of the period ($) | Account value at the end of the period ($) | Expenses paid during the period ($) | Fund’s annualized expense ratio (%) | Effective expenses paid during the period ($) | Fund’s effective annualized expense ratio (%) | |||||
| Actual | Hypothetical | Actual | Hypothetical | Actual | Hypothetical | Actual | Actual | Hypothetical | Actual | |
| Variable Portfolio – Moderate Portfolio | ||||||||||
| Class 1 | 1,000.00 | 1,000.00 | 1,026.00 | 1,024.60 | 0.61 | 0.61 | 0.12 | 3.57 | 3.57 | 0.70 |
| Class 2 | 1,000.00 | 1,000.00 | 1,024.30 | 1,023.34 | 1.89 | 1.89 | 0.37 | 4.85 | 4.84 | 0.95 |
| Class 4 | 1,000.00 | 1,000.00 | 1,024.30 | 1,023.34 | 1.89 | 1.89 | 0.37 | 4.85 | 4.84 | 0.95 |
| Variable Portfolio – Moderately Aggressive Portfolio | ||||||||||
| Class 1 | 1,000.00 | 1,000.00 | 1,032.10 | 1,024.50 | 0.72 | 0.71 | 0.14 | 3.84 | 3.83 | 0.75 |
| Class 2 | 1,000.00 | 1,000.00 | 1,031.00 | 1,023.29 | 1.95 | 1.94 | 0.38 | 5.07 | 5.05 | 0.99 |
| Class 4 | 1,000.00 | 1,000.00 | 1,031.00 | 1,023.29 | 1.95 | 1.94 | 0.38 | 5.07 | 5.05 | 0.99 |
| Variable Portfolio – Aggressive Portfolio | ||||||||||
| Class 1 | 1,000.00 | 1,000.00 | 1,040.60 | 1,024.55 | 0.67 | 0.66 | 0.13 | 4.06 | 4.03 | 0.79 |
| Class 2 | 1,000.00 | 1,000.00 | 1,039.00 | 1,023.29 | 1.95 | 1.94 | 0.38 | 5.34 | 5.30 | 1.04 |
| Class 4 | 1,000.00 | 1,000.00 | 1,039.30 | 1,023.29 | 1.95 | 1.94 | 0.38 | 5.35 | 5.30 | 1.04 |
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 365.
Effective expenses paid during the
period and the Fund’s effective annualized expense ratio include expenses borne directly to the class plus the Fund’s pro rata portion of the ongoing expenses charged by the underlying funds using the
expense ratio of each class of the underlying funds as of the underlying fund’s most recent shareholder report.
| 16 | Portfolio Navigator Funds | Annual Report 2021 |
Portfolio of Investments
Variable Portfolio – Conservative Portfolio, December 31, 2021
Variable Portfolio – Conservative Portfolio, December 31, 2021
(Percentages represent value of
investments compared to net assets)
Investments in securities
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Portfolio Navigator Funds | Annual Report 2021 | 17 |
Portfolio of Investments (continued)
Variable Portfolio – Conservative Portfolio, December 31, 2021
Variable Portfolio – Conservative Portfolio, December 31, 2021
| Money Market Funds 6.8% | ||
| Shares | Value ($) | |
| Columbia Short-Term Cash Fund, 0.085%(a),(c) | 80,596,313 | 80,580,194 |
| Total Money Market Funds (Cost $80,588,026) | 80,580,194 | |
| Total Investments in Securities (Cost: $1,135,876,068) | 1,187,046,091 | |
| Other Assets & Liabilities, Net | 2,704,087 | |
| Net Assets | 1,189,750,178 | |
At December 31, 2021, securities
and/or cash totaling $2,866,429 were pledged as collateral.
Investments in derivatives
| Long futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| EURO STOXX 50 Index | 253 | 03/2022 | EUR | 10,847,375 | 319,552 | — |
| Russell 2000 Index E-mini | 51 | 03/2022 | USD | 5,719,140 | 128,461 | — |
| S&P 500 Index E-mini | 73 | 03/2022 | USD | 17,368,525 | 352,494 | — |
| TOPIX Index | 18 | 03/2022 | JPY | 358,560,000 | — | (13,257) |
| U.S. Treasury 10-Year Note | 218 | 03/2022 | USD | 28,442,188 | 86,391 | — |
| U.S. Ultra Treasury Bond | 40 | 03/2022 | USD | 7,885,000 | 22,267 | — |
| Total | 909,165 | (13,257) | ||||
| Short futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| MSCI EAFE Index | (11) | 03/2022 | USD | (1,276,990) | — | (39,208) |
Notes to Portfolio of
Investments
| (a) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended December 31, 2021 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Capital gain distributions($) | Realized gain (loss)($) | Dividends — affiliated issuers ($) | End of period shares |
| Columbia Short-Term Cash Fund, 0.085% | |||||||||
| 38,478,088 | 125,634,455 | (83,526,415) | (5,934) | 80,580,194 | — | (2,161) | 35,263 | 80,596,313 | |
| Columbia Variable Portfolio – Commodity Strategy Fund, Class 1 Shares | |||||||||
| 1,602,958 | 204,234 | (1,168,871) | 468,299 | 1,106,620 | — | (69,947) | 2,043 | 193,128 | |
| Columbia Variable Portfolio – Contrarian Core Fund, Class 1 Shares | |||||||||
| 24,126,863 | 395,662 | (5,393,318) | 910,966 | 20,040,173 | — | 3,992,097 | — | 492,508 | |
| Columbia Variable Portfolio – Disciplined Core Fund, Class 1 Shares | |||||||||
| 21,204,278 | 1,378,745 | (4,199,738) | 1,663,962 | 20,047,247 | — | 4,546,221 | — | 226,190 | |
| Columbia Variable Portfolio – Dividend Opportunity Fund, Class 1 Shares | |||||||||
| 4,288,229 | — | (3,700,966) | (587,263) | — | — | 758,421 | — | — | |
| Columbia Variable Portfolio – Emerging Markets Bond Fund, Class 1 Shares | |||||||||
| 8,226,376 | 519,829 | (1,162,867) | (491,726) | 7,091,612 | — | 11,876 | 298,897 | 756,842 | |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 18 | Portfolio Navigator Funds | Annual Report 2021 |
Portfolio of Investments (continued)
Variable Portfolio – Conservative Portfolio, December 31, 2021
Variable Portfolio – Conservative Portfolio, December 31, 2021
Notes
to Portfolio of Investments (continued)
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Capital gain distributions($) | Realized gain (loss)($) | Dividends — affiliated issuers ($) | End of period shares |
| Columbia Variable Portfolio – Emerging Markets Fund, Class 1 Shares | |||||||||
| 18,628,680 | 927,634 | (14,765,185) | (4,791,129) | — | 690,923 | 4,063,868 | 202,667 | — | |
| Columbia Variable Portfolio – Income Opportunities Fund, Class 1 Shares | |||||||||
| 5,649,106 | — | (6,122,251) | 473,145 | — | — | (473,144) | — | — | |
| Columbia Variable Portfolio – Intermediate Bond Fund, Class 1 Shares | |||||||||
| 199,369,510 | 20,044,219 | (63,669,837) | (21,573,583) | 134,170,309 | 12,127,564 | 3,197,394 | 5,592,834 | 13,013,609 | |
| Columbia Variable Portfolio – Large Cap Growth Fund, Class 1 Shares | |||||||||
| 20,106,355 | 1,659,206 | (8,893,172) | (1,094,838) | 11,777,551 | — | 4,861,506 | — | 310,344 | |
| Columbia Variable Portfolio – Limited Duration Credit Fund, Class 1 Shares | |||||||||
| 10,138,776 | 32,063,096 | (5,994,008) | (939,045) | 35,268,819 | — | 101,361 | 607,114 | 3,584,230 | |
| Columbia Variable Portfolio – Long Government/Credit Bond Fund, Class 1 Shares | |||||||||
| 43,868,436 | 3,672,737 | (6,867,945) | (5,257,543) | 35,415,685 | 1,755,053 | 1,202,336 | 760,982 | 3,164,940 | |
| Columbia Variable Portfolio – Overseas Core Fund, Class 1 Shares | |||||||||
| 29,823,653 | 14,850,938 | (4,564,508) | 1,410,182 | 41,520,265 | 869,298 | 1,007,174 | 544,060 | 2,753,333 | |
| Columbia Variable Portfolio – Select Large Cap Equity Fund, Class 1 Shares | |||||||||
| 22,527,557 | 22,474,030 | (9,530,592) | 4,612,014 | 40,083,009 | — | 5,965,887 | — | 2,177,241 | |
| Columbia Variable Portfolio – Select Large Cap Value Fund, Class 1 Shares | |||||||||
| 15,832,440 | 3,790,541 | (8,285,032) | 134,974 | 11,472,923 | — | 2,881,005 | — | 306,599 | |
| Columbia Variable Portfolio – Small Cap Value Fund, Class 1 Shares | |||||||||
| 2,464,367 | 10,305,663 | (9,099,686) | (165,537) | 3,504,807 | — | 873,003 | 19,224 | 168,906 | |
| Columbia Variable Portfolio – Small Company Growth Fund, Class 1 Shares | |||||||||
| 3,820,736 | 643,921 | (160,056) | (841,452) | 3,463,149 | 615,968 | 154,256 | — | 141,991 | |
| Columbia Variable Portfolio – Strategic Income Fund, Class 1 Shares | |||||||||
| 5,465,781 | — | (7,439,042) | 1,973,261 | — | — | (1,948,417) | — | — | |
| Columbia Variable Portfolio – U.S. Government Mortgage Fund, Class 1 Shares | |||||||||
| 60,374,716 | 1,993,505 | (12,165,449) | (2,777,126) | 47,425,646 | 796,571 | 589,502 | 1,026,515 | 4,586,620 | |
| CTIVP® – Allspring Short Duration Government Fund, Class 1 Shares | |||||||||
| 37,127,862 | 5,321,830 | (5,080,437) | (1,749,796) | 35,619,459 | 675,613 | (93,030) | 596,044 | 3,627,236 | |
| CTIVP® – American Century Diversified Bond Fund, Class 1 Shares | |||||||||
| 61,708,475 | 46,201,837 | (21,284,157) | (4,462,656) | 82,163,499 | 1,842,711 | 902,038 | 2,016,720 | 7,296,936 | |
| CTIVP® – CenterSquare Real Estate Fund, Class 1 Shares | |||||||||
| 2,873,844 | 728,867 | (1,913,284) | 665,308 | 2,354,735 | 175,361 | 27,039 | 24,467 | 233,605 | |
| CTIVP® – Lazard International Equity Advantage Fund, Class 1 Shares | |||||||||
| 19,433,668 | 2,835,102 | (18,829,509) | (3,439,261) | — | 1,970,752 | 1,567,542 | 830,305 | — | |
| CTIVP® – Loomis Sayles Growth Fund, Class 1 Shares | |||||||||
| 20,899,682 | 399,979 | (8,839,663) | (6,560,098) | 5,899,900 | — | 7,405,617 | — | 100,441 | |
| CTIVP® – Los Angeles Capital Large Cap Growth Fund, Class 1 Shares | |||||||||
| 18,293,094 | 17,022 | (12,159,835) | (6,150,281) | — | — | 7,286,546 | — | — | |
| CTIVP® – MFS® Value Fund, Class 1 Shares | |||||||||
| 28,556,023 | 329,499 | (19,116,393) | (3,875,870) | 5,893,259 | — | 5,798,833 | — | 155,577 | |
| CTIVP® – Morgan Stanley Advantage Fund, Class 1 Shares | |||||||||
| 14,436,102 | 534,701 | (4,921,045) | (4,839,261) | 5,210,497 | — | 4,540,447 | — | 86,842 | |
| CTIVP® – T. Rowe Price Large Cap Value Fund, Class 1 Shares | |||||||||
| 15,234,064 | 123,325 | (9,732,187) | 270,676 | 5,895,878 | — | 1,374,472 | — | 175,004 | |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Portfolio Navigator Funds | Annual Report 2021 | 19 |
Portfolio of Investments (continued)
Variable Portfolio – Conservative Portfolio, December 31, 2021
Variable Portfolio – Conservative Portfolio, December 31, 2021
Notes
to Portfolio of Investments (continued)
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Capital gain distributions($) | Realized gain (loss)($) | Dividends — affiliated issuers ($) | End of period shares |
| CTIVP® – TCW Core Plus Bond Fund, Class 1 Shares | |||||||||
| 136,219,530 | 41,480,875 | (23,183,749) | (11,827,650) | 142,689,006 | 6,556,870 | 1,369,792 | 2,076,853 | 13,285,755 | |
| CTIVP® – Victory Sycamore Established Value Fund, Class 1 Shares | |||||||||
| 11,692,953 | 17,022 | (8,730,938) | (2,979,037) | — | — | 4,290,490 | — | — | |
| CTIVP® – Westfield Mid Cap Growth Fund, Class 1 Shares | |||||||||
| 12,356,177 | 17,022 | (8,198,247) | (4,174,952) | — | — | 4,393,127 | — | — | |
| Variable Portfolio – Partners Core Bond Fund, Class 1 Shares | |||||||||
| 358,268,789 | 43,871,881 | (31,378,344) | (20,063,210) | 350,699,116 | 9,420,289 | 1,186,066 | 5,285,350 | 31,537,690 | |
| Variable Portfolio – Partners Core Equity Fund, Class 1 Shares | |||||||||
| 27,248,916 | 909,847 | (6,542,050) | (2,775,514) | 18,841,199 | — | 8,115,147 | — | 521,483 | |
| Variable Portfolio – Partners International Core Equity Fund, Class 1 Shares | |||||||||
| 27,701,503 | 847,760 | (17,994,889) | (4,637,951) | 5,916,423 | — | 6,264,327 | 121,526 | 435,993 | |
| Variable Portfolio – Partners International Growth Fund, Class 1 Shares | |||||||||
| 20,568,353 | 1,297,889 | (7,689,407) | (2,299,884) | 11,876,951 | 552,427 | 3,385,910 | 8,923 | 811,267 | |
| Variable Portfolio – Partners International Value Fund, Class 1 Shares | |||||||||
| 20,162,763 | 1,186,946 | (9,745,855) | 169,770 | 11,773,624 | — | 1,229,182 | 301,847 | 1,163,402 | |
| Variable Portfolio – Partners Small Cap Growth Fund, Class 1 Shares | |||||||||
| 5,634,141 | 254,738 | (716,517) | (651,382) | 4,520,980 | — | 1,171,772 | — | 118,536 | |
| Variable Portfolio – Partners Small Cap Value Fund, Class 1 Shares | |||||||||
| 4,264,162 | 4,225,399 | (2,711,151) | (1,054,854) | 4,723,556 | — | 2,220,425 | — | 125,794 | |
| Total | 1,378,677,006 | (107,314,276) | 1,187,046,091 | 38,049,400 | 94,147,980 | 20,351,634 | |||
| (b) | Non-income producing investment. |
| (c) | The rate shown is the seven-day current annualized yield at December 31, 2021. |
Currency Legend
| EUR | Euro |
| JPY | Japanese Yen |
| USD | US Dollar |
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 20 | Portfolio Navigator Funds | Annual Report 2021 |
Portfolio of Investments (continued)
Variable Portfolio – Conservative Portfolio, December 31, 2021
Variable Portfolio – Conservative Portfolio, December 31, 2021
Fair value measurements (continued)
Certain investments that have been measured at fair value using the net asset value (NAV) per share (or its equivalent) are not categorized in the fair value hierarchy. The fair value amounts presented in the table are intended to reconcile the fair value hierarchy to the amounts presented in the Portfolio of Investments. The Variable Portfolios serve as investment vehicles for variable annuity contracts and variable life insurance policies. Principle investment strategies within these Variable Portfolios vary based on the Portfolios investment objective. Investments in the Variable Portfolios may be redeemed on a daily basis without restriction.
Certain investments that have been measured at fair value using the net asset value (NAV) per share (or its equivalent) are not categorized in the fair value hierarchy. The fair value amounts presented in the table are intended to reconcile the fair value hierarchy to the amounts presented in the Portfolio of Investments. The Variable Portfolios serve as investment vehicles for variable annuity contracts and variable life insurance policies. Principle investment strategies within these Variable Portfolios vary based on the Portfolios investment objective. Investments in the Variable Portfolios may be redeemed on a daily basis without restriction.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at December 31, 2021:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Assets at NAV ($) | Total ($) | |
| Investments in Securities | |||||
| Alternative Strategies Funds | — | — | — | 1,106,620 | 1,106,620 |
| Equity Funds | — | — | — | 234,816,126 | 234,816,126 |
| Fixed Income Funds | — | — | — | 870,543,151 | 870,543,151 |
| Money Market Funds | 80,580,194 | — | — | — | 80,580,194 |
| Total Investments in Securities | 80,580,194 | — | — | 1,106,465,897 | 1,187,046,091 |
| Investments in Derivatives | |||||
| Asset | |||||
| Futures Contracts | 909,165 | — | — | — | 909,165 |
| Liability | |||||
| Futures Contracts | (52,465) | — | — | — | (52,465) |
| Total | 81,436,894 | — | — | 1,106,465,897 | 1,187,902,791 |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
Derivative instruments are valued at
unrealized appreciation (depreciation).
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Portfolio Navigator Funds | Annual Report 2021 | 21 |
Portfolio of Investments
Variable Portfolio – Moderately Conservative Portfolio, December 31, 2021
Variable Portfolio – Moderately Conservative Portfolio, December 31, 2021
(Percentages represent value of
investments compared to net assets)
Investments in securities
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 22 | Portfolio Navigator Funds | Annual Report 2021 |
Portfolio of Investments (continued)
Variable Portfolio – Moderately Conservative Portfolio, December 31, 2021
Variable Portfolio – Moderately Conservative Portfolio, December 31, 2021
| Fixed Income Funds (continued) | ||
| Shares | Value ($) | |
| Variable Portfolio – Partners Core Bond Fund, Class 1 Shares(a) | 67,932,351 | 755,407,740 |
| Total | 1,791,829,373 | |
| Total Fixed Income Funds (Cost $1,813,356,364) | 1,809,619,354 | |
| Money Market Funds 4.0% | ||
| Columbia Short-Term Cash Fund, 0.085%(a),(c) | 118,848,828 | 118,825,058 |
| Total Money Market Funds (Cost $118,836,288) | 118,825,058 | |
| Total Investments in Securities (Cost: $2,617,172,511) | 2,959,205,724 | |
| Other Assets & Liabilities, Net | 5,418,876 | |
| Net Assets | 2,964,624,600 | |
At December 31, 2021, securities
and/or cash totaling $5,932,408 were pledged as collateral.
Investments in derivatives
| Long futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| EURO STOXX 50 Index | 309 | 03/2022 | EUR | 13,248,375 | 293,558 | — |
| MSCI EAFE Index | 180 | 03/2022 | USD | 20,896,200 | 617,632 | — |
| Russell 2000 Index E-mini | 267 | 03/2022 | USD | 29,941,380 | 782,157 | — |
| S&P 500 Index E-mini | 116 | 03/2022 | USD | 27,599,300 | 550,212 | — |
| TOPIX Index | 88 | 03/2022 | JPY | 1,752,960,000 | — | (64,622) |
| U.S. Treasury 10-Year Note | 104 | 03/2022 | USD | 13,568,750 | 41,214 | — |
| Total | 2,284,773 | (64,622) | ||||
Notes to Portfolio of
Investments
| (a) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended December 31, 2021 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Capital gain distributions($) | Realized gain (loss)($) | Dividends — affiliated issuers ($) | End of period shares |
| Columbia Short-Term Cash Fund, 0.085% | |||||||||
| 100,950,468 | 194,592,414 | (176,714,573) | (3,251) | 118,825,058 | — | (8,585) | 80,900 | 118,848,828 | |
| Columbia Variable Portfolio – Commodity Strategy Fund, Class 1 Shares | |||||||||
| 7,723,952 | 26,544 | (3,158,106) | 2,329,709 | 6,922,099 | — | (105,412) | 17,150 | 1,208,045 | |
| Columbia Variable Portfolio – Contrarian Core Fund, Class 1 Shares | |||||||||
| 63,986,515 | 12,324 | (6,575,965) | 2,352,404 | 59,775,278 | — | 11,374,437 | — | 1,469,041 | |
| Columbia Variable Portfolio – Disciplined Core Fund, Class 1 Shares | |||||||||
| 58,194,227 | 1,459,488 | (8,089,515) | 8,520,668 | 60,084,868 | — | 9,082,552 | — | 677,929 | |
| Columbia Variable Portfolio – Dividend Opportunity Fund, Class 1 Shares | |||||||||
| 14,953,164 | — | (8,089,298) | (6,863,866) | — | — | 7,453,147 | — | — | |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Portfolio Navigator Funds | Annual Report 2021 | 23 |
Portfolio of Investments (continued)
Variable Portfolio – Moderately Conservative Portfolio, December 31, 2021
Variable Portfolio – Moderately Conservative Portfolio, December 31, 2021
Notes
to Portfolio of Investments (continued)
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Capital gain distributions($) | Realized gain (loss)($) | Dividends — affiliated issuers ($) | End of period shares |
| Columbia Variable Portfolio – Emerging Markets Bond Fund, Class 1 Shares | |||||||||
| 20,892,622 | 717,842 | (2,603,335) | (1,217,148) | 17,789,981 | — | 64,562 | 714,051 | 1,898,610 | |
| Columbia Variable Portfolio – Emerging Markets Fund, Class 1 Shares | |||||||||
| 14,484,172 | 693,540 | — | (1,736,223) | 13,441,489 | 536,244 | — | 157,295 | 692,147 | |
| Columbia Variable Portfolio – Income Opportunities Fund, Class 1 Shares | |||||||||
| 14,369,669 | — | (14,949,792) | 580,123 | — | — | (580,123) | — | — | |
| Columbia Variable Portfolio – Intermediate Bond Fund, Class 1 Shares | |||||||||
| 281,204,613 | 27,957,743 | (27,331,578) | (30,196,223) | 251,634,555 | 18,600,766 | 2,412,382 | 8,578,061 | 24,406,843 | |
| Columbia Variable Portfolio – Large Cap Growth Fund, Class 1 Shares | |||||||||
| 63,522,454 | 226,174 | (7,658,772) | 3,275,866 | 59,365,722 | — | 12,900,782 | — | 1,564,314 | |
| Columbia Variable Portfolio – Limited Duration Credit Fund, Class 1 Shares | |||||||||
| 47,868,369 | 15,441,142 | (2,755,562) | (1,253,841) | 59,300,108 | — | (89,645) | 987,047 | 6,026,434 | |
| Columbia Variable Portfolio – Long Government/Credit Bond Fund, Class 1 Shares | |||||||||
| 76,547,336 | 8,403,404 | (15,981,816) | (9,944,119) | 59,024,805 | 2,884,585 | 3,646,278 | 1,250,741 | 5,274,782 | |
| Columbia Variable Portfolio – Overseas Core Fund, Class 1 Shares | |||||||||
| 91,173,100 | 46,755,003 | (9,932,486) | 4,626,043 | 132,621,660 | 2,737,476 | 2,321,523 | 1,692,377 | 8,794,540 | |
| Columbia Variable Portfolio – Select Large Cap Equity Fund, Class 1 Shares | |||||||||
| 84,530,487 | 34,394,270 | (18,081,739) | 18,847,475 | 119,690,493 | — | 12,015,945 | — | 6,501,385 | |
| Columbia Variable Portfolio – Select Large Cap Value Fund, Class 1 Shares | |||||||||
| 50,099,283 | 14,948,277 | (16,275,473) | 11,040,194 | 59,812,281 | — | 4,079,443 | — | 1,598,404 | |
| Columbia Variable Portfolio – Small Cap Value Fund, Class 1 Shares | |||||||||
| 12,109,451 | 12,456,249 | (13,499,297) | (922,719) | 10,143,684 | — | 4,195,093 | 71,983 | 488,852 | |
| Columbia Variable Portfolio – Small Company Growth Fund, Class 1 Shares | |||||||||
| 18,774,396 | 4,291,690 | (6,094,276) | (6,833,666) | 10,138,144 | 1,803,206 | 5,211,801 | — | 415,668 | |
| Columbia Variable Portfolio – Strategic Income Fund, Class 1 Shares | |||||||||
| 14,122,611 | — | (18,259,947) | 4,137,336 | — | — | (4,073,143) | — | — | |
| Columbia Variable Portfolio – U.S. Government Mortgage Fund, Class 1 Shares | |||||||||
| 29,759,704 | 34,639,383 | (2,412,033) | (3,010,661) | 58,976,393 | 967,835 | 32,980 | 1,247,217 | 5,703,713 | |
| CTIVP® – Allspring Short Duration Government Fund, Class 1 Shares | |||||||||
| 106,275,369 | 4,205,787 | (17,308,044) | (4,520,194) | 88,652,918 | 1,642,061 | 6,810 | 1,448,672 | 9,027,792 | |
| CTIVP® – American Century Diversified Bond Fund, Class 1 Shares | |||||||||
| 252,187,670 | 14,771,592 | (61,555,075) | (12,556,938) | 192,847,249 | 4,181,365 | 3,557,318 | 4,576,216 | 17,126,754 | |
| CTIVP® – CenterSquare Real Estate Fund, Class 1 Shares | |||||||||
| 13,665,261 | 1,326,107 | (5,765,538) | 3,260,681 | 12,486,511 | 1,162,044 | 23,124 | 162,131 | 1,238,741 | |
| CTIVP® – Lazard International Equity Advantage Fund, Class 1 Shares | |||||||||
| 50,552,817 | 7,288,128 | (54,416,985) | (3,423,960) | — | 5,127,740 | (1,448,432) | 2,160,387 | — | |
| CTIVP® – Loomis Sayles Growth Fund, Class 1 Shares | |||||||||
| 67,203,495 | 33,815 | (10,497,385) | (8,084,368) | 48,655,557 | — | 16,786,277 | — | 828,321 | |
| CTIVP® – Los Angeles Capital Large Cap Growth Fund, Class 1 Shares | |||||||||
| 59,295,086 | — | (33,351,399) | (25,943,687) | — | — | 29,623,316 | — | — | |
| CTIVP® – MFS® Value Fund, Class 1 Shares | |||||||||
| 94,706,161 | 2,475 | (36,274,374) | (8,931,684) | 49,502,578 | — | 21,756,012 | — | 1,306,826 | |
| CTIVP® – Morgan Stanley Advantage Fund, Class 1 Shares | |||||||||
| 43,326,083 | 8,625,105 | (2,785,726) | (6,233,899) | 42,931,563 | — | 5,281,933 | — | 715,526 | |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 24 | Portfolio Navigator Funds | Annual Report 2021 |
Portfolio of Investments (continued)
Variable Portfolio – Moderately Conservative Portfolio, December 31, 2021
Variable Portfolio – Moderately Conservative Portfolio, December 31, 2021
Notes
to Portfolio of Investments (continued)
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Capital gain distributions($) | Realized gain (loss)($) | Dividends — affiliated issuers ($) | End of period shares |
| CTIVP® – T. Rowe Price Large Cap Value Fund, Class 1 Shares | |||||||||
| 53,310,119 | 445,148 | (5,679,585) | 1,287,939 | 49,363,621 | — | 10,641,163 | — | 1,465,231 | |
| CTIVP® – TCW Core Plus Bond Fund, Class 1 Shares | |||||||||
| 278,333,761 | 89,624,247 | (17,950,220) | (24,022,183) | 325,985,605 | 14,698,680 | 1,244,975 | 4,655,727 | 30,352,477 | |
| CTIVP® – Victory Sycamore Established Value Fund, Class 1 Shares | |||||||||
| 16,061,425 | 2,417 | (4,005,220) | (1,560,964) | 10,497,658 | — | 5,545,690 | — | 242,945 | |
| CTIVP® – Westfield Mid Cap Growth Fund, Class 1 Shares | |||||||||
| 18,986,816 | 42,067 | (4,170,522) | (4,482,677) | 10,375,684 | — | 6,113,175 | — | 216,657 | |
| Variable Portfolio – Partners Core Bond Fund, Class 1 Shares | |||||||||
| 677,467,286 | 154,186,718 | (37,811,326) | (38,434,938) | 755,407,740 | 19,830,976 | 627,216 | 11,126,374 | 67,932,351 | |
| Variable Portfolio – Partners Core Equity Fund, Class 1 Shares | |||||||||
| 92,948,097 | 3,837,475 | (11,635,430) | (7,420,147) | 77,729,995 | — | 27,338,535 | — | 2,151,397 | |
| Variable Portfolio – Partners International Core Equity Fund, Class 1 Shares | |||||||||
| 116,159,465 | 1,614,001 | (44,345,982) | 590,784 | 74,018,268 | — | 9,310,181 | 1,550,478 | 5,454,552 | |
| Variable Portfolio – Partners International Growth Fund, Class 1 Shares | |||||||||
| 41,293,019 | 19,575,194 | (9,769,958) | (607,055) | 50,491,200 | 2,154,951 | 2,334,631 | 37,450 | 3,448,852 | |
| Variable Portfolio – Partners International Value Fund, Class 1 Shares | |||||||||
| 40,406,534 | 19,333,722 | (11,544,549) | 3,118,821 | 51,314,528 | — | (305,646) | 1,017,018 | 5,070,605 | |
| Variable Portfolio – Partners Small Cap Growth Fund, Class 1 Shares | |||||||||
| 23,375,964 | 123,261 | (3,880,379) | (5,691,755) | 13,927,091 | — | 7,727,378 | — | 365,157 | |
| Variable Portfolio – Partners Small Cap Value Fund, Class 1 Shares | |||||||||
| 19,611,047 | 845,824 | (7,160,744) | (5,824,787) | 7,471,340 | — | 10,162,773 | — | 198,971 | |
| Total | 3,130,432,068 | (155,752,910) | 2,959,205,724 | 76,327,929 | 226,260,446 | 41,531,275 | |||
| (b) | Non-income producing investment. |
| (c) | The rate shown is the seven-day current annualized yield at December 31, 2021. |
Currency Legend
| EUR | Euro |
| JPY | Japanese Yen |
| USD | US Dollar |
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Portfolio Navigator Funds | Annual Report 2021 | 25 |
Portfolio of Investments (continued)
Variable Portfolio – Moderately Conservative Portfolio, December 31, 2021
Variable Portfolio – Moderately Conservative Portfolio, December 31, 2021
Fair value measurements (continued)
Inputs that are used in determining fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels within the hierarchy.
Inputs that are used in determining fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels within the hierarchy.
Certain investments that have been
measured at fair value using the net asset value (NAV) per share (or its equivalent) are not categorized in the fair value hierarchy. The fair value amounts presented in the table are intended to reconcile the fair
value hierarchy to the amounts presented in the Portfolio of Investments. The Variable Portfolios serve as investment vehicles for variable annuity contracts and variable life insurance policies. Principle investment
strategies within these Variable Portfolios vary based on the Portfolios investment objective. Investments in the Variable Portfolios may be redeemed on a daily basis without restriction.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at December 31, 2021:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Assets at NAV ($) | Total ($) | |
| Investments in Securities | |||||
| Alternative Strategies Funds | — | — | — | 6,922,099 | 6,922,099 |
| Equity Funds | — | — | — | 1,023,839,213 | 1,023,839,213 |
| Fixed Income Funds | — | — | — | 1,809,619,354 | 1,809,619,354 |
| Money Market Funds | 118,825,058 | — | — | — | 118,825,058 |
| Total Investments in Securities | 118,825,058 | — | — | 2,840,380,666 | 2,959,205,724 |
| Investments in Derivatives | |||||
| Asset | |||||
| Futures Contracts | 2,284,773 | — | — | — | 2,284,773 |
| Liability | |||||
| Futures Contracts | (64,622) | — | — | — | (64,622) |
| Total | 121,045,209 | — | — | 2,840,380,666 | 2,961,425,875 |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
Derivative instruments are valued at
unrealized appreciation (depreciation).
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 26 | Portfolio Navigator Funds | Annual Report 2021 |
Portfolio of Investments
Variable Portfolio – Moderate Portfolio, December 31, 2021
Variable Portfolio – Moderate Portfolio, December 31, 2021
(Percentages represent value of
investments compared to net assets)
Investments in securities
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Portfolio Navigator Funds | Annual Report 2021 | 27 |
Portfolio of Investments (continued)
Variable Portfolio – Moderate Portfolio, December 31, 2021
Variable Portfolio – Moderate Portfolio, December 31, 2021
| Fixed Income Funds (continued) | ||
| Shares | Value ($) | |
| Variable Portfolio – Partners Core Bond Fund, Class 1 Shares(a) | 207,117,763 | 2,303,149,525 |
| Total | 7,905,300,750 | |
| Total Fixed Income Funds (Cost $7,969,448,867) | 8,008,584,540 | |
| Money Market Funds 5.7% | ||
| Columbia Short-Term Cash Fund, 0.085%(a),(c) | 983,593,818 | 983,397,100 |
| Columbia Variable Portfolio – Government Money Market Fund, Class 1 Shares, 0.011%(a),(c) | 29,915,616 | 29,915,616 |
| Total Money Market Funds (Cost $1,013,391,873) | 1,013,312,716 | |
| Total Investments in Securities (Cost: $14,609,800,898) | 17,763,415,325 | |
| Other Assets & Liabilities, Net | 45,270,489 | |
| Net Assets | 17,808,685,814 | |
At December 31, 2021, securities
and/or cash totaling $48,023,769 were pledged as collateral.
Investments in derivatives
| Long futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| EURO STOXX 50 Index | 5,237 | 03/2022 | EUR | 224,536,375 | 7,413,652 | — |
| FTSE 100 Index | 269 | 03/2022 | GBP | 19,701,560 | 626,316 | — |
| Russell 2000 Index E-mini | 1,876 | 03/2022 | USD | 210,374,640 | 5,906,426 | — |
| S&P 500 Index E-mini | 364 | 03/2022 | USD | 86,604,700 | 1,651,797 | — |
| SPI 200 Index | 150 | 03/2022 | AUD | 27,551,250 | 264,208 | — |
| TOPIX Index | 1,205 | 03/2022 | JPY | 24,003,600,000 | — | (883,233) |
| Total | 15,862,399 | (883,233) | ||||
| Cleared credit default swap contracts - sell protection | ||||||||||||
| Reference entity | Counterparty | Maturity date | Receive fixed rate (%) | Payment frequency | Implied credit spread (%)* | Notional currency | Notional amount | Value ($) | Upfront payments ($) | Upfront receipts ($) | Unrealized appreciation ($) | Unrealized depreciation ($) |
| Markit CDX North America Investment Grade Index, Series 37 | Morgan Stanley | 12/20/2026 | 1.000 | Quarterly | 0.494 | USD | 52,323,000 | 24,512 | — | — | 24,512 | — |
| * | Implied credit spreads, represented in absolute terms, utilized in determining the market value of credit default swap agreements on corporate or sovereign issues as of period end serve as an indicator of the current status of the payment/performance risk and represent the likelihood or risk of default for the credit derivative. The implied credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Wider credit spreads represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement. |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 28 | Portfolio Navigator Funds | Annual Report 2021 |
Portfolio of Investments (continued)
Variable Portfolio – Moderate Portfolio, December 31, 2021
Variable Portfolio – Moderate Portfolio, December 31, 2021
Notes to Portfolio of
Investments
| (a) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended December 31, 2021 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Capital gain distributions($) | Realized gain (loss)($) | Dividends — affiliated issuers ($) | End of period shares |
| Columbia Short-Term Cash Fund, 0.085% | |||||||||
| 627,264,139 | 1,496,026,860 | (1,139,876,883) | (17,016) | 983,397,100 | — | (61,632) | 620,805 | 983,593,818 | |
| Columbia Variable Portfolio – Commodity Strategy Fund, Class 1 Shares | |||||||||
| 55,839,319 | 138,854 | (17,828,573) | 17,108,109 | 55,257,709 | — | (78,844) | 138,854 | 9,643,579 | |
| Columbia Variable Portfolio – Contrarian Core Fund, Class 1 Shares | |||||||||
| 443,073,196 | — | (31,149,749) | 46,205,139 | 458,128,586 | — | 53,166,498 | — | 11,258,997 | |
| Columbia Variable Portfolio – Disciplined Core Fund, Class 1 Shares | |||||||||
| 477,394,061 | — | (70,789,817) | 58,865,040 | 465,469,284 | — | 72,802,294 | — | 5,251,825 | |
| Columbia Variable Portfolio – Emerging Markets Bond Fund, Class 1 Shares | |||||||||
| 118,018,144 | 4,079,070 | (12,076,235) | (6,737,189) | 103,283,790 | — | 136,988 | 4,061,790 | 11,022,816 | |
| Columbia Variable Portfolio – Emerging Markets Fund, Class 1 Shares | |||||||||
| 92,763,356 | 2,987,216 | (32,392,047) | (20,853,182) | 42,505,343 | 2,144,529 | 16,759,128 | 840,136 | 2,188,740 | |
| Columbia Variable Portfolio – Government Money Market Fund, Class 1 Shares, 0.011% | |||||||||
| 29,909,632 | 5,984 | — | — | 29,915,616 | 2,991 | — | 2,992 | 29,915,616 | |
| Columbia Variable Portfolio – Income Opportunities Fund, Class 1 Shares | |||||||||
| 65,314,672 | — | (67,130,092) | 1,815,420 | — | — | (1,815,420) | — | — | |
| Columbia Variable Portfolio – Intermediate Bond Fund, Class 1 Shares | |||||||||
| 1,515,649,409 | 205,601,091 | (147,856,263) | (166,902,871) | 1,406,491,366 | 109,692,814 | 3,399,987 | 50,586,718 | 136,420,113 | |
| Columbia Variable Portfolio – Large Cap Growth Fund, Class 1 Shares | |||||||||
| 519,619,615 | — | (26,821,819) | 54,438,646 | 547,236,442 | — | 87,565,955 | — | 14,419,933 | |
| Columbia Variable Portfolio – Limited Duration Credit Fund, Class 1 Shares | |||||||||
| 131,516,322 | 46,085,303 | (634,327) | (3,813,376) | 173,153,922 | — | (21,344) | 2,800,552 | 17,596,943 | |
| Columbia Variable Portfolio – Long Government/Credit Bond Fund, Class 1 Shares | |||||||||
| 760,941,769 | 171,015,852 | (47,642,087) | (82,512,726) | 801,802,808 | 39,108,978 | 8,464,017 | 16,957,455 | 71,653,513 | |
| Columbia Variable Portfolio – Overseas Core Fund, Class 1 Shares | |||||||||
| 698,115,463 | 411,896,152 | (50,287,306) | 40,061,509 | 1,099,785,818 | 22,334,123 | 11,639,871 | 13,759,959 | 72,930,094 | |
| Columbia Variable Portfolio – Select Large Cap Equity Fund, Class 1 Shares | |||||||||
| 664,616,374 | 181,078,396 | (89,372,963) | 168,194,619 | 924,516,426 | — | 61,599,188 | — | 50,218,166 | |
| Columbia Variable Portfolio – Select Large Cap Value Fund, Class 1 Shares | |||||||||
| 501,026,385 | 26,459,085 | (84,059,390) | 106,882,723 | 550,308,803 | — | 21,511,173 | — | 14,706,275 | |
| Columbia Variable Portfolio – Small Cap Value Fund, Class 1 Shares | |||||||||
| 98,201,867 | 55,244,545 | (59,213,526) | 5,299,058 | 99,531,944 | — | 22,251,104 | 771,684 | 4,796,720 | |
| Columbia Variable Portfolio – Small Company Growth Fund, Class 1 Shares | |||||||||
| 152,251,384 | 15,788,709 | (34,586,161) | (44,685,237) | 88,768,695 | 15,788,709 | 29,650,740 | — | 3,639,553 | |
| Columbia Variable Portfolio – Strategic Income Fund, Class 1 Shares | |||||||||
| 65,413,776 | — | (89,836,692) | 24,422,916 | — | — | (24,125,581) | — | — | |
| Columbia Variable Portfolio – U.S. Government Mortgage Fund, Class 1 Shares | |||||||||
| 280,060,912 | 37,104,305 | (1,000,060) | (14,226,938) | 301,938,219 | 4,847,287 | 77,457 | 6,246,539 | 29,200,988 | |
| CTIVP® – Allspring Short Duration Government Fund, Class 1 Shares | |||||||||
| 980,952,332 | 37,547,944 | (451,232,957) | (39,069,437) | 528,197,882 | 9,567,488 | 12,258,311 | 8,440,702 | 53,787,972 | |
| CTIVP® – American Century Diversified Bond Fund, Class 1 Shares | |||||||||
| 1,226,695,720 | 93,651,890 | (294,336,655) | (56,227,553) | 969,783,402 | 22,827,186 | 13,708,521 | 24,982,782 | 86,126,413 | |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Portfolio Navigator Funds | Annual Report 2021 | 29 |
Portfolio of Investments (continued)
Variable Portfolio – Moderate Portfolio, December 31, 2021
Variable Portfolio – Moderate Portfolio, December 31, 2021
Notes
to Portfolio of Investments (continued)
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Capital gain distributions($) | Realized gain (loss)($) | Dividends — affiliated issuers ($) | End of period shares |
| CTIVP® – CenterSquare Real Estate Fund, Class 1 Shares | |||||||||
| 112,684,409 | 12,577,729 | (37,296,630) | 28,068,854 | 116,034,362 | 11,037,721 | 537,399 | 1,540,009 | 11,511,346 | |
| CTIVP® – Lazard International Equity Advantage Fund, Class 1 Shares | |||||||||
| 370,307,787 | 53,522,424 | (399,959,265) | (23,870,946) | — | 37,657,010 | (11,926,709) | 15,865,414 | — | |
| CTIVP® – Loomis Sayles Growth Fund, Class 1 Shares | |||||||||
| 552,773,335 | — | (63,021,174) | (20,815,987) | 468,936,174 | — | 101,956,772 | — | 7,983,251 | |
| CTIVP® – Los Angeles Capital Large Cap Growth Fund, Class 1 Shares | |||||||||
| 481,909,997 | — | (205,548,159) | (276,361,838) | — | — | 306,267,354 | — | — | |
| CTIVP® – MFS® Value Fund, Class 1 Shares | |||||||||
| 647,236,655 | — | (142,257,705) | (26,094,610) | 478,884,340 | — | 140,488,300 | — | 12,642,142 | |
| CTIVP® – Morgan Stanley Advantage Fund, Class 1 Shares | |||||||||
| 343,726,851 | 115,298,337 | (5,075,464) | (42,354,600) | 411,595,124 | — | 28,333,229 | — | 6,859,919 | |
| CTIVP® – T. Rowe Price Large Cap Value Fund, Class 1 Shares | |||||||||
| 357,026,131 | 96,964,176 | (28,040,760) | 50,620,477 | 476,570,024 | — | 56,131,893 | — | 14,145,741 | |
| CTIVP® – TCW Core Plus Bond Fund, Class 1 Shares | |||||||||
| 1,067,029,797 | 483,007,341 | (31,433,261) | (97,820,251) | 1,420,783,626 | 63,093,847 | 1,802,406 | 19,984,632 | 132,288,978 | |
| CTIVP® – Victory Sycamore Established Value Fund, Class 1 Shares | |||||||||
| 130,934,490 | — | (14,996,060) | (14,287,831) | 101,650,599 | — | 50,138,786 | — | 2,352,479 | |
| CTIVP® – Westfield Mid Cap Growth Fund, Class 1 Shares | |||||||||
| 156,819,701 | — | (19,265,582) | (38,010,869) | 99,543,250 | — | 53,161,838 | — | 2,078,581 | |
| Variable Portfolio – Partners Core Bond Fund, Class 1 Shares | |||||||||
| 1,346,101,491 | 1,059,656,040 | (2,821,011) | (99,786,995) | 2,303,149,525 | 58,465,398 | 201,779 | 32,802,611 | 207,117,763 | |
| Variable Portfolio – Partners Core Equity Fund, Class 1 Shares | |||||||||
| 733,189,555 | 41,545,639 | (108,443,582) | 118,825,046 | 785,116,658 | — | 59,308,008 | — | 21,730,325 | |
| Variable Portfolio – Partners International Core Equity Fund, Class 1 Shares | |||||||||
| 799,444,956 | 9,345,169 | (384,902,035) | 25,695,752 | 449,583,842 | — | 37,908,024 | 9,345,169 | 33,130,718 | |
| Variable Portfolio – Partners International Growth Fund, Class 1 Shares | |||||||||
| 296,938,959 | 191,945,937 | (69,706,434) | (3,711,659) | 415,466,803 | 18,003,462 | 16,441,960 | 307,082 | 28,378,880 | |
| Variable Portfolio – Partners International Value Fund, Class 1 Shares | |||||||||
| 283,025,965 | 211,012,029 | (78,211,077) | 20,616,084 | 436,443,001 | — | (1,119,293) | 8,573,427 | 43,126,779 | |
| Variable Portfolio – Partners Small Cap Growth Fund, Class 1 Shares | |||||||||
| 168,161,178 | 5,595 | (20,730,264) | (37,155,218) | 110,281,291 | — | 52,368,470 | — | 2,891,486 | |
| Variable Portfolio – Partners Small Cap Value Fund, Class 1 Shares | |||||||||
| 138,089,063 | 232,362 | (41,910,225) | (36,507,649) | 59,903,551 | — | 67,799,564 | — | 1,595,301 | |
| Total | 17,490,038,167 | (384,704,586) | 17,763,415,325 | 414,571,543 | 1,348,688,191 | 218,629,312 | |||
| (b) | Non-income producing investment. |
| (c) | The rate shown is the seven-day current annualized yield at December 31, 2021. |
Currency Legend
| AUD | Australian Dollar |
| EUR | Euro |
| GBP | British Pound |
| JPY | Japanese Yen |
| USD | US Dollar |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 30 | Portfolio Navigator Funds | Annual Report 2021 |
Portfolio of Investments (continued)
Variable Portfolio – Moderate Portfolio, December 31, 2021
Variable Portfolio – Moderate Portfolio, December 31, 2021
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
Certain investments that have been
measured at fair value using the net asset value (NAV) per share (or its equivalent) are not categorized in the fair value hierarchy. The fair value amounts presented in the table are intended to reconcile the fair
value hierarchy to the amounts presented in the Portfolio of Investments. The Variable Portfolios serve as investment vehicles for variable annuity contracts and variable life insurance policies. Principle investment
strategies within these Variable Portfolios vary based on the Portfolios investment objective. Investments in the Variable Portfolios may be redeemed on a daily basis without restriction.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at December 31, 2021:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Assets at NAV ($) | Total ($) | |
| Investments in Securities | |||||
| Alternative Strategies Funds | — | — | — | 55,257,709 | 55,257,709 |
| Equity Funds | — | — | — | 8,686,260,360 | 8,686,260,360 |
| Fixed Income Funds | — | — | — | 8,008,584,540 | 8,008,584,540 |
| Money Market Funds | 1,013,312,716 | — | — | — | 1,013,312,716 |
| Total Investments in Securities | 1,013,312,716 | — | — | 16,750,102,609 | 17,763,415,325 |
| Investments in Derivatives | |||||
| Asset | |||||
| Futures Contracts | 15,862,399 | — | — | — | 15,862,399 |
| Swap Contracts | — | 24,512 | — | — | 24,512 |
| Liability | |||||
| Futures Contracts | (883,233) | — | — | — | (883,233) |
| Total | 1,028,291,882 | 24,512 | — | 16,750,102,609 | 17,778,419,003 |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
Derivative instruments are valued at
unrealized appreciation (depreciation).
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Portfolio Navigator Funds | Annual Report 2021 | 31 |
Portfolio of Investments
Variable Portfolio – Moderately Aggressive Portfolio, December 31, 2021
Variable Portfolio – Moderately Aggressive Portfolio, December 31, 2021
(Percentages represent value of
investments compared to net assets)
Investments in securities
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 32 | Portfolio Navigator Funds | Annual Report 2021 |
Portfolio of Investments (continued)
Variable Portfolio – Moderately Aggressive Portfolio, December 31, 2021
Variable Portfolio – Moderately Aggressive Portfolio, December 31, 2021
| Fixed Income Funds (continued) | ||
| Shares | Value ($) | |
| Variable Portfolio – Partners Core Bond Fund, Class 1 Shares(a) | 51,528,050 | 572,991,919 |
| Total | 2,190,054,409 | |
| Total Fixed Income Funds (Cost $2,232,821,968) | 2,227,378,237 | |
| Money Market Funds 6.6% | ||
| Columbia Short-Term Cash Fund, 0.085%(a),(c) | 497,939,279 | 497,839,691 |
| Total Money Market Funds (Cost $497,888,682) | 497,839,691 | |
| Total Investments in Securities (Cost: $5,904,499,179) | 7,583,426,092 | |
| Other Assets & Liabilities, Net | 24,779,679 | |
| Net Assets | 7,608,205,771 | |
At December 31, 2021, securities
and/or cash totaling $26,191,029 were pledged as collateral.
Investments in derivatives
| Long futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| EURO STOXX 50 Index | 1,988 | 03/2022 | EUR | 85,235,500 | 2,923,148 | — |
| FTSE 100 Index | 288 | 03/2022 | GBP | 21,093,120 | 670,554 | — |
| Russell 2000 Index E-mini | 1,120 | 03/2022 | USD | 125,596,800 | 3,708,976 | — |
| S&P 500 Index E-mini | 94 | 03/2022 | USD | 22,364,950 | 401,617 | — |
| SPI 200 Index | 180 | 03/2022 | AUD | 33,061,500 | 317,049 | — |
| TOPIX Index | 630 | 03/2022 | JPY | 12,549,600,000 | — | (461,864) |
| U.S. Treasury 10-Year Note | 1,812 | 03/2022 | USD | 236,409,375 | 718,072 | — |
| Total | 8,739,416 | (461,864) | ||||
Notes to Portfolio of
Investments
| (a) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended December 31, 2021 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Capital gain distributions($) | Realized gain (loss)($) | Dividends — affiliated issuers ($) | End of period shares |
| Columbia Short-Term Cash Fund, 0.085% | |||||||||
| 500,640,784 | 479,716,846 | (482,532,609) | 14,670 | 497,839,691 | — | (64,298) | 324,058 | 497,939,279 | |
| Columbia Variable Portfolio – Commodity Strategy Fund, Class 1 Shares | |||||||||
| 25,977,249 | 70,560 | (8,881,453) | 7,927,780 | 25,094,136 | — | (156,110) | 63,039 | 4,379,430 | |
| Columbia Variable Portfolio – Contrarian Core Fund, Class 1 Shares | |||||||||
| 222,268,323 | — | (15,300,191) | 23,292,211 | 230,260,343 | — | 27,349,113 | — | 5,658,893 | |
| Columbia Variable Portfolio – Disciplined Core Fund, Class 1 Shares | |||||||||
| 242,218,406 | — | (37,313,680) | 28,346,337 | 233,251,063 | — | 38,642,790 | — | 2,631,739 | |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Portfolio Navigator Funds | Annual Report 2021 | 33 |
Portfolio of Investments (continued)
Variable Portfolio – Moderately Aggressive Portfolio, December 31, 2021
Variable Portfolio – Moderately Aggressive Portfolio, December 31, 2021
Notes
to Portfolio of Investments (continued)
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Capital gain distributions($) | Realized gain (loss)($) | Dividends — affiliated issuers ($) | End of period shares |
| Columbia Variable Portfolio – Emerging Markets Bond Fund, Class 1 Shares | |||||||||
| 45,517,319 | 1,483,981 | (7,984,473) | (1,692,999) | 37,323,828 | — | (740,732) | 1,467,478 | 3,983,333 | |
| Columbia Variable Portfolio – Emerging Markets Fund, Class 1 Shares | |||||||||
| 21,624,727 | 928,291 | (2,210,902) | (2,851,812) | 17,490,304 | 700,436 | 751,086 | 211,456 | 900,634 | |
| Columbia Variable Portfolio – Income Opportunities Fund, Class 1 Shares | |||||||||
| 21,317,257 | — | (22,447,301) | 1,130,044 | — | — | (1,130,044) | — | — | |
| Columbia Variable Portfolio – Intermediate Bond Fund, Class 1 Shares | |||||||||
| 495,216,374 | 73,174,681 | (18,764,718) | (55,051,656) | 494,574,681 | 36,494,976 | 721,997 | 16,830,283 | 47,970,386 | |
| Columbia Variable Portfolio – Large Cap Growth Fund, Class 1 Shares | |||||||||
| 307,747,588 | — | (20,798,486) | 22,870,291 | 309,819,393 | — | 59,669,093 | — | 8,163,884 | |
| Columbia Variable Portfolio – Limited Duration Credit Fund, Class 1 Shares | |||||||||
| 53,001,478 | 5,254,277 | (490,356) | (1,235,994) | 56,529,405 | — | (19,303) | 916,858 | 5,744,858 | |
| Columbia Variable Portfolio – Long Government/Credit Bond Fund, Class 1 Shares | |||||||||
| 114,290,770 | 21,441,068 | (9,355,967) | (11,814,537) | 114,561,334 | 5,660,829 | 1,319,632 | 2,454,507 | 10,237,831 | |
| Columbia Variable Portfolio – Overseas Core Fund, Class 1 Shares | |||||||||
| 362,971,414 | 186,835,781 | (19,076,184) | 21,629,821 | 552,360,832 | 11,294,452 | 4,954,398 | 6,960,093 | 36,628,702 | |
| Columbia Variable Portfolio – Select Large Cap Equity Fund, Class 1 Shares | |||||||||
| 379,131,996 | 58,515,802 | (56,067,230) | 81,606,106 | 463,186,674 | — | 37,376,865 | — | 25,159,515 | |
| Columbia Variable Portfolio – Select Large Cap Value Fund, Class 1 Shares | |||||||||
| 272,529,025 | 28,585,687 | (33,280,739) | 44,699,259 | 312,533,232 | — | 29,837,415 | — | 8,352,037 | |
| Columbia Variable Portfolio – Small Cap Value Fund, Class 1 Shares | |||||||||
| 38,521,036 | 54,550,954 | (33,665,116) | (1,735,935) | 57,670,939 | — | 12,962,951 | 450,352 | 2,779,322 | |
| Columbia Variable Portfolio – Small Company Growth Fund, Class 1 Shares | |||||||||
| 89,936,711 | 9,222,726 | (20,772,359) | (26,534,240) | 51,852,838 | 9,222,726 | 18,267,037 | — | 2,125,988 | |
| Columbia Variable Portfolio – Strategic Income Fund, Class 1 Shares | |||||||||
| 14,177,518 | — | (16,190,481) | 2,012,963 | — | — | (1,948,520) | — | — | |
| Columbia Variable Portfolio – U.S. Government Mortgage Fund, Class 1 Shares | |||||||||
| 107,379,062 | 11,556,527 | (1,093,628) | (5,297,885) | 112,544,076 | 1,814,409 | 25,356 | 2,338,169 | 10,884,340 | |
| CTIVP® – Allspring Short Duration Government Fund, Class 1 Shares | |||||||||
| 105,383,204 | 57,341,287 | (3,448,562) | (7,573,362) | 151,702,567 | 2,784,638 | (9,973) | 2,456,684 | 15,448,327 | |
| CTIVP® – American Century Diversified Bond Fund, Class 1 Shares | |||||||||
| 344,744,538 | 73,099,281 | (19,871,312) | (15,816,341) | 382,156,166 | 8,272,311 | 606,139 | 9,053,474 | 33,939,269 | |
| CTIVP® – CenterSquare Real Estate Fund, Class 1 Shares | |||||||||
| 67,101,308 | 7,262,998 | (23,908,657) | 16,523,422 | 66,979,071 | 6,373,721 | 90,022 | 889,277 | 6,644,749 | |
| CTIVP® – Lazard International Equity Advantage Fund, Class 1 Shares | |||||||||
| 181,300,397 | 26,038,862 | (195,518,224) | (11,821,035) | — | 18,320,278 | (5,573,164) | 7,718,584 | — | |
| CTIVP® – Loomis Sayles Growth Fund, Class 1 Shares | |||||||||
| 327,834,835 | — | (21,910,286) | (14,080,086) | 291,844,463 | — | 66,032,687 | — | 4,968,411 | |
| CTIVP® – Los Angeles Capital Large Cap Growth Fund, Class 1 Shares | |||||||||
| 285,451,974 | — | (93,856,534) | (191,595,440) | — | — | 209,309,512 | — | — | |
| CTIVP® – MFS® Value Fund, Class 1 Shares | |||||||||
| 351,143,271 | — | (110,131,814) | 57,192,067 | 298,203,524 | — | 12,974,931 | — | 7,872,321 | |
| CTIVP® – Morgan Stanley Advantage Fund, Class 1 Shares | |||||||||
| 212,107,855 | 80,733,014 | (6,006,006) | (28,129,138) | 258,705,725 | — | 20,343,423 | — | 4,311,762 | |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 34 | Portfolio Navigator Funds | Annual Report 2021 |
Portfolio of Investments (continued)
Variable Portfolio – Moderately Aggressive Portfolio, December 31, 2021
Variable Portfolio – Moderately Aggressive Portfolio, December 31, 2021
Notes
to Portfolio of Investments (continued)
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Capital gain distributions($) | Realized gain (loss)($) | Dividends — affiliated issuers ($) | End of period shares |
| CTIVP® – T. Rowe Price Large Cap Value Fund, Class 1 Shares | |||||||||
| 190,098,458 | 100,406,438 | (21,967,929) | 28,315,344 | 296,852,311 | — | 38,204,538 | — | 8,811,289 | |
| CTIVP® – TCW Core Plus Bond Fund, Class 1 Shares | |||||||||
| 194,796,316 | 144,230,725 | (12,759,208) | (21,273,572) | 304,994,261 | 13,725,186 | 610,117 | 4,347,378 | 28,397,976 | |
| CTIVP® – Victory Sycamore Established Value Fund, Class 1 Shares | |||||||||
| 79,389,572 | — | (11,140,607) | (9,361,524) | 58,887,441 | — | 29,678,121 | — | 1,362,820 | |
| CTIVP® – Westfield Mid Cap Growth Fund, Class 1 Shares | |||||||||
| 93,948,207 | 2,153 | (13,067,355) | (23,064,625) | 57,818,380 | — | 31,851,065 | — | 1,207,316 | |
| Variable Portfolio – Partners Core Bond Fund, Class 1 Shares | |||||||||
| 530,805,701 | 208,974,759 | (128,874,006) | (37,914,535) | 572,991,919 | 15,576,678 | 8,272,225 | 8,739,455 | 51,528,050 | |
| Variable Portfolio – Partners Core Equity Fund, Class 1 Shares | |||||||||
| 444,079,209 | 18,529,717 | (48,225,758) | 18,708,654 | 433,091,822 | — | 82,831,981 | — | 11,987,042 | |
| Variable Portfolio – Partners International Core Equity Fund, Class 1 Shares | |||||||||
| 429,992,481 | 5,334,081 | (182,745,964) | 17,018,135 | 269,598,733 | — | 18,535,500 | 5,334,081 | 19,867,261 | |
| Variable Portfolio – Partners International Growth Fund, Class 1 Shares | |||||||||
| 153,104,252 | 127,589,478 | (35,989,383) | (1,541,009) | 243,163,338 | 10,490,372 | 8,373,483 | 174,613 | 16,609,518 | |
| Variable Portfolio – Partners International Value Fund, Class 1 Shares | |||||||||
| 161,585,658 | 113,244,267 | (45,128,923) | 12,550,329 | 242,251,331 | — | (1,105,547) | 4,980,400 | 23,937,879 | |
| Variable Portfolio – Partners Small Cap Growth Fund, Class 1 Shares | |||||||||
| 79,063,539 | 36,314 | (10,233,273) | (10,137,953) | 58,728,627 | — | 17,026,478 | — | 1,539,817 | |
| Variable Portfolio – Partners Small Cap Value Fund, Class 1 Shares | |||||||||
| 63,568,226 | 694,913 | (18,368,376) | (17,331,119) | 28,563,644 | — | 31,793,288 | — | 760,683 | |
| Total | 7,609,966,038 | (112,017,364) | 7,583,426,092 | 140,731,012 | 797,663,552 | 75,710,239 | |||
| (b) | Non-income producing investment. |
| (c) | The rate shown is the seven-day current annualized yield at December 31, 2021. |
Currency Legend
| AUD | Australian Dollar |
| EUR | Euro |
| GBP | British Pound |
| JPY | Japanese Yen |
| USD | US Dollar |
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Portfolio Navigator Funds | Annual Report 2021 | 35 |
Portfolio of Investments (continued)
Variable Portfolio – Moderately Aggressive Portfolio, December 31, 2021
Variable Portfolio – Moderately Aggressive Portfolio, December 31, 2021
Fair value measurements (continued)
Inputs that are used in determining fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels within the hierarchy.
Inputs that are used in determining fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels within the hierarchy.
Certain investments that have been
measured at fair value using the net asset value (NAV) per share (or its equivalent) are not categorized in the fair value hierarchy. The fair value amounts presented in the table are intended to reconcile the fair
value hierarchy to the amounts presented in the Portfolio of Investments. The Variable Portfolios serve as investment vehicles for variable annuity contracts and variable life insurance policies. Principle investment
strategies within these Variable Portfolios vary based on the Portfolios investment objective. Investments in the Variable Portfolios may be redeemed on a daily basis without restriction.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at December 31, 2021:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Assets at NAV ($) | Total ($) | |
| Investments in Securities | |||||
| Alternative Strategies Funds | — | — | — | 25,094,136 | 25,094,136 |
| Equity Funds | — | — | — | 4,833,114,028 | 4,833,114,028 |
| Fixed Income Funds | — | — | — | 2,227,378,237 | 2,227,378,237 |
| Money Market Funds | 497,839,691 | — | — | — | 497,839,691 |
| Total Investments in Securities | 497,839,691 | — | — | 7,085,586,401 | 7,583,426,092 |
| Investments in Derivatives | |||||
| Asset | |||||
| Futures Contracts | 8,739,416 | — | — | — | 8,739,416 |
| Liability | |||||
| Futures Contracts | (461,864) | — | — | — | (461,864) |
| Total | 506,117,243 | — | — | 7,085,586,401 | 7,591,703,644 |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
Derivative instruments are valued at
unrealized appreciation (depreciation).
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 36 | Portfolio Navigator Funds | Annual Report 2021 |
Portfolio of Investments
Variable Portfolio – Aggressive Portfolio, December 31, 2021
Variable Portfolio – Aggressive Portfolio, December 31, 2021
(Percentages represent value of
investments compared to net assets)
Investments in securities
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Portfolio Navigator Funds | Annual Report 2021 | 37 |
Portfolio of Investments (continued)
Variable Portfolio – Aggressive Portfolio, December 31, 2021
Variable Portfolio – Aggressive Portfolio, December 31, 2021
| Money Market Funds 4.5% | ||
| Shares | Value ($) | |
| Columbia Short-Term Cash Fund, 0.085%(a),(c) | 119,242,838 | 119,218,990 |
| Total Money Market Funds (Cost $119,230,511) | 119,218,990 | |
| Total Investments in Securities (Cost: $1,888,309,052) | 2,630,491,679 | |
| Other Assets & Liabilities, Net | 8,982,667 | |
| Net Assets | 2,639,474,346 | |
At December 31, 2021, securities
and/or cash totaling $9,515,694 were pledged as collateral.
Investments in derivatives
| Long futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| EURO STOXX 50 Index | 904 | 03/2022 | EUR | 38,759,000 | 1,418,144 | — |
| FTSE 100 Index | 120 | 03/2022 | GBP | 8,788,800 | 279,398 | — |
| Russell 2000 Index E-mini | 434 | 03/2022 | USD | 48,668,760 | 1,323,641 | — |
| SPI 200 Index | 76 | 03/2022 | AUD | 13,959,300 | 133,865 | — |
| TOPIX Index | 272 | 03/2022 | JPY | 5,418,240,000 | — | (199,452) |
| Total | 3,155,048 | (199,452) | ||||
| Short futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| S&P 500 Index E-mini | (46) | 03/2022 | USD | (10,944,550) | — | (210,389) |
| Cleared credit default swap contracts - sell protection | ||||||||||||
| Reference entity | Counterparty | Maturity date | Receive fixed rate (%) | Payment frequency | Implied credit spread (%)* | Notional currency | Notional amount | Value ($) | Upfront payments ($) | Upfront receipts ($) | Unrealized appreciation ($) | Unrealized depreciation ($) |
| Markit CDX North America Investment Grade Index, Series 37 | Morgan Stanley | 12/20/2026 | 1.000 | Quarterly | 0.494 | USD | 10,308,000 | 3,709 | — | — | 3,709 | — |
| * | Implied credit spreads, represented in absolute terms, utilized in determining the market value of credit default swap agreements on corporate or sovereign issues as of period end serve as an indicator of the current status of the payment/performance risk and represent the likelihood or risk of default for the credit derivative. The implied credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Wider credit spreads represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement. |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 38 | Portfolio Navigator Funds | Annual Report 2021 |
Portfolio of Investments (continued)
Variable Portfolio – Aggressive Portfolio, December 31, 2021
Variable Portfolio – Aggressive Portfolio, December 31, 2021
Notes to Portfolio of
Investments
| (a) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended December 31, 2021 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Capital gain distributions($) | Realized gain (loss)($) | Dividends — affiliated issuers ($) | End of period shares |
| Columbia Short-Term Cash Fund, 0.085% | |||||||||
| 103,507,029 | 169,944,121 | (154,228,137) | (4,023) | 119,218,990 | — | (7,833) | 86,683 | 119,242,838 | |
| Columbia Variable Portfolio – Commodity Strategy Fund, Class 1 Shares | |||||||||
| 10,813,695 | 27,539 | (2,571,144) | 3,360,121 | 11,630,211 | — | (63,347) | 27,539 | 2,029,705 | |
| Columbia Variable Portfolio – Contrarian Core Fund, Class 1 Shares | |||||||||
| 89,519,470 | — | (4,367,114) | 13,105,732 | 98,258,088 | — | 7,510,371 | — | 2,414,797 | |
| Columbia Variable Portfolio – Disciplined Core Fund, Class 1 Shares | |||||||||
| 116,407,811 | 13,058 | (22,672,056) | 7,181,788 | 100,930,601 | — | 20,873,259 | — | 1,138,786 | |
| Columbia Variable Portfolio – Emerging Markets Bond Fund, Class 1 Shares | |||||||||
| 12,122,256 | 1,149,555 | (1,221) | (760,633) | 12,509,957 | — | (115) | 490,483 | 1,335,108 | |
| Columbia Variable Portfolio – Emerging Markets Fund, Class 1 Shares | |||||||||
| 21,738,578 | 489,277 | (9,874,729) | (5,542,247) | 6,810,879 | 341,990 | 5,313,036 | 147,287 | 350,715 | |
| Columbia Variable Portfolio – Income Opportunities Fund, Class 1 Shares | |||||||||
| 53,411 | — | (55,461) | 2,050 | — | — | (2,050) | — | — | |
| Columbia Variable Portfolio – Intermediate Bond Fund, Class 1 Shares | |||||||||
| 85,617,100 | 12,897,458 | (10,258,598) | (9,630,572) | 78,625,388 | 5,686,702 | 1,124,618 | 2,622,520 | 7,626,129 | |
| Columbia Variable Portfolio – Large Cap Growth Fund, Class 1 Shares | |||||||||
| 124,734,982 | 8,195 | (4,913,214) | 20,681,288 | 140,511,251 | — | 13,887,998 | — | 3,702,536 | |
| Columbia Variable Portfolio – Long Government/Credit Bond Fund, Class 1 Shares | |||||||||
| 48,689,863 | 11,792,190 | (2,246,198) | (4,783,103) | 53,452,752 | 2,565,766 | 312,942 | 1,112,503 | 4,776,832 | |
| Columbia Variable Portfolio – Overseas Core Fund, Class 1 Shares | |||||||||
| 148,055,684 | 64,268,491 | (7,908,425) | 9,192,815 | 213,608,565 | 4,324,718 | 1,436,006 | 2,672,420 | 14,165,024 | |
| Columbia Variable Portfolio – Select Large Cap Equity Fund, Class 1 Shares | |||||||||
| 161,631,171 | 12,449,524 | (12,822,162) | 40,253,991 | 201,512,524 | — | 8,726,277 | — | 10,945,819 | |
| Columbia Variable Portfolio – Select Large Cap Value Fund, Class 1 Shares | |||||||||
| 109,631,287 | 20,036,581 | (12,257,163) | 21,016,947 | 138,427,652 | — | 10,416,350 | — | 3,699,296 | |
| Columbia Variable Portfolio – Small Cap Value Fund, Class 1 Shares | |||||||||
| 16,559,650 | 18,864,305 | (10,484,525) | 876,317 | 25,815,747 | — | 3,943,530 | 192,639 | 1,244,132 | |
| Columbia Variable Portfolio – Small Company Growth Fund, Class 1 Shares | |||||||||
| 35,298,866 | 7,465,043 | (9,174,909) | (11,664,149) | 21,924,851 | 3,899,630 | 7,934,752 | — | 898,928 | |
| Columbia Variable Portfolio – Strategic Income Fund, Class 1 Shares | |||||||||
| 3,100,620 | — | (4,277,481) | 1,176,861 | — | — | (1,162,767) | — | — | |
| CTIVP® – Allspring Short Duration Government Fund, Class 1 Shares | |||||||||
| — | 27,348,282 | (115,716) | (1,258,617) | 25,973,949 | 468,696 | (3,147) | 413,496 | 2,645,005 | |
| CTIVP® – American Century Diversified Bond Fund, Class 1 Shares | |||||||||
| 74,856,119 | 9,653,481 | (1,891,585) | (3,187,061) | 79,430,954 | 1,677,387 | 95,772 | 1,835,785 | 7,054,259 | |
| CTIVP® – CenterSquare Real Estate Fund, Class 1 Shares | |||||||||
| 26,426,354 | 3,023,714 | (6,620,259) | 6,799,054 | 29,628,863 | 2,653,492 | 20,699 | 370,222 | 2,939,371 | |
| CTIVP® – Lazard International Equity Advantage Fund, Class 1 Shares | |||||||||
| 74,529,360 | 10,672,570 | (81,129,790) | (4,072,140) | — | 7,508,948 | (3,055,379) | 3,163,623 | — | |
| CTIVP® – Loomis Sayles Growth Fund, Class 1 Shares | |||||||||
| 129,918,619 | — | (9,076,459) | 6,344,452 | 127,186,612 | — | 15,073,337 | — | 2,165,247 | |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Portfolio Navigator Funds | Annual Report 2021 | 39 |
Portfolio of Investments (continued)
Variable Portfolio – Aggressive Portfolio, December 31, 2021
Variable Portfolio – Aggressive Portfolio, December 31, 2021
Notes
to Portfolio of Investments (continued)
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Capital gain distributions($) | Realized gain (loss)($) | Dividends — affiliated issuers ($) | End of period shares |
| CTIVP® – Los Angeles Capital Large Cap Growth Fund, Class 1 Shares | |||||||||
| 112,573,583 | — | (53,340,224) | (59,233,359) | — | — | 66,219,251 | — | — | |
| CTIVP® – MFS® Value Fund, Class 1 Shares | |||||||||
| 144,003,780 | — | (39,221,190) | 25,505,853 | 130,288,443 | — | 3,553,133 | — | 3,439,505 | |
| CTIVP® – Morgan Stanley Advantage Fund, Class 1 Shares | |||||||||
| 82,539,096 | 37,229,341 | (2,480,710) | (8,182,898) | 109,104,829 | — | 4,560,977 | — | 1,818,414 | |
| CTIVP® – T. Rowe Price Large Cap Value Fund, Class 1 Shares | |||||||||
| 70,908,030 | 47,171,583 | (6,841,702) | 17,850,460 | 129,088,371 | — | 9,455,149 | — | 3,831,653 | |
| CTIVP® – TCW Core Plus Bond Fund, Class 1 Shares | |||||||||
| 61,343,634 | 6,556,814 | (10,459,012) | (4,777,264) | 52,664,172 | 2,317,220 | 1,104,240 | 733,967 | 4,903,554 | |
| CTIVP® – Victory Sycamore Established Value Fund, Class 1 Shares | |||||||||
| 30,646,445 | — | (3,169,121) | (1,837,913) | 25,639,411 | — | 9,957,991 | — | 593,367 | |
| CTIVP® – Westfield Mid Cap Growth Fund, Class 1 Shares | |||||||||
| 36,448,430 | 53,626 | (4,396,630) | (7,716,930) | 24,388,496 | — | 11,344,272 | — | 509,261 | |
| Variable Portfolio – Partners Core Bond Fund, Class 1 Shares | |||||||||
| 69,046,614 | 120,712,637 | (70,549,701) | (6,449,922) | 112,759,628 | 2,679,864 | 1,723,913 | 1,503,565 | 10,140,254 | |
| Variable Portfolio – Partners Core Equity Fund, Class 1 Shares | |||||||||
| 149,100,084 | 9,830,546 | (13,787,698) | 20,441,127 | 165,584,059 | — | 16,681,692 | — | 4,583,007 | |
| Variable Portfolio – Partners International Core Equity Fund, Class 1 Shares | |||||||||
| 186,419,150 | 4,140,099 | (55,387,877) | 13,229,935 | 148,401,307 | — | 3,779,448 | 2,806,185 | 10,935,984 | |
| Variable Portfolio – Partners International Growth Fund, Class 1 Shares | |||||||||
| 65,096,351 | 54,419,376 | (15,186,021) | (617,412) | 103,712,294 | 4,398,326 | 3,565,689 | 72,758 | 7,084,173 | |
| Variable Portfolio – Partners International Value Fund, Class 1 Shares | |||||||||
| 64,434,960 | 52,728,900 | (18,593,778) | 5,390,260 | 103,960,342 | — | (864,965) | 2,077,856 | 10,272,761 | |
| Variable Portfolio – Partners Small Cap Growth Fund, Class 1 Shares | |||||||||
| 32,106,412 | 55,405 | (4,949,649) | (1,756,328) | 25,455,840 | — | 4,529,064 | — | 667,432 | |
| Variable Portfolio – Partners Small Cap Value Fund, Class 1 Shares | |||||||||
| 25,725,969 | 1,273,062 | (7,128,523) | (5,883,855) | 13,986,653 | — | 11,830,630 | — | 372,481 | |
| Total | 2,523,604,463 | 75,050,625 | 2,630,491,679 | 38,522,739 | 239,814,793 | 20,329,531 | |||
| (b) | Non-income producing investment. |
| (c) | The rate shown is the seven-day current annualized yield at December 31, 2021. |
Currency Legend
| AUD | Australian Dollar |
| EUR | Euro |
| GBP | British Pound |
| JPY | Japanese Yen |
| USD | US Dollar |
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 40 | Portfolio Navigator Funds | Annual Report 2021 |
Portfolio of Investments (continued)
Variable Portfolio – Aggressive Portfolio, December 31, 2021
Variable Portfolio – Aggressive Portfolio, December 31, 2021
Fair value measurements (continued)
pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example, certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example, certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
Certain investments that have been
measured at fair value using the net asset value (NAV) per share (or its equivalent) are not categorized in the fair value hierarchy. The fair value amounts presented in the table are intended to reconcile the fair
value hierarchy to the amounts presented in the Portfolio of Investments. The Variable Portfolios serve as investment vehicles for variable annuity contracts and variable life insurance policies. Principle investment
strategies within these Variable Portfolios vary based on the Portfolios investment objective. Investments in the Variable Portfolios may be redeemed on a daily basis without restriction.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at December 31, 2021:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Assets at NAV ($) | Total ($) | |
| Investments in Securities | |||||
| Alternative Strategies Funds | — | — | — | 11,630,211 | 11,630,211 |
| Equity Funds | — | — | — | 2,084,225,678 | 2,084,225,678 |
| Fixed Income Funds | — | — | — | 415,416,800 | 415,416,800 |
| Money Market Funds | 119,218,990 | — | — | — | 119,218,990 |
| Total Investments in Securities | 119,218,990 | — | — | 2,511,272,689 | 2,630,491,679 |
| Investments in Derivatives | |||||
| Asset | |||||
| Futures Contracts | 3,155,048 | — | — | — | 3,155,048 |
| Swap Contracts | — | 3,709 | — | — | 3,709 |
| Liability | |||||
| Futures Contracts | (409,841) | — | — | — | (409,841) |
| Total | 121,964,197 | 3,709 | — | 2,511,272,689 | 2,633,240,595 |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The Fund’s assets assigned to
the Level 2 input category are generally valued using the market approach, in which a security’s value is determined through reference to prices and information from market transactions for similar or identical
assets.
Derivative instruments are valued at
unrealized appreciation (depreciation).
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Portfolio Navigator Funds | Annual Report 2021 | 41 |
Statement of Assets and Liabilities
December 31, 2021
December 31, 2021
| Variable Portfolio – Conservative Portfolio | Variable Portfolio – Moderately Conservative Portfolio | Variable Portfolio – Moderate Portfolio | |
| Assets | |||
| Investments in securities, at value | |||
| Affiliated issuers (cost $1,135,876,068, $2,617,172,511, $14,609,800,898, respectively) | $1,187,046,091 | $2,959,205,724 | $17,763,415,325 |
| Margin deposits on: | |||
| Futures contracts | 2,866,429 | 5,932,408 | 46,724,249 |
| Swap contracts | — | — | 1,299,520 |
| Receivable for: | |||
| Investments sold | 1,235,024 | 2,576,793 | 14,037,887 |
| Capital shares sold | 622 | — | 7,575 |
| Dividends | 5,793 | 8,436 | 59,909 |
| Variation margin for futures contracts | 76,840 | 6,500 | — |
| Variation margin for swap contracts | — | — | 10,583 |
| Prepaid expenses | 15,622 | 27,155 | 122,989 |
| Total assets | 1,191,246,421 | 2,967,757,016 | 17,825,678,037 |
| Liabilities | |||
| Payable for: | |||
| Capital shares purchased | 1,235,646 | 2,576,793 | 14,045,462 |
| Variation margin for futures contracts | 60,643 | 146,185 | 964,127 |
| Management services fees | 2,244 | 4,000 | 28,694 |
| Distribution and/or service fees | 8,149 | 20,315 | 121,975 |
| Service fees | 60,906 | 151,066 | 904,131 |
| Compensation of board members | 104,869 | 203,216 | 852,890 |
| Compensation of chief compliance officer | 227 | 557 | 3,307 |
| Other expenses | 23,559 | 30,284 | 71,637 |
| Total liabilities | 1,496,243 | 3,132,416 | 16,992,223 |
| Net assets applicable to outstanding capital stock | $1,189,750,178 | $2,964,624,600 | $17,808,685,814 |
| Represented by | |||
| Trust capital | $1,189,750,178 | $2,964,624,600 | $17,808,685,814 |
| Total - representing net assets applicable to outstanding capital stock | $1,189,750,178 | $2,964,624,600 | $17,808,685,814 |
| Class 1 | |||
| Net assets | $1,169,378 | $1,964,220 | $27,262,559 |
| Shares outstanding | 69,135 | 99,961 | 1,190,745 |
| Net asset value per share | $16.91 | $19.65 | $22.90 |
| Class 2 | |||
| Net assets | $654,063,084 | $1,550,824,914 | $9,154,943,595 |
| Shares outstanding | 38,963,087 | 79,441,719 | 402,187,186 |
| Net asset value per share | $16.79 | $19.52 | $22.76 |
| Class 4 | |||
| Net assets | $534,517,716 | $1,411,835,466 | $8,626,479,660 |
| Shares outstanding | 31,852,688 | 72,186,154 | 378,479,396 |
| Net asset value per share | $16.78 | $19.56 | $22.79 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 42 | Portfolio Navigator Funds | Annual Report 2021 |
Statement of Assets and Liabilities (continued)
December 31, 2021
December 31, 2021
| Variable Portfolio – Moderately Aggressive Portfolio | Variable Portfolio – Aggressive Portfolio | |
| Assets | ||
| Investments in securities, at value | ||
| Affiliated issuers (cost $5,904,499,179, $1,888,309,052, respectively) | $7,583,426,092 | $2,630,491,679 |
| Margin deposits on: | ||
| Futures contracts | 26,191,029 | 9,259,679 |
| Swap contracts | — | 256,015 |
| Receivable for: | ||
| Investments sold | 6,734,576 | 2,059,867 |
| Capital shares sold | 197,284 | 21,508 |
| Dividends | 35,378 | 8,387 |
| Variation margin for futures contracts | 113,250 | 31,625 |
| Variation margin for swap contracts | — | 2,085 |
| Prepaid expenses | 57,413 | 23,494 |
| Total assets | 7,616,755,022 | 2,642,154,339 |
| Liabilities | ||
| Due to custodian | — | 775 |
| Payable for: | ||
| Capital shares purchased | 6,931,860 | 2,081,375 |
| Variation margin for futures contracts | 677,841 | 250,411 |
| Management services fees | 14,150 | 3,902 |
| Distribution and/or service fees | 51,564 | 17,822 |
| Service fees | 386,365 | 133,757 |
| Compensation of board members | 442,137 | 162,899 |
| Compensation of chief compliance officer | 1,424 | 489 |
| Other expenses | 43,910 | 28,563 |
| Total liabilities | 8,549,251 | 2,679,993 |
| Net assets applicable to outstanding capital stock | $7,608,205,771 | $2,639,474,346 |
| Represented by | ||
| Trust capital | $7,608,205,771 | $2,639,474,346 |
| Total - representing net assets applicable to outstanding capital stock | $7,608,205,771 | $2,639,474,346 |
| Class 1 | ||
| Net assets | $95,758,477 | $43,537,853 |
| Shares outstanding | 3,672,800 | 1,477,928 |
| Net asset value per share | $26.07 | $29.46 |
| Class 2 | ||
| Net assets | $4,099,900,756 | $1,459,445,687 |
| Shares outstanding | 158,184,862 | 49,794,554 |
| Net asset value per share | $25.92 | $29.31 |
| Class 4 | ||
| Net assets | $3,412,546,538 | $1,136,490,806 |
| Shares outstanding | 131,460,130 | 38,714,398 |
| Net asset value per share | $25.96 | $29.36 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Portfolio Navigator Funds | Annual Report 2021 | 43 |
Statement of Operations
Year Ended December 31, 2021
Year Ended December 31, 2021
| Variable Portfolio – Conservative Portfolio | Variable Portfolio – Moderately Conservative Portfolio | Variable Portfolio – Moderate Portfolio | |
| Net investment income | |||
| Income: | |||
| Dividends — affiliated issuers | $20,351,634 | $41,531,275 | $218,629,312 |
| Interest | 4 | 2 | 605 |
| Total income | 20,351,638 | 41,531,277 | 218,629,917 |
| Expenses: | |||
| Management services fees | 647,316 | 1,502,879 | 10,007,543 |
| Distribution and/or service fees | |||
| Class 2 | 1,740,019 | 3,957,407 | 22,584,802 |
| Class 4 | 1,457,939 | 3,699,017 | 22,132,971 |
| Service fees | 767,364 | 1,839,202 | 10,755,513 |
| Compensation of board members | 48,711 | 88,247 | 384,496 |
| Custodian fees | 12,846 | 17,489 | 20,319 |
| Printing and postage fees | 18,145 | 35,830 | 181,039 |
| Audit fees | 29,500 | 29,500 | 29,500 |
| Legal fees | 21,668 | 37,775 | 172,230 |
| Interest on collateral | 5,325 | 13,860 | 344,965 |
| Compensation of chief compliance officer | 221 | 513 | 3,085 |
| Other | 16,578 | 31,011 | 155,996 |
| Total expenses | 4,765,632 | 11,252,730 | 66,772,459 |
| Net investment income | 15,586,006 | 30,278,547 | 151,857,458 |
| Realized and unrealized gain (loss) — net | |||
| Net realized gain (loss) on: | |||
| Investments — affiliated issuers | 94,147,980 | 226,260,446 | 1,348,688,191 |
| Capital gain distributions from underlying affiliated funds | 38,049,400 | 76,327,929 | 414,571,543 |
| Foreign currency translations | (10,935) | 296,117 | 2,293,765 |
| Futures contracts | (9,687,003) | (10,209,660) | (10,542,078) |
| Swap contracts | 145,670 | 348,854 | 2,706,490 |
| Net realized gain | 122,645,112 | 293,023,686 | 1,757,717,911 |
| Net change in unrealized appreciation (depreciation) on: | |||
| Investments — affiliated issuers | (107,314,276) | (155,752,910) | (384,704,586) |
| Foreign currency translations | (50,138) | (333,704) | (4,583,774) |
| Futures contracts | 4,216,102 | 4,995,306 | 25,346,179 |
| Swap contracts | (38,914) | (87,897) | (681,942) |
| Net change in unrealized appreciation (depreciation) | (103,187,226) | (151,179,205) | (364,624,123) |
| Net realized and unrealized gain | 19,457,886 | 141,844,481 | 1,393,093,788 |
| Net increase in net assets resulting from operations | $35,043,892 | $172,123,028 | $1,544,951,246 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 44 | Portfolio Navigator Funds | Annual Report 2021 |
Statement of Operations (continued)
Year Ended December 31, 2021
Year Ended December 31, 2021
| Variable Portfolio – Moderately Aggressive Portfolio | Variable Portfolio – Aggressive Portfolio | |
| Net investment income | ||
| Income: | ||
| Dividends — affiliated issuers | $75,710,239 | $20,329,531 |
| Interest | 103,011 | 51,272 |
| Total income | 75,813,250 | 20,380,803 |
| Expenses: | ||
| Management services fees | 5,045,757 | 1,503,708 |
| Distribution and/or service fees | ||
| Class 2 | 10,591,578 | 3,670,394 |
| Class 4 | 8,666,845 | 2,840,456 |
| Service fees | 4,666,900 | 1,582,131 |
| Compensation of board members | 188,390 | 74,928 |
| Custodian fees | 19,355 | 17,574 |
| Printing and postage fees | 81,608 | 29,907 |
| Audit fees | 29,500 | 29,500 |
| Legal fees | 80,484 | 33,889 |
| Interest on collateral | 168,001 | 68,230 |
| Compensation of chief compliance officer | 1,311 | 461 |
| Other | 84,723 | 34,960 |
| Total expenses | 29,624,452 | 9,886,138 |
| Net investment income | 46,188,798 | 10,494,665 |
| Realized and unrealized gain (loss) — net | ||
| Net realized gain (loss) on: | ||
| Investments — affiliated issuers | 797,663,552 | 239,814,793 |
| Capital gain distributions from underlying affiliated funds | 140,731,012 | 38,522,739 |
| Foreign currency translations | 1,606,868 | 72,079 |
| Futures contracts | 20,469,355 | 15,730,849 |
| Swap contracts | 931,078 | 140,083 |
| Net realized gain | 961,401,865 | 294,280,543 |
| Net change in unrealized appreciation (depreciation) on: | ||
| Investments — affiliated issuers | (112,017,364) | 75,050,625 |
| Foreign currency translations | (2,793,152) | (560,377) |
| Futures contracts | 9,750,045 | 2,527,251 |
| Swap contracts | (231,495) | (31,441) |
| Net change in unrealized appreciation (depreciation) | (105,291,966) | 76,986,058 |
| Net realized and unrealized gain | 856,109,899 | 371,266,601 |
| Net increase in net assets resulting from operations | $902,298,697 | $381,761,266 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| Portfolio Navigator Funds | Annual Report 2021 | 45 |
Statement of Changes in Net Assets
| Variable Portfolio – Conservative Portfolio | Variable Portfolio – Moderately Conservative Portfolio | |||
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | Year Ended December 31, 2021 | Year Ended December 31, 2020 | |
| Operations | ||||
| Net investment income | $15,586,006 | $18,436,604 | $30,278,547 | $37,442,267 |
| Net realized gain | 122,645,112 | 12,453,274 | 293,023,686 | 184,344,176 |
| Net change in unrealized appreciation (depreciation) | (103,187,226) | 89,399,429 | (151,179,205) | 91,963,305 |
| Net increase in net assets resulting from operations | 35,043,892 | 120,289,307 | 172,123,028 | 313,749,748 |
| Increase (decrease) in net assets from capital stock activity | (233,106,490) | 184,143,959 | (352,077,035) | (196,001,873) |
| Total increase (decrease) in net assets | (198,062,598) | 304,433,266 | (179,954,007) | 117,747,875 |
| Net assets at beginning of year | 1,387,812,776 | 1,083,379,510 | 3,144,578,607 | 3,026,830,732 |
| Net assets at end of year | $1,189,750,178 | $1,387,812,776 | $2,964,624,600 | $3,144,578,607 |
| Variable Portfolio – Conservative Portfolio | Variable Portfolio – Moderately Conservative Portfolio | |||||||
| Year Ended | Year Ended | Year Ended | Year Ended | |||||
| December 31, 2021 | December 31, 2020 | December 31, 2021 | December 31, 2020 | |||||
| Shares | Dollars ($) | Shares | Dollars ($) | Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||||||
| Class 1 | ||||||||
| Subscriptions | 61,593 | 1,024,919 | 32,036 | 494,602 | 68,961 | 1,317,951 | 78,041 | 1,360,915 |
| Redemptions | (11,411) | (189,684) | (24,626) | (375,622) | (41,972) | (794,690) | (14,427) | (251,089) |
| Net increase | 50,182 | 835,235 | 7,410 | 118,980 | 26,989 | 523,261 | 63,614 | 1,109,826 |
| Class 2 | ||||||||
| Subscriptions | 2,944,854 | 48,663,645 | 14,282,108 | 215,355,722 | 1,568,795 | 29,847,265 | 5,735,409 | 97,640,556 |
| Redemptions | (9,710,378) | (160,288,681) | (3,395,723) | (52,347,722) | (9,118,849) | (173,584,537) | (6,781,969) | (113,798,371) |
| Net increase (decrease) | (6,765,524) | (111,625,036) | 10,886,385 | 163,008,000 | (7,550,054) | (143,737,272) | (1,046,560) | (16,157,815) |
| Class 4 | ||||||||
| Subscriptions | 763,195 | 12,558,711 | 6,751,984 | 100,430,755 | 279,011 | 5,331,862 | 1,338,546 | 22,490,423 |
| Redemptions | (8,175,661) | (134,875,400) | (5,151,534) | (79,413,776) | (11,225,157) | (214,194,886) | (12,013,847) | (203,444,307) |
| Net increase (decrease) | (7,412,466) | (122,316,689) | 1,600,450 | 21,016,979 | (10,946,146) | (208,863,024) | (10,675,301) | (180,953,884) |
| Total net increase (decrease) | (14,127,808) | (233,106,490) | 12,494,245 | 184,143,959 | (18,469,211) | (352,077,035) | (11,658,247) | (196,001,873) |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 46 | Portfolio Navigator Funds | Annual Report 2021 |
Statement of Changes in Net Assets (continued)
| Variable Portfolio – Moderate Portfolio | Variable Portfolio – Moderately Aggressive Portfolio | |||
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | Year Ended December 31, 2021 | Year Ended December 31, 2020 | |
| Operations | ||||
| Net investment income | $151,857,458 | $168,154,590 | $46,188,798 | $43,712,653 |
| Net realized gain | 1,757,717,911 | 1,735,412,614 | 961,401,865 | 793,567,734 |
| Net change in unrealized appreciation (depreciation) | (364,624,123) | 97,093,514 | (105,291,966) | 104,919,018 |
| Net increase in net assets resulting from operations | 1,544,951,246 | 2,000,660,718 | 902,298,697 | 942,199,405 |
| Decrease in net assets from capital stock activity | (1,335,156,447) | (1,585,173,054) | (955,214,164) | (1,046,041,112) |
| Total increase (decrease) in net assets | 209,794,799 | 415,487,664 | (52,915,467) | (103,841,707) |
| Net assets at beginning of year | 17,598,891,015 | 17,183,403,351 | 7,661,121,238 | 7,764,962,945 |
| Net assets at end of year | $17,808,685,814 | $17,598,891,015 | $7,608,205,771 | $7,661,121,238 |
| Variable Portfolio – Moderate Portfolio | Variable Portfolio – Moderately Aggressive Portfolio | |||||||
| Year Ended | Year Ended | Year Ended | Year Ended | |||||
| December 31, 2021 | December 31, 2020 | December 31, 2021 | December 31, 2020 | |||||
| Shares | Dollars ($) | Shares | Dollars ($) | Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||||||
| Class 1 | ||||||||
| Subscriptions | 799,378 | 17,852,828 | 371,035 | 7,030,342 | 2,112,806 | 53,145,081 | 1,178,976 | 24,316,713 |
| Redemptions | (61,143) | (1,351,310) | (102,768) | (2,008,130) | (63,855) | (1,553,693) | (45,382) | (928,925) |
| Net increase | 738,235 | 16,501,518 | 268,267 | 5,022,212 | 2,048,951 | 51,591,388 | 1,133,594 | 23,387,788 |
| Class 2 | ||||||||
| Subscriptions | 4,673,442 | 102,545,690 | 3,296,689 | 62,173,644 | 702,217 | 17,565,831 | 1,276,971 | 25,763,448 |
| Redemptions | (19,243,186) | (424,611,786) | (26,664,189) | (492,645,798) | (24,659,087) | (614,123,878) | (27,064,873) | (552,280,583) |
| Net decrease | (14,569,744) | (322,066,096) | (23,367,500) | (430,472,154) | (23,956,870) | (596,558,047) | (25,787,902) | (526,517,135) |
| Class 4 | ||||||||
| Subscriptions | 344,652 | 7,577,548 | 429,691 | 8,019,925 | 250,775 | 6,178,469 | 131,748 | 2,743,494 |
| Redemptions | (47,066,979) | (1,037,169,417) | (62,876,422) | (1,167,743,037) | (16,790,262) | (416,425,974) | (27,090,755) | (545,655,259) |
| Net decrease | (46,722,327) | (1,029,591,869) | (62,446,731) | (1,159,723,112) | (16,539,487) | (410,247,505) | (26,959,007) | (542,911,765) |
| Total net decrease | (60,553,836) | (1,335,156,447) | (85,545,964) | (1,585,173,054) | (38,447,406) | (955,214,164) | (51,613,315) | (1,046,041,112) |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| Portfolio Navigator Funds | Annual Report 2021 | 47 |
Statement of Changes in Net Assets (continued)
| Variable Portfolio – Aggressive Portfolio | ||
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | |
| Operations | ||
| Net investment income | $10,494,665 | $7,388,823 |
| Net realized gain | 294,280,543 | 222,698,817 |
| Net change in unrealized appreciation (depreciation) | 76,986,058 | 100,525,491 |
| Net increase in net assets resulting from operations | 381,761,266 | 330,613,131 |
| Decrease in net assets from capital stock activity | (281,808,556) | (311,677,129) |
| Total increase in net assets | 99,952,710 | 18,936,002 |
| Net assets at beginning of year | 2,539,521,636 | 2,520,585,634 |
| Net assets at end of year | $2,639,474,346 | $2,539,521,636 |
| Variable Portfolio – Aggressive Portfolio | ||||
| Year Ended | Year Ended | |||
| December 31, 2021 | December 31, 2020 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class 1 | ||||
| Subscriptions | 941,828 | 26,469,369 | 424,521 | 9,367,826 |
| Redemptions | (34,531) | (967,321) | (39,304) | (899,150) |
| Net increase | 907,297 | 25,502,048 | 385,217 | 8,468,676 |
| Class 2 | ||||
| Subscriptions | 755,347 | 21,342,634 | 879,983 | 17,934,962 |
| Redemptions | (7,414,346) | (204,604,175) | (8,169,309) | (178,728,117) |
| Net decrease | (6,658,999) | (183,261,541) | (7,289,326) | (160,793,155) |
| Class 4 | ||||
| Subscriptions | 348,902 | 9,696,348 | 358,200 | 7,570,145 |
| Redemptions | (4,830,251) | (133,745,411) | (7,618,589) | (166,922,795) |
| Net decrease | (4,481,349) | (124,049,063) | (7,260,389) | (159,352,650) |
| Total net decrease | (10,233,051) | (281,808,556) | (14,164,498) | (311,677,129) |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 48 | Portfolio Navigator Funds | Annual Report 2021 |
Financial Highlights
Variable Portfolio – Conservative Portfolio
Variable Portfolio – Conservative Portfolio
The following tables are intended
to help you understand the Funds’ financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts
are calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect any fees and expenses imposed under
your Contract and/or Qualified Plan, as applicable; such fees and expenses would reduce the total returns for all periods shown. Total return and portfolio turnover are not annualized for periods of less than one
year. The portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain derivatives, if any. If such transactions were included, a fund’s portfolio
turnover rate may be higher.
| Net asset value, beginning of period | Net investment income | Net realized and unrealized gain (loss) | Total from investment operations | |
| Class 1 | ||||
| Year Ended 12/31/2021 | $16.41 | 0.28 | 0.22 | 0.50 |
| Year Ended 12/31/2020 | $14.98 | 0.15 | 1.28 | 1.43 |
| Year Ended 12/31/2019(d) | $13.95 | 0.13 | 0.90 | 1.03 |
| Class 2 | ||||
| Year Ended 12/31/2021 | $16.33 | 0.20 | 0.26 | 0.46 |
| Year Ended 12/31/2020 | $14.94 | 0.23 | 1.16 | 1.39 |
| Year Ended 12/31/2019 | $13.49 | 0.27 | 1.18 | 1.45 |
| Year Ended 12/31/2018 | $13.90 | 0.22 | (0.63) | (0.41) |
| Year Ended 12/31/2017 | $12.94 | 0.22 | 0.74 | 0.96 |
| Class 4 | ||||
| Year Ended 12/31/2021 | $16.32 | 0.20 | 0.26 | 0.46 |
| Year Ended 12/31/2020 | $14.94 | 0.23 | 1.15 | 1.38 |
| Year Ended 12/31/2019 | $13.49 | 0.28 | 1.17 | 1.45 |
| Year Ended 12/31/2018 | $13.89 | 0.22 | (0.62) | (0.40) |
| Year Ended 12/31/2017 | $12.94 | 0.21 | 0.74 | 0.95 |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Ratios include interest on collateral expense which is less than 0.01%. |
| (d) | Class 1 shares commenced operations on February 20, 2019. Per share data and total return reflect activity from that date. |
| (e) | Annualized. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 50 | Portfolio Navigator Funds | Annual Report 2021 |
Financial Highlights (continued)
Variable Portfolio – Conservative Portfolio
Variable Portfolio – Conservative Portfolio
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets(a) | Total net expense ratio to average net assets(a),(b) | Net investment income ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Class 1 | |||||||
| Year Ended 12/31/2021 | $16.91 | 3.05% | 0.12%(c) | 0.12%(c) | 1.70% | 22% | $1,169 |
| Year Ended 12/31/2020 | $16.41 | 9.55% | 0.12%(c) | 0.12%(c) | 1.00% | 25% | $311 |
| Year Ended 12/31/2019(d) | $14.98 | 7.38% | 0.13%(e) | 0.13%(e) | 1.10%(e) | 18% | $173 |
| Class 2 | |||||||
| Year Ended 12/31/2021 | $16.79 | 2.82% | 0.37%(c) | 0.37%(c) | 1.22% | 22% | $654,063 |
| Year Ended 12/31/2020 | $16.33 | 9.30% | 0.37%(c) | 0.37%(c) | 1.51% | 25% | $746,628 |
| Year Ended 12/31/2019 | $14.94 | 10.75% | 0.38% | 0.38% | 1.90% | 18% | $520,608 |
| Year Ended 12/31/2018 | $13.49 | (2.95%) | 0.37% | 0.37% | 1.61% | 18% | $450,440 |
| Year Ended 12/31/2017 | $13.90 | 7.42% | 0.33% | 0.33% | 1.60% | 6% | $541,013 |
| Class 4 | |||||||
| Year Ended 12/31/2021 | $16.78 | 2.82% | 0.37%(c) | 0.37%(c) | 1.21% | 22% | $534,518 |
| Year Ended 12/31/2020 | $16.32 | 9.24% | 0.37%(c) | 0.37%(c) | 1.48% | 25% | $640,874 |
| Year Ended 12/31/2019 | $14.94 | 10.75% | 0.38% | 0.38% | 1.94% | 18% | $562,599 |
| Year Ended 12/31/2018 | $13.49 | (2.88%) | 0.37% | 0.37% | 1.60% | 18% | $570,600 |
| Year Ended 12/31/2017 | $13.89 | 7.34% | 0.33% | 0.33% | 1.59% | 6% | $725,015 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Portfolio Navigator Funds | Annual Report 2021 | 51 |
Financial Highlights
Variable Portfolio – Moderately Conservative Portfolio
Variable Portfolio – Moderately Conservative Portfolio
| Net asset value, beginning of period | Net investment income | Net realized and unrealized gain (loss) | Total from investment operations | |
| Class 1 | ||||
| Year Ended 12/31/2021 | $18.54 | 0.26 | 0.85 | 1.11 |
| Year Ended 12/31/2020 | $16.66 | 0.29 | 1.59 | 1.88 |
| Year Ended 12/31/2019(d) | $15.35 | 0.26 | 1.05 | 1.31 |
| Class 2 | ||||
| Year Ended 12/31/2021 | $18.46 | 0.19 | 0.87 | 1.06 |
| Year Ended 12/31/2020 | $16.63 | 0.21 | 1.62 | 1.83 |
| Year Ended 12/31/2019 | $14.65 | 0.24 | 1.74 | 1.98 |
| Year Ended 12/31/2018 | $15.28 | 0.20 | (0.83) | (0.63) |
| Year Ended 12/31/2017 | $13.89 | 0.19 | 1.20 | 1.39 |
| Class 4 | ||||
| Year Ended 12/31/2021 | $18.49 | 0.19 | 0.88 | 1.07 |
| Year Ended 12/31/2020 | $16.66 | 0.21 | 1.62 | 1.83 |
| Year Ended 12/31/2019 | $14.68 | 0.25 | 1.73 | 1.98 |
| Year Ended 12/31/2018 | $15.30 | 0.20 | (0.82) | (0.62) |
| Year Ended 12/31/2017 | $13.92 | 0.19 | 1.19 | 1.38 |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Ratios include interest on collateral expense which is less than 0.01%. |
| (d) | Class 1 shares commenced operations on February 20, 2019. Per share data and total return reflect activity from that date. |
| (e) | Annualized. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 52 | Portfolio Navigator Funds | Annual Report 2021 |
Financial Highlights (continued)
Variable Portfolio – Moderately Conservative Portfolio
Variable Portfolio – Moderately Conservative Portfolio
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets(a) | Total net expense ratio to average net assets(a),(b) | Net investment income ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Class 1 | |||||||
| Year Ended 12/31/2021 | $19.65 | 5.99% | 0.12%(c) | 0.12%(c) | 1.33% | 18% | $1,964 |
| Year Ended 12/31/2020 | $18.54 | 11.28% | 0.13%(c) | 0.12%(c) | 1.70% | 23% | $1,353 |
| Year Ended 12/31/2019(d) | $16.66 | 8.53% | 0.12%(e) | 0.11%(e) | 1.91%(e) | 12% | $156 |
| Class 2 | |||||||
| Year Ended 12/31/2021 | $19.52 | 5.74% | 0.37%(c) | 0.37%(c) | 0.99% | 18% | $1,550,825 |
| Year Ended 12/31/2020 | $18.46 | 11.00% | 0.37%(c) | 0.37%(c) | 1.26% | 23% | $1,605,788 |
| Year Ended 12/31/2019 | $16.63 | 13.51% | 0.37% | 0.36% | 1.54% | 12% | $1,463,901 |
| Year Ended 12/31/2018 | $14.65 | (4.12%) | 0.36% | 0.36% | 1.31% | 10% | $1,311,637 |
| Year Ended 12/31/2017 | $15.28 | 10.01% | 0.33% | 0.33% | 1.30% | 4% | $1,539,179 |
| Class 4 | |||||||
| Year Ended 12/31/2021 | $19.56 | 5.79% | 0.37%(c) | 0.37%(c) | 0.99% | 18% | $1,411,835 |
| Year Ended 12/31/2020 | $18.49 | 10.98% | 0.37%(c) | 0.37%(c) | 1.25% | 23% | $1,537,438 |
| Year Ended 12/31/2019 | $16.66 | 13.49% | 0.37% | 0.36% | 1.55% | 12% | $1,562,773 |
| Year Ended 12/31/2018 | $14.68 | (4.05%) | 0.36% | 0.36% | 1.31% | 10% | $1,578,450 |
| Year Ended 12/31/2017 | $15.30 | 9.91% | 0.33% | 0.33% | 1.30% | 4% | $2,000,352 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Portfolio Navigator Funds | Annual Report 2021 | 53 |
Financial Highlights
Variable Portfolio – Moderate Portfolio
Variable Portfolio – Moderate Portfolio
| Net asset value, beginning of period | Net investment income | Net realized and unrealized gain (loss) | Total from investment operations | |
| Class 1 | ||||
| Year Ended 12/31/2021 | $20.95 | 0.25 | 1.70 | 1.95 |
| Year Ended 12/31/2020 | $18.52 | 0.25 | 2.18 | 2.43 |
| Year Ended 12/31/2019(d) | $16.92 | 0.21 | 1.39 | 1.60 |
| Class 2 | ||||
| Year Ended 12/31/2021 | $20.88 | 0.19 | 1.69 | 1.88 |
| Year Ended 12/31/2020 | $18.50 | 0.19 | 2.19 | 2.38 |
| Year Ended 12/31/2019 | $15.93 | 0.22 | 2.35 | 2.57 |
| Year Ended 12/31/2018 | $16.87 | 0.18 | (1.12) | (0.94) |
| Year Ended 12/31/2017 | $14.90 | 0.16 | 1.81 | 1.97 |
| Class 4 | ||||
| Year Ended 12/31/2021 | $20.90 | 0.19 | 1.70 | 1.89 |
| Year Ended 12/31/2020 | $18.53 | 0.19 | 2.18 | 2.37 |
| Year Ended 12/31/2019 | $15.95 | 0.22 | 2.36 | 2.58 |
| Year Ended 12/31/2018 | $16.89 | 0.18 | (1.12) | (0.94) |
| Year Ended 12/31/2017 | $14.92 | 0.16 | 1.81 | 1.97 |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Ratios include interest on collateral expense which is less than 0.01%. |
| (d) | Class 1 shares commenced operations on February 20, 2019. Per share data and total return reflect activity from that date. |
| (e) | Annualized. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 54 | Portfolio Navigator Funds | Annual Report 2021 |
Financial Highlights (continued)
Variable Portfolio – Moderate Portfolio
Variable Portfolio – Moderate Portfolio
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets(a) | Total net expense ratio to average net assets(a),(b) | Net investment income ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Class 1 | |||||||
| Year Ended 12/31/2021 | $22.90 | 9.31% | 0.12%(c) | 0.12%(c) | 1.10% | 21% | $27,263 |
| Year Ended 12/31/2020 | $20.95 | 13.12% | 0.12%(c) | 0.12%(c) | 1.34% | 20% | $9,478 |
| Year Ended 12/31/2019(d) | $18.52 | 9.46% | 0.10%(e) | 0.10%(e) | 1.38%(e) | 9% | $3,412 |
| Class 2 | |||||||
| Year Ended 12/31/2021 | $22.76 | 9.00% | 0.37%(c) | 0.37%(c) | 0.85% | 21% | $9,154,944 |
| Year Ended 12/31/2020 | $20.88 | 12.86% | 0.36%(c) | 0.36%(c) | 1.02% | 20% | $8,700,781 |
| Year Ended 12/31/2019 | $18.50 | 16.13% | 0.35% | 0.35% | 1.23% | 9% | $8,144,403 |
| Year Ended 12/31/2018 | $15.93 | (5.57%) | 0.35% | 0.35% | 1.05% | 10% | $7,293,208 |
| Year Ended 12/31/2017 | $16.87 | 13.22% | 0.32% | 0.32% | 1.03% | 5% | $8,266,265 |
| Class 4 | |||||||
| Year Ended 12/31/2021 | $22.79 | 9.04% | 0.37%(c) | 0.37%(c) | 0.85% | 21% | $8,626,480 |
| Year Ended 12/31/2020 | $20.90 | 12.79% | 0.36%(c) | 0.36%(c) | 1.01% | 20% | $8,888,631 |
| Year Ended 12/31/2019 | $18.53 | 16.18% | 0.35% | 0.35% | 1.23% | 9% | $9,035,588 |
| Year Ended 12/31/2018 | $15.95 | (5.56%) | 0.35% | 0.35% | 1.05% | 10% | $9,032,721 |
| Year Ended 12/31/2017 | $16.89 | 13.20% | 0.32% | 0.32% | 1.03% | 5% | $11,144,165 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Portfolio Navigator Funds | Annual Report 2021 | 55 |
Financial Highlights
Variable Portfolio – Moderately Aggressive Portfolio
Variable Portfolio – Moderately Aggressive Portfolio
| Net asset value, beginning of period | Net investment income | Net realized and unrealized gain (loss) | Total from investment operations | |
| Class 1 | ||||
| Year Ended 12/31/2021 | $23.15 | 0.20 | 2.72 | 2.92 |
| Year Ended 12/31/2020 | $20.26 | 0.18 | 2.71 | 2.89 |
| Year Ended 12/31/2019(d) | $18.37 | 0.18 | 1.71 | 1.89 |
| Class 2 | ||||
| Year Ended 12/31/2021 | $23.08 | 0.15 | 2.69 | 2.84 |
| Year Ended 12/31/2020 | $20.24 | 0.12 | 2.72 | 2.84 |
| Year Ended 12/31/2019 | $17.05 | 0.18 | 3.01 | 3.19 |
| Year Ended 12/31/2018 | $18.34 | 0.15 | (1.44) | (1.29) |
| Year Ended 12/31/2017 | $15.79 | 0.13 | 2.42 | 2.55 |
| Class 4 | ||||
| Year Ended 12/31/2021 | $23.11 | 0.15 | 2.70 | 2.85 |
| Year Ended 12/31/2020 | $20.27 | 0.12 | 2.72 | 2.84 |
| Year Ended 12/31/2019 | $17.07 | 0.18 | 3.02 | 3.20 |
| Year Ended 12/31/2018 | $18.37 | 0.15 | (1.45) | (1.30) |
| Year Ended 12/31/2017 | $15.81 | 0.13 | 2.43 | 2.56 |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Ratios include interest on collateral expense which is less than 0.01%. |
| (d) | Class 1 shares are based on operations from February 20, 2019 (commencement of operations) through the stated period end. |
| (e) | Annualized. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 56 | Portfolio Navigator Funds | Annual Report 2021 |
Financial Highlights (continued)
Variable Portfolio – Moderately Aggressive Portfolio
Variable Portfolio – Moderately Aggressive Portfolio
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets(a) | Total net expense ratio to average net assets(a),(b) | Net investment income ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Class 1 | |||||||
| Year Ended 12/31/2021 | $26.07 | 12.61% | 0.13%(c) | 0.13%(c) | 0.81% | 20% | $95,758 |
| Year Ended 12/31/2020 | $23.15 | 14.26% | 0.14%(c) | 0.14%(c) | 0.89% | 21% | $37,600 |
| Year Ended 12/31/2019(d) | $20.26 | 10.29% | 0.12%(e) | 0.12%(e) | 1.11%(e) | 10% | $9,932 |
| Class 2 | |||||||
| Year Ended 12/31/2021 | $25.92 | 12.31% | 0.38%(c) | 0.38%(c) | 0.59% | 20% | $4,099,901 |
| Year Ended 12/31/2020 | $23.08 | 14.03% | 0.39%(c) | 0.39%(c) | 0.61% | 21% | $4,203,023 |
| Year Ended 12/31/2019 | $20.24 | 18.71% | 0.37% | 0.37% | 0.97% | 10% | $4,208,417 |
| Year Ended 12/31/2018 | $17.05 | (7.03%) | 0.36% | 0.36% | 0.80% | 10% | $4,016,103 |
| Year Ended 12/31/2017 | $18.34 | 16.15% | 0.33% | 0.33% | 0.79% | 6% | $4,764,394 |
| Class 4 | |||||||
| Year Ended 12/31/2021 | $25.96 | 12.33% | 0.38%(c) | 0.38%(c) | 0.59% | 20% | $3,412,547 |
| Year Ended 12/31/2020 | $23.11 | 14.01% | 0.39%(c) | 0.39%(c) | 0.60% | 21% | $3,420,498 |
| Year Ended 12/31/2019 | $20.27 | 18.75% | 0.37% | 0.37% | 0.97% | 10% | $3,546,614 |
| Year Ended 12/31/2018 | $17.07 | (7.08%) | 0.36% | 0.36% | 0.80% | 10% | $3,625,919 |
| Year Ended 12/31/2017 | $18.37 | 16.19% | 0.33% | 0.33% | 0.78% | 6% | $4,658,189 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Portfolio Navigator Funds | Annual Report 2021 | 57 |
Financial Highlights
Variable Portfolio – Aggressive Portfolio
Variable Portfolio – Aggressive Portfolio
| Net asset value, beginning of period | Net investment income | Net realized and unrealized gain (loss) | Total from investment operations | |
| Class 1 | ||||
| Year Ended 12/31/2021 | $25.39 | 0.16 | 3.91 | 4.07 |
| Year Ended 12/31/2020 | $22.02 | 0.13 | 3.24 | 3.37 |
| Year Ended 12/31/2019(d) | $19.79 | 0.14 | 2.09 | 2.23 |
| Class 2 | ||||
| Year Ended 12/31/2021 | $25.32 | 0.11 | 3.88 | 3.99 |
| Year Ended 12/31/2020 | $22.02 | 0.07 | 3.23 | 3.30 |
| Year Ended 12/31/2019 | $18.11 | 0.13 | 3.78 | 3.91 |
| Year Ended 12/31/2018 | $19.81 | 0.11 | (1.81) | (1.70) |
| Year Ended 12/31/2017 | $16.66 | 0.10 | 3.05 | 3.15 |
| Class 4 | ||||
| Year Ended 12/31/2021 | $25.36 | 0.11 | 3.89 | 4.00 |
| Year Ended 12/31/2020 | $22.06 | 0.07 | 3.23 | 3.30 |
| Year Ended 12/31/2019 | $18.13 | 0.13 | 3.80 | 3.93 |
| Year Ended 12/31/2018 | $19.84 | 0.11 | (1.82) | (1.71) |
| Year Ended 12/31/2017 | $16.69 | 0.10 | 3.05 | 3.15 |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Ratios include interest on collateral expense which is less than 0.01%. |
| (d) | Class 1 shares commenced operations on February 20, 2019. Per share data and total return reflect activity from that date. |
| (e) | Annualized. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 58 | Portfolio Navigator Funds | Annual Report 2021 |
Financial Highlights (continued)
Variable Portfolio – Aggressive Portfolio
Variable Portfolio – Aggressive Portfolio
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets(a) | Total net expense ratio to average net assets(a),(b) | Net investment income ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Class 1 | |||||||
| Year Ended 12/31/2021 | $29.46 | 16.03% | 0.13%(c) | 0.13%(c) | 0.58% | 22% | $43,538 |
| Year Ended 12/31/2020 | $25.39 | 15.30% | 0.13%(c) | 0.13%(c) | 0.58% | 21% | $14,487 |
| Year Ended 12/31/2019(d) | $22.02 | 11.27% | 0.11%(e) | 0.11%(e) | 0.78%(e) | 14% | $4,083 |
| Class 2 | |||||||
| Year Ended 12/31/2021 | $29.31 | 15.76% | 0.38%(c) | 0.38%(c) | 0.40% | 22% | $1,459,446 |
| Year Ended 12/31/2020 | $25.32 | 14.99% | 0.37%(c) | 0.37%(c) | 0.32% | 21% | $1,429,508 |
| Year Ended 12/31/2019 | $22.02 | 21.59% | 0.36% | 0.36% | 0.64% | 14% | $1,403,662 |
| Year Ended 12/31/2018 | $18.11 | (8.58%) | 0.36% | 0.36% | 0.53% | 10% | $1,301,923 |
| Year Ended 12/31/2017 | $19.81 | 18.91% | 0.33% | 0.33% | 0.53% | 9% | $1,529,935 |
| Class 4 | |||||||
| Year Ended 12/31/2021 | $29.36 | 15.77% | 0.38%(c) | 0.38%(c) | 0.40% | 22% | $1,136,491 |
| Year Ended 12/31/2020 | $25.36 | 14.96% | 0.37%(c) | 0.37%(c) | 0.31% | 21% | $1,095,527 |
| Year Ended 12/31/2019 | $22.06 | 21.68% | 0.36% | 0.36% | 0.64% | 14% | $1,112,840 |
| Year Ended 12/31/2018 | $18.13 | (8.62%) | 0.36% | 0.36% | 0.53% | 10% | $1,079,305 |
| Year Ended 12/31/2017 | $19.84 | 18.87% | 0.33% | 0.33% | 0.53% | 9% | $1,384,255 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Portfolio Navigator Funds | Annual Report 2021 | 59 |
Notes to Financial Statements
December 31, 2021
December 31, 2021
Note 1. Organization
Columbia Funds Variable Series
Trust II (the Trust) is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust. Information presented
in these financial statements pertains to the following series of the Trust (each, a Fund and collectively, the Funds): Variable Portfolio – Conservative Portfolio; Variable Portfolio – Moderately
Conservative Portfolio; Variable Portfolio – Moderate Portfolio; Variable Portfolio – Moderately Aggressive Portfolio and Variable Portfolio – Aggressive Portfolio.
Each Fund is a "fund-of-funds",
investing significantly in affiliated funds managed by Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial), its
affiliates, or third-party advised (unaffiliated) funds, including exchange-traded funds (collectively, Underlying Funds). Each Fund is exposed to the same risks as the Underlying Funds in direct proportion to the
allocation of its assets among the Underlying Funds. For information on the investment strategies, operations and risks of the Underlying Funds, please refer to the Fund’s current prospectus as well as the
prospectuses and shareholder reports of the Underlying Funds, which are available from the Securities and Exchange Commission’s website at www.sec.gov or on the Underlying Funds’ website at
columbiathreadneedleus.com/investor/.
Each Fund currently operates as a
diversified fund.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). Each Fund offers Class 1, Class 2 and Class 4 shares. Class 1 shares are offered to separate accounts funding variable annuity contracts and variable life insurance policies
(collectively, Contracts) issued by affiliated life insurance companies (Participating Insurance Companies) and other qualified institutional investors (Qualified Investors) authorized by Columbia Management
Investment Distributors, Inc. (the Distributor). Class 2 shares are offered to Contracts issued by affiliated life insurance companies, RiverSource Life Insurance Company and RiverSource Life Insurance Co. of New York
(Participating Insurance Companies). Class 4 shares are offered to participants in the Portfolio Navigator program, and to owners of other series of annuity contracts or life insurance policies issued by Participating
Insurance Companies. You may not buy (nor will you own) shares of the Funds directly. You invest by buying a Contract and making all allocations to the subaccounts that invest in each Fund. Although all share classes
generally have identical voting, dividend and liquidation rights, each share class votes separately when required by the Trust’s organizational documents or by law. Each share class has its own expense
structure.
Note 2. Summary of
significant accounting policies
Basis of preparation
Each Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Funds in the preparation of their financial statements.
Security valuation
Investments in the Underlying Funds
(other than exchange-traded funds (ETFs)), are valued at the latest net asset value reported by those companies as of the valuation time.
Futures and options on futures
contracts are valued based upon the settlement price at the close of regular trading on their principal exchanges or, in the absence of a settlement price, at the mean of the latest quoted bid and ask prices.
Swap transactions are valued
through an independent pricing service or broker, or if neither is available, through an internal model based upon observable inputs.
| 60 | Portfolio Navigator Funds | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Funds’ Portfolio of Investments.
Foreign currency transactions and
translations
The values of all assets and
liabilities denominated in foreign currencies are generally translated into U.S. dollars at exchange rates determined at the close of regular trading on the New York Stock Exchange. Net realized and unrealized gains
(losses) on foreign currency transactions and translations include gains (losses) arising from the fluctuation in exchange rates between trade and settlement dates on securities transactions, gains (losses) arising
from the disposition of foreign currency and currency gains (losses) between the accrual and payment dates on dividends, interest income and foreign withholding taxes.
For financial statement purposes,
the Funds do not distinguish that portion of gains (losses) on investments which is due to changes in foreign exchange rates from that which is due to changes in market prices of the investments. Such fluctuations are
included with the net realized and unrealized gains (losses) on investments in the Statement of Operations.
Derivative instruments
Each Fund invests in certain
derivative instruments, as detailed below, in seeking to meet its investment objectives. Derivatives are instruments whose values depend on, or are derived from, in whole or in part, the value of one or more
securities, currencies, commodities, indices, or other assets or instruments. Derivatives may be used to increase investment flexibility (including to maintain cash reserves while maintaining desired exposure to
certain assets), for risk management (hedging) purposes, to facilitate trading, to reduce transaction costs and to pursue higher investment returns. The Fund may also use derivative instruments to mitigate certain
investment risks, such as foreign currency exchange rate risk, interest rate risk and credit risk. Derivatives may involve various risks, including the potential inability of the counterparty to fulfill its
obligations under the terms of the contract, the potential for an illiquid secondary market (making it difficult for the Fund to sell or terminate, including at favorable prices) and the potential for market movements
which may expose the Fund to gains or losses in excess of the amount shown in the Statement of Assets and Liabilities. The notional amounts of derivative instruments, if applicable, are not recorded in the financial
statements.
A derivative instrument may suffer
a marked-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform its
obligations under the contract. The Fund’s risk of loss from counterparty credit risk on over-the-counter derivatives is generally limited to the aggregate unrealized gain netted against any collateral held by
the Fund and the amount of any variation margin held by the counterparty, plus any replacement costs or related amounts. With exchange-traded or centrally cleared derivatives, there is reduced counterparty credit risk
to the Fund since the clearinghouse or central counterparty (CCP) provides some protection in the case of clearing member default. The clearinghouse or CCP stands between the buyer and the seller of the contract;
therefore, additional counterparty credit risk is failure of the clearinghouse or CCP. However, credit risk still exists in exchange-traded or centrally cleared derivatives with respect to initial and variation margin
that is held in a clearing broker’s customer account. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into
bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients, U.S. bankruptcy laws will typically allocate that shortfall on a pro-rata basis
across all the clearing broker’s customers (including the Fund), potentially resulting in losses to the Fund.
| Portfolio Navigator Funds | Annual Report 2021 | 61 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
In order to better define its
contractual rights and to secure rights that will help the Fund mitigate its counterparty risk, the Fund may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (ISDA Master Agreement)
or similar agreement with its derivatives counterparties. An ISDA Master Agreement is an agreement between the Fund and a counterparty that governs over-the-counter derivatives and typically contains, among other
things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset with the counterparty
certain derivative instrument’s payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment
in the event of default (close-out netting), including the bankruptcy or insolvency of the counterparty. Note, however, that bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or
prohibitions against the right of offset or netting in bankruptcy, insolvency or other events.
Collateral (margin) requirements
differ by type of derivative. Margin requirements are established by the clearinghouse or CCP for exchange-traded and centrally cleared derivatives. Brokers can ask for margin in excess of the minimum in certain
circumstances. Collateral terms for most over-the-counter derivatives are subject to regulatory requirements to exchange variation margin with trading counterparties and may have contract specific margin terms as
well. For over-the-counter derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the marked-to-market amount for each transaction under such agreement and
comparing that amount to the value of any variation margin currently pledged by the Fund and/or the counterparty. Generally, the amount of collateral due from or to a party has to exceed a minimum transfer amount
threshold (e.g., $250,000) before a transfer has to be made. To the extent amounts due to the Fund from its counterparties are not fully collateralized, contractually or otherwise, the Fund bears the risk of loss from
counterparty nonperformance. The Fund may also pay interest expense on collateral to the broker and/or CCP. Any interest expense paid by the Fund is shown on the Statement of Operations. The Fund attempts to mitigate
counterparty risk by only entering into agreements with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties.
Certain ISDA Master Agreements
allow counterparties of over-the-counter derivatives transactions to terminate derivatives contracts prior to maturity in the event the Fund’s net asset value declines by a stated percentage over a specified
time period or if the Fund fails to meet certain terms of the ISDA Master Agreement, which would cause the Fund to accelerate payment of any net liability owed to the counterparty. The Fund also has termination rights
if the counterparty fails to meet certain terms of the ISDA Master Agreement. In addition to considering counterparty credit risk, the Fund would consider terminating the derivatives contracts based on whether
termination would result in a net liability owed from the counterparty.
For financial reporting purposes,
the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statement of Assets and Liabilities.
Futures contracts
Futures contracts are
exchange-traded and represent commitments for the future purchase or sale of an asset at a specified price on a specified date. Each Fund bought and sold futures contracts to produce incremental earnings, to manage
the duration and yield curve exposure of the Fund versus the benchmark, to manage exposure to movements in interest rates, to manage exposure to the securities market and to maintain appropriate equity market exposure
while keeping sufficient cash to accommodate daily redemptions. These instruments may be used for other purposes in future periods. Upon entering into futures contracts, the Fund bears risks that it may not achieve
the anticipated benefits of the futures contracts and may realize a loss. Additional risks include counterparty credit risk, the possibility of an illiquid market, and that a change in the value of the contract or
option may not correlate with changes in the value of the underlying asset.
Upon entering into a futures
contract, the Fund deposits cash or securities with the broker, known as a futures commission merchant (FCM), in an amount sufficient to meet the initial margin requirement. The initial margin deposit must be
maintained at an established level over the life of the contract. Cash deposited as initial margin is recorded in the Statement of Assets and Liabilities as margin deposits. Securities deposited as initial margin are
designated in the Portfolio of Investments. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily change in the contract value and are
recorded as variation margin receivable or payable and are offset in unrealized gains or losses. The Fund generally expects to earn interest income on its margin deposits. The Fund recognizes a realized gain or loss
when the contract is closed or expires. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities.
| 62 | Portfolio Navigator Funds | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Swap contracts
Swap contracts are negotiated in
the over-the-counter market and may be entered into as a bilateral contract or centrally cleared (centrally cleared swap contract). In a centrally cleared swap contract, immediately following execution of the swap
contract with a broker, the swap contract is novated to a central counterparty (the CCP) and the CCP becomes the Fund’s counterparty to the centrally cleared swap contract. The Fund is required to deposit
initial margin with the futures commission merchant (FCM), which pledges it through to the CCP in the form of cash or securities in an amount that varies depending on the size and risk profile of the particular swap
contract. Securities deposited as initial margin are designated in the Portfolio of Investments and cash deposited is recorded in the Statement of Assets and Liabilities as margin deposits. For a bilateral swap
contract, the Fund has credit exposure to the broker, but exchanges daily variation margin with the broker based on the mark-to-market value of the swap contract to minimize that exposure. For centrally cleared swap
contracts, the Fund has minimal credit exposure to the FCM because the CCP stands between the Fund and the relevant buyer/seller on the other side of the contract. Swap contracts are marked-to-market daily and changes
in value are recorded as unrealized appreciation (depreciation). The daily change in valuation of centrally cleared swap contracts, if any, is recorded as a receivable or payable for variation margin in the Statement
of Assets and Liabilities.
Entering into these contracts
involves, to varying degrees, elements of interest, liquidity and counterparty credit risk in excess of the amounts recognized in the Statement of Assets and Liabilities. Such risks involve the possibility that there
may be unfavorable changes in interest rates, market conditions or other conditions, that it may be difficult to initiate a swap transaction or liquidate a position at an advantageous time or price which may result in
significant losses, and that the FCM or CCP may not fulfill its obligation under the contract.
Credit default swap contracts
Certain Funds entered into credit
default swap contracts as detailed below:
| Credit default swap contracts | Funds |
| To increase or decrease its credit exposure to an index | Variable Portfolio — Conservative Portfolio Variable Portfolio — Moderately Conservative Portfolio Variable Portfolio — Moderate Portfolio Variable Portfolio — Moderately Aggressive Portfolio Variable Portfolio — Aggressive Portfolio |
| To manage credit risk exposure | Variable Portfolio — Conservative Portfolio Variable Portfolio — Moderately Conservative Portfolio Variable Portfolio — Moderate Portfolio Variable Portfolio — Moderately Aggressive Portfolio Variable Portfolio — Aggressive Portfolio |
These instruments may be used
for other purposes in future periods. Credit default swap contracts are transactions in which one party pays fixed periodic payments to a counterparty in consideration for a guarantee from the counterparty to make a
specific payment should a specified credit event(s) take place. Although specified credit events are contract specific, credit events are typically bankruptcy, failure to pay, restructuring, obligation acceleration,
obligation default, or repudiation/moratorium.
As the purchaser of a credit
default swap contract, the Fund purchases protection by paying a periodic interest rate on the notional amount to the counterparty. The interest amount is accrued daily as a component of unrealized appreciation
(depreciation) and is recorded as a realized loss upon payment. If a credit event as specified in the contract occurs, the Fund may have the option either to deliver the reference obligation to the seller in exchange
for a cash payment of its par amount, or to receive a net cash settlement equal to the par amount less an agreed-upon value of the reference obligation as of the date of the credit event. The difference between the
value of the obligation or cash delivered and the notional amount received will be recorded as a realized gain (loss).
As the seller of a credit default
swap contract, the Fund sells protection to a buyer and will generally receive a periodic interest rate on a notional amount. The interest amount is accrued daily as a component of unrealized appreciation
(depreciation) and is recorded as a realized gain upon receipt of the payment. If a credit event as specified in the contract with the counterparty occurs, the Fund may either be required to accept the reference
obligation from the buyer in exchange
| Portfolio Navigator Funds | Annual Report 2021 | 63 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
for a cash payment of its notional amount, or to
pay the buyer a net cash settlement equal to the notional amount less an agreed-upon value of the reference obligation (recovery value) as of the date of the credit event. The difference between the value of the
obligation or cash received and the notional amount paid will be recorded as a realized gain (loss). The maximum potential amount of undiscounted future payments the Fund could be required to make as the seller of
protection under a credit default swap contract is equal to the notional amount of the reference obligation. These potential amounts may be partially offset by any recovery values of the respective reference
obligations or upfront receipts upon entering into the agreement. The notional amounts and market values of all credit default swap contracts in which the Fund is the seller of protection, if any, are disclosed in the
Credit Default Swap Contracts Outstanding schedule following the Portfolio of Investments.
As a protection seller, the Fund
bears the risk of loss from the credit events specified in the contract with the counterparty. For credit default swap contracts on credit indices, quoted market prices and resulting market values serve as an
indicator of the current status of the payment/performance risk. Increasing market values, in absolute terms when compared to the notional amount of the swap, represent a deterioration of the reference entity’s
credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the contract.
Any upfront payment or receipt by
the Fund upon entering into a credit default swap contract is recorded as an asset or liability, respectively, and amortized daily as a component of realized gain (loss) in the Statement of Operations. Credit default
swap contracts are valued daily, and the change in value is recorded as unrealized appreciation (depreciation) until the termination of the swap, at which time a realized gain (loss) is recorded.
Credit default swap contracts can
involve greater risks than if a fund had invested in the reference obligation directly since, in addition to general market risks, credit default swaps are subject to counterparty credit risk, leverage risk, hedging
risk, correlation risk and liquidity risk.
Effects of derivative transactions in
the financial statements
The following tables are intended
to provide additional information about the effect of derivatives on the financial statements of the Funds, including: the fair value of derivatives by risk category and the location of those fair values in the
Statements of Assets and Liabilities; and the impact of derivative transactions over the period in the Statements of Operations, including realized gains or losses and unrealized gains or losses. The derivative
schedules following the Portfolio of Investments present additional information regarding derivative instruments outstanding at the end of the period, if any.
Variable Portfolio –
Conservative Portfolio
The following table is a summary of
the fair value of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) at December 31, 2021:
| Asset derivatives | ||
| Risk exposure category | Statement of assets and liabilities location | Fair value ($) |
| Equity risk | Component of trust capital — unrealized appreciation on futures contracts | 800,507* |
| Interest rate risk | Component of trust capital — unrealized appreciation on futures contracts | 108,658* |
| Total | 909,165 |
| Liability derivatives | ||
| Risk exposure category | Statement of assets and liabilities location | Fair value ($) |
| Equity risk | Component of trust capital - unrealized depreciation on futures contracts | 52,465* |
| * | Includes cumulative appreciation (depreciation) as reported in the tables following the Portfolio of Investments. Only the current day’s variation margin is reported in receivables or payables in the Statement of Assets and Liabilities. |
| 64 | Portfolio Navigator Funds | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
The following table indicates the
effect of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) in the Statement of Operations for the year ended December 31, 2021:
| Amount of realized gain (loss) on derivatives recognized in income | ||||||
| Risk exposure category | Futures contracts ($) | Swap contracts ($) | Total ($) | |||
| Credit risk | — | 145,670 | 145,670 | |||
| Equity risk | (2,869,731) | — | (2,869,731) | |||
| Interest rate risk | (6,817,272) | — | (6,817,272) | |||
| Total | (9,687,003) | 145,670 | (9,541,333) | |||
| Change in unrealized appreciation (depreciation) on derivatives recognized in income | ||||||
| Risk exposure category | Futures contracts ($) | Swap contracts ($) | Total ($) | |||
| Credit risk | — | (38,914) | (38,914) | |||
| Equity risk | 3,253,861 | — | 3,253,861 | |||
| Interest rate risk | 962,241 | — | 962,241 | |||
| Total | 4,216,102 | (38,914) | 4,177,188 | |||
The following table is a summary
of the average outstanding volume by derivative instrument for the year ended December 31, 2021:
| Derivative instrument | Average notional amounts ($) |
| Futures contracts — long | 68,264,056* |
| Futures contracts — short | 13,227,485* |
| Credit default swap contracts — sell protection | 7,797,425** |
| * | Based on the ending quarterly outstanding amounts for the year ended December 31, 2021. |
| ** | Based on the ending daily outstanding amounts for the year ended December 31, 2021. |
Variable Portfolio –
Moderately Conservative Portfolio
The following table is a summary of
the fair value of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) at December 31, 2021:
| Asset derivatives | ||
| Risk exposure category | Statement of assets and liabilities location | Fair value ($) |
| Equity risk | Component of trust capital — unrealized appreciation on futures contracts | 2,243,559* |
| Interest rate risk | Component of trust capital — unrealized appreciation on futures contracts | 41,214* |
| Total | 2,284,773 |
| Liability derivatives | ||
| Risk exposure category | Statement of assets and liabilities location | Fair value ($) |
| Equity risk | Component of trust capital - unrealized depreciation on futures contracts | 64,622* |
| * | Includes cumulative appreciation (depreciation) as reported in the tables following the Portfolio of Investments. Only the current day’s variation margin is reported in receivables or payables in the Statement of Assets and Liabilities. |
| Portfolio Navigator Funds | Annual Report 2021 | 65 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
The following table indicates the
effect of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) in the Statement of Operations for the year ended December 31, 2021:
| Amount of realized gain (loss) on derivatives recognized in income | ||||||
| Risk exposure category | Futures contracts ($) | Swap contracts ($) | Total ($) | |||
| Credit risk | — | 348,854 | 348,854 | |||
| Equity risk | (1,920,577) | — | (1,920,577) | |||
| Interest rate risk | (8,289,083) | — | (8,289,083) | |||
| Total | (10,209,660) | 348,854 | (9,860,806) | |||
| Change in unrealized appreciation (depreciation) on derivatives recognized in income | ||||||
| Risk exposure category | Futures contracts ($) | Swap contracts ($) | Total ($) | |||
| Credit risk | — | (87,897) | (87,897) | |||
| Equity risk | 3,950,368 | — | 3,950,368 | |||
| Interest rate risk | 1,044,938 | — | 1,044,938 | |||
| Total | 4,995,306 | (87,897) | 4,907,409 | |||
The following table is a summary
of the average outstanding volume by derivative instrument for the year ended December 31, 2021:
| Derivative instrument | Average notional amounts ($) |
| Futures contracts — long | 127,893,514* |
| Futures contracts — short | 14,427,337* |
| Credit default swap contracts — sell protection | 19,060,230** |
| * | Based on the ending quarterly outstanding amounts for the year ended December 31, 2021. |
| ** | Based on the ending daily outstanding amounts for the year ended December 31, 2021. |
Variable Portfolio – Moderate
Portfolio
The following table is a summary of
the fair value of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) at December 31, 2021:
| Asset derivatives | ||
| Risk exposure category | Statement of assets and liabilities location | Fair value ($) |
| Credit risk | Component of trust capital — unrealized appreciation on swap contracts | 24,512* |
| Equity risk | Component of trust capital — unrealized appreciation on futures contracts | 15,862,399* |
| Total | 15,886,911 |
| Liability derivatives | ||
| Risk exposure category | Statement of assets and liabilities location | Fair value ($) |
| Equity risk | Component of trust capital - unrealized depreciation on futures contracts | 883,233* |
| * | Includes cumulative appreciation (depreciation) as reported in the tables following the Portfolio of Investments. Only the current day’s variation margin is reported in receivables or payables in the Statement of Assets and Liabilities. |
| 66 | Portfolio Navigator Funds | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
The following table indicates the
effect of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) in the Statement of Operations for the year ended December 31, 2021:
| Amount of realized gain (loss) on derivatives recognized in income | ||||||
| Risk exposure category | Futures contracts ($) | Swap contracts ($) | Total ($) | |||
| Credit risk | — | 2,706,490 | 2,706,490 | |||
| Equity risk | 31,470,372 | — | 31,470,372 | |||
| Interest rate risk | (42,012,450) | — | (42,012,450) | |||
| Total | (10,542,078) | 2,706,490 | (7,835,588) | |||
| Change in unrealized appreciation (depreciation) on derivatives recognized in income | ||||||
| Risk exposure category | Futures contracts ($) | Swap contracts ($) | Total ($) | |||
| Credit risk | — | (681,942) | (681,942) | |||
| Equity risk | 22,613,829 | — | 22,613,829 | |||
| Interest rate risk | 2,732,350 | — | 2,732,350 | |||
| Total | 25,346,179 | (681,942) | 24,664,237 | |||
The following table is a summary
of the average outstanding volume by derivative instrument for the year ended December 31, 2021:
| Derivative instrument | Average notional amounts ($) |
| Futures contracts — long | 692,170,775* |
| Futures contracts — short | 142,627,977** |
| Credit default swap contracts — sell protection | 128,866,250* |
| * | Based on the ending quarterly outstanding amounts for the year ended December 31, 2021. |
| ** | Based on the ending daily outstanding amounts for the year ended December 31, 2021. |
Variable Portfolio –
Moderately Aggressive Portfolio
The following table is a summary of
the fair value of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) at December 31, 2021:
| Asset derivatives | ||
| Risk exposure category | Statement of assets and liabilities location | Fair value ($) |
| Equity risk | Component of trust capital — unrealized appreciation on futures contracts | 8,021,344* |
| Interest rate risk | Component of trust capital — unrealized appreciation on futures contracts | 718,072* |
| Total | 8,739,416 |
| Liability derivatives | ||
| Risk exposure category | Statement of assets and liabilities location | Fair value ($) |
| Equity risk | Component of trust capital - unrealized depreciation on futures contracts | 461,864* |
| * | Includes cumulative appreciation (depreciation) as reported in the tables following the Portfolio of Investments. Only the current day’s variation margin is reported in receivables or payables in the Statement of Assets and Liabilities. |
| Portfolio Navigator Funds | Annual Report 2021 | 67 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
The following table indicates the
effect of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) in the Statement of Operations for the year ended December 31, 2021:
| Amount of realized gain (loss) on derivatives recognized in income | ||||||
| Risk exposure category | Futures contracts ($) | Swap contracts ($) | Total ($) | |||
| Credit risk | — | 931,078 | 931,078 | |||
| Equity risk | 47,452,104 | — | 47,452,104 | |||
| Interest rate risk | (26,982,749) | — | (26,982,749) | |||
| Total | 20,469,355 | 931,078 | 21,400,433 | |||
| Change in unrealized appreciation (depreciation) on derivatives recognized in income | ||||||
| Risk exposure category | Futures contracts ($) | Swap contracts ($) | Total ($) | |||
| Credit risk | — | (231,495) | (231,495) | |||
| Equity risk | 6,394,832 | — | 6,394,832 | |||
| Interest rate risk | 3,355,213 | — | 3,355,213 | |||
| Total | 9,750,045 | (231,495) | 9,518,550 | |||
The following table is a summary
of the average outstanding volume by derivative instrument for the year ended December 31, 2021:
| Derivative instrument | Average notional amounts ($) |
| Futures contracts — long | 600,090,927* |
| Futures contracts — short | 20,242,410* |
| Credit default swap contracts — sell protection | 51,097,523** |
| * | Based on the ending quarterly outstanding amounts for the year ended December 31, 2021. |
| ** | Based on the ending daily outstanding amounts for the year ended December 31, 2021. |
Variable Portfolio –
Aggressive Portfolio
The following table is a summary of
the fair value of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) at December 31, 2021:
| Asset derivatives | ||
| Risk exposure category | Statement of assets and liabilities location | Fair value ($) |
| Credit risk | Component of trust capital — unrealized appreciation on swap contracts | 3,709* |
| Equity risk | Component of trust capital — unrealized appreciation on futures contracts | 3,155,048* |
| Total | 3,158,757 |
| Liability derivatives | ||
| Risk exposure category | Statement of assets and liabilities location | Fair value ($) |
| Equity risk | Component of trust capital - unrealized depreciation on futures contracts | 409,841* |
| * | Includes cumulative appreciation (depreciation) as reported in the tables following the Portfolio of Investments. Only the current day’s variation margin is reported in receivables or payables in the Statement of Assets and Liabilities. |
| 68 | Portfolio Navigator Funds | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
The following table indicates the
effect of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) in the Statement of Operations for the year ended December 31, 2021:
| Amount of realized gain (loss) on derivatives recognized in income | ||||||
| Risk exposure category | Futures contracts ($) | Swap contracts ($) | Total ($) | |||
| Credit risk | — | 140,083 | 140,083 | |||
| Equity risk | 18,308,590 | — | 18,308,590 | |||
| Interest rate risk | (2,577,741) | — | (2,577,741) | |||
| Total | 15,730,849 | 140,083 | 15,870,932 | |||
| Change in unrealized appreciation (depreciation) on derivatives recognized in income | ||||||
| Risk exposure category | Futures contracts ($) | Swap contracts ($) | Total ($) | |||
| Credit risk | — | (31,441) | (31,441) | |||
| Equity risk | 2,582,018 | — | 2,582,018 | |||
| Interest rate risk | (54,767) | — | (54,767) | |||
| Total | 2,527,251 | (31,441) | 2,495,810 | |||
The following table is a summary
of the average outstanding volume by derivative instrument for the year ended December 31, 2021:
| Derivative instrument | Average notional amounts ($)* |
| Futures contracts — long | 152,590,580 |
| Futures contracts — short | 3,703,131 |
| Credit default swap contracts — sell protection | 8,772,500 |
| * | Based on the ending quarterly outstanding amounts for the year ended December 31, 2021. |
Offsetting of assets and
liabilities
The following table presents the
Fund’s gross and net amount of assets and liabilities available for offset under netting arrangements as well as any related collateral received or pledged by the Fund as of December 31, 2021:
Variable Portfolio – Moderate
Portfolio
| Morgan Stanley ($) | ||
| Assets | ||
| Centrally cleared credit default swap contracts (a) | 10,583 | |
| Total financial and derivative net assets | 10,583 | |
| Total collateral received (pledged) (b) | - | |
| Net amount (c) | 10,583 |
| (a) | Centrally cleared swaps are included within payable/receivable for variation margin on the Statement of Assets and Liabilities. |
| (b) | In some instances, the actual collateral received and/or pledged may be more than the amount shown due to overcollateralization. |
| (c) | Represents the net amount due from/(to) counterparties in the event of default. |
| Portfolio Navigator Funds | Annual Report 2021 | 69 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Variable Portfolio –
Aggressive Portfolio
| Morgan Stanley ($) | ||
| Assets | ||
| Centrally cleared credit default swap contracts (a) | 2,085 | |
| Total financial and derivative net assets | 2,085 | |
| Total collateral received (pledged) (b) | - | |
| Net amount (c) | 2,085 |
| (a) | Centrally cleared swaps are included within payable/receivable for variation margin on the Statement of Assets and Liabilities. |
| (b) | In some instances, the actual collateral received and/or pledged may be more than the amount shown due to overcollateralization. |
| (c) | Represents the net amount due from/(to) counterparties in the event of default. |
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
Income recognition
Income and capital gain
distributions from the Underlying Funds, if any, are recorded on the ex-dividend date.
Expenses
General expenses of the Trust are
allocated to the Funds and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to a Fund are
charged to that Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
Determination of class net asset
value
All income, expenses (other than
class-specific expenses which are charged directly to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of a Fund on a daily basis, based
on the relative net assets of each class, for purposes of determining the net asset value of each class.
Federal income tax status
Each Fund is treated as a
partnership for federal income tax purposes, and the Funds do not expect to make regular distributions. The Funds will not be subject to federal income tax, and therefore, there is no provision for federal income
taxes. The partners of each Fund are subject to tax on their distributive share of the Fund’s income and loss. The components of each Fund’s net assets are reported at the partner-level for federal income
tax purposes, and therefore, are not presented in the Statement of Assets and Liabilities.
Management of the Funds has
concluded that there are no significant uncertain tax positions in the Funds that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment
at a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Funds’ federal tax returns for
the prior three fiscal years remain subject to examination by the Internal Revenue Service.
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Funds’ contracts with their service providers contain general indemnification clauses. The Funds’ maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Funds cannot be determined, and the Funds have no historical basis for predicting the likelihood of any such claims.
| 70 | Portfolio Navigator Funds | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Note 3. Fees and other
transactions with affiliates
Management services fees and
underlying fund fees
Each Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager). Under the Management Agreement, the Investment Manager provides the Fund with investment research and advice, as well as
administrative and accounting services. The management services fee is an annual fee that is a blend of (i) 0.02% on assets invested in affiliated underlying funds (including exchange-traded funds and closed-end
funds) that pay a management fee (or investment advisory fee, as applicable) to the Investment Manager, and (ii) a fee that declines from 0.72% to 0.52%, depending on asset levels, on assets invested in securities
(other than affiliated underlying funds (including exchange-traded funds and closed-end funds) that pay a management fee to the Investment Manager), including other funds advised by the Investment Manager that do not
pay a management fee to the Investment Manager, third party funds, derivatives and individual securities.
The effective management services
fee rates based on each Fund’s average daily net assets for the year ended December 31, 2021 were as follows:
| Effective management services fee rate (%) | |
| Variable Portfolio – Conservative Portfolio | 0.05 |
| Variable Portfolio – Moderately Conservative Portfolio | 0.05 |
| Variable Portfolio – Moderate Portfolio | 0.06 |
| Variable Portfolio – Moderately Aggressive Portfolio | 0.06 |
| Variable Portfolio – Aggressive Portfolio | 0.06 |
In addition to the fees and
expenses which the Funds bear directly, the Funds indirectly bear a pro rata share of the fees and expenses of the Underlying Funds in which the Funds invest. Because the Underlying Funds have varied expense and fee
levels and the Funds may own different proportions of Underlying Funds at different times, the amount of fees and expenses incurred indirectly by the Funds will vary. These expenses are not reflected in the expenses
shown in Statement of Operations and are not included in the ratios to average net assets shown in the Financial Highlights.
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Funds as disclosed in the Statement of Operations. Under a Deferred Compensation Plan (the
Deferred Plan), these members of the Board of Trustees may elect to defer payment of up to 100% of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of
certain funds managed by the Investment Manager. Each Fund’s liability for these amounts is adjusted for market value changes and remains in the Funds until distributed in accordance with the Deferred Plan. All
amounts payable under the Deferred Plan constitute a general unsecured obligation of the Funds. The expense for the Deferred Plan, which includes Trustees’ fees deferred during the current period as well as any
gains or losses on the Trustees’ deferred compensation balances as a result of market fluctuations, is included in "Compensation of board members" on the Statement of Operations.
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Funds in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is
allocated to the Funds, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
Service fees
Each Fund has entered into a
Shareholder Services Agreement with Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial. Under this
agreement, each Fund pays a service fee equal to the payments made by the Transfer Agent to Participating Insurance
| Portfolio Navigator Funds | Annual Report 2021 | 71 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Companies and other financial intermediaries
(together, Participating Organizations) for services each such Participating Organization provides to its clients, customers and participants that are invested directly or indirectly in each Fund, up to a cap approved
by the Board of Trustees from time to time.
For the year ended December 31,
2021, each Fund’s effective service fee rate as a percentage of the Fund’s average daily net assets was as follows:
| Effective service fee rate (%) | |
| Variable Portfolio – Conservative Portfolio | 0.06 |
| Variable Portfolio – Moderately Conservative Portfolio | 0.06 |
| Variable Portfolio – Moderate Portfolio | 0.06 |
| Variable Portfolio – Moderately Aggressive Portfolio | 0.06 |
| Variable Portfolio – Aggressive Portfolio | 0.06 |
The Transfer Agent may retain as
compensation for its services revenues from fees for wire, telephone and redemption orders, account transcripts due the Transfer Agent from Fund shareholders and interest (net of bank charges) earned with respect to
balances in accounts the Transfer Agent maintains in connection with its services to each Fund.
Distribution and/or service fees
The Funds have an agreement with
Columbia Management Investment Distributors, Inc. (the Distributor), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution services. Under a Plan and Agreement
of Distribution, each Fund pays a fee at an annual rate of up to 0.25% of each Fund’s average daily net assets attributable to Class 2 and Class 4 shares. The Funds pay no distribution and service fees for Class
1 shares.
Expenses waived/reimbursed by the
Investment Manager and its affiliates
The Investment Manager and certain
of its affiliates have contractually agreed to waive fees and/or reimburse expenses (excluding certain fees and expenses described below) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, so that each Fund’s net operating expenses, after giving effect to fees waived/expenses reimbursed and any balance credits and/or overdraft charges from the Funds’
custodian, do not exceed the following annual rate(s) as a percentage of the classes’ average daily net assets:
| Contractual expense cap July 1, 2021 through April 30, 2022 | Voluntary expense cap May 1, 2021 through June 30, 2021 | Contractual expense cap prior to May 1, 2021 | |||||||
| Class 1 (%) | Class 2 (%) | Class 4 (%) | Class 1 (%) | Class 2 (%) | Class 4 (%) | Class 1 (%) | Class 2 (%) | Class 4 (%) | |
| Variable Portfolio - Conservative Portfolio | 0.22 | 0.47 | 0.47 | 0.22 | 0.47 | 0.47 | 0.22 | 0.47 | 0.47 |
| Variable Portfolio - Moderately Conservative Portfolio | 0.22 | 0.47 | 0.47 | 0.22 | 0.47 | 0.47 | 0.22 | 0.47 | 0.47 |
| Variable Portfolio - Moderate Portfolio | 0.19 | 0.44 | 0.44 | 0.19 | 0.44 | 0.44 | 0.19 | 0.44 | 0.44 |
| Variable Portfolio - Moderately Aggressive Portfolio | 0.18 | 0.43 | 0.43 | 0.18 | 0.43 | 0.43 | 0.18 | 0.43 | 0.43 |
| Variable Portfolio - Aggressive Portfolio | 0.18 | 0.43 | 0.43 | 0.18 | 0.43 | 0.43 | 0.18 | 0.43 | 0.43 |
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), expenses associated with investments in affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange-traded funds), transaction costs and
brokerage commissions, costs related to any securities lending program, dividend expenses associated with securities sold short, inverse floater program fees and expenses, transaction charges and interest on borrowed
money, interest, costs associated with certain shareholder meetings, infrequent and/or unusual expenses and any other expenses the exclusion of which is
| 72 | Portfolio Navigator Funds | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
specifically approved by the Board of Trustees.
This agreement may be modified or amended only with approval from the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements
described above are not recoverable by the Investment Manager or its affiliates in future periods.
Note 4. Portfolio
information
For the year ended December 31,
2021, the cost of purchases and proceeds from sales of investments in the Underlying Funds, but excluding investments in money market funds and derivatives, if any, for each Fund aggregated to:
| Purchases ($) | Proceeds from sales ($) | |
| Variable Portfolio – Conservative Portfolio | 265,525,499 | 486,100,319 |
| Variable Portfolio – Moderately Conservative Portfolio | 528,306,158 | 787,926,464 |
| Variable Portfolio – Moderate Portfolio | 3,563,791,189 | 4,610,615,228 |
| Variable Portfolio – Moderately Aggressive Portfolio | 1,415,138,625 | 2,124,573,294 |
| Variable Portfolio – Aggressive Portfolio | 534,330,651 | 758,032,670 |
The amount of purchase and sale
activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 5. Affiliated money
market fund
Each Fund may invest in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by each Fund and other affiliated funds (the Affiliated MMF). The income earned by the Funds from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, each Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with
a floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes
referred to as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
Note 6. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, each Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Funds did not borrow or lend
money under the Interfund Program during the year ended December 31, 2021.
Note 7. Line of credit
Each Fund has access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to an October 28, 2021 amendment and restatement, the credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment
Manager or an affiliated investment manager, severally and not jointly, permits collective borrowings up to $950 million. Interest is currently charged to each participating fund based on its borrowings at a rate
equal to the higher of (i) the federal funds effective rate, (ii) the secured overnight financing rate plus 0.11448% and (iii) the overnight bank funding rate, plus in each case, 1.00%. Each borrowing under the credit
facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The
| Portfolio Navigator Funds | Annual Report 2021 | 73 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
commitment fee is included in other expenses in
the Statement of Operations. This agreement expires annually in October unless extended or renewed. Prior to the October 28, 2021 amendment and restatement, the Fund had access to a revolving credit facility with a
syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. which permitted collective borrowings up to $950 million. Interest was charged to each participating fund based on its
borrowings at a rate equal to the higher of (i) the federal funds effective rate, (ii) the one-month London Interbank Offered Rate (LIBOR) rate and (iii) the overnight bank funding rate, plus in each case,
1.25%.
No Fund had borrowings during the
year ended December 31, 2021.
Note 8. Significant
risks
Derivatives risk
Variable Portfolio –
Conservative Portfolio may be more susceptible to derivatives risk. Losses involving derivative instruments may be substantial, because a relatively small movement in the underlying reference (which is generally
the price, rate or other economic indicator associated with a security(ies), commodity, currency or index or other instrument or asset) may result in a substantial loss for the Fund. In addition to the potential for
increased losses, the use of derivative instruments may lead to increased volatility within the Fund. Derivatives will typically increase the Fund’s exposure to principal risks to which it is otherwise exposed,
and may expose the Fund to additional risks, including correlation risk, counterparty risk, hedging risk, leverage risk, liquidity risk and pricing risk.
Market risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
The coronavirus disease 2019 and
its variants (COVID-19) pandemic has resulted in, and may continue to result in, significant global economic and societal disruption and market volatility due to disruptions in market access, resource availability,
facilities operations, imposition of tariffs, export controls and supply chain disruption, among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement
and loss in human and other resources. The uncertainty surrounding the magnitude, duration, reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental
authorities or other third parties, present unknowns that are yet to unfold. The impacts, as well as the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and
pandemics that may arise in the future – could negatively affect global economies and markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in
emerging market countries may be greater due to generally less established healthcare systems, governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing
political, social and economic risks in certain countries or globally. The disruptions caused by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively
impact the Fund’s ability to achieve its investment objectives. Any such event(s) could have a significant adverse impact on the value and risk profile of the Fund.
| 74 | Portfolio Navigator Funds | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Shareholder concentration risk
At December 31, 2021, the
Investment Manager and affiliates owned 100% of Class 1, Class 2 and Class 4 shares for each Fund. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Funds. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of
less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Note 9. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
Note 10. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in
connection with the conduct of their business activities. Ameriprise Financial believes that the Funds are not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject
of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts
with the Funds. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (SEC) on legal and regulatory matters that relate to
Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that
these matters, or the adverse publicity associated with them, will not result in increased Fund redemptions, reduced sale of Fund shares or other adverse consequences to the Funds. Further, although we believe
proceedings are not likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines,
penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial or one or more of its affiliates that provides services to
the Funds.
| Portfolio Navigator Funds | Annual Report 2021 | 75 |
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees of Columbia
Funds Variable Series Trust II and Shareholders of Variable Portfolio – Conservative Portfolio, Variable Portfolio – Moderately Conservative Portfolio, Variable Portfolio – Moderate Portfolio,
Variable Portfolio – Moderately Aggressive Portfolio, and Variable Portfolio – Aggressive Portfolio
Opinions on the Financial
Statements
We have audited the accompanying
statements of assets and liabilities, including the portfolios of investments, of Variable Portfolio - Conservative Portfolio, Variable Portfolio - Moderately Conservative Portfolio, Variable Portfolio - Moderate
Portfolio, Variable Portfolio - Moderately Aggressive Portfolio, and Variable Portfolio - Aggressive Portfolio (five of the funds constituting Columbia Funds Variable Series Trust II, hereafter collectively referred
to as the "Funds") as of December 31, 2021, the related statements of operations for the year ended December 31, 2021, the statements of changes in net assets for each of the two years in the period ended December 31,
2021, including the related notes, and the financial highlights for each of the periods indicated therein (collectively referred to as the "financial statements"). In our opinion, the financial statements present
fairly, in all material respects, the financial position of each of the Funds as of December 31, 2021, the results of each of their operations for the year then ended, the changes in each of their net assets for each
of the two years in the period ended December 31, 2021 and each of the financial highlights for each of the periods indicated therein in conformity with accounting principles generally accepted in the United States of
America.
Basis for Opinions
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 Funds 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, 2021 by correspondence with the custodian, transfer agent and brokers. We believe that
our audits provide a reasonable basis for our opinions.
/s/PricewaterhouseCoopers LLP
Minneapolis, Minnesota
February 18, 2022
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| 76 | Portfolio Navigator Funds | Annual Report 2021 |
TRUSTEES AND OFFICERS
The Board oversees the Funds’
operations and appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following table provides basic biographical information about the Funds’ Trustees as
of the printing of this report, including their principal occupations during the past five years, although specific titles for individuals may have varied over the period. The year set forth beneath Length of Service
in the table below is the year in which the Trustee was first appointed or elected as Trustee to any Fund currently in the Columbia Funds Complex or a predecessor thereof. Under current Board policy, each Trustee
generally serves until December 31 of the year such Trustee turns seventy-five (75).
Independent trustees
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| George S. Batejan c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1953 | Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 176 | Former Chairman of the Board, NICSA (National Investment Company Services Association) (Executive Committee, Nominating Committee and Governance Committee), 2014-2016; former Director, Intech Investment Management, 2011-2016; former Board Member, Metro Denver Chamber of Commerce, 2015-2016; former Advisory Board Member, University of Colorado Business School, 2015-2018 |
| Kathleen Blatz c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2006 | Attorney, specializing in arbitration and mediation; Chief Justice, Minnesota Supreme Court, 1998-2006; Associate Justice, Minnesota Supreme Court, 1996-1998; Fourth Judicial District Court Judge, Hennepin County, 1994-1996; Attorney in private practice and public service, 1984-1993; State Representative, Minnesota House of Representatives, 1979-1993, which included service on the Tax and Financial Institutions and Insurance Committees; Member and Interim Chair, Minnesota Sports Facilities Authority, January 2017-July 2017; Interim President and Chief Executive Officer, Blue Cross Blue Shield of Minnesota (health care insurance), February-July 2018, April-October 2021 | 176 | Former Trustee, Blue Cross Blue Shield of Minnesota, 2009-2021 (Chair of the Business Development Committee, 2014-2017; Chair of the Governance Committee, 2017-2019); former Member and Chair of the Board, Minnesota Sports Facilities Authority, January 2017-July 2017; former Director, Robina Foundation, 2009-2020 (Chair, 2014-2020); Director, Schulze Family Foundation, since 2021 |
| Pamela G. Carlton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2007 | President, Springboard — Partners in Cross Cultural Leadership (consulting company) since 2003; Managing Director of US Equity Research, JP Morgan Chase, 1999-2003; Director of US Equity Research, Chase Asset Management, 1996-1999; Co-Director Latin America Research, 1993-1996, COO Global Research, 1992-1996, Co-Director of US Research, 1991-1992, Investment Banker, Morgan Stanley, 1982-1991, Morgan Stanley; Attorney, Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 176 | Trustee, New York Presbyterian Hospital Board (Executive Committee and Chair of People Committee) since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee); Director, Apollo Commercial Real Estate Finance, Inc. since 2021; the Governing Council of the Independent Directors Council (IDC), since 2021 |
| Portfolio Navigator Funds | Annual Report 2021 | 77 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Janet Langford Carrig c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1957 | Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 174 | Director, EQT Corporation (natural gas producer) since 2019; Director, Whiting Petroleum Corporation (independent oil and gas company) since 2020 |
| J. Kevin Connaughton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2020 | Member, FINRA National Adjudicatory Council since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Consultant to Independent Trustees of CFVIT and CFST I from March 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Managing Director and General Manager of Mutual Fund Products, Columbia Management Investment Advisers, LLC, May 2010-February 2015; President, Columbia Funds, 2008-2015; and senior officer of Columbia Funds and affiliated funds, 2003-2015 | 174 | Former Director, The Autism Project, March 2015-December 2021; former Member of the Investment Committee, St. Michael’s College, November 2015-February 2020; former Trustee, St. Michael’s College, June 2017-September 2019; former Trustee, New Century Portfolios, January 2015-December 2017 |
| Olive M. Darragh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since 2020 | Managing Director of Darragh Inc. (strategy and talent management consulting firm) since 2010; Founder and CEO, Zolio, Inc. (investment management talent identification platform) since 2004; Consultant to Independent Trustees of CFVIT and CFST I from June 2019 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 2001-2004 | 174 | Former Director, University of Edinburgh Business School (Member of US Board); former Director, Boston Public Library Foundation |
| Patricia M. Flynn c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1950 | Trustee since 2004 | Trustee Professor of Economics and Management, Bentley University since 1976 (also teaches and conducts research on corporate governance); Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 176 | Trustee, MA Taxpayers Foundation since 1997; Board of Governors, Innovation Institute, MA Technology Collaborative, 2010-2020; former Board of Directors, The MA Business Roundtable, 2003-2019 |
| Brian J. Gallagher c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 176 | Trustee, Catholic Schools Foundation since 2004 |
| 78 | Portfolio Navigator Funds | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Douglas A. Hacker c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1955 | Co-Chair since 2021; Chair of CFST I and CFVIT since 2014; Trustee of CFST I and CFVIT since 1996 and CFST, CFST II, CFVST II, CET I and CET II since 2021 | Independent business executive since May 2006; Executive Vice President – Strategy of United Airlines, December 2002 - May 2006; President of UAL Loyalty Services (airline marketing company), September 2001-December 2002; Executive Vice President and Chief Financial Officer of United Airlines, July 1999-September 2001 | 176 | Director, Spartan Nash Company (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing); former Director, Nash Finch Company (food distributor), 2005-2013; former Director, SeaCube Container Leasing Ltd. (container leasing), 2010-2013; and former Director, Travelport Worldwide Limited (travel information technology), 2014-2019 |
| Nancy T. Lukitsh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1956 | Trustee since 2011 | Senior Vice President, Partner and Director of Marketing, Wellington Management Company, LLP (investment adviser), 1997-2010; Chair, Wellington Management Portfolios (commingled non-U.S. investment pools), 2007 -2010; Director, Wellington Trust Company, NA and other Wellington affiliates, 1997-2010 | 174 | None |
| David M. Moffett c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2011 | Retired; Consultant to Bridgewater and Associates | 174 | Director, CSX Corporation (transportation suppliers); Director, Genworth Financial, Inc. (financial and insurance products and services); Director, PayPal Holdings Inc. (payment and data processing services); Trustee, University of Oklahoma Foundation; former Director, eBay Inc. (online trading community), 2007-2015; and former Director, CIT Bank, CIT Group Inc. (commercial and consumer finance), 2010-2016 |
| Catherine James Paglia c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Co-Chair since 2021; Chair of CFST, CFST II, CFVST II, CET I and CET II since 2020; Trustee of CFST, CFST II and CFVST II since 2004 and CFST I and CFVIT since 2021 | Director, Enterprise Asset Management, Inc. (private real estate and asset management company) since September 1998; Managing Director and Partner, Interlaken Capital, Inc., 1989-1997; Vice President, 1982-1985, Principal, 1985-1987, Managing Director, 1987-1989, Morgan Stanley; Vice President, Investment Banking, 1980-1982, Associate, Investment Banking, 1976-1980, Dean Witter Reynolds, Inc. | 176 | Director, Valmont Industries, Inc. (irrigation systems manufacturer) since 2012; Trustee, Carleton College (on the Investment Committee); Trustee, Carnegie Endowment for International Peace (on the Investment Committee) |
| Portfolio Navigator Funds | Annual Report 2021 | 79 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Minor M. Shaw c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1947 | Trustee since 2003 | President, Micco LLC (private investments) since 2011; President, Micco Corp. (family investment business), 1998-2011 | 176 | Director, Blue Cross Blue Shield of South Carolina (Chair of Compensation Committee) since April 2008; Trustee, Hollingsworth Funds (on the Investment Committee) since 2016 (previously Board Chair from 2016-2019); Former Advisory Board member, Duke Energy Corp., 2016-2020; Chair of the Duke Endowment; Chair of Greenville – Spartanburg Airport Commission; former Trustee, BofA Funds Series Trust (11 funds), 2003-2011; former Director, Piedmont Natural Gas, 2004-2016; former Director, National Association of Corporate Directors, Carolinas Chapter, 2013-2018; Chair, Daniel-Mickel Foundation since 1998 |
| Natalie A. Trunow c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1967 | Trustee since 2020 | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services), January 2016-January 2021; Non-executive Member of the Investment Committee and Valuation Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services), August 2018-January 2021; Advisor, Paradigm Asset Management, November 2016-December 2021; Consultant to Independent Trustees of CFVIT and CFST I from September 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Director of Investments/Consultant, Casey Family Programs, April 2016-November 2016; Senior Vice President and Chief Investment Officer, Calvert Investments, August 2008-January 2016; Section Head and Portfolio Manager, General Motors Asset Management, June 1997-August 2008 | 174 | Former Director, Investment Committee, Health Services for Children with Special Needs, Inc., 2012-2019; Director, Chair of Audit Committee, Consumer Credit Counseling Services (formerly Guidewell Financial Solutions), since 2019; Independent Director, Investment Committee and Valuation Committee, Sarona Asset Management, since 2019 |
| Sandra Yeager c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2017 | Retired; President and founder, Hanoverian Capital, LLC (SEC registered investment advisor firm), 2008-2016; Managing Director, DuPont Capital, 2006-2008; Managing Director, Morgan Stanley Investment Management, 2004-2006; Senior Vice President, Alliance Bernstein, 1990-2004 | 176 | Former Director, NAPE Education Foundation, October 2016-October 2020 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Fund Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I (CET I), Columbia ETF Trust II (CET II), Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Beckman, Gallagher and Hacker and Mses. Blatz, Carlton, Flynn, Paglia, Shaw and Yeager serve as Directors of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
| 80 | Portfolio Navigator Funds | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Interested trustee affiliated with
Investment Manager*
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during the past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex overseen | Other directorships held by Trustee during the past five years |
| Daniel J. Beckman c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since November 2021(a) | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC (since April 2015); officer of Columbia Funds and affiliated funds since 2020. | 176 | Director, Ameriprise Trust Company, since October 2016; Director, Columbia Management Investment Distributors, Inc. since November 2018; Board of Governors, Columbia Wanger Asset Management, LLC since January 2022 |
| * | Interested person (as defined under the 1940 Act) by reason of being an officer, director, security holder and/or employee of the Investment Manager or Ameriprise Financial. |
| (a) | Mr. Beckman serves as the President and Principal Executive Officer of the Columbia Funds (since 2021). |
Nations Funds refer to the Funds
within the Columbia Funds Complex that historically bore the Nations brand and includes series of Columbia Funds Series Trust. RiverSource Funds refer to the Funds within the Columbia Funds Complex that historically
bore the RiverSource brand and includes series of Columbia Funds Series Trust II.
The Statement of Additional
Information has additional information about the Funds’ Board members and is available, without charge, upon request by calling 800.345.6611 or contacting your financial intermediary.
The Board has appointed officers
who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. The following table provides basic information about the Officers of the
Trusts as of the printing of this report, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Petersen, who is the President
and Principal Executive Officer, the Funds’ other officers are:
Fund officers
| Portfolio Navigator Funds | Annual Report 2021 | 81 |
TRUSTEES AND OFFICERS (continued)
Fund
officers (continued)
| 82 | Portfolio Navigator Funds | Annual Report 2021 |
Additional information
Proxy voting policies and
procedures
The policy of the Board of
Trustees is to vote the proxies of the companies in which each Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without
charge by calling 800.345.6611; contacting your financial intermediary or searching the website of the Securities and Exchange Commission (SEC) at sec.gov. Information regarding how each Fund voted proxies relating to
portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge by visiting columbiathreadneedleus.com/investor/, or
searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
Each Fund files a complete
schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. Each Fund’s Form N-PORT filings are available on the SEC’s website at sec.gov. Each
Fund’s complete schedule of portfolio holdings, as filed on Form N-PORT, can also be obtained without charge, upon request, by calling 800.345.6611.
Additional Fund information
Fund investment manager
Columbia Management Investment Advisers, LLC
290 Congress Street
Boston, MA 02210
Fund distributor
Columbia Management Investment Distributors,
Inc.
290 Congress Street
Boston, MA 02210
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
| Portfolio Navigator Funds | Annual Report 2021 | 83 |
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For fund and other investment product prospectuses, which contain this and other important information, contact your
financial advisor or insurance representative. Please read the prospectus carefully before you invest. Each Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved. Columbia Management Investment Distributors, Inc., 290 Congress Street, Boston, MA 02210
© 2022 Columbia Management Investment
Advisers, LLC.
S-6534 AW (2/22)
Columbia Variable
Portfolio – Commodity Strategy Fund
Please remember that you may not
buy (nor will you own) shares of the Fund directly. The Fund is available through variable annuity contracts and variable life insurance policies offered by the separate accounts of participating insurance companies
as well as qualified pension and retirement plans. Please contact your financial advisor or insurance representative for more information.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
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| 18 | |
| 19 | |
| 20 | |
| 22 | |
| 24 | |
| 37 | |
| 38 |
Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which Columbia Variable Portfolio – Commodity Strategy Fund (the Fund) holds investments consistent with the procedures as stated in the Statement of Additional
Information (SAI). You may obtain a copy of the SAI without charge by calling 800.345.6611; contacting your financial intermediary or searching the website of the Securities and Exchange Commission (SEC) at sec.gov.
Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge
by visiting columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT, and for reporting periods ended prior to March 31, 2019, on Form N-Q. The Fund’s Form N-Q and Form N-PORT
filings are available on the SEC’s website at sec.gov. The Fund’s complete schedule of portfolio holdings, as filed on Form N-Q or Form N-PORT, can also be obtained without charge, upon request, by calling
800.345.6611.
Additional Fund information
You may obtain the current net
asset value (NAV) of Fund shares at no cost by calling 800.345.6611 or by sending an e-mail to serviceinquiries@columbiathreadneedle.com.
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
290 Congress Street
Boston, MA 02210
Fund distributor
Columbia Management Investment Distributors,
Inc.
290 Congress Street
Boston, MA 02210
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
Columbia Variable Portfolio – Commodity
Strategy Fund | Annual Report 2021
Fund at a Glance
Investment objective
The Fund
seeks to provide shareholders with total return.
Portfolio management
Marc Khalamayzer, CFA
Commodity Strategies Co-Portfolio Manager
Managed Fund since 2019
Matthew Ferrelli, CFA
Commodity Strategies Co-Portfolio Manager
Managed Fund since 2019
Ronald Stahl, CFA
Cash/Liquidity Strategies Co-Portfolio Manager
Managed Fund since May 2021
Gregory Liechty
Cash/Liquidity Strategies Co-Portfolio Manager
Managed Fund since May 2021
John D. Dempsey, CFA
Cash/Liquidity Strategies Co-Portfolio Manager
Managed Fund since May 2021
| Columbia Variable Portfolio – Commodity Strategy Fund | Annual Report 2021 | 3 |
Fund at a Glance (continued)
Performance of a hypothetical $10,000 investment (April 30, 2013 — December 31, 2021)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class 2 shares of Columbia Variable Portfolio – Commodity Strategy Fund during the stated time period, and does not reflect the deduction of taxes, if any, that
a shareholder may pay on Fund distributions or on the redemption of Fund shares. The returns also do not reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy or
qualified pension or retirement plan, if any.
| 4 | Columbia Variable Portfolio – Commodity Strategy Fund | Annual Report 2021 |
Manager Discussion of Fund Performance
At December 31, 2021,
approximately 75.77% of the Fund’s shares were owned in the aggregate by affiliated funds-of-funds managed by Columbia Management Investment Advisers, LLC (the Investment Manager). As a result of asset
allocation decisions by the Investment Manager, it is possible that the Fund may experience relatively large purchases or redemptions from affiliated funds-of-funds. The Investment Manager seeks to minimize the impact
of these transactions by structuring them over a reasonable period of time. The Fund may also experience increased expenses as it buys and sells securities as a result of purchases or redemptions by affiliated
funds-of-funds.
For the 12-month period ending
December 31, 2021, the Fund’s Class 2 shares returned 32.01%. The Fund outperformed its benchmark, the Bloomberg Commodity Index Total Return, which returned 27.11% over the same time period. The Fund accesses
commodities markets via listed futures and options contracts, using these commodities futures and options contracts to position the Fund relative to the benchmark and to provide shareholders with total return.
Market overview
Commodity prices from energy and
metals to agricultural products rebounded sharply in 2021, with power fuels leading the rally, driven by tight supplies and a strong economic recovery as COVID-19 vaccinations staved off widespread lockdowns. However,
inflation remained a persistent theme throughout 2021 as the pandemic drove strong consumer demand, which also impacted supply-chain complications and labor shortages for many businesses and industries. The surge in
inflation brought about opportunities for sectors that have historically been considered inflation hedging (such as the broad-based commodities market) as commodity prices rose across nearly all sectors in 2021.
2021 has highlighted how changing
weather patterns due to climate change are a growing risk in the energy markets, affecting both demand and supply. Due to the surge in natural gas and coal prices during the year, both solar and wind power have become
even more competitive as an alternative energy source. With many countries looking to reduce their dependency on fossil fuels, the benefit from accelerating the installation of renewable energy cannot be overstated.
The strong performance in energy was coupled with a struggle in the precious metals sectors of the commodities markets. The Federal Reserve announced that it would look to end its bond-buying stimulus, paving the way
for three potential interest rate hikes by the end of 2022. Additionally, as global banks have begun to tighten, both gold and silver have underperformed as real yields have increased.
The agriculture sector saw some of
the largest gains within the commodities market due to record demand from China, who had been continuing to increase its domestic stockpile of grains. Soybean oil and corn were major contributors in the agricultural
sector due to increased global demand combined with low yielding crops after South America’s continued labor shortage and unpredictable weather patterns. In the “softs” sector, coffee prices
continued to reach new highs, fueled by a shipping crunch, a spike in demand, and dry weather.
The Fund’s notable
contributors during the period
| • | Overweights to energy, grains, and livestock relative to the benchmark contributed positively to performance. |
| • | Within energy, outperformance was led by positioning in natural gas and crude oil. |
| • | In grains, positioning within both soybeans and soybean meal led to positive outperformance against the benchmark. |
| • | Curve positioning within live cattle and an overweight to lean hogs aided strong performance in livestock. |
The Fund’s notable
detractors during the period
| • | Industrial metals, due to allocations to copper and nickel, resulted in a negative total effect for the Fund in this sector. |
| • | Precious metals also led to a negative effect for the year with the Fund’s overweight to gold as well as palladium detracting from performance. |
| • | Within softs, an overweight to coffee as well as security selection within coffee were laggards on performance within the Fund. |
| Columbia Variable Portfolio – Commodity Strategy Fund | Annual Report 2021 | 5 |
Manager Discussion of Fund Performance (continued)
Effective May 2021, Ronald Stahl,
Gregory Liechty, and John D. Dempsey were added as named portfolio managers on the Fund alongside the Commodity Strategies sleeve portfolio managers, Marc Khalamayzer and Matthew Ferrelli. The three new portfolio
managers are responsible for managing the Fund’s Cash/Liquidity Strategies sleeve, which was implemented during the reporting period. The Cash/Liquidity Strategies portfolio managers are responsible for the cash
sleeve only and are not providing input on the commodities portion of the portfolio. Cash will be managed in accordance with the existing prospectus allowances and will focus on highly liquid, short-term securities.
There were no changes to the investment process related to the Commodity Strategies sleeve managed by Marc Khalamayzer and Matthew Ferrelli.
The views expressed in this report
reflect the current views of the respective parties who have contributed to this report. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult
to predict, so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective parties
disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Columbia fund are based on numerous factors, may not be relied on as an
indication of trading intent on behalf of any particular Columbia fund. References to specific securities should not be construed as a recommendation or investment advice.
| 6 | Columbia Variable Portfolio – Commodity Strategy Fund | Annual Report 2021 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur ongoing
costs, which generally include management fees, distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to help you compare these costs with the ongoing costs of investing in other mutual funds.
The information below does not
reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy (collectively, Contracts) or qualified pension and retirement plan (Qualified Plan), if any. The total fees
and expenses you bear may therefore be higher than those shown below.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount invested, to estimate the
expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as redemption or exchange fees, or expenses that apply to the subaccount or the Contract. Therefore, the
hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If the fees and expenses imposed under your Contract or
Qualified Plan, if any, were included, your costs would be higher.
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 365.
Expenses do not include fees and
expenses incurred indirectly by the Fund from its investment in underlying funds, including affiliated and non-affiliated pooled investment vehicles, such as mutual funds and exchange-traded funds.
| Columbia Variable Portfolio – Commodity Strategy Fund | Annual Report 2021 | 7 |
Consolidated Portfolio of Investments
December 31, 2021
December 31, 2021
(Percentages represent value of
investments compared to net assets)
Investments in securities
The accompanying Notes to Consolidated
Financial Statements are an integral part of this statement.
| 8 | Columbia Variable Portfolio – Commodity Strategy Fund | Annual Report 2021 |
Consolidated Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Consolidated
Financial Statements are an integral part of this statement.
| Columbia Variable Portfolio – Commodity Strategy Fund | Annual Report 2021 | 9 |
Consolidated Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Consolidated
Financial Statements are an integral part of this statement.
| 10 | Columbia Variable Portfolio – Commodity Strategy Fund | Annual Report 2021 |
Consolidated Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Consolidated
Financial Statements are an integral part of this statement.
| Columbia Variable Portfolio – Commodity Strategy Fund | Annual Report 2021 | 11 |
Consolidated Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Consolidated
Financial Statements are an integral part of this statement.
| 12 | Columbia Variable Portfolio – Commodity Strategy Fund | Annual Report 2021 |
Consolidated Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
At December 31, 2021,
securities and/or cash totaling $10,262,526 were pledged as collateral.
The accompanying Notes to Consolidated Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Commodity Strategy Fund | Annual Report 2021 | 13 |
Consolidated Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Investments in derivatives
| Long futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| Brent Crude | 34 | 01/2022 | USD | 2,644,520 | 363,298 | — |
| Brent Crude | 2 | 01/2022 | USD | 155,560 | — | (82) |
| Brent Crude | 28 | 03/2022 | USD | 2,153,200 | 247,782 | — |
| Brent Crude | 28 | 05/2022 | USD | 2,123,520 | 194,744 | — |
| Brent Crude | 36 | 07/2022 | USD | 2,692,800 | 11,891 | — |
| Brent Crude | 22 | 07/2022 | USD | 1,645,600 | — | (3,126) |
| Coffee | 3 | 03/2022 | USD | 254,363 | 82,258 | — |
| Coffee | 13 | 05/2022 | USD | 1,101,750 | 8,953 | — |
| Coffee | 27 | 07/2022 | USD | 2,280,656 | 156,464 | — |
| Coffee | 13 | 09/2022 | USD | 1,094,438 | — | (55,460) |
| Copper | 1 | 03/2022 | USD | 111,588 | 5,022 | — |
| Copper | 13 | 05/2022 | USD | 1,447,388 | 56,250 | — |
| Copper | 25 | 07/2022 | USD | 2,776,563 | 86,115 | — |
| Copper | 13 | 09/2022 | USD | 1,439,913 | 38,385 | — |
| Corn | 77 | 03/2022 | USD | 2,284,013 | 75,530 | — |
| Corn | 48 | 05/2022 | USD | 1,428,000 | 55,729 | — |
| Corn | 1 | 05/2022 | USD | 29,750 | — | (54) |
| Corn | 99 | 07/2022 | USD | 2,937,825 | 167,080 | — |
| Corn | 52 | 09/2022 | USD | 1,463,150 | — | (6,175) |
| Cotton | 21 | 03/2022 | USD | 1,182,300 | 101,698 | — |
| Cotton | 15 | 03/2022 | USD | 844,500 | — | (11,471) |
| Cotton | 8 | 05/2022 | USD | 441,920 | 35,304 | — |
| Cotton | 1 | 05/2022 | USD | 55,240 | — | (39) |
| Cotton | 11 | 07/2022 | USD | 593,340 | 19,325 | — |
| Cotton | 7 | 07/2022 | USD | 377,580 | — | (5,127) |
| Cotton | 10 | 12/2022 | USD | 463,250 | 14,317 | — |
| Gas Oil | 28 | 03/2022 | USD | 1,856,400 | 139,155 | — |
| Gas Oil | 13 | 05/2022 | USD | 851,500 | 114,229 | — |
| Gas Oil | 27 | 07/2022 | USD | 1,752,975 | — | (58,732) |
| Gas Oil | 14 | 09/2022 | USD | 905,450 | 28,430 | — |
| Gold 100 oz. | 15 | 02/2022 | USD | 2,742,900 | 39,315 | — |
| Gold 100 oz. | 17 | 04/2022 | USD | 3,112,700 | 139,740 | — |
| Gold 100 oz. | 17 | 06/2022 | USD | 3,116,780 | 102,513 | — |
| Gold 100 oz. | 33 | 08/2022 | USD | 6,058,470 | 60,656 | — |
| Lead | 3 | 03/2022 | USD | 173,550 | 4,369 | — |
| Lean Hogs | 43 | 02/2022 | USD | 1,401,370 | 29,536 | — |
| Lean Hogs | 13 | 04/2022 | USD | 450,970 | 14,601 | — |
| Lean Hogs | 12 | 06/2022 | USD | 468,240 | 31,655 | — |
| Lean Hogs | 11 | 07/2022 | USD | 431,530 | 13,326 | — |
| Lean Hogs | 12 | 08/2022 | USD | 467,040 | 11,837 | — |
| Live Cattle | 33 | 02/2022 | USD | 1,844,040 | 67,374 | — |
| Live Cattle | 18 | 04/2022 | USD | 1,042,740 | 46,325 | — |
| Live Cattle | 18 | 06/2022 | USD | 1,002,240 | 63,930 | — |
| Live Cattle | 37 | 08/2022 | USD | 2,045,360 | 39,052 | — |
| Natural Gas | 100 | 02/2022 | USD | 3,557,000 | 261,219 | — |
| Natural Gas | 12 | 02/2022 | USD | 426,840 | — | (2,805) |
| Natural Gas | 24 | 04/2022 | USD | 846,000 | 33,054 | — |
| Natural Gas | 40 | 04/2022 | USD | 1,410,000 | — | (73,909) |
| Natural Gas | 62 | 06/2022 | USD | 2,255,560 | — | (183,415) |
| Natural Gas | 62 | 08/2022 | USD | 2,259,900 | — | (40,874) |
| Nickel | 1 | 03/2022 | USD | 124,761 | 16,973 | — |
| Nickel | 5 | 05/2022 | USD | 621,165 | 47,092 | — |
| Nickel | 11 | 07/2022 | USD | 1,360,755 | 97,682 | — |
| Nickel | 5 | 09/2022 | USD | 616,425 | 30,325 | — |
| NY Harbor ULSD Heat Oil | 5 | 02/2022 | USD | 484,764 | 43,426 | — |
The accompanying Notes to Consolidated Financial
Statements are an integral part of this statement.
| 14 | Columbia Variable Portfolio – Commodity Strategy Fund | Annual Report 2021 |
Consolidated Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
| Long futures contracts (continued) | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| NY Harbor ULSD Heat Oil | 7 | 04/2022 | USD | 666,998 | 67,214 | — |
| NY Harbor ULSD Heat Oil | 15 | 06/2022 | USD | 1,418,697 | — | (33,324) |
| NY Harbor ULSD Heat Oil | 7 | 08/2022 | USD | 660,412 | 22,028 | — |
| Primary Aluminum | 4 | 03/2022 | USD | 280,800 | 36,884 | — |
| Primary Aluminum | 18 | 05/2022 | USD | 1,262,475 | 106,987 | — |
| Primary Aluminum | 36 | 07/2022 | USD | 2,518,425 | 57,565 | — |
| Primary Aluminum | 18 | 09/2022 | USD | 1,255,500 | 71,214 | — |
| RBOB Gasoline | 23 | 02/2022 | USD | 2,152,828 | 142,157 | — |
| RBOB Gasoline | 7 | 04/2022 | USD | 683,285 | 64,749 | — |
| RBOB Gasoline | 15 | 06/2022 | USD | 1,437,723 | — | (33,249) |
| RBOB Gasoline | 8 | 08/2022 | USD | 744,509 | 26,319 | — |
| Silver | 6 | 03/2022 | USD | 700,560 | — | (16,032) |
| Silver | 7 | 05/2022 | USD | 818,335 | 31,184 | — |
| Silver | 6 | 07/2022 | USD | 702,420 | 17,315 | — |
| Silver | 8 | 07/2022 | USD | 936,560 | — | (43,102) |
| Silver | 7 | 09/2022 | USD | 820,960 | 38,183 | — |
| Soybean | 17 | 03/2022 | USD | 1,138,363 | 10,278 | — |
| Soybean | 19 | 05/2022 | USD | 1,281,550 | 47,835 | — |
| Soybean | 37 | 07/2022 | USD | 2,506,750 | 190,448 | — |
| Soybean | 20 | 11/2022 | USD | 1,269,250 | 27,514 | — |
| Soybean Meal | 36 | 03/2022 | USD | 1,436,760 | 75,486 | — |
| Soybean Meal | 18 | 05/2022 | USD | 714,780 | 85,860 | — |
| Soybean Meal | 37 | 07/2022 | USD | 1,471,120 | 222,801 | — |
| Soybean Meal | 19 | 12/2022 | USD | 722,000 | 44,238 | — |
| Soybean Oil | 14 | 03/2022 | USD | 474,852 | 14,474 | — |
| Soybean Oil | 1 | 03/2022 | USD | 33,918 | — | (353) |
| Soybean Oil | 26 | 05/2022 | USD | 882,492 | 1,962 | — |
| Soybean Oil | 53 | 07/2022 | USD | 1,797,018 | — | (46,171) |
| Soybean Oil | 27 | 12/2022 | USD | 891,162 | 10,111 | — |
| Sugar #11 | 83 | 02/2022 | USD | 1,755,085 | 128,782 | — |
| Sugar #11 | 38 | 04/2022 | USD | 791,616 | — | (25,916) |
| Sugar #11 | 77 | 06/2022 | USD | 1,585,954 | — | (64,013) |
| Sugar #11 | 39 | 09/2022 | USD | 801,965 | — | (9,544) |
| Wheat | 11 | 03/2022 | USD | 423,913 | 72,871 | — |
| Wheat | 4 | 03/2022 | USD | 160,300 | 38,269 | — |
| Wheat | 11 | 05/2022 | USD | 441,100 | 10,993 | — |
| Wheat | 20 | 05/2022 | USD | 774,250 | 2,999 | — |
| Wheat | 23 | 07/2022 | USD | 917,413 | 35,744 | — |
| Wheat | 25 | 07/2022 | USD | 955,625 | 9,530 | — |
| Wheat | 15 | 07/2022 | USD | 573,375 | — | (11,590) |
| Wheat | 3 | 09/2022 | USD | 119,888 | 721 | — |
| Wheat | 8 | 09/2022 | USD | 319,700 | — | (3,794) |
| Wheat | 20 | 09/2022 | USD | 766,500 | — | (20,031) |
| WTI Crude | 48 | 02/2022 | USD | 3,594,240 | 366,759 | — |
| WTI Crude | 36 | 04/2022 | USD | 2,661,840 | 311,365 | — |
| WTI Crude | 73 | 06/2022 | USD | 5,312,940 | — | (96,302) |
| WTI Crude | 37 | 08/2022 | USD | 2,647,720 | 84,241 | — |
| Zinc | 20 | 03/2022 | USD | 1,774,000 | 202,654 | — |
| Zinc | 10 | 05/2022 | USD | 877,500 | 124,311 | — |
| Zinc | 20 | 07/2022 | USD | 1,734,000 | 133,946 | — |
| Zinc | 10 | 09/2022 | USD | 855,750 | 49,036 | — |
| Total | 6,180,986 | (844,690) | ||||
| Short futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| U.S. Treasury 2-Year Note | (50) | 03/2022 | USD | (10,908,594) | 20,586 | — |
The accompanying Notes to Consolidated Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Commodity Strategy Fund | Annual Report 2021 | 15 |
Consolidated Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Notes to Consolidated Portfolio of
Investments
| (a) | Represents privately placed and other securities and instruments exempt from Securities and Exchange Commission registration (collectively, private placements), such as Section 4(a)(2) and Rule 144A eligible securities, which are often sold only to qualified institutional buyers. At December 31, 2021, the total value of these securities amounted to $31,282,681, which represents 23.79% of total net assets. |
| (b) | Variable rate security. The interest rate shown was the current rate as of December 31, 2021. |
| (c) | Represents a variable rate security with a step coupon where the rate adjusts according to a schedule for a series of periods, typically lower for an initial period and then increasing to a higher coupon rate thereafter. The interest rate shown was the current rate as of December 31, 2021. |
| (d) | Principal and interest may not be guaranteed by a governmental entity. |
| (e) | Variable or floating rate security, the interest rate of which adjusts periodically based on changes in current interest rates and prepayments on the underlying pool of assets. The interest rate shown was the current rate as of December 31, 2021. |
| (f) | The rate shown is the seven-day current annualized yield at December 31, 2021. |
| (g) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended December 31, 2021 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Realized gain (loss)($) | Dividends($) | End of period shares |
| Columbia Short-Term Cash Fund, 0.085% | ||||||||
| 57,858,771 | 271,006,209 | (277,416,440) | (10,304) | 51,438,236 | 6,320 | 49,666 | 51,448,526 | |
Abbreviation Legend
| CMO | Collateralized Mortgage Obligation |
| LIBOR | London Interbank Offered Rate |
| SOFR | Secured Overnight Financing Rate |
Currency Legend
| USD | US Dollar |
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The accompanying Notes to Consolidated Financial
Statements are an integral part of this statement.
| 16 | Columbia Variable Portfolio – Commodity Strategy Fund | Annual Report 2021 |
Consolidated Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Fair value measurements (continued)
The Committee meets at least monthly to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The Committee meets at least monthly to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at December 31, 2021:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Investments in Securities | ||||
| Asset-Backed Securities — Non-Agency | — | 22,668,072 | — | 22,668,072 |
| Commercial Mortgage-Backed Securities - Non-Agency | — | 2,105,345 | — | 2,105,345 |
| Corporate Bonds & Notes | — | 34,187,264 | — | 34,187,264 |
| Foreign Government Obligations | — | 603,570 | — | 603,570 |
| Residential Mortgage-Backed Securities - Non-Agency | — | 6,321,186 | — | 6,321,186 |
| Treasury Bills | 699,744 | — | — | 699,744 |
| U.S. Government & Agency Obligations | — | 704,638 | — | 704,638 |
| Money Market Funds | 51,438,236 | — | — | 51,438,236 |
| Total Investments in Securities | 52,137,980 | 66,590,075 | — | 118,728,055 |
| Investments in Derivatives | ||||
| Asset | ||||
| Futures Contracts | 6,201,572 | — | — | 6,201,572 |
| Liability | ||||
| Futures Contracts | (844,690) | — | — | (844,690) |
| Total | 57,494,862 | 66,590,075 | — | 124,084,937 |
See the Consolidated Portfolio of
Investments for all investment classifications not indicated in the table.
The Fund’s assets assigned to
the Level 2 input category are generally valued using the market approach, in which a security’s value is determined through reference to prices and information from market transactions for similar or identical
assets.
Derivative instruments are valued at
unrealized appreciation (depreciation).
The accompanying Notes to Consolidated Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Commodity Strategy Fund | Annual Report 2021 | 17 |
Consolidated Statement of Assets and
Liabilities
December 31, 2021
December 31, 2021
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $67,567,251) | $67,289,819 |
| Affiliated issuers (cost $51,434,588) | 51,438,236 |
| Cash | 3,215,986 |
| Margin deposits on: | |
| Futures contracts | 10,262,526 |
| Receivable for: | |
| Capital shares sold | 16,818 |
| Dividends | 2,866 |
| Interest | 144,616 |
| Foreign tax reclaims | 280 |
| Variation margin for futures contracts | 686,957 |
| Prepaid expenses | 7,339 |
| Total assets | 133,065,443 |
| Liabilities | |
| Payable for: | |
| Investments purchased | 298,360 |
| Capital shares purchased | 34,402 |
| Variation margin for futures contracts | 1,136,164 |
| Management services fees | 2,278 |
| Distribution and/or service fees | 199 |
| Service fees | 2,965 |
| Compensation of board members | 45,325 |
| Compensation of chief compliance officer | 26 |
| Other expenses | 28,279 |
| Total liabilities | 1,547,998 |
| Net assets applicable to outstanding capital stock | $131,517,445 |
| Represented by | |
| Paid in capital | 239,314,278 |
| Total distributable earnings (loss) | (107,796,833) |
| Total - representing net assets applicable to outstanding capital stock | $131,517,445 |
| Class 1 | |
| Net assets | $102,521,576 |
| Shares outstanding | 17,902,863 |
| Net asset value per share | $5.73 |
| Class 2 | |
| Net assets | $28,995,869 |
| Shares outstanding | 5,132,271 |
| Net asset value per share | $5.65 |
The accompanying Notes to Consolidated Financial
Statements are an integral part of this statement.
| 18 | Columbia Variable Portfolio – Commodity Strategy Fund | Annual Report 2021 |
Consolidated Statement of Operations
Year Ended December 31, 2021
Year Ended December 31, 2021
| Net investment income | |
| Income: | |
| Dividends — affiliated issuers | $49,666 |
| Interest | 212,386 |
| Total income | 262,052 |
| Expenses: | |
| Management services fees | 833,930 |
| Distribution and/or service fees | |
| Class 2 | 57,700 |
| Service fees | 35,600 |
| Compensation of board members | 23,533 |
| Custodian fees | 13,782 |
| Printing and postage fees | 16,708 |
| Audit fees | 39,500 |
| Legal fees | 11,246 |
| Interest on collateral | 19,131 |
| Compensation of chief compliance officer | 25 |
| Other | 10,566 |
| Total expenses | 1,061,721 |
| Net investment loss | (799,669) |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | (2,152) |
| Investments — affiliated issuers | 6,320 |
| Futures contracts | 41,250,042 |
| Net realized gain | 41,254,210 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | (277,267) |
| Investments — affiliated issuers | (10,304) |
| Futures contracts | (3,251,785) |
| Net change in unrealized appreciation (depreciation) | (3,539,356) |
| Net realized and unrealized gain | 37,714,854 |
| Net increase in net assets resulting from operations | $36,915,185 |
The accompanying Notes to
Consolidated Financial Statements are an integral part of this statement.
| Columbia Variable Portfolio – Commodity Strategy Fund | Annual Report 2021 | 19 |
Consolidated Statement of Changes in Net
Assets
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | |
| Operations | ||
| Net investment income (loss) | $(799,669) | $277,004 |
| Net realized gain (loss) | 41,254,210 | (36,877,312) |
| Net change in unrealized appreciation (depreciation) | (3,539,356) | (5,702,567) |
| Net increase (decrease) in net assets resulting from operations | 36,915,185 | (42,302,875) |
| Distributions to shareholders | ||
| Net investment income and net realized gains | ||
| Class 1 | (254,188) | (19,062,618) |
| Class 2 | — | (2,984,500) |
| Total distributions to shareholders | (254,188) | (22,047,118) |
| Decrease in net assets from capital stock activity | (24,249,059) | (236,796,521) |
| Total increase (decrease) in net assets | 12,411,938 | (301,146,514) |
| Net assets at beginning of year | 119,105,507 | 420,252,021 |
| Net assets at end of year | $131,517,445 | $119,105,507 |
| Year Ended | Year Ended | |||
| December 31, 2021 | December 31, 2020 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class 1 | ||||
| Subscriptions | 394,790 | 2,119,779 | 186,081 | 897,221 |
| Distributions reinvested | 45,717 | 254,188 | 4,990,214 | 19,062,618 |
| Redemptions | (6,362,572) | (34,120,629) | (54,185,035) | (259,794,964) |
| Net decrease | (5,922,065) | (31,746,662) | (49,008,740) | (239,835,125) |
| Class 2 | ||||
| Subscriptions | 2,402,551 | 12,553,461 | 1,179,004 | 5,047,225 |
| Distributions reinvested | — | — | 791,645 | 2,984,500 |
| Redemptions | (979,530) | (5,055,858) | (1,183,598) | (4,993,121) |
| Net increase | 1,423,021 | 7,497,603 | 787,051 | 3,038,604 |
| Total net decrease | (4,499,044) | (24,249,059) | (48,221,689) | (236,796,521) |
The accompanying Notes to Consolidated Financial
Statements are an integral part of this statement.
| 20 | Columbia Variable Portfolio – Commodity Strategy Fund | Annual Report 2021 |
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| Columbia Variable Portfolio – Commodity Strategy Fund | Annual Report 2021 | 21 |
Consolidated Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect any fees and expenses imposed under your
Contract and/or Qualified Plan, as applicable; such fees and expenses would reduce the total returns for all periods shown. Total return and portfolio turnover are not annualized for periods of less than one year. The
portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain derivatives, if any. If such transactions were included, the Fund’s portfolio
turnover rate may be higher.
| Net asset value, beginning of period | Net investment income (loss) | Net realized and unrealized gain (loss) | Total from investment operations | Distributions from net investment income | Total distributions to shareholders | |
| Class 1 | ||||||
| Year Ended 12/31/2021 | $4.33 | (0.03) | 1.44 | 1.41 | (0.01) | (0.01) |
| Year Ended 12/31/2020 | $5.55 | 0.01 | (0.22) | (0.21) | (1.01) | (1.01) |
| Year Ended 12/31/2019 | $5.21 | 0.08 | 0.33 | 0.41 | (0.07) | (0.07) |
| Year Ended 12/31/2018 | $6.05 | 0.07 | (0.90) | (0.83) | (0.01) | (0.01) |
| Year Ended 12/31/2017 | $6.33 | 0.01 | 0.07 | 0.08 | (0.36) | (0.36) |
| Class 2 | ||||||
| Year Ended 12/31/2021 | $4.28 | (0.04) | 1.41 | 1.37 | — | — |
| Year Ended 12/31/2020 | $5.50 | (0.02) | (0.20) | (0.22) | (1.00) | (1.00) |
| Year Ended 12/31/2019 | $5.15 | 0.07 | 0.33 | 0.40 | (0.05) | (0.05) |
| Year Ended 12/31/2018 | $6.00 | 0.06 | (0.91) | (0.85) | — | — |
| Year Ended 12/31/2017 | $6.27 | (0.01) | 0.08 | 0.07 | (0.34) | (0.34) |
| Notes to Consolidated Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Ratios include interest on collateral expense. If interest on collateral expense had been excluded, expenses would have been lower by 0.01%. |
| (d) | Ratios include interfund lending expense which is less than 0.01%. |
The accompanying Notes to
Consolidated Financial Statements are an integral part of this statement.
| 22 | Columbia Variable Portfolio – Commodity Strategy Fund | Annual Report 2021 |
Consolidated Financial Highlights (continued)
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets(a) | Total net expense ratio to average net assets(a),(b) | Net investment income (loss) ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Class 1 | |||||||
| Year Ended 12/31/2021 | $5.73 | 32.63% | 0.76%(c) | 0.76%(c) | (0.56%) | 101% | $102,522 |
| Year Ended 12/31/2020 | $4.33 | (1.29%) | 0.70% | 0.70% | 0.23% | 0% | $103,243 |
| Year Ended 12/31/2019 | $5.55 | 7.80% | 0.66% | 0.66% | 1.53% | 0% | $404,193 |
| Year Ended 12/31/2018 | $5.21 | (13.77%) | 0.66%(d) | 0.66%(d) | 1.18% | 0% | $226,877 |
| Year Ended 12/31/2017 | $6.05 | 1.80% | 0.69% | 0.69% | 0.15% | 0% | $536,624 |
| Class 2 | |||||||
| Year Ended 12/31/2021 | $5.65 | 32.01% | 1.01%(c) | 1.01%(c) | (0.80%) | 101% | $28,996 |
| Year Ended 12/31/2020 | $4.28 | (1.55%) | 0.98% | 0.98% | (0.39%) | 0% | $15,862 |
| Year Ended 12/31/2019 | $5.50 | 7.78% | 0.91% | 0.91% | 1.29% | 0% | $16,059 |
| Year Ended 12/31/2018 | $5.15 | (14.17%) | 0.92%(d) | 0.92%(d) | 1.05% | 0% | $15,269 |
| Year Ended 12/31/2017 | $6.00 | 1.71% | 0.94% | 0.94% | (0.09%) | 0% | $15,541 |
The accompanying Notes to Consolidated Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Commodity Strategy Fund | Annual Report 2021 | 23 |
Notes to Consolidated Financial
Statements
December 31, 2021
December 31, 2021
Note 1. Organization
Columbia Variable Portfolio
– Commodity Strategy Fund (the Fund), a series of Columbia Funds Variable Series Trust II (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended (the
1940 Act), as an open-end management investment company organized as a Massachusetts business trust.
Basis for consolidation
CVPCSF Offshore Fund, Ltd. (the
Subsidiary) is a Cayman Islands exempted company and wholly-owned subsidiary of the Fund. The Subsidiary acts as an investment vehicle in order to effect certain investment strategies consistent with the Fund’s
investment objective and policies as stated in its current prospectus and statement of additional information. In accordance with the Memorandum and Articles of Association of the Subsidiary (the Articles), the Fund
owns the sole issued share of the Subsidiary and retains all rights associated with such share, including the right to receive notice of, attend and vote at general meetings of the Subsidiary, rights in a winding-up
or repayment of capital and the right to participate in the profits or assets of the Subsidiary. The consolidated financial statements (financial statements) include the accounts of the consolidated Fund and the
respective Subsidiary. Subsequent references to the Fund within the Notes to Consolidated Financial Statements collectively refer to the Fund and the Subsidiary. All intercompany transactions and balances have been
eliminated in the consolidation process.
At December 31, 2021, the
Subsidiary financial statement information is as follows:
| CVPCSF Offshore Fund, Ltd. | |
| % of consolidated fund net assets | 9.88% |
| Net assets | $12,996,895 |
| Net investment income (loss) | (161,613) |
| Net realized gain (loss) | 41,227,259 |
| Net change in unrealized appreciation (depreciation) | (3,272,371) |
The financial statements present
the portfolio holdings, financial position and results of operations of the Fund and the Subsidiary on a consolidated basis.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers Class 1 and Class 2 shares to separate accounts funding variable annuity contracts and variable life insurance policies (collectively, Contracts) issued by
affiliated and unaffiliated life insurance companies (Participating Insurance Companies) as well as qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors (Qualified
Investors) authorized by Columbia Management Investment Distributors, Inc. (the Distributor). You may not buy (nor will you own) shares of the Fund directly. You may invest by participating in a Qualified Plan or by
buying a Contract and making allocations to the Fund. Although all share classes generally have identical voting, dividend and liquidation rights, each share class votes separately when required by the Trust’s
organizational documents or by law. Different share classes pay different net investment income distribution amounts to the extent the expenses of such share classes differ, and distributions in liquidation will be
proportional to the net asset value of each share class. Each share class has its own cost structure and other features.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
| 24 | Columbia Variable Portfolio – Commodity Strategy Fund | Annual Report 2021 |
Notes to Consolidated Financial
Statements (continued)
December 31, 2021
December 31, 2021
Security valuation
Debt securities generally are
valued by pricing services approved by the Board of Trustees based upon market transactions for normal, institutional-size trading units of similar securities. The services may use various pricing techniques that take
into account, as applicable, factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data, as well as approved independent broker-dealer quotes. Debt securities for
which quotations are not readily available or not believed to be reflective of market value may also be valued based upon a bid quote from an approved independent broker-dealer. Debt securities maturing in 60 days or
less are valued primarily at amortized market value, unless this method results in a valuation that management believes does not approximate fair value.
Asset- and mortgage-backed
securities are generally valued by pricing services, which utilize pricing models that incorporate the securities’ cash flow and loan performance data. These models also take into account available market data,
including trades, market quotations, and benchmark yield curves for identical or similar securities. Factors used to identify similar securities may include, but are not limited to, issuer, collateral type, vintage,
prepayment speeds, collateral performance, credit ratings, credit enhancement and expected life. Asset-backed securities for which quotations are readily available may also be valued based upon an over-the-counter or
exchange bid quote from an approved independent broker-dealer. Debt securities maturing in 60 days or less are valued primarily at amortized market value, unless this method results in a valuation that management
believes does not approximate fair value.
Investments in open-end investment
companies (other than exchange-traded funds (ETFs)), are valued at the latest net asset value reported by those companies as of the valuation time.
Futures and options on futures
contracts are valued based upon the settlement price at the close of regular trading on their principal exchanges or, in the absence of a settlement price, at the mean of the latest quoted bid and ask prices.
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Consolidated Portfolio of Investments.
Derivative instruments
The Fund invests in certain
derivative instruments, as detailed below, in seeking to meet its investment objectives. Derivatives are instruments whose values depend on, or are derived from, in whole or in part, the value of one or more
securities, currencies, commodities, indices, or other assets or instruments. Derivatives may be used to increase investment flexibility (including to maintain cash reserves while maintaining desired exposure to
certain assets), for risk management (hedging) purposes, to facilitate trading, to reduce transaction costs and to pursue higher investment returns. The Fund may also use derivative instruments to mitigate certain
investment risks, such as foreign currency exchange rate risk, interest rate risk and credit risk. Derivatives may involve various risks, including the potential inability of the counterparty to fulfill its
obligations under the terms of the contract, the potential for an illiquid secondary market (making it difficult for the Fund to sell or terminate, including at favorable prices) and the potential for market movements
which may expose the Fund to gains or losses in excess of the amount shown in the Consolidated Statement of Assets and Liabilities. The notional amounts of derivative instruments, if applicable, are not recorded in
the financial statements.
A derivative instrument may suffer
a marked-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform its
obligations under the contract. The Fund’s risk of loss from counterparty credit risk on over-the-counter derivatives is generally limited to the aggregate unrealized gain netted against any collateral held by
the Fund and the amount of any
| Columbia Variable Portfolio – Commodity Strategy Fund | Annual Report 2021 | 25 |
Notes to Consolidated Financial
Statements (continued)
December 31, 2021
December 31, 2021
variation margin held by the counterparty, plus
any replacement costs or related amounts. With exchange-traded or centrally cleared derivatives, there is reduced counterparty credit risk to the Fund since the clearinghouse or central counterparty (CCP) provides
some protection in the case of clearing member default. The clearinghouse or CCP stands between the buyer and the seller of the contract; therefore, additional counterparty credit risk is failure of the clearinghouse
or CCP. However, credit risk still exists in exchange-traded or centrally cleared derivatives with respect to initial and variation margin that is held in a broker’s customer account. While clearing brokers are
required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held
by the clearing broker for all its clients and such shortfall is remedied by the CCP or otherwise, U.S. bankruptcy laws will typically allocate that shortfall on a pro-rata basis across all the clearing broker’s
customers (including the Fund), potentially resulting in losses to the Fund.
In order to better define its
contractual rights and to secure rights that will help the Fund mitigate its counterparty risk, the Fund may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (ISDA Master Agreement)
or similar agreement with its derivatives counterparties. An ISDA Master Agreement is an agreement between the Fund and a counterparty that governs over-the-counter derivatives and foreign exchange forward contracts
and contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset
with the counterparty certain derivative instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically
permit a single net payment in the event of default (close-out netting), including the bankruptcy or insolvency of the counterparty. Note, however, that bankruptcy or insolvency laws of a particular jurisdiction may
impose restrictions on or prohibitions against the right of offset or netting in bankruptcy, insolvency or other events.
Collateral (margin) requirements
differ by type of derivative. Margin requirements are established by the clearinghouse or CCP for exchange-traded and centrally cleared derivatives. Brokers can ask for margin in excess of the minimum in certain
circumstances. Collateral terms for most over-the-counter derivatives are subject to regulatory requirements to exchange variation margin with trading counterparties and may have contract specific margin terms as
well. For over-the-counter derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the marked-to-market amount for each transaction under such agreement and
comparing that amount to the value of any variation margin currently pledged by the Fund and/or the counterparty. Generally, the amount of collateral due from or to a party has to exceed a minimum transfer amount
threshold (e.g., $250,000) before a transfer has to be made. To the extent amounts due to the Fund from its counterparties are not fully collateralized, contractually or otherwise, the Fund bears the risk of loss from
counterparty nonperformance. The Fund may also pay interest expense on cash collateral received from the broker. Any interest expense paid by the Fund is shown on the Consolidated Statement of Operations. The Fund
attempts to mitigate counterparty risk by only entering into agreements with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those
counterparties.
Certain ISDA Master Agreements
allow counterparties of over-the-counter derivatives transactions to terminate derivatives contracts prior to maturity in the event the Fund’s net asset value declines by a stated percentage over a specified
time period or if the Fund fails to meet certain terms of the ISDA Master Agreement, which would cause the Fund to accelerate payment of any net liability owed to the counterparty. The Fund also has termination
rights if the counterparty fails to meet certain terms of the ISDA Master Agreement. In determining whether to exercise such termination rights, the Fund would consider, in addition to counterparty credit risk,
whether termination would result in a net liability owed from the counterparty.
For financial reporting purposes,
the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Consolidated Statement of Assets and Liabilities.
Futures contracts
Futures contracts are
exchange-traded and represent commitments for the future purchase or sale of an asset at a specified price on a specified date. The Fund bought and sold futures contracts to manage exposure to the commodities market.
These instruments may be used for other purposes in future periods. Upon entering into futures contracts, the Fund bears risks that it may not achieve the anticipated benefits of the futures contracts and may realize
a loss. Additional risks include counterparty credit risk, the possibility of an illiquid market, and that a change in the value of the contract or option may not correlate with changes in the value of the underlying
asset.
| 26 | Columbia Variable Portfolio – Commodity Strategy Fund | Annual Report 2021 |
Notes to Consolidated Financial
Statements (continued)
December 31, 2021
December 31, 2021
Upon entering into a futures
contract, the Fund deposits cash or securities with the broker, known as a futures commission merchant (FCM), in an amount sufficient to meet the initial margin requirement. The initial margin deposit must be
maintained at an established level over the life of the contract. Cash deposited as initial margin is recorded in the Consolidated Statement of Assets and Liabilities as margin deposits. Securities deposited as
initial margin are designated in the Consolidated Portfolio of Investments. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily change
in the contract value and are recorded as variation margin receivable or payable and are offset in unrealized gains or losses. The Fund generally expects to earn interest income on its margin deposits. The Fund
recognizes a realized gain or loss when the contract is closed or expires. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed in the Consolidated Statement of
Assets and Liabilities.
Effects of derivative transactions in
the financial statements
The following tables are intended
to provide additional information about the effect of derivatives on the financial statements of the Fund, including: the fair value of derivatives by risk category and the location of those fair values in the
Consolidated Statement of Assets and Liabilities; and the impact of derivative transactions over the period in the Consolidated Statement of Operations, including realized and unrealized gains (losses). The derivative
instrument schedules following the Consolidated Portfolio of Investments present additional information regarding derivative instruments outstanding at the end of the period, if any.
The following table is a summary of
the fair value of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) at December 31, 2021:
| Asset derivatives | ||
| Risk exposure category | Consolidated statement of assets and liabilities location | Fair value ($) |
| Interest rate risk | Component of total distributable earnings (loss) — unrealized appreciation on futures contracts | 20,586* |
| Commodity-related investment risk | Component of total distributable earnings (loss) — unrealized appreciation on futures contracts | 6,180,986* |
| Total | 6,201,572 |
| Liability derivatives | ||
| Risk exposure category | Consolidated statement of assets and liabilities location | Fair value ($) |
| Commodity-related investment risk | Component of total distributable earnings (loss) — unrealized depreciation on futures contracts | 844,690* |
| * | Includes cumulative appreciation (depreciation) as reported in the tables following the Consolidated Portfolio of Investments. Only the current day’s variation margin is reported in receivables or payables in the Consolidated Statement of Assets and Liabilities. |
| Columbia Variable Portfolio – Commodity Strategy Fund | Annual Report 2021 | 27 |
Notes to Consolidated Financial
Statements (continued)
December 31, 2021
December 31, 2021
The following table indicates the
effect of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) in the Consolidated Statement of Operations for the year ended December 31, 2021:
| Amount of realized gain (loss) on derivatives recognized in income | ||
| Risk exposure category | Futures contracts ($) | Total ($) |
| Commodity-related investment risk | 41,227,194 | 41,227,194 |
| Interest rate risk | 22,848 | 22,848 |
| Total | 41,250,042 | 41,250,042 |
| Change in unrealized appreciation (depreciation) on derivatives recognized in income | ||
| Risk exposure category | Futures contracts ($) | Total ($) |
| Commodity-related investment risk | (3,272,371) | (3,272,371) |
| Interest rate risk | 20,586 | 20,586 |
| Total | (3,251,785) | (3,251,785) |
The following table is a summary
of the average outstanding volume by derivative instrument for the year ended December 31, 2021:
| Derivative instrument | Average notional amounts ($)* |
| Futures contracts — long | 143,901,710 |
| Futures contracts — short | 5,038,387 |
| * | Based on the ending quarterly outstanding amounts for the year ended December 31, 2021. |
Asset- and mortgage-backed
securities
The Fund may invest in asset-backed
and mortgage-backed securities. The maturity dates shown represent the original maturity of the underlying obligation. Actual maturity may vary based upon prepayment activity on these obligations. All, or a portion,
of the obligation may be prepaid at any time because the underlying asset may be prepaid. As a result, decreasing market interest rates could result in an increased level of prepayment. An increased prepayment rate
will have the effect of shortening the maturity of the security. Unless otherwise noted, the coupon rates presented are fixed rates.
Mortgage dollar roll transactions
The Fund may enter into mortgage
“dollar rolls” in which the Fund sells securities for delivery in the current month and simultaneously contracts with the same counterparty to repurchase similar but not identical securities (same type,
coupon and maturity) on a specified future date. During the roll period, the Fund loses the right to receive principal and interest paid on the securities sold. However, the Fund may benefit because it receives
negotiated amounts in the form of reductions of the purchase price for the future purchase plus the interest earned on the cash proceeds of the securities sold until the settlement date of the forward purchase. The
Fund records the incremental difference between the forward purchase and sale of each forward roll as a realized gain or loss. Unless any realized gains exceed the income, capital appreciation, and gain or loss due to
mortgage prepayments that would have been realized on the securities sold as part of the mortgage dollar roll, the use of this technique may diminish the investment performance of the Fund compared to what the
performance would have been without the use of mortgage dollar rolls. All cash proceeds will be invested in instruments that are permissible investments for the Fund. The Fund identifies cash or liquid securities in
an amount equal to the forward purchase price.
For financial reporting and tax
purposes, the Fund treats “to be announced” mortgage dollar rolls as two separate transactions, one involving the purchase of a security and a separate transaction involving a sale. These transactions may
increase the Fund’s portfolio turnover rate. The Fund does not currently enter into mortgage dollar rolls that are accounted for as financing transactions.
| 28 | Columbia Variable Portfolio – Commodity Strategy Fund | Annual Report 2021 |
Notes to Consolidated Financial
Statements (continued)
December 31, 2021
December 31, 2021
Mortgage dollar rolls involve the
risk that the market value of the securities the Fund is obligated to repurchase may decline below the repurchase price, or that the counterparty may default on its obligations.
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
Income recognition
Interest income is recorded on an
accrual basis. Market premiums and discounts, including original issue discounts, are amortized and accreted, respectively, over the expected life of the security on all debt securities, unless otherwise noted. The
Fund classifies gains and losses realized on prepayments received on mortgage-backed securities as adjustments to interest income.
The Fund may place a debt security
on non-accrual status and reduce related interest income when it becomes probable that the interest will not be collected and the amount of uncollectible interest can be reasonably estimated. A defaulted debt security
is removed from non-accrual status when the issuer resumes interest payments or when collectability of interest is reasonably assured.
Dividend income is recorded on the
ex-dividend date.
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Consolidated Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily
basis, based on the relative net assets of each class, for purposes of determining the net asset value of each class.
Federal income tax status
The Fund intends to qualify each
year as a regulated investment company under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its investment company taxable income and net capital gain, if any, for its
tax year, and as such will not be subject to federal income taxes. In addition, because the Fund meets the exception under Internal Revenue Code Section 4982(f), the Fund expects not to be subject to federal excise
tax. Therefore, no federal income or excise tax provision is recorded.
Foreign taxes
The Fund may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries, as applicable, based upon its current interpretation of tax rules
and regulations that exist in the markets in which it invests.
Realized gains in certain countries
may be subject to foreign taxes at the Fund level, based on statutory rates. The Fund accrues for such foreign taxes on realized and unrealized gains at the appropriate rate for each jurisdiction, as applicable. The
amount, if any, is disclosed as a liability on the Consolidated Statement of Assets and Liabilities.
Distributions to subaccounts
Distributions to the subaccounts of
Contracts, Qualified Plans and Qualified Investors are recorded at the close of business on the record date and are payable on the first business day following the record date. Dividends from net investment income, if
any, are declared and distributed annually. Capital gain distributions, when available, will be made annually. However, an additional capital gain distribution may be made during the fiscal year in order to comply
with the Internal Revenue Code, as applicable to registered investment companies. Income distributions and capital gain distributions are
| Columbia Variable Portfolio – Commodity Strategy Fund | Annual Report 2021 | 29 |
Notes to Consolidated Financial
Statements (continued)
December 31, 2021
December 31, 2021
determined in accordance with federal income tax
regulations, which may differ from GAAP. All dividends and distributions are reinvested in additional shares of the applicable share class of the Fund at the net asset value as of the ex-dividend date of the
distribution.
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Under the Management Agreement, the
Investment Manager provides the Fund with investment research and advice, as well as administrative and accounting services. The management services fee is an annual fee that is equal to a percentage of the
Fund’s daily net assets that declines from 0.63% to 0.49% as the Fund’s net assets increase. The effective management services fee rate for the year ended December 31, 2021 was 0.63% of the Fund’s
average daily net assets.
Subadvisory agreement
The Fund’s Board of Trustees
has approved a Subadvisory Agreement between the Investment Manager and Threadneedle International Limited (Threadneedle), an affiliate of the Investment Manager and an indirect wholly-owned subsidiary of Ameriprise
Financial. As of December 31, 2021, Threadneedle is not providing services to the Fund pursuant to the Subadvisory Agreement.
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Consolidated Statement of Operations. Under a Deferred
Compensation Plan (the Deferred Plan), these members of the Board of Trustees may elect to defer payment of up to 100% of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been
invested in shares of certain funds managed by the Investment Manager. The Fund’s liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the
Deferred Plan. All amounts payable under the Deferred Plan constitute a general unsecured obligation of the Fund. The expense for the Deferred Plan, which includes Trustees’ fees deferred during the current
period as well as any gains or losses on the Trustees’ deferred compensation balances as a result of market fluctuations, is included in "Compensation of board members" on the Consolidated Statement of
Operations.
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Consolidated Statement of Operations, a portion of the Chief Compliance Officer’s total compensation
is allocated to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
Service fees
The Fund has entered into a
Shareholder Services Agreement with Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial. Under this
agreement, the Fund pays a service fee equal to the payments made by the Transfer Agent to Participating Insurance Companies and other financial intermediaries (together, Participating Organizations) for services each
such Participating
| 30 | Columbia Variable Portfolio – Commodity Strategy Fund | Annual Report 2021 |
Notes to Consolidated Financial
Statements (continued)
December 31, 2021
December 31, 2021
Organization provides to its clients, customers
and participants that are invested directly or indirectly in the Fund, up to a cap approved by the Board of Trustees from time to time. The effective service fee rate for the year ended December 31, 2021, was 0.03% of
the Fund’s average daily net assets.
The Transfer Agent may retain as
compensation for its services revenues from fees for wire, telephone and redemption orders, account transcripts due the Transfer Agent from Fund shareholders and interest (net of bank charges) earned with respect to
balances in accounts the Transfer Agent maintains in connection with its services to the Fund.
Distribution and/or service fees
The Fund has an agreement with the
Distributor, an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution services. Under a Plan and Agreement of Distribution, the Fund pays a fee at an annual rate
of up to 0.25% of the Fund’s average daily net assets attributable to Class 2 shares. The Fund pays no distribution and service fees for Class 1 shares.
Expenses waived/reimbursed by the
Investment Manager and its affiliates
The Investment Manager and certain
of its affiliates have contractually agreed to waive fees and/or reimburse expenses (excluding certain fees and expenses described below) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, so that the Fund’s net operating expenses, after giving effect to fees waived/expenses reimbursed and any balance credits and/or overdraft charges from the Fund’s
custodian, do not exceed the following annual rate(s) as a percentage of the classes’ average daily net assets:
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), expenses associated with investments in affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange-traded funds), transaction costs and
brokerage commissions, costs related to any securities lending program, dividend expenses associated with securities sold short, inverse floater program fees and expenses, transaction charges and interest on borrowed
money, interest, costs associated with certain shareholder meetings, infrequent and/or unusual expenses and any other expenses the exclusion of which is specifically approved by the Board of Trustees. This
agreement may be modified or amended only with approval from the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements
described above are not recoverable by the Investment Manager or its affiliates in future periods.
Note 4. Federal tax
information
The timing and character of
income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP because of temporary or permanent book to tax differences.
At December 31, 2021, these
differences were primarily due to differing treatment for deferral/reversal of wash sale losses, trustees’ deferred compensation, derivative investments, non-deductible expenses, capital loss carryforward and
investments in commodity subsidiaries. To the extent these differences were permanent, reclassifications were made among the components of the Fund’s net assets. Temporary differences do not require
reclassifications.
| Columbia Variable Portfolio – Commodity Strategy Fund | Annual Report 2021 | 31 |
Notes to Consolidated Financial
Statements (continued)
December 31, 2021
December 31, 2021
The following reclassifications
were made:
| Excess of distributions over net investment income ($) | Accumulated net realized (loss) ($) | Paid in capital ($) |
| 2,065,645 | — | (2,065,645) |
Net investment income (loss) and
net realized gains (losses), as disclosed in the Consolidated Statement of Operations, and net assets were not affected by this reclassification.
The tax character of distributions
paid during the years indicated was as follows:
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | ||||
| Ordinary income ($) | Long-term capital gains ($) | Total ($) | Ordinary income ($) | Long-term capital gains ($) | Total ($) |
| 254,188 | — | 254,188 | 22,047,118 | — | 22,047,118 |
Short-term capital gain
distributions, if any, are considered ordinary income distributions for tax purposes.
At December 31, 2021, the
components of distributable earnings on a tax basis were as follows:
| Undistributed ordinary income ($) | Undistributed long-term capital gains ($) | Capital loss carryforwards ($) | Net unrealized (depreciation) ($) |
| 36,564,014 | — | (156,520) | (131,693,096) |
At December 31, 2021, the cost of
all investments for federal income tax purposes along with the aggregate gross unrealized appreciation and depreciation based on that cost was:
| Federal tax cost ($) | Gross unrealized appreciation ($) | Gross unrealized (depreciation) ($) | Net unrealized (depreciation) ($) |
| 263,438,632 | — | (131,693,096) | (131,693,096) |
Tax cost of investments and
unrealized appreciation/(depreciation) may also include timing differences that do not constitute adjustments to tax basis.
The following capital loss
carryforwards, determined at December 31, 2021, may be available to reduce future net realized gains on investments, if any, to the extent permitted by the Internal Revenue Code. In addition, for the year ended
December 31, 2021, capital loss carryforwards utilized, if any, were as follows:
| No expiration short-term ($) | No expiration long-term ($) | Total ($) | Utilized ($) |
| (156,520) | — | (156,520) | 46,092 |
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Note 5. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $102,495,938 and $35,351,943, respectively, for the year ended December 31, 2021, of which $11,686,359 and
$10,980,743, respectively, were U.S. government securities. The amount of purchase and sale activity impacts the portfolio turnover rate reported in the Consolidated Financial Highlights.
| 32 | Columbia Variable Portfolio – Commodity Strategy Fund | Annual Report 2021 |
Notes to Consolidated Financial
Statements (continued)
December 31, 2021
December 31, 2021
Note 6. Affiliated money
market fund
The Fund invests significantly in
Columbia Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is
included as Dividends - affiliated issuers in the Consolidated Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF
prices its shares with a floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend
redemptions (sometimes referred to as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
Note 7. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund did not borrow or lend
money under the Interfund Program during the year ended December 31, 2021.
Note 8. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to an October 28, 2021 amendment and restatement, the credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment
Manager or an affiliated investment manager, severally and not jointly, permits collective borrowings up to $950 million. Interest is currently charged to each participating fund based on its borrowings at a rate
equal to the higher of (i) the federal funds effective rate, (ii) the secured overnight financing rate plus 0.11448% and (iii) the overnight bank funding rate, plus in each case, 1.00%. Each borrowing under the credit
facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The
commitment fee is included in other expenses in the Consolidated Statement of Operations. This agreement expires annually in October unless extended or renewed. Prior to the October 28, 2021 amendment and restatement,
the Fund had access to a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. which permitted collective borrowings up to $950 million.
Interest was charged to each participating fund based on its borrowings at a rate equal to the higher of (i) the federal funds effective rate, (ii) the one-month London Interbank Offered Rate (LIBOR) rate and (iii)
the overnight bank funding rate, plus in each case, 1.25%.
The Fund had no borrowings during
the year ended December 31, 2021.
Note 9. Significant
risks
Commodity-related investment
risk
The value of commodities
investments will generally be affected by overall market movements and factors specific to a particular industry or commodity, which may include demand for the commodity, weather, embargoes, tariffs, and economic
health, political, international, regulatory and other developments. Exposure to commodities and commodities markets may subject the value of the Fund’s investments to greater volatility than other types of
investments. Commodities investments may also subject the Fund to counterparty risk and liquidity risk. The Fund may make commodity-related investments through one or more wholly-owned subsidiaries organized outside
the U.S. that are generally not subject to U.S. laws (including securities laws) and their protections.
| Columbia Variable Portfolio – Commodity Strategy Fund | Annual Report 2021 | 33 |
Notes to Consolidated Financial
Statements (continued)
December 31, 2021
December 31, 2021
Credit risk
Credit risk is the risk that the
value of debt instruments in the Fund’s portfolio may decline because the issuer defaults or otherwise becomes unable or unwilling, or is perceived to be unable or unwilling, to honor its financial obligations,
such as making payments to the Fund when due. Credit rating agencies assign credit ratings to certain debt instruments to indicate their credit risk. Lower-rated or unrated debt instruments held by the Fund may
present increased credit risk as compared to higher-rated debt instruments.
Derivatives risk
Losses involving derivative
instruments may be substantial, because a relatively small movement in the underlying reference (which is generally the price, rate or other economic indicator associated with a security(ies), commodity, currency or
index or other instrument or asset) may result in a substantial loss for the Fund. In addition to the potential for increased losses, the use of derivative instruments may lead to increased volatility within the Fund.
Derivatives will typically increase the Fund’s exposure to principal risks to which it is otherwise exposed, and may expose the Fund to additional risks, including correlation risk, counterparty risk, hedging
risk, leverage risk, liquidity risk and pricing risk.
Interest rate risk
Interest rate risk is the risk of
losses attributable to changes in interest rates. In general, if prevailing interest rates rise, the values of debt instruments tend to fall, and if interest rates fall, the values of debt instruments tend to rise.
Actions by governments and central banking authorities can result in increases or decreases in interest rates. Higher periods of inflation could lead such authorities to raise interest rates. Increasing interest rates
may negatively affect the value of debt securities held by the Fund, resulting in a negative impact on the Fund’s performance and net asset value per share. In general, the longer the maturity or duration of a
debt security, the greater its sensitivity to changes in interest rates. The Fund is subject to the risk that the income generated by its investments may not keep pace with inflation.
Leverage risk
Leverage occurs when the Fund
increases its assets available for investment using borrowings, short sales, derivatives, or similar instruments or techniques. The use of leverage may produce volatility and may exaggerate changes in the NAV of Fund
shares and in the return on the Fund’s portfolio, which may increase the risk that the Fund will lose more than it has invested. Because short sales involve borrowing securities and then selling them, the
Fund’s short sales effectively leverage the Fund’s assets. The Fund’s assets that are used as collateral to secure the Fund’s obligations to return the securities sold short may decrease in
value while the short positions are outstanding, which may force the Fund to use its other assets to increase the collateral. Leverage can create an interest expense that may lower the Fund’s overall returns.
Leverage presents the opportunity for increased net income and capital gains, but may also exaggerate the Fund’s volatility and risk of loss. There can be no guarantee that a leveraging strategy will be
successful.
Liquidity risk
Liquidity risk is the risk
associated with a lack of marketability of investments which may make it difficult to sell the investment at a desirable time or price. Changing regulatory, market or other conditions or environments (for example, the
interest rate or credit environments) may adversely affect the liquidity of the Fund’s investments. The Fund may have to accept a lower selling price for the holding, sell other investments, or forego another,
more appealing investment opportunity. Generally, the less liquid the market at the time the Fund sells a portfolio investment, the greater the risk of loss or decline of value to the Fund. A less liquid market can
lead to an increase in Fund redemptions, which may negatively impact Fund performance and net asset value per share, including, for example, if the Fund is forced to sell securities in a down market.
Market risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and
| 34 | Columbia Variable Portfolio – Commodity Strategy Fund | Annual Report 2021 |
Notes to Consolidated Financial
Statements (continued)
December 31, 2021
December 31, 2021
conditions and events in one country, region or
financial market may adversely impact issuers in a different country, region or financial market. These risks may be magnified if certain events or developments adversely interrupt the global supply chain; in these
and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public
health issues, recessions, depressions or other events – or the potential for such events – could have a significant negative impact on global economic and market conditions.
The coronavirus disease 2019 and
its variants (COVID-19) pandemic has resulted in, and may continue to result in, significant global economic and societal disruption and market volatility due to disruptions in market access, resource availability,
facilities operations, imposition of tariffs, export controls and supply chain disruption, among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement
and loss in human and other resources. The uncertainty surrounding the magnitude, duration, reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental
authorities or other third parties, present unknowns that are yet to unfold. The impacts, as well as the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and
pandemics that may arise in the future – could negatively affect global economies and markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in
emerging market countries may be greater due to generally less established healthcare systems, governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing
political, social and economic risks in certain countries or globally. The disruptions caused by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively
impact the Fund’s ability to achieve its investment objectives. Any such event(s) could have a significant adverse impact on the value and risk profile of the Fund.
Money market fund investment risk
An investment in a money market
fund is not a bank deposit and is not insured or guaranteed by any bank, the FDIC or any other government agency. Certain money market funds float their net asset value while others seek to preserve the value of
investments at a stable net asset value (typically, $1.00 per share). An investment in a money market fund, even an investment in a fund seeking to maintain a stable net asset value per share, is not guaranteed and it
is possible for the Fund to lose money by investing in these and other types of money market funds. If the liquidity of a money market fund’s portfolio deteriorates below certain levels, the money market fund
may suspend redemptions (i.e., impose a redemption gate) and thereby prevent the Fund from selling its investment in the money market fund or impose a fee of up to 2% on amounts the Fund redeems from the money market
fund (i.e., impose a liquidity fee). These measures may result in an investment loss or prohibit the Fund from redeeming shares when the Investment Manager would otherwise redeem shares. In addition to the fees and
expenses that the Fund directly bears, the Fund indirectly bears the fees and expenses of any money market funds in which it invests, including affiliated money market funds. By investing in a money market fund, the
Fund will be exposed to the investment risks of the money market fund in direct proportion to such investment. To the extent the Fund invests in instruments such as derivatives, the Fund may hold investments,
which may be significant, in money market fund shares to cover its obligations resulting from the Fund’s investments in derivatives. Money market funds and the securities they invest in are subject to
comprehensive regulations. The enactment of new legislation or regulations, as well as changes in interpretation and enforcement of current laws, may affect the manner of operation, performance and/or yield of money
market funds.
Mortgage- and other asset-backed
securities risk
The value of any mortgage-backed
and other asset-backed securities including collateralized debt obligations, if any, held by the Fund may be affected by, among other things, changes or perceived changes in: interest rates; factors concerning the
interests in and structure of the issuer or the originator of the mortgages or other assets; the creditworthiness of the entities that provide any supporting letters of credit, surety bonds or other credit enhancements;
or the market’s assessment of the quality of underlying assets. Payment of principal and interest on some mortgage-backed securities (but not the market value of the securities themselves) may be guaranteed by
the full faith and credit of a particular U.S. Government agency, authority, enterprise or instrumentality, and some, but not all, are also insured or guaranteed by the U.S. Government. Mortgage-backed securities
issued by non-governmental issuers (such as commercial banks, savings and loan institutions, private mortgage insurance companies, mortgage bankers and other secondary market issuers) may entail greater risk than
obligations guaranteed by the U.S. Government. Mortgage- and other asset-backed securities are subject to liquidity risk and
| Columbia Variable Portfolio – Commodity Strategy Fund | Annual Report 2021 | 35 |
Notes to Consolidated Financial
Statements (continued)
December 31, 2021
December 31, 2021
prepayment risk. A decline or flattening of
housing values may cause delinquencies in mortgages (especially sub-prime or non-prime mortgages) underlying mortgage-backed securities and thereby adversely affect the ability of the mortgage-backed securities issuer
to make principal and/or interest payments to mortgage-backed securities holders, including the Fund. Rising or high interest rates tend to extend the duration of mortgage- and other asset-backed securities, making
their prices more volatile and more sensitive to changes in interest rates.
Shareholder concentration risk
At December 31, 2021, affiliated
shareholders of record owned 85.9% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of
less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Note 10. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
Note 11. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in
connection with the conduct of their business activities. Ameriprise Financial believes that the Fund is not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject
of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with
the Fund. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (SEC) on legal and regulatory matters that relate to
Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that
these matters, or the adverse publicity associated with them, will not result in increased Fund redemptions, reduced sale of Fund shares or other adverse consequences to the Fund. Further, although we believe
proceedings are not likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines,
penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial or one or more of its affiliates that provides services to
the Fund.
| 36 | Columbia Variable Portfolio – Commodity Strategy Fund | Annual Report 2021 |
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees of Columbia
Funds Variable Series Trust II and Shareholders of Columbia Variable Portfolio – Commodity Strategy Fund
Opinion on the Financial
Statements
We have audited the accompanying
consolidated statement of assets and liabilities, including the consolidated portfolio of investments, of Columbia Variable Portfolio – Commodity Strategy Fund and its subsidiary (one of the funds constituting
Columbia Funds Variable Series Trust II, referred to hereafter as the "Fund") as of December 31, 2021, the related consolidated statement of operations for the year ended December 31, 2021, the consolidated statement
of changes in net assets for each of the two years in the period ended December 31, 2021, including the related notes, and the consolidated financial highlights for each of the five years in the period ended December
31, 2021 (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Fund as of
December 31, 2021, 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, 2021 and the financial highlights for each of the five
years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial
statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s consolidated financial statements based on our audits. We are a public accounting firm
registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these
consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement, whether due to error or fraud.
Our audits included performing
procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. Our procedures included confirmation of securities owned as of December 31, 2021 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.
/s/PricewaterhouseCoopers LLP
Minneapolis, Minnesota
February 22, 2022
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| Columbia Variable Portfolio – Commodity Strategy Fund | Annual Report 2021 | 37 |
TRUSTEES AND
OFFICERS
The Board oversees the
Fund’s operations and appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following table provides basic biographical information about the
Fund’s Trustees as of the printing of this report, including their principal occupations during the past five years, although specific titles for individuals may have varied over the period. The year set forth
beneath Length of Service in the table below is the year in which the Trustee was first appointed or elected as Trustee to any Fund currently in the Columbia Funds Complex or a predecessor thereof. Under current Board
policy, each Trustee generally serves until December 31 of the year such Trustee turns seventy-five (75).
Independent trustees
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| George S. Batejan c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1953 | Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 176 | Former Chairman of the Board, NICSA (National Investment Company Services Association) (Executive Committee, Nominating Committee and Governance Committee), 2014-2016; former Director, Intech Investment Management, 2011-2016; former Board Member, Metro Denver Chamber of Commerce, 2015-2016; former Advisory Board Member, University of Colorado Business School, 2015-2018 |
| Kathleen Blatz c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2006 | Attorney, specializing in arbitration and mediation; Chief Justice, Minnesota Supreme Court, 1998-2006; Associate Justice, Minnesota Supreme Court, 1996-1998; Fourth Judicial District Court Judge, Hennepin County, 1994-1996; Attorney in private practice and public service, 1984-1993; State Representative, Minnesota House of Representatives, 1979-1993, which included service on the Tax and Financial Institutions and Insurance Committees; Member and Interim Chair, Minnesota Sports Facilities Authority, January 2017-July 2017; Interim President and Chief Executive Officer, Blue Cross Blue Shield of Minnesota (health care insurance), February-July 2018, April-October 2021 | 176 | Former Trustee, Blue Cross Blue Shield of Minnesota, 2009-2021 (Chair of the Business Development Committee, 2014-2017; Chair of the Governance Committee, 2017-2019); former Member and Chair of the Board, Minnesota Sports Facilities Authority, January 2017-July 2017; former Director, Robina Foundation, 2009-2020 (Chair, 2014-2020); Director, Schulze Family Foundation, since 2021 |
| Pamela G. Carlton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2007 | President, Springboard — Partners in Cross Cultural Leadership (consulting company) since 2003; Managing Director of US Equity Research, JP Morgan Chase, 1999-2003; Director of US Equity Research, Chase Asset Management, 1996-1999; Co-Director Latin America Research, 1993-1996, COO Global Research, 1992-1996, Co-Director of US Research, 1991-1992, Investment Banker, Morgan Stanley, 1982-1991, Morgan Stanley; Attorney, Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 176 | Trustee, New York Presbyterian Hospital Board (Executive Committee and Chair of People Committee) since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee); Director, Apollo Commercial Real Estate Finance, Inc. since 2021; the Governing Council of the Independent Directors Council (IDC), since 2021 |
| 38 | Columbia Variable Portfolio – Commodity Strategy Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Janet Langford Carrig c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1957 | Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 174 | Director, EQT Corporation (natural gas producer) since 2019; Director, Whiting Petroleum Corporation (independent oil and gas company) since 2020 |
| J. Kevin Connaughton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2020 | Member, FINRA National Adjudicatory Council since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Consultant to Independent Trustees of CFVIT and CFST I from March 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Managing Director and General Manager of Mutual Fund Products, Columbia Management Investment Advisers, LLC, May 2010-February 2015; President, Columbia Funds, 2008-2015; and senior officer of Columbia Funds and affiliated funds, 2003-2015 | 174 | Former Director, The Autism Project, March 2015-December 2021; former Member of the Investment Committee, St. Michael’s College, November 2015-February 2020; former Trustee, St. Michael’s College, June 2017-September 2019; former Trustee, New Century Portfolios, January 2015-December 2017 |
| Olive M. Darragh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since 2020 | Managing Director of Darragh Inc. (strategy and talent management consulting firm) since 2010; Founder and CEO, Zolio, Inc. (investment management talent identification platform) since 2004; Consultant to Independent Trustees of CFVIT and CFST I from June 2019 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 2001-2004 | 174 | Former Director, University of Edinburgh Business School (Member of US Board); former Director, Boston Public Library Foundation |
| Patricia M. Flynn c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1950 | Trustee since 2004 | Trustee Professor of Economics and Management, Bentley University since 1976 (also teaches and conducts research on corporate governance); Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 176 | Trustee, MA Taxpayers Foundation since 1997; Board of Governors, Innovation Institute, MA Technology Collaborative, 2010-2020; former Board of Directors, The MA Business Roundtable, 2003-2019 |
| Brian J. Gallagher c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 176 | Trustee, Catholic Schools Foundation since 2004 |
| Columbia Variable Portfolio – Commodity Strategy Fund | Annual Report 2021 | 39 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Douglas A. Hacker c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1955 | Co-Chair since 2021; Chair of CFST I and CFVIT since 2014; Trustee of CFST I and CFVIT since 1996 and CFST, CFST II, CFVST II, CET I and CET II since 2021 | Independent business executive since May 2006; Executive Vice President – Strategy of United Airlines, December 2002 - May 2006; President of UAL Loyalty Services (airline marketing company), September 2001-December 2002; Executive Vice President and Chief Financial Officer of United Airlines, July 1999-September 2001 | 176 | Director, Spartan Nash Company (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing); former Director, Nash Finch Company (food distributor), 2005-2013; former Director, SeaCube Container Leasing Ltd. (container leasing), 2010-2013; and former Director, Travelport Worldwide Limited (travel information technology), 2014-2019 |
| Nancy T. Lukitsh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1956 | Trustee since 2011 | Senior Vice President, Partner and Director of Marketing, Wellington Management Company, LLP (investment adviser), 1997-2010; Chair, Wellington Management Portfolios (commingled non-U.S. investment pools), 2007 -2010; Director, Wellington Trust Company, NA and other Wellington affiliates, 1997-2010 | 174 | None |
| David M. Moffett c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2011 | Retired; Consultant to Bridgewater and Associates | 174 | Director, CSX Corporation (transportation suppliers); Director, Genworth Financial, Inc. (financial and insurance products and services); Director, PayPal Holdings Inc. (payment and data processing services); Trustee, University of Oklahoma Foundation; former Director, eBay Inc. (online trading community), 2007-2015; and former Director, CIT Bank, CIT Group Inc. (commercial and consumer finance), 2010-2016 |
| Catherine James Paglia c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Co-Chair since 2021; Chair of CFST, CFST II, CFVST II, CET I and CET II since 2020; Trustee of CFST, CFST II and CFVST II since 2004 and CFST I and CFVIT since 2021 | Director, Enterprise Asset Management, Inc. (private real estate and asset management company) since September 1998; Managing Director and Partner, Interlaken Capital, Inc., 1989-1997; Vice President, 1982-1985, Principal, 1985-1987, Managing Director, 1987-1989, Morgan Stanley; Vice President, Investment Banking, 1980-1982, Associate, Investment Banking, 1976-1980, Dean Witter Reynolds, Inc. | 176 | Director, Valmont Industries, Inc. (irrigation systems manufacturer) since 2012; Trustee, Carleton College (on the Investment Committee); Trustee, Carnegie Endowment for International Peace (on the Investment Committee) |
| 40 | Columbia Variable Portfolio – Commodity Strategy Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Minor M. Shaw c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1947 | Trustee since 2003 | President, Micco LLC (private investments) since 2011; President, Micco Corp. (family investment business), 1998-2011 | 176 | Director, Blue Cross Blue Shield of South Carolina (Chair of Compensation Committee) since April 2008; Trustee, Hollingsworth Funds (on the Investment Committee) since 2016 (previously Board Chair from 2016-2019); Former Advisory Board member, Duke Energy Corp., 2016-2020; Chair of the Duke Endowment; Chair of Greenville – Spartanburg Airport Commission; former Trustee, BofA Funds Series Trust (11 funds), 2003-2011; former Director, Piedmont Natural Gas, 2004-2016; former Director, National Association of Corporate Directors, Carolinas Chapter, 2013-2018; Chair, Daniel-Mickel Foundation since 1998 |
| Natalie A. Trunow c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1967 | Trustee since 2020 | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services), January 2016-January 2021; Non-executive Member of the Investment Committee and Valuation Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services), August 2018-January 2021; Advisor, Paradigm Asset Management, November 2016-December 2021; Consultant to Independent Trustees of CFVIT and CFST I from September 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Director of Investments/Consultant, Casey Family Programs, April 2016-November 2016; Senior Vice President and Chief Investment Officer, Calvert Investments, August 2008-January 2016; Section Head and Portfolio Manager, General Motors Asset Management, June 1997-August 2008 | 174 | Former Director, Investment Committee, Health Services for Children with Special Needs, Inc., 2012-2019; Director, Chair of Audit Committee, Consumer Credit Counseling Services (formerly Guidewell Financial Solutions), since 2019; Independent Director, Investment Committee and Valuation Committee, Sarona Asset Management, since 2019 |
| Sandra Yeager c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2017 | Retired; President and founder, Hanoverian Capital, LLC (SEC registered investment advisor firm), 2008-2016; Managing Director, DuPont Capital, 2006-2008; Managing Director, Morgan Stanley Investment Management, 2004-2006; Senior Vice President, Alliance Bernstein, 1990-2004 | 176 | Former Director, NAPE Education Foundation, October 2016-October 2020 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Fund Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I (CET I), Columbia ETF Trust II (CET II), Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Beckman, Gallagher and Hacker and Mses. Blatz, Carlton, Flynn, Paglia, Shaw and Yeager serve as Directors of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
| Columbia Variable Portfolio – Commodity Strategy Fund | Annual Report 2021 | 41 |
TRUSTEES AND OFFICERS (continued)
Interested trustee affiliated with Investment Manager*
Interested trustee affiliated with Investment Manager*
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during the past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex overseen | Other directorships held by Trustee during the past five years |
| Daniel J. Beckman c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since November 2021(a) | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC (since April 2015); officer of Columbia Funds and affiliated funds since 2020. | 176 | Director, Ameriprise Trust Company, since October 2016; Director, Columbia Management Investment Distributors, Inc. since November 2018; Board of Governors, Columbia Wanger Asset Management, LLC since January 2022 |
| * | Interested person (as defined under the 1940 Act) by reason of being an officer, director, security holder and/or employee of the Investment Manager or Ameriprise Financial. |
| (a) | Mr. Beckman serves as the President and Principal Executive Officer of the Columbia Funds (since 2021). |
The Statement of Additional
Information has additional information about the Fund’s Board members and is available, without charge, upon request by calling 800.345.6611 or contacting your financial intermediary.
The Board has appointed officers
who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. The following table provides basic information about the Officers of the
Fund, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Beckman, who is President and Principal Executive Officer, the
Fund’s other officers are:
Fund officers
| 42 | Columbia Variable Portfolio – Commodity Strategy Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Fund officers (continued)
Fund officers (continued)
| Columbia Variable Portfolio – Commodity Strategy Fund | Annual Report 2021 | 43 |
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For Fund and other investment product prospectuses, which contain this and other important information, contact your
financial advisor or insurance representative. Please read the prospectus carefully before you invest. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved. Columbia Management Investment Distributors, Inc., 290 Congress Street, Boston, MA 02210
© 2022 Columbia Management Investment
Advisers, LLC.
S-6628 AW (2/22)
Columbia Variable
Portfolio – Emerging Markets Fund
Please remember that you may not
buy (nor will you own) shares of the Fund directly. The Fund is available through variable annuity contracts and variable life insurance policies offered by the separate accounts of participating insurance companies
as well as qualified pension and retirement plans. Please contact your financial advisor or insurance representative for more information.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
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| 12 | |
| 13 | |
| 14 | |
| 16 | |
| 18 | |
| 27 | |
| 28 | |
| 28 |
Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which Columbia Variable Portfolio – Emerging Markets Fund (the Fund) holds investments consistent with the procedures as stated in the Statement of Additional
Information (SAI). You may obtain a copy of the SAI without charge by calling 800.345.6611; contacting your financial intermediary or searching the website of the Securities and Exchange Commission (SEC) at sec.gov.
Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge
by visiting columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. The Fund’s Form N-PORT is available on the SEC’s website at sec.gov. The Fund’s complete
schedule of portfolio holdings, as filed on Form N-PORT, can also be obtained without charge, upon request, by calling 800.345.6611.
Additional Fund information
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
290 Congress Street
Boston, MA 02210
Fund distributor
Columbia Management Investment Distributors,
Inc.
290 Congress Street
Boston, MA 02210
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
Columbia Variable Portfolio – Emerging
Markets Fund | Annual Report 2021
Fund at a Glance
Investment objective
The Fund
seeks to provide shareholders with long-term capital growth.
Portfolio management
Dara White, CFA
Lead Portfolio Manager
Managed Fund since 2012
Robert Cameron
Portfolio Manager
Managed Fund since 2012
Perry Vickery, CFA
Portfolio Manager
Managed Fund since 2017
Derek Lin
Portfolio Manager
Managed Fund since 2020
Darren Powell, CFA
Portfolio Manager
Managed Fund since March 2021
| Columbia Variable Portfolio – Emerging Markets Fund | Annual Report 2021 | 3 |
Fund at a Glance (continued)
Performance of a hypothetical $10,000 investment (December 31, 2011 — December 31, 2021)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class 2 shares of Columbia Variable Portfolio – Emerging Markets Fund during the stated time period, and does not reflect the deduction of taxes, if any, that a
shareholder may pay on Fund distributions or on the redemption of Fund shares. The returns also do not reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy or
qualified pension or retirement plan, if any.
| 4 | Columbia Variable Portfolio – Emerging Markets Fund | Annual Report 2021 |
Manager Discussion of Fund Performance
For the 12-month period ended
December 31, 2021, Class 2 shares of the Fund returned -7.47%. The Fund underperformed its benchmark, the MSCI Emerging Markets Index (Net), which returned -2.54% during the same time period.
Market overview
Emerging market stocks were
challenged in 2021, posting negative returns in aggregate and lagging their developed market counterparts. Supportive factors such as a rebound in the global economy and rising commodity prices were offset by the
expectation for higher U.S. interest rates and a stronger U.S. dollar. In addition, the slow rollout of COVID-19 vaccinations weighed on conditions in a number of emerging market economies.
China is by far the largest
benchmark constituent and was also among the worst-performing markets, as a regulatory crackdown and uncertainty around the over-leveraged property sector weighed on sentiment. Brazil, South Korea, and Turkey were
notable laggards, as well. Conversely, the Taiwan market rose sharply on a strong technology demand backdrop, while returns for India were boosted by strong economic data and corporate earnings along with an effective
vaccination campaign. The notable rise in energy prices boosted performance in Russia and other oil-producing countries in Africa and the Middle East.
The Fund’s notable
detractors during the period
| • | In country terms, selection within China and Brazil weighed most heavily on the Fund’s performance relative to the benchmark for the 12-month period ended December 31, 2021. |
| • | In sector terms, security selection within financials and information technology detracted the most from performance. |
| • | Individual names held that detracted most significantly included: |
| ○ | New Oriental Education & Technology Group, Inc., a Chinese company offering online educational services to students. The company’s shares declined when the Chinese government announced restrictions on private tutoring as part of the regulatory cycle which started in the back end of 2020. While the new restrictions on for-profit education companies surprised investors, the intent was to lessen the financial burden on families as the government continues to focus on the notion of common prosperity. We sold the Fund’s position. |
| ○ | Also within China, shares of New Horizon Health Ltd., a Chinese company offering cancer screening technology, fell over the period as the COVID-19 pandemic had a greater-than-expected negative impact on sales. |
| ○ | Shares of Azul SA, a Brazilian airline, fell on COVID-19 concerns and uncertainty surrounding travel recovery given the ineffective response of Brazil’s government in addressing the pandemic. |
The Fund’s most notable
contributors during the period
| • | The Fund’s country allocation contributed positively to performance relative to the benchmark for the 12 months, most notably an underweight to China. |
| • | In country terms, security selection was most beneficial within South Korea. |
| • | Viewed on a sector basis, selection within health care and consumer staples highlighted positive contributions. |
| • | Individual names held that contributed most positively to relative performance included Taiwanese semiconductor company MediaTek, Inc. within information technology. We believe the company’s growth in 5G market share can drive long-term results, and the impact of supply chain disruptions eased as the period progressed. |
| • | A pair of holdings within industrials were notable contributors. |
| ○ | Shares of Ecopro BM Co., Ltd., a Korean battery materials manufacturer, rallied following the announcement of a new $8.6 billion order to supply its high nickel cathode materials. |
| ○ | In addition, sentiment with respect to Techtronic Industries Co., Ltd., a Hong Kong-based power tool manufacturer, benefited as the company experienced a strong earnings recovery supported by what we believe to be its superior brand, product leadership and efficient supply chain strategy. |
| Columbia Variable Portfolio – Emerging Markets Fund | Annual Report 2021 | 5 |
Manager Discussion of Fund Performance (continued)
| • | Shares of Russian fintech company TCS Group Holding PLC moved higher in the period as the company posted strong profits. TCS is a digital provider of online financial services. The company’s positive results have been driven by customer growth, successful new product launches and rising demand across its product range. |
The views expressed in this report
reflect the current views of the respective parties who have contributed to this report. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult
to predict, so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective parties
disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Columbia fund are based on numerous factors, may not be relied on as an
indication of trading intent on behalf of any particular Columbia fund. References to specific securities should not be construed as a recommendation or investment advice.
| 6 | Columbia Variable Portfolio – Emerging Markets Fund | Annual Report 2021 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur ongoing
costs, which generally include management fees, distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to help you compare these costs with the ongoing costs of investing in other mutual funds.
The information below does not
reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy (collectively, Contracts) or qualified pension and retirement plan (Qualified Plan), if any. The total fees
and expenses you bear may therefore be higher than those shown below.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount invested, to estimate the
expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as redemption or exchange fees, or expenses that apply to the subaccount or the Contract. Therefore, the
hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If the fees and expenses imposed under your Contract or
Qualified Plan, if any, were included, your costs would be higher.
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 365.
Expenses do not include fees and
expenses incurred indirectly by the Fund from its investment in underlying funds, including affiliated and non-affiliated pooled investment vehicles, such as mutual funds and exchange-traded funds.
Had Columbia Management Investment
Advisers, LLC and/or certain of its affiliates not waived/reimbursed certain fees and expenses, account value at the end of the period would have been reduced.
| Columbia Variable Portfolio – Emerging Markets Fund | Annual Report 2021 | 7 |
Portfolio of Investments
December 31, 2021
December 31, 2021
(Percentages represent value of
investments compared to net assets)
Investments in securities
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 8 | Columbia Variable Portfolio – Emerging Markets Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Emerging Markets Fund | Annual Report 2021 | 9 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
| Money Market Funds 3.3% | ||
| Shares | Value ($) | |
| Columbia Short-Term Cash Fund, 0.085%(e),(f) | 11,906,543 | 11,904,161 |
| Total Money Market Funds (Cost $11,904,747) | 11,904,161 | |
| Total Investments in Securities (Cost $257,175,865) | 362,723,842 | |
| Other Assets & Liabilities, Net | (1,707,625) | |
| Net Assets | $361,016,217 | |
Notes to Portfolio of
Investments
| (a) | Non-income producing investment. |
| (b) | Represents fair value as determined in good faith under procedures approved by the Board of Trustees. At December 31, 2021, the total value of these securities amounted to $2,267,801, which represents 0.63% of total net assets. |
| (c) | Valuation based on significant unobservable inputs. |
| (d) | Represents privately placed and other securities and instruments exempt from Securities and Exchange Commission registration (collectively, private placements), such as Section 4(a)(2) and Rule 144A eligible securities, which are often sold only to qualified institutional buyers. At December 31, 2021, the total value of these securities amounted to $9,558,200, which represents 2.65% of total net assets. |
| (e) | The rate shown is the seven-day current annualized yield at December 31, 2021. |
| (f) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended December 31, 2021 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Realized gain (loss)($) | Dividends($) | End of period shares |
| Columbia Short-Term Cash Fund, 0.085% | ||||||||
| 1,289,633 | 121,905,355 | (111,290,241) | (586) | 11,904,161 | (549) | 3,993 | 11,906,543 | |
Abbreviation Legend
| ADR | American Depositary Receipt |
| GDR | Global Depositary Receipt |
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 10 | Columbia Variable Portfolio – Emerging Markets Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Fair value measurements (continued)
Foreign equity securities actively traded in markets where there is a significant delay in the local close relative to the New York Stock Exchange are classified as Level 2. The values of these securities may include an adjustment to reflect the impact of market movements following the close of local trading, as described in Note 2 to the financial statements – Security valuation.
Foreign equity securities actively traded in markets where there is a significant delay in the local close relative to the New York Stock Exchange are classified as Level 2. The values of these securities may include an adjustment to reflect the impact of market movements following the close of local trading, as described in Note 2 to the financial statements – Security valuation.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at December 31, 2021:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Investments in Securities | ||||
| Common Stocks | ||||
| Argentina | 12,913,497 | — | — | 12,913,497 |
| Brazil | 14,835,553 | — | — | 14,835,553 |
| Canada | 2,017,976 | — | — | 2,017,976 |
| China | 20,467,489 | 73,343,332 | 1 | 93,810,822 |
| Hong Kong | — | 9,629,640 | — | 9,629,640 |
| Hungary | — | 5,565,261 | — | 5,565,261 |
| India | 7,408,425 | 42,926,612 | — | 50,335,037 |
| Indonesia | — | 16,271,719 | — | 16,271,719 |
| Kazakhstan | — | — | 2,267,800 | 2,267,800 |
| Philippines | — | 2,057,805 | — | 2,057,805 |
| Poland | — | 2,394,426 | — | 2,394,426 |
| Russian Federation | 6,612,562 | 17,100,257 | — | 23,712,819 |
| South Africa | — | 5,569,105 | — | 5,569,105 |
| South Korea | 2,106,340 | 39,043,963 | — | 41,150,303 |
| Taiwan | 6,423,932 | 48,376,710 | — | 54,800,642 |
| Thailand | — | 2,766,706 | — | 2,766,706 |
| Uruguay | 2,493,125 | — | — | 2,493,125 |
| Total Common Stocks | 75,278,899 | 265,045,536 | 2,267,801 | 342,592,236 |
| Preferred Stocks | ||||
| Brazil | 3,397,241 | — | — | 3,397,241 |
| South Korea | — | 4,830,204 | — | 4,830,204 |
| Total Preferred Stocks | 3,397,241 | 4,830,204 | — | 8,227,445 |
| Money Market Funds | 11,904,161 | — | — | 11,904,161 |
| Total Investments in Securities | 90,580,301 | 269,875,740 | 2,267,801 | 362,723,842 |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The Fund’s assets assigned to
the Level 2 input category are generally valued using the market approach, in which a security’s value is determined through reference to prices and information from market transactions for similar or identical
assets. These assets include certain foreign securities for which a third party statistical pricing service may be employed for purposes of fair market valuation. The model utilized by such third party statistical
pricing service takes into account a security’s correlation to available market data including, but not limited to, intraday index, ADR, and exchange-traded fund movements.
The Fund does not hold any
significant investments (greater than one percent of net assets) categorized as Level 3.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Emerging Markets Fund | Annual Report 2021 | 11 |
Statement of Assets and Liabilities
December 31, 2021
December 31, 2021
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $245,271,118) | $350,819,681 |
| Affiliated issuers (cost $11,904,747) | 11,904,161 |
| Receivable for: | |
| Investments sold | 13,505 |
| Capital shares sold | 99,417 |
| Dividends | 516,182 |
| Foreign tax reclaims | 39,375 |
| Expense reimbursement due from Investment Manager | 918 |
| Prepaid expenses | 9,867 |
| Total assets | 363,403,106 |
| Liabilities | |
| Foreign currency (cost $1,160) | 1,167 |
| Payable for: | |
| Capital shares purchased | 38,220 |
| Foreign capital gains taxes deferred | 2,150,725 |
| Management services fees | 10,873 |
| Distribution and/or service fees | 1,218 |
| Service fees | 14,821 |
| Compensation of board members | 117,859 |
| Compensation of chief compliance officer | 73 |
| Other expenses | 51,933 |
| Total liabilities | 2,386,889 |
| Net assets applicable to outstanding capital stock | $361,016,217 |
| Represented by | |
| Paid in capital | 179,436,609 |
| Total distributable earnings (loss) | 181,579,608 |
| Total - representing net assets applicable to outstanding capital stock | $361,016,217 |
| Class 1 | |
| Net assets | $85,630,383 |
| Shares outstanding | 4,410,215 |
| Net asset value per share | $19.42 |
| Class 2 | |
| Net assets | $80,662,649 |
| Shares outstanding | 4,204,519 |
| Net asset value per share | $19.18 |
| Class 3 | |
| Net assets | $194,723,185 |
| Shares outstanding | 10,080,655 |
| Net asset value per share | $19.32 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 12 | Columbia Variable Portfolio – Emerging Markets Fund | Annual Report 2021 |
Statement of Operations
Year Ended December 31, 2021
Year Ended December 31, 2021
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $4,977,110 |
| Dividends — affiliated issuers | 3,993 |
| Foreign taxes withheld | (699,502) |
| Total income | 4,281,601 |
| Expenses: | |
| Management services fees | 4,756,143 |
| Distribution and/or service fees | |
| Class 2 | 211,410 |
| Class 3 | 277,462 |
| Service fees | 188,278 |
| Compensation of board members | 41,221 |
| Custodian fees | 163,044 |
| Printing and postage fees | 44,749 |
| Audit fees | 40,082 |
| Legal fees | 14,052 |
| Interest on interfund lending | 202 |
| Compensation of chief compliance officer | 77 |
| Other | 64,325 |
| Total expenses | 5,801,045 |
| Fees waived or expenses reimbursed by Investment Manager and its affiliates | (386,575) |
| Total net expenses | 5,414,470 |
| Net investment loss | (1,132,869) |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 80,252,305 |
| Investments — affiliated issuers | (549) |
| Foreign currency translations | (95,173) |
| Net realized gain | 80,156,583 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | (104,800,411) |
| Investments — affiliated issuers | (586) |
| Foreign currency translations | (800) |
| Foreign capital gains tax | (19,042) |
| Net change in unrealized appreciation (depreciation) | (104,820,839) |
| Net realized and unrealized loss | (24,664,256) |
| Net decrease in net assets resulting from operations | $(25,797,125) |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| Columbia Variable Portfolio – Emerging Markets Fund | Annual Report 2021 | 13 |
Statement of Changes in Net Assets
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | |
| Operations | ||
| Net investment loss | $(1,132,869) | $(575,105) |
| Net realized gain | 80,156,583 | 17,421,318 |
| Net change in unrealized appreciation (depreciation) | (104,820,839) | 100,973,714 |
| Net increase (decrease) in net assets resulting from operations | (25,797,125) | 117,819,927 |
| Distributions to shareholders | ||
| Net investment income and net realized gains | ||
| Class 1 | (6,131,794) | (17,184,859) |
| Class 2 | (3,847,632) | (7,093,772) |
| Class 3 | (10,278,225) | (23,201,660) |
| Total distributions to shareholders | (20,257,651) | (47,480,291) |
| Increase (decrease) in net assets from capital stock activity | (61,812,019) | 12,189,849 |
| Total increase (decrease) in net assets | (107,866,795) | 82,529,485 |
| Net assets at beginning of year | 468,883,012 | 386,353,527 |
| Net assets at end of year | $361,016,217 | $468,883,012 |
| Year Ended | Year Ended | |||
| December 31, 2021 | December 31, 2020 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class 1 | ||||
| Subscriptions | 185,706 | 4,005,276 | 874,539 | 14,585,879 |
| Distributions reinvested | 272,325 | 6,131,794 | 1,105,769 | 17,184,859 |
| Redemptions | (3,867,668) | (86,223,548) | (1,220,287) | (21,626,925) |
| Net increase (decrease) | (3,409,637) | (76,086,478) | 760,021 | 10,143,813 |
| Class 2 | ||||
| Subscriptions | 787,974 | 17,403,719 | 524,846 | 9,534,366 |
| Distributions reinvested | 172,269 | 3,847,632 | 459,958 | 7,093,772 |
| Redemptions | (242,592) | (5,172,823) | (471,860) | (8,007,169) |
| Net increase | 717,651 | 16,078,528 | 512,944 | 8,620,969 |
| Class 3 | ||||
| Subscriptions | 273,093 | 5,991,387 | 118,035 | 2,077,123 |
| Distributions reinvested | 457,739 | 10,278,225 | 1,497,424 | 23,201,660 |
| Redemptions | (840,148) | (18,073,681) | (1,825,799) | (31,853,716) |
| Net decrease | (109,316) | (1,804,069) | (210,340) | (6,574,933) |
| Total net increase (decrease) | (2,801,302) | (61,812,019) | 1,062,625 | 12,189,849 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 14 | Columbia Variable Portfolio – Emerging Markets Fund | Annual Report 2021 |
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| Columbia Variable Portfolio – Emerging Markets Fund | Annual Report 2021 | 15 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect any fees and expenses imposed under your
Contract and/or Qualified Plan, as applicable; such fees and expenses would reduce the total returns for all periods shown. Total return and portfolio turnover are not annualized for periods of less than one year. The
portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain derivatives, if any. If such transactions were included, the Fund’s portfolio
turnover rate may be higher.
| Net asset value, beginning of period | Net investment income (loss) | Net realized and unrealized gain (loss) | Total from investment operations | Distributions from net investment income | Distributions from net realized gains | Total distributions to shareholders | |
| Class 1 | |||||||
| Year Ended 12/31/2021 | $21.90 | (0.03) | (1.41) | (1.44) | (0.24) | (0.80) | (1.04) |
| Year Ended 12/31/2020 | $18.98 | (0.01) | 5.36 | 5.35 | (0.12) | (2.31) | (2.43) |
| Year Ended 12/31/2019 | $16.38 | 0.09 | 4.79 | 4.88 | (0.04) | (2.25) | (2.29) |
| Year Ended 12/31/2018 | $21.04 | 0.14 | (4.67) | (4.53) | (0.13) | — | (0.13) |
| Year Ended 12/31/2017 | $14.29 | 0.05 | 6.73 | 6.78 | (0.03) | — | (0.03) |
| Class 2 | |||||||
| Year Ended 12/31/2021 | $21.66 | (0.08) | (1.40) | (1.48) | (0.20) | (0.80) | (1.00) |
| Year Ended 12/31/2020 | $18.78 | (0.05) | 5.32 | 5.27 | (0.08) | (2.31) | (2.39) |
| Year Ended 12/31/2019 | $16.26 | 0.06 | 4.73 | 4.79 | (0.02) | (2.25) | (2.27) |
| Year Ended 12/31/2018 | $20.84 | 0.06 | (4.59) | (4.53) | (0.05) | — | (0.05) |
| Year Ended 12/31/2017 | $14.17 | 0.01 | 6.66 | 6.67 | (0.00)(f) | — | (0.00)(f) |
| Class 3 | |||||||
| Year Ended 12/31/2021 | $21.80 | (0.06) | (1.40) | (1.46) | (0.22) | (0.80) | (1.02) |
| Year Ended 12/31/2020 | $18.89 | (0.03) | 5.35 | 5.32 | (0.10) | (2.31) | (2.41) |
| Year Ended 12/31/2019 | $16.33 | 0.08 | 4.76 | 4.84 | (0.03) | (2.25) | (2.28) |
| Year Ended 12/31/2018 | $20.96 | 0.09 | (4.63) | (4.54) | (0.09) | — | (0.09) |
| Year Ended 12/31/2017 | $14.24 | 0.03 | 6.71 | 6.74 | (0.02) | — | (0.02) |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Ratios include interfund lending expense which is less than 0.01%. |
| (d) | Ratios include line of credit interest expense which is less than 0.01%. |
| (e) | The Fund received a payment from an affiliate. Had the Fund not received this payment, the total return would have been lower by 0.04%. |
| (f) | Rounds to zero. |
| (g) | The Fund received a payment from an affiliate which had an impact of less than 0.01%. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 16 | Columbia Variable Portfolio – Emerging Markets Fund | Annual Report 2021 |
Financial Highlights (continued)
| Reimbursement from affiliate | Net asset value, end of period | Total return | Total gross expense ratio to average net assets(a) | Total net expense ratio to average net assets(a),(b) | Net investment income (loss) ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Class 1 | ||||||||
| Year Ended 12/31/2021 | — | $19.42 | (7.20%) | 1.22%(c) | 1.14%(c) | (0.16%) | 28% | $85,630 |
| Year Ended 12/31/2020 | — | $21.90 | 33.61% | 1.23%(c),(d) | 1.14%(c),(d) | (0.05%) | 26% | $171,261 |
| Year Ended 12/31/2019 | 0.01 | $18.98 | 31.50%(e) | 1.22%(c) | 1.17%(c) | 0.53% | 26% | $133,990 |
| Year Ended 12/31/2018 | — | $16.38 | (21.62%) | 1.20%(c) | 1.20%(c) | 0.70% | 41% | $196,720 |
| Year Ended 12/31/2017 | — | $21.04 | 47.51% | 1.25%(d) | 1.24%(d) | 0.31% | 43% | $457,065 |
| Class 2 | ||||||||
| Year Ended 12/31/2021 | — | $19.18 | (7.47%) | 1.48%(c) | 1.39%(c) | (0.39%) | 28% | $80,663 |
| Year Ended 12/31/2020 | — | $21.66 | 33.31% | 1.48%(c),(d) | 1.39%(c),(d) | (0.30%) | 26% | $75,522 |
| Year Ended 12/31/2019 | 0.00(f) | $18.78 | 31.13%(g) | 1.47%(c) | 1.42%(c) | 0.33% | 26% | $55,859 |
| Year Ended 12/31/2018 | — | $16.26 | (21.78%) | 1.47%(c) | 1.46%(c) | 0.33% | 41% | $42,531 |
| Year Ended 12/31/2017 | — | $20.84 | 47.10% | 1.50%(d) | 1.48%(d) | 0.04% | 43% | $46,421 |
| Class 3 | ||||||||
| Year Ended 12/31/2021 | — | $19.32 | (7.33%) | 1.35%(c) | 1.26%(c) | (0.27%) | 28% | $194,723 |
| Year Ended 12/31/2020 | — | $21.80 | 33.51% | 1.35%(c),(d) | 1.27%(c),(d) | (0.18%) | 26% | $222,100 |
| Year Ended 12/31/2019 | 0.00(f) | $18.89 | 31.29%(g) | 1.34%(c) | 1.29%(c) | 0.45% | 26% | $196,505 |
| Year Ended 12/31/2018 | — | $16.33 | (21.73%) | 1.34%(c) | 1.33%(c) | 0.44% | 41% | $173,529 |
| Year Ended 12/31/2017 | — | $20.96 | 47.34% | 1.37%(d) | 1.36%(d) | 0.18% | 43% | $244,408 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Emerging Markets Fund | Annual Report 2021 | 17 |
Notes to Financial Statements
December 31, 2021
December 31, 2021
Note 1. Organization
Columbia Variable Portfolio
– Emerging Markets Fund (the Fund), a series of Columbia Funds Variable Series Trust II (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940
Act), as an open-end management investment company organized as a Massachusetts business trust.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers Class 1, Class 2 and Class 3 shares to separate accounts funding variable annuity contracts and variable life insurance policies (collectively, Contracts) issued
by affiliated and unaffiliated life insurance companies (Participating Insurance Companies) as well as qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors (Qualified
Investors) authorized by Columbia Management Investment Distributors, Inc. (the Distributor). You may not buy (nor will you own) shares of the Fund directly. You may invest by participating in a Qualified Plan or by
buying a Contract and making allocations to the Fund. Although all share classes generally have identical voting, dividend and liquidation rights, each share class votes separately when required by the Trust’s
organizational documents or by law. Different share classes pay different net investment income distribution amounts to the extent the expenses of such share classes differ, and distributions in liquidation will be
proportional to the net asset value of each share class. Each share class has its own cost structure and other features.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Equity securities listed on an
exchange are valued at the closing price or last trade price on their primary exchange at the close of business of the New York Stock Exchange. Securities with a closing price not readily available or not listed on
any exchange are valued at the mean between the closing bid and ask prices. Listed preferred stocks convertible into common stocks are valued using an evaluated price from a pricing service.
Foreign equity securities are
valued based on the closing price or last trade price on their primary exchange at the close of business of the New York Stock Exchange. If any foreign equity security closing prices are not readily available,
the securities are valued at the mean of the latest quoted bid and ask prices on such exchanges or markets. Foreign currency exchange rates are determined at the scheduled closing time of the New York Stock Exchange.
Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange; therefore, the closing prices for securities in such markets or on such exchanges may not fully reflect
events that occur after such close but before the close of the New York Stock Exchange. In those situations, foreign securities will be fair valued pursuant to a policy adopted by the Board of Trustees. Under the
policy, the Fund may utilize a third-party pricing service to determine these fair values. The third-party pricing service takes into account multiple factors, including, but not limited to, movements in the U.S.
securities markets, certain depositary receipts, futures contracts and foreign exchange rates that have occurred subsequent to the close of the foreign exchange or market, to determine a good faith estimate that
reasonably reflects the current market conditions as of the close of the New York Stock Exchange. The fair value of a security is likely to be different from the quoted or published price, if available.
Investments in open-end investment
companies (other than exchange-traded funds (ETFs)), are valued at the latest net asset value reported by those companies as of the valuation time.
| 18 | Columbia Variable Portfolio – Emerging Markets Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Foreign currency transactions and
translations
The values of all assets and
liabilities denominated in foreign currencies are generally translated into U.S. dollars at exchange rates determined at the close of regular trading on the New York Stock Exchange. Net realized and unrealized gains
(losses) on foreign currency transactions and translations include gains (losses) arising from the fluctuation in exchange rates between trade and settlement dates on securities transactions, gains (losses) arising
from the disposition of foreign currency and currency gains (losses) between the accrual and payment dates on dividends, interest income and foreign withholding taxes.
For financial statement purposes,
the Fund does not distinguish that portion of gains (losses) on investments which is due to changes in foreign exchange rates from that which is due to changes in market prices of the investments. Such fluctuations
are included with the net realized and unrealized gains (losses) on investments in the Statement of Operations.
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
Income recognition
Corporate actions and dividend
income are generally recorded net of any non-reclaimable tax withholdings, on the ex-dividend date or upon receipt of an ex-dividend notification in the case of certain foreign securities.
The Fund may receive distributions
from holdings in equity securities, business development companies (BDCs), exchange-traded funds (ETFs), limited partnerships (LPs), other regulated investment companies (RICs), and real estate investment trusts
(REITs), which report information as to the tax character of their distributions annually. These distributions are allocated to dividend income, capital gain and return of capital based on actual information reported.
Return of capital is recorded as a reduction of the cost basis of securities held. If the Fund no longer owns the applicable securities, return of capital is recorded as a realized gain. With respect to REITs, to the
extent actual information has not yet been reported, estimates for return of capital are made by Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise
Financial, Inc. (Ameriprise Financial). The Investment Manager’s estimates are subsequently adjusted when the actual character of the distributions is disclosed by the REITs, which could result in a
proportionate change in return of capital to shareholders.
Awards from class action litigation
are recorded as a reduction of cost basis if the Fund still owns the applicable securities on the payment date. If the Fund no longer owns the applicable securities on the payment date, the proceeds are recorded as
realized gains.
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
| Columbia Variable Portfolio – Emerging Markets Fund | Annual Report 2021 | 19 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
Federal income tax status
The Fund intends to qualify each
year as a regulated investment company under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its investment company taxable income and net capital gain, if any, for its
tax year, and as such will not be subject to federal income taxes. In addition, because the Fund meets the exception under Internal Revenue Code Section 4982(f), the Fund expects not to be subject to federal excise
tax. Therefore, no federal income or excise tax provision is recorded.
Foreign taxes
The Fund may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries, as applicable, based upon its current interpretation of tax rules
and regulations that exist in the markets in which it invests.
Realized gains in certain countries
may be subject to foreign taxes at the Fund level, based on statutory rates. The Fund accrues for such foreign taxes on realized and unrealized gains at the appropriate rate for each jurisdiction, as applicable. The
amount, if any, is disclosed as a liability on the Statement of Assets and Liabilities.
Distributions to subaccounts
Distributions to the subaccounts of
Contracts, Qualified Plans and Qualified Investors are recorded at the close of business on the record date and are payable on the first business day following the record date. Dividends from net investment income, if
any, are declared and distributed quarterly. Capital gain distributions, when available, will be made annually. However, an additional capital gain distribution may be made during the fiscal year in order to comply
with the Internal Revenue Code, as applicable to registered investment companies. Income distributions and capital gain distributions are determined in accordance with federal income tax regulations, which may differ
from GAAP. All dividends and distributions are reinvested in additional shares of the applicable share class of the Fund at the net asset value as of the ex-dividend date of the distribution.
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Under the Management Agreement, the
Investment Manager provides the Fund with investment research and advice, as well as administrative and accounting services. The management services fee is an annual fee that is equal to a percentage of the
Fund’s daily net assets that declines from 1.10% to 0.70% as the Fund’s net assets increase. The effective management services fee rate for the year ended December 31, 2021 was 1.10% of the Fund’s
average daily net assets.
| 20 | Columbia Variable Portfolio – Emerging Markets Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. Under a Deferred Compensation Plan (the
Deferred Plan), these members of the Board of Trustees may elect to defer payment of up to 100% of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of
certain funds managed by the Investment Manager. The Fund’s liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Deferred Plan. All
amounts payable under the Deferred Plan constitute a general unsecured obligation of the Fund. The expense for the Deferred Plan, which includes Trustees’ fees deferred during the current period as well as any
gains or losses on the Trustees’ deferred compensation balances as a result of market fluctuations, is included in "Compensation of board members" on the Statement of Operations.
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
Service fees
The Fund has entered into a
Shareholder Services Agreement with Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial. Under this
agreement, the Fund pays a service fee equal to the payments made by the Transfer Agent to Participating Insurance Companies and other financial intermediaries (together, Participating Organizations) for services each
such Participating Organization provides to its clients, customers and participants that are invested directly or indirectly in the Fund, up to a cap approved by the Board of Trustees from time to time. The effective
service fee rate for the year ended December 31, 2021, was 0.04% of the Fund’s average daily net assets.
The Transfer Agent may retain as
compensation for its services revenues from fees for wire, telephone and redemption orders, account transcripts due the Transfer Agent from Fund shareholders and interest (net of bank charges) earned with respect to
balances in accounts the Transfer Agent maintains in connection with its services to the Fund.
Distribution and/or service fees
The Fund has an agreement with the
Distributor, an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution services. Under a Plan and Agreement of Distribution, the Fund pays a fee at an annual rate
of up to 0.25% of the Fund’s average daily net assets attributable to Class 2 shares and an annual rate of up to 0.125% of the Fund’s average daily net assets attributable to Class 3 shares. The Fund pays
no distribution and service fees for Class 1 shares.
Expenses waived/reimbursed by the
Investment Manager and its affiliates
The Investment Manager and certain
of its affiliates have contractually agreed to waive fees and/or reimburse expenses (excluding certain fees and expenses described below) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, so that the Fund’s net operating expenses, after giving effect to fees waived/expenses reimbursed and any balance credits and/or overdraft charges from the Fund’s
custodian, do not exceed the following annual rate(s) as a percentage of the classes’ average daily net assets:
| Columbia Variable Portfolio – Emerging Markets Fund | Annual Report 2021 | 21 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), expenses associated with investments in affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange-traded funds), transaction costs and
brokerage commissions, costs related to any securities lending program, dividend expenses associated with securities sold short, inverse floater program fees and expenses, transaction charges and interest on borrowed
money, interest, costs associated with certain shareholder meetings, infrequent and/or unusual expenses and any other expenses the exclusion of which is specifically approved by the Board of Trustees. This
agreement may be modified or amended only with approval from the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements
described above are not recoverable by the Investment Manager or its affiliates in future periods.
Note 4. Federal tax
information
The timing and character of
income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP because of temporary or permanent book to tax differences.
At December 31, 2021, these
differences were primarily due to differing treatment for deferral/reversal of wash sale losses, trustees’ deferred compensation, distribution reclassifications, net operating loss, foreign capital gains tax,
foreign currency transactions and passive foreign investment company (PFIC) holdings. To the extent these differences were permanent, reclassifications were made among the components of the Fund’s net assets.
Temporary differences do not require reclassifications.
The following reclassifications
were made:
| Excess of distributions over net investment income ($) | Accumulated net realized gain ($) | Paid in capital ($) |
| 3,438,989 | (483,716) | (2,955,273) |
Net investment income (loss) and
net realized gains (losses), as disclosed in the Statement of Operations, and net assets were not affected by this reclassification.
The tax character of distributions
paid during the years indicated was as follows:
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | ||||
| Ordinary income ($) | Long-term capital gains ($) | Total ($) | Ordinary income ($) | Long-term capital gains ($) | Total ($) |
| 4,405,469 | 15,852,182 | 20,257,651 | 2,136,081 | 45,344,210 | 47,480,291 |
Short-term capital gain
distributions, if any, are considered ordinary income distributions for tax purposes.
At December 31, 2021, the
components of distributable earnings on a tax basis were as follows:
| Undistributed ordinary income ($) | Undistributed long-term capital gains ($) | Capital loss carryforwards ($) | Net unrealized appreciation ($) |
| — | 79,743,655 | — | 104,103,246 |
At December 31, 2021, the cost of
all investments for federal income tax purposes along with the aggregate gross unrealized appreciation and depreciation based on that cost was:
| Federal tax cost ($) | Gross unrealized appreciation ($) | Gross unrealized (depreciation) ($) | Net unrealized appreciation ($) |
| 258,620,596 | 127,506,115 | (23,402,869) | 104,103,246 |
| 22 | Columbia Variable Portfolio – Emerging Markets Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Tax cost of investments and
unrealized appreciation/(depreciation) may also include timing differences that do not constitute adjustments to tax basis.
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Note 5. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $120,711,626 and $216,247,540, respectively, for the year ended December 31, 2021. The amount of purchase and
sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 6. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes
referred to as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
Note 7. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund’s activity in the
Interfund Program during the year ended December 31, 2021 was as follows:
| Borrower or lender | Average loan balance ($) | Weighted average interest rate (%) | Number of days with outstanding loans |
| Borrower | 588,889 | 0.68 | 18 |
Interest expense incurred by the
Fund is recorded as Interfund lending in the Statement of Operations. The Fund had no outstanding interfund loans at December 31, 2021.
Note 8. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to an October 28, 2021 amendment and restatement, the credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment
Manager or an affiliated investment manager, severally and not jointly, permits collective borrowings up to $950 million. Interest is currently charged to each participating fund based on its borrowings at a rate
equal to the higher of (i) the federal funds effective rate, (ii) the secured overnight financing rate plus 0.11448% and (iii) the overnight bank funding rate, plus in each case, 1.00%. Each borrowing under the credit
facility matures no later than 60 days after the date of borrowing. The Fund also pays a
| Columbia Variable Portfolio – Emerging Markets Fund | Annual Report 2021 | 23 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
commitment fee equal to its pro rata share of the
unused amount of the credit facility at a rate of 0.15% per annum. The commitment fee is included in other expenses in the Statement of Operations. This agreement expires annually in October unless extended or
renewed. Prior to the October 28, 2021 amendment and restatement, the Fund had access to a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank,
N.A. which permitted collective borrowings up to $950 million. Interest was charged to each participating fund based on its borrowings at a rate equal to the higher of (i) the federal funds effective rate, (ii) the
one-month London Interbank Offered Rate (LIBOR) rate and (iii) the overnight bank funding rate, plus in each case, 1.25%.
The Fund had no borrowings during
the year ended December 31, 2021.
Note 9. Significant
risks
Foreign securities and emerging
market countries risk
Investing in foreign securities may
involve certain risks not typically associated with investing in U.S. securities, such as increased currency volatility and risks associated with political, regulatory, economic, social, diplomatic and other
conditions or events occurring in the country or region, which may result in significant market volatility. In addition, certain foreign securities may not be as liquid as U.S. securities. Investing in emerging
markets may increase these risks and expose the Fund to elevated risks associated with increased inflation, deflation or currency devaluation. To the extent that the Fund concentrates its investment exposure to any
one or a few specific countries, the Fund will be particularly susceptible to the risks associated with the conditions, events or other factors impacting those countries or regions and may, therefore, have a greater
risk than that of a fund that is more geographically diversified.
Geographic focus risk
The Fund may be particularly
susceptible to economic, political, regulatory or other events or conditions affecting issuers and countries within the specific geographic regions in which the Fund invests. The Fund’s NAV may be more volatile
than the NAV of a more geographically diversified fund.
Asia Pacific Region. The Fund is particularly susceptible to economic, political, regulatory or other events or conditions affecting issuers and countries in the Asia Pacific region. Many of the countries in
the region are considered underdeveloped or developing, including from a political, economic and/or social perspective, and may have relatively unstable governments and economies based on limited business, industries
and/or natural resources or commodities. Events in any one country within the region may impact other countries in the region or the region as a whole. As a result, events in the region will generally have a greater
effect on the Fund than if the Fund were more geographically diversified. This could result in increased volatility in the value of the Fund’s investments and losses for the Fund. Also, securities of some
companies in the region can be less liquid than U.S. or other foreign securities, potentially making it difficult for the Fund to sell such securities at a desirable time and price.
Greater China. The Fund is particularly susceptible to economic, political, regulatory or other events or conditions affecting issuers in the Greater China region. The region consists of Hong Kong, The
People’s Republic of China and Taiwan, among other countries, and the Fund’s investments in the region are particularly susceptible to risks in that region. The Hong Kong, Taiwanese, and Chinese economies
are dependent on the economies of other countries and can be significantly affected by currency fluctuations and increasing competition from other emerging economies in Asia with lower costs. Adverse events in any one
country within the region may impact the other countries in the region or Asia as a whole. As a result, adverse events in the region will generally have a greater effect on the Fund than if the Fund were more
geographically diversified, which could result in greater volatility in the Fund’s NAV and losses. Markets in the Greater China region can experience significant volatility due to social, economic, regulatory
and political uncertainties. The public health crises caused by the COVID-19 outbreak have exacerbated political and diplomatic tensions between the United States and China, which could adversely affect international
trade and the value of the Fund’s portfolio securities. Changes in Chinese government policy and economic growth rates could significantly affect local markets and the entire Greater China region. China has yet
to develop comprehensive securities, corporate, or commercial laws, its market is relatively new and less developed, and its economy is experiencing a relative slowdown. Export growth continues to be a major driver of
China’s economic growth. As a result, a
| 24 | Columbia Variable Portfolio – Emerging Markets Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
reduction in spending on Chinese products and
services, the institution of additional tariffs or other trade barriers, including as a result of heightened trade tensions between China and the United States, or a downturn in any of the economies of China’s
key trading partners may have an adverse impact on the Chinese economy.
Information technology sector risk
The Fund is more susceptible to the
particular risks that may affect companies in the information technology sector than if it were invested in a wider variety of companies in unrelated sectors. Companies in the information technology sector are subject
to certain risks, including the risk that new services, equipment or technologies will not be accepted by consumers and businesses or will become rapidly obsolete. Performance of such companies may be affected by
factors including obtaining and protecting patents (or the failure to do so) and significant competitive pressures, including aggressive pricing of their products or services, new market entrants, competition for
market share and short product cycles due to an accelerated rate of technological developments. Such competitive pressures may lead to limited earnings and/or falling profit margins. As a result, the value of their
securities may fall or fail to rise. In addition, many information technology sector companies have limited operating histories and prices of these companies’ securities historically have been more volatile than
other securities, especially over the short term. Some companies in the information technology sector are facing increased government and regulatory scrutiny and may be subject to adverse government or regulatory
action, which could negatively impact the value of their securities.
Market risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
The coronavirus disease 2019 and
its variants (COVID-19) pandemic has resulted in, and may continue to result in, significant global economic and societal disruption and market volatility due to disruptions in market access, resource availability,
facilities operations, imposition of tariffs, export controls and supply chain disruption, among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement
and loss in human and other resources. The uncertainty surrounding the magnitude, duration, reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental
authorities or other third parties, present unknowns that are yet to unfold. The impacts, as well as the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and
pandemics that may arise in the future – could negatively affect global economies and markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in
emerging market countries may be greater due to generally less established healthcare systems, governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing
political, social and economic risks in certain countries or globally. The disruptions caused by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively
impact the Fund’s ability to achieve its investment objectives. Any such event(s) could have a significant adverse impact on the value and risk profile of the Fund.
Shareholder concentration risk
At December 31, 2021, affiliated
shareholders of record owned 99.6% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its
| Columbia Variable Portfolio – Emerging Markets Fund | Annual Report 2021 | 25 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
liquid positions, which may result in Fund losses
and the Fund holding a higher percentage of less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Variable interest entity risk
Many Chinese companies to which the
Fund seeks investment exposure use a structure known as a variable interest entity (a VIE) to address Chinese restrictions on direct foreign investment in Chinese companies operating in certain sectors. The
Fund’s investment exposure to VIEs may pose additional risks because the Fund’s investment is in a holding company domiciled outside of China (a Holding Company) whose interests in the business of the
underlying Chinese operating company (the VIE) are established through contracts rather than equity ownership. The VIE structure is a longstanding practice in China but is not formally recognized under Chinese law and
the Chinese government may cease to tolerate VIE structures at any time or impose new restrictions on the structure. Further, in case of dispute, the remedies and rights of the Fund may be limited and legal
uncertainty may be exploited against the interests of the Fund. Further, the Fund is not a VIE owner/shareholder and cannot exert influence through proxy voting or other means. Foreign companies listed on stock
exchanges in the United States, including companies using the VIE structure, could also face delisting or other ramifications for failure to meet the expectations and/or requirements of U.S. regulators. Any of these
risks could reduce the liquidity and value of the Fund’s investments in Holding Companies or render them valueless.
Note 10. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
Note 11. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in
connection with the conduct of their business activities. Ameriprise Financial believes that the Fund is not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject
of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with
the Fund. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (SEC) on legal and regulatory matters that relate to
Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that
these matters, or the adverse publicity associated with them, will not result in increased Fund redemptions, reduced sale of Fund shares or other adverse consequences to the Fund. Further, although we believe
proceedings are not likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines,
penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial or one or more of its affiliates that provides services to
the Fund.
| 26 | Columbia Variable Portfolio – Emerging Markets Fund | Annual Report 2021 |
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees of Columbia
Funds Variable Series Trust II and Shareholders of Columbia Variable Portfolio – Emerging Markets Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of Columbia Variable Portfolio – Emerging Markets Fund (one of the funds constituting Columbia Funds Variable Series Trust II,
referred to hereafter as the "Fund") as of December 31, 2021, the related statement of operations for the year ended December 31, 2021, the statement of changes in net assets for each of the two years in the period
ended December 31, 2021, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2021 (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, 2021, 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, 2021 and the financial highlights for each of the five years in the period ended December 31, 2021 in conformity with accounting principles generally
accepted in the United States of America.
Basis for Opinion
These financial statements are the
responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these
financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2021 by correspondence with the custodian and transfer agent. We believe that our
audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Minneapolis, Minnesota
February 18, 2022
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| Columbia Variable Portfolio – Emerging Markets Fund | Annual Report 2021 | 27 |
Federal Income Tax
Information
(Unaudited)
The Fund hereby designates the
following tax attributes for the fiscal year ended December 31, 2021.
| Capital gain dividend | Foreign taxes paid to foreign countries | Foreign taxes paid per share to foreign countries | Foreign source income | Foreign source income per share |
| $83,899,283 | $1,695,178 | $0.09 | $5,972,786 | $0.32 |
Capital gain dividend. The Fund
designates as a capital gain dividend the amount reflected above, or if subsequently determined to be different, the net capital gain of such fiscal period.
Foreign taxes. The Fund makes the
election to pass through to shareholders the foreign taxes paid. Eligible shareholders may claim a foreign tax credit. These taxes, and the corresponding foreign source income, are provided in the table above.
Foreign taxes are deemed to be
passed through to shareholders with dividends paid after the close of the taxable year, on the next regularly scheduled distribution date of March 30, 2022.
TRUSTEES AND
OFFICERS
The Board oversees the Fund’s
operations and appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following table provides basic biographical information about the Fund’s Trustees as
of the printing of this report, including their principal occupations during the past five years, although specific titles for individuals may have varied over the period. The year set forth beneath Length of Service
in the table below is the year in which the Trustee was first appointed or elected as Trustee to any Fund currently in the Columbia Funds Complex or a predecessor thereof. Under current Board policy, each Trustee
generally serves until December 31 of the year such Trustee turns seventy-five (75).
Independent trustees
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| George S. Batejan c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1953 | Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 176 | Former Chairman of the Board, NICSA (National Investment Company Services Association) (Executive Committee, Nominating Committee and Governance Committee), 2014-2016; former Director, Intech Investment Management, 2011-2016; former Board Member, Metro Denver Chamber of Commerce, 2015-2016; former Advisory Board Member, University of Colorado Business School, 2015-2018 |
| 28 | Columbia Variable Portfolio – Emerging Markets Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Kathleen Blatz c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2006 | Attorney, specializing in arbitration and mediation; Chief Justice, Minnesota Supreme Court, 1998-2006; Associate Justice, Minnesota Supreme Court, 1996-1998; Fourth Judicial District Court Judge, Hennepin County, 1994-1996; Attorney in private practice and public service, 1984-1993; State Representative, Minnesota House of Representatives, 1979-1993, which included service on the Tax and Financial Institutions and Insurance Committees; Member and Interim Chair, Minnesota Sports Facilities Authority, January 2017-July 2017; Interim President and Chief Executive Officer, Blue Cross Blue Shield of Minnesota (health care insurance), February-July 2018, April-October 2021 | 176 | Former Trustee, Blue Cross Blue Shield of Minnesota, 2009-2021 (Chair of the Business Development Committee, 2014-2017; Chair of the Governance Committee, 2017-2019); former Member and Chair of the Board, Minnesota Sports Facilities Authority, January 2017-July 2017; former Director, Robina Foundation, 2009-2020 (Chair, 2014-2020); Director, Schulze Family Foundation, since 2021 |
| Pamela G. Carlton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2007 | President, Springboard — Partners in Cross Cultural Leadership (consulting company) since 2003; Managing Director of US Equity Research, JP Morgan Chase, 1999-2003; Director of US Equity Research, Chase Asset Management, 1996-1999; Co-Director Latin America Research, 1993-1996, COO Global Research, 1992-1996, Co-Director of US Research, 1991-1992, Investment Banker, Morgan Stanley, 1982-1991, Morgan Stanley; Attorney, Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 176 | Trustee, New York Presbyterian Hospital Board (Executive Committee and Chair of People Committee) since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee); Director, Apollo Commercial Real Estate Finance, Inc. since 2021; the Governing Council of the Independent Directors Council (IDC), since 2021 |
| Janet Langford Carrig c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1957 | Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 174 | Director, EQT Corporation (natural gas producer) since 2019; Director, Whiting Petroleum Corporation (independent oil and gas company) since 2020 |
| J. Kevin Connaughton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2020 | Member, FINRA National Adjudicatory Council since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Consultant to Independent Trustees of CFVIT and CFST I from March 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Managing Director and General Manager of Mutual Fund Products, Columbia Management Investment Advisers, LLC, May 2010-February 2015; President, Columbia Funds, 2008-2015; and senior officer of Columbia Funds and affiliated funds, 2003-2015 | 174 | Former Director, The Autism Project, March 2015-December 2021; former Member of the Investment Committee, St. Michael’s College, November 2015-February 2020; former Trustee, St. Michael’s College, June 2017-September 2019; former Trustee, New Century Portfolios, January 2015-December 2017 |
| Columbia Variable Portfolio – Emerging Markets Fund | Annual Report 2021 | 29 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Olive M. Darragh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since 2020 | Managing Director of Darragh Inc. (strategy and talent management consulting firm) since 2010; Founder and CEO, Zolio, Inc. (investment management talent identification platform) since 2004; Consultant to Independent Trustees of CFVIT and CFST I from June 2019 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 2001-2004 | 174 | Former Director, University of Edinburgh Business School (Member of US Board); former Director, Boston Public Library Foundation |
| Patricia M. Flynn c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1950 | Trustee since 2004 | Trustee Professor of Economics and Management, Bentley University since 1976 (also teaches and conducts research on corporate governance); Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 176 | Trustee, MA Taxpayers Foundation since 1997; Board of Governors, Innovation Institute, MA Technology Collaborative, 2010-2020; former Board of Directors, The MA Business Roundtable, 2003-2019 |
| Brian J. Gallagher c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 176 | Trustee, Catholic Schools Foundation since 2004 |
| Douglas A. Hacker c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1955 | Co-Chair since 2021; Chair of CFST I and CFVIT since 2014; Trustee of CFST I and CFVIT since 1996 and CFST, CFST II, CFVST II, CET I and CET II since 2021 | Independent business executive since May 2006; Executive Vice President – Strategy of United Airlines, December 2002 - May 2006; President of UAL Loyalty Services (airline marketing company), September 2001-December 2002; Executive Vice President and Chief Financial Officer of United Airlines, July 1999-September 2001 | 176 | Director, Spartan Nash Company (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing); former Director, Nash Finch Company (food distributor), 2005-2013; former Director, SeaCube Container Leasing Ltd. (container leasing), 2010-2013; and former Director, Travelport Worldwide Limited (travel information technology), 2014-2019 |
| Nancy T. Lukitsh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1956 | Trustee since 2011 | Senior Vice President, Partner and Director of Marketing, Wellington Management Company, LLP (investment adviser), 1997-2010; Chair, Wellington Management Portfolios (commingled non-U.S. investment pools), 2007 -2010; Director, Wellington Trust Company, NA and other Wellington affiliates, 1997-2010 | 174 | None |
| 30 | Columbia Variable Portfolio – Emerging Markets Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| David M. Moffett c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2011 | Retired; Consultant to Bridgewater and Associates | 174 | Director, CSX Corporation (transportation suppliers); Director, Genworth Financial, Inc. (financial and insurance products and services); Director, PayPal Holdings Inc. (payment and data processing services); Trustee, University of Oklahoma Foundation; former Director, eBay Inc. (online trading community), 2007-2015; and former Director, CIT Bank, CIT Group Inc. (commercial and consumer finance), 2010-2016 |
| Catherine James Paglia c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Co-Chair since 2021; Chair of CFST, CFST II, CFVST II, CET I and CET II since 2020; Trustee of CFST, CFST II and CFVST II since 2004 and CFST I and CFVIT since 2021 | Director, Enterprise Asset Management, Inc. (private real estate and asset management company) since September 1998; Managing Director and Partner, Interlaken Capital, Inc., 1989-1997; Vice President, 1982-1985, Principal, 1985-1987, Managing Director, 1987-1989, Morgan Stanley; Vice President, Investment Banking, 1980-1982, Associate, Investment Banking, 1976-1980, Dean Witter Reynolds, Inc. | 176 | Director, Valmont Industries, Inc. (irrigation systems manufacturer) since 2012; Trustee, Carleton College (on the Investment Committee); Trustee, Carnegie Endowment for International Peace (on the Investment Committee) |
| Minor M. Shaw c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1947 | Trustee since 2003 | President, Micco LLC (private investments) since 2011; President, Micco Corp. (family investment business), 1998-2011 | 176 | Director, Blue Cross Blue Shield of South Carolina (Chair of Compensation Committee) since April 2008; Trustee, Hollingsworth Funds (on the Investment Committee) since 2016 (previously Board Chair from 2016-2019); Former Advisory Board member, Duke Energy Corp., 2016-2020; Chair of the Duke Endowment; Chair of Greenville – Spartanburg Airport Commission; former Trustee, BofA Funds Series Trust (11 funds), 2003-2011; former Director, Piedmont Natural Gas, 2004-2016; former Director, National Association of Corporate Directors, Carolinas Chapter, 2013-2018; Chair, Daniel-Mickel Foundation since 1998 |
| Columbia Variable Portfolio – Emerging Markets Fund | Annual Report 2021 | 31 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Natalie A. Trunow c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1967 | Trustee since 2020 | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services), January 2016-January 2021; Non-executive Member of the Investment Committee and Valuation Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services), August 2018-January 2021; Advisor, Paradigm Asset Management, November 2016-December 2021; Consultant to Independent Trustees of CFVIT and CFST I from September 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Director of Investments/Consultant, Casey Family Programs, April 2016-November 2016; Senior Vice President and Chief Investment Officer, Calvert Investments, August 2008-January 2016; Section Head and Portfolio Manager, General Motors Asset Management, June 1997-August 2008 | 174 | Former Director, Investment Committee, Health Services for Children with Special Needs, Inc., 2012-2019; Director, Chair of Audit Committee, Consumer Credit Counseling Services (formerly Guidewell Financial Solutions), since 2019; Independent Director, Investment Committee and Valuation Committee, Sarona Asset Management, since 2019 |
| Sandra Yeager c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2017 | Retired; President and founder, Hanoverian Capital, LLC (SEC registered investment advisor firm), 2008-2016; Managing Director, DuPont Capital, 2006-2008; Managing Director, Morgan Stanley Investment Management, 2004-2006; Senior Vice President, Alliance Bernstein, 1990-2004 | 176 | Former Director, NAPE Education Foundation, October 2016-October 2020 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Fund Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I (CET I), Columbia ETF Trust II (CET II), Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Beckman, Gallagher and Hacker and Mses. Blatz, Carlton, Flynn, Paglia, Shaw and Yeager serve as Directors of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
Interested trustee affiliated with
Investment Manager*
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during the past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex overseen | Other directorships held by Trustee during the past five years |
| Daniel J. Beckman c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since November 2021(a) | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC (since April 2015); officer of Columbia Funds and affiliated funds since 2020. | 176 | Director, Ameriprise Trust Company, since October 2016; Director, Columbia Management Investment Distributors, Inc. since November 2018; Board of Governors, Columbia Wanger Asset Management, LLC since January 2022 |
| * | Interested person (as defined under the 1940 Act) by reason of being an officer, director, security holder and/or employee of the Investment Manager or Ameriprise Financial. |
| (a) | Mr. Beckman serves as the President and Principal Executive Officer of the Columbia Funds (since 2021). |
The Statement of Additional
Information has additional information about the Fund’s Board members and is available, without charge, upon request by calling 800.345.6611 or contacting your financial intermediary.
| 32 | Columbia Variable Portfolio – Emerging Markets Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. The following table provides basic information about the Officers of the Fund, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Beckman, who is President and Principal Executive Officer, the Fund’s other officers are:
The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. The following table provides basic information about the Officers of the Fund, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Beckman, who is President and Principal Executive Officer, the Fund’s other officers are:
Fund officers
| Columbia Variable Portfolio – Emerging Markets Fund | Annual Report 2021 | 33 |
TRUSTEES AND OFFICERS (continued)
Fund officers (continued)
Fund officers (continued)
| Name, address and year of birth | Position and year first appointed to position for any Fund in the Columbia Funds Complex or a predecessor thereof | Principal occupation(s) during past five years |
| Lyn Kephart-Strong 5228 Ameriprise Financial Center Minneapolis, MN 55474 1960 | Vice President (2015) | President, Columbia Management Investment Services Corp. since October 2014; Vice President & Resolution Officer, Ameriprise Trust Company since August 2009. |
| 34 | Columbia Variable Portfolio – Emerging Markets Fund | Annual Report 2021 |
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For Fund and other investment product prospectuses, which contain this and other important information, contact your
financial advisor or insurance representative. Please read the prospectus carefully before you invest. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved. Columbia Management Investment Distributors, Inc., 290 Congress Street, Boston, MA 02210
© 2022 Columbia Management Investment
Advisers, LLC.
S-2000 AW (2/22)
Columbia Variable
Portfolio – Disciplined Core Fund
Please remember that you may not
buy (nor will you own) shares of the Fund directly. The Fund is available through variable annuity contracts and variable life insurance policies offered by the separate accounts of participating insurance companies
as well as qualified pension and retirement plans. Please contact your financial advisor or insurance representative for more information.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
| 3 | |
| 5 | |
| 7 | |
| 8 | |
| 13 | |
| 14 | |
| 15 | |
| 16 | |
| 18 | |
| 27 | |
| 28 |
Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which Columbia Variable Portfolio – Disciplined Core Fund (the Fund) holds investments consistent with the procedures as stated in the Statement of Additional
Information (SAI). You may obtain a copy of the SAI without charge by calling 800.345.6611; contacting your financial intermediary or searching the website of the Securities and Exchange Commission (SEC) at sec.gov.
Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge
by visiting columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. The Fund’s Form N-PORT is available on the SEC’s website at sec.gov. The Fund’s complete
schedule of portfolio holdings, as filed on Form N-PORT, can also be obtained without charge, upon request, by calling 800.345.6611.
Additional Fund information
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
290 Congress Street
Boston, MA 02210
Fund distributor
Columbia Management Investment Distributors,
Inc.
290 Congress Street
Boston, MA 02210
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
Columbia Variable Portfolio – Disciplined
Core Fund | Annual Report 2021
Fund at a Glance
Investment objective
The Fund
seeks to provide shareholders with capital appreciation.
Portfolio management
Raghavendran Sivaraman, Ph.D., CFA
Co-Portfolio Manager
Managed Fund since 2019
Oleg Nusinzon, CFA
Co-Portfolio Manager
Managed Fund since June 2021
| Columbia Variable Portfolio – Disciplined Core Fund | Annual Report 2021 | 3 |
Fund at a Glance (continued)
Performance of a hypothetical $10,000 investment (December 31, 2011 — December 31, 2021)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class 2 shares of Columbia Variable Portfolio – Disciplined Core Fund during the stated time period, and does not reflect the deduction of taxes, if any, that a
shareholder may pay on Fund distributions or on the redemption of Fund shares. The returns also do not reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy or
qualified pension or retirement plan, if any.
| 4 | Columbia Variable Portfolio – Disciplined Core Fund | Annual Report 2021 |
Manager Discussion of Fund Performance
At December 31, 2021,
approximately 65.71% of the Fund’s shares were owned in the aggregate by affiliated funds-of-funds managed by Columbia Management Investment Advisers, LLC (the Investment Manager). As a result of asset
allocation decisions by the Investment Manager, it is possible that the Fund may experience relatively large purchases or redemptions from affiliated funds-of-funds. The Investment Manager seeks to minimize the impact
of these transactions by structuring them over a reasonable period of time. The Fund may also experience increased expenses as it buys and sells securities as a result of purchases or redemptions by affiliated
funds-of-funds.
For the 12-month period that ended
December 31, 2021, the Fund’s Class 2 shares gained 32.41%. The Fund outperformed the S&P 500 Index, which rose 28.71%.
Market overview
Despite the emergence of new
COVID-19 variants and higher inflation, continued monetary and fiscal stimulus extended the bull market for U.S. equities during the annual period, as company earnings beat investor expectations. Improving earnings
and rising interest rates provided a better backdrop for value stocks during the annual period. In a reversal from calendar year 2020, when growth stocks handily beat value stocks across the capitalization spectrum,
value stocks outperformed growth stocks in the mid-cap and small-cap segments of the U.S. equity market in 2021 and performed relatively in line with each other within the large-cap segment of the U.S. equity market.
The Russell 2000 Value Index returned 28.27% compared to the 2.83% return for the Russell 2000 Growth Index. In large cap, the Russell 1000 Value Index returned 25.16% compared to the 27.60% return of the Russell 1000
Growth Index. As the U.S. economy reopened, investors rotated to bid up stocks with strong fundamentals. Stocks characterized by high operating cash flow-to-price, high earnings before interest, taxes, depreciation
and amortization (EBITDA)-to-enterprise value, and high return on invested capital were in favor during the annual period. Conversely, high cash flow margin volatility and high predicted earnings per share growth
characteristics detracted most during the annual period.
We divide the metrics for our stock
selection model into three broad categories—quality, value and catalyst. We then rank the securities within a sector/industry from “1” (most attractive) to “5” (least attractive) based
upon the metrics within these categories. During the annual period, the stock selection model’s performance was positive overall. This investor focus on fundamentals led to our quality, value and catalyst themes
each performing well during the annual period. Of our 22 industry-specific models, 20 outperformed the S&P 500 Index, with communication services, energy-exploration & production and industrials-transportation
contributing most positively. Energy-equipment & services and information technology-hardware were the only two industry models that detracted during the annual period.
The Fund’s notable
contributors during the period
| • | The Fund maintained a relatively neutral stance on sector allocation, though sector allocation did contribute positively, albeit modestly, to relative performance during the annual period. Stock selection overall contributed most positively to the Fund’s performance relative to the S&P 500 Index. |
| • | Stock selection in the information technology, communication services and consumer staples sectors contributed most positively to the Fund’s relative performance during the annual period. |
| • | Among the Fund’s greatest individual positive contributors was Fortinet, Inc., the leading mid-market vendor in the network security firewall market, which was also a top contributor in the prior annual period. Its shares gained ground after the company’s management reported strong results across its product offerings and geographies and raised guidance driven by Fortinet’s healthy billings and revenue growth. The portfolio’s overweight in Fortinet was driven by our quality and catalyst themes, and the models delivered effective stock selection guidance. |
| • | Alphabet Inc., which is the parent company of search engine giant Google, was an outstanding performer for the Fund, though it should be noted the portfolio owns Alphabet Class A shares only. During the annual period, Alphabet reported solid earnings results with robust growth across several of its businesses, including YouTube, search, cloud and advertising. The company also showed relative resilience in the face of the dramatic impact of the COVID-19 pandemic, as its return on investment remained materially higher versus other forms of media. Further, the company generated an attractive level of free cash flow during the annual period. The portfolio’s overweight in Alphabet (Class A) was based on attractive scores by all three of our themes—value, quality and catalyst, and the models provided positive guidance. |
| Columbia Variable Portfolio – Disciplined Core Fund | Annual Report 2021 | 5 |
Manager Discussion of Fund Performance (continued)
| • | Advanced Micro Devices, Inc., a semiconductor company, benefited during the annual period from its reports of solid earnings. The company also raised its forward guidance, driven by healthy demand across its businesses, most notably gaming and personal computer demand. As was the case for other chip companies as well, the global semiconductor shortage held customer demand steady. The decision to overweight the portfolio’s position in Advanced Micro Devices was based on its attractive quality, value and catalyst scores. |
The Fund’s notable
detractors during the period
| • | Stock selection in the financials sector detracted most from the Fund’s relative performance during the annual period, followed at some distance by real estate and materials. |
| • | Among the individual stocks detracting most from relative performance was NVIDIA Corp., which designs and develops three-dimensional graphics processors and related software, as the Fund held no position in its strongly performing stock. Boosting the stock’s performance was strong data center demand and the global shortage of semiconductors, which, in turn, drove NVIDIA’s earnings higher. The portfolio’s lack of exposure to NVIDIA was determined based on unattractive scores by all three of our themes—quality, value and catalyst, but the models provided negative stock selection guidance. |
| • | Autodesk, Inc. is an architecture, engineering and construction enterprise software company. Its shares sold off dramatically in the fourth quarter of 2021, erasing gains made earlier in the year after the company missed consensus billings and free cash flow estimates and reduced its forward guidance due to macro events such as supply chain disruptions and labor shortages. The portfolio’s overweight in Autodesk was due to its attractive quality and value theme scores, but the models delivered negative stock selection guidance. |
| • | Capital One Financial Corp. operates as a financial holding company and operates through credit card, consumer banking and commercial banking segments. Like many financials companies, high consumer cash levels, low interest rates and weak loan demand hampered Capital One Financial’s revenues and acted as a headwind to stock appreciation. The portfolio’s overweight to Capital One Financial was established based on strong value and catalyst metrics, but the models provided negative stock selection guidance. |
| • | Notably, having no exposure to Alphabet Inc. (Class C) also proved to be a significant detractor from the Fund’s relative results, as Class C shares performed similarly well to the company’s Class A shares, which the Fund did own during the annual period. |
The views expressed in this report
reflect the current views of the respective parties who have contributed to this report. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult
to predict, so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective parties
disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Columbia fund are based on numerous factors, may not be relied on as an
indication of trading intent on behalf of any particular Columbia fund. References to specific securities should not be construed as a recommendation or investment advice.
| 6 | Columbia Variable Portfolio – Disciplined Core Fund | Annual Report 2021 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur ongoing
costs, which generally include management fees, distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to help you compare these costs with the ongoing costs of investing in other mutual funds.
The information below does not
reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy (collectively, Contracts) or qualified pension and retirement plan (Qualified Plan), if any. The total fees
and expenses you bear may therefore be higher than those shown below.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount invested, to estimate the
expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as redemption or exchange fees, or expenses that apply to the subaccount or the Contract. Therefore, the
hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If the fees and expenses imposed under your Contract or
Qualified Plan, if any, were included, your costs would be higher.
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 365.
Expenses do not include fees and
expenses incurred indirectly by the Fund from its investment in underlying funds, including affiliated and non-affiliated pooled investment vehicles, such as mutual funds and exchange-traded funds.
| Columbia Variable Portfolio – Disciplined Core Fund | Annual Report 2021 | 7 |
Portfolio of Investments
December 31, 2021
December 31, 2021
(Percentages represent value of
investments compared to net assets)
Investments in securities
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 8 | Columbia Variable Portfolio – Disciplined Core Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Disciplined Core Fund | Annual Report 2021 | 9 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
At December 31, 2021,
securities and/or cash totaling $8,292,519 were pledged as collateral.
Investments in
derivatives
| Long futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| S&P 500 Index E-mini | 296 | 03/2022 | USD | 70,425,800 | 1,919,287 | — |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 10 | Columbia Variable Portfolio – Disciplined Core Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Notes to Portfolio of
Investments
| (a) | Non-income producing investment. |
| (b) | This security or a portion of this security has been pledged as collateral in connection with derivative contracts. |
| (c) | The rate shown is the seven-day current annualized yield at December 31, 2021. |
| (d) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended December 31, 2021 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Realized gain (loss)($) | Dividends($) | End of period shares |
| Columbia Short-Term Cash Fund, 0.085% | ||||||||
| 79,402,628 | 417,010,710 | (431,117,170) | — | 65,296,168 | (2,035) | 47,086 | 65,309,230 | |
Currency Legend
| USD | US Dollar |
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Disciplined Core Fund | Annual Report 2021 | 11 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Fair value measurements (continued)
The following table is a summary of the inputs used to value the Fund’s investments at December 31, 2021:
The following table is a summary of the inputs used to value the Fund’s investments at December 31, 2021:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Investments in Securities | ||||
| Common Stocks | ||||
| Communication Services | 483,999,375 | — | — | 483,999,375 |
| Consumer Discretionary | 569,294,956 | — | — | 569,294,956 |
| Consumer Staples | 284,287,343 | — | — | 284,287,343 |
| Energy | 106,306,391 | — | — | 106,306,391 |
| Financials | 478,937,721 | — | — | 478,937,721 |
| Health Care | 637,767,326 | — | — | 637,767,326 |
| Industrials | 369,447,779 | — | — | 369,447,779 |
| Information Technology | 1,375,631,701 | — | — | 1,375,631,701 |
| Materials | 102,068,560 | — | — | 102,068,560 |
| Real Estate | 143,131,172 | — | — | 143,131,172 |
| Utilities | 98,511,480 | — | — | 98,511,480 |
| Total Common Stocks | 4,649,383,804 | — | — | 4,649,383,804 |
| Money Market Funds | 65,296,168 | — | — | 65,296,168 |
| Total Investments in Securities | 4,714,679,972 | — | — | 4,714,679,972 |
| Investments in Derivatives | ||||
| Asset | ||||
| Futures Contracts | 1,919,287 | — | — | 1,919,287 |
| Total | 4,716,599,259 | — | — | 4,716,599,259 |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
Derivative instruments are valued at
unrealized appreciation (depreciation).
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 12 | Columbia Variable Portfolio – Disciplined Core Fund | Annual Report 2021 |
Statement of Assets and Liabilities
December 31, 2021
December 31, 2021
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $3,291,083,894) | $4,649,383,804 |
| Affiliated issuers (cost $65,296,168) | 65,296,168 |
| Receivable for: | |
| Capital shares sold | 4,331 |
| Dividends | 2,766,969 |
| Variation margin for futures contracts | 12,128 |
| Prepaid expenses | 38,680 |
| Total assets | 4,717,502,080 |
| Liabilities | |
| Payable for: | |
| Capital shares purchased | 8,264,586 |
| Variation margin for futures contracts | 237,187 |
| Management services fees | 82,503 |
| Distribution and/or service fees | 5,678 |
| Service fees | 80,366 |
| Compensation of board members | 280,181 |
| Compensation of chief compliance officer | 824 |
| Other expenses | 37,717 |
| Total liabilities | 8,989,042 |
| Net assets applicable to outstanding capital stock | $4,708,513,038 |
| Represented by | |
| Trust capital | $4,708,513,038 |
| Total - representing net assets applicable to outstanding capital stock | $4,708,513,038 |
| Class 1 | |
| Net assets | $3,111,300,307 |
| Shares outstanding | 35,103,399 |
| Net asset value per share | $88.63 |
| Class 2 | |
| Net assets | $54,906,243 |
| Shares outstanding | 637,588 |
| Net asset value per share | $86.12 |
| Class 3 | |
| Net assets | $1,542,306,488 |
| Shares outstanding | 17,663,878 |
| Net asset value per share | $87.31 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Disciplined Core Fund | Annual Report 2021 | 13 |
Statement of Operations
Year Ended December 31, 2021
Year Ended December 31, 2021
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $74,937,292 |
| Dividends — affiliated issuers | 47,086 |
| Total income | 74,984,378 |
| Expenses: | |
| Management services fees | 29,245,732 |
| Distribution and/or service fees | |
| Class 2 | 120,896 |
| Class 3 | 1,786,905 |
| Service fees | 891,613 |
| Compensation of board members | 121,180 |
| Custodian fees | 30,819 |
| Printing and postage fees | 105,561 |
| Audit fees | 29,500 |
| Legal fees | 50,996 |
| Interest on collateral | 4,128 |
| Compensation of chief compliance officer | 734 |
| Other | 90,080 |
| Total expenses | 32,478,144 |
| Net investment income | 42,506,234 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 1,026,862,660 |
| Investments — affiliated issuers | (2,035) |
| Futures contracts | 20,814,396 |
| Net realized gain | 1,047,675,021 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | 204,869,566 |
| Futures contracts | (597,884) |
| Net change in unrealized appreciation (depreciation) | 204,271,682 |
| Net realized and unrealized gain | 1,251,946,703 |
| Net increase in net assets resulting from operations | $1,294,452,937 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 14 | Columbia Variable Portfolio – Disciplined Core Fund | Annual Report 2021 |
Statement of Changes in Net Assets
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | |
| Operations | ||
| Net investment income | $42,506,234 | $63,810,156 |
| Net realized gain | 1,047,675,021 | 424,606,198 |
| Net change in unrealized appreciation (depreciation) | 204,271,682 | 167,522,286 |
| Net increase in net assets resulting from operations | 1,294,452,937 | 655,938,640 |
| Decrease in net assets from capital stock activity | (1,627,511,802) | (1,204,268,950) |
| Total decrease in net assets | (333,058,865) | (548,330,310) |
| Net assets at beginning of year | 5,041,571,903 | 5,589,902,213 |
| Net assets at end of year | $4,708,513,038 | $5,041,571,903 |
| Year Ended | Year Ended | |||
| December 31, 2021 | December 31, 2020 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class 1 | ||||
| Subscriptions | 157,955 | 12,007,746 | 1,781,125 | 94,242,538 |
| Redemptions | (20,676,360) | (1,495,894,104) | (19,487,540) | (1,165,912,378) |
| Net decrease | (20,518,405) | (1,483,886,358) | (17,706,415) | (1,071,669,840) |
| Class 2 | ||||
| Subscriptions | 75,216 | 5,837,666 | 54,545 | 2,995,049 |
| Redemptions | (74,199) | (5,692,992) | (106,832) | (6,089,581) |
| Net increase (decrease) | 1,017 | 144,674 | (52,287) | (3,094,532) |
| Class 3 | ||||
| Subscriptions | 16,044 | 1,225,611 | 5,640 | 283,752 |
| Redemptions | (1,884,721) | (144,995,729) | (2,280,577) | (129,788,330) |
| Net decrease | (1,868,677) | (143,770,118) | (2,274,937) | (129,504,578) |
| Total net decrease | (22,386,065) | (1,627,511,802) | (20,033,639) | (1,204,268,950) |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Disciplined Core Fund | Annual Report 2021 | 15 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect any fees and expenses imposed under your
Contract and/or Qualified Plan, as applicable; such fees and expenses would reduce the total returns for all periods shown. Total return and portfolio turnover are not annualized for periods of less than one year. The
portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain derivatives, if any. If such transactions were included, the Fund’s portfolio
turnover rate may be higher.
| Net asset value, beginning of period | Net investment income | Net realized and unrealized gain (loss) | Total from investment operations | |
| Class 1 | ||||
| Year Ended 12/31/2021 | $66.77 | 0.75 | 21.11 | 21.86 |
| Year Ended 12/31/2020 | $58.51 | 0.79 | 7.47 | 8.26 |
| Year Ended 12/31/2019 | $46.89 | 0.76 | 10.86 | 11.62 |
| Year Ended 12/31/2018 | $48.64 | 0.72 | (2.47) | (1.75) |
| Year Ended 12/31/2017 | $39.11 | 0.77 | 8.76 | 9.53 |
| Class 2 | ||||
| Year Ended 12/31/2021 | $65.04 | 0.55 | 20.53 | 21.08 |
| Year Ended 12/31/2020 | $57.13 | 0.63 | 7.28 | 7.91 |
| Year Ended 12/31/2019 | $45.90 | 0.61 | 10.62 | 11.23 |
| Year Ended 12/31/2018 | $47.74 | 0.60 | (2.44) | (1.84) |
| Year Ended 12/31/2017 | $38.48 | 0.65 | 8.61 | 9.26 |
| Class 3 | ||||
| Year Ended 12/31/2021 | $65.86 | 0.65 | 20.80 | 21.45 |
| Year Ended 12/31/2020 | $57.78 | 0.71 | 7.37 | 8.08 |
| Year Ended 12/31/2019 | $46.36 | 0.68 | 10.74 | 11.42 |
| Year Ended 12/31/2018 | $48.16 | 0.65 | (2.45) | (1.80) |
| Year Ended 12/31/2017 | $38.77 | 0.71 | 8.68 | 9.39 |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Ratios include interest on collateral expense which is less than 0.01%. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 16 | Columbia Variable Portfolio – Disciplined Core Fund | Annual Report 2021 |
Financial Highlights (continued)
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets(a) | Total net expense ratio to average net assets(a),(b) | Net investment income ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Class 1 | |||||||
| Year Ended 12/31/2021 | $88.63 | 32.74% | 0.67%(c) | 0.67%(c) | 0.96% | 58% | $3,111,300 |
| Year Ended 12/31/2020 | $66.77 | 14.12% | 0.66% | 0.66% | 1.36% | 74% | $3,713,795 |
| Year Ended 12/31/2019 | $58.51 | 24.78% | 0.66% | 0.66% | 1.41% | 69% | $4,290,429 |
| Year Ended 12/31/2018 | $46.89 | (3.60%) | 0.66% | 0.66% | 1.42% | 74% | $3,650,498 |
| Year Ended 12/31/2017 | $48.64 | 24.37% | 0.68% | 0.68% | 1.79% | 69% | $4,219,124 |
| Class 2 | |||||||
| Year Ended 12/31/2021 | $86.12 | 32.41% | 0.92%(c) | 0.92%(c) | 0.73% | 58% | $54,906 |
| Year Ended 12/31/2020 | $65.04 | 13.85% | 0.91% | 0.91% | 1.12% | 74% | $41,400 |
| Year Ended 12/31/2019 | $57.13 | 24.46% | 0.91% | 0.91% | 1.17% | 69% | $39,356 |
| Year Ended 12/31/2018 | $45.90 | (3.85%) | 0.91% | 0.91% | 1.21% | 74% | $28,322 |
| Year Ended 12/31/2017 | $47.74 | 24.07% | 0.93% | 0.93% | 1.54% | 69% | $23,671 |
| Class 3 | |||||||
| Year Ended 12/31/2021 | $87.31 | 32.57% | 0.79%(c) | 0.79%(c) | 0.85% | 58% | $1,542,306 |
| Year Ended 12/31/2020 | $65.86 | 13.98% | 0.79% | 0.79% | 1.24% | 74% | $1,286,377 |
| Year Ended 12/31/2019 | $57.78 | 24.63% | 0.78% | 0.78% | 1.29% | 69% | $1,260,116 |
| Year Ended 12/31/2018 | $46.36 | (3.74%) | 0.78% | 0.78% | 1.29% | 74% | $1,139,339 |
| Year Ended 12/31/2017 | $48.16 | 24.22% | 0.81% | 0.81% | 1.67% | 69% | $1,328,984 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Disciplined Core Fund | Annual Report 2021 | 17 |
Notes to Financial Statements
December 31, 2021
December 31, 2021
Note 1. Organization
Columbia Variable Portfolio
– Disciplined Core Fund (the Fund), a series of Columbia Funds Variable Series Trust II (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940
Act), as an open-end management investment company organized as a Massachusetts business trust.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers Class 1, Class 2 and Class 3 shares to separate accounts funding variable annuity contracts and variable life insurance policies (collectively, Contracts) issued
by affiliated and unaffiliated life insurance companies (Participating Insurance Companies) as well as qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors (Qualified
Investors) authorized by Columbia Management Investment Distributors, Inc. (the Distributor). You may not buy (nor will you own) shares of the Fund directly. You may invest by participating in a Qualified Plan or by
buying a Contract and making allocations to the Fund. Although all share classes generally have identical voting, dividend and liquidation rights, each share class votes separately when required by the Trust’s
organizational documents or by law. Different share classes pay different net investment income distribution amounts to the extent the expenses of such share classes differ, and distributions in liquidation will be
proportional to the net asset value of each share class. Each share class has its own cost structure and other features.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Equity securities listed on an
exchange are valued at the closing price or last trade price on their primary exchange at the close of business of the New York Stock Exchange. Securities with a closing price not readily available or not listed on
any exchange are valued at the mean between the closing bid and ask prices. Listed preferred stocks convertible into common stocks are valued using an evaluated price from a pricing service.
Foreign equity securities are
valued based on the closing price or last trade price on their primary exchange at the close of business of the New York Stock Exchange. If any foreign equity security closing prices are not readily available,
the securities are valued at the mean of the latest quoted bid and ask prices on such exchanges or markets. Foreign currency exchange rates are determined at the scheduled closing time of the New York Stock Exchange.
Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange; therefore, the closing prices for securities in such markets or on such exchanges may not fully reflect
events that occur after such close but before the close of the New York Stock Exchange. In those situations, foreign securities will be fair valued pursuant to a policy adopted by the Board of Trustees. Under the
policy, the Fund may utilize a third-party pricing service to determine these fair values. The third-party pricing service takes into account multiple factors, including, but not limited to, movements in the U.S.
securities markets, certain depositary receipts, futures contracts and foreign exchange rates that have occurred subsequent to the close of the foreign exchange or market, to determine a good faith estimate that
reasonably reflects the current market conditions as of the close of the New York Stock Exchange. The fair value of a security is likely to be different from the quoted or published price, if available.
Investments in open-end investment
companies (other than exchange-traded funds (ETFs)), are valued at the latest net asset value reported by those companies as of the valuation time.
| 18 | Columbia Variable Portfolio – Disciplined Core Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Futures and options on futures
contracts are valued based upon the settlement price at the close of regular trading on their principal exchanges or, in the absence of a settlement price, at the mean of the latest quoted bid and ask prices.
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Derivative instruments
The Fund invests in certain
derivative instruments, as detailed below, in seeking to meet its investment objectives. Derivatives are instruments whose values depend on, or are derived from, in whole or in part, the value of one or more
securities, currencies, commodities, indices, or other assets or instruments. Derivatives may be used to increase investment flexibility (including to maintain cash reserves while maintaining desired exposure to
certain assets), for risk management (hedging) purposes, to facilitate trading, to reduce transaction costs and to pursue higher investment returns. The Fund may also use derivative instruments to mitigate certain
investment risks, such as foreign currency exchange rate risk, interest rate risk and credit risk. Derivatives may involve various risks, including the potential inability of the counterparty to fulfill its
obligations under the terms of the contract, the potential for an illiquid secondary market (making it difficult for the Fund to sell or terminate, including at favorable prices) and the potential for market movements
which may expose the Fund to gains or losses in excess of the amount shown in the Statement of Assets and Liabilities. The notional amounts of derivative instruments, if applicable, are not recorded in the financial
statements.
A derivative instrument may suffer
a marked-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform its
obligations under the contract. The Fund’s risk of loss from counterparty credit risk on over-the-counter derivatives is generally limited to the aggregate unrealized gain netted against any collateral held by
the Fund and the amount of any variation margin held by the counterparty, plus any replacement costs or related amounts. With exchange-traded or centrally cleared derivatives, there is reduced counterparty credit risk
to the Fund since the clearinghouse or central counterparty (CCP) provides some protection in the case of clearing member default. The clearinghouse or CCP stands between the buyer and the seller of the contract;
therefore, additional counterparty credit risk is failure of the clearinghouse or CCP. However, credit risk still exists in exchange-traded or centrally cleared derivatives with respect to initial and variation margin
that is held in a broker’s customer account. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy
and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients and such shortfall is remedied by the CCP or otherwise, U.S. bankruptcy laws will typically
allocate that shortfall on a pro-rata basis across all the clearing broker’s customers (including the Fund), potentially resulting in losses to the Fund.
In order to better define its
contractual rights and to secure rights that will help the Fund mitigate its counterparty risk, the Fund may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (ISDA Master Agreement)
or similar agreement with its derivatives counterparties. An ISDA Master Agreement is an agreement between the Fund and a counterparty that governs over-the-counter derivatives and foreign exchange forward contracts
and contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset
with the counterparty certain derivative instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically
permit a single net payment in the event of default (close-out netting), including the bankruptcy or insolvency of the counterparty. Note, however, that bankruptcy or insolvency laws of a particular jurisdiction may
impose restrictions on or prohibitions against the right of offset or netting in bankruptcy, insolvency or other events.
| Columbia Variable Portfolio – Disciplined Core Fund | Annual Report 2021 | 19 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Collateral (margin) requirements
differ by type of derivative. Margin requirements are established by the clearinghouse or CCP for exchange-traded and centrally cleared derivatives. Brokers can ask for margin in excess of the minimum in certain
circumstances. Collateral terms for most over-the-counter derivatives are subject to regulatory requirements to exchange variation margin with trading counterparties and may have contract specific margin terms as
well. For over-the-counter derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the marked-to-market amount for each transaction under such agreement and
comparing that amount to the value of any variation margin currently pledged by the Fund and/or the counterparty. Generally, the amount of collateral due from or to a party has to exceed a minimum transfer amount
threshold (e.g., $250,000) before a transfer has to be made. To the extent amounts due to the Fund from its counterparties are not fully collateralized, contractually or otherwise, the Fund bears the risk of loss from
counterparty nonperformance. The Fund may also pay interest expense on cash collateral received from the broker. Any interest expense paid by the Fund is shown on the Statement of Operations. The Fund attempts to
mitigate counterparty risk by only entering into agreements with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those
counterparties.
Certain ISDA Master Agreements
allow counterparties of over-the-counter derivatives transactions to terminate derivatives contracts prior to maturity in the event the Fund’s net asset value declines by a stated percentage over a specified
time period or if the Fund fails to meet certain terms of the ISDA Master Agreement, which would cause the Fund to accelerate payment of any net liability owed to the counterparty. The Fund also has termination
rights if the counterparty fails to meet certain terms of the ISDA Master Agreement. In determining whether to exercise such termination rights, the Fund would consider, in addition to counterparty credit risk,
whether termination would result in a net liability owed from the counterparty.
For financial reporting purposes,
the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statement of Assets and Liabilities.
Futures contracts
Futures contracts are
exchange-traded and represent commitments for the future purchase or sale of an asset at a specified price on a specified date. The Fund bought and sold futures contracts to maintain appropriate equity market exposure
while keeping sufficient cash to accommodate daily redemptions. These instruments may be used for other purposes in future periods. Upon entering into futures contracts, the Fund bears risks that it may not achieve
the anticipated benefits of the futures contracts and may realize a loss. Additional risks include counterparty credit risk, the possibility of an illiquid market, and that a change in the value of the contract or
option may not correlate with changes in the value of the underlying asset.
Upon entering into a futures
contract, the Fund deposits cash or securities with the broker, known as a futures commission merchant (FCM), in an amount sufficient to meet the initial margin requirement. The initial margin deposit must be
maintained at an established level over the life of the contract. Cash deposited as initial margin is recorded in the Statement of Assets and Liabilities as margin deposits. Securities deposited as initial margin are
designated in the Portfolio of Investments. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily change in the contract value and are
recorded as variation margin receivable or payable and are offset in unrealized gains or losses. The Fund generally expects to earn interest income on its margin deposits. The Fund recognizes a realized gain or loss
when the contract is closed or expires. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities.
Effects of derivative transactions in
the financial statements
The following tables are intended
to provide additional information about the effect of derivatives on the financial statements of the Fund, including: the fair value of derivatives by risk category and the location of those fair values in the
Statement of Assets and Liabilities; and the impact of derivative transactions over the period in the Statement of Operations, including realized and unrealized gains (losses). The derivative instrument schedules
following the Portfolio of Investments present additional information regarding derivative instruments outstanding at the end of the period, if any.
| 20 | Columbia Variable Portfolio – Disciplined Core Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
The following table is a summary of
the fair value of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) at December 31, 2021:
| Asset derivatives | ||
| Risk exposure category | Statement of assets and liabilities location | Fair value ($) |
| Equity risk | Component of trust capital — unrealized appreciation on futures contracts | 1,919,287* |
| * | Includes cumulative appreciation (depreciation) as reported in the tables following the Portfolio of Investments. Only the current day’s variation margin is reported in receivables or payables in the Statement of Assets and Liabilities. |
The following table indicates the
effect of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) in the Statement of Operations for the year ended December 31, 2021:
The following table is a summary
of the average outstanding volume by derivative instrument for the year ended December 31, 2021:
| Derivative instrument | Average notional amounts ($)* |
| Futures contracts — long | 77,654,515 |
| * | Based on the ending quarterly outstanding amounts for the year ended December 31, 2021. |
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
Income recognition
Corporate actions and dividend
income are generally recorded net of any non-reclaimable tax withholdings, on the ex-dividend date or upon receipt of an ex-dividend notification in the case of certain foreign securities.
The Fund may receive distributions
from holdings in equity securities, business development companies (BDCs), exchange-traded funds (ETFs), limited partnerships (LPs), other regulated investment companies (RICs), and real estate investment trusts
(REITs), which report information as to the tax character of their distributions annually. These distributions are allocated to dividend income, capital gain and return of capital based on actual information reported.
Return of capital is recorded as a reduction of the cost basis of securities held. If the Fund no longer owns the applicable securities, return of capital is recorded as a realized gain. With respect to REITs, to the
extent actual information has not yet been reported, estimates for return of capital are made by Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise
Financial, Inc. (Ameriprise Financial). The Investment Manager’s estimates are subsequently adjusted when the actual character of the distributions is disclosed by the REITs, which could result in a
proportionate change in return of capital to shareholders.
| Columbia Variable Portfolio – Disciplined Core Fund | Annual Report 2021 | 21 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Awards from class action litigation
are recorded as a reduction of cost basis if the Fund still owns the applicable securities on the payment date. If the Fund no longer owns the applicable securities on the payment date, the proceeds are recorded as
realized gains.
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
Federal income tax status
The Fund is treated as a
partnership for federal income tax purposes, and the Fund does not expect to make regular distributions. The Fund will not be subject to federal income tax, and therefore, there is no provision for federal income
taxes. The partners of the Fund are subject to tax on their distributive share of the Fund’s income and loss. The components of the Fund’s net assets are reported at the partner-level for federal income
tax purposes, and therefore, are not presented in the Statement of Assets and Liabilities.
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Under the Management Agreement, the
Investment Manager provides the Fund with investment research and advice, as well as administrative and accounting services. The management services fee is an annual fee that is equal to a percentage of the
Fund’s daily net assets that declines from 0.77% to 0.57% as the Fund’s net assets increase. The effective management services fee rate for the year ended December 31, 2021 was 0.64% of the Fund’s
average daily net assets.
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. Under a Deferred Compensation Plan (the
Deferred Plan), these members of the Board of Trustees may elect to defer payment of up to 100% of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of
certain funds managed by the Investment Manager. The Fund’s liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Deferred Plan. All
amounts payable under the Deferred Plan
| 22 | Columbia Variable Portfolio – Disciplined Core Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
constitute a general unsecured obligation of the
Fund. The expense for the Deferred Plan, which includes Trustees’ fees deferred during the current period as well as any gains or losses on the Trustees’ deferred compensation balances as a result of
market fluctuations, is included in "Compensation of board members" on the Statement of Operations.
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
Transactions with affiliates
The Fund is permitted to engage in
purchase and/or sale transactions with affiliates and/or accounts that have a common investment manager (or affiliated investment managers), common directors/trustees, and/or common officers under specified conditions
outlined in a policy adopted by the Board, pursuant to Rule 17a-7 under the 1940 Act (cross-trades). The Board relies on quarterly written representation from the Fund’s Chief Compliance Officer that
cross-trades complied with approved policy.
For the year ended December 31,
2021, the Fund engaged in cross-trades as follows:
| Purchases ($) | Sales ($) | Net realized gain (loss) ($) |
| — | 378,963,992 | 144,866,911 |
Service fees
The Fund has entered into a
Shareholder Services Agreement with Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial. Under this
agreement, the Fund pays a service fee equal to the payments made by the Transfer Agent to Participating Insurance Companies and other financial intermediaries (together, Participating Organizations) for services each
such Participating Organization provides to its clients, customers and participants that are invested directly or indirectly in the Fund, up to a cap approved by the Board of Trustees from time to time. The effective
service fee rate for the year ended December 31, 2021, was 0.02% of the Fund’s average daily net assets.
The Transfer Agent may retain as
compensation for its services revenues from fees for wire, telephone and redemption orders, account transcripts due the Transfer Agent from Fund shareholders and interest (net of bank charges) earned with respect to
balances in accounts the Transfer Agent maintains in connection with its services to the Fund.
Distribution and/or service fees
The Fund has an agreement with the
Distributor, an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution services. Under a Plan and Agreement of Distribution, the Fund pays a fee at an annual rate
of up to 0.25% of the Fund’s average daily net assets attributable to Class 2 shares and an annual rate of up to 0.125% of the Fund’s average daily net assets attributable to Class 3 shares. The Fund pays
no distribution and service fees for Class 1 shares.
| Columbia Variable Portfolio – Disciplined Core Fund | Annual Report 2021 | 23 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Expenses waived/reimbursed by the
Investment Manager and its affiliates
The Investment Manager and certain
of its affiliates have contractually agreed to waive fees and/or reimburse expenses (excluding certain fees and expenses described below) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, so that the Fund’s net operating expenses, after giving effect to fees waived/expenses reimbursed and any balance credits and/or overdraft charges from the Fund’s
custodian, do not exceed the following annual rate(s) as a percentage of the classes’ average daily net assets:
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), expenses associated with investments in affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange-traded funds), transaction costs and
brokerage commissions, costs related to any securities lending program, dividend expenses associated with securities sold short, inverse floater program fees and expenses, transaction charges and interest on borrowed
money, interest, costs associated with certain shareholder meetings, infrequent and/or unusual expenses and any other expenses the exclusion of which is specifically approved by the Board of Trustees. This
agreement may be modified or amended only with approval from the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements
described above are not recoverable by the Investment Manager or its affiliates in future periods.
Note 4. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $2,618,715,102 and $4,160,342,848, respectively, for the year ended December 31, 2021. The amount of purchase
and sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 5. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes
referred to as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
Note 6. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund did not borrow or lend
money under the Interfund Program during the year ended December 31, 2021.
| 24 | Columbia Variable Portfolio – Disciplined Core Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Note 7. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to an October 28, 2021 amendment and restatement, the credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment
Manager or an affiliated investment manager, severally and not jointly, permits collective borrowings up to $950 million. Interest is currently charged to each participating fund based on its borrowings at a rate
equal to the higher of (i) the federal funds effective rate, (ii) the secured overnight financing rate plus 0.11448% and (iii) the overnight bank funding rate, plus in each case, 1.00%. Each borrowing under the credit
facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The
commitment fee is included in other expenses in the Statement of Operations. This agreement expires annually in October unless extended or renewed. Prior to the October 28, 2021 amendment and restatement, the Fund had
access to a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. which permitted collective borrowings up to $950 million. Interest was
charged to each participating fund based on its borrowings at a rate equal to the higher of (i) the federal funds effective rate, (ii) the one-month London Interbank Offered Rate (LIBOR) rate and (iii) the overnight
bank funding rate, plus in each case, 1.25%.
The Fund had no borrowings during
the year ended December 31, 2021.
Note 8. Significant
risks
Information technology sector
risk
The Fund is more susceptible to the
particular risks that may affect companies in the information technology sector than if it were invested in a wider variety of companies in unrelated sectors. Companies in the information technology sector are subject
to certain risks, including the risk that new services, equipment or technologies will not be accepted by consumers and businesses or will become rapidly obsolete. Performance of such companies may be affected by
factors including obtaining and protecting patents (or the failure to do so) and significant competitive pressures, including aggressive pricing of their products or services, new market entrants, competition for
market share and short product cycles due to an accelerated rate of technological developments. Such competitive pressures may lead to limited earnings and/or falling profit margins. As a result, the value of their
securities may fall or fail to rise. In addition, many information technology sector companies have limited operating histories and prices of these companies’ securities historically have been more volatile than
other securities, especially over the short term. Some companies in the information technology sector are facing increased government and regulatory scrutiny and may be subject to adverse government or regulatory
action, which could negatively impact the value of their securities.
Market risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
The coronavirus disease 2019 and
its variants (COVID-19) pandemic has resulted in, and may continue to result in, significant global economic and societal disruption and market volatility due to disruptions in market access, resource availability,
facilities operations, imposition of tariffs, export controls and supply chain disruption, among others. Such
| Columbia Variable Portfolio – Disciplined Core Fund | Annual Report 2021 | 25 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
disruptions may be caused, or exacerbated by,
quarantines and travel restrictions, workforce displacement and loss in human and other resources. The uncertainty surrounding the magnitude, duration, reach, costs and effects of the global pandemic, as well as
actions that have been or could be taken by governmental authorities or other third parties, present unknowns that are yet to unfold. The impacts, as well as the uncertainty over impacts to come, of COVID-19 –
and any other infectious illness outbreaks, epidemics and pandemics that may arise in the future – could negatively affect global economies and markets in ways that cannot necessarily be foreseen. In addition,
the impact of infectious illness outbreaks and epidemics in emerging market countries may be greater due to generally less established healthcare systems, governments and financial markets. Public health crises caused
by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic risks in certain countries or globally. The disruptions caused by COVID-19 could prevent the Fund from executing advantageous
investment decisions in a timely manner and negatively impact the Fund’s ability to achieve its investment objectives. Any such event(s) could have a significant adverse impact on the value and risk profile of
the Fund.
Shareholder concentration risk
At December 31, 2021, affiliated
shareholders of record owned 100.0% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of
less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Note 9. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
Note 10. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in
connection with the conduct of their business activities. Ameriprise Financial believes that the Fund is not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject
of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with
the Fund. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (SEC) on legal and regulatory matters that relate to
Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that
these matters, or the adverse publicity associated with them, will not result in increased Fund redemptions, reduced sale of Fund shares or other adverse consequences to the Fund. Further, although we believe
proceedings are not likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines,
penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial or one or more of its affiliates that provides services to
the Fund.
| 26 | Columbia Variable Portfolio – Disciplined Core Fund | Annual Report 2021 |
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees of Columbia
Funds Variable Series Trust II and Shareholders of Columbia Variable Portfolio – Disciplined Core Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of Columbia Variable Portfolio – Disciplined Core Fund (one of the funds constituting Columbia Funds Variable Series Trust II,
referred to hereafter as the "Fund") as of December 31, 2021, the related statement of operations for the year ended December 31, 2021, the statement of changes in net assets for each of the two years in the period
ended December 31, 2021, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2021 (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, 2021, 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, 2021 and the financial highlights for each of the five years in the period ended December 31, 2021 in conformity with accounting principles generally
accepted in the United States of America.
Basis for Opinion
These financial statements are the
responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these
financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2021 by correspondence with the custodian, transfer agent and broker. We believe that
our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Minneapolis, Minnesota
February 22, 2022
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| Columbia Variable Portfolio – Disciplined Core Fund | Annual Report 2021 | 27 |
TRUSTEES AND
OFFICERS
The Board oversees the
Fund’s operations and appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following table provides basic biographical information about the
Fund’s Trustees as of the printing of this report, including their principal occupations during the past five years, although specific titles for individuals may have varied over the period. The year set forth
beneath Length of Service in the table below is the year in which the Trustee was first appointed or elected as Trustee to any Fund currently in the Columbia Funds Complex or a predecessor thereof. Under current Board
policy, each Trustee generally serves until December 31 of the year such Trustee turns seventy-five (75).
Independent trustees
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| George S. Batejan c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1953 | Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 176 | Former Chairman of the Board, NICSA (National Investment Company Services Association) (Executive Committee, Nominating Committee and Governance Committee), 2014-2016; former Director, Intech Investment Management, 2011-2016; former Board Member, Metro Denver Chamber of Commerce, 2015-2016; former Advisory Board Member, University of Colorado Business School, 2015-2018 |
| Kathleen Blatz c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2006 | Attorney, specializing in arbitration and mediation; Chief Justice, Minnesota Supreme Court, 1998-2006; Associate Justice, Minnesota Supreme Court, 1996-1998; Fourth Judicial District Court Judge, Hennepin County, 1994-1996; Attorney in private practice and public service, 1984-1993; State Representative, Minnesota House of Representatives, 1979-1993, which included service on the Tax and Financial Institutions and Insurance Committees; Member and Interim Chair, Minnesota Sports Facilities Authority, January 2017-July 2017; Interim President and Chief Executive Officer, Blue Cross Blue Shield of Minnesota (health care insurance), February-July 2018, April-October 2021 | 176 | Former Trustee, Blue Cross Blue Shield of Minnesota, 2009-2021 (Chair of the Business Development Committee, 2014-2017; Chair of the Governance Committee, 2017-2019); former Member and Chair of the Board, Minnesota Sports Facilities Authority, January 2017-July 2017; former Director, Robina Foundation, 2009-2020 (Chair, 2014-2020); Director, Schulze Family Foundation, since 2021 |
| Pamela G. Carlton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2007 | President, Springboard — Partners in Cross Cultural Leadership (consulting company) since 2003; Managing Director of US Equity Research, JP Morgan Chase, 1999-2003; Director of US Equity Research, Chase Asset Management, 1996-1999; Co-Director Latin America Research, 1993-1996, COO Global Research, 1992-1996, Co-Director of US Research, 1991-1992, Investment Banker, Morgan Stanley, 1982-1991, Morgan Stanley; Attorney, Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 176 | Trustee, New York Presbyterian Hospital Board (Executive Committee and Chair of People Committee) since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee); Director, Apollo Commercial Real Estate Finance, Inc. since 2021; the Governing Council of the Independent Directors Council (IDC), since 2021 |
| 28 | Columbia Variable Portfolio – Disciplined Core Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Janet Langford Carrig c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1957 | Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 174 | Director, EQT Corporation (natural gas producer) since 2019; Director, Whiting Petroleum Corporation (independent oil and gas company) since 2020 |
| J. Kevin Connaughton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2020 | Member, FINRA National Adjudicatory Council since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Consultant to Independent Trustees of CFVIT and CFST I from March 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Managing Director and General Manager of Mutual Fund Products, Columbia Management Investment Advisers, LLC, May 2010-February 2015; President, Columbia Funds, 2008-2015; and senior officer of Columbia Funds and affiliated funds, 2003-2015 | 174 | Former Director, The Autism Project, March 2015-December 2021; former Member of the Investment Committee, St. Michael’s College, November 2015-February 2020; former Trustee, St. Michael’s College, June 2017-September 2019; former Trustee, New Century Portfolios, January 2015-December 2017 |
| Olive M. Darragh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since 2020 | Managing Director of Darragh Inc. (strategy and talent management consulting firm) since 2010; Founder and CEO, Zolio, Inc. (investment management talent identification platform) since 2004; Consultant to Independent Trustees of CFVIT and CFST I from June 2019 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 2001-2004 | 174 | Former Director, University of Edinburgh Business School (Member of US Board); former Director, Boston Public Library Foundation |
| Patricia M. Flynn c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1950 | Trustee since 2004 | Trustee Professor of Economics and Management, Bentley University since 1976 (also teaches and conducts research on corporate governance); Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 176 | Trustee, MA Taxpayers Foundation since 1997; Board of Governors, Innovation Institute, MA Technology Collaborative, 2010-2020; former Board of Directors, The MA Business Roundtable, 2003-2019 |
| Brian J. Gallagher c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 176 | Trustee, Catholic Schools Foundation since 2004 |
| Columbia Variable Portfolio – Disciplined Core Fund | Annual Report 2021 | 29 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Douglas A. Hacker c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1955 | Co-Chair since 2021; Chair of CFST I and CFVIT since 2014; Trustee of CFST I and CFVIT since 1996 and CFST, CFST II, CFVST II, CET I and CET II since 2021 | Independent business executive since May 2006; Executive Vice President – Strategy of United Airlines, December 2002 - May 2006; President of UAL Loyalty Services (airline marketing company), September 2001-December 2002; Executive Vice President and Chief Financial Officer of United Airlines, July 1999-September 2001 | 176 | Director, Spartan Nash Company (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing); former Director, Nash Finch Company (food distributor), 2005-2013; former Director, SeaCube Container Leasing Ltd. (container leasing), 2010-2013; and former Director, Travelport Worldwide Limited (travel information technology), 2014-2019 |
| Nancy T. Lukitsh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1956 | Trustee since 2011 | Senior Vice President, Partner and Director of Marketing, Wellington Management Company, LLP (investment adviser), 1997-2010; Chair, Wellington Management Portfolios (commingled non-U.S. investment pools), 2007 -2010; Director, Wellington Trust Company, NA and other Wellington affiliates, 1997-2010 | 174 | None |
| David M. Moffett c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2011 | Retired; Consultant to Bridgewater and Associates | 174 | Director, CSX Corporation (transportation suppliers); Director, Genworth Financial, Inc. (financial and insurance products and services); Director, PayPal Holdings Inc. (payment and data processing services); Trustee, University of Oklahoma Foundation; former Director, eBay Inc. (online trading community), 2007-2015; and former Director, CIT Bank, CIT Group Inc. (commercial and consumer finance), 2010-2016 |
| Catherine James Paglia c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Co-Chair since 2021; Chair of CFST, CFST II, CFVST II, CET I and CET II since 2020; Trustee of CFST, CFST II and CFVST II since 2004 and CFST I and CFVIT since 2021 | Director, Enterprise Asset Management, Inc. (private real estate and asset management company) since September 1998; Managing Director and Partner, Interlaken Capital, Inc., 1989-1997; Vice President, 1982-1985, Principal, 1985-1987, Managing Director, 1987-1989, Morgan Stanley; Vice President, Investment Banking, 1980-1982, Associate, Investment Banking, 1976-1980, Dean Witter Reynolds, Inc. | 176 | Director, Valmont Industries, Inc. (irrigation systems manufacturer) since 2012; Trustee, Carleton College (on the Investment Committee); Trustee, Carnegie Endowment for International Peace (on the Investment Committee) |
| 30 | Columbia Variable Portfolio – Disciplined Core Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Minor M. Shaw c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1947 | Trustee since 2003 | President, Micco LLC (private investments) since 2011; President, Micco Corp. (family investment business), 1998-2011 | 176 | Director, Blue Cross Blue Shield of South Carolina (Chair of Compensation Committee) since April 2008; Trustee, Hollingsworth Funds (on the Investment Committee) since 2016 (previously Board Chair from 2016-2019); Former Advisory Board member, Duke Energy Corp., 2016-2020; Chair of the Duke Endowment; Chair of Greenville – Spartanburg Airport Commission; former Trustee, BofA Funds Series Trust (11 funds), 2003-2011; former Director, Piedmont Natural Gas, 2004-2016; former Director, National Association of Corporate Directors, Carolinas Chapter, 2013-2018; Chair, Daniel-Mickel Foundation since 1998 |
| Natalie A. Trunow c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1967 | Trustee since 2020 | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services), January 2016-January 2021; Non-executive Member of the Investment Committee and Valuation Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services), August 2018-January 2021; Advisor, Paradigm Asset Management, November 2016-December 2021; Consultant to Independent Trustees of CFVIT and CFST I from September 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Director of Investments/Consultant, Casey Family Programs, April 2016-November 2016; Senior Vice President and Chief Investment Officer, Calvert Investments, August 2008-January 2016; Section Head and Portfolio Manager, General Motors Asset Management, June 1997-August 2008 | 174 | Former Director, Investment Committee, Health Services for Children with Special Needs, Inc., 2012-2019; Director, Chair of Audit Committee, Consumer Credit Counseling Services (formerly Guidewell Financial Solutions), since 2019; Independent Director, Investment Committee and Valuation Committee, Sarona Asset Management, since 2019 |
| Sandra Yeager c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2017 | Retired; President and founder, Hanoverian Capital, LLC (SEC registered investment advisor firm), 2008-2016; Managing Director, DuPont Capital, 2006-2008; Managing Director, Morgan Stanley Investment Management, 2004-2006; Senior Vice President, Alliance Bernstein, 1990-2004 | 176 | Former Director, NAPE Education Foundation, October 2016-October 2020 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Fund Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I (CET I), Columbia ETF Trust II (CET II), Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Beckman, Gallagher and Hacker and Mses. Blatz, Carlton, Flynn, Paglia, Shaw and Yeager serve as Directors of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
| Columbia Variable Portfolio – Disciplined Core Fund | Annual Report 2021 | 31 |
TRUSTEES AND OFFICERS (continued)
Interested trustee affiliated with Investment Manager*
Interested trustee affiliated with Investment Manager*
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during the past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex overseen | Other directorships held by Trustee during the past five years |
| Daniel J. Beckman c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since November 2021(a) | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC (since April 2015); officer of Columbia Funds and affiliated funds since 2020. | 176 | Director, Ameriprise Trust Company, since October 2016; Director, Columbia Management Investment Distributors, Inc. since November 2018; Board of Governors, Columbia Wanger Asset Management, LLC since January 2022 |
| * | Interested person (as defined under the 1940 Act) by reason of being an officer, director, security holder and/or employee of the Investment Manager or Ameriprise Financial. |
| (a) | Mr. Beckman serves as the President and Principal Executive Officer of the Columbia Funds (since 2021). |
The Statement of Additional
Information has additional information about the Fund’s Board members and is available, without charge, upon request by calling 800.345.6611 or contacting your financial intermediary.
The Board has appointed officers
who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. The following table provides basic information about the Officers of the
Fund, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Beckman, who is President and Principal Executive Officer, the
Fund’s other officers are:
Fund officers
| 32 | Columbia Variable Portfolio – Disciplined Core Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Fund officers (continued)
Fund officers (continued)
| Columbia Variable Portfolio – Disciplined Core Fund | Annual Report 2021 | 33 |
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For Fund and other investment product prospectuses, which contain this and other important information, contact your
financial advisor or insurance representative. Please read the prospectus carefully before you invest. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved. Columbia Management Investment Distributors, Inc., 290 Congress Street, Boston, MA 02210
© 2022 Columbia Management Investment
Advisers, LLC.
S-2005 AW (2/22)
Columbia Variable
Portfolio – Select Large Cap Equity Fund
Please remember that you may not
buy (nor will you own) shares of the Fund directly. The Fund is available through variable annuity contracts and variable life insurance policies offered by the separate accounts of participating insurance companies
as well as qualified pension and retirement plans. Please contact your financial advisor or insurance representative for more information.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
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| 25 | |
| 26 |
Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which Columbia Variable Portfolio – Select Large Cap Equity Fund (the Fund) holds investments consistent with the procedures as stated in the Statement of Additional
Information (SAI). You may obtain a copy of the SAI without charge by calling 800.345.6611; contacting your financial intermediary or searching the website of the Securities and Exchange Commission (SEC) at sec.gov.
Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge
by visiting columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. The Fund’s Form N-PORT is available on the SEC’s website at sec.gov. The Fund’s complete
schedule of portfolio holdings, as filed on Form N-PORT, can also be obtained without charge, upon request, by calling 800.345.6611.
Additional Fund information
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
290 Congress Street
Boston, MA 02210
Fund distributor
Columbia Management Investment Distributors,
Inc.
290 Congress Street
Boston, MA 02210
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
Columbia Variable Portfolio – Select Large
Cap Equity Fund | Annual Report 2021
Fund at a Glance
Investment objective
The Fund
seeks long-term capital appreciation.
Portfolio management
Melda Mergen, CFA, CAIA
Co-Portfolio Manager
Managed Fund since 2018
Tiffany Wade
Co-Portfolio Manager
Managed Fund since 2019
| Columbia Variable Portfolio – Select Large Cap Equity Fund | Annual Report 2021 | 3 |
Fund at a Glance (continued)
Performance of a hypothetical $10,000 investment (January 04, 2018 — December 31, 2021)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class 2 shares of Columbia Variable Portfolio – Select Large Cap Equity Fund during the stated time period, and does not reflect the deduction of taxes, if any,
that a shareholder may pay on Fund distributions or on the redemption of Fund shares. The returns also do not reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance
policy or qualified pension or retirement plan, if any.
| 4 | Columbia Variable Portfolio – Select Large Cap Equity Fund | Annual Report 2021 |
Manager Discussion of Fund Performance
At December 31, 2021,
approximately 100% of the Fund’s shares were owned in the aggregate by affiliated funds-of-funds managed by Columbia Management Investment Advisers, LLC (the Investment Manager). As a result of asset allocation
decisions by the Investment Manager, it is possible that the Fund may experience relatively large purchases or redemptions from affiliated funds-of-funds. The Investment Manager seeks to minimize the impact of these
transactions by structuring them over a reasonable period of time. The Fund may also experience increased expenses as it buys and sells securities as a result of purchases or redemptions by affiliated
funds-of-funds.
For the 12-month period that ended
December 31, 2021, Class 2 shares of the Fund returned 29.11%. The Fund outperformed its benchmark, the S&P 500 Index, which returned 28.71% during the period.
Market overview
U.S. equities and most notably
large-cap stocks posted strong gains in 2021. As pandemic-related restrictions were eased, robust economic growth and corporate earnings drove gains for stocks. Both U.S. monetary and fiscal policy were highly
supportive, as Congress approved massive spending packages that included direct payments to citizens and the U.S. Federal Reserve (Fed) maintained its benchmark overnight lending rate near zero while engaging in bond
market purchases to keep longer term borrowing costs low. The fourth quarter of 2021 saw the Fed adopt a more hawkish tone in response to high inflation, leading to increased market volatility. Nonetheless, the major
large-cap indexes ended the year at or near all-time highs, with information technology and communication services stocks the key drivers of market performance.
The Fund’s notable
contributors during the period
| • | Positive contributions to the Fund’s performance were led by selections within information technology and communication services. |
| • | Within information technology, a number of semiconductor names were leading positive contributors, including Applied Materials, Nvidia, Broadcom and NXP. |
| ○ | The segment continued to be supported by the work-from-home trend and a shift in workloads to the cloud as demand from data centers remained strong. In addition, demand was strong from the communications, gaming and automobile end markets. |
| ○ | Shortages of semiconductors emerged during the year due to supply chain constraints, which hampered some end market sales but also elongated the demand cycle and contributed to strong pricing. In addition, several semiconductor companies have announced plans to increase manufacturing spending, which was particularly supportive for Applied Materials. |
| • | Outside of semiconductors, financial services and accounting software firm Intuit reported strong results throughout the year, demonstrating accelerating revenue growth and good margin expansion. We think the company’s transition to a small/medium business and consumer financial services platform continues to progress and is underappreciated by investors. Recent acquisitions of CreditKarma and MailChimp add to the company’s platform offerings and we believe should continue to deliver upside to estimates. |
| • | Positive contributions within communication services were highlighted by Alphabet. The Google parent experienced growth in advertising revenue driven by the broader acceleration in digital advertising in the wake of COVID-19, along with improving margins. Alphabet has continued to show impressive growth in YouTube advertising and the cloud services business as well. |
| • | Another leading contributor came from within real estate, as Extra Space Storage posted strong results and raised guidance based on high occupancy rates and strong pricing increases. We believe, a benign outlook for market capacity growth combined with Extra Space Storage’s below-management target leverage levels positions the company well to continue strong organic and inorganic (i.e., via acquisition) growth. |
The Fund’s notable
detractors during the period
| • | Stock selection within consumer discretionary and financials weighed most heavily on return. |
| Columbia Variable Portfolio – Select Large Cap Equity Fund | Annual Report 2021 | 5 |
Manager Discussion of Fund Performance (continued)
| • | On the downside, within consumer discretionary, retailer Gap saw supply chain constraints and COVID-related manufacturing facility shutdowns negatively impact results. Concerns around a potential softening in demand also weighed on the stock as first the Delta and then the Omicron variants took hold. We exited the position during the year. |
| • | Shares of Amazon lagged relative to the strong overall market performance seen in the year. After a very strong 2020 for both the retail and cloud businesses, the company faced tough comparisons. In addition, this year Amazon has been investing heavily to meet the surge in demand, which has weighed on margins. As with prior investment cycles, we believe Amazon’s elevated investment will leave the company even better positioned to continue to grow and take market share. |
| • | Within financials, Allstate has seen results for its auto insurance business pressured by a recovery in miles driven along with higher used vehicle prices and repair costs, which have led to a period of margin compression as it takes time for pricing increases to catch up. We believe the company is much better positioned to maintain and capture additional market share relative to past difficult stretches for the auto insurance industry. |
| • | Within health care, shares of medical equipment manufacturer Medtronic came under pressure during the year as a slow recovery in elective surgeries weighed on revenue growth while Delta and Omicron raised concerns around further surgery delays. In addition, the company experienced delays in several key product launches. We sold the position during the year. |
| • | Similarly, Exact Sciences experienced slowing growth for its key product Cologuard given fewer patient and sales representative visits to doctors’ offices. In addition, the company faces the prospect of increased competition for Cologuard and its other products. We exited the position during the period. |
The views expressed in this report
reflect the current views of the respective parties who have contributed to this report. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult
to predict, so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective parties
disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Columbia fund are based on numerous factors, may not be relied on as an
indication of trading intent on behalf of any particular Columbia fund. References to specific securities should not be construed as a recommendation or investment advice.
| 6 | Columbia Variable Portfolio – Select Large Cap Equity Fund | Annual Report 2021 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur ongoing
costs, which generally include management fees, distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to help you compare these costs with the ongoing costs of investing in other mutual funds.
The information below does not
reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy (collectively, Contracts) or qualified pension and retirement plan (Qualified Plan), if any. The total fees
and expenses you bear may therefore be higher than those shown below.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount invested, to estimate the
expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as redemption or exchange fees, or expenses that apply to the subaccount or the Contract. Therefore, the
hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If the fees and expenses imposed under your Contract or
Qualified Plan, if any, were included, your costs would be higher.
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 365.
Expenses do not include fees and
expenses incurred indirectly by the Fund from its investment in underlying funds, including affiliated and non-affiliated pooled investment vehicles, such as mutual funds and exchange-traded funds.
| Columbia Variable Portfolio – Select Large Cap Equity Fund | Annual Report 2021 | 7 |
Portfolio of Investments
December 31, 2021
December 31, 2021
(Percentages represent value of
investments compared to net assets)
Investments in securities
The accompanying Notes to Portfolio of
Investments are an integral part of this statement.
| 8 | Columbia Variable Portfolio – Select Large Cap Equity Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Portfolio of
Investments are an integral part of this statement.
| Columbia Variable Portfolio – Select Large Cap Equity Fund | Annual Report 2021 | 9 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Notes to Portfolio of
Investments
| (a) | Non-income producing investment. |
| (b) | The rate shown is the seven-day current annualized yield at December 31, 2021. |
| (c) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended December 31, 2021 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Realized gain (loss)($) | Dividends($) | End of period shares |
| Columbia Short-Term Cash Fund, 0.085% | ||||||||
| 30,928,636 | 1,521,522,520 | (1,547,203,683) | (288) | 5,247,185 | (975) | 30,309 | 5,248,235 | |
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at December 31, 2021:
The accompanying Notes to Portfolio of Investments
are an integral part of this statement.
| 10 | Columbia Variable Portfolio – Select Large Cap Equity Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Fair value measurements (continued)
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Information Technology | 1,246,118,113 | — | — | 1,246,118,113 |
| Real Estate | 69,878,639 | — | — | 69,878,639 |
| Utilities | 106,014,406 | — | — | 106,014,406 |
| Total Common Stocks | 3,938,797,762 | — | — | 3,938,797,762 |
| Money Market Funds | 5,247,185 | — | — | 5,247,185 |
| Total Investments in Securities | 3,944,044,947 | — | — | 3,944,044,947 |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The accompanying Notes to Portfolio of Investments
are an integral part of this statement.
| Columbia Variable Portfolio – Select Large Cap Equity Fund | Annual Report 2021 | 11 |
Statement of Assets and Liabilities
December 31, 2021
December 31, 2021
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $2,822,325,787) | $3,938,797,762 |
| Affiliated issuers (cost $5,247,166) | 5,247,185 |
| Receivable for: | |
| Investments sold | 22,467,288 |
| Dividends | 3,164,076 |
| Foreign tax reclaims | 120,116 |
| Prepaid expenses | 22,338 |
| Total assets | 3,969,818,765 |
| Liabilities | |
| Due to custodian | 35,392 |
| Payable for: | |
| Capital shares purchased | 9,412,812 |
| Management services fees | 71,205 |
| Compensation of board members | 52,802 |
| Compensation of chief compliance officer | 711 |
| Other expenses | 27,681 |
| Total liabilities | 9,600,603 |
| Net assets applicable to outstanding capital stock | $3,960,218,162 |
| Represented by | |
| Trust capital | $3,960,218,162 |
| Total - representing net assets applicable to outstanding capital stock | $3,960,218,162 |
| Class 1 | |
| Net assets | $3,960,213,605 |
| Shares outstanding | 215,098,776 |
| Net asset value per share | $18.41 |
| Class 2 | |
| Net assets | $4,557 |
| Shares outstanding | 250 |
| Net asset value per share | $18.23 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 12 | Columbia Variable Portfolio – Select Large Cap Equity Fund | Annual Report 2021 |
Statement of Operations
Year Ended December 31, 2021
Year Ended December 31, 2021
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $48,972,001 |
| Dividends — affiliated issuers | 30,309 |
| Interfund lending | 522 |
| Foreign taxes withheld | (147,784) |
| Total income | 48,855,048 |
| Expenses: | |
| Management services fees | 23,456,428 |
| Distribution and/or service fees | |
| Class 2 | 10 |
| Compensation of board members | 60,948 |
| Custodian fees | 20,179 |
| Printing and postage fees | 5,645 |
| Audit fees | 29,500 |
| Legal fees | 42,665 |
| Interest on interfund lending | 83 |
| Compensation of chief compliance officer | 749 |
| Other | 27,281 |
| Total expenses | 23,643,488 |
| Net investment income | 25,211,560 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 152,249,792 |
| Investments — affiliated issuers | (975) |
| Net realized gain | 152,248,817 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | 721,257,592 |
| Investments — affiliated issuers | (288) |
| Net change in unrealized appreciation (depreciation) | 721,257,304 |
| Net realized and unrealized gain | 873,506,121 |
| Net increase in net assets resulting from operations | $898,717,681 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| Columbia Variable Portfolio – Select Large Cap Equity Fund | Annual Report 2021 | 13 |
Statement of Changes in Net Assets
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | |
| Operations | ||
| Net investment income | $25,211,560 | $22,457,061 |
| Net realized gain | 152,248,817 | 69,762,402 |
| Net change in unrealized appreciation (depreciation) | 721,257,304 | 186,342,352 |
| Net increase in net assets resulting from operations | 898,717,681 | 278,561,815 |
| Increase in net assets from capital stock activity | 991,765,438 | 443,342,869 |
| Total increase in net assets | 1,890,483,119 | 721,904,684 |
| Net assets at beginning of year | 2,069,735,043 | 1,347,830,359 |
| Net assets at end of year | $3,960,218,162 | $2,069,735,043 |
| Year Ended | Year Ended | |||
| December 31, 2021 | December 31, 2020 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class 1 | ||||
| Subscriptions | 95,447,317 | 1,434,389,211 | 38,091,456 | 517,924,683 |
| Redemptions | (25,798,421) | (442,623,773) | (6,022,948) | (74,581,814) |
| Net increase | 69,648,896 | 991,765,438 | 32,068,508 | 443,342,869 |
| Total net increase | 69,648,896 | 991,765,438 | 32,068,508 | 443,342,869 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 14 | Columbia Variable Portfolio – Select Large Cap Equity Fund | Annual Report 2021 |
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| Columbia Variable Portfolio – Select Large Cap Equity Fund | Annual Report 2021 | 15 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect any fees and expenses imposed under your
Contract and/or Qualified Plan, as applicable; such fees and expenses would reduce the total returns for all periods shown. Total return and portfolio turnover are not annualized for periods of less than one year. The
portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain derivatives, if any. If such transactions were included, the Fund’s portfolio
turnover rate may be higher.
| Net asset value, beginning of period | Net investment income | Net realized and unrealized gain (loss) | Total from investment operations | |
| Class 1 | ||||
| Year Ended 12/31/2021 | $14.23 | 0.12 | 4.06 | 4.18 |
| Year Ended 12/31/2020 | $11.89 | 0.19 | 2.15 | 2.34 |
| Year Ended 12/31/2019 | $9.29 | 0.13 | 2.47 | 2.60 |
| Year Ended 12/31/2018(d) | $10.00 | 0.13 | (0.84) | (0.71) |
| Class 2 | ||||
| Year Ended 12/31/2021 | $14.12 | 0.07 | 4.04 | 4.11 |
| Year Ended 12/31/2020 | $11.83 | 0.16 | 2.13 | 2.29 |
| Year Ended 12/31/2019 | $9.27 | 0.10 | 2.46 | 2.56 |
| Year Ended 12/31/2018(d) | $10.00 | 0.09 | (0.82) | (0.73) |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Ratios include interfund lending expense which is less than 0.01%. |
| (d) | The Fund commenced operations on January 4, 2018. Per share data and total return reflect activity from that date. |
| (e) | Annualized. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 16 | Columbia Variable Portfolio – Select Large Cap Equity Fund | Annual Report 2021 |
Financial Highlights (continued)
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets(a) | Total net expense ratio to average net assets(a),(b) | Net investment income ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Class 1 | |||||||
| Year Ended 12/31/2021 | $18.41 | 29.37% | 0.66%(c) | 0.66%(c) | 0.71% | 60% | $3,960,214 |
| Year Ended 12/31/2020 | $14.23 | 19.68% | 0.73% | 0.69% | 1.59% | 65% | $2,069,732 |
| Year Ended 12/31/2019 | $11.89 | 27.99% | 0.74% | 0.69% | 1.25% | 59% | $1,347,827 |
| Year Ended 12/31/2018(d) | $9.29 | (7.10%) | 0.75%(e) | 0.69%(e) | 1.27%(e) | 58% | $1,070,480 |
| Class 2 | |||||||
| Year Ended 12/31/2021 | $18.23 | 29.11% | 0.91%(c) | 0.91%(c) | 0.45% | 60% | $5 |
| Year Ended 12/31/2020 | $14.12 | 19.36% | 0.97% | 0.94% | 1.32% | 65% | $4 |
| Year Ended 12/31/2019 | $11.83 | 27.62% | 0.97% | 0.94% | 0.97% | 59% | $3 |
| Year Ended 12/31/2018(d) | $9.27 | (7.30%) | 0.97%(e) | 0.94%(e) | 0.84%(e) | 58% | $2 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Select Large Cap Equity Fund | Annual Report 2021 | 17 |
Notes to Financial Statements
December 31, 2021
December 31, 2021
Note 1. Organization
Columbia Variable Portfolio
– Select Large Cap Equity Fund (the Fund), a series of Columbia Funds Variable Series Trust II (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended
(the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers Class 1 and Class 2 shares to separate accounts funding variable annuity contracts and variable life insurance policies (collectively, Contracts) issued by
affiliated and unaffiliated life insurance companies (Participating Insurance Companies) as well as qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors (Qualified
Investors) authorized by Columbia Management Investment Distributors, Inc. (the Distributor). You may not buy (nor will you own) shares of the Fund directly. You may invest by participating in a Qualified Plan or by
buying a Contract and making allocations to the Fund. Although all share classes generally have identical voting, dividend and liquidation rights, each share class votes separately when required by the Trust’s
organizational documents or by law. Different share classes pay different net investment income distribution amounts to the extent the expenses of such share classes differ, and distributions in liquidation will be
proportional to the net asset value of each share class. Each share class has its own cost structure and other features.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Equity securities listed on an
exchange are valued at the closing price or last trade price on their primary exchange at the close of business of the New York Stock Exchange. Securities with a closing price not readily available or not listed on
any exchange are valued at the mean between the closing bid and ask prices. Listed preferred stocks convertible into common stocks are valued using an evaluated price from a pricing service.
Foreign equity securities are
valued based on the closing price or last trade price on their primary exchange at the close of business of the New York Stock Exchange. If any foreign equity security closing prices are not readily available,
the securities are valued at the mean of the latest quoted bid and ask prices on such exchanges or markets. Foreign currency exchange rates are determined at the scheduled closing time of the New York Stock Exchange.
Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange; therefore, the closing prices for securities in such markets or on such exchanges may not fully reflect
events that occur after such close but before the close of the New York Stock Exchange. In those situations, foreign securities will be fair valued pursuant to a policy adopted by the Board of Trustees. Under the
policy, the Fund may utilize a third-party pricing service to determine these fair values. The third-party pricing service takes into account multiple factors, including, but not limited to, movements in the U.S.
securities markets, certain depositary receipts, futures contracts and foreign exchange rates that have occurred subsequent to the close of the foreign exchange or market, to determine a good faith estimate that
reasonably reflects the current market conditions as of the close of the New York Stock Exchange. The fair value of a security is likely to be different from the quoted or published price, if available.
Investments in open-end investment
companies (other than exchange-traded funds (ETFs)), are valued at the latest net asset value reported by those companies as of the valuation time.
| 18 | Columbia Variable Portfolio – Select Large Cap Equity Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
Income recognition
Corporate actions and dividend
income are generally recorded net of any non-reclaimable tax withholdings, on the ex-dividend date or upon receipt of an ex-dividend notification in the case of certain foreign securities.
The Fund may receive distributions
from holdings in equity securities, business development companies (BDCs), exchange-traded funds (ETFs), limited partnerships (LPs), other regulated investment companies (RICs), and real estate investment trusts
(REITs), which report information as to the tax character of their distributions annually. These distributions are allocated to dividend income, capital gain and return of capital based on actual information reported.
Return of capital is recorded as a reduction of the cost basis of securities held. If the Fund no longer owns the applicable securities, return of capital is recorded as a realized gain. With respect to REITs, to the
extent actual information has not yet been reported, estimates for return of capital are made by Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise
Financial, Inc. (Ameriprise Financial). The Investment Manager’s estimates are subsequently adjusted when the actual character of the distributions is disclosed by the REITs, which could result in a
proportionate change in return of capital to shareholders.
Awards from class action litigation
are recorded as a reduction of cost basis if the Fund still owns the applicable securities on the payment date. If the Fund no longer owns the applicable securities on the payment date, the proceeds are recorded as
realized gains.
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
Federal income tax status
The Fund is treated as a
partnership for federal income tax purposes, and the Fund does not expect to make regular distributions. The Fund will not be subject to federal income tax, and therefore, there is no provision for federal income
taxes. The partners of the Fund are subject to tax on their distributive share of the Fund’s income and loss. The components of the Fund’s net assets are reported at the partner-level for federal income
tax purposes, and therefore, are not presented in the Statement of Assets and Liabilities.
| Columbia Variable Portfolio – Select Large Cap Equity Fund | Annual Report 2021 | 19 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Foreign taxes
The Fund may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries, as applicable, based upon its current interpretation of tax rules
and regulations that exist in the markets in which it invests.
Realized gains in certain countries
may be subject to foreign taxes at the Fund level, based on statutory rates. The Fund accrues for such foreign taxes on realized and unrealized gains at the appropriate rate for each jurisdiction, as applicable. The
amount, if any, is disclosed as a liability on the Statement of Assets and Liabilities.
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Under the Management Agreement, the
Investment Manager provides the Fund with investment research and advice, as well as administrative and accounting services. The management services fee is an annual fee that is equal to a percentage of the
Fund’s daily net assets that declines from 0.77% to 0.57% as the Fund’s net assets increase. The effective management services fee rate for the year ended December 31, 2021 was 0.66% of the Fund’s
average daily net assets.
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. Under a Deferred Compensation Plan (the
Deferred Plan), these members of the Board of Trustees may elect to defer payment of up to 100% of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of
certain funds managed by the Investment Manager. The Fund’s liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Deferred Plan. All
amounts payable under the Deferred Plan constitute a general unsecured obligation of the Fund. The expense for the Deferred Plan, which includes Trustees’ fees deferred during the current period as well as any
gains or losses on the Trustees’ deferred compensation balances as a result of market fluctuations, is included in "Compensation of board members" on the Statement of Operations.
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
| 20 | Columbia Variable Portfolio – Select Large Cap Equity Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Transactions with affiliates
The Fund is permitted to engage in
purchase and/or sale transactions with affiliates and/or accounts that have a common investment manager (or affiliated investment managers), common directors/trustees, and/or common officers under specified conditions
outlined in a policy adopted by the Board, pursuant to Rule 17a-7 under the 1940 Act (cross-trades). The Board relies on quarterly written representation from the Fund’s Chief Compliance Officer that
cross-trades complied with approved policy.
For the year ended December 31,
2021, the Fund engaged in cross-trades as follows:
| Purchases ($) | Sales ($) | Net realized gain (loss) ($) |
| 473,190,545 | — | — |
Service fees
The Fund has entered into a
Shareholder Services Agreement with Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial. Under this
agreement, the Fund pays a service fee equal to the payments made by the Transfer Agent to Participating Insurance Companies and other financial intermediaries (together, Participating Organizations) for services each
such Participating Organization provides to its clients, customers and participants that are invested directly or indirectly in the Fund, up to a cap approved by the Board of Trustees from time to time. For the year
ended December 31, 2021, there were no assets subject to the service fee.
The Transfer Agent may retain as
compensation for its services revenues from fees for wire, telephone and redemption orders, account transcripts due the Transfer Agent from Fund shareholders and interest (net of bank charges) earned with respect to
balances in accounts the Transfer Agent maintains in connection with its services to the Fund.
Distribution and/or service fees
The Fund has an agreement with the
Distributor, an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution services. Under a Plan and Agreement of Distribution, the Fund pays a fee at an annual rate
of up to 0.25% of the Fund’s average daily net assets attributable to Class 2 shares. The Fund pays no distribution and service fees for Class 1 shares.
Expenses waived/reimbursed by the
Investment Manager and its affiliates
The Investment Manager and certain
of its affiliates have contractually agreed to waive fees and/or reimburse expenses (excluding certain fees and expenses described below) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, so that the Fund’s net operating expenses, after giving effect to fees waived/expenses reimbursed and any balance credits and/or overdraft charges from the Fund’s
custodian, do not exceed the following annual rate(s) as a percentage of the classes’ average daily net assets:
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), expenses associated with investments in affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange-traded funds), transaction costs and
brokerage commissions, costs related to any securities lending program, dividend expenses associated with securities sold short, inverse floater program fees and expenses, transaction charges and interest on borrowed
money, interest, costs associated with certain shareholder meetings, infrequent and/or unusual expenses and any other expenses the exclusion of which is
| Columbia Variable Portfolio – Select Large Cap Equity Fund | Annual Report 2021 | 21 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
specifically approved by the Board of Trustees.
This agreement may be modified or amended only with approval from the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements
described above are not recoverable by the Investment Manager or its affiliates in future periods.
Note 4. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $3,105,470,700 and $2,076,910,468, respectively, for the year ended December 31, 2021. The amount of purchase
and sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 5. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes
referred to as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
Note 6. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund’s activity in the
Interfund Program during the year ended December 31, 2021 was as follows:
| Borrower or lender | Average loan balance ($) | Weighted average interest rate (%) | Number of days with outstanding loans |
| Borrower | 4,900,000 | 0.61 | 1 |
| Lender | 13,550,000 | 0.69 | 2 |
Interest income earned and
interest expense incurred by the Fund is recorded as Interfund lending in the Statement of Operations. The Fund had no outstanding interfund loans at December 31, 2021.
Note 7. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to an October 28, 2021 amendment and restatement, the credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment
Manager or an affiliated investment manager, severally and not jointly, permits collective borrowings up to $950 million. Interest is currently charged to each participating fund based on its borrowings at a rate
equal to the higher of (i) the federal funds effective rate, (ii) the secured overnight financing rate plus 0.11448% and (iii) the overnight bank funding rate, plus in each case, 1.00%. Each borrowing under the credit
facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The
commitment fee is included in other expenses in the Statement of Operations. This agreement expires annually in October unless extended or renewed. Prior to the October 28, 2021 amendment and restatement, the Fund had
access to a revolving
| 22 | Columbia Variable Portfolio – Select Large Cap Equity Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
credit facility with a syndicate of banks led by
JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. which permitted collective borrowings up to $950 million. Interest was charged to each participating fund based on its borrowings at a rate equal to
the higher of (i) the federal funds effective rate, (ii) the one-month London Interbank Offered Rate (LIBOR) rate and (iii) the overnight bank funding rate, plus in each case, 1.25%.
The Fund had no borrowings during
the year ended December 31, 2021.
Note 8. Significant
risks
Information technology sector
risk
The Fund is more susceptible to the
particular risks that may affect companies in the information technology sector than if it were invested in a wider variety of companies in unrelated sectors. Companies in the information technology sector are subject
to certain risks, including the risk that new services, equipment or technologies will not be accepted by consumers and businesses or will become rapidly obsolete. Performance of such companies may be affected by
factors including obtaining and protecting patents (or the failure to do so) and significant competitive pressures, including aggressive pricing of their products or services, new market entrants, competition for
market share and short product cycles due to an accelerated rate of technological developments. Such competitive pressures may lead to limited earnings and/or falling profit margins. As a result, the value of their
securities may fall or fail to rise. In addition, many information technology sector companies have limited operating histories and prices of these companies’ securities historically have been more volatile than
other securities, especially over the short term. Some companies in the information technology sector are facing increased government and regulatory scrutiny and may be subject to adverse government or regulatory
action, which could negatively impact the value of their securities.
Market risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
The coronavirus disease 2019 and
its variants (COVID-19) pandemic has resulted in, and may continue to result in, significant global economic and societal disruption and market volatility due to disruptions in market access, resource availability,
facilities operations, imposition of tariffs, export controls and supply chain disruption, among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement
and loss in human and other resources. The uncertainty surrounding the magnitude, duration, reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental
authorities or other third parties, present unknowns that are yet to unfold. The impacts, as well as the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and
pandemics that may arise in the future – could negatively affect global economies and markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in
emerging market countries may be greater due to generally less established healthcare systems, governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing
political, social and economic risks in certain countries or globally. The disruptions caused by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively
impact the Fund’s ability to achieve its investment objectives. Any such event(s) could have a significant adverse impact on the value and risk profile of the Fund.
| Columbia Variable Portfolio – Select Large Cap Equity Fund | Annual Report 2021 | 23 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Shareholder concentration risk
At December 31, 2021, affiliated
shareholders of record owned 100.0% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of
less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Note 9. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
Note 10. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in
connection with the conduct of their business activities. Ameriprise Financial believes that the Fund is not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject
of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with
the Fund. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (SEC) on legal and regulatory matters that relate to
Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that
these matters, or the adverse publicity associated with them, will not result in increased Fund redemptions, reduced sale of Fund shares or other adverse consequences to the Fund. Further, although we believe
proceedings are not likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines,
penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial or one or more of its affiliates that provides services to
the Fund.
| 24 | Columbia Variable Portfolio – Select Large Cap Equity Fund | Annual Report 2021 |
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees of Columbia
Funds Variable Series Trust II and Shareholders of Columbia Variable Portfolio – Select Large Cap Equity Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of Columbia Variable Portfolio – Select Large Cap Equity Fund (one of the funds constituting Columbia Funds Variable Series Trust II,
referred to hereafter as the "Fund") as of December 31, 2021, the related statement of operations for the year ended December 31, 2021, the statement of changes in net assets for each of the two years in the period
ended December 31, 2021, including the related notes, and the financial highlights for each of the three years in the period ended December 31, 2021 and for the period January 4, 2018 (commencement of operations)
through December 31, 2018 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as
of December 31, 2021, 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, 2021 and the financial highlights for each of the
three years in the period ended December 31, 2021 and for the period January 4, 2018 (commencement of operations) through December 31, 2018 in conformity with accounting principles generally accepted in the United
States of America.
Basis for Opinion
These financial statements are the
responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these
financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2021 by correspondence with the custodian and transfer agent. We believe that our
audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Minneapolis, Minnesota
February 18, 2022
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| Columbia Variable Portfolio – Select Large Cap Equity Fund | Annual Report 2021 | 25 |
TRUSTEES AND
OFFICERS
The Board oversees the
Fund’s operations and appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following table provides basic biographical information about the
Fund’s Trustees as of the printing of this report, including their principal occupations during the past five years, although specific titles for individuals may have varied over the period. The year set forth
beneath Length of Service in the table below is the year in which the Trustee was first appointed or elected as Trustee to any Fund currently in the Columbia Funds Complex or a predecessor thereof. Under current Board
policy, each Trustee generally serves until December 31 of the year such Trustee turns seventy-five (75).
Independent trustees
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| George S. Batejan c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1953 | Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 176 | Former Chairman of the Board, NICSA (National Investment Company Services Association) (Executive Committee, Nominating Committee and Governance Committee), 2014-2016; former Director, Intech Investment Management, 2011-2016; former Board Member, Metro Denver Chamber of Commerce, 2015-2016; former Advisory Board Member, University of Colorado Business School, 2015-2018 |
| Kathleen Blatz c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2006 | Attorney, specializing in arbitration and mediation; Chief Justice, Minnesota Supreme Court, 1998-2006; Associate Justice, Minnesota Supreme Court, 1996-1998; Fourth Judicial District Court Judge, Hennepin County, 1994-1996; Attorney in private practice and public service, 1984-1993; State Representative, Minnesota House of Representatives, 1979-1993, which included service on the Tax and Financial Institutions and Insurance Committees; Member and Interim Chair, Minnesota Sports Facilities Authority, January 2017-July 2017; Interim President and Chief Executive Officer, Blue Cross Blue Shield of Minnesota (health care insurance), February-July 2018, April-October 2021 | 176 | Former Trustee, Blue Cross Blue Shield of Minnesota, 2009-2021 (Chair of the Business Development Committee, 2014-2017; Chair of the Governance Committee, 2017-2019); former Member and Chair of the Board, Minnesota Sports Facilities Authority, January 2017-July 2017; former Director, Robina Foundation, 2009-2020 (Chair, 2014-2020); Director, Schulze Family Foundation, since 2021 |
| Pamela G. Carlton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2007 | President, Springboard — Partners in Cross Cultural Leadership (consulting company) since 2003; Managing Director of US Equity Research, JP Morgan Chase, 1999-2003; Director of US Equity Research, Chase Asset Management, 1996-1999; Co-Director Latin America Research, 1993-1996, COO Global Research, 1992-1996, Co-Director of US Research, 1991-1992, Investment Banker, Morgan Stanley, 1982-1991, Morgan Stanley; Attorney, Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 176 | Trustee, New York Presbyterian Hospital Board (Executive Committee and Chair of People Committee) since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee); Director, Apollo Commercial Real Estate Finance, Inc. since 2021; the Governing Council of the Independent Directors Council (IDC), since 2021 |
| 26 | Columbia Variable Portfolio – Select Large Cap Equity Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Janet Langford Carrig c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1957 | Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 174 | Director, EQT Corporation (natural gas producer) since 2019; Director, Whiting Petroleum Corporation (independent oil and gas company) since 2020 |
| J. Kevin Connaughton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2020 | Member, FINRA National Adjudicatory Council since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Consultant to Independent Trustees of CFVIT and CFST I from March 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Managing Director and General Manager of Mutual Fund Products, Columbia Management Investment Advisers, LLC, May 2010-February 2015; President, Columbia Funds, 2008-2015; and senior officer of Columbia Funds and affiliated funds, 2003-2015 | 174 | Former Director, The Autism Project, March 2015-December 2021; former Member of the Investment Committee, St. Michael’s College, November 2015-February 2020; former Trustee, St. Michael’s College, June 2017-September 2019; former Trustee, New Century Portfolios, January 2015-December 2017 |
| Olive M. Darragh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since 2020 | Managing Director of Darragh Inc. (strategy and talent management consulting firm) since 2010; Founder and CEO, Zolio, Inc. (investment management talent identification platform) since 2004; Consultant to Independent Trustees of CFVIT and CFST I from June 2019 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 2001-2004 | 174 | Former Director, University of Edinburgh Business School (Member of US Board); former Director, Boston Public Library Foundation |
| Patricia M. Flynn c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1950 | Trustee since 2004 | Trustee Professor of Economics and Management, Bentley University since 1976 (also teaches and conducts research on corporate governance); Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 176 | Trustee, MA Taxpayers Foundation since 1997; Board of Governors, Innovation Institute, MA Technology Collaborative, 2010-2020; former Board of Directors, The MA Business Roundtable, 2003-2019 |
| Brian J. Gallagher c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 176 | Trustee, Catholic Schools Foundation since 2004 |
| Columbia Variable Portfolio – Select Large Cap Equity Fund | Annual Report 2021 | 27 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Douglas A. Hacker c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1955 | Co-Chair since 2021; Chair of CFST I and CFVIT since 2014; Trustee of CFST I and CFVIT since 1996 and CFST, CFST II, CFVST II, CET I and CET II since 2021 | Independent business executive since May 2006; Executive Vice President – Strategy of United Airlines, December 2002 - May 2006; President of UAL Loyalty Services (airline marketing company), September 2001-December 2002; Executive Vice President and Chief Financial Officer of United Airlines, July 1999-September 2001 | 176 | Director, Spartan Nash Company (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing); former Director, Nash Finch Company (food distributor), 2005-2013; former Director, SeaCube Container Leasing Ltd. (container leasing), 2010-2013; and former Director, Travelport Worldwide Limited (travel information technology), 2014-2019 |
| Nancy T. Lukitsh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1956 | Trustee since 2011 | Senior Vice President, Partner and Director of Marketing, Wellington Management Company, LLP (investment adviser), 1997-2010; Chair, Wellington Management Portfolios (commingled non-U.S. investment pools), 2007 -2010; Director, Wellington Trust Company, NA and other Wellington affiliates, 1997-2010 | 174 | None |
| David M. Moffett c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2011 | Retired; Consultant to Bridgewater and Associates | 174 | Director, CSX Corporation (transportation suppliers); Director, Genworth Financial, Inc. (financial and insurance products and services); Director, PayPal Holdings Inc. (payment and data processing services); Trustee, University of Oklahoma Foundation; former Director, eBay Inc. (online trading community), 2007-2015; and former Director, CIT Bank, CIT Group Inc. (commercial and consumer finance), 2010-2016 |
| Catherine James Paglia c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Co-Chair since 2021; Chair of CFST, CFST II, CFVST II, CET I and CET II since 2020; Trustee of CFST, CFST II and CFVST II since 2004 and CFST I and CFVIT since 2021 | Director, Enterprise Asset Management, Inc. (private real estate and asset management company) since September 1998; Managing Director and Partner, Interlaken Capital, Inc., 1989-1997; Vice President, 1982-1985, Principal, 1985-1987, Managing Director, 1987-1989, Morgan Stanley; Vice President, Investment Banking, 1980-1982, Associate, Investment Banking, 1976-1980, Dean Witter Reynolds, Inc. | 176 | Director, Valmont Industries, Inc. (irrigation systems manufacturer) since 2012; Trustee, Carleton College (on the Investment Committee); Trustee, Carnegie Endowment for International Peace (on the Investment Committee) |
| 28 | Columbia Variable Portfolio – Select Large Cap Equity Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Minor M. Shaw c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1947 | Trustee since 2003 | President, Micco LLC (private investments) since 2011; President, Micco Corp. (family investment business), 1998-2011 | 176 | Director, Blue Cross Blue Shield of South Carolina (Chair of Compensation Committee) since April 2008; Trustee, Hollingsworth Funds (on the Investment Committee) since 2016 (previously Board Chair from 2016-2019); Former Advisory Board member, Duke Energy Corp., 2016-2020; Chair of the Duke Endowment; Chair of Greenville – Spartanburg Airport Commission; former Trustee, BofA Funds Series Trust (11 funds), 2003-2011; former Director, Piedmont Natural Gas, 2004-2016; former Director, National Association of Corporate Directors, Carolinas Chapter, 2013-2018; Chair, Daniel-Mickel Foundation since 1998 |
| Natalie A. Trunow c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1967 | Trustee since 2020 | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services), January 2016-January 2021; Non-executive Member of the Investment Committee and Valuation Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services), August 2018-January 2021; Advisor, Paradigm Asset Management, November 2016-December 2021; Consultant to Independent Trustees of CFVIT and CFST I from September 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Director of Investments/Consultant, Casey Family Programs, April 2016-November 2016; Senior Vice President and Chief Investment Officer, Calvert Investments, August 2008-January 2016; Section Head and Portfolio Manager, General Motors Asset Management, June 1997-August 2008 | 174 | Former Director, Investment Committee, Health Services for Children with Special Needs, Inc., 2012-2019; Director, Chair of Audit Committee, Consumer Credit Counseling Services (formerly Guidewell Financial Solutions), since 2019; Independent Director, Investment Committee and Valuation Committee, Sarona Asset Management, since 2019 |
| Sandra Yeager c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2017 | Retired; President and founder, Hanoverian Capital, LLC (SEC registered investment advisor firm), 2008-2016; Managing Director, DuPont Capital, 2006-2008; Managing Director, Morgan Stanley Investment Management, 2004-2006; Senior Vice President, Alliance Bernstein, 1990-2004 | 176 | Former Director, NAPE Education Foundation, October 2016-October 2020 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Fund Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I (CET I), Columbia ETF Trust II (CET II), Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Beckman, Gallagher and Hacker and Mses. Blatz, Carlton, Flynn, Paglia, Shaw and Yeager serve as Directors of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
| Columbia Variable Portfolio – Select Large Cap Equity Fund | Annual Report 2021 | 29 |
TRUSTEES AND OFFICERS (continued)
Interested trustee affiliated with Investment Manager*
Interested trustee affiliated with Investment Manager*
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during the past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex overseen | Other directorships held by Trustee during the past five years |
| Daniel J. Beckman c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since November 2021(a) | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC (since April 2015); officer of Columbia Funds and affiliated funds since 2020. | 176 | Director, Ameriprise Trust Company, since October 2016; Director, Columbia Management Investment Distributors, Inc. since November 2018; Board of Governors, Columbia Wanger Asset Management, LLC since January 2022 |
| * | Interested person (as defined under the 1940 Act) by reason of being an officer, director, security holder and/or employee of the Investment Manager or Ameriprise Financial. |
| (a) | Mr. Beckman serves as the President and Principal Executive Officer of the Columbia Funds (since 2021). |
The Statement of Additional
Information has additional information about the Fund’s Board members and is available, without charge, upon request by calling 800.345.6611 or contacting your financial intermediary.
The Board has appointed officers
who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. The following table provides basic information about the Officers of the
Fund, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Beckman, who is President and Principal Executive Officer, the
Fund’s other officers are:
Fund officers
| 30 | Columbia Variable Portfolio – Select Large Cap Equity Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Fund officers (continued)
Fund officers (continued)
| Columbia Variable Portfolio – Select Large Cap Equity Fund | Annual Report 2021 | 31 |
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For Fund and other investment product prospectuses, which contain this and other important information, contact your
financial advisor or insurance representative. Please read the prospectus carefully before you invest. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved. Columbia Management Investment Distributors, Inc., 290 Congress Street, Boston, MA 02210
© 2022 Columbia Management Investment
Advisers, LLC.
C-2035 AW (2/22)
Columbia Variable
Portfolio – Global Strategic Income Fund
Please remember that you may not
buy (nor will you own) shares of the Fund directly. The Fund is available through variable annuity contracts and variable life insurance policies offered by the separate accounts of participating insurance companies
as well as qualified pension and retirement plans. Please contact your financial advisor or insurance representative for more information.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
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| 6 | |
| 8 | |
| 9 | |
| 30 | |
| 31 | |
| 32 | |
| 34 | |
| 36 | |
| 52 | |
| 53 |
Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which Columbia Variable Portfolio – Global Strategic Income Fund (the Fund) holds investments consistent with the procedures as stated in the Statement of Additional
Information (SAI). You may obtain a copy of the SAI without charge by calling 800.345.6611; contacting your financial intermediary or searching the website of the Securities and Exchange Commission (SEC) at sec.gov.
Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge
by visiting columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. The Fund’s Form N-PORT is available on the SEC’s website at sec.gov. The Fund’s complete
schedule of portfolio holdings, as filed on Form N-PORT, can also be obtained without charge, upon request, by calling 800.345.6611.
Additional Fund information
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
290 Congress Street
Boston, MA 02210
Fund distributor
Columbia Management Investment Distributors,
Inc.
290 Congress Street
Boston, MA 02210
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
Columbia Variable Portfolio – Global
Strategic Income Fund | Annual Report 2021
Fund at a Glance
Investment objective
The Fund
seeks to provide shareholders with high total return through income and growth of capital.
Portfolio management
Adrian Hilton
Co-Portfolio Manager
Managed Fund since October 2020
Ryan Staszewski, CFA
Co-Portfolio Manager
Managed Fund since 2018
David Janssen, CFA
Co-Portfolio Manager
Managed Fund since March 2021
| Columbia Variable Portfolio – Global Strategic Income Fund | Annual Report 2021 | 3 |
Fund at a Glance (continued)
Performance of a hypothetical $10,000 investment (December 31, 2011 — December 31, 2021)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class 2 shares of Columbia Variable Portfolio – Global Strategic Income Fund during the stated time period, and does not reflect the deduction of taxes, if any,
that a shareholder may pay on Fund distributions or on the redemption of Fund shares. The returns also do not reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance
policy or qualified pension or retirement plan, if any.
| Quality breakdown (%) (at December 31, 2021) | |
| AAA rating | 1.9 |
| AA rating | 3.2 |
| A rating | 9.8 |
| BBB rating | 34.0 |
| BB rating | 26.0 |
| B rating | 15.7 |
| CCC rating | 3.9 |
| CC rating | 0.0(a) |
| Not rated | 5.5 |
| Total | 100.0 |
| (a) | Rounds to zero. |
Percentages indicated are based upon
total fixed income investments.
Bond ratings apply to the underlying
holdings of the Fund and not the Fund itself and are divided into categories ranging from highest to lowest credit quality, determined by using the middle rating of Moody’s, S&P and Fitch, after dropping the
highest and lowest available ratings. When ratings are available from only two rating agencies, the lower rating is used. When a rating is available from only one rating agency, that rating is used. When a bond is not
rated by any rating agency, it is designated as “Not rated.” Credit quality ratings assigned by a rating agency are subjective opinions, not statements of fact, and are subject to change, including daily.
The ratings assigned by credit rating agencies are but one of the considerations that the Investment Manager and/or Fund’s subadviser incorporates into its credit analysis process, along with such other
country-specific factors as the direction and stance of fiscal policy, balance of payment trends and commodity prices, the level and structure of public debt as well as political stability and commitment to strong
macroeconomic policies.
| 4 | Columbia Variable Portfolio – Global Strategic Income Fund | Annual Report 2021 |
Fund at a Glance (continued)
| Columbia Variable Portfolio – Global Strategic Income Fund | Annual Report 2021 | 5 |
Manager Discussion of Fund Performance
For the 12-month period that
ended December 31, 2021, the Fund’s Class 2 shares returned 1.03%. The Fund outperformed its benchmark, the Bloomberg Global Aggregate Hedged USD Index, which returned -1.39% for the same period. The Fund also
outperformed its secondary benchmark, the Bloomberg Global Credit Hedged USD Index, which returned -0.95% for the same period.
Market overview
2021 ended up being a weak year
for fixed-income markets, with most sectors within the benchmark posting negative returns for the year, although the out-of-benchmark sectors of high-yield corporate bonds and bank loans had relatively stronger
performance. Such broad underperformance was primarily driven by the rise in global interest rates.
The volatility in interest rates
began after the Democrats swept the Georgia runoff U.S. Senate elections on January 5, 2021, which resulted in the Democrats holding a majority in the House and Senate as well as the Presidency. This led to
expectations of larger government spending programs, sending the 10-year U.S. Treasury yield up from 0.90% at the beginning of the calendar year to 1.74% at the end of March 2021. The 10-year U.S. Treasury yield
peaked there, trading between 1.60% and 1.20% for most of the rest of the calendar year. Another important development for interest rates in 2021 was an increase in realized inflation, beginning in March but
accelerating throughout the year. Inflation readings were above 5% through the entire second half of the year, which compared to the U.S. Federal Reserve’s (Fed) target rate of 2%. In the fourth quarter,
partially driven by higher than anticipated inflation, the Fed began to signal a sooner start to the hiking cycle and a faster pace of interest rate hikes than it had previously indicated, sending yields at the front,
or short-term, end of the U.S. Treasury yield curve up steadily as the market began pricing in this tightening of monetary policy.
Credit assets rallied to begin the
annual period on the improved economic picture that came with the rollout of COVID-19 vaccines, and fiscal stimulus helped lower spreads, or yield differentials to duration-adjusted U.S. Treasuries. Throughout the
year, even as new variants of COVID-19 emerged, there were only modest sell-offs in credit that quickly rebounded. Two important themes in corporate credit in 2021 were the strength of “rebound” sectors
that stood to benefit as consumer behavior returned closer to normal and “rising stars,” which are companies on track to return to investment-grade status.
The Fund’s notable
contributors during the period
| • | Positioning in U.S. high-yield corporate bonds and emerging markets debt contributed most positively to the Fund’s performance during the annual period. |
| ○ | The Fund began the annual period with a diversified exposure to credit sectors, as most valuations, in our view, were fair to attractive at the start of the calendar year. |
| ○ | High-yield corporate bond returns within the Fund benefited from a bias toward “rising star” credits, which performed well. |
| ○ | Elsewhere in corporate credit, positioning in emerging markets and European investment-grade corporate bonds contributed positively to relative results. |
| • | Among structured securities, positioning in agency securities, asset-backed securities, commercial mortgage-backed securities and non-agency residential mortgage-backed securities all added value. |
| • | The Fund’s duration, which was shorter than that of the benchmark, was a notable driver of outperformance, as interest rates rose during the annual period. We maintained the Fund’s relatively shorter duration for most of the year but reduced it somewhat at the end of the year as interest rates had already risen significantly. Duration is a measure of a fund’s sensitivity to changes in interest rates. |
The Fund’s notable
detractors during the period
| • | Yield curve positioning detracted from performance, attributable primarily to the fourth quarter, as the Fund was overweight the front end of the spectrum of maturities, where yields rose more than they rose for longer term maturities during the annual period. |
| • | There were no other notable detractors during the annual period. |
| 6 | Columbia Variable Portfolio – Global Strategic Income Fund | Annual Report 2021 |
Manager Discussion of Fund Performance (continued)
Derivatives usage
The Fund utilized U.S. Treasury
futures, German bund futures and European government bond, or gilt, futures to manage and adjust its duration positioning. The Fund used CMBX (which track the commercial mortgage-backed securities market), CDX (a U.S.
high-yield credit default swap index) and European credit default swap indices to hedge its credit exposure and, at times, create a synthetic long exposure. The Fund also used currency forwards and swaptions to
maintain and modify target duration, yield curve, credit and currency positioning. These derivative instruments were used for hedging and investing purposes, and they overall had a positive impact on the Fund’s
performance during the annual period.
The views expressed in this report
reflect the current views of the respective parties who have contributed to this report. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult
to predict, so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective parties
disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Columbia fund are based on numerous factors, may not be relied on as an
indication of trading intent on behalf of any particular Columbia fund. References to specific securities should not be construed as a recommendation or investment advice.
| Columbia Variable Portfolio – Global Strategic Income Fund | Annual Report 2021 | 7 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur ongoing
costs, which generally include management fees, distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to help you compare these costs with the ongoing costs of investing in other mutual funds.
The information below does not
reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy (collectively, Contracts) or qualified pension and retirement plan (Qualified Plan), if any. The total fees
and expenses you bear may therefore be higher than those shown below.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount invested, to estimate the
expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as redemption or exchange fees, or expenses that apply to the subaccount or the Contract. Therefore, the
hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If the fees and expenses imposed under your Contract or
Qualified Plan, if any, were included, your costs would be higher.
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 365.
Expenses do not include fees and
expenses incurred indirectly by the Fund from its investment in underlying funds, including affiliated and non-affiliated pooled investment vehicles, such as mutual funds and exchange-traded funds.
Had Columbia Management Investment
Advisers, LLC and/or certain of its affiliates not waived/reimbursed certain fees and expenses, account value at the end of the period would have been reduced.
| 8 | Columbia Variable Portfolio – Global Strategic Income Fund | Annual Report 2021 |
Portfolio of Investments
December 31, 2021
December 31, 2021
(Percentages represent value of
investments compared to net assets)
Investments in securities
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Global Strategic Income Fund | Annual Report 2021 | 9 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 10 | Columbia Variable Portfolio – Global Strategic Income Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Global Strategic Income Fund | Annual Report 2021 | 11 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 12 | Columbia Variable Portfolio – Global Strategic Income Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Global Strategic Income Fund | Annual Report 2021 | 13 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 14 | Columbia Variable Portfolio – Global Strategic Income Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Global Strategic Income Fund | Annual Report 2021 | 15 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 16 | Columbia Variable Portfolio – Global Strategic Income Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Global Strategic Income Fund | Annual Report 2021 | 17 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 18 | Columbia Variable Portfolio – Global Strategic Income Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Global Strategic Income Fund | Annual Report 2021 | 19 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 20 | Columbia Variable Portfolio – Global Strategic Income Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Global Strategic Income Fund | Annual Report 2021 | 21 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 22 | Columbia Variable Portfolio – Global Strategic Income Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Global Strategic Income Fund | Annual Report 2021 | 23 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 24 | Columbia Variable Portfolio – Global Strategic Income Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Global Strategic Income Fund | Annual Report 2021 | 25 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 26 | Columbia Variable Portfolio – Global Strategic Income Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
| Money Market Funds 2.7% | ||
| Shares | Value ($) | |
| Columbia Short-Term Cash Fund, 0.085%(m),(n) | 2,761,333 | 2,760,780 |
| Total Money Market Funds (Cost $2,760,896) | 2,760,780 | |
| Total Investments in Securities (Cost $98,064,308) | 100,279,603 | |
| Other Assets & Liabilities, Net | 2,351,973 | |
| Net Assets | $102,631,576 | |
At December 31, 2021, securities
and/or cash totaling $562,041 were pledged as collateral.
Investments in derivatives
| Forward foreign currency exchange contracts | |||||
| Currency to be sold | Currency to be purchased | Counterparty | Settlement date | Unrealized appreciation ($) | Unrealized depreciation ($) |
| 18,142,000 EUR | 20,685,073 USD | UBS | 01/11/2022 | 27,401 | — |
| 3,130,000 GBP | 4,204,060 USD | UBS | 01/11/2022 | — | (32,479) |
| Total | 27,401 | (32,479) | |||
| Long futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| Euro-BTP | 34 | 03/2022 | EUR | 4,998,340 | — | (106,731) |
| U.S. Treasury 10-Year Note | 8 | 03/2022 | USD | 1,043,750 | 7,084 | — |
| Total | 7,084 | (106,731) | ||||
| Short futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| U.S. Long Bond | (22) | 03/2022 | USD | (3,529,625) | — | (4,345) |
| U.S. Treasury 10-Year Note | (16) | 03/2022 | USD | (2,087,500) | — | (11,270) |
| U.S. Ultra Treasury Bond | (34) | 03/2022 | USD | (6,702,250) | — | (18,931) |
| Total | — | (34,546) | ||||
| Cleared credit default swap contracts - buy protection | |||||||||||
| Reference entity | Counterparty | Maturity date | Pay fixed rate (%) | Payment frequency | Notional currency | Notional amount | Value ($) | Upfront payments ($) | Upfront receipts ($) | Unrealized appreciation ($) | Unrealized depreciation ($) |
| Markit CDX North America High Yield Index, Series 37 | Morgan Stanley | 12/20/2026 | 5.000 | Quarterly | USD | 2,000,000 | (2,238) | — | — | — | (2,238) |
Notes to Portfolio of
Investments
| (a) | Represents privately placed and other securities and instruments exempt from Securities and Exchange Commission registration (collectively, private placements), such as Section 4(a)(2) and Rule 144A eligible securities, which are often sold only to qualified institutional buyers. At December 31, 2021, the total value of these securities amounted to $72,507,700, which represents 70.65% of total net assets. |
| (b) | Variable rate security. The interest rate shown was the current rate as of December 31, 2021. |
| (c) | Principal amounts are denominated in United States Dollars unless otherwise noted. |
| (d) | Variable or floating rate security, the interest rate of which adjusts periodically based on changes in current interest rates and prepayments on the underlying pool of assets. The interest rate shown was the current rate as of December 31, 2021. |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Global Strategic Income Fund | Annual Report 2021 | 27 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Notes to Portfolio of Investments (continued)
| (e) | Represents a variable rate security with a step coupon where the rate adjusts according to a schedule for a series of periods, typically lower for an initial period and then increasing to a higher coupon rate thereafter. The interest rate shown was the current rate as of December 31, 2021. |
| (f) | Payment-in-kind security. Interest can be paid by issuing additional par of the security or in cash. |
| (g) | Zero coupon bond. |
| (h) | Principal and interest may not be guaranteed by a governmental entity. |
| (i) | Represents interest only securities which have the right to receive the monthly interest payments on an underlying pool of mortgage loans. |
| (j) | Valuation based on significant unobservable inputs. |
| (k) | Represents a security purchased on a forward commitment basis. |
| (l) | The stated interest rate represents the weighted average interest rate at December 31, 2021 of contracts within the senior loan facility. Interest rates on contracts are primarily determined either weekly, monthly or quarterly by reference to the indicated base lending rate and spread and the reset period. These base lending rates are primarily the LIBOR and other short-term rates. Base lending rates may be subject to a floor or minimum rate. The interest rate for senior loans purchased on a when-issued or delayed delivery basis will be determined upon settlement, therefore no interest rate is disclosed. Senior loans often require prepayments from excess cash flows or permit the borrowers to repay at their election. The degree to which borrowers repay cannot be predicted with accuracy. As a result, remaining maturities of senior loans may be less than the stated maturities. Generally, the Fund is contractually obligated to receive approval from the agent bank and/or borrower prior to the disposition of a senior loan. |
| (m) | The rate shown is the seven-day current annualized yield at December 31, 2021. |
| (n) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended December 31, 2021 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Realized gain (loss)($) | Dividends($) | End of period shares |
| Columbia Short-Term Cash Fund, 0.085% | ||||||||
| 3,725,981 | 55,603,628 | (56,568,842) | 13 | 2,760,780 | (249) | 3,307 | 2,761,333 | |
Abbreviation Legend
| CMO | Collateralized Mortgage Obligation |
| LIBOR | London Interbank Offered Rate |
| SOFR | Secured Overnight Financing Rate |
Currency Legend
| EUR | Euro |
| GBP | British Pound |
| USD | US Dollar |
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 28 | Columbia Variable Portfolio – Global Strategic Income Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Fair value measurements (continued)
Investments falling into the Level 3 category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and estimated cash flows, and comparable company data.
Investments falling into the Level 3 category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at December 31, 2021:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Investments in Securities | ||||
| Asset-Backed Securities — Non-Agency | — | 4,099,756 | — | 4,099,756 |
| Commercial Mortgage-Backed Securities - Non-Agency | — | 4,985,050 | — | 4,985,050 |
| Convertible Bonds | — | 45,434 | — | 45,434 |
| Corporate Bonds & Notes | — | 59,654,997 | — | 59,654,997 |
| Foreign Government Obligations | — | 15,438,209 | — | 15,438,209 |
| Residential Mortgage-Backed Securities - Agency | — | 998,183 | — | 998,183 |
| Residential Mortgage-Backed Securities - Non-Agency | — | 11,576,696 | 500,000 | 12,076,696 |
| Senior Loans | — | 220,498 | — | 220,498 |
| Money Market Funds | 2,760,780 | — | — | 2,760,780 |
| Total Investments in Securities | 2,760,780 | 97,018,823 | 500,000 | 100,279,603 |
| Investments in Derivatives | ||||
| Asset | ||||
| Forward Foreign Currency Exchange Contracts | — | 27,401 | — | 27,401 |
| Futures Contracts | 7,084 | — | — | 7,084 |
| Liability | ||||
| Forward Foreign Currency Exchange Contracts | — | (32,479) | — | (32,479) |
| Futures Contracts | (141,277) | — | — | (141,277) |
| Swap Contracts | — | (2,238) | — | (2,238) |
| Total | 2,626,587 | 97,011,507 | 500,000 | 100,138,094 |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The Fund’s assets assigned to
the Level 2 input category are generally valued using the market approach, in which a security’s value is determined through reference to prices and information from market transactions for similar or identical
assets.
Derivative instruments are valued at
unrealized appreciation (depreciation).
The Fund does not hold any
significant investments (greater than one percent of net assets) categorized as Level 3.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Global Strategic Income Fund | Annual Report 2021 | 29 |
Statement of Assets and Liabilities
December 31, 2021
December 31, 2021
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $95,303,412) | $97,518,823 |
| Affiliated issuers (cost $2,760,896) | 2,760,780 |
| Foreign currency (cost $1,209,380) | 1,194,797 |
| Margin deposits on: | |
| Futures contracts | 456,534 |
| Swap contracts | 105,507 |
| Unrealized appreciation on forward foreign currency exchange contracts | 27,401 |
| Receivable for: | |
| Dividends | 173 |
| Interest | 948,406 |
| Foreign tax reclaims | 1,603 |
| Variation margin for futures contracts | 500 |
| Expense reimbursement due from Investment Manager | 807 |
| Prepaid expenses | 7,242 |
| Total assets | 103,022,573 |
| Liabilities | |
| Due to custodian | 9,435 |
| Unrealized depreciation on forward foreign currency exchange contracts | 32,479 |
| Payable for: | |
| Investments purchased on a delayed delivery basis | 70,835 |
| Capital shares purchased | 38,376 |
| Variation margin for futures contracts | 66,499 |
| Variation margin for swap contracts | 1,823 |
| Management services fees | 1,831 |
| Distribution and/or service fees | 391 |
| Service fees | 5,249 |
| Compensation of board members | 131,389 |
| Compensation of chief compliance officer | 19 |
| Audit fees | 19,750 |
| Other expenses | 12,921 |
| Total liabilities | 390,997 |
| Net assets applicable to outstanding capital stock | $102,631,576 |
| Represented by | |
| Paid in capital | 103,226,654 |
| Total distributable earnings (loss) | (595,078) |
| Total - representing net assets applicable to outstanding capital stock | $102,631,576 |
| Class 1 | |
| Net assets | $10,793 |
| Shares outstanding | 1,231 |
| Net asset value per share | $8.77 |
| Class 2 | |
| Net assets | $11,300,604 |
| Shares outstanding | 1,313,180 |
| Net asset value per share | $8.61 |
| Class 3 | |
| Net assets | $91,320,179 |
| Shares outstanding | 10,501,282 |
| Net asset value per share | $8.70 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 30 | Columbia Variable Portfolio – Global Strategic Income Fund | Annual Report 2021 |
Statement of Operations
Year Ended December 31, 2021
Year Ended December 31, 2021
| Net investment income | |
| Income: | |
| Dividends — affiliated issuers | $3,307 |
| Interest | 3,697,130 |
| Total income | 3,700,437 |
| Expenses: | |
| Management services fees | 690,982 |
| Distribution and/or service fees | |
| Class 2 | 27,950 |
| Class 3 | 118,894 |
| Service fees | 63,786 |
| Compensation of board members | 39,915 |
| Custodian fees | 51,903 |
| Printing and postage fees | 34,907 |
| Audit fees | 39,500 |
| Legal fees | 10,997 |
| Interest on collateral | 1,511 |
| Compensation of chief compliance officer | 18 |
| Other | 10,043 |
| Total expenses | 1,090,406 |
| Fees waived or expenses reimbursed by Investment Manager and its affiliates | (290,551) |
| Total net expenses | 799,855 |
| Net investment income | 2,900,582 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 2,075,266 |
| Investments — affiliated issuers | (249) |
| Foreign currency translations | 44,122 |
| Forward foreign currency exchange contracts | 1,092,460 |
| Futures contracts | 804,204 |
| Swap contracts | (225,744) |
| Net realized gain | 3,790,059 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | (5,876,070) |
| Investments — affiliated issuers | 13 |
| Foreign currency translations | (161,904) |
| Forward foreign currency exchange contracts | 683,216 |
| Futures contracts | (268,109) |
| Swap contracts | 138,221 |
| Net change in unrealized appreciation (depreciation) | (5,484,633) |
| Net realized and unrealized loss | (1,694,574) |
| Net increase in net assets resulting from operations | $1,206,008 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| Columbia Variable Portfolio – Global Strategic Income Fund | Annual Report 2021 | 31 |
Statement of Changes in Net Assets
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | |
| Operations | ||
| Net investment income | $2,900,582 | $3,165,393 |
| Net realized gain (loss) | 3,790,059 | (1,822,583) |
| Net change in unrealized appreciation (depreciation) | (5,484,633) | 3,057,749 |
| Net increase in net assets resulting from operations | 1,206,008 | 4,400,559 |
| Distributions to shareholders | ||
| Net investment income and net realized gains | ||
| Class 1 | (422) | (512) |
| Class 2 | (409,583) | (522,982) |
| Class 3 | (3,703,346) | (4,964,649) |
| Total distributions to shareholders | (4,113,351) | (5,488,143) |
| Decrease in net assets from capital stock activity | (2,602,044) | (4,200,397) |
| Total decrease in net assets | (5,509,387) | (5,287,981) |
| Net assets at beginning of year | 108,140,963 | 113,428,944 |
| Net assets at end of year | $102,631,576 | $108,140,963 |
| Year Ended | Year Ended | |||
| December 31, 2021 | December 31, 2020 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class 1 | ||||
| Distributions reinvested | 49 | 422 | 66 | 512 |
| Net increase | 49 | 422 | 66 | 512 |
| Class 2 | ||||
| Subscriptions | 251,111 | 2,174,426 | 224,892 | 1,908,452 |
| Distributions reinvested | 48,357 | 409,583 | 68,904 | 522,982 |
| Redemptions | (201,814) | (1,751,121) | (278,207) | (2,296,736) |
| Net increase | 97,654 | 832,888 | 15,589 | 134,698 |
| Class 3 | ||||
| Subscriptions | 348,257 | 3,057,713 | 373,207 | 3,259,167 |
| Distributions reinvested | 433,140 | 3,703,346 | 648,126 | 4,964,649 |
| Redemptions | (1,163,505) | (10,196,413) | (1,487,888) | (12,559,423) |
| Net decrease | (382,108) | (3,435,354) | (466,555) | (4,335,607) |
| Total net decrease | (284,405) | (2,602,044) | (450,900) | (4,200,397) |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 32 | Columbia Variable Portfolio – Global Strategic Income Fund | Annual Report 2021 |
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| Columbia Variable Portfolio – Global Strategic Income Fund | Annual Report 2021 | 33 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect any fees and expenses imposed under your
Contract and/or Qualified Plan, as applicable; such fees and expenses would reduce the total returns for all periods shown. Total return and portfolio turnover are not annualized for periods of less than one year. The
portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain derivatives, if any. If such transactions were included, the Fund’s portfolio
turnover rate may be higher.
| Net asset value, beginning of period | Net investment income | Net realized and unrealized gain (loss) | Increase from payment by affiliate | Total from investment operations | Distributions from net investment income | Total distributions to shareholders | |
| Class 1 | |||||||
| Year Ended 12/31/2021 | $9.01 | 0.25 | (0.13) | — | 0.12 | (0.36) | (0.36) |
| Year Ended 12/31/2020 | $9.11 | 0.27 | 0.09 | — | 0.36 | (0.46) | (0.46) |
| Year Ended 12/31/2019 | $8.21 | 0.29 | 0.61 | 0.00(d) | 0.90 | — | — |
| Year Ended 12/31/2018 | $9.03 | 0.29 | (0.74) | — | (0.45) | (0.37) | (0.37) |
| Year Ended 12/31/2017 | $8.53 | 0.29 | 0.21 | — | 0.50 | — | — |
| Class 2 | |||||||
| Year Ended 12/31/2021 | $8.86 | 0.23 | (0.14) | — | 0.09 | (0.34) | (0.34) |
| Year Ended 12/31/2020 | $8.96 | 0.24 | 0.10 | — | 0.34 | (0.44) | (0.44) |
| Year Ended 12/31/2019 | $8.09 | 0.26 | 0.61 | 0.00(d) | 0.87 | — | — |
| Year Ended 12/31/2018 | $8.91 | 0.26 | (0.73) | — | (0.47) | (0.35) | (0.35) |
| Year Ended 12/31/2017 | $8.43 | 0.27 | 0.21 | — | 0.48 | — | — |
| Class 3 | |||||||
| Year Ended 12/31/2021 | $8.95 | 0.24 | (0.14) | — | 0.10 | (0.35) | (0.35) |
| Year Ended 12/31/2020 | $9.05 | 0.26 | 0.09 | — | 0.35 | (0.45) | (0.45) |
| Year Ended 12/31/2019 | $8.16 | 0.27 | 0.62 | 0.00(d) | 0.89 | — | — |
| Year Ended 12/31/2018 | $8.98 | 0.28 | (0.74) | — | (0.46) | (0.36) | (0.36) |
| Year Ended 12/31/2017 | $8.49 | 0.28 | 0.21 | — | 0.49 | — | — |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Ratios include interest on collateral expense which is less than 0.01%. |
| (d) | Rounds to zero. |
| (e) | The Fund received a payment from an affiliate. Had the Fund not received this payment, the total return would have been lower by 0.01%. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 34 | Columbia Variable Portfolio – Global Strategic Income Fund | Annual Report 2021 |
Financial Highlights (continued)
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets(a) | Total net expense ratio to average net assets(a),(b) | Net investment income ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Class 1 | |||||||
| Year Ended 12/31/2021 | $8.77 | 1.37% | 0.89%(c) | 0.61%(c) | 2.87% | 42% | $11 |
| Year Ended 12/31/2020 | $9.01 | 4.79% | 0.87% | 0.60% | 3.11% | 53% | $11 |
| Year Ended 12/31/2019 | $9.11 | 10.96%(e) | 0.87% | 0.59% | 3.27% | 57% | $10 |
| Year Ended 12/31/2018 | $8.21 | (5.20%) | 0.86%(c) | 0.64%(c) | 3.34% | 86% | $9 |
| Year Ended 12/31/2017 | $9.03 | 5.86% | 0.85% | 0.68% | 3.33% | 37% | $10 |
| Class 2 | |||||||
| Year Ended 12/31/2021 | $8.61 | 1.03% | 1.14%(c) | 0.86%(c) | 2.62% | 42% | $11,301 |
| Year Ended 12/31/2020 | $8.86 | 4.59% | 1.12% | 0.85% | 2.87% | 53% | $10,766 |
| Year Ended 12/31/2019 | $8.96 | 10.75%(e) | 1.12% | 0.84% | 3.01% | 57% | $10,750 |
| Year Ended 12/31/2018 | $8.09 | (5.51%) | 1.10%(c) | 0.89%(c) | 3.08% | 86% | $9,512 |
| Year Ended 12/31/2017 | $8.91 | 5.69% | 1.10% | 0.93% | 3.07% | 37% | $9,719 |
| Class 3 | |||||||
| Year Ended 12/31/2021 | $8.70 | 1.14% | 1.01%(c) | 0.74%(c) | 2.74% | 42% | $91,320 |
| Year Ended 12/31/2020 | $8.95 | 4.68% | 0.99% | 0.73% | 2.99% | 53% | $97,365 |
| Year Ended 12/31/2019 | $9.05 | 10.91%(e) | 1.00% | 0.72% | 3.14% | 57% | $102,668 |
| Year Ended 12/31/2018 | $8.16 | (5.34%) | 0.97%(c) | 0.76%(c) | 3.25% | 86% | $104,256 |
| Year Ended 12/31/2017 | $8.98 | 5.77% | 0.98% | 0.80% | 3.18% | 37% | $131,599 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Global Strategic Income Fund | Annual Report 2021 | 35 |
Notes to Financial Statements
December 31, 2021
December 31, 2021
Note 1. Organization
Columbia Variable Portfolio
– Global Strategic Income Fund (the Fund), a series of Columbia Funds Variable Series Trust II (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended
(the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers Class 1, Class 2 and Class 3 shares to separate accounts funding variable annuity contracts and variable life insurance policies (collectively, Contracts) issued
by affiliated and unaffiliated life insurance companies (Participating Insurance Companies) as well as qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors (Qualified
Investors) authorized by Columbia Management Investment Distributors, Inc. (the Distributor). You may not buy (nor will you own) shares of the Fund directly. You may invest by participating in a Qualified Plan or by
buying a Contract and making allocations to the Fund. Although all share classes generally have identical voting, dividend and liquidation rights, each share class votes separately when required by the Trust’s
organizational documents or by law. Different share classes pay different net investment income distribution amounts to the extent the expenses of such share classes differ, and distributions in liquidation will be
proportional to the net asset value of each share class. Each share class has its own cost structure and other features.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Debt securities generally are
valued by pricing services approved by the Board of Trustees based upon market transactions for normal, institutional-size trading units of similar securities. The services may use various pricing techniques that take
into account, as applicable, factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data, as well as approved independent broker-dealer quotes. Debt securities for
which quotations are not readily available or not believed to be reflective of market value may also be valued based upon a bid quote from an approved independent broker-dealer. Debt securities maturing in 60 days or
less are valued primarily at amortized market value, unless this method results in a valuation that management believes does not approximate fair value.
Asset- and mortgage-backed
securities are generally valued by pricing services, which utilize pricing models that incorporate the securities’ cash flow and loan performance data. These models also take into account available market data,
including trades, market quotations, and benchmark yield curves for identical or similar securities. Factors used to identify similar securities may include, but are not limited to, issuer, collateral type, vintage,
prepayment speeds, collateral performance, credit ratings, credit enhancement and expected life. Asset-backed securities for which quotations are readily available may also be valued based upon an over-the-counter or
exchange bid quote from an approved independent broker-dealer. Debt securities maturing in 60 days or less are valued primarily at amortized market value, unless this method results in a valuation that management
believes does not approximate fair value.
Senior loan securities for which
reliable market quotations are readily available are generally valued by pricing services at the average of the bids received.
Investments in open-end investment
companies (other than exchange-traded funds (ETFs)), are valued at the latest net asset value reported by those companies as of the valuation time.
| 36 | Columbia Variable Portfolio – Global Strategic Income Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Forward foreign currency exchange
contracts are marked-to-market based upon foreign currency exchange rates provided by a pricing service.
Futures and options on futures
contracts are valued based upon the settlement price at the close of regular trading on their principal exchanges or, in the absence of a settlement price, at the mean of the latest quoted bid and ask prices.
Swap transactions are valued
through an independent pricing service or broker, or if neither is available, through an internal model based upon observable inputs.
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Foreign currency transactions and
translations
The values of all assets and
liabilities denominated in foreign currencies are generally translated into U.S. dollars at exchange rates determined at the close of regular trading on the New York Stock Exchange. Net realized and unrealized gains
(losses) on foreign currency transactions and translations include gains (losses) arising from the fluctuation in exchange rates between trade and settlement dates on securities transactions, gains (losses) arising
from the disposition of foreign currency and currency gains (losses) between the accrual and payment dates on dividends, interest income and foreign withholding taxes.
For financial statement purposes,
the Fund does not distinguish that portion of gains (losses) on investments which is due to changes in foreign exchange rates from that which is due to changes in market prices of the investments. Such fluctuations
are included with the net realized and unrealized gains (losses) on investments in the Statement of Operations.
Derivative instruments
The Fund invests in certain
derivative instruments, as detailed below, in seeking to meet its investment objectives. Derivatives are instruments whose values depend on, or are derived from, in whole or in part, the value of one or more
securities, currencies, commodities, indices, or other assets or instruments. Derivatives may be used to increase investment flexibility (including to maintain cash reserves while maintaining desired exposure to
certain assets), for risk management (hedging) purposes, to facilitate trading, to reduce transaction costs and to pursue higher investment returns. The Fund may also use derivative instruments to mitigate certain
investment risks, such as foreign currency exchange rate risk, interest rate risk and credit risk. Derivatives may involve various risks, including the potential inability of the counterparty to fulfill its
obligations under the terms of the contract, the potential for an illiquid secondary market (making it difficult for the Fund to sell or terminate, including at favorable prices) and the potential for market movements
which may expose the Fund to gains or losses in excess of the amount shown in the Statement of Assets and Liabilities. The notional amounts of derivative instruments, if applicable, are not recorded in the financial
statements.
A derivative instrument may suffer
a marked-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform its
obligations under the contract. The Fund’s risk of loss from counterparty credit risk on over-the-counter derivatives is generally limited to the aggregate unrealized gain netted against any collateral held by
the Fund and the amount of any variation margin held by the counterparty, plus any replacement costs or related amounts. With exchange-traded or centrally cleared derivatives, there is reduced counterparty credit risk
to the Fund since the clearinghouse or central counterparty (CCP) provides some protection in the case of clearing member default. The clearinghouse or CCP stands between the buyer
| Columbia Variable Portfolio – Global Strategic Income Fund | Annual Report 2021 | 37 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
and the seller of the contract; therefore,
additional counterparty credit risk is failure of the clearinghouse or CCP. However, credit risk still exists in exchange-traded or centrally cleared derivatives with respect to initial and variation margin that is
held in a broker’s customer account. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy and at
that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients and such shortfall is remedied by the CCP or otherwise, U.S. bankruptcy laws will typically allocate
that shortfall on a pro-rata basis across all the clearing broker’s customers (including the Fund), potentially resulting in losses to the Fund.
In order to better define its
contractual rights and to secure rights that will help the Fund mitigate its counterparty risk, the Fund may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (ISDA Master Agreement)
or similar agreement with its derivatives counterparties. An ISDA Master Agreement is an agreement between the Fund and a counterparty that governs over-the-counter derivatives and foreign exchange forward contracts
and contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset
with the counterparty certain derivative instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically
permit a single net payment in the event of default (close-out netting), including the bankruptcy or insolvency of the counterparty. Note, however, that bankruptcy or insolvency laws of a particular jurisdiction may
impose restrictions on or prohibitions against the right of offset or netting in bankruptcy, insolvency or other events.
Collateral (margin) requirements
differ by type of derivative. Margin requirements are established by the clearinghouse or CCP for exchange-traded and centrally cleared derivatives. Brokers can ask for margin in excess of the minimum in certain
circumstances. Collateral terms for most over-the-counter derivatives are subject to regulatory requirements to exchange variation margin with trading counterparties and may have contract specific margin terms as
well. For over-the-counter derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the marked-to-market amount for each transaction under such agreement and
comparing that amount to the value of any variation margin currently pledged by the Fund and/or the counterparty. Generally, the amount of collateral due from or to a party has to exceed a minimum transfer amount
threshold (e.g., $250,000) before a transfer has to be made. To the extent amounts due to the Fund from its counterparties are not fully collateralized, contractually or otherwise, the Fund bears the risk of loss from
counterparty nonperformance. The Fund may also pay interest expense on cash collateral received from the broker. Any interest expense paid by the Fund is shown on the Statement of Operations. The Fund attempts to
mitigate counterparty risk by only entering into agreements with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those
counterparties.
Certain ISDA Master Agreements
allow counterparties of over-the-counter derivatives transactions to terminate derivatives contracts prior to maturity in the event the Fund’s net asset value declines by a stated percentage over a specified
time period or if the Fund fails to meet certain terms of the ISDA Master Agreement, which would cause the Fund to accelerate payment of any net liability owed to the counterparty. The Fund also has termination
rights if the counterparty fails to meet certain terms of the ISDA Master Agreement. In determining whether to exercise such termination rights, the Fund would consider, in addition to counterparty credit risk,
whether termination would result in a net liability owed from the counterparty.
For financial reporting purposes,
the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statement of Assets and Liabilities.
Forward foreign currency exchange
contracts
Forward foreign currency exchange
contracts are over-the-counter agreements between two parties to buy and sell a currency at a set price on a future date. The Fund utilized forward foreign currency exchange contracts to hedge the currency exposure
associated with some or all of the Fund’s securities, to shift foreign currency exposure back to U.S. dollars, to shift investment exposure from one currency to another, to shift U.S. dollar exposure to achieve
a representative weighted mix of major currencies in its benchmark and to recover an underweight country exposure in its portfolio. These instruments may be used for other purposes in future periods.
| 38 | Columbia Variable Portfolio – Global Strategic Income Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
The values of forward foreign
currency exchange contracts fluctuate daily with changes in foreign currency exchange rates. Changes in the value of these contracts are recorded as unrealized appreciation or depreciation until the contract is
exercised or has expired. The Fund will realize a gain or loss when the forward foreign currency exchange contract is closed or expires. Non-deliverable forward foreign currency exchange contracts are settled with the
counterparty in U.S. dollars without delivery of foreign currency.
The use of forward foreign currency
exchange contracts does not eliminate fluctuations in the prices of the Fund’s portfolio securities. The risks of forward foreign currency exchange contracts include movement in the values of the foreign
currencies relative to the U.S. dollar (or other foreign currencies) and the possibility that counterparties will not complete their contractual obligations, which may be in excess of the amount reflected, if any, in
the Statement of Assets and Liabilities.
Futures contracts
Futures contracts are
exchange-traded and represent commitments for the future purchase or sale of an asset at a specified price on a specified date. The Fund bought and sold futures contracts to produce incremental earnings, to manage the
duration and yield curve exposure of the Fund versus the benchmark and to manage exposure to movements in interest rates. These instruments may be used for other purposes in future periods. Upon entering into futures
contracts, the Fund bears risks that it may not achieve the anticipated benefits of the futures contracts and may realize a loss. Additional risks include counterparty credit risk, the possibility of an illiquid
market, and that a change in the value of the contract or option may not correlate with changes in the value of the underlying asset.
Upon entering into a futures
contract, the Fund deposits cash or securities with the broker, known as a futures commission merchant (FCM), in an amount sufficient to meet the initial margin requirement. The initial margin deposit must be
maintained at an established level over the life of the contract. Cash deposited as initial margin is recorded in the Statement of Assets and Liabilities as margin deposits. Securities deposited as initial margin are
designated in the Portfolio of Investments. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily change in the contract value and are
recorded as variation margin receivable or payable and are offset in unrealized gains or losses. The Fund generally expects to earn interest income on its margin deposits. The Fund recognizes a realized gain or loss
when the contract is closed or expires. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities.
Swap contracts
Swap contracts are negotiated in
the over-the-counter market and may be entered into as a bilateral contract or centrally cleared (centrally cleared swap contract). In a centrally cleared swap contract, immediately following execution of the swap
contract with a broker, the swap contract is novated to a central counterparty (the CCP) and the CCP becomes the Fund’s counterparty to the centrally cleared swap contract. The Fund is required to deposit
initial margin with the futures commission merchant (FCM), which pledges it through to the CCP in the form of cash or securities in an amount that varies depending on the size and risk profile of the particular swap
contract. Securities deposited as initial margin are designated in the Portfolio of Investments and cash deposited is recorded in the Statement of Assets and Liabilities as margin deposits. For a bilateral swap
contract, the Fund has credit exposure to the broker, but exchanges daily variation margin with the broker based on the mark-to-market value of the swap contract to minimize that exposure. For centrally cleared swap
contracts, the Fund has minimal credit exposure to the FCM because the CCP stands between the Fund and the relevant buyer/seller on the other side of the contract. Swap contracts are marked-to-market daily and changes
in value are recorded as unrealized appreciation (depreciation). The daily change in valuation of centrally cleared swap contracts, if any, is recorded as a receivable or payable for variation margin in the Statement
of Assets and Liabilities.
Entering into these contracts
involves, to varying degrees, elements of interest, liquidity and counterparty credit risk in excess of the amounts recognized in the Statement of Assets and Liabilities. Such risks involve the possibility that there
may be unfavorable changes in interest rates, market conditions or other conditions, that it may be difficult to initiate a swap transaction or liquidate a position at an advantageous time or price which may result in
significant losses, and that the FCM or CCP may not fulfill its obligation under the contract.
| Columbia Variable Portfolio – Global Strategic Income Fund | Annual Report 2021 | 39 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Credit default swap contracts
The Fund entered into credit
default swap contracts to increase or decrease its credit exposure to an index, increase or decrease its credit exposure to a single issuer of debt securities and to manage credit risk exposure. These instruments may
be used for other purposes in future periods. Credit default swap contracts are transactions in which one party pays fixed periodic payments to a counterparty in consideration for an agreement from the counterparty to
make a specific payment should a specified credit event(s) take place. Although specified credit events are contract specific, credit events are typically bankruptcy, failure to pay, restructuring, obligation
acceleration, obligation default, or repudiation/moratorium.
As the purchaser of a credit
default swap contract, the Fund purchases protection by paying a periodic interest rate on the notional amount to the counterparty. The interest amount is accrued daily as a component of unrealized appreciation
(depreciation) and is recorded as a realized loss upon payment. If a credit event as specified in the contract occurs, the Fund may have the option either to deliver the reference obligation to the seller in exchange
for a cash payment of its par amount, or to receive a net cash settlement equal to the par amount less an agreed-upon value of the reference obligation as of the date of the credit event. The difference between the
value of the obligation or cash delivered and the notional amount received will be recorded as a realized gain (loss).
Any upfront payment or receipt by
the Fund upon entering into a credit default swap contract is recorded as an asset or liability, respectively, and amortized daily as a component of realized gain (loss) in the Statement of Operations. Credit default
swap contracts are valued daily, and the change in value is recorded as unrealized appreciation (depreciation) until the termination of the swap, at which time a realized gain (loss) is recorded.
Credit default swap contracts can
involve greater risks than if a fund had invested in the reference obligation directly since, in addition to general market risks, credit default swaps are subject to counterparty credit risk, leverage risk, hedging
risk, correlation risk and liquidity risk.
Effects of derivative transactions in
the financial statements
The following tables are intended
to provide additional information about the effect of derivatives on the financial statements of the Fund, including: the fair value of derivatives by risk category and the location of those fair values in the
Statement of Assets and Liabilities; and the impact of derivative transactions over the period in the Statement of Operations, including realized and unrealized gains (losses). The derivative instrument schedules
following the Portfolio of Investments present additional information regarding derivative instruments outstanding at the end of the period, if any.
The following table is a summary of
the fair value of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) at December 31, 2021:
| Asset derivatives | ||
| Risk exposure category | Statement of assets and liabilities location | Fair value ($) |
| Foreign exchange risk | Unrealized appreciation on forward foreign currency exchange contracts | 27,401 |
| Interest rate risk | Component of total distributable earnings (loss) — unrealized appreciation on futures contracts | 7,084* |
| Total | 34,485 |
| Liability derivatives | ||
| Risk exposure category | Statement of assets and liabilities location | Fair value ($) |
| Credit risk | Component of total distributable earnings (loss) — unrealized depreciation on swap contracts | 2,238* |
| Foreign exchange risk | Unrealized depreciation on forward foreign currency exchange contracts | 32,479 |
| Interest rate risk | Component of total distributable earnings (loss) — unrealized depreciation on futures contracts | 141,277* |
| Total | 175,994 |
| * | Includes cumulative appreciation (depreciation) as reported in the tables following the Portfolio of Investments. Only the current day’s variation margin is reported in receivables or payables in the Statement of Assets and Liabilities. |
| 40 | Columbia Variable Portfolio – Global Strategic Income Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
The following table indicates the
effect of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) in the Statement of Operations for the year ended December 31, 2021:
| Amount of realized gain (loss) on derivatives recognized in income | ||||
| Risk exposure category | Forward foreign currency exchange contracts ($) | Futures contracts ($) | Swap contracts ($) | Total ($) |
| Credit risk | — | — | (225,744) | (225,744) |
| Foreign exchange risk | 1,092,460 | — | — | 1,092,460 |
| Interest rate risk | — | 804,204 | — | 804,204 |
| Total | 1,092,460 | 804,204 | (225,744) | 1,670,920 |
| Change in unrealized appreciation (depreciation) on derivatives recognized in income | ||||
| Risk exposure category | Forward foreign currency exchange contracts ($) | Futures contracts ($) | Swap contracts ($) | Total ($) |
| Credit risk | — | — | 138,221 | 138,221 |
| Foreign exchange risk | 683,216 | — | — | 683,216 |
| Interest rate risk | — | (268,109) | — | (268,109) |
| Total | 683,216 | (268,109) | 138,221 | 553,328 |
The following table is a summary
of the average outstanding volume by derivative instrument for the year ended December 31, 2021:
| Derivative instrument | Average notional amounts ($)* |
| Futures contracts — long | 3,969,780 |
| Futures contracts — short | 15,175,875 |
| Credit default swap contracts — buy protection | 5,241,088 |
| Derivative instrument | Average unrealized appreciation ($)* | Average unrealized depreciation ($)* |
| Forward foreign currency exchange contracts | 335,744 | (10,411) |
| * | Based on the ending quarterly outstanding amounts for the year ended December 31, 2021. |
Investments in senior loans
The Fund may invest in senior loan
assignments. When the Fund purchases an assignment of a senior loan, the Fund typically has direct rights against the borrower; provided, however, that the Fund’s rights may be more limited than the lender from
which it acquired the assignment and the Fund may be able to enforce its rights only through an administrative agent. Although certain senior loan assignments are secured by collateral, the Fund could experience
delays or limitations in realizing such collateral or have its interest subordinated to other indebtedness of the obligor. In the event that the administrator or collateral agent of a loan becomes insolvent or enters
into receivership or bankruptcy, the Fund may incur costs and delays in realizing payment or may suffer a loss of principal and/or interest. The risk of loss is greater for unsecured or subordinated loans. In
addition, senior loan assignments are vulnerable to market, economic or other conditions or events that may reduce the demand for senior loan assignments and certain senior loan assignments which were liquid when
purchased, may become illiquid.
| Columbia Variable Portfolio – Global Strategic Income Fund | Annual Report 2021 | 41 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
The Fund may enter into senior loan
assignments where all or a portion of the loan may be unfunded. The Fund is obligated to fund these commitments at the borrower’s discretion. These commitments, if any, are generally traded and priced in the
same manner as other senior loan securities and are disclosed as unfunded senior loan commitments in the Fund’s Portfolio of Investments with a corresponding payable for investments purchased. The Fund
designates cash or liquid securities to cover these commitments.
Asset- and mortgage-backed
securities
The Fund may invest in asset-backed
and mortgage-backed securities. The maturity dates shown represent the original maturity of the underlying obligation. Actual maturity may vary based upon prepayment activity on these obligations. All, or a portion,
of the obligation may be prepaid at any time because the underlying asset may be prepaid. As a result, decreasing market interest rates could result in an increased level of prepayment. An increased prepayment rate
will have the effect of shortening the maturity of the security. Unless otherwise noted, the coupon rates presented are fixed rates.
Delayed delivery securities
The Fund may trade securities on
other than normal settlement terms, including securities purchased or sold on a “when-issued” or "forward commitment" basis. This may increase risk to the Fund since the other party to the transaction may
fail to deliver, which could cause the Fund to subsequently invest at less advantageous prices. The Fund designates cash or liquid securities in an amount equal to the delayed delivery commitment.
Mortgage dollar roll transactions
The Fund may enter into mortgage
“dollar rolls” in which the Fund sells securities for delivery in the current month and simultaneously contracts with the same counterparty to repurchase similar but not identical securities (same type,
coupon and maturity) on a specified future date. During the roll period, the Fund loses the right to receive principal and interest paid on the securities sold. However, the Fund may benefit because it receives
negotiated amounts in the form of reductions of the purchase price for the future purchase plus the interest earned on the cash proceeds of the securities sold until the settlement date of the forward purchase. The
Fund records the incremental difference between the forward purchase and sale of each forward roll as a realized gain or loss. Unless any realized gains exceed the income, capital appreciation, and gain or loss due to
mortgage prepayments that would have been realized on the securities sold as part of the mortgage dollar roll, the use of this technique may diminish the investment performance of the Fund compared to what the
performance would have been without the use of mortgage dollar rolls. All cash proceeds will be invested in instruments that are permissible investments for the Fund. The Fund identifies cash or liquid securities in
an amount equal to the forward purchase price.
For financial reporting and tax
purposes, the Fund treats “to be announced” mortgage dollar rolls as two separate transactions, one involving the purchase of a security and a separate transaction involving a sale. These transactions may
increase the Fund’s portfolio turnover rate. The Fund does not currently enter into mortgage dollar rolls that are accounted for as financing transactions.
Mortgage dollar rolls involve the
risk that the market value of the securities the Fund is obligated to repurchase may decline below the repurchase price, or that the counterparty may default on its obligations.
Interest only and principal only
securities
The Fund may invest in Interest
Only (IO) or Principal Only (PO) securities. IOs are stripped securities entitled to receive all of the security’s interest, but none of its principal. IOs are particularly sensitive to changes in interest rates
and therefore subject to greater fluctuations in price than typical interest bearing debt securities. IOs are also subject to credit risk because the Fund may not receive all or part of the interest payments if the
issuer, obligor, guarantor or counterparty defaults on its obligation. Payments received for IOs are included in interest income on the Statement of Operations. Because no principal will be received at the maturity of
an IO, adjustments are made to the cost of the security on a monthly basis until maturity. These adjustments are included in interest income on the Statement of Operations. POs are stripped securities entitled to
receive the principal from the underlying obligation, but not the interest. POs are particularly sensitive to changes in interest rates and therefore are subject to fluctuations in price. POs are also subject to
credit risk because the Fund may not receive
| 42 | Columbia Variable Portfolio – Global Strategic Income Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
all or part of its principal if the issuer,
obligor, guarantor or counterparty defaults on its obligation. The Fund may also invest in IO or PO stripped mortgage-backed securities. Payments received for POs are treated as reductions to the cost and par value of
the securities.
Offsetting of assets and
liabilities
The following table presents the
Fund’s gross and net amount of assets and liabilities available for offset under netting arrangements as well as any related collateral received or pledged by the Fund as of December 31, 2021:
| Morgan Stanley ($) | UBS ($) | Total ($) | |
| Assets | |||
| Forward foreign currency exchange contracts | - | 27,401 | 27,401 |
| Total assets | - | 27,401 | 27,401 |
| Liabilities | |||
| Centrally cleared credit default swap contracts (a) | 1,823 | - | 1,823 |
| Forward foreign currency exchange contracts | - | 32,479 | 32,479 |
| Total liabilities | 1,823 | 32,479 | 34,302 |
| Total financial and derivative net assets | (1,823) | (5,078) | (6,901) |
| Total collateral received (pledged) (b) | (1,823) | - | (1,823) |
| Net amount (c) | - | (5,078) | (5,078) |
| (a) | Centrally cleared swaps are included within payable/receivable for variation margin on the Statement of Assets and Liabilities. |
| (b) | In some instances, the actual collateral received and/or pledged may be more than the amount shown due to overcollateralization. |
| (c) | Represents the net amount due from/(to) counterparties in the event of default. |
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
The trade date for senior loans
purchased in the primary market is the date on which the loan is allocated. The trade date for senior loans purchased in the secondary market is the date on which the transaction is entered into.
Income recognition
Interest income is recorded on an
accrual basis. Market premiums and discounts, including original issue discounts, are amortized and accreted, respectively, over the expected life of the security on all debt securities, unless otherwise noted. The
Fund classifies gains and losses realized on prepayments received on mortgage-backed securities as adjustments to interest income. For convertible securities, premiums attributable to the conversion feature are
not amortized.
The Fund may place a debt security
on non-accrual status and reduce related interest income when it becomes probable that the interest will not be collected and the amount of uncollectible interest can be reasonably estimated. A defaulted debt security
is removed from non-accrual status when the issuer resumes interest payments or when collectability of interest is reasonably assured.
Dividend income is recorded on the
ex-dividend date.
The value of additional securities
received as an income payment through a payment in kind, if any, is recorded as interest income and increases the cost basis of such securities.
The Fund may receive other income
from senior loans, including amendment fees, consent fees and commitment fees. These fees are recorded as income when received by the Fund. These amounts are included in Interest Income in the Statement of
Operations.
| Columbia Variable Portfolio – Global Strategic Income Fund | Annual Report 2021 | 43 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
Federal income tax status
The Fund intends to qualify each
year as a regulated investment company under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its investment company taxable income and net capital gain, if any, for its
tax year, and as such will not be subject to federal income taxes. In addition, because the Fund meets the exception under Internal Revenue Code Section 4982(f), the Fund expects not to be subject to federal excise
tax. Therefore, no federal income or excise tax provision is recorded.
Foreign taxes
The Fund may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries, as applicable, based upon its current interpretation of tax rules
and regulations that exist in the markets in which it invests.
Realized gains in certain countries
may be subject to foreign taxes at the Fund level, based on statutory rates. The Fund accrues for such foreign taxes on realized and unrealized gains at the appropriate rate for each jurisdiction, as applicable. The
amount, if any, is disclosed as a liability on the Statement of Assets and Liabilities.
Distributions to subaccounts
Distributions to the subaccounts of
Contracts, Qualified Plans and Qualified Investors are recorded at the close of business on the record date and are payable on the first business day following the record date. Dividends from net investment income, if
any, are declared and distributed quarterly. Capital gain distributions, when available, will be made annually. However, an additional capital gain distribution may be made during the fiscal year in order to comply
with the Internal Revenue Code, as applicable to registered investment companies. Income distributions and capital gain distributions are determined in accordance with federal income tax regulations, which may differ
from GAAP. All dividends and distributions are reinvested in additional shares of the applicable share class of the Fund at the net asset value as of the ex-dividend date of the distribution.
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Under the Management Agreement, the
Investment Manager provides the Fund with investment research and advice, as well as administrative and accounting
| 44 | Columbia Variable Portfolio – Global Strategic Income Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
services. The management services fee is an annual
fee that is equal to a percentage of the Fund’s daily net assets that declines from 0.65% to 0.52% as the Fund’s net assets increase. The effective management services fee rate for the year ended December
31, 2021 was 0.65% of the Fund’s average daily net assets.
Participating Affiliates
The Investment Manager and its
investment advisory affiliates (Participating Affiliates) around the world may coordinate in providing services to their clients. From time to time the Investment Manager (or any affiliated investment subadviser to
the Fund, as the case may be) may engage its Participating Affiliates to provide a variety of services such as investment research, investment monitoring, trading and discretionary investment management (including
portfolio management) to certain accounts managed by the Investment Manager, including the Fund. These Participating Affiliates provide services to the Investment Manager (or any affiliated investment subadviser to
the Fund, as the case may be) either pursuant to subadvisory agreements, personnel-sharing agreements or other inter-company arrangements, and the Fund pays no additional fees and expenses as a result of any such
arrangements.
These Participating Affiliates,
like the Investment Manager, are direct or indirect subsidiaries of Ameriprise Financial and are registered, as appropriate, with respective regulators in their home jurisdictions and, where required, the Securities
and Exchange Commission and the Commodity Futures Trading Commission in the United States.
Pursuant to some of these
arrangements, certain employees of these Participating Affiliates may serve as "associated persons" of the Investment Manager and, in this capacity, subject to the oversight and supervision of the Investment Manager
and consistent with the investment objectives, policies and limitations set forth in the Fund’s prospectus and Statement of Additional Information (SAI), may provide such services to the Fund on behalf of the
Investment Manager.
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. Under a Deferred Compensation Plan (the
Deferred Plan), these members of the Board of Trustees may elect to defer payment of up to 100% of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of
certain funds managed by the Investment Manager. The Fund’s liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Deferred Plan. All
amounts payable under the Deferred Plan constitute a general unsecured obligation of the Fund. The expense for the Deferred Plan, which includes Trustees’ fees deferred during the current period as well as any
gains or losses on the Trustees’ deferred compensation balances as a result of market fluctuations, is included in "Compensation of board members" on the Statement of Operations.
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
Service fees
The Fund has entered into a
Shareholder Services Agreement with Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial. Under this
agreement, the Fund pays a service fee equal to the payments made by the Transfer Agent to Participating Insurance Companies and other financial intermediaries (together, Participating Organizations) for services each
such Participating Organization provides to its clients, customers and participants that are invested directly or indirectly in the Fund, up to a cap approved by the Board of Trustees from time to time. The effective
service fee rate for the year ended December 31, 2021, was 0.06% of the Fund’s average daily net assets.
The Transfer Agent may retain as
compensation for its services revenues from fees for wire, telephone and redemption orders, account transcripts due the Transfer Agent from Fund shareholders and interest (net of bank charges) earned with respect to
balances in accounts the Transfer Agent maintains in connection with its services to the Fund.
| Columbia Variable Portfolio – Global Strategic Income Fund | Annual Report 2021 | 45 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Distribution and/or service fees
The Fund has an agreement with the
Distributor, an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution services. Under a Plan and Agreement of Distribution, the Fund pays a fee at an annual rate
of up to 0.25% of the Fund’s average daily net assets attributable to Class 2 shares and an annual rate of up to 0.125% of the Fund’s average daily net assets attributable to Class 3 shares. The Fund pays
no distribution and service fees for Class 1 shares.
Expenses waived/reimbursed by the
Investment Manager and its affiliates
The Investment Manager and certain
of its affiliates have contractually agreed to waive fees and/or reimburse expenses (excluding certain fees and expenses described below) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, so that the Fund’s net operating expenses, after giving effect to fees waived/expenses reimbursed and any balance credits and/or overdraft charges from the Fund’s
custodian, do not exceed the following annual rate(s) as a percentage of the classes’ average daily net assets:
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), expenses associated with investments in affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange-traded funds), transaction costs and
brokerage commissions, costs related to any securities lending program, dividend expenses associated with securities sold short, inverse floater program fees and expenses, transaction charges and interest on borrowed
money, interest, costs associated with certain shareholder meetings, infrequent and/or unusual expenses and any other expenses the exclusion of which is specifically approved by the Board of Trustees. This
agreement may be modified or amended only with approval from the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements
described above are not recoverable by the Investment Manager or its affiliates in future periods.
Note 4. Federal tax
information
The timing and character of
income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP because of temporary or permanent book to tax differences.
At December 31, 2021, these
differences were primarily due to differing treatment for deferral/reversal of wash sale losses, trustees’ deferred compensation, derivative investments, tax straddles, capital loss carryforward, swap
investments, principal and/or interest of fixed income securities and foreign currency transactions. To the extent these differences were permanent, reclassifications were made among the components of the Fund’s
net assets. Temporary differences do not require reclassifications.
The following reclassifications
were made:
| Undistributed net investment income ($) | Accumulated net realized (loss) ($) | Paid in capital ($) |
| 1,124,056 | (1,124,056) | — |
Net investment income (loss) and
net realized gains (losses), as disclosed in the Statement of Operations, and net assets were not affected by this reclassification.
| 46 | Columbia Variable Portfolio – Global Strategic Income Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
The tax character of distributions
paid during the years indicated was as follows:
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | ||||
| Ordinary income ($) | Long-term capital gains ($) | Total ($) | Ordinary income ($) | Long-term capital gains ($) | Total ($) |
| 4,113,351 | — | 4,113,351 | 5,488,143 | — | 5,488,143 |
Short-term capital gain
distributions, if any, are considered ordinary income distributions for tax purposes.
At December 31, 2021, the
components of distributable earnings on a tax basis were as follows:
| Undistributed ordinary income ($) | Undistributed long-term capital gains ($) | Capital loss carryforwards ($) | Net unrealized appreciation ($) |
| 2,918,799 | — | (4,775,096) | 1,411,338 |
At December 31, 2021, the cost of
all investments for federal income tax purposes along with the aggregate gross unrealized appreciation and depreciation based on that cost was:
| Federal tax cost ($) | Gross unrealized appreciation ($) | Gross unrealized (depreciation) ($) | Net unrealized appreciation ($) |
| 98,726,756 | 3,170,975 | (1,759,637) | 1,411,338 |
Tax cost of investments and
unrealized appreciation/(depreciation) may also include timing differences that do not constitute adjustments to tax basis.
The following capital loss
carryforwards, determined at December 31, 2021, may be available to reduce future net realized gains on investments, if any, to the extent permitted by the Internal Revenue Code. In addition, for the year ended
December 31, 2021, capital loss carryforwards utilized, if any, were as follows:
| No expiration short-term ($) | No expiration long-term ($) | Total ($) | Utilized ($) |
| (1,744,023) | (3,031,073) | (4,775,096) | 2,592,074 |
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Note 5. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $42,328,169 and $41,413,242, respectively, for the year ended December 31, 2021. The amount of purchase and
sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 6. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes
referred to as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
| Columbia Variable Portfolio – Global Strategic Income Fund | Annual Report 2021 | 47 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Note 7. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund did not borrow or lend
money under the Interfund Program during the year ended December 31, 2021.
Note 8. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to an October 28, 2021 amendment and restatement, the credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment
Manager or an affiliated investment manager, severally and not jointly, permits collective borrowings up to $950 million. Interest is currently charged to each participating fund based on its borrowings at a rate
equal to the higher of (i) the federal funds effective rate, (ii) the secured overnight financing rate plus 0.11448% and (iii) the overnight bank funding rate, plus in each case, 1.00%. Each borrowing under the credit
facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The
commitment fee is included in other expenses in the Statement of Operations. This agreement expires annually in October unless extended or renewed. Prior to the October 28, 2021 amendment and restatement, the Fund had
access to a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. which permitted collective borrowings up to $950 million. Interest was
charged to each participating fund based on its borrowings at a rate equal to the higher of (i) the federal funds effective rate, (ii) the one-month London Interbank Offered Rate (LIBOR) rate and (iii) the overnight
bank funding rate, plus in each case, 1.25%.
The Fund had no borrowings during
the year ended December 31, 2021.
Note 9. Significant
risks
Credit risk
Credit risk is the risk that the
value of debt instruments in the Fund’s portfolio may decline because the issuer defaults or otherwise becomes unable or unwilling, or is perceived to be unable or unwilling, to honor its financial obligations,
such as making payments to the Fund when due. Credit rating agencies assign credit ratings to certain debt instruments to indicate their credit risk. Lower-rated or unrated debt instruments held by the Fund may
present increased credit risk as compared to higher-rated debt instruments.
Derivatives risk
Losses involving derivative
instruments may be substantial, because a relatively small movement in the underlying reference (which is generally the price, rate or other economic indicator associated with a security(ies), commodity, currency or
index or other instrument or asset) may result in a substantial loss for the Fund. In addition to the potential for increased losses, the use of derivative instruments may lead to increased volatility within the Fund.
Derivatives will typically increase the Fund’s exposure to principal risks to which it is otherwise exposed, and may expose the Fund to additional risks, including correlation risk, counterparty risk, hedging
risk, leverage risk, liquidity risk and pricing risk.
| 48 | Columbia Variable Portfolio – Global Strategic Income Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Foreign currency risk
The performance of the Fund may be
materially affected positively or negatively by foreign currency strength or weakness relative to the U.S. dollar, particularly if the Fund invests a significant percentage of its assets in foreign securities or other
assets denominated in currencies other than the U.S. dollar. Currency rates in foreign countries may fluctuate significantly over short or long periods of time for a number of reasons, including changes in interest
rates, imposition of currency controls and economic or political developments in the U.S. or abroad. The Fund may also incur currency conversion costs when converting foreign currencies into U.S. dollars and vice
versa.
Foreign securities and emerging
market countries risk
Investing in foreign securities may
involve certain risks not typically associated with investing in U.S. securities, such as increased currency volatility and risks associated with political, regulatory, economic, social, diplomatic and other
conditions or events occurring in the country or region, which may result in significant market volatility. In addition, certain foreign securities may not be as liquid as U.S. securities. Investing in emerging
markets may increase these risks and expose the Fund to elevated risks associated with increased inflation, deflation or currency devaluation. To the extent that the Fund concentrates its investment exposure to any
one or a few specific countries, the Fund will be particularly susceptible to the risks associated with the conditions, events or other factors impacting those countries or regions and may, therefore, have a greater
risk than that of a fund that is more geographically diversified.
Geographic focus risk
The Fund may be particularly
susceptible to economic, political, regulatory or other events or conditions affecting issuers and countries within the specific geographic regions in which the Fund invests. The Fund’s NAV may be more volatile
than the NAV of a more geographically diversified fund.
Europe. The Fund is particularly susceptible to economic, political, regulatory or other events or conditions affecting issuers and countries in Europe which are often closely connected and
interdependent, and events in one European country can have an adverse impact on other European countries. In addition, the private and public sectors’ debt problems of a single European Union (EU) country can
pose significant economic risks to the EU as a whole. As a result, the Fund’s NAV may be more volatile than the NAV of a more geographically diversified fund. If securities of issuers in Europe fall out of
favor, it may cause the Fund to underperform other funds that do not focus their investments in this region of the world. The UK’s departure from the EU single market became effective January 1, 2021 with the
end of the Brexit transition period and the post-Brexit trade deal between the UK and EU taking effect on December 31, 2020. The impact of Brexit on the UK and European economies and the broader global economy could
be significant, resulting in negative impacts on currency and financial markets generally, such as increased volatility and illiquidity, and potentially lower economic growth in markets in Europe, which may adversely
affect the value of your investment in the Fund.
High-yield investments risk
Securities and other debt
instruments held by the Fund that are rated below investment grade (commonly called "high-yield" or "junk" bonds) and unrated debt instruments of comparable quality expose the Fund to a greater risk of loss of
principal and income than a fund that invests solely or primarily in investment grade debt instruments. In addition, these investments have greater price fluctuations, are less liquid and are more likely to experience
a default than higher-rated debt instruments. High-yield debt instruments are considered to be predominantly speculative with respect to the issuer’s capacity to pay interest and repay principal.
Interest rate risk
Interest rate risk is the risk of
losses attributable to changes in interest rates. In general, if prevailing interest rates rise, the values of debt instruments tend to fall, and if interest rates fall, the values of debt instruments tend to rise.
Actions by governments and central banking authorities can result in increases or decreases in interest rates. Higher periods of inflation could lead such authorities to raise interest rates. Increasing interest rates
may negatively affect the value of debt securities held by the Fund, resulting in a negative impact on the Fund’s performance and net asset value per share. In general, the longer the maturity or duration of a
debt security, the greater its sensitivity to changes in interest rates. The Fund is subject to the risk that the income generated by its investments may not keep pace with inflation.
| Columbia Variable Portfolio – Global Strategic Income Fund | Annual Report 2021 | 49 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Liquidity risk
Liquidity risk is the risk
associated with a lack of marketability of investments which may make it difficult to sell the investment at a desirable time or price. Changing regulatory, market or other conditions or environments (for example, the
interest rate or credit environments) may adversely affect the liquidity of the Fund’s investments. The Fund may have to accept a lower selling price for the holding, sell other investments, or forego another,
more appealing investment opportunity. Generally, the less liquid the market at the time the Fund sells a portfolio investment, the greater the risk of loss or decline of value to the Fund. A less liquid market can
lead to an increase in Fund redemptions, which may negatively impact Fund performance and net asset value per share, including, for example, if the Fund is forced to sell securities in a down market.
Market risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
The coronavirus disease 2019 and
its variants (COVID-19) pandemic has resulted in, and may continue to result in, significant global economic and societal disruption and market volatility due to disruptions in market access, resource availability,
facilities operations, imposition of tariffs, export controls and supply chain disruption, among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement
and loss in human and other resources. The uncertainty surrounding the magnitude, duration, reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental
authorities or other third parties, present unknowns that are yet to unfold. The impacts, as well as the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and
pandemics that may arise in the future – could negatively affect global economies and markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in
emerging market countries may be greater due to generally less established healthcare systems, governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing
political, social and economic risks in certain countries or globally. The disruptions caused by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively
impact the Fund’s ability to achieve its investment objectives. Any such event(s) could have a significant adverse impact on the value and risk profile of the Fund.
Mortgage- and other asset-backed
securities risk
The value of any mortgage-backed
and other asset-backed securities including collateralized debt obligations, if any, held by the Fund may be affected by, among other things, changes or perceived changes in: interest rates; factors concerning the
interests in and structure of the issuer or the originator of the mortgages or other assets; the creditworthiness of the entities that provide any supporting letters of credit, surety bonds or other credit enhancements;
or the market’s assessment of the quality of underlying assets. Payment of principal and interest on some mortgage-backed securities (but not the market value of the securities themselves) may be guaranteed by
the full faith and credit of a particular U.S. Government agency, authority, enterprise or instrumentality, and some, but not all, are also insured or guaranteed by the U.S. Government. Mortgage-backed securities
issued by non-governmental issuers (such as commercial banks, savings and loan institutions, private mortgage insurance companies, mortgage bankers and other secondary market issuers) may entail greater risk than
obligations guaranteed by the U.S. Government. Mortgage- and other asset-backed securities are subject to liquidity risk and prepayment risk. A decline or flattening of housing values may cause delinquencies in
mortgages (especially sub-prime or non-prime mortgages) underlying mortgage-backed securities and thereby adversely affect the ability of the mortgage-backed
| 50 | Columbia Variable Portfolio – Global Strategic Income Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
securities issuer to make principal and/or
interest payments to mortgage-backed securities holders, including the Fund. Rising or high interest rates tend to extend the duration of mortgage- and other asset-backed securities, making their prices more volatile
and more sensitive to changes in interest rates.
Shareholder concentration risk
At December 31, 2021, affiliated
shareholders of record owned 100.0% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of
less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Note 10. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
Note 11. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in
connection with the conduct of their business activities. Ameriprise Financial believes that the Fund is not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject
of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with
the Fund. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (SEC) on legal and regulatory matters that relate to
Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that
these matters, or the adverse publicity associated with them, will not result in increased Fund redemptions, reduced sale of Fund shares or other adverse consequences to the Fund. Further, although we believe
proceedings are not likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines,
penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial or one or more of its affiliates that provides services to
the Fund.
| Columbia Variable Portfolio – Global Strategic Income Fund | Annual Report 2021 | 51 |
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees of Columbia
Funds Variable Series Trust II and Shareholders of Columbia Variable Portfolio – Global Strategic Income Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of Columbia Variable Portfolio – Global Strategic Income Fund (one of the funds constituting Columbia Funds Variable Series Trust II,
referred to hereafter as the "Fund") as of December 31, 2021, the related statement of operations for the year ended December 31, 2021, the statement of changes in net assets for each of the two years in the period
ended December 31, 2021, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2021 (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, 2021, 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, 2021 and the financial highlights for each of the five years in the period ended December 31, 2021 in conformity with accounting principles generally
accepted in the United States of America.
Basis for Opinion
These financial statements are the
responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these
financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2021 by correspondence with the custodian, transfer agent, brokers and agent banks;
when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Minneapolis, Minnesota
February 22, 2022
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| 52 | Columbia Variable Portfolio – Global Strategic Income Fund | Annual Report 2021 |
TRUSTEES AND
OFFICERS
The Board oversees the
Fund’s operations and appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following table provides basic biographical information about the
Fund’s Trustees as of the printing of this report, including their principal occupations during the past five years, although specific titles for individuals may have varied over the period. The year set forth
beneath Length of Service in the table below is the year in which the Trustee was first appointed or elected as Trustee to any Fund currently in the Columbia Funds Complex or a predecessor thereof. Under current Board
policy, each Trustee generally serves until December 31 of the year such Trustee turns seventy-five (75).
Independent trustees
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| George S. Batejan c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1953 | Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 176 | Former Chairman of the Board, NICSA (National Investment Company Services Association) (Executive Committee, Nominating Committee and Governance Committee), 2014-2016; former Director, Intech Investment Management, 2011-2016; former Board Member, Metro Denver Chamber of Commerce, 2015-2016; former Advisory Board Member, University of Colorado Business School, 2015-2018 |
| Kathleen Blatz c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2006 | Attorney, specializing in arbitration and mediation; Chief Justice, Minnesota Supreme Court, 1998-2006; Associate Justice, Minnesota Supreme Court, 1996-1998; Fourth Judicial District Court Judge, Hennepin County, 1994-1996; Attorney in private practice and public service, 1984-1993; State Representative, Minnesota House of Representatives, 1979-1993, which included service on the Tax and Financial Institutions and Insurance Committees; Member and Interim Chair, Minnesota Sports Facilities Authority, January 2017-July 2017; Interim President and Chief Executive Officer, Blue Cross Blue Shield of Minnesota (health care insurance), February-July 2018, April-October 2021 | 176 | Former Trustee, Blue Cross Blue Shield of Minnesota, 2009-2021 (Chair of the Business Development Committee, 2014-2017; Chair of the Governance Committee, 2017-2019); former Member and Chair of the Board, Minnesota Sports Facilities Authority, January 2017-July 2017; former Director, Robina Foundation, 2009-2020 (Chair, 2014-2020); Director, Schulze Family Foundation, since 2021 |
| Pamela G. Carlton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2007 | President, Springboard — Partners in Cross Cultural Leadership (consulting company) since 2003; Managing Director of US Equity Research, JP Morgan Chase, 1999-2003; Director of US Equity Research, Chase Asset Management, 1996-1999; Co-Director Latin America Research, 1993-1996, COO Global Research, 1992-1996, Co-Director of US Research, 1991-1992, Investment Banker, Morgan Stanley, 1982-1991, Morgan Stanley; Attorney, Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 176 | Trustee, New York Presbyterian Hospital Board (Executive Committee and Chair of People Committee) since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee); Director, Apollo Commercial Real Estate Finance, Inc. since 2021; the Governing Council of the Independent Directors Council (IDC), since 2021 |
| Columbia Variable Portfolio – Global Strategic Income Fund | Annual Report 2021 | 53 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Janet Langford Carrig c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1957 | Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 174 | Director, EQT Corporation (natural gas producer) since 2019; Director, Whiting Petroleum Corporation (independent oil and gas company) since 2020 |
| J. Kevin Connaughton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2020 | Member, FINRA National Adjudicatory Council since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Consultant to Independent Trustees of CFVIT and CFST I from March 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Managing Director and General Manager of Mutual Fund Products, Columbia Management Investment Advisers, LLC, May 2010-February 2015; President, Columbia Funds, 2008-2015; and senior officer of Columbia Funds and affiliated funds, 2003-2015 | 174 | Former Director, The Autism Project, March 2015-December 2021; former Member of the Investment Committee, St. Michael’s College, November 2015-February 2020; former Trustee, St. Michael’s College, June 2017-September 2019; former Trustee, New Century Portfolios, January 2015-December 2017 |
| Olive M. Darragh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since 2020 | Managing Director of Darragh Inc. (strategy and talent management consulting firm) since 2010; Founder and CEO, Zolio, Inc. (investment management talent identification platform) since 2004; Consultant to Independent Trustees of CFVIT and CFST I from June 2019 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 2001-2004 | 174 | Former Director, University of Edinburgh Business School (Member of US Board); former Director, Boston Public Library Foundation |
| Patricia M. Flynn c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1950 | Trustee since 2004 | Trustee Professor of Economics and Management, Bentley University since 1976 (also teaches and conducts research on corporate governance); Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 176 | Trustee, MA Taxpayers Foundation since 1997; Board of Governors, Innovation Institute, MA Technology Collaborative, 2010-2020; former Board of Directors, The MA Business Roundtable, 2003-2019 |
| Brian J. Gallagher c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 176 | Trustee, Catholic Schools Foundation since 2004 |
| 54 | Columbia Variable Portfolio – Global Strategic Income Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Douglas A. Hacker c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1955 | Co-Chair since 2021; Chair of CFST I and CFVIT since 2014; Trustee of CFST I and CFVIT since 1996 and CFST, CFST II, CFVST II, CET I and CET II since 2021 | Independent business executive since May 2006; Executive Vice President – Strategy of United Airlines, December 2002 - May 2006; President of UAL Loyalty Services (airline marketing company), September 2001-December 2002; Executive Vice President and Chief Financial Officer of United Airlines, July 1999-September 2001 | 176 | Director, Spartan Nash Company (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing); former Director, Nash Finch Company (food distributor), 2005-2013; former Director, SeaCube Container Leasing Ltd. (container leasing), 2010-2013; and former Director, Travelport Worldwide Limited (travel information technology), 2014-2019 |
| Nancy T. Lukitsh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1956 | Trustee since 2011 | Senior Vice President, Partner and Director of Marketing, Wellington Management Company, LLP (investment adviser), 1997-2010; Chair, Wellington Management Portfolios (commingled non-U.S. investment pools), 2007 -2010; Director, Wellington Trust Company, NA and other Wellington affiliates, 1997-2010 | 174 | None |
| David M. Moffett c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2011 | Retired; Consultant to Bridgewater and Associates | 174 | Director, CSX Corporation (transportation suppliers); Director, Genworth Financial, Inc. (financial and insurance products and services); Director, PayPal Holdings Inc. (payment and data processing services); Trustee, University of Oklahoma Foundation; former Director, eBay Inc. (online trading community), 2007-2015; and former Director, CIT Bank, CIT Group Inc. (commercial and consumer finance), 2010-2016 |
| Catherine James Paglia c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Co-Chair since 2021; Chair of CFST, CFST II, CFVST II, CET I and CET II since 2020; Trustee of CFST, CFST II and CFVST II since 2004 and CFST I and CFVIT since 2021 | Director, Enterprise Asset Management, Inc. (private real estate and asset management company) since September 1998; Managing Director and Partner, Interlaken Capital, Inc., 1989-1997; Vice President, 1982-1985, Principal, 1985-1987, Managing Director, 1987-1989, Morgan Stanley; Vice President, Investment Banking, 1980-1982, Associate, Investment Banking, 1976-1980, Dean Witter Reynolds, Inc. | 176 | Director, Valmont Industries, Inc. (irrigation systems manufacturer) since 2012; Trustee, Carleton College (on the Investment Committee); Trustee, Carnegie Endowment for International Peace (on the Investment Committee) |
| Columbia Variable Portfolio – Global Strategic Income Fund | Annual Report 2021 | 55 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Minor M. Shaw c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1947 | Trustee since 2003 | President, Micco LLC (private investments) since 2011; President, Micco Corp. (family investment business), 1998-2011 | 176 | Director, Blue Cross Blue Shield of South Carolina (Chair of Compensation Committee) since April 2008; Trustee, Hollingsworth Funds (on the Investment Committee) since 2016 (previously Board Chair from 2016-2019); Former Advisory Board member, Duke Energy Corp., 2016-2020; Chair of the Duke Endowment; Chair of Greenville – Spartanburg Airport Commission; former Trustee, BofA Funds Series Trust (11 funds), 2003-2011; former Director, Piedmont Natural Gas, 2004-2016; former Director, National Association of Corporate Directors, Carolinas Chapter, 2013-2018; Chair, Daniel-Mickel Foundation since 1998 |
| Natalie A. Trunow c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1967 | Trustee since 2020 | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services), January 2016-January 2021; Non-executive Member of the Investment Committee and Valuation Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services), August 2018-January 2021; Advisor, Paradigm Asset Management, November 2016-December 2021; Consultant to Independent Trustees of CFVIT and CFST I from September 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Director of Investments/Consultant, Casey Family Programs, April 2016-November 2016; Senior Vice President and Chief Investment Officer, Calvert Investments, August 2008-January 2016; Section Head and Portfolio Manager, General Motors Asset Management, June 1997-August 2008 | 174 | Former Director, Investment Committee, Health Services for Children with Special Needs, Inc., 2012-2019; Director, Chair of Audit Committee, Consumer Credit Counseling Services (formerly Guidewell Financial Solutions), since 2019; Independent Director, Investment Committee and Valuation Committee, Sarona Asset Management, since 2019 |
| Sandra Yeager c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2017 | Retired; President and founder, Hanoverian Capital, LLC (SEC registered investment advisor firm), 2008-2016; Managing Director, DuPont Capital, 2006-2008; Managing Director, Morgan Stanley Investment Management, 2004-2006; Senior Vice President, Alliance Bernstein, 1990-2004 | 176 | Former Director, NAPE Education Foundation, October 2016-October 2020 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Fund Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I (CET I), Columbia ETF Trust II (CET II), Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Beckman, Gallagher and Hacker and Mses. Blatz, Carlton, Flynn, Paglia, Shaw and Yeager serve as Directors of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
| 56 | Columbia Variable Portfolio – Global Strategic Income Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Interested trustee affiliated with Investment Manager*
Interested trustee affiliated with Investment Manager*
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during the past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex overseen | Other directorships held by Trustee during the past five years |
| Daniel J. Beckman c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since November 2021(a) | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC (since April 2015); officer of Columbia Funds and affiliated funds since 2020. | 176 | Director, Ameriprise Trust Company, since October 2016; Director, Columbia Management Investment Distributors, Inc. since November 2018; Board of Governors, Columbia Wanger Asset Management, LLC since January 2022 |
| * | Interested person (as defined under the 1940 Act) by reason of being an officer, director, security holder and/or employee of the Investment Manager or Ameriprise Financial. |
| (a) | Mr. Beckman serves as the President and Principal Executive Officer of the Columbia Funds (since 2021). |
The Statement of Additional
Information has additional information about the Fund’s Board members and is available, without charge, upon request by calling 800.345.6611 or contacting your financial intermediary.
The Board has appointed officers
who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. The following table provides basic information about the Officers of the
Fund, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Beckman, who is President and Principal Executive Officer, the
Fund’s other officers are:
Fund officers
| Columbia Variable Portfolio – Global Strategic Income Fund | Annual Report 2021 | 57 |
TRUSTEES AND OFFICERS (continued)
Fund officers (continued)
Fund officers (continued)
| 58 | Columbia Variable Portfolio – Global Strategic Income Fund | Annual Report 2021 |
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For Fund and other investment product prospectuses, which contain this and other important information, contact your
financial advisor or insurance representative. Please read the prospectus carefully before you invest. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved. Columbia Management Investment Distributors, Inc., 290 Congress Street, Boston, MA 02210
© 2022 Columbia Management Investment
Advisers, LLC.
C-2050 AW (2/22)
Columbia Variable
Portfolio – Intermediate Bond Fund
Please remember that you may not
buy (nor will you own) shares of the Fund directly. The Fund is available through variable annuity contracts and variable life insurance policies offered by the separate accounts of participating insurance companies
as well as qualified pension and retirement plans. Please contact your financial advisor or insurance representative for more information.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
| 3 | |
| 6 | |
| 8 | |
| 9 | |
| 38 | |
| 40 | |
| 41 | |
| 42 | |
| 44 | |
| 62 | |
| 63 | |
| 63 |
Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which Columbia Variable Portfolio – Intermediate Bond Fund (the Fund) holds investments consistent with the procedures as stated in the Statement of Additional
Information (SAI). You may obtain a copy of the SAI without charge by calling 800.345.6611; contacting your financial intermediary or searching the website of the Securities and Exchange Commission (SEC) at sec.gov.
Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge
by visiting columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. The Fund’s Form N-PORT is available on the SEC’s website at sec.gov. The Fund’s complete
schedule of portfolio holdings, as filed on Form N-PORT, can also be obtained without charge, upon request, by calling 800.345.6611.
Additional Fund information
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
290 Congress Street
Boston, MA 02210
Fund distributor
Columbia Management Investment Distributors,
Inc.
290 Congress Street
Boston, MA 02210
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
Columbia Variable Portfolio – Intermediate
Bond Fund | Annual Report 2021
Fund at a Glance
Investment objective
The Fund
seeks to provide shareholders with a high level of current income while attempting to conserve the value of the investment for the longest period of time.
Portfolio management
Jason Callan
Lead Portfolio Manager
Managed Fund since 2016
Gene Tannuzzo, CFA
Portfolio Manager
Managed Fund since 2017
Alex Christensen, CFA
Portfolio Manager
Managed Fund since March 2021
| Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 | 3 |
Fund at a Glance (continued)
Performance of a hypothetical $10,000 investment (December 31, 2011 — December 31, 2021)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class 2 shares of Columbia Variable Portfolio – Intermediate Bond Fund during the stated time period, and does not reflect the deduction of taxes, if any, that
a shareholder may pay on Fund distributions or on the redemption of Fund shares. The returns also do not reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy or
qualified pension or retirement plan, if any.
| 4 | Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 |
Fund at a Glance (continued)
| Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 | 5 |
Manager Discussion of Fund Performance
At December 31, 2021,
approximately 85.61% of the Fund’s shares were owned in the aggregate by affiliated funds-of-funds managed by Columbia Management Investment Advisers, LLC (the Investment Manager). As a result of asset
allocation decisions by the Investment Manager, it is possible that the Fund may experience relatively large purchases or redemptions from affiliated funds-of-funds. The Investment Manager seeks to minimize the impact
of these transactions by structuring them over a reasonable period of time. The Fund also may experience increased expenses as it buys and sells securities as a result of purchases or redemptions by affiliated
funds-of-funds.
For the 12-month period ended
December 31, 2021, the Fund’s Class 2 shares returned -0.49%. The Fund outperformed its benchmark, the Bloomberg U.S. Aggregate Bond Index, which returned -1.54% during the same time period.
Market overview
As pandemic-related restrictions
were eased over the period, robust economic growth and corporate earnings supported risk sentiment and credit-oriented segments of the bond market. In addition, both U.S. monetary and fiscal policy were highly
supportive for much of the period. In this vein, Congress approved massive spending packages that included direct payments to citizens and the U.S. Federal Reserve (Fed) maintained its benchmark overnight lending rate
near zero while engaging in bond market purchases to keep longer term borrowing costs low.
The fourth quarter of 2021 saw the
Fed adopt a more hawkish tone in response to persistently high inflation driven by post-pandemic supply chain disruptions and rising commodity prices, leading to increased market volatility. The Fed officially
tightened policy in November as it began tapering its monthly bond purchases. In December, the Fed accelerated the timetable for ending its bond purchase program and signaled the likelihood of three increases in the
Fed funds rate in 2022.
Investment-grade bond market
returns for the 12 months were generally muted given the move higher in U.S. Treasury yields. To illustrate, the 10-year Treasury note yield, which entered the year at 0.93%, reached as high as 1.74% at the end of the
first quarter before drifting lower and ending 2021 at 1.52%.
The Fund’s notable
contributors during the period
| • | The Fund’s allocation to off-benchmark, credit-oriented securitized assets including non-agency mortgage-backed securities (MBS), commercial mortgage-backed securities (CMBS) and asset-backed securities (ABS) added to relative performance for the 12 months. Securitized sectors were well-supported during the period by positive consumer credit metrics given the high levels of fiscal stimulus and a robust housing market. |
| • | An allocation to below-investment-grade, high-yield corporate bonds proved additive. In this vein, exposure to “rising stars” that have recovering balance sheets and that are viewed by investors as poised to be upgraded to investment-grade status contributed to relative performance. In addition, exposure to high-yield energy credits, such as exploration and production company Occidental Petroleum and pipeline company Western Midstream, that benefited from the significant rise in oil prices over the period was beneficial. We sold the Fund’s position in Western Midstream. |
| • | The Fund’s performance relative to the benchmark for the 12 months was also helped by its positioning within agency MBS. Specifically, the Fund was underweight Government National Mortgage Association (“Ginne Mae”) issues which were most impacted by elevated prepayments, while focusing purchases on the lower coupon “to-be-announced” pools for which performance was supported by the Fed’s bond buying program. (To-be-announced, or TBA, is a term describing forward-settling mortgage-backed securities trades.) |
The Fund’s notable
detractors during the period
| • | The Fund’s exposure to collateralized mortgage obligations (CMOs) was the principal detractor from relative performance for the 12 months. The CMO positions held by the Fund were negatively impacted as prepayments surprised to the upside against a backdrop of streamlined refinancing programs and eased credit standards. |
| • | The Fund’s tactical positioning over the period with respect to interest rates detracted modestly from relative performance. Specifically, the Fund was overweight the front end of the yield curve which rose as the market anticipated hikes in the Fed’s benchmark overnight lending rate. |
| 6 | Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 |
Manager Discussion of Fund Performance (continued)
| • | Finally, positioning with respect to inflation weighed on performance. The Fund held derivative positions designed to benefit from any easing of inflation expectations, which suffered as supply chain issues and rising commodity prices persisted. |
Derivative positions
During the annual period, the
Fund utilized options on interest rate swaps (or “swaptions”) to manage yield curve exposures. In addition, the Fund used Treasury futures contracts to manage interest rate risk in the portfolio. We also
used index credit default swaps as a hedge against long cash positions to reduce the Fund’s overall credit exposure. In aggregate, on a stand-alone basis, the Fund’s use of derivatives had a negative
impact on performance.
The views expressed in this report
reflect the current views of the respective parties who have contributed to this report. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult
to predict, so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective parties
disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Columbia fund are based on numerous factors, may not be relied on as an
indication of trading intent on behalf of any particular Columbia fund. References to specific securities should not be construed as a recommendation or investment advice.
| Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 | 7 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur ongoing
costs, which generally include management fees, distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to help you compare these costs with the ongoing costs of investing in other mutual funds.
The information below does not
reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy (collectively, Contracts) or qualified pension and retirement plan (Qualified Plan), if any. The total fees
and expenses you bear may therefore be higher than those shown below.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount invested, to estimate the
expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as redemption or exchange fees, or expenses that apply to the subaccount or the Contract. Therefore, the
hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If the fees and expenses imposed under your Contract or
Qualified Plan, if any, were included, your costs would be higher.
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 365.
Expenses do not include fees and
expenses incurred indirectly by the Fund from its investment in underlying funds, including affiliated and non-affiliated pooled investment vehicles, such as mutual funds and exchange-traded funds.
| 8 | Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 |
Portfolio of Investments
December 31, 2021
December 31, 2021
(Percentages represent value of
investments compared to net assets)
Investments in securities
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 | 9 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 10 | Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 | 11 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 12 | Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 | 13 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 14 | Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 | 15 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 16 | Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 | 17 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 18 | Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 | 19 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 20 | Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 | 21 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 22 | Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 | 23 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 24 | Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 | 25 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 26 | Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 | 27 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 28 | Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 | 29 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 30 | Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
At December 31, 2021,
securities and/or cash totaling $39,292,459 were pledged as collateral.
Investments in
derivatives
| Forward foreign currency exchange contracts | |||||
| Currency to be sold | Currency to be purchased | Counterparty | Settlement date | Unrealized appreciation ($) | Unrealized depreciation ($) |
| 10,556,000 EUR | 12,035,698 USD | UBS | 01/11/2022 | 15,943 | — |
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 | 31 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
| Long futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| Euro-BTP | 778 | 03/2022 | EUR | 114,373,780 | — | (2,442,251) |
| U.S. Treasury 10-Year Note | 6,153 | 03/2022 | USD | 802,774,219 | 5,448,026 | — |
| U.S. Treasury 10-Year Note | 1,350 | 03/2022 | USD | 176,132,813 | — | (1,226,003) |
| U.S. Treasury 2-Year Note | 792 | 03/2022 | USD | 172,792,126 | — | (348,124) |
| U.S. Treasury 5-Year Note | 2,256 | 03/2022 | USD | 272,923,126 | — | (163,208) |
| U.S. Treasury Ultra 10-Year Note | 146 | 03/2022 | USD | 21,379,875 | 133,125 | — |
| U.S. Ultra Treasury Bond | 650 | 03/2022 | USD | 128,131,250 | 476,467 | — |
| Total | 6,057,618 | (4,179,586) | ||||
| Short futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| Euro-Bund | (617) | 03/2022 | EUR | (105,735,290) | 2,252,358 | — |
| Put option contracts purchased | ||||||||
| Description | Counterparty | Trading currency | Notional amount | Number of contracts | Exercise price/Rate | Expiration date | Cost ($) | Value ($) |
| 10-Year OTC interest rate swap with Citi to receive 3-Month USD LIBOR BBA and pay exercise rate | Citi | USD | 200,300,000 | 200,300,000 | 1.75 | 07/15/2022 | 3,465,190 | 3,382,426 |
| 10-Year OTC interest rate swap with Morgan Stanley to receive 3-Month USD LIBOR BBA and pay exercise rate | Morgan Stanley | USD | 279,500,000 | 279,500,000 | 1.75 | 11/09/2022 | 6,540,300 | 6,581,806 |
| 5-Year OTC interest rate swap with Morgan Stanley to receive 3-Month USD LIBOR BBA and pay exercise rate | Morgan Stanley | USD | 253,000,000 | 253,000,000 | 1.50 | 05/20/2022 | 2,656,500 | 2,195,306 |
| Total | 12,661,990 | 12,159,538 | ||||||
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 32 | Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
| Put option contracts written | ||||||||
| Description | Counterparty | Trading currency | Notional amount | Number of contracts | Exercise price/Rate | Expiration date | Premium received ($) | Value ($) |
| 10-Year OTC interest rate swap with Citi to receive exercise rate and pay 3-Month USD LIBOR BBA | Citi | USD | (220,000,000) | (220,000,000) | 2.20 | 03/17/2022 | (4,114,000) | (301,576) |
| 2-Year OTC interest rate swap with Citi to receive exercise rate and pay 3-Month USD LIBOR BBA | Citi | USD | (188,000,000) | (188,000,000) | 1.10 | 05/03/2022 | (799,000) | (746,642) |
| 2-Year OTC interest rate swap with Citi to receive exercise rate and pay 3-Month USD LIBOR BBA | Citi | USD | (188,100,000) | (188,100,000) | 1.25 | 05/23/2022 | (695,970) | (611,005) |
| 2-Year OTC interest rate swap with Morgan Stanley to receive exercise rate and pay 3-Month USD LIBOR BBA | Morgan Stanley | USD | (188,100,000) | (188,100,000) | 1.25 | 05/23/2022 | (742,995) | (611,005) |
| Total | (6,351,965) | (2,270,228) | ||||||
| Cleared credit default swap contracts - buy protection | |||||||||||
| Reference entity | Counterparty | Maturity date | Pay fixed rate (%) | Payment frequency | Notional currency | Notional amount | Value ($) | Upfront payments ($) | Upfront receipts ($) | Unrealized appreciation ($) | Unrealized depreciation ($) |
| Markit CDX North America High Yield Index, Series 37 | Morgan Stanley | 12/20/2026 | 5.000 | Quarterly | USD | 93,799,800 | (82,147) | — | — | — | (82,147) |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 | 33 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
| Credit default swap contracts - sell protection (continued) | |||||||||||||
| Reference entity | Counterparty | Maturity date | Receive fixed rate (%) | Payment frequency | Implied credit spread (%)* | Notional currency | Notional amount | Value ($) | Periodic payments receivable (payable) ($) | Upfront payments ($) | Upfront receipts ($) | Unrealized appreciation ($) | Unrealized depreciation ($) |
| Markit CMBX North America Index, Series 10 BBB- | JPMorgan | 11/17/2059 | 3.000 | Monthly | 5.156 | USD | 10,000,000 | (892,188) | 5,833 | — | (2,219,050) | 1,332,695 | — |
| Markit CMBX North America Index, Series 10 BBB- | JPMorgan | 11/17/2059 | 3.000 | Monthly | 5.156 | USD | 10,000,000 | (892,187) | 5,833 | — | (1,718,950) | 832,596 | — |
| Markit CMBX North America Index, Series 10 BBB- | JPMorgan | 11/17/2059 | 3.000 | Monthly | 5.156 | USD | 11,250,000 | (1,003,712) | 6,563 | — | (1,802,011) | 804,862 | — |
| Markit CMBX North America Index, Series 10 BBB- | JPMorgan | 11/17/2059 | 3.000 | Monthly | 5.156 | USD | 9,500,000 | (847,579) | 5,542 | — | (1,572,483) | 730,446 | — |
| Markit CMBX North America Index, Series 11 BBB- | JPMorgan | 11/18/2054 | 3.000 | Monthly | 3.952 | USD | 6,100,000 | (288,797) | 3,558 | — | (916,450) | 631,211 | — |
| Markit CMBX North America Index, Series 13 BBB- | JPMorgan | 12/16/2072 | 3.000 | Monthly | 3.809 | USD | 7,600,000 | (393,062) | 4,433 | — | (436,517) | 47,888 | — |
| Markit CMBX North America Index, Series 10 BBB- | Morgan Stanley | 11/17/2059 | 3.000 | Monthly | 5.156 | USD | 15,000,000 | (1,338,282) | 8,750 | — | (3,319,002) | 1,989,470 | — |
| Markit CMBX North America Index, Series 10 BBB- | Morgan Stanley | 11/17/2059 | 3.000 | Monthly | 5.156 | USD | 10,000,000 | (892,188) | 5,833 | — | (2,008,307) | 1,121,952 | — |
| Markit CMBX North America Index, Series 10 BBB- | Morgan Stanley | 11/17/2059 | 3.000 | Monthly | 5.156 | USD | 14,250,000 | (1,271,367) | 8,312 | — | (2,358,724) | 1,095,669 | — |
| Markit CMBX North America Index, Series 10 BBB- | Morgan Stanley | 11/17/2059 | 3.000 | Monthly | 5.156 | USD | 7,000,000 | (624,532) | 4,083 | — | (1,364,249) | 743,800 | — |
| Markit CMBX North America Index, Series 11 BBB- | Morgan Stanley | 11/18/2054 | 3.000 | Monthly | 3.952 | USD | 12,200,000 | (577,595) | 7,117 | — | (755,867) | 185,389 | — |
| Markit CMBX North America Index, Series 12 BBB- | Morgan Stanley | 08/17/2061 | 3.000 | Monthly | 3.927 | USD | 10,700,000 | (553,392) | 6,242 | — | (513,104) | — | (34,046) |
| Total | (11,675,992) | 91,991 | — | (22,349,245) | 10,799,290 | (34,046) | |||||||
| * | Implied credit spreads, represented in absolute terms, utilized in determining the market value of credit default swap agreements on corporate or sovereign issues as of period end serve as an indicator of the current status of the payment/performance risk and represent the likelihood or risk of default for the credit derivative. The implied credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Wider credit spreads represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement. |
Notes to Portfolio of
Investments
| (a) | Represents privately placed and other securities and instruments exempt from Securities and Exchange Commission registration (collectively, private placements), such as Section 4(a)(2) and Rule 144A eligible securities, which are often sold only to qualified institutional buyers. At December 31, 2021, the total value of these securities amounted to $2,848,074,407, which represents 65.33% of total net assets. |
| (b) | Variable rate security. The interest rate shown was the current rate as of December 31, 2021. |
| (c) | Security represents a pool of loans that generate cash payments generally over fixed periods of time. Such securities entitle the security holders to receive distributions (i.e. principal and interest, net of fees and expenses) that are tied to the payments made by the borrower on the underlying loans. Due to the structure of the security the cash payments received are not known until the time of payment. The interest rate shown is the stated coupon rate as of December 31, 2021 and is not reflective of the cash flow payments. |
| (d) | Valuation based on significant unobservable inputs. |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 34 | Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Notes to Portfolio of Investments (continued)
| (e) | Represents fair value as determined in good faith under procedures approved by the Board of Trustees. At December 31, 2021, the total value of these securities amounted to $105,581,058, which represents 2.42% of total net assets. |
| (f) | Variable or floating rate security, the interest rate of which adjusts periodically based on changes in current interest rates and prepayments on the underlying pool of assets. The interest rate shown was the current rate as of December 31, 2021. |
| (g) | Represents interest only securities which have the right to receive the monthly interest payments on an underlying pool of mortgage loans. |
| (h) | Represents a variable rate security with a step coupon where the rate adjusts according to a schedule for a series of periods, typically lower for an initial period and then increasing to a higher coupon rate thereafter. The interest rate shown was the current rate as of December 31, 2021. |
| (i) | Payment-in-kind security. Interest can be paid by issuing additional par of the security or in cash. |
| (j) | Principal amounts are denominated in United States Dollars unless otherwise noted. |
| (k) | Principal and interest may not be guaranteed by a governmental entity. |
| (l) | This security or a portion of this security has been pledged as collateral in connection with derivative contracts. |
| (m) | Represents a security purchased on a when-issued basis. |
| (n) | The stated interest rate represents the weighted average interest rate at December 31, 2021 of contracts within the senior loan facility. Interest rates on contracts are primarily determined either weekly, monthly or quarterly by reference to the indicated base lending rate and spread and the reset period. These base lending rates are primarily the LIBOR and other short-term rates. Base lending rates may be subject to a floor or minimum rate. The interest rate for senior loans purchased on a when-issued or delayed delivery basis will be determined upon settlement, therefore no interest rate is disclosed. Senior loans often require prepayments from excess cash flows or permit the borrowers to repay at their election. The degree to which borrowers repay cannot be predicted with accuracy. As a result, remaining maturities of senior loans may be less than the stated maturities. Generally, the Fund is contractually obligated to receive approval from the agent bank and/or borrower prior to the disposition of a senior loan. |
| (o) | Represents a security purchased on a forward commitment basis. |
| (p) | The rate shown is the seven-day current annualized yield at December 31, 2021. |
| (q) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended December 31, 2021 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Realized gain (loss)($) | Dividends($) | End of period shares |
| Columbia Short-Term Cash Fund, 0.085% | ||||||||
| 279,463,875 | 1,852,856,353 | (1,940,381,799) | (4,122) | 191,934,307 | (10,578) | 134,095 | 191,972,701 | |
Abbreviation Legend
| CMO | Collateralized Mortgage Obligation |
| LIBOR | London Interbank Offered Rate |
| SOFR | Secured Overnight Financing Rate |
| STRIPS | Separate Trading of Registered Interest and Principal Securities |
| TBA | To Be Announced |
Currency Legend
| EUR | Euro |
| USD | US Dollar |
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 | 35 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Fair value measurements (continued)
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at December 31, 2021:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Investments in Securities | ||||
| Asset-Backed Securities — Agency | — | 185,787 | — | 185,787 |
| Asset-Backed Securities — Non-Agency | — | 704,739,244 | 70,733,084 | 775,472,328 |
| Commercial Mortgage-Backed Securities - Agency | — | 72,555,577 | — | 72,555,577 |
| Commercial Mortgage-Backed Securities - Non-Agency | — | 335,591,908 | — | 335,591,908 |
| Convertible Bonds | — | 4,271,433 | — | 4,271,433 |
| Corporate Bonds & Notes | — | 1,256,220,089 | — | 1,256,220,089 |
| Foreign Government Obligations | — | 162,964,836 | — | 162,964,836 |
| Residential Mortgage-Backed Securities - Agency | — | 668,203,437 | — | 668,203,437 |
| Residential Mortgage-Backed Securities - Non-Agency | — | 1,074,625,708 | 124,730,661 | 1,199,356,369 |
| Senior Loans | — | 8,274,188 | — | 8,274,188 |
| U.S. Treasury Obligations | 40,791,963 | — | — | 40,791,963 |
| Options Purchased Calls | — | 211,551 | — | 211,551 |
| Options Purchased Puts | — | 12,159,538 | — | 12,159,538 |
| Money Market Funds | 191,934,307 | — | — | 191,934,307 |
| Total Investments in Securities | 232,726,270 | 4,300,003,296 | 195,463,745 | 4,728,193,311 |
| Investments in Derivatives | ||||
| Asset | ||||
| Forward Foreign Currency Exchange Contracts | — | 15,943 | — | 15,943 |
| Futures Contracts | 8,309,976 | — | — | 8,309,976 |
| Swap Contracts | — | 11,753,912 | — | 11,753,912 |
| Liability | ||||
| Futures Contracts | (4,179,586) | — | — | (4,179,586) |
| Options Contracts Written | — | (2,270,228) | — | (2,270,228) |
| Swap Contracts | — | (116,193) | — | (116,193) |
| Total | 236,856,660 | 4,309,386,730 | 195,463,745 | 4,741,707,135 |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The Fund’s assets assigned to
the Level 2 input category are generally valued using the market approach, in which a security’s value is determined through reference to prices and information from market transactions for similar or identical
assets.
Forward foreign currency exchange
contracts, futures contracts and swap contracts are valued at unrealized appreciation (depreciation).
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 36 | Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Fair value measurements (continued)
The following table is a reconciliation of Level 3 assets for which significant observable and unobservable inputs were used to determine fair value:
The following table is a reconciliation of Level 3 assets for which significant observable and unobservable inputs were used to determine fair value:
(a) Change in unrealized
appreciation (depreciation) relating to securities held at December 31, 2021 was $2,264,318, which is comprised of Asset-Backed Securities — Non-Agency of $2,254,537 and Residential Mortgage-Backed Securities
— Non-Agency of $9,781.
The Fund’s assets assigned to
the Level 3 category are valued utilizing the valuation technique deemed the most appropriate in the circumstances. Certain residential mortgage backed securities and asset backed securities classified as Level 3
securities are valued using the market approach and utilize single market quotations from broker dealers which may have included, but were not limited to, observable transactions for identical or similar assets in the
market and the distressed nature of the security. The appropriateness of fair values for these securities is monitored on an ongoing basis which may include results of back testing, manual price reviews and other
control procedures. Significant increases (decreases) to any of these inputs would have resulted in a significantly higher (lower) valuation measurement.
Financial assets were transferred
from Level 3 to Level 2 as observable market inputs were utilized and management determined that there was sufficient, reliable and observable market data to value these assets as of period end.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 | 37 |
Statement of Assets and Liabilities
December 31, 2021
December 31, 2021
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $4,459,769,069) | $4,523,887,915 |
| Affiliated issuers (cost $191,938,429) | 191,934,307 |
| Options purchased (cost $19,701,100) | 12,371,089 |
| Foreign currency (cost $304,499) | 305,562 |
| Cash collateral held at broker for: | |
| Swap contracts | 5,057,000 |
| TBA | 122,000 |
| Other(a) | 163,000 |
| Margin deposits on: | |
| Swap contracts | 4,948,233 |
| Unrealized appreciation on forward foreign currency exchange contracts | 15,943 |
| Unrealized appreciation on swap contracts | 11,753,912 |
| Upfront payments on swap contracts | 1,079,736 |
| Receivable for: | |
| Investments sold | 1,407,460 |
| Capital shares sold | 75,009 |
| Dividends | 12,327 |
| Interest | 23,179,974 |
| Foreign tax reclaims | 26,852 |
| Variation margin for futures contracts | 1,715,271 |
| Prepaid expenses | 36,661 |
| Total assets | 4,778,092,251 |
| Liabilities | |
| Option contracts written, at value (premiums received $6,351,965) | 2,270,228 |
| Due to custodian | 1,787,983 |
| Unrealized depreciation on swap contracts | 34,046 |
| Upfront receipts on swap contracts | 22,349,245 |
| Payable for: | |
| Investments purchased on a delayed delivery basis | 390,987,287 |
| Capital shares purchased | 449,765 |
| Variation margin for swap contracts | 85,473 |
| Management services fees | 56,128 |
| Distribution and/or service fees | 2,418 |
| Service fees | 32,455 |
| Compensation of board members | 451,878 |
| Compensation of chief compliance officer | 841 |
| Other expenses | 52,979 |
| Total liabilities | 418,560,726 |
| Net assets applicable to outstanding capital stock | $4,359,531,525 |
| Represented by | |
| Paid in capital | 4,185,442,145 |
| Total distributable earnings (loss) | 174,089,380 |
| Total - representing net assets applicable to outstanding capital stock | $4,359,531,525 |
| Class 1 | |
| Net assets | $3,734,781,128 |
| Shares outstanding | 362,354,119 |
| Net asset value per share | $10.31 |
| Class 2 | |
| Net assets | $80,858,856 |
| Shares outstanding | 7,884,092 |
| Net asset value per share | $10.26 |
| Class 3 | |
| Net assets | $543,891,541 |
| Shares outstanding | 52,723,719 |
| Net asset value per share | $10.32 |
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 38 | Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 |
Statement of Assets and Liabilities (continued)
December 31, 2021
December 31, 2021
| (a) | Includes collateral related to options contracts written and swap contracts. |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 | 39 |
Statement of Operations
Year Ended December 31, 2021
Year Ended December 31, 2021
| Net investment income | |
| Income: | |
| Dividends — affiliated issuers | $134,095 |
| Interest | 150,642,824 |
| Total income | 150,776,919 |
| Expenses: | |
| Management services fees | 21,408,957 |
| Distribution and/or service fees | |
| Class 2 | 194,747 |
| Class 3 | 719,388 |
| Service fees | 394,418 |
| Compensation of board members | 153,938 |
| Custodian fees | 64,046 |
| Printing and postage fees | 59,790 |
| Audit fees | 49,500 |
| Legal fees | 51,206 |
| Interest on collateral | 87,565 |
| Compensation of chief compliance officer | 754 |
| Other | 40,977 |
| Total expenses | 23,225,286 |
| Net investment income | 127,551,633 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 54,804,525 |
| Investments — affiliated issuers | (10,578) |
| Foreign currency translations | 37,769 |
| Forward foreign currency exchange contracts | 332,763 |
| Futures contracts | (51,409,846) |
| Options purchased | 11,464,250 |
| Options contracts written | 359,210 |
| Swap contracts | (24,110,945) |
| Net realized loss | (8,532,852) |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | (131,044,824) |
| Investments — affiliated issuers | (4,122) |
| Foreign currency translations | (12,954) |
| Forward foreign currency exchange contracts | 722,509 |
| Futures contracts | 3,889,632 |
| Options purchased | (8,858,453) |
| Options contracts written | 4,081,737 |
| Swap contracts | (434,345) |
| Net change in unrealized appreciation (depreciation) | (131,660,820) |
| Net realized and unrealized loss | (140,193,672) |
| Net decrease in net assets resulting from operations | $(12,642,039) |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 40 | Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 |
Statement of Changes in Net Assets
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | |
| Operations | ||
| Net investment income | $127,551,633 | $146,999,278 |
| Net realized gain (loss) | (8,532,852) | 286,043,539 |
| Net change in unrealized appreciation (depreciation) | (131,660,820) | 114,057,961 |
| Net increase (decrease) in net assets resulting from operations | (12,642,039) | 547,100,778 |
| Distributions to shareholders | ||
| Net investment income and net realized gains | ||
| Class 1 | (410,469,394) | (161,196,609) |
| Class 2 | (8,010,306) | (2,429,771) |
| Class 3 | (59,202,042) | (21,874,499) |
| Total distributions to shareholders | (477,681,742) | (185,500,879) |
| Increase (decrease) in net assets from capital stock activity | 68,873,765 | (240,660,704) |
| Total increase (decrease) in net assets | (421,450,016) | 120,939,195 |
| Net assets at beginning of year | 4,780,981,541 | 4,660,042,346 |
| Net assets at end of year | $4,359,531,525 | $4,780,981,541 |
| Year Ended | Year Ended | |||
| December 31, 2021 | December 31, 2020 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class 1 | ||||
| Subscriptions | 14,701,589 | 166,294,346 | 12,264,798 | 134,334,232 |
| Distributions reinvested | 39,316,992 | 410,469,394 | 14,405,416 | 161,196,609 |
| Redemptions | (48,043,731) | (530,446,805) | (52,440,890) | (574,772,886) |
| Net increase (decrease) | 5,974,850 | 46,316,935 | (25,770,676) | (279,242,045) |
| Class 2 | ||||
| Subscriptions | 1,508,641 | 16,465,741 | 1,770,601 | 19,662,463 |
| Distributions reinvested | 770,222 | 8,010,306 | 217,917 | 2,429,771 |
| Redemptions | (909,535) | (9,952,699) | (466,322) | (5,108,305) |
| Net increase | 1,369,328 | 14,523,348 | 1,522,196 | 16,983,929 |
| Class 3 | ||||
| Subscriptions | 823,642 | 9,245,599 | 3,079,900 | 34,353,886 |
| Distributions reinvested | 5,665,267 | 59,202,042 | 1,953,080 | 21,874,499 |
| Redemptions | (5,517,208) | (60,414,159) | (3,167,429) | (34,630,973) |
| Net increase | 971,701 | 8,033,482 | 1,865,551 | 21,597,412 |
| Total net increase (decrease) | 8,315,879 | 68,873,765 | (22,382,929) | (240,660,704) |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 | 41 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect any fees and expenses imposed under your
Contract and/or Qualified Plan, as applicable; such fees and expenses would reduce the total returns for all periods shown. Total return and portfolio turnover are not annualized for periods of less than one year. The
portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain derivatives, if any. If such transactions were included, the Fund’s portfolio
turnover rate may be higher.
| Net asset value, beginning of period | Net investment income | Net realized and unrealized gain (loss) | Total from investment operations | Distributions from net investment income | Distributions from net realized gains | Total distributions to shareholders | |
| Class 1 | |||||||
| Year Ended 12/31/2021 | $11.53 | 0.31 | (0.32) | (0.01) | (0.38) | (0.83) | (1.21) |
| Year Ended 12/31/2020 | $10.66 | 0.35 | 0.98 | 1.33 | (0.33) | (0.13) | (0.46) |
| Year Ended 12/31/2019 | $10.08 | 0.36 | 0.57 | 0.93 | (0.35) | — | (0.35) |
| Year Ended 12/31/2018 | $10.36 | 0.33 | (0.29) | 0.04 | (0.25) | (0.07) | (0.32) |
| Year Ended 12/31/2017 | $10.35 | 0.28 | 0.12 | 0.40 | (0.30) | (0.09) | (0.39) |
| Class 2 | |||||||
| Year Ended 12/31/2021 | $11.48 | 0.28 | (0.32) | (0.04) | (0.35) | (0.83) | (1.18) |
| Year Ended 12/31/2020 | $10.62 | 0.32 | 0.97 | 1.29 | (0.30) | (0.13) | (0.43) |
| Year Ended 12/31/2019 | $10.04 | 0.33 | 0.57 | 0.90 | (0.32) | — | (0.32) |
| Year Ended 12/31/2018 | $10.32 | 0.30 | (0.29) | 0.01 | (0.22) | (0.07) | (0.29) |
| Year Ended 12/31/2017 | $10.31 | 0.25 | 0.12 | 0.37 | (0.27) | (0.09) | (0.36) |
| Class 3 | |||||||
| Year Ended 12/31/2021 | $11.54 | 0.30 | (0.33) | (0.03) | (0.36) | (0.83) | (1.19) |
| Year Ended 12/31/2020 | $10.67 | 0.34 | 0.97 | 1.31 | (0.31) | (0.13) | (0.44) |
| Year Ended 12/31/2019 | $10.09 | 0.35 | 0.56 | 0.91 | (0.33) | — | (0.33) |
| Year Ended 12/31/2018 | $10.37 | 0.31 | (0.29) | 0.02 | (0.23) | (0.07) | (0.30) |
| Year Ended 12/31/2017 | $10.36 | 0.27 | 0.11 | 0.38 | (0.28) | (0.09) | (0.37) |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Ratios include interest on collateral expense which is less than 0.01%. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 42 | Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 |
Financial Highlights (continued)
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets(a) | Total net expense ratio to average net assets(a),(b) | Net investment income ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Class 1 | |||||||
| Year Ended 12/31/2021 | $10.31 | (0.24%) | 0.49%(c) | 0.49%(c) | 2.81% | 204% | $3,734,781 |
| Year Ended 12/31/2020 | $11.53 | 12.58% | 0.49%(c) | 0.49%(c) | 3.16% | 312% | $4,108,990 |
| Year Ended 12/31/2019 | $10.66 | 9.25% | 0.49%(c) | 0.49%(c) | 3.46% | 256% | $4,074,589 |
| Year Ended 12/31/2018 | $10.08 | 0.40% | 0.49%(c) | 0.49%(c) | 3.21% | 222% | $3,919,654 |
| Year Ended 12/31/2017 | $10.36 | 3.86% | 0.51% | 0.51% | 2.69% | 396% | $4,242,173 |
| Class 2 | |||||||
| Year Ended 12/31/2021 | $10.26 | (0.49%) | 0.74%(c) | 0.74%(c) | 2.56% | 204% | $80,859 |
| Year Ended 12/31/2020 | $11.48 | 12.28% | 0.74%(c) | 0.74%(c) | 2.93% | 312% | $74,775 |
| Year Ended 12/31/2019 | $10.62 | 9.03% | 0.74%(c) | 0.74%(c) | 3.19% | 256% | $53,012 |
| Year Ended 12/31/2018 | $10.04 | 0.14% | 0.74%(c) | 0.74%(c) | 2.96% | 222% | $37,454 |
| Year Ended 12/31/2017 | $10.32 | 3.61% | 0.76% | 0.76% | 2.44% | 396% | $37,866 |
| Class 3 | |||||||
| Year Ended 12/31/2021 | $10.32 | (0.35%) | 0.61%(c) | 0.61%(c) | 2.69% | 204% | $543,892 |
| Year Ended 12/31/2020 | $11.54 | 12.45% | 0.61%(c) | 0.61%(c) | 3.04% | 312% | $597,217 |
| Year Ended 12/31/2019 | $10.67 | 9.12% | 0.61%(c) | 0.61%(c) | 3.33% | 256% | $532,441 |
| Year Ended 12/31/2018 | $10.09 | 0.27% | 0.61%(c) | 0.61%(c) | 3.07% | 222% | $518,931 |
| Year Ended 12/31/2017 | $10.37 | 3.73% | 0.64% | 0.64% | 2.56% | 396% | $617,144 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 | 43 |
Notes to Financial Statements
December 31, 2021
December 31, 2021
Note 1. Organization
Columbia Variable Portfolio
– Intermediate Bond Fund (the Fund), a series of Columbia Funds Variable Series Trust II (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940
Act), as an open-end management investment company organized as a Massachusetts business trust.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers Class 1, Class 2 and Class 3 shares to separate accounts funding variable annuity contracts and variable life insurance policies (collectively, Contracts) issued
by affiliated and unaffiliated life insurance companies (Participating Insurance Companies) as well as qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors (Qualified
Investors) authorized by Columbia Management Investment Distributors, Inc. (the Distributor). You may not buy (nor will you own) shares of the Fund directly. You may invest by participating in a Qualified Plan or by
buying a Contract and making allocations to the Fund. Although all share classes generally have identical voting, dividend and liquidation rights, each share class votes separately when required by the Trust’s
organizational documents or by law. Different share classes pay different net investment income distribution amounts to the extent the expenses of such share classes differ, and distributions in liquidation will be
proportional to the net asset value of each share class. Each share class has its own cost structure and other features.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Debt securities generally are
valued by pricing services approved by the Board of Trustees based upon market transactions for normal, institutional-size trading units of similar securities. The services may use various pricing techniques that take
into account, as applicable, factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data, as well as approved independent broker-dealer quotes. Debt securities for
which quotations are not readily available or not believed to be reflective of market value may also be valued based upon a bid quote from an approved independent broker-dealer. Debt securities maturing in 60 days or
less are valued primarily at amortized market value, unless this method results in a valuation that management believes does not approximate fair value.
Asset- and mortgage-backed
securities are generally valued by pricing services, which utilize pricing models that incorporate the securities’ cash flow and loan performance data. These models also take into account available market data,
including trades, market quotations, and benchmark yield curves for identical or similar securities. Factors used to identify similar securities may include, but are not limited to, issuer, collateral type, vintage,
prepayment speeds, collateral performance, credit ratings, credit enhancement and expected life. Asset-backed securities for which quotations are readily available may also be valued based upon an over-the-counter or
exchange bid quote from an approved independent broker-dealer. Debt securities maturing in 60 days or less are valued primarily at amortized market value, unless this method results in a valuation that management
believes does not approximate fair value.
Senior loan securities for which
reliable market quotations are readily available are generally valued by pricing services at the average of the bids received.
Investments in open-end investment
companies (other than exchange-traded funds (ETFs)), are valued at the latest net asset value reported by those companies as of the valuation time.
| 44 | Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Forward foreign currency exchange
contracts are marked-to-market based upon foreign currency exchange rates provided by a pricing service.
Futures and options on futures
contracts are valued based upon the settlement price at the close of regular trading on their principal exchanges or, in the absence of a settlement price, at the mean of the latest quoted bid and ask prices.
Option contracts are valued at the
mean of the latest quoted bid and ask prices on their primary exchanges. Option contracts, including over-the-counter option contracts, with no readily available market quotations are valued using mid-market
evaluations from independent third-party vendors.
Swap transactions are valued
through an independent pricing service or broker, or if neither is available, through an internal model based upon observable inputs.
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Foreign currency transactions and
translations
The values of all assets and
liabilities denominated in foreign currencies are generally translated into U.S. dollars at exchange rates determined at the close of regular trading on the New York Stock Exchange. Net realized and unrealized gains
(losses) on foreign currency transactions and translations include gains (losses) arising from the fluctuation in exchange rates between trade and settlement dates on securities transactions, gains (losses) arising
from the disposition of foreign currency and currency gains (losses) between the accrual and payment dates on dividends, interest income and foreign withholding taxes.
For financial statement purposes,
the Fund does not distinguish that portion of gains (losses) on investments which is due to changes in foreign exchange rates from that which is due to changes in market prices of the investments. Such fluctuations
are included with the net realized and unrealized gains (losses) on investments in the Statement of Operations.
Derivative instruments
The Fund invests in certain
derivative instruments, as detailed below, in seeking to meet its investment objectives. Derivatives are instruments whose values depend on, or are derived from, in whole or in part, the value of one or more
securities, currencies, commodities, indices, or other assets or instruments. Derivatives may be used to increase investment flexibility (including to maintain cash reserves while maintaining desired exposure to
certain assets), for risk management (hedging) purposes, to facilitate trading, to reduce transaction costs and to pursue higher investment returns. The Fund may also use derivative instruments to mitigate certain
investment risks, such as foreign currency exchange rate risk, interest rate risk and credit risk. Derivatives may involve various risks, including the potential inability of the counterparty to fulfill its
obligations under the terms of the contract, the potential for an illiquid secondary market (making it difficult for the Fund to sell or terminate, including at favorable prices) and the potential for market movements
which may expose the Fund to gains or losses in excess of the amount shown in the Statement of Assets and Liabilities. The notional amounts of derivative instruments, if applicable, are not recorded in the financial
statements.
A derivative instrument may suffer
a marked-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform its
obligations under the contract. The Fund’s risk of loss from counterparty credit risk on over-the-counter derivatives
| Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 | 45 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
is generally limited to the aggregate unrealized
gain netted against any collateral held by the Fund and the amount of any variation margin held by the counterparty, plus any replacement costs or related amounts. With exchange-traded or centrally cleared
derivatives, there is reduced counterparty credit risk to the Fund since the clearinghouse or central counterparty (CCP) provides some protection in the case of clearing member default. The clearinghouse or CCP stands
between the buyer and the seller of the contract; therefore, additional counterparty credit risk is failure of the clearinghouse or CCP. However, credit risk still exists in exchange-traded or centrally cleared
derivatives with respect to initial and variation margin that is held in a broker’s customer account. While clearing brokers are required to segregate customer margin from their own assets, in the event that a
clearing broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients and such shortfall is remedied by the
CCP or otherwise, U.S. bankruptcy laws will typically allocate that shortfall on a pro-rata basis across all the clearing broker’s customers (including the Fund), potentially resulting in losses to the Fund.
In order to better define its
contractual rights and to secure rights that will help the Fund mitigate its counterparty risk, the Fund may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (ISDA Master Agreement)
or similar agreement with its derivatives counterparties. An ISDA Master Agreement is an agreement between the Fund and a counterparty that governs over-the-counter derivatives and foreign exchange forward contracts
and contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset
with the counterparty certain derivative instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically
permit a single net payment in the event of default (close-out netting), including the bankruptcy or insolvency of the counterparty. Note, however, that bankruptcy or insolvency laws of a particular jurisdiction may
impose restrictions on or prohibitions against the right of offset or netting in bankruptcy, insolvency or other events.
Collateral (margin) requirements
differ by type of derivative. Margin requirements are established by the clearinghouse or CCP for exchange-traded and centrally cleared derivatives. Brokers can ask for margin in excess of the minimum in certain
circumstances. Collateral terms for most over-the-counter derivatives are subject to regulatory requirements to exchange variation margin with trading counterparties and may have contract specific margin terms as
well. For over-the-counter derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the marked-to-market amount for each transaction under such agreement and
comparing that amount to the value of any variation margin currently pledged by the Fund and/or the counterparty. Generally, the amount of collateral due from or to a party has to exceed a minimum transfer amount
threshold (e.g., $250,000) before a transfer has to be made. To the extent amounts due to the Fund from its counterparties are not fully collateralized, contractually or otherwise, the Fund bears the risk of loss from
counterparty nonperformance. The Fund may also pay interest expense on cash collateral received from the broker. Any interest expense paid by the Fund is shown on the Statement of Operations. The Fund attempts to
mitigate counterparty risk by only entering into agreements with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those
counterparties.
Certain ISDA Master Agreements
allow counterparties of over-the-counter derivatives transactions to terminate derivatives contracts prior to maturity in the event the Fund’s net asset value declines by a stated percentage over a specified
time period or if the Fund fails to meet certain terms of the ISDA Master Agreement, which would cause the Fund to accelerate payment of any net liability owed to the counterparty. The Fund also has termination
rights if the counterparty fails to meet certain terms of the ISDA Master Agreement. In determining whether to exercise such termination rights, the Fund would consider, in addition to counterparty credit risk,
whether termination would result in a net liability owed from the counterparty.
For financial reporting purposes,
the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statement of Assets and Liabilities.
Forward foreign currency exchange
contracts
Forward foreign currency exchange
contracts are over-the-counter agreements between two parties to buy and sell a currency at a set price on a future date. The Fund utilized forward foreign currency exchange contracts to hedge the currency exposure
associated with some or all of the Fund’s securities. These instruments may be used for other purposes in future periods.
| 46 | Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
The values of forward foreign
currency exchange contracts fluctuate daily with changes in foreign currency exchange rates. Changes in the value of these contracts are recorded as unrealized appreciation or depreciation until the contract is
exercised or has expired. The Fund will realize a gain or loss when the forward foreign currency exchange contract is closed or expires. Non-deliverable forward foreign currency exchange contracts are settled with the
counterparty in U.S. dollars without delivery of foreign currency.
The use of forward foreign currency
exchange contracts does not eliminate fluctuations in the prices of the Fund’s portfolio securities. The risks of forward foreign currency exchange contracts include movement in the values of the foreign
currencies relative to the U.S. dollar (or other foreign currencies) and the possibility that counterparties will not complete their contractual obligations, which may be in excess of the amount reflected, if any, in
the Statement of Assets and Liabilities.
Futures contracts
Futures contracts are
exchange-traded and represent commitments for the future purchase or sale of an asset at a specified price on a specified date. The Fund bought and sold futures contracts to manage the duration and yield curve
exposure of the Fund versus the benchmark and to manage exposure to movements in interest rates. These instruments may be used for other purposes in future periods. Upon entering into futures contracts, the Fund bears
risks that it may not achieve the anticipated benefits of the futures contracts and may realize a loss. Additional risks include counterparty credit risk, the possibility of an illiquid market, and that a change in
the value of the contract or option may not correlate with changes in the value of the underlying asset.
Upon entering into a futures
contract, the Fund deposits cash or securities with the broker, known as a futures commission merchant (FCM), in an amount sufficient to meet the initial margin requirement. The initial margin deposit must be
maintained at an established level over the life of the contract. Cash deposited as initial margin is recorded in the Statement of Assets and Liabilities as margin deposits. Securities deposited as initial margin are
designated in the Portfolio of Investments. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily change in the contract value and are
recorded as variation margin receivable or payable and are offset in unrealized gains or losses. The Fund generally expects to earn interest income on its margin deposits. The Fund recognizes a realized gain or loss
when the contract is closed or expires. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities.
Options contracts
Options are contracts which entitle
the holder to purchase or sell securities or other identified assets at a specified price, or in the case of index option contracts, to receive or pay the difference between the index value and the strike price of the
index option contract. Option contracts can be either exchange-traded or over-the-counter. The Fund purchased and has written option contracts to manage exposure to fluctuations in interest rates. These instruments
may be used for other purposes in future periods. Completion of transactions for option contracts traded in the over-the-counter market depends upon the performance of the other party. Collateral may be collected or
posted by the Fund to secure over-the-counter option contract trades. Collateral held or posted by the Fund for such option contract trades must be returned to the broker or the Fund upon closure, exercise or
expiration of the contract.
Options contracts purchased are
recorded as investments. When the Fund writes an options contract, the premium received is recorded as an asset and an amount equivalent to the premium is recorded as a liability in the Statement of Assets and
Liabilities and is subsequently adjusted to reflect the current fair value of the option written. Changes in the fair value of the written option are recorded as unrealized appreciation or depreciation until the
contract is exercised or has expired. The Fund realizes a gain or loss when the option contract is closed or expires. When option contracts are exercised, the proceeds on sales for a written call or purchased put
option contract, or the purchase cost for a written put or purchased call option contract, is adjusted by the amount of premium received or paid.
For over-the-counter options
purchased, the Fund bears the risk of loss of the amount of the premiums paid plus the positive change in market values net of any collateral held by the Fund should the counterparty fail to perform under the
contracts. Option contracts written by the Fund do not typically give rise to significant counterparty credit risk, as options written generally obligate the Fund and not the counterparty to perform. The risk in
writing a call option contract is that the Fund gives up the opportunity for profit if the market price of the security increases above the strike price and the option contract
| Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 | 47 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
is exercised. The risk in writing a put option
contract is that the Fund may incur a loss if the market price of the security decreases below the strike price and the option contract is exercised. Exercise of a written option could result in the Fund purchasing or
selling a security or foreign currency when it otherwise would not, or at a price different from the current market value. In purchasing and writing options, the Fund bears the risk of an unfavorable change in the
value of the underlying instrument or the risk that the Fund may not be able to enter into a closing transaction due to an illiquid market.
Interest rate swaption contracts
Interest rate swaption contracts
entered into by the Fund typically represent an option that gives the purchaser the right, but not the obligation, to enter into an interest rate swap contract on a future date. Each interest rate swaption contract
will specify if the buyer is entitled to receive the fixed or floating rate if the interest rate is exercised. Changes in the value of a purchased interest rate swaption contracts are reported as unrealized
appreciation or depreciation on options in the Statement of Assets and Liabilities. Gain or loss is recognized in the Statement of Operations when the interest rate swaption contract is closed or expires.
When the Fund writes an interest
rate swaption contract, the premium received is recorded as an asset and an amount equivalent to the premium is recorded as a liability in the Statement of Assets and Liabilities and is subsequently adjusted to
reflect the current fair value of the interest rate swaption contract written. Premiums received from writing interest rate swaption contracts that expire unexercised are recorded by the Fund on the expiration date as
realized gains from options written in the Statement of Operations. The difference between the premium and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also recorded
as realized gain, or if the premium is less than the amount paid for the closing purchase, as realized loss. These amounts are reflected as net realized gain (loss) on options written in the Statement of
Operations.
Swap contracts
Swap contracts are negotiated in
the over-the-counter market and may be entered into as a bilateral contract or centrally cleared (centrally cleared swap contract). In a centrally cleared swap contract, immediately following execution of the swap
contract with a broker, the swap contract is novated to a central counterparty (the CCP) and the CCP becomes the Fund’s counterparty to the centrally cleared swap contract. The Fund is required to deposit
initial margin with the futures commission merchant (FCM), which pledges it through to the CCP in the form of cash or securities in an amount that varies depending on the size and risk profile of the particular swap
contract. Securities deposited as initial margin are designated in the Portfolio of Investments and cash deposited is recorded in the Statement of Assets and Liabilities as margin deposits. For a bilateral swap
contract, the Fund has credit exposure to the broker, but exchanges daily variation margin with the broker based on the mark-to-market value of the swap contract to minimize that exposure. For centrally cleared swap
contracts, the Fund has minimal credit exposure to the FCM because the CCP stands between the Fund and the relevant buyer/seller on the other side of the contract. Swap contracts are marked-to-market daily and changes
in value are recorded as unrealized appreciation (depreciation). The daily change in valuation of centrally cleared swap contracts, if any, is recorded as a receivable or payable for variation margin in the Statement
of Assets and Liabilities.
Entering into these contracts
involves, to varying degrees, elements of interest, liquidity and counterparty credit risk in excess of the amounts recognized in the Statement of Assets and Liabilities. Such risks involve the possibility that there
may be unfavorable changes in interest rates, market conditions or other conditions, that it may be difficult to initiate a swap transaction or liquidate a position at an advantageous time or price which may result in
significant losses, and that the FCM or CCP may not fulfill its obligation under the contract.
Credit default swap contracts
The Fund entered into credit
default swap contracts to manage credit risk exposure. These instruments may be used for other purposes in future periods. Credit default swap contracts are transactions in which one party pays fixed periodic payments
to a counterparty in consideration for an agreement from the counterparty to make a specific payment should a specified credit event(s) take place. Although specified credit events are contract specific, credit events
are typically bankruptcy, failure to pay, restructuring, obligation acceleration, obligation default, or repudiation/moratorium.
| 48 | Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
As the purchaser of a credit
default swap contract, the Fund purchases protection by paying a periodic interest rate on the notional amount to the counterparty. The interest amount is accrued daily as a component of unrealized appreciation
(depreciation) and is recorded as a realized loss upon payment. If a credit event as specified in the contract occurs, the Fund may have the option either to deliver the reference obligation to the seller in exchange
for a cash payment of its par amount, or to receive a net cash settlement equal to the par amount less an agreed-upon value of the reference obligation as of the date of the credit event. The difference between the
value of the obligation or cash delivered and the notional amount received will be recorded as a realized gain (loss).
As the seller of a credit default
swap contract, the Fund sells protection to a buyer and will generally receive a periodic interest rate on a notional amount. The interest amount is accrued daily as a component of unrealized appreciation
(depreciation) and is recorded as a realized gain upon receipt of the payment. If a credit event as specified in the contract with the counterparty occurs, the Fund may either be required to accept the reference
obligation from the buyer in exchange for a cash payment of its notional amount, or to pay the buyer a net cash settlement equal to the notional amount less an agreed-upon value of the reference obligation (recovery
value) as of the date of the credit event. The difference between the value of the obligation or cash received and the notional amount paid will be recorded as a realized gain (loss). The maximum potential amount of
undiscounted future payments the Fund could be required to make as the seller of protection under a credit default swap contract is equal to the notional amount of the reference obligation. These potential amounts may
be partially offset by any recovery values of the respective reference obligations or upfront receipts upon entering into the agreement. The notional amounts and market values of all credit default swap contracts in
which the Fund is the seller of protection, if any, are disclosed in the Credit Default Swap Contracts Outstanding schedule following the Portfolio of Investments.
As a protection seller, the Fund
bears the risk of loss from the credit events specified in the contract with the counterparty. For credit default swap contracts on credit indices, quoted market prices and resulting market values serve as an
indicator of the current status of the payment/performance risk. Increasing market values, in absolute terms when compared to the notional amount of the swap, represent a deterioration of the reference entity’s
credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the contract.
Any upfront payment or receipt by
the Fund upon entering into a credit default swap contract is recorded as an asset or liability, respectively, and amortized daily as a component of realized gain (loss) in the Statement of Operations. Credit default
swap contracts are valued daily, and the change in value is recorded as unrealized appreciation (depreciation) until the termination of the swap, at which time a realized gain (loss) is recorded.
Credit default swap contracts can
involve greater risks than if a fund had invested in the reference obligation directly since, in addition to general market risks, credit default swaps are subject to counterparty credit risk, leverage risk, hedging
risk, correlation risk and liquidity risk.
Interest rate and inflation
rate swap contracts
The Fund entered into interest rate
swap transactions and/or inflation rate swap contracts to manage interest rate and market risk exposure to produce incremental earnings. These instruments may be used for other purposes in future periods. An
interest rate swap or inflation rate swap, as applicable, is an agreement between two parties where there are two flows and payments are made between the two counterparties and the payments are dependent upon changes
in an interest rate, inflation rate or inflation index calculated on a nominal amount. Interest rate swaps are agreements between two parties that involve the exchange of one type of interest rate for another type of
interest rate cash flow on specified dates in the future, based on a predetermined, specified notional amount. Certain interest rate swaps are considered forward-starting, whereby the accrual for the exchange of cash
flows does not begin until a specified date in the future. The net cash flow for a standard interest rate swap transaction is generally the difference between a floating market interest rate versus a fixed interest
rate.
Interest rate swaps are valued
daily and unrealized appreciation (depreciation) is recorded. Certain interest rate swaps may accrue periodic interest on a daily basis as a component of unrealized appreciation (depreciation); the Fund will realize a
gain or loss upon the payment or receipt of accrued interest. The Fund will realize a gain or a loss when the interest rate swap is terminated.
| Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 | 49 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Effects of derivative transactions in
the financial statements
The following tables are intended
to provide additional information about the effect of derivatives on the financial statements of the Fund, including: the fair value of derivatives by risk category and the location of those fair values in the
Statement of Assets and Liabilities; and the impact of derivative transactions over the period in the Statement of Operations, including realized and unrealized gains (losses). The derivative instrument schedules
following the Portfolio of Investments present additional information regarding derivative instruments outstanding at the end of the period, if any.
The following table is a summary of
the fair value of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) at December 31, 2021:
| Asset derivatives | ||
| Risk exposure category | Statement of assets and liabilities location | Fair value ($) |
| Credit risk | Component of total distributable earnings (loss) — unrealized appreciation on swap contracts | 11,753,912* |
| Credit risk | Upfront payments on swap contracts | 1,079,736 |
| Foreign exchange risk | Unrealized appreciation on forward foreign currency exchange contracts | 15,943 |
| Interest rate risk | Component of total distributable earnings (loss) — unrealized appreciation on futures contracts | 8,309,976* |
| Interest rate risk | Investments, at value — Options purchased | 12,371,089 |
| Total | 33,530,656 |
| Liability derivatives | ||
| Risk exposure category | Statement of assets and liabilities location | Fair value ($) |
| Credit risk | Component of total distributable earnings (loss) — unrealized depreciation on swap contracts | 116,193* |
| Credit risk | Upfront receipts on swap contracts | 22,349,245 |
| Interest rate risk | Component of total distributable earnings (loss) — unrealized depreciation on futures contracts | 4,179,586* |
| Interest rate risk | Options contracts written, at value | 2,270,228 |
| Total | 28,915,252 |
| * | Includes cumulative appreciation (depreciation) as reported in the tables following the Portfolio of Investments. Only the current day’s variation margin is reported in receivables or payables in the Statement of Assets and Liabilities. |
| 50 | Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
The following table indicates the
effect of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) in the Statement of Operations for the year ended December 31, 2021:
| Amount of realized gain (loss) on derivatives recognized in income | ||||||
| Risk exposure category | Forward foreign currency exchange contracts ($) | Futures contracts ($) | Options contracts written ($) | Options contracts purchased ($) | Swap contracts ($) | Total ($) |
| Credit risk | — | — | — | — | (2,654,312) | (2,654,312) |
| Foreign exchange risk | 332,763 | — | — | — | — | 332,763 |
| Interest rate risk | — | (51,409,846) | 359,210 | 11,464,250 | (21,456,633) | (61,043,019) |
| Total | 332,763 | (51,409,846) | 359,210 | 11,464,250 | (24,110,945) | (63,364,568) |
| Change in unrealized appreciation (depreciation) on derivatives recognized in income | ||||||
| Risk exposure category | Forward foreign currency exchange contracts ($) | Futures contracts ($) | Options contracts written ($) | Options contracts purchased ($) | Swap contracts ($) | Total ($) |
| Credit risk | — | — | — | — | (434,345) | (434,345) |
| Foreign exchange risk | 722,509 | — | — | — | — | 722,509 |
| Interest rate risk | — | 3,889,632 | 4,081,737 | (8,858,453) | — | (887,084) |
| Total | 722,509 | 3,889,632 | 4,081,737 | (8,858,453) | (434,345) | (598,920) |
The following table is a summary
of the average outstanding volume by derivative instrument for the year ended December 31, 2021:
| Derivative instrument | Average notional amounts ($) |
| Futures contracts — long | 1,784,340,820* |
| Futures contracts — short | 29,858,966** |
| Credit default swap contracts — buy protection | 307,383,400* |
| Credit default swap contracts — sell protection | 136,450,000* |
| Derivative instrument | Average value ($)* |
| Options contracts — purchased | 29,802,026 |
| Options contracts — written | (3,928,781) |
| Derivative instrument | Average unrealized appreciation ($)* | Average unrealized depreciation ($)* |
| Forward foreign currency exchange contracts | 219,041 | — |
| Interest rate swap contracts | 615,840 | (3,680,929) |
| * | Based on the ending quarterly outstanding amounts for the year ended December 31, 2021. |
| ** | Based on the ending daily outstanding amounts for the year ended December 31, 2021. |
Investments in senior loans
The Fund may invest in senior loan
assignments. When the Fund purchases an assignment of a senior loan, the Fund typically has direct rights against the borrower; provided, however, that the Fund’s rights may be more limited than the lender from
which it acquired the assignment and the Fund may be able to enforce its rights only through an administrative agent. Although certain senior loan assignments are secured by collateral, the Fund could experience
delays or limitations in realizing such collateral or have its interest subordinated to other indebtedness of the obligor. In the event that the administrator or collateral agent of a loan becomes insolvent or enters
into receivership or bankruptcy, the Fund may incur
| Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 | 51 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
costs and delays in realizing payment or may
suffer a loss of principal and/or interest. The risk of loss is greater for unsecured or subordinated loans. In addition, senior loan assignments are vulnerable to market, economic or other conditions or events that
may reduce the demand for senior loan assignments and certain senior loan assignments which were liquid when purchased, may become illiquid.
The Fund may enter into senior loan
assignments where all or a portion of the loan may be unfunded. The Fund is obligated to fund these commitments at the borrower’s discretion. These commitments, if any, are generally traded and priced in the
same manner as other senior loan securities and are disclosed as unfunded senior loan commitments in the Fund’s Portfolio of Investments with a corresponding payable for investments purchased. The Fund
designates cash or liquid securities to cover these commitments.
Asset- and mortgage-backed
securities
The Fund may invest in asset-backed
and mortgage-backed securities. The maturity dates shown represent the original maturity of the underlying obligation. Actual maturity may vary based upon prepayment activity on these obligations. All, or a portion,
of the obligation may be prepaid at any time because the underlying asset may be prepaid. As a result, decreasing market interest rates could result in an increased level of prepayment. An increased prepayment rate
will have the effect of shortening the maturity of the security. Unless otherwise noted, the coupon rates presented are fixed rates.
Delayed delivery securities
The Fund may trade securities on
other than normal settlement terms, including securities purchased or sold on a “when-issued” or "forward commitment" basis. This may increase risk to the Fund since the other party to the transaction may
fail to deliver, which could cause the Fund to subsequently invest at less advantageous prices. The Fund designates cash or liquid securities in an amount equal to the delayed delivery commitment.
To be announced securities
The Fund may trade securities on a
To Be Announced (TBA) basis. As with other delayed-delivery transactions, a seller agrees to issue a TBA security at a future date. However, the seller does not specify the particular securities to be delivered.
Instead, the Fund agrees to accept any security that meets specified terms.
In some cases, Master Securities
Forward Transaction Agreements (MSFTAs) may be used to govern transactions of certain forward-settling agency mortgage-backed securities, such as delayed-delivery and TBAs, between the Fund and counterparty. The MSFTA
maintains provisions for, among other things, initiation and confirmation, payment and transfer, events of default, termination, and maintenance of collateral relating to such transactions.
Mortgage dollar roll transactions
The Fund may enter into mortgage
“dollar rolls” in which the Fund sells securities for delivery in the current month and simultaneously contracts with the same counterparty to repurchase similar but not identical securities (same type,
coupon and maturity) on a specified future date. During the roll period, the Fund loses the right to receive principal and interest paid on the securities sold. However, the Fund may benefit because it receives
negotiated amounts in the form of reductions of the purchase price for the future purchase plus the interest earned on the cash proceeds of the securities sold until the settlement date of the forward purchase. The
Fund records the incremental difference between the forward purchase and sale of each forward roll as a realized gain or loss. Unless any realized gains exceed the income, capital appreciation, and gain or loss due to
mortgage prepayments that would have been realized on the securities sold as part of the mortgage dollar roll, the use of this technique may diminish the investment performance of the Fund compared to what the
performance would have been without the use of mortgage dollar rolls. All cash proceeds will be invested in instruments that are permissible investments for the Fund. The Fund identifies cash or liquid securities in
an amount equal to the forward purchase price.
For financial reporting and tax
purposes, the Fund treats “to be announced” mortgage dollar rolls as two separate transactions, one involving the purchase of a security and a separate transaction involving a sale. These transactions may
increase the Fund’s portfolio turnover rate. The Fund does not currently enter into mortgage dollar rolls that are accounted for as financing transactions.
| 52 | Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Mortgage dollar rolls involve the
risk that the market value of the securities the Fund is obligated to repurchase may decline below the repurchase price, or that the counterparty may default on its obligations.
Interest only and principal only
securities
The Fund may invest in Interest
Only (IO) or Principal Only (PO) securities. IOs are stripped securities entitled to receive all of the security’s interest, but none of its principal. IOs are particularly sensitive to changes in interest rates
and therefore subject to greater fluctuations in price than typical interest bearing debt securities. IOs are also subject to credit risk because the Fund may not receive all or part of the interest payments if the
issuer, obligor, guarantor or counterparty defaults on its obligation. Payments received for IOs are included in interest income on the Statement of Operations. Because no principal will be received at the maturity of
an IO, adjustments are made to the cost of the security on a monthly basis until maturity. These adjustments are included in interest income on the Statement of Operations. POs are stripped securities entitled to
receive the principal from the underlying obligation, but not the interest. POs are particularly sensitive to changes in interest rates and therefore are subject to fluctuations in price. POs are also subject to
credit risk because the Fund may not receive all or part of its principal if the issuer, obligor, guarantor or counterparty defaults on its obligation. The Fund may also invest in IO or PO stripped mortgage-backed
securities. Payments received for POs are treated as reductions to the cost and par value of the securities.
Offsetting of assets and
liabilities
The following table presents the
Fund’s gross and net amount of assets and liabilities available for offset under netting arrangements as well as any related collateral received or pledged by the Fund as of December 31, 2021:
| Citi ($)(a) | Citi ($)(a) | Goldman Sachs International ($) | JPMorgan ($) | Morgan Stanley ($)(a) | Morgan Stanley ($)(a) | UBS ($) | Total ($) | ||
| Assets | |||||||||
| Forward foreign currency exchange contracts | - | - | - | - | - | - | 15,943 | 15,943 | |
| Options purchased calls | - | 196,928 | - | - | 14,623 | - | - | 211,551 | |
| Options purchased puts | - | 3,382,426 | - | - | 8,777,112 | - | - | 12,159,538 | |
| OTC credit default swap contracts (b) | 1,218,976 | - | 64,336 | 6,059,515 | 5,490,821 | - | - | 12,833,648 | |
| Total assets | 1,218,976 | 3,579,354 | 64,336 | 6,059,515 | 14,282,556 | - | 15,943 | 25,220,680 | |
| Liabilities | |||||||||
| Centrally cleared credit default swap contracts (c) | - | - | - | - | - | 85,473 | - | 85,473 | |
| Options contracts written | - | 1,659,223 | - | - | 611,005 | - | - | 2,270,228 | |
| OTC credit default swap contracts (b) | 2,016,695 | - | 1,347,836 | 8,665,461 | 10,353,299 | - | - | 22,383,291 | |
| Total liabilities | 2,016,695 | 1,659,223 | 1,347,836 | 8,665,461 | 10,964,304 | 85,473 | - | 24,738,992 | |
| Total financial and derivative net assets | (797,719) | 1,920,131 | (1,283,500) | (2,605,946) | 3,318,252 | (85,473) | 15,943 | 481,688 | |
| Total collateral received (pledged) (d) | (787,000) | 1,920,131 | (1,283,500) | (2,605,946) | 3,318,252 | - | - | 561,937 | |
| Net amount (e) | (10,719) | - | - | - | - | (85,473) | 15,943 | (80,249) |
| (a) | Exposure can only be netted across transactions governed under the same master agreement with the same legal entity. |
| (b) | Over-the-Counter (OTC) swap contracts are presented at market value plus periodic payments receivable (payable), which is comprised of unrealized appreciation, unrealized depreciation, upfront payments and upfront receipts. |
| (c) | Centrally cleared swaps are included within payable/receivable for variation margin on the Statement of Assets and Liabilities. |
| (d) | In some instances, the actual collateral received and/or pledged may be more than the amount shown due to overcollateralization. |
| (e) | Represents the net amount due from/(to) counterparties in the event of default. |
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
The trade date for senior loans
purchased in the primary market is the date on which the loan is allocated. The trade date for senior loans purchased in the secondary market is the date on which the transaction is entered into.
| Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 | 53 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Income recognition
Interest income is recorded on an
accrual basis. Market premiums and discounts, including original issue discounts, are amortized and accreted, respectively, over the expected life of the security on all debt securities, unless otherwise noted. The
Fund classifies gains and losses realized on prepayments received on mortgage-backed securities as adjustments to interest income. For convertible securities, premiums attributable to the conversion feature are
not amortized.
The Fund may place a debt security
on non-accrual status and reduce related interest income when it becomes probable that the interest will not be collected and the amount of uncollectible interest can be reasonably estimated. A defaulted debt security
is removed from non-accrual status when the issuer resumes interest payments or when collectability of interest is reasonably assured.
Dividend income is recorded on the
ex-dividend date.
The value of additional securities
received as an income payment through a payment in kind, if any, is recorded as interest income and increases the cost basis of such securities.
The Fund may receive other income
from senior loans, including amendment fees, consent fees and commitment fees. These fees are recorded as income when received by the Fund. These amounts are included in Interest Income in the Statement of
Operations.
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
Federal income tax status
The Fund intends to qualify each
year as a regulated investment company under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its investment company taxable income and net capital gain, if any, for its
tax year, and as such will not be subject to federal income taxes. In addition, because the Fund meets the exception under Internal Revenue Code Section 4982(f), the Fund expects not to be subject to federal excise
tax. Therefore, no federal income or excise tax provision is recorded.
Foreign taxes
The Fund may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries, as applicable, based upon its current interpretation of tax rules
and regulations that exist in the markets in which it invests.
Realized gains in certain countries
may be subject to foreign taxes at the Fund level, based on statutory rates. The Fund accrues for such foreign taxes on realized and unrealized gains at the appropriate rate for each jurisdiction, as applicable. The
amount, if any, is disclosed as a liability on the Statement of Assets and Liabilities.
Distributions to subaccounts
Distributions to the subaccounts of
Contracts, Qualified Plans and Qualified Investors are recorded at the close of business on the record date and are payable on the first business day following the record date. Dividends from net investment income, if
any, are declared and distributed annually. Capital gain distributions, when available, will be made annually. However, an additional capital gain distribution may be made during the fiscal year in order to comply
with the Internal Revenue Code, as applicable to registered investment companies. Income distributions and capital gain distributions are
| 54 | Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
determined in accordance with federal income tax
regulations, which may differ from GAAP. All dividends and distributions are reinvested in additional shares of the applicable share class of the Fund at the net asset value as of the ex-dividend date of the
distribution.
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Under the Management Agreement, the
Investment Manager provides the Fund with investment research and advice, as well as administrative and accounting services. The management services fee is an annual fee that is equal to a percentage of the
Fund’s daily net assets that declines from 0.50% to 0.34% as the Fund’s net assets increase. The effective management services fee rate for the year ended December 31, 2021 was 0.47% of the Fund’s
average daily net assets.
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. Under a Deferred Compensation Plan (the
Deferred Plan), these members of the Board of Trustees may elect to defer payment of up to 100% of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of
certain funds managed by the Investment Manager. The Fund’s liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Deferred Plan. All
amounts payable under the Deferred Plan constitute a general unsecured obligation of the Fund. The expense for the Deferred Plan, which includes Trustees’ fees deferred during the current period as well as any
gains or losses on the Trustees’ deferred compensation balances as a result of market fluctuations, is included in "Compensation of board members" on the Statement of Operations.
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
Service fees
The Fund has entered into a
Shareholder Services Agreement with Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial. Under this
agreement, the Fund pays a service fee equal to the payments made by the Transfer Agent to Participating Insurance Companies and other financial intermediaries (together, Participating Organizations) for services each
such Participating Organization provides to its clients, customers and participants that are invested directly or indirectly in the Fund, up to a cap approved by the Board of Trustees from time to time. The effective
service fee rate for the year ended December 31, 2021, was 0.01% of the Fund’s average daily net assets.
The Transfer Agent may retain as
compensation for its services revenues from fees for wire, telephone and redemption orders, account transcripts due the Transfer Agent from Fund shareholders and interest (net of bank charges) earned with respect to
balances in accounts the Transfer Agent maintains in connection with its services to the Fund.
| Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 | 55 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Distribution and/or service fees
The Fund has an agreement with the
Distributor, an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution services. Under a Plan and Agreement of Distribution, the Fund pays a fee at an annual rate
of up to 0.25% of the Fund’s average daily net assets attributable to Class 2 shares and an annual rate of up to 0.125% of the Fund’s average daily net assets attributable to Class 3 shares. The Fund pays
no distribution and service fees for Class 1 shares.
Expenses waived/reimbursed by the
Investment Manager and its affiliates
The Investment Manager and certain
of its affiliates have contractually agreed to waive fees and/or reimburse expenses (excluding certain fees and expenses described below) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, so that the Fund’s net operating expenses, after giving effect to fees waived/expenses reimbursed and any balance credits and/or overdraft charges from the Fund’s
custodian, do not exceed the following annual rate(s) as a percentage of the classes’ average daily net assets:
| Contractual expense cap July 1, 2021 through April 30, 2022 | Voluntary expense cap May 1, 2021 through June 30, 2021 | Contractual expense cap prior to May 1, 2021 | |
| Class 1 | 0.55% | 0.55% | 0.55% |
| Class 2 | 0.80 | 0.80 | 0.80 |
| Class 3 | 0.675 | 0.675 | 0.675 |
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), expenses associated with investments in affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange-traded funds), transaction costs and
brokerage commissions, costs related to any securities lending program, dividend expenses associated with securities sold short, inverse floater program fees and expenses, transaction charges and interest on borrowed
money, interest, costs associated with certain shareholder meetings, infrequent and/or unusual expenses and any other expenses the exclusion of which is specifically approved by the Board of Trustees. This
agreement may be modified or amended only with approval from the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements
described above are not recoverable by the Investment Manager or its affiliates in future periods.
Note 4. Federal tax
information
The timing and character of
income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP because of temporary or permanent book to tax differences.
At December 31, 2021, these
differences were primarily due to differing treatment for deferral/reversal of wash sale losses, trustees’ deferred compensation, derivative investments, tax straddles, swap investments, principal and/or
interest of fixed income securities, distribution reclassifications, investments in partnerships and foreign currency transactions. To the extent these differences were permanent, reclassifications were made among the
components of the Fund’s net assets. Temporary differences do not require reclassifications.
The following reclassifications
were made:
| Undistributed net investment income ($) | Accumulated net realized (loss) ($) | Paid in capital ($) |
| (7,291,311) | 7,291,311 | — |
Net investment income (loss) and
net realized gains (losses), as disclosed in the Statement of Operations, and net assets were not affected by this reclassification.
| 56 | Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
The tax character of distributions
paid during the years indicated was as follows:
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | ||||
| Ordinary income ($) | Long-term capital gains ($) | Total ($) | Ordinary income ($) | Long-term capital gains ($) | Total ($) |
| 349,608,790 | 128,072,952 | 477,681,742 | 161,296,453 | 24,204,426 | 185,500,879 |
Short-term capital gain
distributions, if any, are considered ordinary income distributions for tax purposes.
At December 31, 2021, the
components of distributable earnings on a tax basis were as follows:
| Undistributed ordinary income ($) | Undistributed long-term capital gains ($) | Capital loss carryforwards ($) | Net unrealized appreciation ($) |
| 115,533,300 | 2,329,083 | — | 56,681,438 |
At December 31, 2021, the cost of
all investments for federal income tax purposes along with the aggregate gross unrealized appreciation and depreciation based on that cost was:
| Federal tax cost ($) | Gross unrealized appreciation ($) | Gross unrealized (depreciation) ($) | Net unrealized appreciation ($) |
| 4,663,756,188 | 109,315,403 | (52,633,965) | 56,681,438 |
Tax cost of investments and
unrealized appreciation/(depreciation) may also include timing differences that do not constitute adjustments to tax basis.
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Note 5. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $10,034,364,357 and $10,743,165,859, respectively, for the year ended December 31, 2021, of which
$7,652,752,481 and $8,131,637,471, respectively, were U.S. government securities. The amount of purchase and sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 6. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes
referred to as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
Note 7. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
| Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 | 57 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund did not borrow or lend
money under the Interfund Program during the year ended December 31, 2021.
Note 8. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to an October 28, 2021 amendment and restatement, the credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment
Manager or an affiliated investment manager, severally and not jointly, permits collective borrowings up to $950 million. Interest is currently charged to each participating fund based on its borrowings at a rate
equal to the higher of (i) the federal funds effective rate, (ii) the secured overnight financing rate plus 0.11448% and (iii) the overnight bank funding rate, plus in each case, 1.00%. Each borrowing under the credit
facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The
commitment fee is included in other expenses in the Statement of Operations. This agreement expires annually in October unless extended or renewed. Prior to the October 28, 2021 amendment and restatement, the Fund had
access to a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. which permitted collective borrowings up to $950 million. Interest was
charged to each participating fund based on its borrowings at a rate equal to the higher of (i) the federal funds effective rate, (ii) the one-month London Interbank Offered Rate (LIBOR) rate and (iii) the overnight
bank funding rate, plus in each case, 1.25%.
The Fund had no borrowings during
the year ended December 31, 2021.
Note 9. Significant
risks
Credit risk
Credit risk is the risk that the
value of debt instruments in the Fund’s portfolio may decline because the issuer defaults or otherwise becomes unable or unwilling, or is perceived to be unable or unwilling, to honor its financial obligations,
such as making payments to the Fund when due. Credit rating agencies assign credit ratings to certain debt instruments to indicate their credit risk. Lower-rated or unrated debt instruments held by the Fund may
present increased credit risk as compared to higher-rated debt instruments.
Derivatives risk
Losses involving derivative
instruments may be substantial, because a relatively small movement in the underlying reference (which is generally the price, rate or other economic indicator associated with a security(ies), commodity, currency or
index or other instrument or asset) may result in a substantial loss for the Fund. In addition to the potential for increased losses, the use of derivative instruments may lead to increased volatility within the Fund.
Derivatives will typically increase the Fund’s exposure to principal risks to which it is otherwise exposed, and may expose the Fund to additional risks, including correlation risk, counterparty risk, hedging
risk, leverage risk, liquidity risk and pricing risk.
High-yield investments risk
Securities and other debt
instruments held by the Fund that are rated below investment grade (commonly called "high-yield" or "junk" bonds) and unrated debt instruments of comparable quality expose the Fund to a greater risk of loss of
principal and income than a fund that invests solely or primarily in investment grade debt instruments. In addition, these investments have greater price fluctuations, are less liquid and are more likely to experience
a default than higher-rated debt instruments. High-yield debt instruments are considered to be predominantly speculative with respect to the issuer’s capacity to pay interest and repay principal.
| 58 | Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Interest rate risk
Interest rate risk is the risk of
losses attributable to changes in interest rates. In general, if prevailing interest rates rise, the values of debt instruments tend to fall, and if interest rates fall, the values of debt instruments tend to rise.
Actions by governments and central banking authorities can result in increases or decreases in interest rates. Higher periods of inflation could lead such authorities to raise interest rates. Increasing interest rates
may negatively affect the value of debt securities held by the Fund, resulting in a negative impact on the Fund’s performance and net asset value per share. In general, the longer the maturity or duration of a
debt security, the greater its sensitivity to changes in interest rates. The Fund is subject to the risk that the income generated by its investments may not keep pace with inflation.
LIBOR replacement risk
The elimination of London
Inter-Bank Offered Rate (LIBOR), among other "inter-bank offered" reference rates, may adversely affect the interest rates on, and value of, certain Fund investments for which the value is tied to LIBOR. The U.K.
Financial Conduct Authority and the ICE Benchmark Administration have announced that most LIBOR settings will no longer be published after December 31, 2021 and a majority of U.S. dollar LIBOR settings will cease
publication after June 30, 2023. It is possible that a subset of LIBOR settings will be published after these dates on a “synthetic” basis, but any such publications would be considered non-representative
of the underlying market. Markets are slowly developing in response to these new reference rates. Uncertainty related to the liquidity impact of the change in rates, and how to appropriately adjust these rates at the
time of transition, poses risks for the Fund. These risks are likely to persist until new reference rates and fallbacks for both legacy and new instruments and contracts are commercially accepted and market practices
become settled. Alternatives to LIBOR have been established or are in development in most major currencies, including the Secured Overnight Financing Rate (SOFR) that is intended to replace U.S. dollar LIBOR.
Liquidity risk
Liquidity risk is the risk
associated with a lack of marketability of investments which may make it difficult to sell the investment at a desirable time or price. Changing regulatory, market or other conditions or environments (for example, the
interest rate or credit environments) may adversely affect the liquidity of the Fund’s investments. The Fund may have to accept a lower selling price for the holding, sell other investments, or forego another,
more appealing investment opportunity. Generally, the less liquid the market at the time the Fund sells a portfolio investment, the greater the risk of loss or decline of value to the Fund. A less liquid market can
lead to an increase in Fund redemptions, which may negatively impact Fund performance and net asset value per share, including, for example, if the Fund is forced to sell securities in a down market.
Market risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
The coronavirus disease 2019 and
its variants (COVID-19) pandemic has resulted in, and may continue to result in, significant global economic and societal disruption and market volatility due to disruptions in market access, resource availability,
facilities operations, imposition of tariffs, export controls and supply chain disruption, among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement
and loss in human and other resources. The uncertainty surrounding the magnitude, duration, reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental
authorities or other third parties, present unknowns that are yet to unfold. The impacts, as well as the uncertainty over impacts to come, of COVID-19 – and any other
| Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 | 59 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
infectious illness outbreaks, epidemics and
pandemics that may arise in the future – could negatively affect global economies and markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in
emerging market countries may be greater due to generally less established healthcare systems, governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing
political, social and economic risks in certain countries or globally. The disruptions caused by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively
impact the Fund’s ability to achieve its investment objectives. Any such event(s) could have a significant adverse impact on the value and risk profile of the Fund.
Mortgage- and other asset-backed
securities risk
The value of any mortgage-backed
and other asset-backed securities including collateralized debt obligations, if any, held by the Fund may be affected by, among other things, changes or perceived changes in: interest rates; factors concerning the
interests in and structure of the issuer or the originator of the mortgages or other assets; the creditworthiness of the entities that provide any supporting letters of credit, surety bonds or other credit enhancements;
or the market’s assessment of the quality of underlying assets. Payment of principal and interest on some mortgage-backed securities (but not the market value of the securities themselves) may be guaranteed by
the full faith and credit of a particular U.S. Government agency, authority, enterprise or instrumentality, and some, but not all, are also insured or guaranteed by the U.S. Government. Mortgage-backed securities
issued by non-governmental issuers (such as commercial banks, savings and loan institutions, private mortgage insurance companies, mortgage bankers and other secondary market issuers) may entail greater risk than
obligations guaranteed by the U.S. Government. Mortgage- and other asset-backed securities are subject to liquidity risk and prepayment risk. A decline or flattening of housing values may cause delinquencies in
mortgages (especially sub-prime or non-prime mortgages) underlying mortgage-backed securities and thereby adversely affect the ability of the mortgage-backed securities issuer to make principal and/or interest
payments to mortgage-backed securities holders, including the Fund. Rising or high interest rates tend to extend the duration of mortgage- and other asset-backed securities, making their prices more volatile and more
sensitive to changes in interest rates.
Shareholder concentration risk
At December 31, 2021, affiliated
shareholders of record owned 100.0% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of
less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Note 10. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
Note 11. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in
connection with the conduct of their business activities. Ameriprise Financial believes that the Fund is not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject
of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with
the Fund. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (SEC) on legal and regulatory matters that relate to
Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that
these matters, or the adverse publicity associated with them, will not result in increased Fund redemptions, reduced sale of Fund shares or other adverse consequences to the Fund. Further, although we believe
proceedings are not likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund, these proceedings are subject to
uncertainties and, as such, we are unable to
| 60 | Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
estimate the possible loss or range of loss that
may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines, penalties or other relief that could have a material adverse effect on the consolidated
financial condition or results of operations of Ameriprise Financial or one or more of its affiliates that provides services to the Fund.
| Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 | 61 |
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees of Columbia
Funds Variable Series Trust II and Shareholders of Columbia Variable Portfolio – Intermediate Bond Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of Columbia Variable Portfolio – Intermediate Bond Fund (one of the funds constituting Columbia Funds Variable Series Trust II,
referred to hereafter as the "Fund") as of December 31, 2021, the related statement of operations for the year ended December 31, 2021, the statement of changes in net assets for each of the two years in the period
ended December 31, 2021, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2021 (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, 2021, 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, 2021 and the financial highlights for each of the five years in the period ended December 31, 2021 in conformity with accounting principles generally
accepted in the United States of America.
Basis for Opinion
These financial statements are the
responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these
financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2021 by correspondence with the custodian, transfer agent, brokers and agent banks;
when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Minneapolis, Minnesota
February 22, 2022
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| 62 | Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 |
Federal Income Tax
Information
(Unaudited)
The Fund hereby designates the
following tax attributes for the fiscal year ended December 31, 2021.
| Capital gain dividend | |
| $3,024,865 |
Capital gain dividend. The Fund
designates as a capital gain dividend the amount reflected above, or if subsequently determined to be different, the net capital gain of such fiscal period.
TRUSTEES AND
OFFICERS
The Board oversees the Fund’s
operations and appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following table provides basic biographical information about the Fund’s Trustees as
of the printing of this report, including their principal occupations during the past five years, although specific titles for individuals may have varied over the period. The year set forth beneath Length of Service
in the table below is the year in which the Trustee was first appointed or elected as Trustee to any Fund currently in the Columbia Funds Complex or a predecessor thereof. Under current Board policy, each Trustee
generally serves until December 31 of the year such Trustee turns seventy-five (75).
Independent trustees
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| George S. Batejan c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1953 | Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 176 | Former Chairman of the Board, NICSA (National Investment Company Services Association) (Executive Committee, Nominating Committee and Governance Committee), 2014-2016; former Director, Intech Investment Management, 2011-2016; former Board Member, Metro Denver Chamber of Commerce, 2015-2016; former Advisory Board Member, University of Colorado Business School, 2015-2018 |
| Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 | 63 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Kathleen Blatz c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2006 | Attorney, specializing in arbitration and mediation; Chief Justice, Minnesota Supreme Court, 1998-2006; Associate Justice, Minnesota Supreme Court, 1996-1998; Fourth Judicial District Court Judge, Hennepin County, 1994-1996; Attorney in private practice and public service, 1984-1993; State Representative, Minnesota House of Representatives, 1979-1993, which included service on the Tax and Financial Institutions and Insurance Committees; Member and Interim Chair, Minnesota Sports Facilities Authority, January 2017-July 2017; Interim President and Chief Executive Officer, Blue Cross Blue Shield of Minnesota (health care insurance), February-July 2018, April-October 2021 | 176 | Former Trustee, Blue Cross Blue Shield of Minnesota, 2009-2021 (Chair of the Business Development Committee, 2014-2017; Chair of the Governance Committee, 2017-2019); former Member and Chair of the Board, Minnesota Sports Facilities Authority, January 2017-July 2017; former Director, Robina Foundation, 2009-2020 (Chair, 2014-2020); Director, Schulze Family Foundation, since 2021 |
| Pamela G. Carlton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2007 | President, Springboard — Partners in Cross Cultural Leadership (consulting company) since 2003; Managing Director of US Equity Research, JP Morgan Chase, 1999-2003; Director of US Equity Research, Chase Asset Management, 1996-1999; Co-Director Latin America Research, 1993-1996, COO Global Research, 1992-1996, Co-Director of US Research, 1991-1992, Investment Banker, Morgan Stanley, 1982-1991, Morgan Stanley; Attorney, Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 176 | Trustee, New York Presbyterian Hospital Board (Executive Committee and Chair of People Committee) since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee); Director, Apollo Commercial Real Estate Finance, Inc. since 2021; the Governing Council of the Independent Directors Council (IDC), since 2021 |
| Janet Langford Carrig c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1957 | Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 174 | Director, EQT Corporation (natural gas producer) since 2019; Director, Whiting Petroleum Corporation (independent oil and gas company) since 2020 |
| J. Kevin Connaughton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2020 | Member, FINRA National Adjudicatory Council since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Consultant to Independent Trustees of CFVIT and CFST I from March 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Managing Director and General Manager of Mutual Fund Products, Columbia Management Investment Advisers, LLC, May 2010-February 2015; President, Columbia Funds, 2008-2015; and senior officer of Columbia Funds and affiliated funds, 2003-2015 | 174 | Former Director, The Autism Project, March 2015-December 2021; former Member of the Investment Committee, St. Michael’s College, November 2015-February 2020; former Trustee, St. Michael’s College, June 2017-September 2019; former Trustee, New Century Portfolios, January 2015-December 2017 |
| 64 | Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Olive M. Darragh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since 2020 | Managing Director of Darragh Inc. (strategy and talent management consulting firm) since 2010; Founder and CEO, Zolio, Inc. (investment management talent identification platform) since 2004; Consultant to Independent Trustees of CFVIT and CFST I from June 2019 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 2001-2004 | 174 | Former Director, University of Edinburgh Business School (Member of US Board); former Director, Boston Public Library Foundation |
| Patricia M. Flynn c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1950 | Trustee since 2004 | Trustee Professor of Economics and Management, Bentley University since 1976 (also teaches and conducts research on corporate governance); Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 176 | Trustee, MA Taxpayers Foundation since 1997; Board of Governors, Innovation Institute, MA Technology Collaborative, 2010-2020; former Board of Directors, The MA Business Roundtable, 2003-2019 |
| Brian J. Gallagher c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 176 | Trustee, Catholic Schools Foundation since 2004 |
| Douglas A. Hacker c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1955 | Co-Chair since 2021; Chair of CFST I and CFVIT since 2014; Trustee of CFST I and CFVIT since 1996 and CFST, CFST II, CFVST II, CET I and CET II since 2021 | Independent business executive since May 2006; Executive Vice President – Strategy of United Airlines, December 2002 - May 2006; President of UAL Loyalty Services (airline marketing company), September 2001-December 2002; Executive Vice President and Chief Financial Officer of United Airlines, July 1999-September 2001 | 176 | Director, Spartan Nash Company (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing); former Director, Nash Finch Company (food distributor), 2005-2013; former Director, SeaCube Container Leasing Ltd. (container leasing), 2010-2013; and former Director, Travelport Worldwide Limited (travel information technology), 2014-2019 |
| Nancy T. Lukitsh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1956 | Trustee since 2011 | Senior Vice President, Partner and Director of Marketing, Wellington Management Company, LLP (investment adviser), 1997-2010; Chair, Wellington Management Portfolios (commingled non-U.S. investment pools), 2007 -2010; Director, Wellington Trust Company, NA and other Wellington affiliates, 1997-2010 | 174 | None |
| Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 | 65 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| David M. Moffett c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2011 | Retired; Consultant to Bridgewater and Associates | 174 | Director, CSX Corporation (transportation suppliers); Director, Genworth Financial, Inc. (financial and insurance products and services); Director, PayPal Holdings Inc. (payment and data processing services); Trustee, University of Oklahoma Foundation; former Director, eBay Inc. (online trading community), 2007-2015; and former Director, CIT Bank, CIT Group Inc. (commercial and consumer finance), 2010-2016 |
| Catherine James Paglia c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Co-Chair since 2021; Chair of CFST, CFST II, CFVST II, CET I and CET II since 2020; Trustee of CFST, CFST II and CFVST II since 2004 and CFST I and CFVIT since 2021 | Director, Enterprise Asset Management, Inc. (private real estate and asset management company) since September 1998; Managing Director and Partner, Interlaken Capital, Inc., 1989-1997; Vice President, 1982-1985, Principal, 1985-1987, Managing Director, 1987-1989, Morgan Stanley; Vice President, Investment Banking, 1980-1982, Associate, Investment Banking, 1976-1980, Dean Witter Reynolds, Inc. | 176 | Director, Valmont Industries, Inc. (irrigation systems manufacturer) since 2012; Trustee, Carleton College (on the Investment Committee); Trustee, Carnegie Endowment for International Peace (on the Investment Committee) |
| Minor M. Shaw c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1947 | Trustee since 2003 | President, Micco LLC (private investments) since 2011; President, Micco Corp. (family investment business), 1998-2011 | 176 | Director, Blue Cross Blue Shield of South Carolina (Chair of Compensation Committee) since April 2008; Trustee, Hollingsworth Funds (on the Investment Committee) since 2016 (previously Board Chair from 2016-2019); Former Advisory Board member, Duke Energy Corp., 2016-2020; Chair of the Duke Endowment; Chair of Greenville – Spartanburg Airport Commission; former Trustee, BofA Funds Series Trust (11 funds), 2003-2011; former Director, Piedmont Natural Gas, 2004-2016; former Director, National Association of Corporate Directors, Carolinas Chapter, 2013-2018; Chair, Daniel-Mickel Foundation since 1998 |
| 66 | Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Natalie A. Trunow c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1967 | Trustee since 2020 | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services), January 2016-January 2021; Non-executive Member of the Investment Committee and Valuation Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services), August 2018-January 2021; Advisor, Paradigm Asset Management, November 2016-December 2021; Consultant to Independent Trustees of CFVIT and CFST I from September 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Director of Investments/Consultant, Casey Family Programs, April 2016-November 2016; Senior Vice President and Chief Investment Officer, Calvert Investments, August 2008-January 2016; Section Head and Portfolio Manager, General Motors Asset Management, June 1997-August 2008 | 174 | Former Director, Investment Committee, Health Services for Children with Special Needs, Inc., 2012-2019; Director, Chair of Audit Committee, Consumer Credit Counseling Services (formerly Guidewell Financial Solutions), since 2019; Independent Director, Investment Committee and Valuation Committee, Sarona Asset Management, since 2019 |
| Sandra Yeager c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2017 | Retired; President and founder, Hanoverian Capital, LLC (SEC registered investment advisor firm), 2008-2016; Managing Director, DuPont Capital, 2006-2008; Managing Director, Morgan Stanley Investment Management, 2004-2006; Senior Vice President, Alliance Bernstein, 1990-2004 | 176 | Former Director, NAPE Education Foundation, October 2016-October 2020 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Fund Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I (CET I), Columbia ETF Trust II (CET II), Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Beckman, Gallagher and Hacker and Mses. Blatz, Carlton, Flynn, Paglia, Shaw and Yeager serve as Directors of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
Interested trustee affiliated with
Investment Manager*
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during the past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex overseen | Other directorships held by Trustee during the past five years |
| Daniel J. Beckman c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since November 2021(a) | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC (since April 2015); officer of Columbia Funds and affiliated funds since 2020. | 176 | Director, Ameriprise Trust Company, since October 2016; Director, Columbia Management Investment Distributors, Inc. since November 2018; Board of Governors, Columbia Wanger Asset Management, LLC since January 2022 |
| * | Interested person (as defined under the 1940 Act) by reason of being an officer, director, security holder and/or employee of the Investment Manager or Ameriprise Financial. |
| (a) | Mr. Beckman serves as the President and Principal Executive Officer of the Columbia Funds (since 2021). |
The Statement of Additional
Information has additional information about the Fund’s Board members and is available, without charge, upon request by calling 800.345.6611 or contacting your financial intermediary.
| Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 | 67 |
TRUSTEES AND OFFICERS (continued)
The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. The following table provides basic information about the Officers of the Fund, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Beckman, who is President and Principal Executive Officer, the Fund’s other officers are:
The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. The following table provides basic information about the Officers of the Fund, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Beckman, who is President and Principal Executive Officer, the Fund’s other officers are:
Fund officers
| 68 | Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Fund officers (continued)
Fund officers (continued)
| Name, address and year of birth | Position and year first appointed to position for any Fund in the Columbia Funds Complex or a predecessor thereof | Principal occupation(s) during past five years |
| Lyn Kephart-Strong 5228 Ameriprise Financial Center Minneapolis, MN 55474 1960 | Vice President (2015) | President, Columbia Management Investment Services Corp. since October 2014; Vice President & Resolution Officer, Ameriprise Trust Company since August 2009. |
| Columbia Variable Portfolio – Intermediate Bond Fund | Annual Report 2021 | 69 |
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For Fund and other investment product prospectuses, which contain this and other important information, contact your
financial advisor or insurance representative. Please read the prospectus carefully before you invest. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved. Columbia Management Investment Distributors, Inc., 290 Congress Street, Boston, MA 02210
© 2022 Columbia Management Investment
Advisers, LLC.
C-2055 AW (2/22)
CTIVP® –
BlackRock Global Inflation-Protected Securities Fund
Please remember that you may not
buy (nor will you own) shares of the Fund directly. The Fund is available through variable annuity contracts and variable life insurance policies offered by the separate accounts of participating insurance companies
as well as qualified pension and retirement plans. Please contact your financial advisor or insurance representative for more information.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
| 3 | |
| 6 | |
| 8 | |
| 9 | |
| 31 | |
| 32 | |
| 33 | |
| 34 | |
| 36 | |
| 52 | |
| 53 | |
| 53 |
Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which CTIVP® – BlackRock Global Inflation-Protected Securities Fund (the Fund) holds investments consistent with the procedures as stated in the Statement of
Additional Information (SAI). You may obtain a copy of the SAI without charge by calling 800.345.6611; contacting your financial intermediary or searching the website of the Securities and Exchange Commission (SEC) at
sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available
without charge by visiting columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. The Fund’s Form N-PORT is available on the SEC’s website at sec.gov. The Fund’s complete
schedule of portfolio holdings, as filed on Form N-PORT, can also be obtained without charge, upon request, by calling 800.345.6611.
Additional Fund information
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
290 Congress Street
Boston, MA 02210
Fund distributor
Columbia Management Investment Distributors,
Inc.
290 Congress Street
Boston, MA 02210
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
CTIVP® – BlackRock Global
Inflation-Protected Securities Fund | Annual Report 2021
Fund at a Glance
Investment objective
The Fund
seeks to provide shareholders with total return that exceeds the rate of inflation over the long term.
Portfolio management
BlackRock Financial Management, Inc. (subadviser)
Akiva Dickstein
Emanuella Enenajor
BlackRock International Limited (sub-subadviser)
Christopher Allen, CFA
| CTIVP® – BlackRock Global Inflation-Protected Securities Fund | Annual Report 2021 | 3 |
Fund at a Glance (continued)
Performance of a hypothetical $10,000 investment (December 31, 2011 — December 31, 2021)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class 2 shares of CTIVP® – Blackrock Global Inflation-Protected Securities Fund during the stated time period, and does not reflect the deduction of taxes,
if any, that a shareholder may pay on Fund distributions or on the redemption of Fund shares. The returns also do not reflect fees and expenses imposed under your variable annuity contract and/or variable life
insurance policy or qualified pension or retirement plan, if any.
| Quality breakdown (%) (at December 31, 2021) | |
| AAA rating | 55.7 |
| AA rating | 32.2 |
| A rating | 3.7 |
| BBB rating | 8.2 |
| BB rating | 0.2 |
| Total | 100.0 |
Percentages indicated are based
upon total fixed income investments.
Bond ratings apply to the underlying
holdings of the Fund and not the Fund itself and are divided into categories ranging from highest to lowest credit quality, determined by using the middle rating of Moody’s, S&P and Fitch, after dropping the
highest and lowest available ratings. When ratings are available from only two rating agencies, the lower rating is used. When a rating is available from only one rating agency, that rating is used. If a security is
not rated but has a rating by Kroll and/or DBRS, the same methodology is applied to those bonds that would otherwise be not rated. When a bond is not rated by any rating agency, it is designated as “Not
rated.” Credit quality ratings assigned by a rating agency are subjective opinions, not statements of fact, and are subject to change, including daily. The ratings assigned by credit rating agencies are but one
of the considerations that the Investment Manager and/or Fund’s subadviser incorporates into its credit analysis process, along with such other issuer-specific factors as cash flows, capital structure and
leverage ratios, ability to de-leverage (repay) through free cash flow, quality of management, market positioning and access to capital, as well as such security-specific factors as the terms of the security (e.g.,
interest rate and time to maturity) and the amount and type of any collateral.
| 4 | CTIVP® – BlackRock Global Inflation-Protected Securities Fund | Annual Report 2021 |
Fund at a Glance (continued)
| CTIVP® – BlackRock Global Inflation-Protected Securities Fund | Annual Report 2021 | 5 |
Manager Discussion of Fund Performance
For the 12-month period that
ended December 31, 2021, the Fund’s Class 2 shares returned 4.43%. While the Fund posted solid absolute gains, it underperformed its benchmark, the Bloomberg World Government Inflation-Linked Bond Index USD
Hedged, which returned 5.49%.
Market overview
The global markets in 2021 were
influenced by the COVID-19 pandemic and by geopolitical uncertainty. The annual period began with a reflationary outlook and increased expectations for stronger economic growth, as interest rates moved higher and
spread (i.e., non-government bond) sectors moved marginally tighter. A few key events led to the rise in yields in January and February. Notably, the COVID-19 vaccine rollout had accelerated, and the $1.9 trillion
fiscal stimulus package passed, with the potential of more infrastructure stimulus in the then-coming months. The significant pick-up in government bond yields rattled investors’ confidence, as the market pulled
forward its estimate on when the U.S. Federal Reserve (Fed) might start lifting interest rates. General demand from pension funds and the Fed remaining dovish for much of 2021 kept interest rates at the long-term end
of the U.S. Treasury yield curve (i.e., the spectrum of maturities). Inflation expectations moved higher given the strong risk sentiment.
As summer arrived, COVID-19 was not
viewed as being as much of a risk in the market given the vaccination progress and the ongoing reopening of the economy. Spread sectors continued to perform well given this optimism, and the yield curve flattened as
inflation moved higher and investors continued to price in a more hawkish Fed. Risk assets remained resilient for much of the rest of the annual period but wobbled around concerns stemming both from the Delta and
Omicron COVID-19 variants and their potential risks to the economy and from slowing growth in China. Later in the annual period, the Fed became even more hawkish in an effort to combat higher inflation, announcing it
was doubling the pace of its asset purchase tapering such that the quantitative easing program would end in March 2022 and also signaling the likelihood of three interest rate hikes in 2022.
Overall, in the U.S., consumer
demand was quite healthy during the annual period; the employment picture continued to improve with record numbers of jobs added; and inflation was running at elevated levels. Inflation levels in Europe and the U.K.
similarly surpassed consensus expectations during the annual period, pointing toward a steady increase in prices. In December 2021, the Bank of England became one of the first major central banks to raise interest
rates since the pandemic began.
The Fund’s notable
detractors during the period
| • | The Fund was broadly positioned for a risk-on, reflationary environment entering 2021. However, the Fund’s tactical underweight position in U.S. Treasury inflation protected securities (TIPS) detracted from performance, as heightened inflation levels and concerns of prolonged inflation pushed real rates, or yields on non-inflation-linked securities, lower across the yield curve. This triggered a significant rally in U.S. real rates, especially during the second quarter of 2021. |
| • | The Fund’s outright short position in U.K. breakevens dampened relative results, as inflation expectations in the U.K. rose significantly during the annual period. This was materially exacerbated late in the third calendar quarter when the acute energy shortage in the U.K. pushed the country’s inflation expectations materially higher. (Inflation breakevens are the level of inflation the TIPS market or another inflation-linked securities market is pricing in over the life of the bond. Breakeven rates are the difference in yield between inflation-protected and nominal, or non-inflation-protected, debt of the same maturity. If the breakeven rate is negative, it suggests the markets are betting the economy may face deflation in the near future. If the breakeven rate is positive, it suggests the markets are betting the economy may face inflation in the near future.) |
| • | Against a similar backdrop, persistent upside surprises in European inflation data fueled a sizable expansion in European Union (EU) inflation expectations that hurt the Fund’s short position in Germany breakevens. |
| • | The Fund’s relative value positions between U.S. and EU breakevens detracted from performance. |
| • | The Fund’s tactical interest rate volatility positions erased their gains from the first three quarters of the annual period when rate volatility increased in November and December 2021. |
| 6 | CTIVP® – BlackRock Global Inflation-Protected Securities Fund | Annual Report 2021 |
Manager Discussion of Fund Performance (continued)
The Fund’s notable
contributors during the period
| • | The Fund’s structural underweight in U.S. nominal, or non-inflation-linked, rates was the most notable positive contributor to its performance during the annual period. Hawkish comments from the Fed brought forward market participants’ timeline on the tapering of asset purchase program and interest rate hike projections, triggering a significant repricing in the rates market. |
| • | In the U.K., despite moves higher in U.K. breakevens during the first and third quarters of 2021, inflation expectations in the U.K. underperformed its EU and U.S. counterparts for most of the annual period. Against this backdrop, the Fund’s relative value positions between EU/U.S. versus U.K. breakevens materially added to relative results. |
| • | The Fund’s tactical positions in U.S., France and New Zealand breakevens added value as well. |
| • | Strategic trading in Germany nominal rates and tactical allocations to spread assets modestly added to performance. |
Derivatives usage
In our view, derivatives are an
effective and efficient tool to manage duration, yield curve and volatility risk in the Fund. During the annual period, the Fund utilized forward currency contracts to hedge the currency exposure associated with some
or all of the Fund’s securities and to shift investment exposure from one currency to another. We used futures contracts to manage duration and yield exposure of the Fund in an efficient manner. We used written
and purchased options to create various exposures for the Fund, isolate perceived mispricing and create asymmetric risk profiles. We also used written options to increase the Fund’s carry. We used interest rate
swaps to express our breakeven strategies or enhance yields of already existing positions. We used inflation swaps to hedge underlying inflation-linked positions, as caps and floors may provide protection against
adverse moves in the inflation market. The use of these instruments is integral to the Fund’s investment strategy, which overall realized solidly positive absolute returns during the annual period.
The views expressed in this report
reflect the current views of the respective parties who have contributed to this report. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult
to predict, so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective parties
disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Columbia fund are based on numerous factors, may not be relied on as an
indication of trading intent on behalf of any particular Columbia fund. References to specific securities should not be construed as a recommendation or investment advice.
| CTIVP® – BlackRock Global Inflation-Protected Securities Fund | Annual Report 2021 | 7 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur ongoing
costs, which generally include management fees, distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to help you compare these costs with the ongoing costs of investing in other mutual funds.
The information below does not
reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy (collectively, Contracts) or qualified pension and retirement plan (Qualified Plan), if any. The total fees
and expenses you bear may therefore be higher than those shown below.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount invested, to estimate the
expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as redemption or exchange fees, or expenses that apply to the subaccount or the Contract. Therefore, the
hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If the fees and expenses imposed under your Contract or
Qualified Plan, if any, were included, your costs would be higher.
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 365.
Expenses do not include fees and
expenses incurred indirectly by the Fund from its investment in underlying funds, including affiliated and non-affiliated pooled investment vehicles, such as mutual funds and exchange-traded funds.
Had Columbia Management Investment
Advisers, LLC and/or certain of its affiliates not waived/reimbursed certain fees and expenses, account value at the end of the period would have been reduced.
| 8 | CTIVP® – BlackRock Global Inflation-Protected Securities Fund | Annual Report 2021 |
Portfolio of Investments
December 31, 2021
December 31, 2021
(Percentages represent value of
investments compared to net assets)
Investments in securities
The accompanying Notes to Financial
Statements are an integral part of this statement.
| CTIVP® – BlackRock Global Inflation-Protected Securities Fund | Annual Report 2021 | 9 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 10 | CTIVP® – BlackRock Global Inflation-Protected Securities Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
At December 31, 2021,
securities and/or cash totaling $1,334,164 were pledged as collateral.
Investments in
derivatives
The accompanying Notes to Financial Statements are
an integral part of this statement.
| CTIVP® – BlackRock Global Inflation-Protected Securities Fund | Annual Report 2021 | 11 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
| Forward foreign currency exchange contracts (continued) | |||||
| Currency to be sold | Currency to be purchased | Counterparty | Settlement date | Unrealized appreciation ($) | Unrealized depreciation ($) |
| 8,625 USD | 978,331 JPY | Deutsche Bank | 02/02/2022 | — | (118) |
| 6,315 USD | 9,312 NZD | Deutsche Bank | 02/02/2022 | 60 | — |
| Total | 48,516 | (763,922) | |||
| Long futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| 3-Month SONIA | 20 | 12/2022 | GBP | 4,945,750 | — | (13,494) |
| 90-Day AUD Bank Bill | 17 | 12/2022 | AUD | 16,958,185 | 5,424 | — |
| Banker’s Acceptance | 15 | 06/2022 | CAD | 3,703,500 | — | (14,047) |
| Euro-Bund | 7 | 03/2022 | EUR | 1,199,590 | — | (23,650) |
| Long Gilt | 28 | 03/2022 | GBP | 3,497,200 | — | (32,554) |
| U.S. Treasury 10-Year Note | 5 | 03/2022 | USD | 652,344 | 581 | — |
| U.S. Treasury 10-Year Note | 4 | 03/2022 | USD | 521,875 | — | (755) |
| Total | 6,005 | (84,500) | ||||
| Short futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| Banker’s Acceptance | (15) | 03/2022 | CAD | (3,719,063) | — | (1,424) |
| Euro-Bobl | (1) | 03/2022 | EUR | (133,240) | 919 | — |
| Euro-Buxl 30-Year | (7) | 03/2022 | EUR | (1,447,180) | 74,459 | — |
| Eurodollar 90-Day | (5) | 12/2024 | USD | (1,228,625) | 3,208 | — |
| Euro-OAT | (6) | 03/2022 | EUR | (978,900) | 19,882 | — |
| U.S. Treasury 2-Year Note | (18) | 03/2022 | USD | (3,927,094) | 3,076 | — |
| U.S. Treasury Ultra 10-Year Note | (4) | 03/2022 | USD | (585,750) | 3,259 | — |
| U.S. Treasury Ultra 10-Year Note | (21) | 03/2022 | USD | (3,075,188) | — | (40,917) |
| U.S. Ultra Treasury Bond | (5) | 03/2022 | USD | (985,625) | 9,250 | — |
| U.S. Ultra Treasury Bond | (1) | 03/2022 | USD | (197,125) | — | (3,595) |
| Total | 114,053 | (45,936) | ||||
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 12 | CTIVP® – BlackRock Global Inflation-Protected Securities Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
| Call option contracts purchased (continued) | ||||||||
| Description | Counterparty | Trading currency | Notional amount | Number of contracts | Exercise price/Rate | Expiration date | Cost ($) | Value ($) |
| 10-Year OTC interest rate swap with Deutsche Bank to receive exercise rate and pay 3-Month USD LIBOR BBA | Deutsche Bank | USD | 205,000 | 205,000 | 1.97 | 06/24/2024 | 9,369 | 10,359 |
| 10-Year OTC interest rate swap with Deutsche Bank to receive exercise rate and pay 3-Month USD LIBOR BBA | Deutsche Bank | USD | 205,000 | 205,000 | 2.00 | 06/28/2024 | 9,030 | 10,714 |
| 10-Year OTC interest rate swap with Deutsche Bank to receive exercise rate and pay 3-Month USD LIBOR BBA | Deutsche Bank | USD | 130,000 | 130,000 | 1.68 | 07/22/2024 | 5,772 | 4,746 |
| 10-Year OTC interest rate swap with Deutsche Bank to receive exercise rate and pay 3-Month USD LIBOR BBA | Deutsche Bank | USD | 290,000 | 290,000 | 1.55 | 07/29/2024 | 10,527 | 9,128 |
| 10-Year OTC interest rate swap with Deutsche Bank to receive exercise rate and pay 3-Month USD LIBOR BBA | Deutsche Bank | USD | 130,000 | 130,000 | 0.89 | 04/30/2025 | 7,014 | 2,072 |
| 10-Year OTC interest rate swap with Deutsche Bank to receive exercise rate and pay 3-Month USD LIBOR BBA | Deutsche Bank | USD | 95,000 | 95,000 | 1.28 | 06/04/2025 | 5,140 | 2,493 |
| 10-Year OTC interest rate swap with Deutsche Bank to receive exercise rate and pay 3-Month USD LIBOR BBA | Deutsche Bank | USD | 95,000 | 95,000 | 1.42 | 06/05/2025 | 5,092 | 2,981 |
| 10-Year OTC interest rate swap with Deutsche Bank to receive exercise rate and pay 3-Month USD LIBOR BBA | Deutsche Bank | USD | 230,000 | 230,000 | 2.60 | 04/07/2026 | 12,868 | 21,618 |
| 30-Year OTC interest rate swap with Deutsche Bank to receive exercise rate and pay 3-Month USD LIBOR BBA | Deutsche Bank | USD | 110,000 | 110,000 | 1.71 | 05/31/2022 | 6,232 | 4,735 |
| 5-Year OTC interest rate swap with Citi to receive exercise rate and pay 3-Month USD LIBOR BBA | Citi | USD | 450,000 | 450,000 | 1.53 | 04/05/2022 | 6,525 | 4,624 |
| 5-Year OTC interest rate swap with Citi to receive exercise rate and pay 3-Month USD LIBOR BBA | Citi | USD | 890,000 | 890,000 | 1.39 | 04/08/2022 | 13,426 | 5,871 |
| 5-Year OTC interest rate swap with Citi to receive exercise rate and pay 3-Month USD LIBOR BBA | Citi | USD | 1,060,000 | 1,060,000 | 1.32 | 07/01/2022 | 12,163 | 6,960 |
| 5-Year OTC interest rate swap with Deutsche Bank to receive exercise rate and pay 3-Month USD LIBOR BBA | Deutsche Bank | USD | 1,260,000 | 1,260,000 | 1.20 | 04/28/2022 | 12,335 | 4,385 |
| 5-Year OTC interest rate swap with Deutsche Bank to receive exercise rate and pay 3-Month USD LIBOR BBA | Deutsche Bank | USD | 560,000 | 560,000 | 1.54 | 08/03/2022 | 7,168 | 6,743 |
| U.S. Treasury 10-Year Note | UBS | USD | 913,281 | 7 | 131.00 | 01/21/2022 | 3,948 | 2,406 |
| Total | 229,659 | 305,863 | ||||||
| Put option contracts purchased | ||||||||
| Description | Counterparty | Trading currency | Notional amount | Number of contracts | Exercise price/Rate | Expiration date | Cost ($) | Value ($) |
| 10-Year OTC interest rate swap with Citi to receive 3-Month USD LIBOR BBA and pay exercise rate | Citi | USD | 390,000 | 390,000 | 2.25 | 08/02/2022 | 10,530 | 2,446 |
| 10-Year OTC interest rate swap with Citi to receive 3-Month USD LIBOR BBA and pay exercise rate | Citi | USD | 390,000 | 390,000 | 2.25 | 08/08/2022 | 9,227 | 2,530 |
| 10-Year OTC interest rate swap with Citi to receive 3-Month USD LIBOR BBA and pay exercise rate | Citi | USD | 351,500 | 351,500 | 2.98 | 03/07/2024 | 16,093 | 3,702 |
| 10-Year OTC interest rate swap with Citi to receive 3-Month USD LIBOR BBA and pay exercise rate | Citi | USD | 350,000 | 350,000 | 2.95 | 03/12/2024 | 15,697 | 3,829 |
| 10-Year OTC interest rate swap with Citi to receive 3-Month USD LIBOR BBA and pay exercise rate | Citi | USD | 380,000 | 380,000 | 2.50 | 06/13/2024 | 16,763 | 7,512 |
| 10-Year OTC interest rate swap with Citi to receive 3-Month USD LIBOR BBA and pay exercise rate | Citi | USD | 380,000 | 380,000 | 2.50 | 06/20/2024 | 15,708 | 7,551 |
| 10-Year OTC interest rate swap with Citi to receive 3-Month USD LIBOR BBA and pay exercise rate | Citi | USD | 130,000 | 130,000 | 1.68 | 08/02/2024 | 5,829 | 6,232 |
| 10-Year OTC interest rate swap with Citi to receive 3-Month USD LIBOR BBA and pay exercise rate | Citi | USD | 220,000 | 220,000 | 1.49 | 02/25/2025 | 11,555 | 13,517 |
| 10-Year OTC interest rate swap with Citi to receive 3-Month USD LIBOR BBA and pay exercise rate | Citi | USD | 100,000 | 100,000 | 3.05 | 01/10/2029 | 5,675 | 2,740 |
| 10-Year OTC interest rate swap with Citi to receive 3-Month USD LIBOR BBA and pay exercise rate | Citi | USD | 100,000 | 100,000 | 3.04 | 01/11/2029 | 5,700 | 2,762 |
| 10-Year OTC interest rate swap with Citi to receive 3-Month USD LIBOR BBA and pay exercise rate | Citi | USD | 100,000 | 100,000 | 3.08 | 01/29/2029 | 5,688 | 2,694 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| CTIVP® – BlackRock Global Inflation-Protected Securities Fund | Annual Report 2021 | 13 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
| Put option contracts purchased (continued) | ||||||||
| Description | Counterparty | Trading currency | Notional amount | Number of contracts | Exercise price/Rate | Expiration date | Cost ($) | Value ($) |
| 10-Year OTC interest rate swap with Citi to receive 3-Month USD LIBOR BBA and pay exercise rate | Citi | USD | 370,000 | 370,000 | 3.08 | 12/06/2038 | 17,228 | 11,389 |
| 10-Year OTC interest rate swap with Citi to receive 3-Month USD LIBOR BBA and pay exercise rate | Citi | USD | 95,000 | 95,000 | 2.87 | 02/22/2039 | 4,606 | 3,282 |
| 10-Year OTC interest rate swap with Deutsche Bank to receive 1-Day JPY TONA and pay exercise rate | Deutsche Bank | JPY | 197,935,000 | 197,935,000 | 1.04 | 06/29/2022 | — | 7 |
| 10-Year OTC interest rate swap with Deutsche Bank to receive 3-Month USD LIBOR BBA and pay exercise rate | Deutsche Bank | USD | 370,000 | 370,000 | 1.94 | 11/15/2023 | 14,846 | 11,386 |
| 10-Year OTC interest rate swap with Deutsche Bank to receive 3-Month USD LIBOR BBA and pay exercise rate | Deutsche Bank | USD | 130,000 | 130,000 | 1.68 | 07/22/2024 | 5,772 | 6,224 |
| 10-Year OTC interest rate swap with Deutsche Bank to receive 3-Month USD LIBOR BBA and pay exercise rate | Deutsche Bank | USD | 410,000 | 410,000 | 1.80 | 08/05/2024 | 16,154 | 17,462 |
| 10-Year OTC interest rate swap with Deutsche Bank to receive 3-Month USD LIBOR BBA and pay exercise rate | Deutsche Bank | USD | 130,000 | 130,000 | 0.89 | 04/30/2025 | 7,014 | 12,945 |
| 10-Year OTC interest rate swap with Deutsche Bank to receive 3-Month USD LIBOR BBA and pay exercise rate | Deutsche Bank | USD | 95,000 | 95,000 | 1.28 | 06/04/2025 | 5,140 | 7,115 |
| 10-Year OTC interest rate swap with Deutsche Bank to receive 3-Month USD LIBOR BBA and pay exercise rate | Deutsche Bank | USD | 95,000 | 95,000 | 1.42 | 06/05/2025 | 5,092 | 6,288 |
| 10-Year OTC Interest rate swap with Deutsche Bank to receive 3-Month USD LIBOR BBA and pay exercise rate | Deutsche Bank | USD | 205,000 | 205,000 | 1.97 | 06/24/2024 | 9,368 | 7,161 |
| 10-Year OTC Interest rate swap with Deutsche Bank to receive 3-Month USD LIBOR BBA and pay exercise rate | Deutsche Bank | USD | 205,000 | 205,000 | 2.00 | 06/28/2024 | 9,030 | 6,968 |
| 10-Year OTC Interest rate swap with Deutsche Bank to receive 3-Month USD LIBOR BBA and pay exercise rate | Deutsche Bank | USD | 230,000 | 230,000 | 2.60 | 04/07/2026 | 12,868 | 6,374 |
| 30-Year OTC interest rate swap with Citi to receive 3-Month USD LIBOR BBA and pay exercise rate | Citi | USD | 470,000 | 470,000 | 2.85 | 05/09/2022 | 27,754 | 542 |
| 30-Year OTC interest rate swap with Deutsche Bank to receive 3-Month USD LIBOR BBA and pay exercise rate | Deutsche Bank | USD | 110,000 | 110,000 | 1.71 | 05/31/2022 | 6,232 | 5,610 |
| 5-Year OTC interest rate swap with Citi to receive 3-Month USD LIBOR BBA and pay exercise rate | Citi | USD | 1,060,000 | 1,060,000 | 1.32 | 07/01/2022 | 12,163 | 16,084 |
| 5-Year OTC interest rate swap with Citi to receive 3-Month USD LIBOR BBA and pay exercise rate | Citi | USD | 1,330,000 | 1,330,000 | 1.25 | 07/15/2022 | 16,297 | 23,920 |
| 5-Year OTC Interest rate swap with Citi to receive 3-Month USD LIBOR BBA and pay exercise rate | Citi | USD | 450,000 | 450,000 | 1.53 | 04/05/2022 | 6,525 | 2,688 |
| 5-Year OTC Interest rate swap with Citi to receive 3-Month USD LIBOR BBA and pay exercise rate | Citi | USD | 890,000 | 890,000 | 1.39 | 04/08/2022 | 12,906 | 8,254 |
| 5-Year OTC interest rate swap with Deutsche Bank to receive 3-Month USD LIBOR BBA and pay exercise rate | Deutsche Bank | USD | 475,000 | 475,000 | 1.34 | 01/19/2022 | 2,862 | 2,053 |
| 5-Year OTC interest rate swap with Deutsche Bank to receive 3-Month USD LIBOR BBA and pay exercise rate | Deutsche Bank | USD | 1,060,000 | 1,060,000 | 1.45 | 07/06/2022 | 9,668 | 12,700 |
| 5-Year OTC interest rate swap with Deutsche Bank to receive 3-Month USD LIBOR BBA and pay exercise rate | Deutsche Bank | USD | 560,000 | 560,000 | 1.54 | 08/03/2022 | 7,165 | 6,238 |
| Total | 327,155 | 230,205 | ||||||
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 14 | CTIVP® – BlackRock Global Inflation-Protected Securities Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
| Call option contracts written | ||||||||
| Description | Counterparty | Trading currency | Notional amount | Number of contracts | Exercise price/Rate | Expiration date | Premium received ($) | Value ($) |
| 10-Year OTC interest rate swap with Citi to receive 3-Month USD LIBOR BBA and pay exercise rate | Citi | USD | (220,000) | (220,000) | 1.25 | 1/27/2022 | (5,000) | (123) |
| 10-Year OTC interest rate swap with Citi to receive 3-Month USD LIBOR BBA and pay exercise rate | Citi | USD | (210,000) | (210,000) | 1.62 | 2/18/2022 | (5,568) | (2,584) |
| 10-Year OTC interest rate swap with Citi to receive 3-Month USD LIBOR BBA and pay exercise rate | Citi | USD | (170,000) | (170,000) | 1.25 | 12/30/2022 | (5,606) | (1,912) |
| 10-Year OTC interest rate swap with Citi to receive 3-Month USD LIBOR BBA and pay exercise rate | Citi | USD | (310,000) | (310,000) | 1.44 | 1/09/2023 | (10,988) | (5,160) |
| 10-Year OTC interest rate swap with Citi to receive 3-Month USD LIBOR BBA and pay exercise rate | Citi | USD | (330,000) | (330,000) | 2.01 | 3/01/2023 | (12,573) | (14,959) |
| 10-Year OTC interest rate swap with Citi to receive 3-Month USD LIBOR BBA and pay exercise rate | Citi | USD | (280,000) | (280,000) | 3.05 | 3/12/2029 | (14,854) | (34,359) |
| 10-Year OTC interest rate swap with Deutsche Bank to receive 1-Day USD SOFR and pay exercise rate | Deutsche Bank | USD | (260,000) | (260,000) | 1.44 | 12/05/2022 | (7,920) | (6,850) |
| 10-Year OTC interest rate swap with Deutsche Bank to receive 1-Day USD SOFR and pay exercise rate | Deutsche Bank | USD | (417,000) | (417,000) | 1.43 | 12/13/2022 | (11,801) | (10,965) |
| 10-Year OTC interest rate swap with Deutsche Bank to receive 1-Day USD SOFR and pay exercise rate | Deutsche Bank | USD | (418,000) | (418,000) | 1.43 | 12/15/2022 | (11,767) | (10,805) |
| 10-Year OTC interest rate swap with Deutsche Bank to receive 3-Month USD LIBOR BBA and pay exercise rate | Deutsche Bank | USD | (240,000) | (240,000) | 1.00 | 1/27/2022 | (3,288) | (9) |
| 10-Year OTC interest rate swap with Deutsche Bank to receive 3-Month USD LIBOR BBA and pay exercise rate | Deutsche Bank | USD | (250,000) | (250,000) | 1.40 | 3/01/2022 | (1,325) | (1,202) |
| 10-Year OTC interest rate swap with Deutsche Bank to receive 3-Month USD LIBOR BBA and pay exercise rate | Deutsche Bank | USD | (210,000) | (210,000) | 0.74 | 5/02/2022 | (7,266) | (142) |
| 10-Year OTC interest rate swap with Deutsche Bank to receive 3-Month USD LIBOR BBA and pay exercise rate | Deutsche Bank | USD | (490,000) | (490,000) | 1.53 | 9/01/2022 | (13,009) | (8,144) |
| 10-Year OTC interest rate swap with Deutsche Bank to receive 3-Month USD LIBOR BBA and pay exercise rate | Deutsche Bank | USD | (245,000) | (245,000) | 1.80 | 10/07/2022 | (6,738) | (7,480) |
| 10-Year OTC interest rate swap with Deutsche Bank to receive 3-Month USD LIBOR BBA and pay exercise rate | Deutsche Bank | USD | (245,000) | (245,000) | 1.80 | 10/13/2022 | (6,670) | (7,427) |
| 10-Year OTC interest rate swap with Deutsche Bank to receive 3-Month USD LIBOR BBA and pay exercise rate | Deutsche Bank | USD | (520,000) | (520,000) | 1.85 | 11/15/2022 | (15,366) | (17,632) |
| 10-Year OTC interest rate swap with Deutsche Bank to receive 3-Month USD LIBOR BBA and pay exercise rate | Deutsche Bank | USD | (155,000) | (155,000) | 1.23 | 12/16/2022 | (5,084) | (1,630) |
| 10-Year OTC interest rate swap with Deutsche Bank to receive 3-Month USD LIBOR BBA and pay exercise rate | Deutsche Bank | USD | (155,000) | (155,000) | 1.24 | 12/16/2022 | (5,069) | (1,666) |
| 10-Year OTC Interest rate swap with Deutsche Bank to receive 3-Month USD LIBOR BBA and pay exercise rate | Deutsche Bank | USD | (300,000) | (300,000) | 1.40 | 6/07/2022 | (2,850) | (2,885) |
| 10-Year OTC interest rate swap with Deutsche Bank to receive exercise rate and pay 3-Month USD LIBOR BBA | Deutsche Bank | USD | (170,000) | (170,000) | 1.06 | 10/11/2022 | (5,718) | (1,022) |
| 2-Year OTC interest rate swap with Citi to receive 3-Month USD LIBOR BBA and pay exercise rate | Citi | USD | (1,095,000) | (1,095,000) | 0.52 | 3/03/2022 | (3,189) | (131) |
| 2-Year OTC interest rate swap with Citi to receive 3-Month USD LIBOR BBA and pay exercise rate | Citi | USD | (3,230,000) | (3,230,000) | 0.61 | 4/01/2022 | (7,752) | (706) |
| 2-Year OTC interest rate swap with Citi to receive 3-Month USD LIBOR BBA and pay exercise rate | Citi | USD | (800,000) | (800,000) | 1.24 | 10/25/2022 | (4,770) | (3,018) |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| CTIVP® – BlackRock Global Inflation-Protected Securities Fund | Annual Report 2021 | 15 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
| Call option contracts written (continued) | ||||||||
| Description | Counterparty | Trading currency | Notional amount | Number of contracts | Exercise price/Rate | Expiration date | Premium received ($) | Value ($) |
| 2-Year OTC interest rate swap with Citi to receive 3-Month USD LIBOR BBA and pay exercise rate | Citi | USD | (1,200,000) | (1,200,000) | 1.24 | 10/25/2022 | (7,155) | (4,554) |
| 2-Year OTC Interest rate swap with Citi to receive 3-Month USD LIBOR BBA and pay exercise rate | Citi | USD | (2,490,000) | (2,490,000) | 0.51 | 1/10/2022 | (7,245) | (10) |
| 2-Year OTC interest rate swap with Deutsche Bank to receive 3-Month USD LIBOR BBA and pay exercise rate | Deutsche Bank | USD | (2,140,000) | (2,140,000) | 0.51 | 3/01/2022 | (6,714) | (240) |
| 2-Year OTC interest rate swap with Deutsche Bank to receive 3-Month USD LIBOR BBA and pay exercise rate | Deutsche Bank | USD | (1,095,000) | (1,095,000) | 0.56 | 3/21/2022 | (3,682) | (178) |
| 2-Year OTC interest rate swap with Deutsche Bank to receive 3-Month USD LIBOR BBA and pay exercise rate | Deutsche Bank | USD | (2,170,000) | (2,170,000) | 0.57 | 3/23/2022 | (7,052) | (371) |
| 2-Year OTC interest rate swap with Deutsche Bank to receive 3-Month USD LIBOR BBA and pay exercise rate | Deutsche Bank | USD | (1,680,000) | (1,680,000) | 1.02 | 5/03/2022 | (6,636) | (3,652) |
| 2-Year OTC interest rate swap with Deutsche Bank to receive 3-Month USD LIBOR BBA and pay exercise rate | Deutsche Bank | USD | (1,195,000) | (1,195,000) | 1.25 | 11/04/2022 | (6,573) | (4,655) |
| 30-Year OTC interest rate swap with Citi to receive 3-Month USD LIBOR BBA and pay exercise rate | Citi | USD | (80,000) | (80,000) | 2.00 | 9/30/2024 | (8,320) | (10,811) |
| 30-Year OTC interest rate swap with Deutsche Bank to receive 1-Day USD SOFR and pay exercise rate | Deutsche Bank | USD | (50,000) | (50,000) | 1.38 | 12/02/2026 | (6,947) | (5,680) |
| 30-Year OTC interest rate swap with Deutsche Bank to receive 3-Month USD LIBOR BBA and pay exercise rate | Deutsche Bank | USD | (120,000) | (120,000) | 1.85 | 9/17/2024 | (12,510) | (13,689) |
| 30-Year OTC interest rate swap with Deutsche Bank to receive 3-Month USD LIBOR BBA and pay exercise rate | Deutsche Bank | USD | (50,000) | (50,000) | 1.98 | 10/19/2026 | (6,300) | (7,690) |
| 5-Year OTC Interest rate swap with Citi to receive 3-Month USD LIBOR BBA and pay exercise rate | Citi | USD | (630,000) | (630,000) | 0.90 | 4/22/2022 | (3,339) | (474) |
| 5-Year OTC Interest rate swap with Deutsche Bank to receive 3-Month USD LIBOR BBA and pay exercise rate | Deutsche Bank | USD | (1,900,000) | (1,900,000) | 0.90 | 4/28/2022 | (8,485) | (1,516) |
| U.S. Treasury 10-Year Note | UBS | USD | (913,281) | (7) | 132.00 | 1/21/2022 | (1,630) | (766) |
| Total | (266,759) | (195,097) | ||||||
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 16 | CTIVP® – BlackRock Global Inflation-Protected Securities Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
| Put option contracts written (continued) | ||||||||
| Description | Counterparty | Trading currency | Notional amount | Number of contracts | Exercise price/Rate | Expiration date | Premium received ($) | Value ($) |
| 10-Year OTC interest rate swap with Citi to receive exercise rate and pay 3-Month USD LIBOR BBA | Citi | USD | (390,000) | (390,000) | 2.75 | 08/08/2022 | (4,719) | (872) |
| 10-Year OTC interest rate swap with Citi to receive exercise rate and pay 3-Month USD LIBOR BBA | Citi | USD | (170,000) | (170,000) | 1.25 | 12/30/2022 | (5,606) | (9,234) |
| 10-Year OTC interest rate swap with Citi to receive exercise rate and pay 3-Month USD LIBOR BBA | Citi | USD | (310,000) | (310,000) | 1.44 | 01/09/2023 | (9,224) | (13,271) |
| 10-Year OTC interest rate swap with Citi to receive exercise rate and pay 3-Month USD LIBOR BBA | Citi | USD | (330,000) | (330,000) | 2.01 | 03/01/2023 | (12,573) | (6,501) |
| 10-Year OTC interest rate swap with Citi to receive exercise rate and pay 3-Month USD LIBOR BBA | Citi | USD | (380,000) | (380,000) | 3.50 | 06/13/2024 | (6,286) | (2,680) |
| 10-Year OTC interest rate swap with Citi to receive exercise rate and pay 3-Month USD LIBOR BBA | Citi | USD | (380,000) | (380,000) | 3.00 | 06/13/2024 | (10,477) | (4,443) |
| 10-Year OTC interest rate swap with Citi to receive exercise rate and pay 3-Month USD LIBOR BBA | Citi | USD | (380,000) | (380,000) | 3.50 | 06/20/2024 | (5,680) | (2,702) |
| 10-Year OTC interest rate swap with Citi to receive exercise rate and pay 3-Month USD LIBOR BBA | Citi | USD | (380,000) | (380,000) | 3.00 | 06/20/2024 | (9,428) | (4,473) |
| 10-Year OTC interest rate swap with Citi to receive exercise rate and pay 3-Month USD LIBOR BBA | Citi | USD | (400,000) | (400,000) | 2.25 | 08/20/2024 | (12,000) | (10,860) |
| 10-Year OTC interest rate swap with Citi to receive exercise rate and pay 3-Month USD LIBOR BBA | Citi | USD | (280,000) | (280,000) | 3.05 | 03/12/2029 | (14,854) | (7,772) |
| 10-Year OTC interest rate swap with Deutsche Bank to receive 3-Month USD LIBOR BBA and pay exercise rate | Deutsche Bank | USD | (170,000) | (170,000) | 1.06 | 10/11/2022 | (5,718) | (10,970) |
| 10-Year OTC interest rate swap with Deutsche Bank to receive exercise rate and pay 1-Day USD SOFR | Deutsche Bank | USD | (320,000) | (320,000) | 1.57 | 03/01/2022 | (1,512) | (1,603) |
| 10-Year OTC interest rate swap with Deutsche Bank to receive exercise rate and pay 1-Day USD SOFR | Deutsche Bank | USD | (260,000) | (260,000) | 1.44 | 12/05/2022 | (7,920) | (7,170) |
| 10-Year OTC interest rate swap with Deutsche Bank to receive exercise rate and pay 1-Day USD SOFR | Deutsche Bank | USD | (417,000) | (417,000) | 1.43 | 12/13/2022 | (11,801) | (11,775) |
| 10-Year OTC interest rate swap with Deutsche Bank to receive exercise rate and pay 1-Day USD SOFR | Deutsche Bank | USD | (418,000) | (418,000) | 1.43 | 12/15/2022 | (11,767) | (12,155) |
| 10-Year OTC interest rate swap with Deutsche Bank to receive exercise rate and pay 3-Month USD LIBOR BBA | Deutsche Bank | USD | (240,000) | (240,000) | 1.50 | 01/27/2022 | (3,288) | (2,998) |
| 10-Year OTC interest rate swap with Deutsche Bank to receive exercise rate and pay 3-Month USD LIBOR BBA | Deutsche Bank | USD | (240,000) | (240,000) | 1.60 | 02/28/2022 | (4,380) | (2,840) |
| 10-Year OTC interest rate swap with Deutsche Bank to receive exercise rate and pay 3-Month USD LIBOR BBA | Deutsche Bank | USD | (210,000) | (210,000) | 0.74 | 05/02/2022 | (7,266) | (17,640) |
| 10-Year OTC interest rate swap with Deutsche Bank to receive exercise rate and pay 3-Month USD LIBOR BBA | Deutsche Bank | USD | (300,000) | (300,000) | 2.40 | 06/07/2022 | (3,360) | (843) |
| 10-Year OTC interest rate swap with Deutsche Bank to receive exercise rate and pay 3-Month USD LIBOR BBA | Deutsche Bank | USD | (490,000) | (490,000) | 1.53 | 09/01/2022 | (13,009) | (15,219) |
| 10-Year OTC interest rate swap with Deutsche Bank to receive exercise rate and pay 3-Month USD LIBOR BBA | Deutsche Bank | USD | (245,000) | (245,000) | 1.80 | 10/07/2022 | (6,738) | (5,013) |
| 10-Year OTC interest rate swap with Deutsche Bank to receive exercise rate and pay 3-Month USD LIBOR BBA | Deutsche Bank | USD | (245,000) | (245,000) | 1.80 | 10/13/2022 | (6,670) | (5,120) |
| 10-Year OTC interest rate swap with Deutsche Bank to receive exercise rate and pay 3-Month USD LIBOR BBA | Deutsche Bank | USD | (520,000) | (520,000) | 1.85 | 11/15/2022 | (15,366) | (10,688) |
| 10-Year OTC interest rate swap with Deutsche Bank to receive exercise rate and pay 3-Month USD LIBOR BBA | Deutsche Bank | USD | (155,000) | (155,000) | 1.24 | 12/16/2022 | (5,069) | (8,429) |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| CTIVP® – BlackRock Global Inflation-Protected Securities Fund | Annual Report 2021 | 17 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
| Put option contracts written (continued) | ||||||||
| Description | Counterparty | Trading currency | Notional amount | Number of contracts | Exercise price/Rate | Expiration date | Premium received ($) | Value ($) |
| 10-Year OTC interest rate swap with Deutsche Bank to receive exercise rate and pay 3-Month USD LIBOR BBA | Deutsche Bank | USD | (155,000) | (155,000) | 1.23 | 12/16/2022 | (5,084) | (8,537) |
| 10-Year OTC interest rate swap with Deutsche Bank to receive exercise rate and pay 6-month EURIBOR | Deutsche Bank | EUR | (410,000) | (410,000) | 0.70 | 05/15/2023 | (11,067) | (9,830) |
| 2-Year OTC interest rate swap with Citi to receive exercise rate and pay 3-Month USD LIBOR BBA | Citi | USD | (2,490,000) | (2,490,000) | 0.51 | 01/10/2022 | (6,957) | (21,406) |
| 2-Year OTC interest rate swap with Citi to receive exercise rate and pay 3-Month USD LIBOR BBA | Citi | USD | (1,095,000) | (1,095,000) | 0.52 | 03/03/2022 | (3,189) | (11,589) |
| 2-Year OTC interest rate swap with Citi to receive exercise rate and pay 3-Month USD LIBOR BBA | Citi | USD | (3,230,000) | (3,230,000) | 0.61 | 04/01/2022 | (7,752) | (32,267) |
| 2-Year OTC interest rate swap with Citi to receive exercise rate and pay 3-Month USD LIBOR BBA | Citi | USD | (800,000) | (800,000) | 1.24 | 10/25/2022 | (4,770) | (5,741) |
| 2-Year OTC interest rate swap with Citi to receive exercise rate and pay 3-Month USD LIBOR BBA | Citi | USD | (1,200,000) | (1,200,000) | 1.24 | 10/25/2022 | (7,155) | (8,579) |
| 2-Year OTC interest rate swap with Citi to receive exercise rate and pay 3-Month USD LIBOR BBA | Citi | USD | (720,000) | (720,000) | 1.48 | 11/02/2022 | (3,636) | (3,642) |
| 2-Year OTC interest rate swap with Deutsche Bank to receive exercise rate and pay 3-Month USD LIBOR BBA | Deutsche Bank | USD | (680,000) | (680,000) | 0.50 | 01/19/2022 | (1,278) | (6,209) |
| 2-Year OTC interest rate swap with Deutsche Bank to receive exercise rate and pay 3-Month USD LIBOR BBA | Deutsche Bank | USD | (1,480,000) | (1,480,000) | 0.75 | 02/25/2022 | (3,483) | (9,080) |
| 2-Year OTC interest rate swap with Deutsche Bank to receive exercise rate and pay 3-Month USD LIBOR BBA | Deutsche Bank | USD | (2,140,000) | (2,140,000) | 0.51 | 03/01/2022 | (6,714) | (22,818) |
| 2-Year OTC interest rate swap with Deutsche Bank to receive exercise rate and pay 3-Month USD LIBOR BBA | Deutsche Bank | USD | (1,095,000) | (1,095,000) | 0.56 | 03/21/2022 | (3,682) | (11,387) |
| 2-Year OTC interest rate swap with Deutsche Bank to receive exercise rate and pay 3-Month USD LIBOR BBA | Deutsche Bank | USD | (2,170,000) | (2,170,000) | 0.57 | 03/23/2022 | (7,052) | (22,383) |
| 2-Year OTC interest rate swap with Deutsche Bank to receive exercise rate and pay 3-Month USD LIBOR BBA | Deutsche Bank | USD | (3,230,000) | (3,230,000) | 0.74 | 04/06/2022 | (5,168) | (25,109) |
| 2-Year OTC interest rate swap with Deutsche Bank to receive exercise rate and pay 3-Month USD LIBOR BBA | Deutsche Bank | USD | (1,680,000) | (1,680,000) | 1.02 | 05/03/2022 | (6,636) | (8,117) |
| 2-Year OTC interest rate swap with Deutsche Bank to receive exercise rate and pay 3-Month USD LIBOR BBA | Deutsche Bank | USD | (1,195,000) | (1,195,000) | 1.25 | 11/04/2022 | (6,573) | (8,681) |
| 30-Year OTC interest rate swap with Citi to receive exercise rate and pay 3-Month USD LIBOR BBA | Citi | USD | (80,000) | (80,000) | 2.00 | 09/30/2024 | (8,320) | (6,298) |
| 30-Year OTC interest rate swap with Deutsche Bank to receive exercise rate and pay 1-Day USD SOFR | Deutsche Bank | USD | (50,000) | (50,000) | 1.38 | 12/02/2026 | (6,947) | (6,819) |
| 30-Year OTC interest rate swap with Deutsche Bank to receive exercise rate and pay 3-Month USD LIBOR BBA | Deutsche Bank | USD | (120,000) | (120,000) | 1.85 | 09/17/2024 | (12,510) | (11,187) |
| 30-Year OTC interest rate swap with Deutsche Bank to receive exercise rate and pay 3-Month USD LIBOR BBA | Deutsche Bank | USD | (50,000) | (50,000) | 1.98 | 10/19/2026 | (6,300) | (4,978) |
| 5-Year OTC interest rate swap with Deutsche Bank to receive exercise rate and pay 6-Month EURIBOR | Deutsche Bank | EUR | (1,045,000) | (1,045,000) | 0.27 | 04/19/2022 | (3,456) | (4,274) |
| Total | (389,038) | (435,495) | ||||||
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 18 | CTIVP® – BlackRock Global Inflation-Protected Securities Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
| Cleared interest rate swap contracts | |||||||||||
| Fund receives | Fund pays | Payment frequency | Counterparty | Maturity date | Notional currency | Notional amount | Value ($) | Upfront payments ($) | Upfront receipts ($) | Unrealized appreciation ($) | Unrealized depreciation ($) |
| Fixed rate of 0.882% | 3-Month USD LIBOR | Receives SemiAnnually, Pays Quarterly | Goldman Sachs | 03/02/2023 | USD | 475,000 | 2,929 | — | — | 2,929 | — |
| 3-Month USD LIBOR | Fixed rate of 1.771% | Receives Quarterly, Pays SemiAnnually | Goldman Sachs | 07/12/2023 | USD | 3,380,000 | (26,516) | — | — | — | (26,516) |
| 3-Month USD LIBOR | Fixed rate of 0.473% | Receives Quarterly, Pays SemiAnnually | Goldman Sachs | 10/14/2023 | USD | 520,000 | 3,033 | — | — | 3,033 | — |
| Fixed rate of 0.353% | 3-Month USD LIBOR | Receives SemiAnnually, Pays Quarterly | Goldman Sachs | 11/18/2023 | USD | 900,000 | (8,672) | — | — | — | (8,672) |
| Fixed rate of 0.500% | 3-Month USD LIBOR | Receives SemiAnnually, Pays Quarterly | Goldman Sachs | 12/08/2023 | USD | 960,000 | (6,439) | — | — | — | (6,439) |
| Fixed rate of 0.450% | 3-Month USD LIBOR | Receives SemiAnnually, Pays Quarterly | Goldman Sachs | 12/14/2023 | USD | 963,000 | (7,617) | — | — | — | (7,617) |
| Fixed rate of 1.000% | 3-Month USD LIBOR | Receives SemiAnnually, Pays Quarterly | Goldman Sachs | 12/31/2023 | USD | 1,920,000 | (739) | — | — | — | (739) |
| 3-Month USD LIBOR | Fixed rate of 0.649% | Receives Quarterly, Pays SemiAnnually | Goldman Sachs | 01/18/2024 | USD | 600,000 | 3,599 | — | — | 3,599 | — |
| 3-Month USD LIBOR | Fixed rate of 1.059% | Receives Quarterly, Pays SemiAnnually | Goldman Sachs | 02/24/2024 | USD | 620,000 | (393) | — | — | — | (393) |
| 3-Month USD LIBOR | Fixed rate of 1.069% | Receives Quarterly, Pays SemiAnnually | Goldman Sachs | 02/25/2024 | USD | 620,000 | (493) | — | — | — | (493) |
| 3-Month USD LIBOR | Fixed rate of 1.053% | Receives Quarterly, Pays SemiAnnually | Goldman Sachs | 02/28/2024 | USD | 1,230,000 | (455) | — | — | — | (455) |
| 3-Month USD LIBOR | Fixed rate of 1.062% | Receives Quarterly, Pays SemiAnnually | Goldman Sachs | 02/29/2024 | USD | 140,000 | (75) | — | — | — | (75) |
| 3-Month USD LIBOR | Fixed rate of 1.060% | Receives Quarterly, Pays SemiAnnually | Goldman Sachs | 02/29/2024 | USD | 305,000 | (155) | — | — | — | (155) |
| 3-Month USD LIBOR | Fixed rate of 0.563% | Receives Quarterly, Pays SemiAnnually | Goldman Sachs | 03/24/2024 | USD | 280,000 | 2,895 | — | — | 2,895 | — |
| 3-Month USD LIBOR | Fixed rate of 1.097% | Receives Quarterly, Pays SemiAnnually | Goldman Sachs | 04/04/2024 | USD | 155,000 | (1) | — | — | — | (1) |
| 3-Month USD LIBOR | Fixed rate of 1.087% | Receives Quarterly, Pays SemiAnnually | Goldman Sachs | 04/05/2024 | USD | 210,000 | 70 | — | — | 70 | — |
| 3-Month USD LIBOR | Fixed rate of 0.633% | Receives Quarterly, Pays SemiAnnually | Goldman Sachs | 04/08/2024 | USD | 1,070,000 | 10,113 | — | — | 10,113 | — |
| 3-Month USD LIBOR | Fixed rate of 0.649% | Receives Quarterly, Pays SemiAnnually | Goldman Sachs | 04/11/2024 | USD | 590,000 | 5,439 | — | — | 5,439 | — |
| 3-Month USD LIBOR | Fixed rate of 0.661% | Receives Quarterly, Pays SemiAnnually | Goldman Sachs | 04/11/2024 | USD | 340,000 | 3,057 | — | — | 3,057 | — |
| 3-Month USD LIBOR | Fixed rate of 0.677% | Receives Quarterly, Pays SemiAnnually | Goldman Sachs | 04/12/2024 | USD | 600,000 | 5,220 | — | — | 5,220 | — |
| 3-Month USD LIBOR | Fixed rate of 0.689% | Receives Quarterly, Pays SemiAnnually | Goldman Sachs | 04/12/2024 | USD | 600,000 | 5,079 | — | — | 5,079 | — |
| 3-Month USD LIBOR | Fixed rate of 0.789% | Receives Quarterly, Pays SemiAnnually | Goldman Sachs | 04/14/2024 | USD | 590,000 | 3,889 | — | — | 3,889 | — |
| 3-Month USD LIBOR | Fixed rate of 0.797% | Receives Quarterly, Pays SemiAnnually | Goldman Sachs | 04/14/2024 | USD | 590,000 | 3,787 | — | — | 3,787 | — |
| 3-Month USD LIBOR | Fixed rate of 0.728% | Receives Quarterly, Pays SemiAnnually | Goldman Sachs | 04/14/2024 | USD | 360,000 | 2,808 | — | — | 2,808 | — |
| 3-Month USD LIBOR | Fixed rate of 0.761% | Receives Quarterly, Pays SemiAnnually | Goldman Sachs | 04/19/2024 | USD | 310,000 | 2,259 | — | — | 2,259 | — |
| 3-Month USD LIBOR | Fixed rate of 0.762% | Receives Quarterly, Pays SemiAnnually | Goldman Sachs | 04/19/2024 | USD | 310,000 | 2,252 | — | — | 2,252 | — |
| 3-Month USD LIBOR | Fixed rate of 0.935% | Receives Quarterly, Pays SemiAnnually | Goldman Sachs | 04/20/2024 | USD | 450,000 | 1,759 | — | — | 1,759 | — |
| 3-Month USD LIBOR | Fixed rate of 0.919% | Receives Quarterly, Pays SemiAnnually | Goldman Sachs | 04/20/2024 | USD | 300,000 | 1,270 | — | — | 1,270 | — |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| CTIVP® – BlackRock Global Inflation-Protected Securities Fund | Annual Report 2021 | 19 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 20 | CTIVP® – BlackRock Global Inflation-Protected Securities Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial Statements are
an integral part of this statement.
| CTIVP® – BlackRock Global Inflation-Protected Securities Fund | Annual Report 2021 | 21 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 22 | CTIVP® – BlackRock Global Inflation-Protected Securities Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial Statements are
an integral part of this statement.
| CTIVP® – BlackRock Global Inflation-Protected Securities Fund | Annual Report 2021 | 23 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
| Cleared interest rate swap contracts (continued) | |||||||||||
| Fund receives | Fund pays | Payment frequency | Counterparty | Maturity date | Notional currency | Notional amount | Value ($) | Upfront payments ($) | Upfront receipts ($) | Unrealized appreciation ($) | Unrealized depreciation ($) |
| Eurostat Eurozone HICP ex-Tobacco NSA | Fixed rate of 2.091% | Receives at Maturity, Pays at Maturity | Goldman Sachs | 10/15/2031 | EUR | 70,000 | 221 | — | — | 221 | — |
| Eurostat Eurozone HICP ex-Tobacco NSA | Fixed rate of 2.134% | Receives at Maturity, Pays at Maturity | Goldman Sachs | 10/15/2031 | EUR | 65,000 | (176) | — | — | — | (176) |
| 3-Month USD LIBOR | Fixed rate of 1.775% | Receives Quarterly, Pays SemiAnnually | Goldman Sachs | 10/18/2031 | USD | 190,000 | (409) | — | — | — | (409) |
| Fixed rate of 2.755% | U.S. CPI Urban Consumers NSA | Receives at Maturity, Pays at Maturity | Goldman Sachs | 10/22/2031 | USD | 107,000 | (1,793) | — | — | — | (1,793) |
| Fixed rate of 2.827% | U.S. CPI Urban Consumers NSA | Receives at Maturity, Pays at Maturity | Goldman Sachs | 10/25/2031 | USD | 108,000 | (932) | — | — | — | (932) |
| Fixed rate of 2.855% | U.S. CPI Urban Consumers NSA | Receives at Maturity, Pays at Maturity | Goldman Sachs | 10/26/2031 | USD | 108,000 | (589) | — | — | — | (589) |
| Fixed rate of 2.890% | U.S. CPI Urban Consumers NSA | Receives at Maturity, Pays at Maturity | Goldman Sachs | 10/28/2031 | USD | 110,000 | (161) | — | — | — | (161) |
| Fixed rate of 2.825% | U.S. CPI Urban Consumers NSA | Receives at Maturity, Pays at Maturity | Goldman Sachs | 11/03/2031 | USD | 210,000 | (1,845) | — | — | — | (1,845) |
| Fixed rate of 4.415% | UK Retail Price Index All Items Monthly | Receives at Maturity, Pays at Maturity | Goldman Sachs | 11/15/2031 | GBP | 165,000 | 4,155 | — | — | 4,155 | — |
| Eurostat Eurozone HICP ex-Tobacco NSA | Fixed rate of 2.004% | Receives at Maturity, Pays at Maturity | Goldman Sachs | 11/15/2031 | EUR | 115,000 | 1,725 | — | — | 1,725 | — |
| SOFR | Fixed rate of 1.424% | Receives Annually, Pays Annually | Goldman Sachs | 11/18/2031 | USD | 60,000 | (848) | — | — | — | (848) |
| SOFR | Fixed rate of 1.452% | Receives Annually, Pays Annually | Goldman Sachs | 11/19/2031 | USD | 40,000 | (671) | — | — | — | (671) |
| SOFR | Fixed rate of 1.401% | Receives Annually, Pays Annually | Goldman Sachs | 11/22/2031 | USD | 80,000 | (945) | — | — | — | (945) |
| SOFR | Fixed rate of 1.431% | Receives Annually, Pays Annually | Goldman Sachs | 11/22/2031 | USD | 80,000 | (1,176) | — | — | — | (1,176) |
| SOFR | Fixed rate of 1.421% | Receives Annually, Pays Annually | Goldman Sachs | 11/24/2031 | USD | 60,000 | (818) | — | — | — | (818) |
| SOFR | Fixed rate of 1.442% | Receives Annually, Pays Annually | Goldman Sachs | 11/24/2031 | USD | 60,000 | (938) | — | — | — | (938) |
| SOFR | Fixed rate of 1.477% | Receives Annually, Pays Annually | Goldman Sachs | 11/26/2031 | USD | 80,000 | (1,511) | — | — | — | (1,511) |
| Fixed rate of 1.315% | SOFR | Receives Annually, Pays Annually | Goldman Sachs | 11/30/2031 | USD | 110,000 | 359 | — | — | 359 | — |
| Fixed rate of 1.298% | SOFR | Receives Annually, Pays Annually | Goldman Sachs | 12/02/2031 | USD | 65,000 | 97 | — | — | 97 | — |
| Fixed rate of 1.277% | SOFR | Receives Annually, Pays Annually | Goldman Sachs | 12/02/2031 | USD | 65,000 | (33) | — | — | — | (33) |
| Fixed rate of 1.275% | SOFR | Receives Annually, Pays Annually | Goldman Sachs | 12/02/2031 | USD | 65,000 | (42) | — | — | — | (42) |
| Fixed rate of 1.275% | SOFR | Receives Annually, Pays Annually | Goldman Sachs | 12/02/2031 | USD | 65,000 | (45) | — | — | — | (45) |
| Fixed rate of 1.186% | SOFR | Receives Annually, Pays Annually | Goldman Sachs | 12/07/2031 | USD | 43,000 | (402) | — | — | — | (402) |
| Fixed rate of 1.238% | SOFR | Receives Annually, Pays Annually | Goldman Sachs | 12/07/2031 | USD | 130,000 | (571) | — | — | — | (571) |
| SOFR | Fixed rate of 1.333% | Receives Annually, Pays Annually | Goldman Sachs | 12/10/2031 | USD | 60,000 | (272) | — | — | — | (272) |
| Fixed rate of 1.307% | SOFR | Receives Annually, Pays Annually | Goldman Sachs | 12/13/2031 | USD | 60,000 | 115 | — | — | 115 | — |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 24 | CTIVP® – BlackRock Global Inflation-Protected Securities Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
| Cleared interest rate swap contracts (continued) | |||||||||||
| Fund receives | Fund pays | Payment frequency | Counterparty | Maturity date | Notional currency | Notional amount | Value ($) | Upfront payments ($) | Upfront receipts ($) | Unrealized appreciation ($) | Unrealized depreciation ($) |
| Fixed rate of 1.302% | SOFR | Receives Annually, Pays Annually | Goldman Sachs | 12/13/2031 | USD | 40,000 | 58 | — | — | 58 | — |
| Fixed rate of 4.265% | UK Retail Price Index All Items Monthly | Receives at Maturity, Pays at Maturity | Goldman Sachs | 12/15/2031 | GBP | 200,000 | 3,773 | — | — | 3,773 | — |
| UK Retail Price Index All Items Monthly | Fixed rate of 4.228% | Receives at Maturity, Pays at Maturity | Goldman Sachs | 12/15/2031 | GBP | 165,000 | (1,568) | — | — | — | (1,568) |
| Fixed rate of 4.449% | UK Retail Price Index All Items Monthly | Receives at Maturity, Pays at Maturity | Goldman Sachs | 12/15/2031 | GBP | 350,000 | (17,326) | — | — | — | (17,326) |
| Fixed rate of 1.272% | SOFR | Receives Annually, Pays Annually | Goldman Sachs | 12/16/2031 | USD | 65,000 | (102) | — | — | — | (102) |
| Fixed rate of 1.247% | SOFR | Receives Annually, Pays Annually | Goldman Sachs | 12/20/2031 | USD | 30,000 | (123) | — | — | — | (123) |
| Fixed rate of 1.239% | SOFR | Receives Annually, Pays Annually | Goldman Sachs | 12/20/2031 | USD | 30,000 | (146) | — | — | — | (146) |
| Fixed rate of 1.208% | SOFR | Receives Annually, Pays Annually | Goldman Sachs | 12/21/2031 | USD | 65,000 | (510) | — | — | — | (510) |
| Fixed rate of 1.192% | SOFR | Receives Annually, Pays Annually | Goldman Sachs | 12/22/2031 | USD | 32,500 | (307) | — | — | — | (307) |
| SOFR | Fixed rate of 1.314% | Receives Annually, Pays Annually | Goldman Sachs | 12/28/2031 | USD | 60,000 | (117) | — | — | — | (117) |
| SOFR | Fixed rate of 1.375% | Receives Annually, Pays Annually | Goldman Sachs | 12/31/2031 | USD | 32,000 | (191) | — | — | — | (191) |
| SOFR | Fixed rate of 1.367% | Receives Annually, Pays Annually | Goldman Sachs | 12/31/2031 | USD | 32,000 | (220) | — | — | — | (220) |
| SOFR | Fixed rate of 1.354% | Receives Annually, Pays Annually | Goldman Sachs | 01/03/2032 | USD | 33,000 | (180) | — | — | — | (180) |
| SOFR | Fixed rate of 1.311% | Receives Annually, Pays Annually | Goldman Sachs | 01/04/2032 | USD | 33,000 | (1) | — | — | — | (1) |
| Fixed rate of 1.775% | 3-Month USD LIBOR | Receives SemiAnnually, Pays Quarterly | Goldman Sachs | 01/26/2032 | USD | 100,000 | 1,820 | — | — | 1,820 | — |
| SOFR | Fixed rate of 1.310% | Receives Annually, Pays Annually | Goldman Sachs | 01/26/2032 | USD | 73,000 | (26) | — | — | — | (26) |
| 3-Month USD LIBOR | Fixed rate of 1.594% | Receives Quarterly, Pays SemiAnnually | Goldman Sachs | 02/22/2032 | USD | 225,000 | 21 | — | — | 21 | — |
| 3-Month USD LIBOR | Fixed rate of 1.621% | Receives Quarterly, Pays SemiAnnually | Goldman Sachs | 02/22/2032 | USD | 112,500 | (275) | — | — | — | (275) |
| 3-Month USD LIBOR | Fixed rate of 0.760% | Receives Quarterly, Pays SemiAnnually | Goldman Sachs | 05/03/2032 | USD | 180,000 | 14,654 | — | — | 14,654 | — |
| 3-Month USD LIBOR | Fixed rate of 0.765% | Receives Quarterly, Pays SemiAnnually | Goldman Sachs | 05/04/2032 | USD | 320,000 | 25,908 | — | — | 25,908 | — |
| 6-Month EURIBOR | Fixed rate of 0.440% | Receives SemiAnnually, Pays Annually | Goldman Sachs | 05/16/2033 | EUR | 50,000 | 223 | — | — | 223 | — |
| UK Retail Price Index All Items Monthly | Fixed rate of 3.420% | Receives at Maturity, Pays at Maturity | Goldman Sachs | 10/15/2034 | GBP | 815,000 | 120,195 | — | — | 120,195 | — |
| 3-Month USD LIBOR | Fixed rate of 1.907% | Receives Quarterly, Pays SemiAnnually | Goldman Sachs | 10/21/2034 | USD | 150,000 | (1,351) | — | — | — | (1,351) |
| 3-Month USD LIBOR | Fixed rate of 1.933% | Receives Quarterly, Pays SemiAnnually | Goldman Sachs | 10/22/2034 | USD | 100,000 | (1,135) | — | — | — | (1,135) |
| 3-Month USD LIBOR | Fixed rate of 1.998% | Receives Quarterly, Pays SemiAnnually | Goldman Sachs | 11/07/2034 | USD | 130,000 | (2,221) | — | — | — | (2,221) |
| 3-Month USD LIBOR | Fixed rate of 2.111% | Receives Quarterly, Pays SemiAnnually | Goldman Sachs | 11/12/2034 | USD | 130,000 | (3,536) | — | — | — | (3,536) |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| CTIVP® – BlackRock Global Inflation-Protected Securities Fund | Annual Report 2021 | 25 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
| Cleared interest rate swap contracts (continued) | |||||||||||
| Fund receives | Fund pays | Payment frequency | Counterparty | Maturity date | Notional currency | Notional amount | Value ($) | Upfront payments ($) | Upfront receipts ($) | Unrealized appreciation ($) | Unrealized depreciation ($) |
| UK Retail Price Index All Items Monthly | Fixed rate of 3.360% | Receives at Maturity, Pays at Maturity | Goldman Sachs | 01/15/2035 | GBP | 300,000 | 54,611 | — | — | 54,611 | — |
| UK Retail Price Index All Items Monthly | Fixed rate of 3.390% | Receives at Maturity, Pays at Maturity | Goldman Sachs | 01/15/2035 | GBP | 300,000 | 52,035 | — | — | 52,035 | — |
| Fixed rate of 3.360% | UK Retail Price Index All Items Monthly | Receives at Maturity, Pays at Maturity | Goldman Sachs | 10/15/2039 | GBP | 815,000 | (160,536) | — | — | — | (160,536) |
| 3-Month USD LIBOR | Fixed rate of 2.098% | Receives Quarterly, Pays SemiAnnually | Goldman Sachs | 10/23/2039 | USD | 70,000 | (965) | — | — | — | (965) |
| Fixed rate of 3.341% | UK Retail Price Index All Items Monthly | Receives at Maturity, Pays at Maturity | Goldman Sachs | 01/15/2040 | GBP | 300,000 | (67,015) | — | — | — | (67,015) |
| Fixed rate of 3.310% | UK Retail Price Index All Items Monthly | Receives at Maturity, Pays at Maturity | Goldman Sachs | 01/15/2040 | GBP | 300,000 | (70,978) | — | — | — | (70,978) |
| 3-Month USD LIBOR | Fixed rate of 0.973% | Receives Quarterly, Pays SemiAnnually | Goldman Sachs | 08/17/2040 | USD | 60,000 | 7,289 | — | — | 7,289 | — |
| Fixed rate of 3.333% | UK Retail Price Index All Items Monthly | Receives at Maturity, Pays at Maturity | Goldman Sachs | 11/15/2040 | GBP | 115,000 | (31,271) | — | — | — | (31,271) |
| Fixed rate of 3.560% | UK Retail Price Index All Items Monthly | Receives at Maturity, Pays at Maturity | Goldman Sachs | 03/15/2041 | GBP | 120,000 | (21,313) | — | — | — | (21,313) |
| UK Retail Price Index All Items Monthly | Fixed rate of 3.725% | Receives at Maturity, Pays at Maturity | Goldman Sachs | 12/15/2041 | GBP | 100,000 | 3,452 | — | — | 3,452 | — |
| UK Retail Price Index All Items Monthly | Fixed rate of 3.774% | Receives at Maturity, Pays at Maturity | Goldman Sachs | 12/15/2041 | GBP | 65,000 | 1,226 | — | — | 1,226 | — |
| UK Retail Price Index All Items Monthly | Fixed rate of 3.855% | Receives at Maturity, Pays at Maturity | Goldman Sachs | 12/15/2041 | GBP | 65,000 | (1,503) | — | — | — | (1,503) |
| Fixed rate of 3.270% | UK Retail Price Index All Items Monthly | Receives at Maturity, Pays at Maturity | Goldman Sachs | 10/15/2044 | GBP | 630,000 | (162,824) | — | — | — | (162,824) |
| 3-Month USD LIBOR | Fixed rate of 2.110% | Receives Quarterly, Pays SemiAnnually | Goldman Sachs | 11/15/2044 | USD | 160,000 | (2,737) | — | — | — | (2,737) |
| Fixed rate of 3.239% | UK Retail Price Index All Items Monthly | Receives at Maturity, Pays at Maturity | Goldman Sachs | 01/15/2045 | GBP | 200,000 | (58,121) | — | — | — | (58,121) |
| Fixed rate of 3.220% | UK Retail Price Index All Items Monthly | Receives at Maturity, Pays at Maturity | Goldman Sachs | 01/15/2045 | GBP | 300,000 | (90,533) | — | — | — | (90,533) |
| Fixed rate of 1.362% | SOFR | Receives Annually, Pays Annually | Goldman Sachs | 05/15/2047 | USD | 170,000 | (3,889) | — | — | — | (3,889) |
| SOFR | Fixed rate of 1.640% | Receives Annually, Pays Annually | Goldman Sachs | 05/15/2047 | USD | 320,000 | (9,449) | — | — | — | (9,449) |
| 3-Month USD LIBOR | Fixed rate of 2.378% | Receives Quarterly, Pays SemiAnnually | Goldman Sachs | 07/05/2049 | USD | 60,000 | (2,736) | — | — | — | (2,736) |
| 3-Month USD LIBOR | Fixed rate of 1.709% | Receives Quarterly, Pays SemiAnnually | Goldman Sachs | 08/16/2049 | USD | 50,000 | 94 | — | — | 94 | — |
| 3-Month USD LIBOR | Fixed rate of 1.667% | Receives Quarterly, Pays SemiAnnually | Goldman Sachs | 08/17/2049 | USD | 40,000 | 196 | — | — | 196 | — |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 26 | CTIVP® – BlackRock Global Inflation-Protected Securities Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
| Cleared interest rate swap contracts (continued) | |||||||||||
| Fund receives | Fund pays | Payment frequency | Counterparty | Maturity date | Notional currency | Notional amount | Value ($) | Upfront payments ($) | Upfront receipts ($) | Unrealized appreciation ($) | Unrealized depreciation ($) |
| UK Retail Price Index All Items Monthly | Fixed rate of 3.160% | Receives at Maturity, Pays at Maturity | Goldman Sachs | 10/15/2049 | GBP | 630,000 | 205,483 | — | — | 205,483 | — |
| UK Retail Price Index All Items Monthly | Fixed rate of 3.111% | Receives at Maturity, Pays at Maturity | Goldman Sachs | 01/15/2050 | GBP | 300,000 | 110,950 | — | — | 110,950 | — |
| UK Retail Price Index All Items Monthly | Fixed rate of 3.133% | Receives at Maturity, Pays at Maturity | Goldman Sachs | 01/15/2050 | GBP | 200,000 | 70,659 | — | — | 70,659 | — |
| Fixed rate of 1.828% | 3-Month USD LIBOR | Receives SemiAnnually, Pays Quarterly | Goldman Sachs | 02/10/2050 | USD | 50,000 | 1,537 | — | — | 1,537 | — |
| Fixed rate of 1.870% | 3-Month USD LIBOR | Receives SemiAnnually, Pays Quarterly | Goldman Sachs | 02/19/2051 | USD | 90,000 | 3,803 | — | — | 3,803 | — |
| Fixed rate of 1.905% | 3-Month USD LIBOR | Receives SemiAnnually, Pays Quarterly | Goldman Sachs | 02/22/2051 | USD | 45,000 | 2,276 | — | — | 2,276 | — |
| Fixed rate of 1.904% | 3-Month USD LIBOR | Receives SemiAnnually, Pays Quarterly | Goldman Sachs | 06/11/2051 | USD | 20,000 | 906 | — | — | 906 | — |
| Fixed rate of 1.793% | Eurostat Eurozone HICP ex-Tobacco NSA | Receives at Maturity, Pays at Maturity | Goldman Sachs | 07/15/2051 | EUR | 50,000 | (13,377) | — | — | — | (13,377) |
| Fixed rate of 1.886% | Eurostat Eurozone HICP ex-Tobacco NSA | Receives at Maturity, Pays at Maturity | Goldman Sachs | 08/15/2051 | EUR | 85,000 | (18,544) | — | — | — | (18,544) |
| Fixed rate of 2.320% | Eurostat Eurozone HICP ex-Tobacco NSA | Receives at Maturity, Pays at Maturity | Goldman Sachs | 10/15/2051 | EUR | 65,000 | 1,929 | — | — | 1,929 | — |
| Fixed rate of 2.277% | Eurostat Eurozone HICP ex-Tobacco NSA | Receives at Maturity, Pays at Maturity | Goldman Sachs | 10/15/2051 | EUR | 70,000 | 315 | — | — | 315 | — |
| Fixed rate of 2.221% | Eurostat Eurozone HICP ex-Tobacco NSA | Receives at Maturity, Pays at Maturity | Goldman Sachs | 10/15/2051 | EUR | 67,500 | (1,881) | — | — | — | (1,881) |
| Fixed rate of 2.132% | Eurostat Eurozone HICP ex-Tobacco NSA | Receives at Maturity, Pays at Maturity | Goldman Sachs | 10/15/2051 | EUR | 67,500 | (5,319) | — | — | — | (5,319) |
| Fixed rate of 2.205% | Eurostat Eurozone HICP ex-Tobacco NSA | Receives at Maturity, Pays at Maturity | Goldman Sachs | 10/15/2051 | EUR | 310,000 | (11,544) | — | — | — | (11,544) |
| U.S. CPI Urban Consumers NSA | Fixed rate of 2.570% | Receives at Maturity, Pays at Maturity | Goldman Sachs | 10/22/2051 | USD | 107,000 | 764 | — | — | 764 | — |
| U.S. CPI Urban Consumers NSA | Fixed rate of 2.624% | Receives at Maturity, Pays at Maturity | Goldman Sachs | 10/25/2051 | USD | 108,000 | (1,618) | — | — | — | (1,618) |
| U.S. CPI Urban Consumers NSA | Fixed rate of 2.606% | Receives at Maturity, Pays at Maturity | Goldman Sachs | 10/25/2051 | USD | 465,000 | (3,524) | — | — | — | (3,524) |
| U.S. CPI Urban Consumers NSA | Fixed rate of 2.620% | Receives at Maturity, Pays at Maturity | Goldman Sachs | 10/26/2051 | USD | 108,000 | (1,441) | — | — | — | (1,441) |
| U.S. CPI Urban Consumers NSA | Fixed rate of 2.625% | Receives at Maturity, Pays at Maturity | Goldman Sachs | 10/28/2051 | USD | 110,000 | (1,696) | — | — | — | (1,696) |
| U.S. CPI Urban Consumers NSA | Fixed rate of 2.540% | Receives at Maturity, Pays at Maturity | Goldman Sachs | 11/03/2051 | USD | 60,000 | 1,148 | — | — | 1,148 | — |
| Eurostat Eurozone HICP ex-Tobacco NSA | Fixed rate of 2.127% | Receives at Maturity, Pays at Maturity | Goldman Sachs | 11/15/2051 | EUR | 50,000 | 4,095 | — | — | 4,095 | — |
| Eurostat Eurozone HICP ex-Tobacco NSA | Fixed rate of 2.184% | Receives at Maturity, Pays at Maturity | Goldman Sachs | 11/15/2051 | EUR | 50,000 | 2,486 | — | — | 2,486 | — |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| CTIVP® – BlackRock Global Inflation-Protected Securities Fund | Annual Report 2021 | 27 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
| Cleared interest rate swap contracts (continued) | |||||||||||
| Fund receives | Fund pays | Payment frequency | Counterparty | Maturity date | Notional currency | Notional amount | Value ($) | Upfront payments ($) | Upfront receipts ($) | Unrealized appreciation ($) | Unrealized depreciation ($) |
| Eurostat Eurozone HICP ex-Tobacco NSA | Fixed rate of 2.194% | Receives at Maturity, Pays at Maturity | Goldman Sachs | 11/15/2051 | EUR | 50,000 | 2,194 | — | — | 2,194 | — |
| Fixed rate of 2.628% | U.S. CPI Urban Consumers NSA | Receives at Maturity, Pays at Maturity | Goldman Sachs | 11/15/2051 | USD | 75,000 | 1,253 | — | — | 1,253 | — |
| Eurostat Eurozone HICP ex-Tobacco NSA | Fixed rate of 2.170% | Receives at Maturity, Pays at Maturity | Goldman Sachs | 11/15/2051 | EUR | 20,000 | 1,152 | — | — | 1,152 | — |
| Fixed rate of 2.206% | Eurostat Eurozone HICP ex-Tobacco NSA | Receives at Maturity, Pays at Maturity | Goldman Sachs | 11/15/2051 | EUR | 25,000 | (987) | — | — | — | (987) |
| U.S. CPI Urban Consumers NSA | Fixed rate of 2.676% | Receives at Maturity, Pays at Maturity | Goldman Sachs | 11/17/2051 | USD | 75,000 | 2,749 | — | — | 2,749 | — |
| Fixed rate of 2.626% | U.S. CPI Urban Consumers NSA | Receives at Maturity, Pays at Maturity | Goldman Sachs | 11/22/2051 | USD | 20,000 | 319 | — | — | 319 | — |
| Fixed rate of 2.613% | U.S. CPI Urban Consumers NSA | Receives at Maturity, Pays at Maturity | Goldman Sachs | 11/24/2051 | USD | 75,000 | 796 | — | — | 796 | — |
| Fixed rate of 1.389% | SOFR | Receives Annually, Pays Annually | Goldman Sachs | 12/15/2051 | USD | 30,000 | (321) | — | — | — | (321) |
| Fixed rate of 2.096% | Eurostat Eurozone HICP ex-Tobacco NSA | Receives at Maturity, Pays at Maturity | Goldman Sachs | 12/15/2051 | EUR | 10,000 | (958) | — | — | — | (958) |
| Fixed rate of 2.170% | Eurostat Eurozone HICP ex-Tobacco NSA | Receives at Maturity, Pays at Maturity | Goldman Sachs | 12/15/2051 | EUR | 50,000 | (2,717) | — | — | — | (2,717) |
| Fixed rate of 2.125% | Eurostat Eurozone HICP ex-Tobacco NSA | Receives at Maturity, Pays at Maturity | Goldman Sachs | 12/15/2051 | EUR | 50,000 | (3,988) | — | — | — | (3,988) |
| U.S. CPI Urban Consumers NSA | Fixed rate of 2.445% | Receives at Maturity, Pays at Maturity | Goldman Sachs | 12/20/2051 | USD | 75,000 | 3,709 | — | — | 3,709 | — |
| 3-Month USD LIBOR | Fixed rate of 1.090% | Receives Quarterly, Pays SemiAnnually | Goldman Sachs | 06/20/2052 | USD | 60,000 | 9,438 | — | — | 9,438 | — |
| 3-Month USD LIBOR | Fixed rate of 1.136% | Receives Quarterly, Pays SemiAnnually | Goldman Sachs | 06/20/2052 | USD | 60,000 | 8,771 | — | — | 8,771 | — |
| 3-Month USD LIBOR | Fixed rate of 0.881% | Receives Quarterly, Pays SemiAnnually | Goldman Sachs | 07/12/2053 | USD | 60,000 | 12,651 | — | — | 12,651 | — |
| Fixed rate of 1.929% | 3-Month USD LIBOR | Receives SemiAnnually, Pays Quarterly | Goldman Sachs | 12/01/2056 | USD | 10,000 | 413 | — | — | 413 | — |
| Total | 272,556 | — | — | 1,345,264 | (1,072,708) | ||||||
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 28 | CTIVP® – BlackRock Global Inflation-Protected Securities Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Notes to Portfolio of
Investments
| (a) | Principal amounts are denominated in United States Dollars unless otherwise noted. |
| (b) | Principal and interest may not be guaranteed by a governmental entity. |
| (c) | Represents privately placed and other securities and instruments exempt from Securities and Exchange Commission registration (collectively, private placements), such as Section 4(a)(2) and Rule 144A eligible securities, which are often sold only to qualified institutional buyers. At December 31, 2021, the total value of these securities amounted to $52,476,634, which represents 42.85% of total net assets. |
| (d) | This security or a portion of this security has been pledged as collateral in connection with derivative contracts. |
| (e) | The rate shown is the seven-day current annualized yield at December 31, 2021. |
| (f) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended December 31, 2021 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Realized gain (loss)($) | Dividends($) | End of period shares |
| Columbia Short-Term Cash Fund, 0.085% | ||||||||
| 2,526,899 | 50,110,679 | (49,396,145) | (178) | 3,241,255 | (91) | 1,818 | 3,241,903 | |
Abbreviation Legend
| EURIBOR | Euro Interbank Offered Rate |
| LIBOR | London Interbank Offered Rate |
| SOFR | Secured Overnight Financing Rate |
Currency Legend
| AUD | Australian Dollar |
| CAD | Canada Dollar |
| DKK | Danish Krone |
| EUR | Euro |
| GBP | British Pound |
| JPY | Japanese Yen |
| NZD | New Zealand Dollar |
| SEK | Swedish Krona |
| USD | US Dollar |
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| CTIVP® – BlackRock Global Inflation-Protected Securities Fund | Annual Report 2021 | 29 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Fair value measurements (continued)
Investments falling into the Level 3 category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and estimated cash flows, and comparable company data.
Investments falling into the Level 3 category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at December 31, 2021:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Investments in Securities | ||||
| Foreign Government Obligations | — | 1,140,733 | — | 1,140,733 |
| Inflation-Indexed Bonds | — | 115,955,856 | — | 115,955,856 |
| U.S. Treasury Obligations | 1,700,430 | — | — | 1,700,430 |
| Options Purchased Calls | 2,406 | 303,457 | — | 305,863 |
| Options Purchased Puts | — | 230,205 | — | 230,205 |
| Money Market Funds | 3,241,255 | — | — | 3,241,255 |
| Total Investments in Securities | 4,944,091 | 117,630,251 | — | 122,574,342 |
| Investments in Derivatives | ||||
| Asset | ||||
| Forward Foreign Currency Exchange Contracts | — | 48,516 | — | 48,516 |
| Futures Contracts | 120,058 | — | — | 120,058 |
| Swap Contracts | — | 1,345,264 | — | 1,345,264 |
| Liability | ||||
| Forward Foreign Currency Exchange Contracts | — | (763,922) | — | (763,922) |
| Futures Contracts | (130,436) | — | — | (130,436) |
| Options Contracts Written | (766) | (629,826) | — | (630,592) |
| Swap Contracts | — | (1,072,708) | — | (1,072,708) |
| Total | 4,932,947 | 116,557,575 | — | 121,490,522 |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The Fund’s assets assigned to
the Level 2 input category are generally valued using the market approach, in which a security’s value is determined through reference to prices and information from market transactions for similar or identical
assets.
Forward foreign currency exchange
contracts, futures contracts and swap contracts are valued at unrealized appreciation (depreciation).
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 30 | CTIVP® – BlackRock Global Inflation-Protected Securities Fund | Annual Report 2021 |
Statement of Assets and Liabilities
December 31, 2021
December 31, 2021
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $108,624,375) | $118,797,019 |
| Affiliated issuers (cost $3,241,433) | 3,241,255 |
| Options purchased (cost $556,814) | 536,068 |
| Foreign currency (cost $513,924) | 522,962 |
| Margin deposits on: | |
| Futures contracts | 280,728 |
| Swap contracts | 468,590 |
| Unrealized appreciation on forward foreign currency exchange contracts | 48,516 |
| Receivable for: | |
| Investments sold | 704,375 |
| Dividends | 205 |
| Interest | 239,010 |
| Foreign tax reclaims | 3,432 |
| Variation margin for futures contracts | 6,867 |
| Variation margin for swap contracts | 28,092 |
| Expense reimbursement due from Investment Manager | 255 |
| Prepaid expenses | 7,251 |
| Total assets | 124,884,625 |
| Liabilities | |
| Option contracts written, at value (premiums received $655,797) | 630,592 |
| Unrealized depreciation on forward foreign currency exchange contracts | 763,922 |
| Cash collateral due to broker for: | |
| Other(a) | 88,265 |
| Payable for: | |
| Investments purchased | 518,610 |
| Capital shares purchased | 100,388 |
| Variation margin for futures contracts | 18,636 |
| Variation margin for swap contracts | 68,949 |
| Management services fees | 1,713 |
| Distribution and/or service fees | 524 |
| Service fees | 6,242 |
| Compensation of board members | 182,724 |
| Compensation of chief compliance officer | 22 |
| Other expenses | 36,963 |
| Total liabilities | 2,417,550 |
| Net assets applicable to outstanding capital stock | $122,467,075 |
| Represented by | |
| Paid in capital | 111,076,374 |
| Total distributable earnings (loss) | 11,390,701 |
| Total - representing net assets applicable to outstanding capital stock | $122,467,075 |
| Class 1 | |
| Net assets | $682,222 |
| Shares outstanding | 111,168 |
| Net asset value per share | $6.14 |
| Class 2 | |
| Net assets | $31,002,274 |
| Shares outstanding | 5,178,325 |
| Net asset value per share | $5.99 |
| Class 3 | |
| Net assets | $90,782,579 |
| Shares outstanding | 14,887,273 |
| Net asset value per share | $6.10 |
| (a) | Includes collateral related to options purchased and options contracts written. |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| CTIVP® – BlackRock Global Inflation-Protected Securities Fund | Annual Report 2021 | 31 |
Statement of Operations
Year Ended December 31, 2021
Year Ended December 31, 2021
| Net investment income | |
| Income: | |
| Dividends — affiliated issuers | $1,818 |
| Interest | 3,724,509 |
| Foreign taxes withheld | (1,060) |
| Total income | 3,725,267 |
| Expenses: | |
| Management services fees | 589,487 |
| Distribution and/or service fees | |
| Class 2 | 65,130 |
| Class 3 | 111,476 |
| Service fees | 69,360 |
| Compensation of board members | 49,912 |
| Custodian fees | 36,009 |
| Printing and postage fees | 17,712 |
| Audit fees | 49,500 |
| Legal fees | 11,069 |
| Interest on collateral | 1,652 |
| Compensation of chief compliance officer | 20 |
| Other | 9,427 |
| Total expenses | 1,010,754 |
| Fees waived or expenses reimbursed by Investment Manager and its affiliates | (118,817) |
| Total net expenses | 891,937 |
| Net investment income | 2,833,330 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 2,521,579 |
| Investments — affiliated issuers | (91) |
| Foreign currency translations | (144,545) |
| Forward foreign currency exchange contracts | 2,349,054 |
| Futures contracts | 205,664 |
| Options purchased | (31,964) |
| Options contracts written | 72,095 |
| Swap contracts | 3,778 |
| Net realized gain | 4,975,570 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | (3,349,476) |
| Investments — affiliated issuers | (178) |
| Foreign currency translations | (14,925) |
| Forward foreign currency exchange contracts | 655,960 |
| Futures contracts | (40,332) |
| Options purchased | (5,670) |
| Options contracts written | (119,314) |
| Swap contracts | 262,358 |
| Net change in unrealized appreciation (depreciation) | (2,611,577) |
| Net realized and unrealized gain | 2,363,993 |
| Net increase in net assets resulting from operations | $5,197,323 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 32 | CTIVP® – BlackRock Global Inflation-Protected Securities Fund | Annual Report 2021 |
Statement of Changes in Net Assets
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | |
| Operations | ||
| Net investment income (loss) | $2,833,330 | $(389,727) |
| Net realized gain (loss) | 4,975,570 | (342,832) |
| Net change in unrealized appreciation (depreciation) | (2,611,577) | 9,772,386 |
| Net increase in net assets resulting from operations | 5,197,323 | 9,039,827 |
| Distributions to shareholders | ||
| Net investment income and net realized gains | ||
| Class 1 | (9,823) | (1,178) |
| Class 2 | (696,846) | (446,018) |
| Class 3 | (2,466,100) | (2,032,285) |
| Total distributions to shareholders | (3,172,769) | (2,479,481) |
| Increase (decrease) in net assets from capital stock activity | 12,563,748 | (7,500,076) |
| Total increase (decrease) in net assets | 14,588,302 | (939,730) |
| Net assets at beginning of year | 107,878,773 | 108,818,503 |
| Net assets at end of year | $122,467,075 | $107,878,773 |
| Year Ended | Year Ended | |||
| December 31, 2021 | December 31, 2020 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class 1 | ||||
| Subscriptions | 116,795 | 707,018 | 17,336 | 103,071 |
| Distributions reinvested | 1,618 | 9,823 | 198 | 1,178 |
| Redemptions | (25,233) | (154,067) | (4,415) | (25,783) |
| Net increase | 93,180 | 562,774 | 13,119 | 78,466 |
| Class 2 | ||||
| Subscriptions | 1,754,197 | 10,314,906 | 687,541 | 3,990,780 |
| Distributions reinvested | 117,512 | 696,846 | 76,768 | 446,018 |
| Redemptions | (330,257) | (1,941,198) | (680,209) | (3,869,999) |
| Net increase | 1,541,452 | 9,070,554 | 84,100 | 566,799 |
| Class 3 | ||||
| Subscriptions | 1,383,197 | 8,230,554 | 1,049,010 | 6,157,463 |
| Distributions reinvested | 408,972 | 2,466,100 | 343,872 | 2,032,285 |
| Redemptions | (1,294,141) | (7,766,234) | (2,830,058) | (16,335,089) |
| Net increase (decrease) | 498,028 | 2,930,420 | (1,437,176) | (8,145,341) |
| Total net increase (decrease) | 2,132,660 | 12,563,748 | (1,339,957) | (7,500,076) |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| CTIVP® – BlackRock Global Inflation-Protected Securities Fund | Annual Report 2021 | 33 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect any fees and expenses imposed under your
Contract and/or Qualified Plan, as applicable; such fees and expenses would reduce the total returns for all periods shown. Total return and portfolio turnover are not annualized for periods of less than one year. The
portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain derivatives, if any. If such transactions were included, the Fund’s portfolio
turnover rate may be higher.
| Net asset value, beginning of period | Net investment income (loss) | Net realized and unrealized gain (loss) | Total from investment operations | Distributions from net investment income | Distributions from net realized gains | Total distributions to shareholders | |
| Class 1 | |||||||
| Year Ended 12/31/2021 | $6.04 | 0.18 | 0.09 | 0.27 | (0.05) | (0.12) | (0.17) |
| Year Ended 12/31/2020 | $5.66 | (0.01) | 0.54 | 0.53 | (0.04) | (0.11) | (0.15) |
| Year Ended 12/31/2019 | $5.42 | 0.03 | 0.40 | 0.43 | (0.19) | — | (0.19) |
| Year Ended 12/31/2018 | $5.47 | 0.08 | (0.10) | (0.02) | — | (0.03) | (0.03) |
| Year Ended 12/31/2017 | $5.51 | 0.06 | 0.08 | 0.14 | (0.13) | (0.05) | (0.18) |
| Class 2 | |||||||
| Year Ended 12/31/2021 | $5.89 | 0.14 | 0.12 | 0.26 | (0.04) | (0.12) | (0.16) |
| Year Ended 12/31/2020 | $5.53 | (0.03) | 0.52 | 0.49 | (0.02) | (0.11) | (0.13) |
| Year Ended 12/31/2019 | $5.30 | 0.02 | 0.38 | 0.40 | (0.17) | — | (0.17) |
| Year Ended 12/31/2018 | $5.37 | 0.06 | (0.10) | (0.04) | — | (0.03) | (0.03) |
| Year Ended 12/31/2017 | $5.41 | 0.05 | 0.08 | 0.13 | (0.12) | (0.05) | (0.17) |
| Class 3 | |||||||
| Year Ended 12/31/2021 | $6.00 | 0.15 | 0.12 | 0.27 | (0.05) | (0.12) | (0.17) |
| Year Ended 12/31/2020 | $5.63 | (0.02) | 0.53 | 0.51 | (0.03) | (0.11) | (0.14) |
| Year Ended 12/31/2019 | $5.39 | 0.03 | 0.39 | 0.42 | (0.18) | — | (0.18) |
| Year Ended 12/31/2018 | $5.45 | 0.07 | (0.10) | (0.03) | — | (0.03) | (0.03) |
| Year Ended 12/31/2017 | $5.49 | 0.05 | 0.08 | 0.13 | (0.12) | (0.05) | (0.17) |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Ratios include interest on collateral expense which is less than 0.01%. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 34 | CTIVP® – BlackRock Global Inflation-Protected Securities Fund | Annual Report 2021 |
Financial Highlights (continued)
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets(a) | Total net expense ratio to average net assets(a),(b) | Net investment income (loss) ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Class 1 | |||||||
| Year Ended 12/31/2021 | $6.14 | 4.56% | 0.72%(c) | 0.61%(c) | 2.99% | 58% | $682 |
| Year Ended 12/31/2020 | $6.04 | 9.37% | 0.74% | 0.65% | (0.09%) | 70% | $109 |
| Year Ended 12/31/2019 | $5.66 | 7.90% | 0.71%(c) | 0.61%(c) | 0.57% | 62% | $28 |
| Year Ended 12/31/2018 | $5.42 | (0.33%) | 0.71%(c) | 0.61%(c) | 1.41% | 118% | $11 |
| Year Ended 12/31/2017 | $5.47 | 2.66% | 0.71% | 0.62% | 1.09% | 99% | $11 |
| Class 2 | |||||||
| Year Ended 12/31/2021 | $5.99 | 4.43% | 0.97%(c) | 0.87%(c) | 2.41% | 58% | $31,002 |
| Year Ended 12/31/2020 | $5.89 | 8.97% | 0.97% | 0.89% | (0.47%) | 70% | $21,434 |
| Year Ended 12/31/2019 | $5.53 | 7.63% | 0.96%(c) | 0.86%(c) | 0.38% | 62% | $19,663 |
| Year Ended 12/31/2018 | $5.30 | (0.71%) | 0.95%(c) | 0.86%(c) | 1.14% | 118% | $17,272 |
| Year Ended 12/31/2017 | $5.37 | 2.46% | 0.97% | 0.87% | 0.86% | 99% | $13,986 |
| Class 3 | |||||||
| Year Ended 12/31/2021 | $6.10 | 4.48% | 0.85%(c) | 0.74%(c) | 2.46% | 58% | $90,783 |
| Year Ended 12/31/2020 | $6.00 | 9.11% | 0.85% | 0.76% | (0.34%) | 70% | $86,336 |
| Year Ended 12/31/2019 | $5.63 | 7.81% | 0.83%(c) | 0.73%(c) | 0.49% | 62% | $89,128 |
| Year Ended 12/31/2018 | $5.39 | (0.51%) | 0.82%(c) | 0.74%(c) | 1.28% | 118% | $96,659 |
| Year Ended 12/31/2017 | $5.45 | 2.54% | 0.84% | 0.75% | 0.97% | 99% | $111,829 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| CTIVP® – BlackRock Global Inflation-Protected Securities Fund | Annual Report 2021 | 35 |
Notes to Financial Statements
December 31, 2021
December 31, 2021
Note 1. Organization
CTIVP® – BlackRock
Global Inflation-Protected Securities Fund (the Fund), a series of Columbia Funds Variable Series Trust II (the Trust), is a non-diversified fund. The Trust is registered under the Investment Company Act of 1940, as
amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers Class 1, Class 2 and Class 3 shares to separate accounts funding variable annuity contracts and variable life insurance policies (collectively, Contracts) issued
by affiliated and unaffiliated life insurance companies (Participating Insurance Companies) as well as qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors (Qualified
Investors) authorized by Columbia Management Investment Distributors, Inc. (the Distributor). You may not buy (nor will you own) shares of the Fund directly. You may invest by participating in a Qualified Plan or by
buying a Contract and making allocations to the Fund. Although all share classes generally have identical voting, dividend and liquidation rights, each share class votes separately when required by the Trust’s
organizational documents or by law. Different share classes pay different net investment income distribution amounts to the extent the expenses of such share classes differ, and distributions in liquidation will be
proportional to the net asset value of each share class. Each share class has its own cost structure and other features.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Debt securities generally are
valued by pricing services approved by the Board of Trustees based upon market transactions for normal, institutional-size trading units of similar securities. The services may use various pricing techniques that take
into account, as applicable, factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data, as well as approved independent broker-dealer quotes. Debt securities for
which quotations are not readily available or not believed to be reflective of market value may also be valued based upon a bid quote from an approved independent broker-dealer. Debt securities maturing in 60 days or
less are valued primarily at amortized market value, unless this method results in a valuation that management believes does not approximate fair value.
Investments in open-end investment
companies (other than exchange-traded funds (ETFs)), are valued at the latest net asset value reported by those companies as of the valuation time.
Forward foreign currency exchange
contracts are marked-to-market based upon foreign currency exchange rates provided by a pricing service.
Futures and options on futures
contracts are valued based upon the settlement price at the close of regular trading on their principal exchanges or, in the absence of a settlement price, at the mean of the latest quoted bid and ask prices.
Option contracts are valued at the
mean of the latest quoted bid and ask prices on their primary exchanges. Option contracts, including over-the-counter option contracts, with no readily available market quotations are valued using mid-market
evaluations from independent third-party vendors.
| 36 | CTIVP® – BlackRock Global Inflation-Protected Securities Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Swap transactions are valued
through an independent pricing service or broker, or if neither is available, through an internal model based upon observable inputs.
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Foreign currency transactions and
translations
The values of all assets and
liabilities denominated in foreign currencies are generally translated into U.S. dollars at exchange rates determined at the close of regular trading on the New York Stock Exchange. Net realized and unrealized gains
(losses) on foreign currency transactions and translations include gains (losses) arising from the fluctuation in exchange rates between trade and settlement dates on securities transactions, gains (losses) arising
from the disposition of foreign currency and currency gains (losses) between the accrual and payment dates on dividends, interest income and foreign withholding taxes.
For financial statement purposes,
the Fund does not distinguish that portion of gains (losses) on investments which is due to changes in foreign exchange rates from that which is due to changes in market prices of the investments. Such fluctuations
are included with the net realized and unrealized gains (losses) on investments in the Statement of Operations.
Derivative instruments
The Fund invests in certain
derivative instruments, as detailed below, in seeking to meet its investment objectives. Derivatives are instruments whose values depend on, or are derived from, in whole or in part, the value of one or more
securities, currencies, commodities, indices, or other assets or instruments. Derivatives may be used to increase investment flexibility (including to maintain cash reserves while maintaining desired exposure to
certain assets), for risk management (hedging) purposes, to facilitate trading, to reduce transaction costs and to pursue higher investment returns. The Fund may also use derivative instruments to mitigate certain
investment risks, such as foreign currency exchange rate risk, interest rate risk and credit risk. Derivatives may involve various risks, including the potential inability of the counterparty to fulfill its
obligations under the terms of the contract, the potential for an illiquid secondary market (making it difficult for the Fund to sell or terminate, including at favorable prices) and the potential for market movements
which may expose the Fund to gains or losses in excess of the amount shown in the Statement of Assets and Liabilities. The notional amounts of derivative instruments, if applicable, are not recorded in the financial
statements.
A derivative instrument may suffer
a marked-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform its
obligations under the contract. The Fund’s risk of loss from counterparty credit risk on over-the-counter derivatives is generally limited to the aggregate unrealized gain netted against any collateral held by
the Fund and the amount of any variation margin held by the counterparty, plus any replacement costs or related amounts. With exchange-traded or centrally cleared derivatives, there is reduced counterparty credit risk
to the Fund since the clearinghouse or central counterparty (CCP) provides some protection in the case of clearing member default. The clearinghouse or CCP stands between the buyer and the seller of the contract;
therefore, additional counterparty credit risk is failure of the clearinghouse or CCP. However, credit risk still exists in exchange-traded or centrally cleared derivatives with respect to initial and variation margin
that is held in a broker’s customer account. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy
and at that time there is a shortfall in the
| CTIVP® – BlackRock Global Inflation-Protected Securities Fund | Annual Report 2021 | 37 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
aggregate amount of margin held by the clearing
broker for all its clients and such shortfall is remedied by the CCP or otherwise, U.S. bankruptcy laws will typically allocate that shortfall on a pro-rata basis across all the clearing broker’s customers
(including the Fund), potentially resulting in losses to the Fund.
In order to better define its
contractual rights and to secure rights that will help the Fund mitigate its counterparty risk, the Fund may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (ISDA Master Agreement)
or similar agreement with its derivatives counterparties. An ISDA Master Agreement is an agreement between the Fund and a counterparty that governs over-the-counter derivatives and foreign exchange forward contracts
and contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset
with the counterparty certain derivative instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically
permit a single net payment in the event of default (close-out netting), including the bankruptcy or insolvency of the counterparty. Note, however, that bankruptcy or insolvency laws of a particular jurisdiction may
impose restrictions on or prohibitions against the right of offset or netting in bankruptcy, insolvency or other events.
Collateral (margin) requirements
differ by type of derivative. Margin requirements are established by the clearinghouse or CCP for exchange-traded and centrally cleared derivatives. Brokers can ask for margin in excess of the minimum in certain
circumstances. Collateral terms for most over-the-counter derivatives are subject to regulatory requirements to exchange variation margin with trading counterparties and may have contract specific margin terms as
well. For over-the-counter derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the marked-to-market amount for each transaction under such agreement and
comparing that amount to the value of any variation margin currently pledged by the Fund and/or the counterparty. Generally, the amount of collateral due from or to a party has to exceed a minimum transfer amount
threshold (e.g., $250,000) before a transfer has to be made. To the extent amounts due to the Fund from its counterparties are not fully collateralized, contractually or otherwise, the Fund bears the risk of loss from
counterparty nonperformance. The Fund may also pay interest expense on cash collateral received from the broker. Any interest expense paid by the Fund is shown on the Statement of Operations. The Fund attempts to
mitigate counterparty risk by only entering into agreements with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those
counterparties.
Certain ISDA Master Agreements
allow counterparties of over-the-counter derivatives transactions to terminate derivatives contracts prior to maturity in the event the Fund’s net asset value declines by a stated percentage over a specified
time period or if the Fund fails to meet certain terms of the ISDA Master Agreement, which would cause the Fund to accelerate payment of any net liability owed to the counterparty. The Fund also has termination
rights if the counterparty fails to meet certain terms of the ISDA Master Agreement. In determining whether to exercise such termination rights, the Fund would consider, in addition to counterparty credit risk,
whether termination would result in a net liability owed from the counterparty.
For financial reporting purposes,
the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statement of Assets and Liabilities.
Forward foreign currency exchange
contracts
Forward foreign currency exchange
contracts are over-the-counter agreements between two parties to buy and sell a currency at a set price on a future date. The Fund utilized forward foreign currency exchange contracts to hedge the currency exposure
associated with some or all of the Fund’s securities, to shift foreign currency exposure back to U.S. dollars and to generate total return through long and short positions versus the U.S. dollar. These
instruments may be used for other purposes in future periods.
The values of forward foreign
currency exchange contracts fluctuate daily with changes in foreign currency exchange rates. Changes in the value of these contracts are recorded as unrealized appreciation or depreciation until the contract is
exercised or has expired. The Fund will realize a gain or loss when the forward foreign currency exchange contract is closed or expires. Non-deliverable forward foreign currency exchange contracts are settled with the
counterparty in U.S. dollars without delivery of foreign currency.
| 38 | CTIVP® – BlackRock Global Inflation-Protected Securities Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
The use of forward foreign currency
exchange contracts does not eliminate fluctuations in the prices of the Fund’s portfolio securities. The risks of forward foreign currency exchange contracts include movement in the values of the foreign
currencies relative to the U.S. dollar (or other foreign currencies) and the possibility that counterparties will not complete their contractual obligations, which may be in excess of the amount reflected, if any, in
the Statement of Assets and Liabilities.
Futures contracts
Futures contracts are
exchange-traded and represent commitments for the future purchase or sale of an asset at a specified price on a specified date. The Fund bought and sold futures contracts to produce incremental earnings, to manage the
duration and yield curve exposure of the Fund versus the benchmark, to manage exposure to movements in interest rates and to attain desired breakeven inflation exposure. These instruments may be used for other
purposes in future periods. Upon entering into futures contracts, the Fund bears risks that it may not achieve the anticipated benefits of the futures contracts and may realize a loss. Additional risks include
counterparty credit risk, the possibility of an illiquid market, and that a change in the value of the contract or option may not correlate with changes in the value of the underlying asset.
Upon entering into a futures
contract, the Fund deposits cash or securities with the broker, known as a futures commission merchant (FCM), in an amount sufficient to meet the initial margin requirement. The initial margin deposit must be
maintained at an established level over the life of the contract. Cash deposited as initial margin is recorded in the Statement of Assets and Liabilities as margin deposits. Securities deposited as initial margin are
designated in the Portfolio of Investments. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily change in the contract value and are
recorded as variation margin receivable or payable and are offset in unrealized gains or losses. The Fund generally expects to earn interest income on its margin deposits. The Fund recognizes a realized gain or loss
when the contract is closed or expires. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities.
Options contracts
Options are contracts which entitle
the holder to purchase or sell securities or other identified assets at a specified price, or in the case of index option contracts, to receive or pay the difference between the index value and the strike price of the
index option contract. Option contracts can be either exchange-traded or over-the-counter. The Fund purchased and has written option contracts to produce incremental earnings, to protect gains and to manage exposure
to fluctuations in interest rates. These instruments may be used for other purposes in future periods. Completion of transactions for option contracts traded in the over-the-counter market depends upon the performance
of the other party. Collateral may be collected or posted by the Fund to secure over-the-counter option contract trades. Collateral held or posted by the Fund for such option contract trades must be returned to the
broker or the Fund upon closure, exercise or expiration of the contract.
Options contracts purchased are
recorded as investments. When the Fund writes an options contract, the premium received is recorded as an asset and an amount equivalent to the premium is recorded as a liability in the Statement of Assets and
Liabilities and is subsequently adjusted to reflect the current fair value of the option written. Changes in the fair value of the written option are recorded as unrealized appreciation or depreciation until the
contract is exercised or has expired. The Fund realizes a gain or loss when the option contract is closed or expires. When option contracts are exercised, the proceeds on sales for a written call or purchased put
option contract, or the purchase cost for a written put or purchased call option contract, is adjusted by the amount of premium received or paid.
For over-the-counter options
purchased, the Fund bears the risk of loss of the amount of the premiums paid plus the positive change in market values net of any collateral held by the Fund should the counterparty fail to perform under the
contracts. Option contracts written by the Fund do not typically give rise to significant counterparty credit risk, as options written generally obligate the Fund and not the counterparty to perform. The risk in
writing a call option contract is that the Fund gives up the opportunity for profit if the market price of the security increases above the strike price and the option contract is exercised. The risk in writing a put
option contract is that the Fund may incur a loss if the market price of the security decreases below the strike price and the option contract is exercised. Exercise of a written option could result in the Fund
purchasing or selling a security or foreign currency when it otherwise would not, or at a price different from the current market value. In purchasing and writing options, the Fund bears the risk of an unfavorable
change in the value of the underlying instrument or the risk that the Fund may not be able to enter into a closing transaction due to an illiquid market.
| CTIVP® – BlackRock Global Inflation-Protected Securities Fund | Annual Report 2021 | 39 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Interest rate swaption contracts
Interest rate swaption contracts
entered into by the Fund typically represent an option that gives the purchaser the right, but not the obligation, to enter into an interest rate swap contract on a future date. Each interest rate swaption contract
will specify if the buyer is entitled to receive the fixed or floating rate if the interest rate is exercised. Changes in the value of a purchased interest rate swaption contracts are reported as unrealized
appreciation or depreciation on options in the Statement of Assets and Liabilities. Gain or loss is recognized in the Statement of Operations when the interest rate swaption contract is closed or expires.
When the Fund writes an interest
rate swaption contract, the premium received is recorded as an asset and an amount equivalent to the premium is recorded as a liability in the Statement of Assets and Liabilities and is subsequently adjusted to
reflect the current fair value of the interest rate swaption contract written. Premiums received from writing interest rate swaption contracts that expire unexercised are recorded by the Fund on the expiration date as
realized gains from options written in the Statement of Operations. The difference between the premium and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also recorded
as realized gain, or if the premium is less than the amount paid for the closing purchase, as realized loss. These amounts are reflected as net realized gain (loss) on options written in the Statement of
Operations.
Swap contracts
Swap contracts are negotiated in
the over-the-counter market and may be entered into as a bilateral contract or centrally cleared (centrally cleared swap contract). In a centrally cleared swap contract, immediately following execution of the swap
contract with a broker, the swap contract is novated to a central counterparty (the CCP) and the CCP becomes the Fund’s counterparty to the centrally cleared swap contract. The Fund is required to deposit
initial margin with the futures commission merchant (FCM), which pledges it through to the CCP in the form of cash or securities in an amount that varies depending on the size and risk profile of the particular swap
contract. Securities deposited as initial margin are designated in the Portfolio of Investments and cash deposited is recorded in the Statement of Assets and Liabilities as margin deposits. For a bilateral swap
contract, the Fund has credit exposure to the broker, but exchanges daily variation margin with the broker based on the mark-to-market value of the swap contract to minimize that exposure. For centrally cleared swap
contracts, the Fund has minimal credit exposure to the FCM because the CCP stands between the Fund and the relevant buyer/seller on the other side of the contract. Swap contracts are marked-to-market daily and changes
in value are recorded as unrealized appreciation (depreciation). The daily change in valuation of centrally cleared swap contracts, if any, is recorded as a receivable or payable for variation margin in the Statement
of Assets and Liabilities.
Entering into these contracts
involves, to varying degrees, elements of interest, liquidity and counterparty credit risk in excess of the amounts recognized in the Statement of Assets and Liabilities. Such risks involve the possibility that there
may be unfavorable changes in interest rates, market conditions or other conditions, that it may be difficult to initiate a swap transaction or liquidate a position at an advantageous time or price which may result in
significant losses, and that the FCM or CCP may not fulfill its obligation under the contract.
Interest rate and inflation
rate swap contracts
The Fund entered into interest rate
swap transactions and/or inflation rate swap contracts to produce incremental earnings, to manage interest rate and market risk exposure to produce incremental earnings, to gain exposure to or protect itself from
market rate changes, to hedge the portfolio risk associated with some or all of the Fund’s securities and to attain desired breakeven inflation exposure. These instruments may be used for other purposes in
future periods. An interest rate swap or inflation rate swap, as applicable, is an agreement between two parties where there are two flows and payments are made between the two counterparties and the payments are
dependent upon changes in an interest rate, inflation rate or inflation index calculated on a nominal amount. Interest rate swaps are agreements between two parties that involve the exchange of one type of interest
rate for another type of interest rate cash flow on specified dates in the future, based on a predetermined, specified notional amount. Certain interest rate swaps are considered forward-starting, whereby the accrual
for the exchange of cash flows does not begin until a specified date in the future. The net cash flow for a standard interest rate swap transaction is generally the difference between a floating market interest rate
versus a fixed interest rate.
| 40 | CTIVP® – BlackRock Global Inflation-Protected Securities Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Interest rate swaps are valued
daily and unrealized appreciation (depreciation) is recorded. Certain interest rate swaps may accrue periodic interest on a daily basis as a component of unrealized appreciation (depreciation); the Fund will realize a
gain or loss upon the payment or receipt of accrued interest. The Fund will realize a gain or a loss when the interest rate swap is terminated.
Effects of derivative transactions in
the financial statements
The following tables are intended
to provide additional information about the effect of derivatives on the financial statements of the Fund, including: the fair value of derivatives by risk category and the location of those fair values in the
Statement of Assets and Liabilities; and the impact of derivative transactions over the period in the Statement of Operations, including realized and unrealized gains (losses). The derivative instrument schedules
following the Portfolio of Investments present additional information regarding derivative instruments outstanding at the end of the period, if any.
The following table is a summary of
the fair value of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) at December 31, 2021:
| Asset derivatives | ||
| Risk exposure category | Statement of assets and liabilities location | Fair value ($) |
| Foreign exchange risk | Unrealized appreciation on forward foreign currency exchange contracts | 48,516 |
| Interest rate risk | Component of total distributable earnings (loss) — unrealized appreciation on futures contracts | 120,058* |
| Interest rate risk | Investments, at value — Options purchased | 536,068 |
| Interest rate risk | Component of total distributable earnings (loss) — unrealized appreciation on swap contracts | 1,345,264* |
| Total | 2,049,906 |
| Liability derivatives | ||
| Risk exposure category | Statement of assets and liabilities location | Fair value ($) |
| Foreign exchange risk | Unrealized depreciation on forward foreign currency exchange contracts | 763,922 |
| Interest rate risk | Component of total distributable earnings (loss) — unrealized depreciation on futures contracts | 130,436* |
| Interest rate risk | Options contracts written, at value | 630,592 |
| Interest rate risk | Component of total distributable earnings (loss) — unrealized depreciation on swap contracts | 1,072,708* |
| Total | 2,597,658 |
| * | Includes cumulative appreciation (depreciation) as reported in the tables following the Portfolio of Investments. Only the current day’s variation margin is reported in receivables or payables in the Statement of Assets and Liabilities. |
| CTIVP® – BlackRock Global Inflation-Protected Securities Fund | Annual Report 2021 | 41 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
The following table indicates the
effect of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) in the Statement of Operations for the year ended December 31, 2021:
| Amount of realized gain (loss) on derivatives recognized in income | ||||||
| Risk exposure category | Forward foreign currency exchange contracts ($) | Futures contracts ($) | Options contracts written ($) | Options contracts purchased ($) | Swap contracts ($) | Total ($) |
| Foreign exchange risk | 2,349,054 | — | — | (5,197) | — | 2,343,857 |
| Interest rate risk | — | 205,664 | 72,095 | (26,767) | 3,778 | 254,770 |
| Total | 2,349,054 | 205,664 | 72,095 | (31,964) | 3,778 | 2,598,627 |
| Change in unrealized appreciation (depreciation) on derivatives recognized in income | ||||||
| Risk exposure category | Forward foreign currency exchange contracts ($) | Futures contracts ($) | Options contracts written ($) | Options contracts purchased ($) | Swap contracts ($) | Total ($) |
| Foreign exchange risk | 655,960 | — | — | — | — | 655,960 |
| Interest rate risk | — | (40,332) | (119,314) | (5,670) | 262,358 | 97,042 |
| Total | 655,960 | (40,332) | (119,314) | (5,670) | 262,358 | 753,002 |
The following table is a summary
of the average outstanding volume by derivative instrument for the year ended December 31, 2021:
| Derivative instrument | Average notional amounts ($)* |
| Futures contracts — long | 18,834,049 |
| Futures contracts — short | 15,307,667 |
| Derivative instrument | Average value ($)* |
| Options contracts — purchased | 483,123 |
| Options contracts — written | (598,630) |
| Derivative instrument | Average unrealized appreciation ($)* | Average unrealized depreciation ($)* |
| Forward foreign currency exchange contracts | 1,452,161 | (408,311) |
| Interest rate swap contracts | 1,207,635 | (955,117) |
| * | Based on the ending quarterly outstanding amounts for the year ended December 31, 2021. |
Treasury inflation protected
securities
The Fund may invest in treasury
inflation protected securities (TIPS). The principal amount of TIPS is adjusted periodically and is increased for inflation or decreased for deflation based on a monthly published index. These adjustments are recorded
as interest income in the Statement of Operations. Coupon payments are based on the adjusted principal at the time the interest is paid.
| 42 | CTIVP® – BlackRock Global Inflation-Protected Securities Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Offsetting of assets and
liabilities
The following table presents the
Fund’s gross and net amount of assets and liabilities available for offset under netting arrangements as well as any related collateral received or pledged by the Fund as of December 31, 2021:
| Citi ($) | Deutsche Bank ($) | Goldman Sachs ($) | UBS ($) | Total ($) | |
| Assets | |||||
| Centrally cleared interest rate swap contracts (a) | - | - | 28,092 | - | 28,092 |
| Forward foreign currency exchange contracts | 97 | 48,419 | - | - | 48,516 |
| Options purchased calls | 206,641 | 96,816 | - | 2,406 | 305,863 |
| Options purchased puts | 121,674 | 108,531 | - | - | 230,205 |
| Total assets | 328,412 | 253,766 | 28,092 | 2,406 | 612,676 |
| Liabilities | |||||
| Centrally cleared interest rate swap contracts (a) | - | - | 68,949 | - | 68,949 |
| Forward foreign currency exchange contracts | 118,290 | 645,632 | - | - | 763,922 |
| Options contracts written | 242,424 | 387,402 | - | 766 | 630,592 |
| Total liabilities | 360,714 | 1,033,034 | 68,949 | 766 | 1,463,463 |
| Total financial and derivative net assets | (32,302) | (779,268) | (40,857) | 1,640 | (850,787) |
| Total collateral received (pledged) (b) | - | (584,846) | (40,857) | - | (625,703) |
| Net amount (c) | (32,302) | (194,422) | - | 1,640 | (225,084) |
| (a) | Centrally cleared swaps are included within payable/receivable for variation margin on the Statement of Assets and Liabilities. |
| (b) | In some instances, the actual collateral received and/or pledged may be more than the amount shown due to overcollateralization. |
| (c) | Represents the net amount due from/(to) counterparties in the event of default. |
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
Income recognition
Interest income is recorded on an
accrual basis. Market premiums and discounts, including original issue discounts, are amortized and accreted, respectively, over the expected life of the security on all debt securities, unless otherwise noted.
The Fund may place a debt security
on non-accrual status and reduce related interest income when it becomes probable that the interest will not be collected and the amount of uncollectible interest can be reasonably estimated. A defaulted debt security
is removed from non-accrual status when the issuer resumes interest payments or when collectability of interest is reasonably assured.
Dividend income is recorded on the
ex-dividend date.
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
| CTIVP® – BlackRock Global Inflation-Protected Securities Fund | Annual Report 2021 | 43 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Federal income tax status
The Fund intends to qualify each
year as a regulated investment company under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its investment company taxable income and net capital gain, if any, for its
tax year, and as such will not be subject to federal income taxes. In addition, because the Fund meets the exception under Internal Revenue Code Section 4982(f), the Fund expects not to be subject to federal excise
tax. Therefore, no federal income or excise tax provision is recorded.
Foreign taxes
The Fund may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries, as applicable, based upon its current interpretation of tax rules
and regulations that exist in the markets in which it invests.
Realized gains in certain countries
may be subject to foreign taxes at the Fund level, based on statutory rates. The Fund accrues for such foreign taxes on realized and unrealized gains at the appropriate rate for each jurisdiction, as applicable. The
amount, if any, is disclosed as a liability on the Statement of Assets and Liabilities.
Distributions to subaccounts
Distributions to the subaccounts of
Contracts, Qualified Plans and Qualified Investors are recorded at the close of business on the record date and are payable on the first business day following the record date. Dividends from net investment income, if
any, are declared and distributed annually. Capital gain distributions, when available, will be made annually. However, an additional capital gain distribution may be made during the fiscal year in order to comply
with the Internal Revenue Code, as applicable to registered investment companies. Income distributions and capital gain distributions are determined in accordance with federal income tax regulations, which may differ
from GAAP. All dividends and distributions are reinvested in additional shares of the applicable share class of the Fund at the net asset value as of the ex-dividend date of the distribution.
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Under the Management Agreement, the
Investment Manager provides the Fund with investment research and advice, as well as administrative and accounting services. The Investment Manager is responsible for the ultimate oversight of investments made by the
Fund. The Fund’s subadvisers (see Subadvisory agreements below) have the primary responsibility for the day-to-day portfolio management of the Fund. The management services fee is an annual fee that is equal to
a percentage of the Fund’s daily net assets that declines from 0.51% to 0.29% as the Fund’s net assets increase. The effective management services fee rate for the year ended December 31, 2021 was 0.51% of
the Fund’s average daily net assets.
Subadvisory agreements
The Investment Manager has entered
into a Subadvisory Agreement with BlackRock Financial Management, Inc. (BlackRock) to serve as a subadviser to the Fund. BlackRock International Limited (BIL), an affiliate of BlackRock, assists in providing
day-to-day portfolio management of the Fund pursuant to the Sub-Subadvisory Agreement between BlackRock and BIL. The Investment Manager compensates the subadviser to manage the investment of the Fund’s
assets.
| 44 | CTIVP® – BlackRock Global Inflation-Protected Securities Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. Under a Deferred Compensation Plan (the
Deferred Plan), these members of the Board of Trustees may elect to defer payment of up to 100% of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of
certain funds managed by the Investment Manager. The Fund’s liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Deferred Plan. All
amounts payable under the Deferred Plan constitute a general unsecured obligation of the Fund. The expense for the Deferred Plan, which includes Trustees’ fees deferred during the current period as well as any
gains or losses on the Trustees’ deferred compensation balances as a result of market fluctuations, is included in "Compensation of board members" on the Statement of Operations.
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
Service fees
The Fund has entered into a
Shareholder Services Agreement with Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial. Under this
agreement, the Fund pays a service fee equal to the payments made by the Transfer Agent to Participating Insurance Companies and other financial intermediaries (together, Participating Organizations) for services each
such Participating Organization provides to its clients, customers and participants that are invested directly or indirectly in the Fund, up to a cap approved by the Board of Trustees from time to time. The effective
service fee rate for the year ended December 31, 2021, was 0.06% of the Fund’s average daily net assets.
The Transfer Agent may retain as
compensation for its services revenues from fees for wire, telephone and redemption orders, account transcripts due the Transfer Agent from Fund shareholders and interest (net of bank charges) earned with respect to
balances in accounts the Transfer Agent maintains in connection with its services to the Fund.
Distribution and/or service fees
The Fund has an agreement with the
Distributor, an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution services. Under a Plan and Agreement of Distribution, the Fund pays a fee at an annual rate
of up to 0.25% of the Fund’s average daily net assets attributable to Class 2 shares and an annual rate of up to 0.125% of the Fund’s average daily net assets attributable to Class 3 shares. The Fund pays
no distribution and service fees for Class 1 shares.
Expenses waived/reimbursed by the
Investment Manager and its affiliates
The Investment Manager and certain
of its affiliates have contractually agreed to waive fees and/or reimburse expenses (excluding certain fees and expenses described below) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, so that the Fund’s net operating expenses, after giving effect to fees waived/expenses reimbursed and any balance credits and/or overdraft charges from the Fund’s
custodian, do not exceed the following annual rate(s) as a percentage of the classes’ average daily net assets:
| CTIVP® – BlackRock Global Inflation-Protected Securities Fund | Annual Report 2021 | 45 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), expenses associated with investments in affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange-traded funds), transaction costs and
brokerage commissions, costs related to any securities lending program, dividend expenses associated with securities sold short, inverse floater program fees and expenses, transaction charges and interest on borrowed
money, interest, costs associated with certain shareholder meetings, infrequent and/or unusual expenses and any other expenses the exclusion of which is specifically approved by the Board of Trustees. This
agreement may be modified or amended only with approval from the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements
described above are not recoverable by the Investment Manager or its affiliates in future periods.
Note 4. Federal tax
information
The timing and character of
income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP because of temporary or permanent book to tax differences.
At December 31, 2021, these
differences were primarily due to differing treatment for deferral/reversal of wash sale losses, trustees’ deferred compensation, derivative investments, tax straddles, swap investments, principal and/or
interest of fixed income securities and foreign currency transactions. To the extent these differences were permanent, reclassifications were made among the components of the Fund’s net assets. Temporary
differences do not require reclassifications.
The following reclassifications
were made:
| Undistributed net investment income ($) | Accumulated net realized gain ($) | Paid in capital ($) |
| 2,740,267 | (2,740,267) | — |
Net investment income (loss) and
net realized gains (losses), as disclosed in the Statement of Operations, and net assets were not affected by this reclassification.
The tax character of distributions
paid during the years indicated was as follows:
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | ||||
| Ordinary income ($) | Long-term capital gains ($) | Total ($) | Ordinary income ($) | Long-term capital gains ($) | Total ($) |
| 2,143,966 | 1,028,803 | 3,172,769 | 2,479,481 | — | 2,479,481 |
Short-term capital gain
distributions, if any, are considered ordinary income distributions for tax purposes.
At December 31, 2021, the
components of distributable earnings on a tax basis were as follows:
| Undistributed ordinary income ($) | Undistributed long-term capital gains ($) | Capital loss carryforwards ($) | Net unrealized appreciation ($) |
| 6,824,576 | 72,770 | — | 4,668,116 |
At December 31, 2021, the cost of
all investments for federal income tax purposes along with the aggregate gross unrealized appreciation and depreciation based on that cost was:
| Federal tax cost ($) | Gross unrealized appreciation ($) | Gross unrealized (depreciation) ($) | Net unrealized appreciation ($) |
| 116,822,406 | 5,647,056 | (978,940) | 4,668,116 |
Tax cost of investments and
unrealized appreciation/(depreciation) may also include timing differences that do not constitute adjustments to tax basis.
| 46 | CTIVP® – BlackRock Global Inflation-Protected Securities Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Note 5. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $76,047,794 and $64,457,066, respectively, for the year ended December 31, 2021, of which $59,288,428 and
$47,086,833, respectively, were U.S. government securities. The amount of purchase and sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 6. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes
referred to as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
Note 7. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund did not borrow or lend
money under the Interfund Program during the year ended December 31, 2021.
Note 8. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to an October 28, 2021 amendment and restatement, the credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment
Manager or an affiliated investment manager, severally and not jointly, permits collective borrowings up to $950 million. Interest is currently charged to each participating fund based on its borrowings at a rate
equal to the higher of (i) the federal funds effective rate, (ii) the secured overnight financing rate plus 0.11448% and (iii) the overnight bank funding rate, plus in each case, 1.00%. Each borrowing under the credit
facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The
commitment fee is included in other expenses in the Statement of Operations. This agreement expires annually in October unless extended or renewed. Prior to the October 28, 2021 amendment and restatement, the Fund had
access to a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. which permitted collective borrowings up to $950 million. Interest was
charged to each participating fund based on its borrowings at a rate equal to the higher of (i) the federal funds effective rate, (ii) the one-month London Interbank Offered Rate (LIBOR) rate and (iii) the overnight
bank funding rate, plus in each case, 1.25%.
The Fund had no borrowings during
the year ended December 31, 2021.
| CTIVP® – BlackRock Global Inflation-Protected Securities Fund | Annual Report 2021 | 47 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Note 9. Significant
risks
Credit risk
Credit risk is the risk that the
value of debt instruments in the Fund’s portfolio may decline because the issuer defaults or otherwise becomes unable or unwilling, or is perceived to be unable or unwilling, to honor its financial obligations,
such as making payments to the Fund when due. Credit rating agencies assign credit ratings to certain debt instruments to indicate their credit risk. Lower-rated or unrated debt instruments held by the Fund may
present increased credit risk as compared to higher-rated debt instruments.
Derivatives risk
Losses involving derivative
instruments may be substantial, because a relatively small movement in the underlying reference (which is generally the price, rate or other economic indicator associated with a security(ies), commodity, currency or
index or other instrument or asset) may result in a substantial loss for the Fund. In addition to the potential for increased losses, the use of derivative instruments may lead to increased volatility within the Fund.
Derivatives will typically increase the Fund’s exposure to principal risks to which it is otherwise exposed, and may expose the Fund to additional risks, including correlation risk, counterparty risk, hedging
risk, leverage risk, liquidity risk and pricing risk.
Foreign currency risk
The performance of the Fund may be
materially affected positively or negatively by foreign currency strength or weakness relative to the U.S. dollar, particularly if the Fund invests a significant percentage of its assets in foreign securities or other
assets denominated in currencies other than the U.S. dollar. Currency rates in foreign countries may fluctuate significantly over short or long periods of time for a number of reasons, including changes in interest
rates, imposition of currency controls and economic or political developments in the U.S. or abroad. The Fund may also incur currency conversion costs when converting foreign currencies into U.S. dollars and vice
versa.
Foreign securities and emerging
market countries risk
Investing in foreign securities may
involve certain risks not typically associated with investing in U.S. securities, such as increased currency volatility and risks associated with political, regulatory, economic, social, diplomatic and other
conditions or events occurring in the country or region, which may result in significant market volatility. In addition, certain foreign securities may not be as liquid as U.S. securities. Investing in emerging
markets may increase these risks and expose the Fund to elevated risks associated with increased inflation, deflation or currency devaluation. To the extent that the Fund concentrates its investment exposure to any
one or a few specific countries, the Fund will be particularly susceptible to the risks associated with the conditions, events or other factors impacting those countries or regions and may, therefore, have a greater
risk than that of a fund that is more geographically diversified.
Geographic focus risk
The Fund may be particularly
susceptible to economic, political, regulatory or other events or conditions affecting issuers and countries within the specific geographic regions in which the Fund invests. The Fund’s NAV may be more volatile
than the NAV of a more geographically diversified fund.
Europe. The Fund is particularly susceptible to economic, political, regulatory or other events or conditions affecting issuers and countries in Europe which are often closely connected and
interdependent, and events in one European country can have an adverse impact on other European countries. In addition, the private and public sectors’ debt problems of a single European Union (EU) country can
pose significant economic risks to the EU as a whole. As a result, the Fund’s NAV may be more volatile than the NAV of a more geographically diversified fund. If securities of issuers in Europe fall out of
favor, it may cause the Fund to underperform other funds that do not focus their investments in this region of the world. The UK’s departure from the EU single market became effective January 1, 2021 with the
end of the Brexit transition period and the post-Brexit trade deal between the UK and EU taking effect on December 31, 2020. The impact of Brexit on the UK and European economies and the broader global economy could
be significant, resulting in negative impacts on currency and financial markets generally, such as increased volatility and illiquidity, and potentially lower economic growth in markets in Europe, which may adversely
affect the value of your investment in the Fund.
| 48 | CTIVP® – BlackRock Global Inflation-Protected Securities Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Inflation-protected securities
risk
Inflation-protected debt securities
tend to react to changes in real interest rates (i.e., nominal interest rates minus the expected impact of inflation). In general, the price of such securities falls when real interest rates rise, and rises when real
interest rates fall. Interest payments on these securities will vary and may be more volatile than interest paid on ordinary bonds. In periods of deflation, the Fund may have no income at all from such investments.
Interest rate risk
Interest rate risk is the risk of
losses attributable to changes in interest rates. In general, if prevailing interest rates rise, the values of debt instruments tend to fall, and if interest rates fall, the values of debt instruments tend to rise.
Actions by governments and central banking authorities can result in increases or decreases in interest rates. Higher periods of inflation could lead such authorities to raise interest rates. Increasing interest rates
may negatively affect the value of debt securities held by the Fund, resulting in a negative impact on the Fund’s performance and net asset value per share. In general, the longer the maturity or duration of a
debt security, the greater its sensitivity to changes in interest rates. The Fund is subject to the risk that the income generated by its investments may not keep pace with inflation.
Leverage risk
Leverage occurs when the Fund
increases its assets available for investment using borrowings, short sales, derivatives, or similar instruments or techniques. The use of leverage may produce volatility and may exaggerate changes in the NAV of Fund
shares and in the return on the Fund’s portfolio, which may increase the risk that the Fund will lose more than it has invested. Because short sales involve borrowing securities and then selling them, the
Fund’s short sales effectively leverage the Fund’s assets. The Fund’s assets that are used as collateral to secure the Fund’s obligations to return the securities sold short may decrease in
value while the short positions are outstanding, which may force the Fund to use its other assets to increase the collateral. Leverage can create an interest expense that may lower the Fund’s overall returns.
Leverage presents the opportunity for increased net income and capital gains, but may also exaggerate the Fund’s volatility and risk of loss. There can be no guarantee that a leveraging strategy will be
successful.
LIBOR replacement risk
The elimination of London
Inter-Bank Offered Rate (LIBOR), among other "inter-bank offered" reference rates, may adversely affect the interest rates on, and value of, certain Fund investments for which the value is tied to LIBOR. The U.K.
Financial Conduct Authority and the ICE Benchmark Administration have announced that most LIBOR settings will no longer be published after December 31, 2021 and a majority of U.S. dollar LIBOR settings will cease
publication after June 30, 2023. It is possible that a subset of LIBOR settings will be published after these dates on a “synthetic” basis, but any such publications would be considered non-representative
of the underlying market. Markets are slowly developing in response to these new reference rates. Uncertainty related to the liquidity impact of the change in rates, and how to appropriately adjust these rates at the
time of transition, poses risks for the Fund. These risks are likely to persist until new reference rates and fallbacks for both legacy and new instruments and contracts are commercially accepted and market practices
become settled. Alternatives to LIBOR have been established or are in development in most major currencies, including the Secured Overnight Financing Rate (SOFR) that is intended to replace U.S. dollar LIBOR.
Liquidity risk
Liquidity risk is the risk
associated with a lack of marketability of investments which may make it difficult to sell the investment at a desirable time or price. Changing regulatory, market or other conditions or environments (for example, the
interest rate or credit environments) may adversely affect the liquidity of the Fund’s investments. The Fund may have to accept a lower selling price for the holding, sell other investments, or forego another,
more appealing investment opportunity. Generally, the less liquid the market at the time the Fund sells a portfolio investment, the greater the risk of loss or decline of value to the Fund. A less liquid market can
lead to an increase in Fund redemptions, which may negatively impact Fund performance and net asset value per share, including, for example, if the Fund is forced to sell securities in a down market.
| CTIVP® – BlackRock Global Inflation-Protected Securities Fund | Annual Report 2021 | 49 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Market risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
The coronavirus disease 2019 and
its variants (COVID-19) pandemic has resulted in, and may continue to result in, significant global economic and societal disruption and market volatility due to disruptions in market access, resource availability,
facilities operations, imposition of tariffs, export controls and supply chain disruption, among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement
and loss in human and other resources. The uncertainty surrounding the magnitude, duration, reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental
authorities or other third parties, present unknowns that are yet to unfold. The impacts, as well as the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and
pandemics that may arise in the future – could negatively affect global economies and markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in
emerging market countries may be greater due to generally less established healthcare systems, governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing
political, social and economic risks in certain countries or globally. The disruptions caused by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively
impact the Fund’s ability to achieve its investment objectives. Any such event(s) could have a significant adverse impact on the value and risk profile of the Fund.
Non-diversification risk
A non-diversified fund is permitted
to invest a greater percentage of its total assets in fewer issuers than a diversified fund. This increases the risk that a change in the value of any one investment held by the Fund could affect the overall value of
the Fund more than it would affect that of a diversified fund holding a greater number of investments. Accordingly, the Fund’s value will likely be more volatile than the value of a more diversified fund.
Shareholder concentration risk
At December 31, 2021, affiliated
shareholders of record owned 100.0% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of
less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Note 10. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
| 50 | CTIVP® – BlackRock Global Inflation-Protected Securities Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Note 11. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in
connection with the conduct of their business activities. Ameriprise Financial believes that the Fund is not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject
of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with
the Fund. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (SEC) on legal and regulatory matters that relate to
Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that
these matters, or the adverse publicity associated with them, will not result in increased Fund redemptions, reduced sale of Fund shares or other adverse consequences to the Fund. Further, although we believe
proceedings are not likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines,
penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial or one or more of its affiliates that provides services to
the Fund.
| CTIVP® – BlackRock Global Inflation-Protected Securities Fund | Annual Report 2021 | 51 |
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees of Columbia
Funds Variable Series Trust II and Shareholders of CTIVP® – BlackRock Global Inflation-Protected Securities Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of CTIVP® – BlackRock Global Inflation-Protected Securities Fund (one of the funds constituting Columbia Funds Variable Series
Trust II, referred to hereafter as the "Fund") as of December 31, 2021, the related statement of operations for the year ended December 31, 2021, the statement of changes in net assets for each of the two years in the
period ended December 31, 2021, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2021 (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, 2021, 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, 2021 and the financial highlights for each of the five years in the period ended December 31, 2021 in conformity with accounting principles generally
accepted in the United States of America.
Basis for Opinion
These financial statements are the
responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these
financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2021 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.
/s/PricewaterhouseCoopers LLP
Minneapolis, Minnesota
February 22, 2022
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| 52 | CTIVP® – BlackRock Global Inflation-Protected Securities Fund | Annual Report 2021 |
Federal Income Tax
Information
(Unaudited)
The Fund hereby designates the
following tax attributes for the fiscal year ended December 31, 2021.
| Capital gain dividend | |
| $102,719 |
Capital gain dividend. The Fund
designates as a capital gain dividend the amount reflected above, or if subsequently determined to be different, the net capital gain of such fiscal period.
TRUSTEES AND
OFFICERS
The Board oversees the Fund’s
operations and appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following table provides basic biographical information about the Fund’s Trustees as
of the printing of this report, including their principal occupations during the past five years, although specific titles for individuals may have varied over the period. The year set forth beneath Length of Service
in the table below is the year in which the Trustee was first appointed or elected as Trustee to any Fund currently in the Columbia Funds Complex or a predecessor thereof. Under current Board policy, each Trustee
generally serves until December 31 of the year such Trustee turns seventy-five (75).
Independent trustees
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| George S. Batejan c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1953 | Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 176 | Former Chairman of the Board, NICSA (National Investment Company Services Association) (Executive Committee, Nominating Committee and Governance Committee), 2014-2016; former Director, Intech Investment Management, 2011-2016; former Board Member, Metro Denver Chamber of Commerce, 2015-2016; former Advisory Board Member, University of Colorado Business School, 2015-2018 |
| CTIVP® – BlackRock Global Inflation-Protected Securities Fund | Annual Report 2021 | 53 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Kathleen Blatz c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2006 | Attorney, specializing in arbitration and mediation; Chief Justice, Minnesota Supreme Court, 1998-2006; Associate Justice, Minnesota Supreme Court, 1996-1998; Fourth Judicial District Court Judge, Hennepin County, 1994-1996; Attorney in private practice and public service, 1984-1993; State Representative, Minnesota House of Representatives, 1979-1993, which included service on the Tax and Financial Institutions and Insurance Committees; Member and Interim Chair, Minnesota Sports Facilities Authority, January 2017-July 2017; Interim President and Chief Executive Officer, Blue Cross Blue Shield of Minnesota (health care insurance), February-July 2018, April-October 2021 | 176 | Former Trustee, Blue Cross Blue Shield of Minnesota, 2009-2021 (Chair of the Business Development Committee, 2014-2017; Chair of the Governance Committee, 2017-2019); former Member and Chair of the Board, Minnesota Sports Facilities Authority, January 2017-July 2017; former Director, Robina Foundation, 2009-2020 (Chair, 2014-2020); Director, Schulze Family Foundation, since 2021 |
| Pamela G. Carlton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2007 | President, Springboard — Partners in Cross Cultural Leadership (consulting company) since 2003; Managing Director of US Equity Research, JP Morgan Chase, 1999-2003; Director of US Equity Research, Chase Asset Management, 1996-1999; Co-Director Latin America Research, 1993-1996, COO Global Research, 1992-1996, Co-Director of US Research, 1991-1992, Investment Banker, Morgan Stanley, 1982-1991, Morgan Stanley; Attorney, Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 176 | Trustee, New York Presbyterian Hospital Board (Executive Committee and Chair of People Committee) since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee); Director, Apollo Commercial Real Estate Finance, Inc. since 2021; the Governing Council of the Independent Directors Council (IDC), since 2021 |
| Janet Langford Carrig c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1957 | Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 174 | Director, EQT Corporation (natural gas producer) since 2019; Director, Whiting Petroleum Corporation (independent oil and gas company) since 2020 |
| J. Kevin Connaughton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2020 | Member, FINRA National Adjudicatory Council since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Consultant to Independent Trustees of CFVIT and CFST I from March 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Managing Director and General Manager of Mutual Fund Products, Columbia Management Investment Advisers, LLC, May 2010-February 2015; President, Columbia Funds, 2008-2015; and senior officer of Columbia Funds and affiliated funds, 2003-2015 | 174 | Former Director, The Autism Project, March 2015-December 2021; former Member of the Investment Committee, St. Michael’s College, November 2015-February 2020; former Trustee, St. Michael’s College, June 2017-September 2019; former Trustee, New Century Portfolios, January 2015-December 2017 |
| 54 | CTIVP® – BlackRock Global Inflation-Protected Securities Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Olive M. Darragh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since 2020 | Managing Director of Darragh Inc. (strategy and talent management consulting firm) since 2010; Founder and CEO, Zolio, Inc. (investment management talent identification platform) since 2004; Consultant to Independent Trustees of CFVIT and CFST I from June 2019 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 2001-2004 | 174 | Former Director, University of Edinburgh Business School (Member of US Board); former Director, Boston Public Library Foundation |
| Patricia M. Flynn c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1950 | Trustee since 2004 | Trustee Professor of Economics and Management, Bentley University since 1976 (also teaches and conducts research on corporate governance); Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 176 | Trustee, MA Taxpayers Foundation since 1997; Board of Governors, Innovation Institute, MA Technology Collaborative, 2010-2020; former Board of Directors, The MA Business Roundtable, 2003-2019 |
| Brian J. Gallagher c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 176 | Trustee, Catholic Schools Foundation since 2004 |
| Douglas A. Hacker c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1955 | Co-Chair since 2021; Chair of CFST I and CFVIT since 2014; Trustee of CFST I and CFVIT since 1996 and CFST, CFST II, CFVST II, CET I and CET II since 2021 | Independent business executive since May 2006; Executive Vice President – Strategy of United Airlines, December 2002 - May 2006; President of UAL Loyalty Services (airline marketing company), September 2001-December 2002; Executive Vice President and Chief Financial Officer of United Airlines, July 1999-September 2001 | 176 | Director, Spartan Nash Company (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing); former Director, Nash Finch Company (food distributor), 2005-2013; former Director, SeaCube Container Leasing Ltd. (container leasing), 2010-2013; and former Director, Travelport Worldwide Limited (travel information technology), 2014-2019 |
| Nancy T. Lukitsh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1956 | Trustee since 2011 | Senior Vice President, Partner and Director of Marketing, Wellington Management Company, LLP (investment adviser), 1997-2010; Chair, Wellington Management Portfolios (commingled non-U.S. investment pools), 2007 -2010; Director, Wellington Trust Company, NA and other Wellington affiliates, 1997-2010 | 174 | None |
| CTIVP® – BlackRock Global Inflation-Protected Securities Fund | Annual Report 2021 | 55 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| David M. Moffett c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2011 | Retired; Consultant to Bridgewater and Associates | 174 | Director, CSX Corporation (transportation suppliers); Director, Genworth Financial, Inc. (financial and insurance products and services); Director, PayPal Holdings Inc. (payment and data processing services); Trustee, University of Oklahoma Foundation; former Director, eBay Inc. (online trading community), 2007-2015; and former Director, CIT Bank, CIT Group Inc. (commercial and consumer finance), 2010-2016 |
| Catherine James Paglia c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Co-Chair since 2021; Chair of CFST, CFST II, CFVST II, CET I and CET II since 2020; Trustee of CFST, CFST II and CFVST II since 2004 and CFST I and CFVIT since 2021 | Director, Enterprise Asset Management, Inc. (private real estate and asset management company) since September 1998; Managing Director and Partner, Interlaken Capital, Inc., 1989-1997; Vice President, 1982-1985, Principal, 1985-1987, Managing Director, 1987-1989, Morgan Stanley; Vice President, Investment Banking, 1980-1982, Associate, Investment Banking, 1976-1980, Dean Witter Reynolds, Inc. | 176 | Director, Valmont Industries, Inc. (irrigation systems manufacturer) since 2012; Trustee, Carleton College (on the Investment Committee); Trustee, Carnegie Endowment for International Peace (on the Investment Committee) |
| Minor M. Shaw c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1947 | Trustee since 2003 | President, Micco LLC (private investments) since 2011; President, Micco Corp. (family investment business), 1998-2011 | 176 | Director, Blue Cross Blue Shield of South Carolina (Chair of Compensation Committee) since April 2008; Trustee, Hollingsworth Funds (on the Investment Committee) since 2016 (previously Board Chair from 2016-2019); Former Advisory Board member, Duke Energy Corp., 2016-2020; Chair of the Duke Endowment; Chair of Greenville – Spartanburg Airport Commission; former Trustee, BofA Funds Series Trust (11 funds), 2003-2011; former Director, Piedmont Natural Gas, 2004-2016; former Director, National Association of Corporate Directors, Carolinas Chapter, 2013-2018; Chair, Daniel-Mickel Foundation since 1998 |
| 56 | CTIVP® – BlackRock Global Inflation-Protected Securities Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Natalie A. Trunow c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1967 | Trustee since 2020 | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services), January 2016-January 2021; Non-executive Member of the Investment Committee and Valuation Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services), August 2018-January 2021; Advisor, Paradigm Asset Management, November 2016-December 2021; Consultant to Independent Trustees of CFVIT and CFST I from September 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Director of Investments/Consultant, Casey Family Programs, April 2016-November 2016; Senior Vice President and Chief Investment Officer, Calvert Investments, August 2008-January 2016; Section Head and Portfolio Manager, General Motors Asset Management, June 1997-August 2008 | 174 | Former Director, Investment Committee, Health Services for Children with Special Needs, Inc., 2012-2019; Director, Chair of Audit Committee, Consumer Credit Counseling Services (formerly Guidewell Financial Solutions), since 2019; Independent Director, Investment Committee and Valuation Committee, Sarona Asset Management, since 2019 |
| Sandra Yeager c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2017 | Retired; President and founder, Hanoverian Capital, LLC (SEC registered investment advisor firm), 2008-2016; Managing Director, DuPont Capital, 2006-2008; Managing Director, Morgan Stanley Investment Management, 2004-2006; Senior Vice President, Alliance Bernstein, 1990-2004 | 176 | Former Director, NAPE Education Foundation, October 2016-October 2020 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Fund Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I (CET I), Columbia ETF Trust II (CET II), Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Beckman, Gallagher and Hacker and Mses. Blatz, Carlton, Flynn, Paglia, Shaw and Yeager serve as Directors of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
Interested trustee affiliated with
Investment Manager*
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during the past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex overseen | Other directorships held by Trustee during the past five years |
| Daniel J. Beckman c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since November 2021(a) | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC (since April 2015); officer of Columbia Funds and affiliated funds since 2020. | 176 | Director, Ameriprise Trust Company, since October 2016; Director, Columbia Management Investment Distributors, Inc. since November 2018; Board of Governors, Columbia Wanger Asset Management, LLC since January 2022 |
| * | Interested person (as defined under the 1940 Act) by reason of being an officer, director, security holder and/or employee of the Investment Manager or Ameriprise Financial. |
| (a) | Mr. Beckman serves as the President and Principal Executive Officer of the Columbia Funds (since 2021). |
The Statement of Additional
Information has additional information about the Fund’s Board members and is available, without charge, upon request by calling 800.345.6611 or contacting your financial intermediary.
| CTIVP® – BlackRock Global Inflation-Protected Securities Fund | Annual Report 2021 | 57 |
TRUSTEES AND OFFICERS (continued)
The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. The following table provides basic information about the Officers of the Fund, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Beckman, who is President and Principal Executive Officer, the Fund’s other officers are:
The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. The following table provides basic information about the Officers of the Fund, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Beckman, who is President and Principal Executive Officer, the Fund’s other officers are:
Fund officers
| 58 | CTIVP® – BlackRock Global Inflation-Protected Securities Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Fund officers (continued)
Fund officers (continued)
| Name, address and year of birth | Position and year first appointed to position for any Fund in the Columbia Funds Complex or a predecessor thereof | Principal occupation(s) during past five years |
| Lyn Kephart-Strong 5228 Ameriprise Financial Center Minneapolis, MN 55474 1960 | Vice President (2015) | President, Columbia Management Investment Services Corp. since October 2014; Vice President & Resolution Officer, Ameriprise Trust Company since August 2009. |
| CTIVP® – BlackRock Global Inflation-Protected Securities Fund | Annual Report 2021 | 59 |
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For Fund and other investment product prospectuses, which contain this and other important information, contact your
financial advisor or insurance representative. Please read the prospectus carefully before you invest. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved. Columbia Management Investment Distributors, Inc., 290 Congress Street, Boston, MA 02210
© 2022 Columbia Management Investment
Advisers, LLC.
C-2060 AW (2/22)
CTIVP® –
Victory Sycamore Established Value Fund
Please remember that you may not
buy (nor will you own) shares of the Fund directly. The Fund is available through variable annuity contracts and variable life insurance policies offered by the separate accounts of participating insurance companies
as well as qualified pension and retirement plans. Please contact your financial advisor or insurance representative for more information.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
| 3 | |
| 5 | |
| 7 | |
| 8 | |
| 12 | |
| 13 | |
| 14 | |
| 16 | |
| 18 | |
| 25 | |
| 26 |
Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which CTIVP® – Victory Sycamore Established Value Fund (the Fund) holds investments consistent with the procedures as stated in the Statement of Additional
Information (SAI). You may obtain a copy of the SAI without charge by calling 800.345.6611; contacting your financial intermediary or searching the website of the Securities and Exchange Commission (SEC) at sec.gov.
Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge
by visiting columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. The Fund’s Form N-PORT is available on the SEC’s website at sec.gov. The Fund’s complete
schedule of portfolio holdings, as filed on Form N-PORT, can also be obtained without charge, upon request, by calling 800.345.6611.
Additional Fund information
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
290 Congress Street
Boston, MA 02210
Fund distributor
Columbia Management Investment Distributors,
Inc.
290 Congress Street
Boston, MA 02210
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
CTIVP® – Victory Sycamore Established
Value Fund | Annual Report 2021
Fund at a Glance
Investment objective
The Fund
seeks to provide shareholders with long-term growth of capital.
Portfolio management
Victory Capital Management Inc.
Gary Miller
Jeffrey Graff, CFA
Gregory Conners
James Albers, CFA
Michael Rodarte, CFA
| CTIVP® – Victory Sycamore Established Value Fund | Annual Report 2021 | 3 |
Fund at a Glance (continued)
Performance of a hypothetical $10,000 investment (December 31, 2011 — December 31, 2021)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class 2 shares of CTIVP® – Victory Sycamore Established Value Fund during the stated time period, and does not reflect the deduction of taxes, if any, that
a shareholder may pay on Fund distributions or on the redemption of Fund shares. The returns also do not reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy or
qualified pension or retirement plan, if any.
| 4 | CTIVP® – Victory Sycamore Established Value Fund | Annual Report 2021 |
Manager Discussion of Fund Performance
At December 31, 2021,
approximately 70.26% of the Fund’s shares were owned in the aggregate by affiliated funds-of-funds managed by Columbia Management Investment Advisers, LLC (the Investment Manager). As a result of asset
allocation decisions by the Investment Manager, it is possible that the Fund may experience relatively large purchases or redemptions from affiliated funds-of-funds. The Investment Manager seeks to minimize the impact
of these transactions by structuring them over a reasonable period of time. The Fund may experience increased expenses as it buys and sells securities as a result of purchases or redemptions by affiliated
funds-of-funds.
For the 12-month period that ended
December 31, 2021, the Fund’s Class 2 shares returned 31.55%. The Fund outperformed its benchmark, the Russell Midcap Value Index, which returned 28.34% over the same period.
Market overview
In the fourth quarter of 2021,
the U.S. equity market, as measured by the S&P 500® Index, posted its best quarter of the year, capping a third consecutive banner year for equities with a return of 28.71%. Despite the strong performance,
investors had to contend with another headline-heavy year, which injected bouts of volatility into the market.
The annual period started off
strong, with the pro-cyclical/reopening rotation continuing its momentum from the fourth quarter of 2020. Driving bullish sentiment was the continuation of unprecedented monetary and fiscal stimulus, accelerated
COVID-19 vaccine rollouts, positive corporate commentary and broader TINA/FOMO dynamics (There is No Alternative/Fear of Missing Out). While these tailwinds persisted into the second half of the year, risks began to
emerge. Most notably, perhaps, discussions about supply-chain constraints and inflation picked up steam during the summer. Also, while the Federal Reserve (Fed) had stuck to its message for most of the year that
inflation was “transitory” and should abate once supply-chain issues were resolved, the year-over-year increases in headline inflation in October and November, which were at multi-decade highs, forced the
Fed to concede that inflation was less fleeting than originally thought. In November, the Fed began its prior telegraphed reduction in asset purchases by $15 billion per month from the $120 billion per month it had
been buying. That number increased to $30 billion per month in December. Additionally, projections released in December suggested the median forecast for interest rate hikes in 2022 stood at three.
The Fund’s notable
contributors during the period
| • | Stock selection overall contributed most positively to the Fund’s relative results during the annual period. Sector allocation is a by-product of the bottom-up stock selection process and not a result of top-down tactical decisions but also proved favorable. |
| • | Stock selection in health care, energy and communication services bolstered the Fund’s relative performance most during the annual period. |
| • | Having underweighted allocations to communication services and health care, each of which underperformed the benchmark during the annual period, also helped. |
| • | From an individual security perspective, two of the Fund’s top three top positive contributors relative to the benchmark during the annual period were in the energy sector—Devon Energy Corp. and Cimarex Energy Co. Both benefited from the rise in oil prices during the year. Also, energy was the best performing sector in the benchmark during the annual period, so both names appreciated with the group. Additionally, both companies were committed to operating within cash flow and announced their intention to return excess cash to shareholders. Cimarex Energy completed its merger with Cabot Oil Corp. in October 2021, with the combined company now known as Coterra Energy Inc. |
| • | Insurer American Financial Group, Inc. was also a significant positive contributor to the Fund’s relative results. The insurer sold its annuity business to Massachusetts Mutual Life Insurance Co. (MassMutual) earlier in 2021 and returned the proceeds to shareholders via a special dividend. American Financial Group also reported third quarter 2021 earnings that were ahead of expectations, driven by strong operating results and premium growth. The company further benefited during the annual period from having minimal catastrophe losses relative to industry peers and from its portfolio investment exposure to real estate and alternatives. |
| CTIVP® – Victory Sycamore Established Value Fund | Annual Report 2021 | 5 |
Manager Discussion of Fund Performance (continued)
The Fund’s notable
detractors during the period
| • | Stock selection in the consumer discretionary, financials and real estate sectors detracted most from the Fund’s relative performance during the annual period. |
| • | Detracting most from the Fund’s results relative to the benchmark was a position in gaming operator Las Vegas Sands Corp., which has significant exposure to Macau. The company’s shares were under pressure given the Chinese government’s “no tolerance” approach to the COVID-19 pandemic, which limited travel to Macau. Its shares sold off further after the Chinese government cracked down on after-school tutoring programs, as some market participants were alarmed by the government’s heavy-handed approach and wondered which industry could be next. We sold the Fund’s position by the end of the annual period. |
| • | Cold storage REIT Americold Realty Trust was another top detractor, as the company lowered its guidance on several occasions during the annual period due to ongoing labor and production constraints even as demand remained robust. These production headwinds resulted in customers holding less inventory at Americold Realty Trust’s facilities, which, in turn, led to lower economic and physical occupancy. We sold the Fund’s position by the end of the annual period. |
| • | Another significant detractor was Leidos Holdings, Inc., a defense contractor that provides applied technology solutions to the U.S. government. It reported third quarter 2021 results that were mixed relative to consensus expectations. Its management cited supply-chain issues for computers and components and lower award activity due to uncertainty around near-term Congressional funding as headwinds. Additionally, the U.S. pullout from Afghanistan negatively impacted Leidos Holdings’ revenue. We maintained the Fund’s position in the company based on our view of both its long-term earnings potential given its record project backlog and its attractive free cash flow. |
The views expressed in this report
reflect the current views of the respective parties who have contributed to this report. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult
to predict, so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective parties
disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Columbia fund are based on numerous factors, may not be relied on as an
indication of trading intent on behalf of any particular Columbia fund. References to specific securities should not be construed as a recommendation or investment advice.
| 6 | CTIVP® – Victory Sycamore Established Value Fund | Annual Report 2021 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur ongoing
costs, which generally include management fees, distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to help you compare these costs with the ongoing costs of investing in other mutual funds.
The information below does not
reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy (collectively, Contracts) or qualified pension and retirement plan (Qualified Plan), if any. The total fees
and expenses you bear may therefore be higher than those shown below.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount invested, to estimate the
expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as redemption or exchange fees, or expenses that apply to the subaccount or the Contract. Therefore, the
hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If the fees and expenses imposed under your Contract or
Qualified Plan, if any, were included, your costs would be higher.
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 365.
Expenses do not include fees and
expenses incurred indirectly by the Fund from its investment in underlying funds, including affiliated and non-affiliated pooled investment vehicles, such as mutual funds and exchange-traded funds.
| CTIVP® – Victory Sycamore Established Value Fund | Annual Report 2021 | 7 |
Portfolio of Investments
December 31, 2021
December 31, 2021
(Percentages represent value of
investments compared to net assets)
Investments in securities
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 8 | CTIVP® – Victory Sycamore Established Value Fund | Annual Report 2021 |
The accompanying Notes to Financial
Statements are an integral part of this statement.
| CTIVP® – Victory Sycamore Established Value Fund | Annual Report 2021 | 9 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Notes to Portfolio of
Investments
| (a) | Non-income producing investment. |
| (b) | The rate shown is the seven-day current annualized yield at December 31, 2021. |
| (c) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended December 31, 2021 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Realized gain (loss)($) | Dividends($) | End of period shares |
| Columbia Short-Term Cash Fund, 0.085% | ||||||||
| 11,650,439 | 180,160,988 | (180,287,655) | (360) | 11,523,412 | (425) | 5,445 | 11,525,717 | |
Fair value
measurements
The Fund categorizes
its fair value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when
available. Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that
reflect the Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input
that is deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For
example, certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active
market.
Fair value inputs are
summarized in the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in
determining fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable
inputs can vary between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs
will be considered by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date,
which may include periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between
the various levels within the hierarchy.
Investments falling into
the Level 3 category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market
transparency and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more
significant unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount
rates and estimated cash flows, and comparable company data.
Under the direction of
the Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists
of voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at
least monthly to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and
the results of Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including
recommendations of third party pricing vendors and a determination of appropriate pricing
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 10 | CTIVP® – Victory Sycamore Established Value Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Fair value measurements (continued)
methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at December 31, 2021:
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| CTIVP® – Victory Sycamore Established Value Fund | Annual Report 2021 | 11 |
Statement of Assets and Liabilities
December 31, 2021
December 31, 2021
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $409,978,743) | $554,997,465 |
| Affiliated issuers (cost $11,523,772) | 11,523,412 |
| Receivable for: | |
| Investments sold | 219,555 |
| Capital shares sold | 28,015 |
| Dividends | 599,077 |
| Prepaid expenses | 11,308 |
| Total assets | 567,378,832 |
| Liabilities | |
| Payable for: | |
| Investments purchased | 394,412 |
| Capital shares purchased | 1,081,995 |
| Management services fees | 11,849 |
| Distribution and/or service fees | 807 |
| Service fees | 7,777 |
| Compensation of board members | 86,806 |
| Compensation of chief compliance officer | 103 |
| Other expenses | 22,829 |
| Total liabilities | 1,606,578 |
| Net assets applicable to outstanding capital stock | $565,772,254 |
| Represented by | |
| Trust capital | $565,772,254 |
| Total - representing net assets applicable to outstanding capital stock | $565,772,254 |
| Class 1 | |
| Net assets | $403,831,982 |
| Shares outstanding | 9,346,811 |
| Net asset value per share | $43.21 |
| Class 2 | |
| Net assets | $74,121,612 |
| Shares outstanding | 1,765,287 |
| Net asset value per share | $41.99 |
| Class 3 | |
| Net assets | $87,818,660 |
| Shares outstanding | 2,060,676 |
| Net asset value per share | $42.62 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 12 | CTIVP® – Victory Sycamore Established Value Fund | Annual Report 2021 |
Statement of Operations
Year Ended December 31, 2021
Year Ended December 31, 2021
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $13,735,346 |
| Dividends — affiliated issuers | 5,445 |
| Interfund lending | 24 |
| Total income | 13,740,815 |
| Expenses: | |
| Management services fees | 4,566,784 |
| Distribution and/or service fees | |
| Class 2 | 163,237 |
| Class 3 | 97,687 |
| Service fees | 87,386 |
| Compensation of board members | 37,289 |
| Custodian fees | 13,909 |
| Printing and postage fees | 14,916 |
| Audit fees | 29,500 |
| Legal fees | 15,549 |
| Compensation of chief compliance officer | 109 |
| Other | 15,768 |
| Total expenses | 5,042,134 |
| Net investment income | 8,698,681 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 112,740,697 |
| Investments — affiliated issuers | (425) |
| Net realized gain | 112,740,272 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | 56,320,032 |
| Investments — affiliated issuers | (360) |
| Net change in unrealized appreciation (depreciation) | 56,319,672 |
| Net realized and unrealized gain | 169,059,944 |
| Net increase in net assets resulting from operations | $177,758,625 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| CTIVP® – Victory Sycamore Established Value Fund | Annual Report 2021 | 13 |
Statement of Changes in Net Assets
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | |
| Operations | ||
| Net investment income | $8,698,681 | $8,159,726 |
| Net realized gain | 112,740,272 | 31,303,067 |
| Net change in unrealized appreciation (depreciation) | 56,319,672 | 14,116,633 |
| Net increase in net assets resulting from operations | 177,758,625 | 53,579,426 |
| Decrease in net assets from capital stock activity | (310,724,170) | (11,442,338) |
| Total increase (decrease) in net assets | (132,965,545) | 42,137,088 |
| Net assets at beginning of year | 698,737,799 | 656,600,711 |
| Net assets at end of year | $565,772,254 | $698,737,799 |
| Year Ended | Year Ended | |||
| December 31, 2021 | December 31, 2020 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class 1 | ||||
| Subscriptions | 68,326 | 2,794,000 | 528,183 | 12,490,299 |
| Redemptions | (8,547,264) | (323,905,306) | (346,188) | (10,495,499) |
| Net increase (decrease) | (8,478,938) | (321,111,306) | 181,995 | 1,994,800 |
| Class 2 | ||||
| Subscriptions | 321,458 | 12,549,323 | 158,168 | 4,365,767 |
| Redemptions | (191,212) | (7,321,921) | (351,980) | (9,491,983) |
| Net increase (decrease) | 130,246 | 5,227,402 | (193,812) | (5,126,216) |
| Class 3 | ||||
| Subscriptions | 249,282 | 9,878,828 | 56,261 | 1,558,809 |
| Redemptions | (123,171) | (4,719,094) | (372,566) | (9,869,731) |
| Net increase (decrease) | 126,111 | 5,159,734 | (316,305) | (8,310,922) |
| Total net decrease | (8,222,581) | (310,724,170) | (328,122) | (11,442,338) |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 14 | CTIVP® – Victory Sycamore Established Value Fund | Annual Report 2021 |
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BLANK]
| CTIVP® – Victory Sycamore Established Value Fund | Annual Report 2021 | 15 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect any fees and expenses imposed under your
Contract and/or Qualified Plan, as applicable; such fees and expenses would reduce the total returns for all periods shown. Total return and portfolio turnover are not annualized for periods of less than one year. The
portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain derivatives, if any. If such transactions were included, the Fund’s portfolio
turnover rate may be higher.
| Net asset value, beginning of period | Net investment income | Net realized and unrealized gain (loss) | Total from investment operations | |
| Class 1 | ||||
| Year Ended 12/31/2021 | $32.76 | 0.58(c) | 9.87 | 10.45 |
| Year Ended 12/31/2020 | $30.32 | 0.38 | 2.06 | 2.44 |
| Year Ended 12/31/2019 | $23.65 | 0.34 | 6.33 | 6.67 |
| Year Ended 12/31/2018 | $26.27 | 0.27 | (2.89) | (2.62) |
| Year Ended 12/31/2017 | $22.68 | 0.17 | 3.42 | 3.59 |
| Class 2 | ||||
| Year Ended 12/31/2021 | $31.92 | 0.50(c) | 9.57 | 10.07 |
| Year Ended 12/31/2020 | $29.61 | 0.31 | 2.00 | 2.31 |
| Year Ended 12/31/2019 | $23.16 | 0.27 | 6.18 | 6.45 |
| Year Ended 12/31/2018 | $25.79 | 0.20 | (2.83) | (2.63) |
| Year Ended 12/31/2017 | $22.32 | 0.11 | 3.36 | 3.47 |
| Class 3 | ||||
| Year Ended 12/31/2021 | $32.35 | 0.55(c) | 9.72 | 10.27 |
| Year Ended 12/31/2020 | $29.98 | 0.35 | 2.02 | 2.37 |
| Year Ended 12/31/2019 | $23.42 | 0.31 | 6.25 | 6.56 |
| Year Ended 12/31/2018 | $26.05 | 0.23 | (2.86) | (2.63) |
| Year Ended 12/31/2017 | $22.51 | 0.14 | 3.40 | 3.54 |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Net investment income per share includes special dividends. The effect of these dividends amounted to $0.15 per share. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 16 | CTIVP® – Victory Sycamore Established Value Fund | Annual Report 2021 |
Financial Highlights (continued)
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets(a) | Total net expense ratio to average net assets(a),(b) | Net investment income ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Class 1 | |||||||
| Year Ended 12/31/2021 | $43.21 | 31.90% | 0.80% | 0.80% | 1.48% | 24% | $403,832 |
| Year Ended 12/31/2020 | $32.76 | 8.05% | 0.79% | 0.79% | 1.41% | 41% | $583,965 |
| Year Ended 12/31/2019 | $30.32 | 28.20% | 0.79% | 0.79% | 1.25% | 39% | $534,959 |
| Year Ended 12/31/2018 | $23.65 | (9.97%) | 0.79% | 0.79% | 1.00% | 36% | $442,931 |
| Year Ended 12/31/2017 | $26.27 | 15.83% | 0.82% | 0.82% | 0.69% | 41% | $487,245 |
| Class 2 | |||||||
| Year Ended 12/31/2021 | $41.99 | 31.55% | 1.05% | 1.05% | 1.28% | 24% | $74,122 |
| Year Ended 12/31/2020 | $31.92 | 7.80% | 1.04% | 1.04% | 1.16% | 41% | $52,184 |
| Year Ended 12/31/2019 | $29.61 | 27.85% | 1.04% | 1.04% | 1.00% | 39% | $54,158 |
| Year Ended 12/31/2018 | $23.16 | (10.20%) | 1.04% | 1.04% | 0.76% | 36% | $40,488 |
| Year Ended 12/31/2017 | $25.79 | 15.55% | 1.07% | 1.07% | 0.46% | 41% | $40,477 |
| Class 3 | |||||||
| Year Ended 12/31/2021 | $42.62 | 31.75% | 0.93% | 0.93% | 1.41% | 24% | $87,819 |
| Year Ended 12/31/2020 | $32.35 | 7.91% | 0.92% | 0.92% | 1.29% | 41% | $62,589 |
| Year Ended 12/31/2019 | $29.98 | 28.01% | 0.91% | 0.91% | 1.12% | 39% | $67,484 |
| Year Ended 12/31/2018 | $23.42 | (10.10%) | 0.92% | 0.92% | 0.88% | 36% | $53,581 |
| Year Ended 12/31/2017 | $26.05 | 15.73% | 0.95% | 0.95% | 0.57% | 41% | $57,946 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| CTIVP® – Victory Sycamore Established Value Fund | Annual Report 2021 | 17 |
Notes to Financial Statements
December 31, 2021
December 31, 2021
Note 1. Organization
CTIVP® – Victory
Sycamore Established Value Fund (the Fund), a series of Columbia Funds Variable Series Trust II (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended (the
1940 Act), as an open-end management investment company organized as a Massachusetts business trust.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers Class 1, Class 2 and Class 3 shares to separate accounts funding variable annuity contracts and variable life insurance policies (collectively, Contracts) issued
by affiliated and unaffiliated life insurance companies (Participating Insurance Companies) as well as qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors (Qualified
Investors) authorized by Columbia Management Investment Distributors, Inc. (the Distributor). You may not buy (nor will you own) shares of the Fund directly. You may invest by participating in a Qualified Plan or by
buying a Contract and making allocations to the Fund. Although all share classes generally have identical voting, dividend and liquidation rights, each share class votes separately when required by the Trust’s
organizational documents or by law. Different share classes pay different net investment income distribution amounts to the extent the expenses of such share classes differ, and distributions in liquidation will be
proportional to the net asset value of each share class. Each share class has its own cost structure and other features.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Equity securities listed on an
exchange are valued at the closing price or last trade price on their primary exchange at the close of business of the New York Stock Exchange. Securities with a closing price not readily available or not listed on
any exchange are valued at the mean between the closing bid and ask prices. Listed preferred stocks convertible into common stocks are valued using an evaluated price from a pricing service.
Foreign equity securities are
valued based on the closing price or last trade price on their primary exchange at the close of business of the New York Stock Exchange. If any foreign equity security closing prices are not readily available,
the securities are valued at the mean of the latest quoted bid and ask prices on such exchanges or markets. Foreign currency exchange rates are determined at the scheduled closing time of the New York Stock Exchange.
Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange; therefore, the closing prices for securities in such markets or on such exchanges may not fully reflect
events that occur after such close but before the close of the New York Stock Exchange. In those situations, foreign securities will be fair valued pursuant to a policy adopted by the Board of Trustees. Under the
policy, the Fund may utilize a third-party pricing service to determine these fair values. The third-party pricing service takes into account multiple factors, including, but not limited to, movements in the U.S.
securities markets, certain depositary receipts, futures contracts and foreign exchange rates that have occurred subsequent to the close of the foreign exchange or market, to determine a good faith estimate that
reasonably reflects the current market conditions as of the close of the New York Stock Exchange. The fair value of a security is likely to be different from the quoted or published price, if available.
Investments in open-end investment
companies (other than exchange-traded funds (ETFs)), are valued at the latest net asset value reported by those companies as of the valuation time.
| 18 | CTIVP® – Victory Sycamore Established Value Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
Income recognition
Corporate actions and dividend
income are generally recorded net of any non-reclaimable tax withholdings, on the ex-dividend date or upon receipt of an ex-dividend notification in the case of certain foreign securities.
The Fund may receive distributions
from holdings in equity securities, business development companies (BDCs), exchange-traded funds (ETFs), limited partnerships (LPs), other regulated investment companies (RICs), and real estate investment trusts
(REITs), which report information as to the tax character of their distributions annually. These distributions are allocated to dividend income, capital gain and return of capital based on actual information reported.
Return of capital is recorded as a reduction of the cost basis of securities held. If the Fund no longer owns the applicable securities, return of capital is recorded as a realized gain. With respect to REITs, to the
extent actual information has not yet been reported, estimates for return of capital are made by Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise
Financial, Inc. (Ameriprise Financial). The Investment Manager’s estimates are subsequently adjusted when the actual character of the distributions is disclosed by the REITs, which could result in a
proportionate change in return of capital to shareholders.
Awards from class action litigation
are recorded as a reduction of cost basis if the Fund still owns the applicable securities on the payment date. If the Fund no longer owns the applicable securities on the payment date, the proceeds are recorded as
realized gains.
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
Federal income tax status
The Fund is treated as a
partnership for federal income tax purposes, and the Fund does not expect to make regular distributions. The Fund will not be subject to federal income tax, and therefore, there is no provision for federal income
taxes. The partners of the Fund are subject to tax on their distributive share of the Fund’s income and loss. The components of the Fund’s net assets are reported at the partner-level for federal income
tax purposes, and therefore, are not presented in the Statement of Assets and Liabilities.
| CTIVP® – Victory Sycamore Established Value Fund | Annual Report 2021 | 19 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Under the Management Agreement, the
Investment Manager provides the Fund with investment research and advice, as well as administrative and accounting services. The Investment Manager is responsible for the ultimate oversight of investments made by the
Fund. The Fund’s subadviser (see Subadvisory agreement below) has the primary responsibility for the day-to-day portfolio management of the Fund. The management services fee is an annual fee that is equal to a
percentage of the Fund’s daily net assets that declines from 0.77% to 0.57% as the Fund’s net assets increase. The effective management services fee rate for the year ended December 31, 2021 was 0.76% of
the Fund’s average daily net assets.
Subadvisory agreement
The Investment Manager has entered
into a Subadvisory Agreement with Victory Capital Management Inc. to serve as the subadviser to the Fund. The Investment Manager compensates the subadviser to manage the investment of the Fund’s assets.
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. Under a Deferred Compensation Plan (the
Deferred Plan), these members of the Board of Trustees may elect to defer payment of up to 100% of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of
certain funds managed by the Investment Manager. The Fund’s liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Deferred Plan. All
amounts payable under the Deferred Plan constitute a general unsecured obligation of the Fund. The expense for the Deferred Plan, which includes Trustees’ fees deferred during the current period as well as any
gains or losses on the Trustees’ deferred compensation balances as a result of market fluctuations, is included in "Compensation of board members" on the Statement of Operations.
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
Service fees
The Fund has entered into a
Shareholder Services Agreement with Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial. Under this
agreement, the Fund pays a service fee equal to the payments made by the Transfer Agent to Participating Insurance
| 20 | CTIVP® – Victory Sycamore Established Value Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Companies and other financial intermediaries
(together, Participating Organizations) for services each such Participating Organization provides to its clients, customers and participants that are invested directly or indirectly in the Fund, up to a cap approved
by the Board of Trustees from time to time. The effective service fee rate for the year ended December 31, 2021, was 0.01% of the Fund’s average daily net assets.
The Transfer Agent may retain as
compensation for its services revenues from fees for wire, telephone and redemption orders, account transcripts due the Transfer Agent from Fund shareholders and interest (net of bank charges) earned with respect to
balances in accounts the Transfer Agent maintains in connection with its services to the Fund.
Distribution and/or service fees
The Fund has an agreement with the
Distributor, an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution services. Under a Plan and Agreement of Distribution, the Fund pays a fee at an annual rate
of up to 0.25% of the Fund’s average daily net assets attributable to Class 2 shares and an annual rate of up to 0.125% of the Fund’s average daily net assets attributable to Class 3 shares. The Fund pays
no distribution and service fees for Class 1 shares.
Expenses waived/reimbursed by the
Investment Manager and its affiliates
The Investment Manager and certain
of its affiliates have contractually agreed to waive fees and/or reimburse expenses (excluding certain fees and expenses described below) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, so that the Fund’s net operating expenses, after giving effect to fees waived/expenses reimbursed and any balance credits and/or overdraft charges from the Fund’s
custodian, do not exceed the following annual rate(s) as a percentage of the classes’ average daily net assets:
| Contractual expense cap July 1, 2021 through April 30, 2022 | Voluntary expense cap May 1, 2021 through June 30, 2021 | Contractual expense cap prior to May 1, 2021 | |
| Class 1 | 0.85% | 0.85% | 0.85% |
| Class 2 | 1.10 | 1.10 | 1.10 |
| Class 3 | 0.975 | 0.975 | 0.975 |
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), expenses associated with investments in affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange-traded funds), transaction costs and
brokerage commissions, costs related to any securities lending program, dividend expenses associated with securities sold short, inverse floater program fees and expenses, transaction charges and interest on borrowed
money, interest, costs associated with certain shareholder meetings, infrequent and/or unusual expenses and any other expenses the exclusion of which is specifically approved by the Board of Trustees. This
agreement may be modified or amended only with approval from the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements
described above are not recoverable by the Investment Manager or its affiliates in future periods.
Note 4. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $141,860,568 and $442,834,401, respectively, for the year ended December 31, 2021. The amount of purchase and
sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 5. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate
| CTIVP® – Victory Sycamore Established Value Fund | Annual Report 2021 | 21 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
share of the expenses of the Affiliated MMF. The
Affiliated MMF prices its shares with a floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or
temporarily suspend redemptions (sometimes referred to as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
Note 6. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund’s activity in the
Interfund Program during the year ended December 31, 2021 was as follows:
| Borrower or lender | Average loan balance ($) | Weighted average interest rate (%) | Number of days with outstanding loans |
| Lender | 1,300,000 | 0.69 | 1 |
Interest income earned by the Fund
is recorded as Interfund lending in the Statement of Operations. The Fund had no outstanding interfund loans at December 31, 2021.
Note 7. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to an October 28, 2021 amendment and restatement, the credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment
Manager or an affiliated investment manager, severally and not jointly, permits collective borrowings up to $950 million. Interest is currently charged to each participating fund based on its borrowings at a rate
equal to the higher of (i) the federal funds effective rate, (ii) the secured overnight financing rate plus 0.11448% and (iii) the overnight bank funding rate, plus in each case, 1.00%. Each borrowing under the credit
facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The
commitment fee is included in other expenses in the Statement of Operations. This agreement expires annually in October unless extended or renewed. Prior to the October 28, 2021 amendment and restatement, the Fund had
access to a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. which permitted collective borrowings up to $950 million. Interest was
charged to each participating fund based on its borrowings at a rate equal to the higher of (i) the federal funds effective rate, (ii) the one-month London Interbank Offered Rate (LIBOR) rate and (iii) the overnight
bank funding rate, plus in each case, 1.25%.
The Fund had no borrowings during
the year ended December 31, 2021.
Note 8. Significant
risks
Industrials sector risk
The Fund is more susceptible to the
particular risks that may affect companies in the industrials sector than if it were invested in a wider variety of companies in unrelated sectors. Companies in the industrials sector are subject to certain risks,
including changes in supply and demand for their specific product or service and for industrial sector products in general, including decline in demand for such products due to rapid technological developments and
frequent new product introduction. Performance of such companies may be affected by factors including government regulation, world events and economic conditions and risks for environmental damage and product
liability claims.
| 22 | CTIVP® – Victory Sycamore Established Value Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Market risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
The coronavirus disease 2019 and
its variants (COVID-19) pandemic has resulted in, and may continue to result in, significant global economic and societal disruption and market volatility due to disruptions in market access, resource availability,
facilities operations, imposition of tariffs, export controls and supply chain disruption, among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement
and loss in human and other resources. The uncertainty surrounding the magnitude, duration, reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental
authorities or other third parties, present unknowns that are yet to unfold. The impacts, as well as the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and
pandemics that may arise in the future – could negatively affect global economies and markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in
emerging market countries may be greater due to generally less established healthcare systems, governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing
political, social and economic risks in certain countries or globally. The disruptions caused by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively
impact the Fund’s ability to achieve its investment objectives. Any such event(s) could have a significant adverse impact on the value and risk profile of the Fund.
Shareholder concentration risk
At December 31, 2021, affiliated
shareholders of record owned 100.0% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of
less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Small- and mid-cap company risk
Investments in small- and
mid-capitalization companies (small- and mid-cap companies) often involve greater risks than investments in larger, more established companies (larger companies) because small- and mid-cap companies tend to have less
predictable earnings and may lack the management experience, financial resources, product diversification and competitive strengths of larger companies. Securities of small- and mid-cap companies may be less liquid
and more volatile than the securities of larger companies.
Note 9. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
| CTIVP® – Victory Sycamore Established Value Fund | Annual Report 2021 | 23 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Note 10. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in
connection with the conduct of their business activities. Ameriprise Financial believes that the Fund is not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject
of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with
the Fund. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (SEC) on legal and regulatory matters that relate to
Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that
these matters, or the adverse publicity associated with them, will not result in increased Fund redemptions, reduced sale of Fund shares or other adverse consequences to the Fund. Further, although we believe
proceedings are not likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines,
penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial or one or more of its affiliates that provides services to
the Fund.
| 24 | CTIVP® – Victory Sycamore Established Value Fund | Annual Report 2021 |
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees of Columbia
Funds Variable Series Trust II and Shareholders of CTIVP® – Victory Sycamore Established Value Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of CTIVP® – Victory Sycamore Established Value Fund (one of the funds constituting Columbia Funds Variable Series Trust II,
referred to hereafter as the "Fund") as of December 31, 2021, the related statement of operations for the year ended December 31, 2021, the statement of changes in net assets for each of the two years in the period
ended December 31, 2021, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2021 (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, 2021, 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, 2021 and the financial highlights for each of the five years in the period ended December 31, 2021 in conformity with accounting principles generally
accepted in the United States of America.
Basis for Opinion
These financial statements are the
responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these
financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2021 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.
/s/PricewaterhouseCoopers LLP
Minneapolis, Minnesota
February 18, 2022
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| CTIVP® – Victory Sycamore Established Value Fund | Annual Report 2021 | 25 |
TRUSTEES AND
OFFICERS
The Board oversees the
Fund’s operations and appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following table provides basic biographical information about the
Fund’s Trustees as of the printing of this report, including their principal occupations during the past five years, although specific titles for individuals may have varied over the period. The year set forth
beneath Length of Service in the table below is the year in which the Trustee was first appointed or elected as Trustee to any Fund currently in the Columbia Funds Complex or a predecessor thereof. Under current Board
policy, each Trustee generally serves until December 31 of the year such Trustee turns seventy-five (75).
Independent trustees
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| George S. Batejan c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1953 | Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 176 | Former Chairman of the Board, NICSA (National Investment Company Services Association) (Executive Committee, Nominating Committee and Governance Committee), 2014-2016; former Director, Intech Investment Management, 2011-2016; former Board Member, Metro Denver Chamber of Commerce, 2015-2016; former Advisory Board Member, University of Colorado Business School, 2015-2018 |
| Kathleen Blatz c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2006 | Attorney, specializing in arbitration and mediation; Chief Justice, Minnesota Supreme Court, 1998-2006; Associate Justice, Minnesota Supreme Court, 1996-1998; Fourth Judicial District Court Judge, Hennepin County, 1994-1996; Attorney in private practice and public service, 1984-1993; State Representative, Minnesota House of Representatives, 1979-1993, which included service on the Tax and Financial Institutions and Insurance Committees; Member and Interim Chair, Minnesota Sports Facilities Authority, January 2017-July 2017; Interim President and Chief Executive Officer, Blue Cross Blue Shield of Minnesota (health care insurance), February-July 2018, April-October 2021 | 176 | Former Trustee, Blue Cross Blue Shield of Minnesota, 2009-2021 (Chair of the Business Development Committee, 2014-2017; Chair of the Governance Committee, 2017-2019); former Member and Chair of the Board, Minnesota Sports Facilities Authority, January 2017-July 2017; former Director, Robina Foundation, 2009-2020 (Chair, 2014-2020); Director, Schulze Family Foundation, since 2021 |
| Pamela G. Carlton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2007 | President, Springboard — Partners in Cross Cultural Leadership (consulting company) since 2003; Managing Director of US Equity Research, JP Morgan Chase, 1999-2003; Director of US Equity Research, Chase Asset Management, 1996-1999; Co-Director Latin America Research, 1993-1996, COO Global Research, 1992-1996, Co-Director of US Research, 1991-1992, Investment Banker, Morgan Stanley, 1982-1991, Morgan Stanley; Attorney, Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 176 | Trustee, New York Presbyterian Hospital Board (Executive Committee and Chair of People Committee) since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee); Director, Apollo Commercial Real Estate Finance, Inc. since 2021; the Governing Council of the Independent Directors Council (IDC), since 2021 |
| 26 | CTIVP® – Victory Sycamore Established Value Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Janet Langford Carrig c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1957 | Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 174 | Director, EQT Corporation (natural gas producer) since 2019; Director, Whiting Petroleum Corporation (independent oil and gas company) since 2020 |
| J. Kevin Connaughton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2020 | Member, FINRA National Adjudicatory Council since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Consultant to Independent Trustees of CFVIT and CFST I from March 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Managing Director and General Manager of Mutual Fund Products, Columbia Management Investment Advisers, LLC, May 2010-February 2015; President, Columbia Funds, 2008-2015; and senior officer of Columbia Funds and affiliated funds, 2003-2015 | 174 | Former Director, The Autism Project, March 2015-December 2021; former Member of the Investment Committee, St. Michael’s College, November 2015-February 2020; former Trustee, St. Michael’s College, June 2017-September 2019; former Trustee, New Century Portfolios, January 2015-December 2017 |
| Olive M. Darragh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since 2020 | Managing Director of Darragh Inc. (strategy and talent management consulting firm) since 2010; Founder and CEO, Zolio, Inc. (investment management talent identification platform) since 2004; Consultant to Independent Trustees of CFVIT and CFST I from June 2019 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 2001-2004 | 174 | Former Director, University of Edinburgh Business School (Member of US Board); former Director, Boston Public Library Foundation |
| Patricia M. Flynn c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1950 | Trustee since 2004 | Trustee Professor of Economics and Management, Bentley University since 1976 (also teaches and conducts research on corporate governance); Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 176 | Trustee, MA Taxpayers Foundation since 1997; Board of Governors, Innovation Institute, MA Technology Collaborative, 2010-2020; former Board of Directors, The MA Business Roundtable, 2003-2019 |
| Brian J. Gallagher c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 176 | Trustee, Catholic Schools Foundation since 2004 |
| CTIVP® – Victory Sycamore Established Value Fund | Annual Report 2021 | 27 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Douglas A. Hacker c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1955 | Co-Chair since 2021; Chair of CFST I and CFVIT since 2014; Trustee of CFST I and CFVIT since 1996 and CFST, CFST II, CFVST II, CET I and CET II since 2021 | Independent business executive since May 2006; Executive Vice President – Strategy of United Airlines, December 2002 - May 2006; President of UAL Loyalty Services (airline marketing company), September 2001-December 2002; Executive Vice President and Chief Financial Officer of United Airlines, July 1999-September 2001 | 176 | Director, Spartan Nash Company (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing); former Director, Nash Finch Company (food distributor), 2005-2013; former Director, SeaCube Container Leasing Ltd. (container leasing), 2010-2013; and former Director, Travelport Worldwide Limited (travel information technology), 2014-2019 |
| Nancy T. Lukitsh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1956 | Trustee since 2011 | Senior Vice President, Partner and Director of Marketing, Wellington Management Company, LLP (investment adviser), 1997-2010; Chair, Wellington Management Portfolios (commingled non-U.S. investment pools), 2007 -2010; Director, Wellington Trust Company, NA and other Wellington affiliates, 1997-2010 | 174 | None |
| David M. Moffett c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2011 | Retired; Consultant to Bridgewater and Associates | 174 | Director, CSX Corporation (transportation suppliers); Director, Genworth Financial, Inc. (financial and insurance products and services); Director, PayPal Holdings Inc. (payment and data processing services); Trustee, University of Oklahoma Foundation; former Director, eBay Inc. (online trading community), 2007-2015; and former Director, CIT Bank, CIT Group Inc. (commercial and consumer finance), 2010-2016 |
| Catherine James Paglia c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Co-Chair since 2021; Chair of CFST, CFST II, CFVST II, CET I and CET II since 2020; Trustee of CFST, CFST II and CFVST II since 2004 and CFST I and CFVIT since 2021 | Director, Enterprise Asset Management, Inc. (private real estate and asset management company) since September 1998; Managing Director and Partner, Interlaken Capital, Inc., 1989-1997; Vice President, 1982-1985, Principal, 1985-1987, Managing Director, 1987-1989, Morgan Stanley; Vice President, Investment Banking, 1980-1982, Associate, Investment Banking, 1976-1980, Dean Witter Reynolds, Inc. | 176 | Director, Valmont Industries, Inc. (irrigation systems manufacturer) since 2012; Trustee, Carleton College (on the Investment Committee); Trustee, Carnegie Endowment for International Peace (on the Investment Committee) |
| 28 | CTIVP® – Victory Sycamore Established Value Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Minor M. Shaw c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1947 | Trustee since 2003 | President, Micco LLC (private investments) since 2011; President, Micco Corp. (family investment business), 1998-2011 | 176 | Director, Blue Cross Blue Shield of South Carolina (Chair of Compensation Committee) since April 2008; Trustee, Hollingsworth Funds (on the Investment Committee) since 2016 (previously Board Chair from 2016-2019); Former Advisory Board member, Duke Energy Corp., 2016-2020; Chair of the Duke Endowment; Chair of Greenville – Spartanburg Airport Commission; former Trustee, BofA Funds Series Trust (11 funds), 2003-2011; former Director, Piedmont Natural Gas, 2004-2016; former Director, National Association of Corporate Directors, Carolinas Chapter, 2013-2018; Chair, Daniel-Mickel Foundation since 1998 |
| Natalie A. Trunow c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1967 | Trustee since 2020 | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services), January 2016-January 2021; Non-executive Member of the Investment Committee and Valuation Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services), August 2018-January 2021; Advisor, Paradigm Asset Management, November 2016-December 2021; Consultant to Independent Trustees of CFVIT and CFST I from September 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Director of Investments/Consultant, Casey Family Programs, April 2016-November 2016; Senior Vice President and Chief Investment Officer, Calvert Investments, August 2008-January 2016; Section Head and Portfolio Manager, General Motors Asset Management, June 1997-August 2008 | 174 | Former Director, Investment Committee, Health Services for Children with Special Needs, Inc., 2012-2019; Director, Chair of Audit Committee, Consumer Credit Counseling Services (formerly Guidewell Financial Solutions), since 2019; Independent Director, Investment Committee and Valuation Committee, Sarona Asset Management, since 2019 |
| Sandra Yeager c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2017 | Retired; President and founder, Hanoverian Capital, LLC (SEC registered investment advisor firm), 2008-2016; Managing Director, DuPont Capital, 2006-2008; Managing Director, Morgan Stanley Investment Management, 2004-2006; Senior Vice President, Alliance Bernstein, 1990-2004 | 176 | Former Director, NAPE Education Foundation, October 2016-October 2020 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Fund Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I (CET I), Columbia ETF Trust II (CET II), Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Beckman, Gallagher and Hacker and Mses. Blatz, Carlton, Flynn, Paglia, Shaw and Yeager serve as Directors of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
| CTIVP® – Victory Sycamore Established Value Fund | Annual Report 2021 | 29 |
TRUSTEES AND OFFICERS (continued)
Interested trustee affiliated with Investment Manager*
Interested trustee affiliated with Investment Manager*
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during the past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex overseen | Other directorships held by Trustee during the past five years |
| Daniel J. Beckman c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since November 2021(a) | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC (since April 2015); officer of Columbia Funds and affiliated funds since 2020. | 176 | Director, Ameriprise Trust Company, since October 2016; Director, Columbia Management Investment Distributors, Inc. since November 2018; Board of Governors, Columbia Wanger Asset Management, LLC since January 2022 |
| * | Interested person (as defined under the 1940 Act) by reason of being an officer, director, security holder and/or employee of the Investment Manager or Ameriprise Financial. |
| (a) | Mr. Beckman serves as the President and Principal Executive Officer of the Columbia Funds (since 2021). |
The Statement of Additional
Information has additional information about the Fund’s Board members and is available, without charge, upon request by calling 800.345.6611 or contacting your financial intermediary.
The Board has appointed officers
who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. The following table provides basic information about the Officers of the
Fund, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Beckman, who is President and Principal Executive Officer, the
Fund’s other officers are:
Fund officers
| 30 | CTIVP® – Victory Sycamore Established Value Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Fund officers (continued)
Fund officers (continued)
| CTIVP® – Victory Sycamore Established Value Fund | Annual Report 2021 | 31 |
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For Fund and other investment product prospectuses, which contain this and other important information, contact your
financial advisor or insurance representative. Please read the prospectus carefully before you invest. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved. Columbia Management Investment Distributors, Inc., 290 Congress Street, Boston, MA 02210
© 2022 Columbia Management Investment
Advisers, LLC.
C-2065 AW (2/22)
Variable Portfolio
– Partners Core Equity Fund
Please remember that you may not
buy (nor will you own) shares of the Fund directly. The Fund is available through variable annuity contracts and variable life insurance policies offered by the separate accounts of participating insurance companies
as well as qualified pension and retirement plans. Please contact your financial advisor or insurance representative for more information.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
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| 30 |
Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which Variable Portfolio – Partners Core Equity Fund (the Fund) holds investments consistent with the procedures as stated in the Statement of Additional Information
(SAI). You may obtain a copy of the SAI without charge by calling 800.345.6611; contacting your financial intermediary or searching the website of the Securities and Exchange Commission (SEC) at sec.gov. Information
regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge by visiting
columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. The Fund’s Form N-PORT is available on the SEC’s website at sec.gov. The Fund’s complete
schedule of portfolio holdings, as filed on Form N-PORT, can also be obtained without charge, upon request, by calling 800.345.6611.
Additional Fund information
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
290 Congress Street
Boston, MA 02210
Fund distributor
Columbia Management Investment Distributors,
Inc.
290 Congress Street
Boston, MA 02210
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
Variable Portfolio – Partners Core Equity
Fund | Annual Report 2021
Fund at a Glance
Investment objective
The Fund
seeks to provide shareholders with long-term capital growth.
Portfolio management
J.P. Morgan Investment Management Inc.
Scott Davis
Shilpee Raina, CFA
David Small
T. Rowe Price Associates, Inc.
Jeffrey Rottinghaus, CPA*
* Effective April 1, 2022, Jeffrey Rottinghaus will step down as the portfolio manager of the T. Rowe Price portion of the Fund and will be succeeded by Shawn Driscoll. Mr. Driscoll currently
serves as Vice President and Portfolio Manager of T. Rowe Price.
| Variable Portfolio – Partners Core Equity Fund | Annual Report 2021 | 3 |
Fund at a Glance (continued)
Performance of a hypothetical $10,000 investment (December 31, 2011 — December 31, 2021)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class 2 shares of Variable Portfolio – Partners Core Equity Fund during the stated time period, and does not reflect the deduction of taxes, if any, that a
shareholder may pay on Fund distributions or on the redemption of Fund shares. The returns also do not reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy or
qualified pension or retirement plan, if any.
| 4 | Variable Portfolio – Partners Core Equity Fund | Annual Report 2021 |
Manager Discussion of Fund Performance
At December 31, 2021, approximately
98.51% of the Fund’s shares were owned in the aggregate by affiliated funds-of-funds managed by Columbia Management Investment Advisers, LLC (the Investment Manager). As a result of asset allocation decisions by
the Investment Manager, it is possible that the Fund may experience relatively large purchases or redemptions from affiliated funds-of-funds. The Investment Manager seeks to minimize the impact of these transactions
by structuring them over a reasonable period of time. The Fund may also experience increased expenses as it buys and sells securities as a result of purchases or redemptions by affiliated funds-of-funds.
During the annual period ended
December 31, 2021, the Fund was managed by three subadvisers. Effective April 30, 2021, Jacobs Levy Equity Management, Inc. (Jacobs Levy) was terminated as a subadviser to the Fund and, effective May 3, 2021, J.P.
Morgan Investment Management Inc. (JPMorgan) was added as a subadviser to the Fund. As of December 31, 2021, JPMorgan managed approximately 50.27% and T. Rowe Price Associates, Inc. (T. Rowe Price) managed
approximately 49.73% of the Fund’s assets.
For the 12-month period that ended
December 31, 2021, Class 2 shares of the Fund returned 29.18%. The Fund outperformed its benchmark, the S&P 500 Index, which returned 28.71% for the same time period.
Market overview
Encouraging economic data
bolstered by a steady rise in economic activity and robust corporate earnings results buoyed the markets throughout the year, with the S&P 500 Index posting an historic record of 70 all-time highs. The
extraordinary fiscal and monetary stimulus that helped shape the pandemic recovery continued to provide an excellent backdrop for the year. The rally was not without its challenges, as several volatility shocks tested
the market’s resilience. While an unprecedented, targeted short squeeze whipsawed the U.S. equity market in the first quarter, a confluence of mounting inflation fears, threats from COVID-19 variants, widening
fiscal deficit, and supply disruptions loomed over the rest of the year. Finally, a fourth wave of the pandemic in some parts of Europe and the new variant Omicron were identified, triggering a sell-off in November.
However, studies suggesting that the Omicron variant might be less severe than the previous variants helped lift investors’ confidence, and the markets ended strongly for the third consecutive year. Although
investors seemed to have looked beyond the uncertainty, tightened lockdowns and restrictions in some parts of Asia and Europe, along with rising COVID-19 cases globally, remain as potential areas of concern that could
further disrupt global supply chains and move inflation higher.
Large-cap stocks, as represented by
the S&P 500 Index, outperformed the small-cap Russell 2000 Index. The ongoing dominance of technology stocks also led to outperformance for the growth style within the large-cap space. However, this trend did not
hold with regard to smaller cap stocks, as the value style outperformed growth by a wide margin. Within the benchmark, the energy and real estate sectors, which were the laggards of 2020, contributed most this year.
While all sectors of the benchmark delivered positive results, the utilities and consumer staples sectors failed to keep up the pace, underperforming the benchmark the most for the period.
The Fund’s notable
contributors during the period
Jacobs Levy
We managed a portion of the
Fund’s assets from the start of the reporting period through April 30, 2021 (our reporting period). During that time period, our portion of the Fund outperformed the benchmark.
| • | During our reporting period, the three strongest contributing market sectors on a relative basis were information technology, consumer discretionary, and energy. Security selection was positive in each of the three sectors. An overweight of energy also benefited the portfolio. The portfolio had positive absolute returns in the three sectors. |
| • | During our reporting period, the three stocks that contributed the most to our portion of the portfolio’s relative performance were Ford Motor Company, General Motors Company, and Eli Lilly and Company. |
| ○ | Ford Motor Company and General Motors both engage in the manufacture, distribution, and sale of automobiles. Both companies outperformed the benchmark during our reporting period due, in part, to the fact that both had a |
| Variable Portfolio – Partners Core Equity Fund | Annual Report 2021 | 5 |
Manager Discussion of Fund Performance (continued)
| smaller-than-benchmark capitalization along with a value orientation. Stocks that exhibited these two characteristics were amply rewarded during our reporting period. In addition, as both companies made inroads into newer technology such as electric vehicles, their share prices have undergone a fundamental repricing that is being driven, in part, by the dramatic increase in the share price of Tesla over the past two years. | |
| ○ | Eli Lilly and Company engages in the discovery, development, manufacture, and sale of pharmaceutical products. Our portion of the Fund was overweight in Eli Lilly during the month of January, when the share price experienced its sharpest increase. After liquidating our position in the company at the end of January 2021, the stock generated negative returns for the remainder of our reporting period. |
JPMorgan
We began managing a portion of
the Fund’s portfolio on May 3, 2021. From May 3, 2021 through the end of the reporting period on December 31, 2021, our portion of the portfolio outperformed the benchmark.
| • | Outperformance in our portion of the portfolio was driven primarily by stock selection, most notably in real estate investment trusts (REITs), telecommunications and media sectors. |
| • | In REITs, our overweight in Prologis contributed to performance during the period. The company delivered an earnings beat, continuing their streak of beats and raises. Fundamentals for industrial real estate continued to accelerate and beat records, fueled by insatiable demand, which has led to very strong market rent growth for Prologis. |
| • | Within financial services, an overweight in S&P Global contributed to performance. The company delivered a modest earnings beat, with revenue growth across many business lines, notably S&P Ratings. We believe long-term debt issuance will be beneficial to the company’s growth potential. |
| • | Within industrials, an overweight in Eaton Corporation was a contributor to performance. Strong quarterly results driven by better-than-expected organic growth and margin performance, benefited Eaton’s performance during the year. |
T. Rowe Price
Our portion of the Fund
underperformed the S&P 500 Index for the 12-month period ended December 31, 2021.
| • | Stock selection and an average overweight allocation to financials contributed as the sector outperformed the broader market. Shares of banking company Wells Fargo advanced. |
| • | Within communication services, stock selection was beneficial. Shares of Alphabet, the market share leader in global search, outperformed. |
| • | Stock selection in materials also added value. Industrial gas company Linde performed well. |
| • | The top individual contributors to our portion of the Fund’s portfolio during the period included Advanced Micro Devices, Eli Lily, and Zoetis. |
| ○ | Shares of semiconductor manufacturer Advanced Micro Devices climbed on back-to-back strong quarterly results and increases to forward guidance as the company continued to gain share from competitor Intel, bolstered by the scale advantages afforded by the company’s third-party foundry, Taiwan Semiconductor Manufacturing. |
| ○ | Shares of pharmaceutical company Eli Lilly benefited from investor optimism toward the company’s experimental Alzheimer’s drug, donanemab, which received Breakthrough Therapy designation by the U.S. Food and Drug Administration (FDA) in June and was submitted for FDA approval in October. Late in the period, shares were also boosted by a significant increase in the company’s 2021 annual revenue forecast as well as an analyst upgrade. |
| ○ | Zoetis is a pharmaceuticals firm that specializes in vaccines and treatments for livestock and household pets. Shares appreciated on a string of strong quarterly results and raised guidance throughout much of the period. More recently, the company announced a share buyback program as well as a 30% dividend increase. |
| 6 | Variable Portfolio – Partners Core Equity Fund | Annual Report 2021 |
Manager Discussion of Fund Performance (continued)
The Fund’s notable
detractors during the period
Jacobs Levy
| • | During our reporting period, only two sectors detracted from performance in our portion of the portfolio on a relative basis: real estate and health care. Security selection was negative in real estate and negligible in health care. An underweight of real estate and an overweight of health care detracted modestly from performance. The portfolio had positive absolute returns in both sectors. |
| • | The three stocks that detracted the most from our portion of the Fund’s relative performance during our reporting period were Viatris, Inc., Intel Corporation, and QUALCOMM Inc. |
| ○ | Viatris, Inc. is a health care company, which engages in the provision of access to medicines and offers support services such as diagnostic clinics, educational seminars, and digital tools. Wall Street analysts steadily reduced their earnings per share estimates for 2021. The deteriorating outlook for the company was supported by conservative guidance provided by the company in mid-January, followed by a further reduction in fiscal year revenue projections provided by management in February 2021 that were below consensus estimates. |
| ○ | Intel Corporation is the world’s largest semiconductor chip manufacturer and is the developer of the microprocessors in most personal computers. Intel performed strongly early in the period and was added to our portion of the portfolio in mid-April. At the close of our reporting period at the end of April, Intel’s share price had declined -9.17%. Contributing to the decline were concerns about a drop in data-center sales, where Intel is facing stiffer competition from Advanced Micro Devices. |
| ○ | QUALCOMM, Inc. engages in the development, design, and provision of digital telecommunications products and services. The company underperformed the benchmark during our reporting period due, in part, to the fact that large cap growth stocks were out of favor for most of the period and underperformed the broader market. Also contributing to QUALCOMM’s underperformance was a disappointing first quarter 2021 earnings call, in which the company exceeded profit expectations but narrowly missed Wall Street’s sales expectations. |
JPMorgan
| • | The largest areas of detraction in our portion of the Fund’s portfolio were the semiconductors & hardware, pharma/medical technology and health services & systems sectors. |
| • | From an individual stock selection perspective, an overweight position in Norfolk Southern (NSC) within autos & transportation detracted from performance during the period. This year saw service issues as a result of economy-wide labor attrition, in addition to pandemic-driven supply chain disruptions. We continued to believe NSC remained well on track to drive significant operating improvement on the back of Precision Scheduled Railroading (PSR) implementation and consistent pricing gains/discipline. Therefore, we remained comfortable with our overweight position. |
| • | Within semiconductors & hardware, NVIDIA (NVDA) which was not held in the portfolio during the period, detracted from performance. In our view, NVDA was well-positioned to significantly outgrow the industry – but it was also priced that way, as it was near its highest valuation on what appeared to be above-trend revenue growth. Given its expensive valuation, we remained comfortable not holding the name. |
| • | Also within semiconductors & hardware, an overweight position in Analog Devices detracted from performance. Despite reporting earnings that were roughly in line and guiding slightly above expectations, Analog Devices underperformed in a quarter that saw demand remaining strong with supply remaining a constraint. |
T. Rowe Price
| • | During the period, both stock selection and sector allocation detracted from relative performance. |
| • | The consumer discretionary sector was the largest detractor from relative returns due to stock selection. E-commerce company Amazon.com underperformed. |
| • | Within information technology, security selection weighed on relative returns, led by Zoom Video Communications. |
| Variable Portfolio – Partners Core Equity Fund | Annual Report 2021 | 7 |
Manager Discussion of Fund Performance (continued)
| • | An underweight allocation to energy, the best-performing sector in the benchmark, also hurt relative gains. |
| • | The largest individual detractors in our portion of the Fund’s portfolio during the period included Zoom Video Communications, Fiserv and Fidelity National Information Services. |
| ○ | Zoom Video Communications declined during the second half of the year. While the company reported a string of better-than-expected quarterly earnings, shares declined on investor and analyst concerns about the company’s slowing growth. We eliminated our position during the year. |
| ○ | Shares of IT services firm Fiserv traded lower during much of the year due to concerns over low payment volume in regions still heavily impacted by the pandemic, which has had a knock-on effect on demand for its financial services technology. Shares slumped further after the company announced it had lost a large client that significantly impacted North American processing volumes. We trimmed our position during the year. |
| ○ | Fidelity National Information Services is a producer of financial software for large enterprises. Shares declined during much of the period on longer term industry concerns, including increased competition from fast-growing competitors and disintermediation within the industry. We trimmed our position during the year. |
The views expressed in this report
reflect the current views of the respective parties who have contributed to this report. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult
to predict, so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective parties
disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Columbia fund are based on numerous factors, may not be relied on as an
indication of trading intent on behalf of any particular Columbia fund. References to specific securities should not be construed as a recommendation or investment advice.
| 8 | Variable Portfolio – Partners Core Equity Fund | Annual Report 2021 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur ongoing
costs, which generally include management fees, distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to help you compare these costs with the ongoing costs of investing in other mutual funds.
The information below does not
reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy (collectively, Contracts) or qualified pension and retirement plan (Qualified Plan), if any. The total fees
and expenses you bear may therefore be higher than those shown below.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount invested, to estimate the
expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as redemption or exchange fees, or expenses that apply to the subaccount or the Contract. Therefore, the
hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If the fees and expenses imposed under your Contract or
Qualified Plan, if any, were included, your costs would be higher.
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 365.
Expenses do not include fees and
expenses incurred indirectly by the Fund from its investment in underlying funds, including affiliated and non-affiliated pooled investment vehicles, such as mutual funds and exchange-traded funds.
| Variable Portfolio – Partners Core Equity Fund | Annual Report 2021 | 9 |
Portfolio of Investments
December 31, 2021
December 31, 2021
(Percentages represent value of
investments compared to net assets)
Investments in securities
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 10 | Variable Portfolio – Partners Core Equity Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Variable Portfolio – Partners Core Equity Fund | Annual Report 2021 | 11 |
At December 31, 2021,
securities and/or cash totaling $290,000 were pledged as collateral.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 12 | Variable Portfolio – Partners Core Equity Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Notes to Portfolio of
Investments
| (a) | Non-income producing investment. |
| (b) | The rate shown is the seven-day current annualized yield at December 31, 2021. |
| (c) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended December 31, 2021 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Realized gain (loss)($) | Dividends($) | End of period shares |
| Columbia Short-Term Cash Fund, 0.085% | ||||||||
| 61,365,177 | 969,900,272 | (998,958,602) | (2,329) | 32,304,518 | (2,429) | 49,347 | 32,310,980 | |
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at December 31, 2021:
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Variable Portfolio – Partners Core Equity Fund | Annual Report 2021 | 13 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Fair value measurements (continued)
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Materials | 107,207,889 | — | — | 107,207,889 |
| Real Estate | 91,956,047 | — | — | 91,956,047 |
| Utilities | 125,011,039 | — | — | 125,011,039 |
| Total Common Stocks | 3,272,386,182 | — | — | 3,272,386,182 |
| Money Market Funds | 32,304,518 | — | — | 32,304,518 |
| Total Investments in Securities | 3,304,690,700 | — | — | 3,304,690,700 |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 14 | Variable Portfolio – Partners Core Equity Fund | Annual Report 2021 |
Statement of Assets and Liabilities
December 31, 2021
December 31, 2021
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $2,686,101,651) | $3,272,386,182 |
| Affiliated issuers (cost $32,306,847) | 32,304,518 |
| Margin deposits on: | |
| Futures contracts | 290,000 |
| Receivable for: | |
| Investments sold | 1,540,940 |
| Capital shares sold | 403 |
| Dividends | 2,068,040 |
| Foreign tax reclaims | 28,879 |
| Prepaid expenses | 27,564 |
| Total assets | 3,308,646,526 |
| Liabilities | |
| Due to custodian | 290,000 |
| Payable for: | |
| Investments purchased | 2,073,568 |
| Capital shares purchased | 3,077,436 |
| Management services fees | 60,252 |
| Distribution and/or service fees | 211 |
| Service fees | 2,463 |
| Compensation of board members | 204,302 |
| Compensation of chief compliance officer | 578 |
| Other expenses | 55,855 |
| Total liabilities | 5,764,665 |
| Net assets applicable to outstanding capital stock | $3,302,881,861 |
| Represented by | |
| Trust capital | $3,302,881,861 |
| Total - representing net assets applicable to outstanding capital stock | $3,302,881,861 |
| Class 1 | |
| Net assets | $3,254,886,807 |
| Shares outstanding | 90,075,636 |
| Net asset value per share | $36.14 |
| Class 2 | |
| Net assets | $13,395,800 |
| Shares outstanding | 381,141 |
| Net asset value per share | $35.15 |
| Class 3 | |
| Net assets | $34,599,254 |
| Shares outstanding | 971,422 |
| Net asset value per share | $35.62 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Variable Portfolio – Partners Core Equity Fund | Annual Report 2021 | 15 |
Statement of Operations
Year Ended December 31, 2021
Year Ended December 31, 2021
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $35,593,793 |
| Dividends — affiliated issuers | 49,347 |
| Foreign taxes withheld | (66,095) |
| Total income | 35,577,045 |
| Expenses: | |
| Management services fees | 20,144,257 |
| Distribution and/or service fees | |
| Class 2 | 31,507 |
| Class 3 | 41,203 |
| Service fees | 27,589 |
| Compensation of board members | 87,536 |
| Custodian fees | 30,823 |
| Printing and postage fees | 16,987 |
| Audit fees | 54,500 |
| Legal fees | 36,714 |
| Interest on collateral | 305 |
| Compensation of chief compliance officer | 529 |
| Other | 31,590 |
| Total expenses | 20,503,540 |
| Net investment income | 15,073,505 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 769,149,849 |
| Investments — affiliated issuers | (2,429) |
| Futures contracts | 2,036,834 |
| Net realized gain | 771,184,254 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | (22,898,829) |
| Investments — affiliated issuers | (2,329) |
| Net change in unrealized appreciation (depreciation) | (22,901,158) |
| Net realized and unrealized gain | 748,283,096 |
| Net increase in net assets resulting from operations | $763,356,601 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 16 | Variable Portfolio – Partners Core Equity Fund | Annual Report 2021 |
Statement of Changes in Net Assets
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | |
| Operations | ||
| Net investment income | $15,073,505 | $30,134,128 |
| Net realized gain | 771,184,254 | 104,097,983 |
| Net change in unrealized appreciation (depreciation) | (22,901,158) | 357,900,256 |
| Net increase in net assets resulting from operations | 763,356,601 | 492,132,367 |
| Increase (decrease) in net assets from capital stock activity | (587,945,720) | 354,005,333 |
| Total increase in net assets | 175,410,881 | 846,137,700 |
| Net assets at beginning of year | 3,127,470,980 | 2,281,333,280 |
| Net assets at end of year | $3,302,881,861 | $3,127,470,980 |
| Year Ended | Year Ended | |||
| December 31, 2021 | December 31, 2020 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class 1 | ||||
| Subscriptions | 5,448,922 | 171,600,336 | 41,602,071 | 990,376,728 |
| Redemptions | (25,917,436) | (753,572,961) | (24,886,181) | (629,023,178) |
| Net increase (decrease) | (20,468,514) | (581,972,625) | 16,715,890 | 361,353,550 |
| Class 2 | ||||
| Subscriptions | 21,302 | 652,265 | 20,260 | 446,212 |
| Redemptions | (53,149) | (1,681,208) | (68,798) | (1,582,964) |
| Net decrease | (31,847) | (1,028,943) | (48,538) | (1,136,752) |
| Class 3 | ||||
| Subscriptions | 23,798 | 763,604 | 17,393 | 375,516 |
| Redemptions | (181,965) | (5,707,756) | (282,094) | (6,586,981) |
| Net decrease | (158,167) | (4,944,152) | (264,701) | (6,211,465) |
| Total net increase (decrease) | (20,658,528) | (587,945,720) | 16,402,651 | 354,005,333 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Variable Portfolio – Partners Core Equity Fund | Annual Report 2021 | 17 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect any fees and expenses imposed under your
Contract and/or Qualified Plan, as applicable; such fees and expenses would reduce the total returns for all periods shown. Total return and portfolio turnover are not annualized for periods of less than one year. The
portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain derivatives, if any. If such transactions were included, the Fund’s portfolio
turnover rate may be higher.
| Net asset value, beginning of period | Net investment income | Net realized and unrealized gain (loss) | Total from investment operations | |
| Class 1 | ||||
| Year Ended 12/31/2021 | $27.91 | 0.16 | 8.07 | 8.23 |
| Year Ended 12/31/2020 | $23.85 | 0.24 | 3.82 | 4.06 |
| Year Ended 12/31/2019 | $18.84 | 0.27 | 4.74 | 5.01 |
| Year Ended 12/31/2018 | $20.48 | 0.24 | (1.88) | (1.64) |
| Year Ended 12/31/2017 | $17.00 | 0.20 | 3.28 | 3.48 |
| Class 2 | ||||
| Year Ended 12/31/2021 | $27.21 | 0.08 | 7.86 | 7.94 |
| Year Ended 12/31/2020 | $23.31 | 0.18 | 3.72 | 3.90 |
| Year Ended 12/31/2019 | $18.47 | 0.21 | 4.63 | 4.84 |
| Year Ended 12/31/2018 | $20.12 | 0.18 | (1.83) | (1.65) |
| Year Ended 12/31/2017 | $16.75 | 0.15 | 3.22 | 3.37 |
| Class 3 | ||||
| Year Ended 12/31/2021 | $27.54 | 0.12 | 7.96 | 8.08 |
| Year Ended 12/31/2020 | $23.57 | 0.21 | 3.76 | 3.97 |
| Year Ended 12/31/2019 | $18.65 | 0.24 | 4.68 | 4.92 |
| Year Ended 12/31/2018 | $20.29 | 0.21 | (1.85) | (1.64) |
| Year Ended 12/31/2017 | $16.87 | 0.18 | 3.24 | 3.42 |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Ratios include interest on collateral expense which is less than 0.01%. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 18 | Variable Portfolio – Partners Core Equity Fund | Annual Report 2021 |
Financial Highlights (continued)
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets(a) | Total net expense ratio to average net assets(a),(b) | Net investment income ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Class 1 | |||||||
| Year Ended 12/31/2021 | $36.14 | 29.49% | 0.68%(c) | 0.68%(c) | 0.50% | 99% | $3,254,887 |
| Year Ended 12/31/2020 | $27.91 | 17.02% | 0.68% | 0.68% | 1.02% | 92% | $3,085,119 |
| Year Ended 12/31/2019 | $23.85 | 26.59% | 0.70% | 0.69% | 1.25% | 129% | $2,237,714 |
| Year Ended 12/31/2018 | $18.84 | (8.01%) | 0.70% | 0.69% | 1.13% | 55% | $1,775,821 |
| Year Ended 12/31/2017 | $20.48 | 20.47% | 0.74% | 0.74% | 1.08% | 51% | $1,934,400 |
| Class 2 | |||||||
| Year Ended 12/31/2021 | $35.15 | 29.18% | 0.93%(c) | 0.93%(c) | 0.26% | 99% | $13,396 |
| Year Ended 12/31/2020 | $27.21 | 16.73% | 0.93% | 0.93% | 0.76% | 92% | $11,239 |
| Year Ended 12/31/2019 | $23.31 | 26.21% | 0.95% | 0.94% | 1.00% | 129% | $10,760 |
| Year Ended 12/31/2018 | $18.47 | (8.20%) | 0.95% | 0.94% | 0.88% | 55% | $9,255 |
| Year Ended 12/31/2017 | $20.12 | 20.12% | 0.99% | 0.99% | 0.83% | 51% | $10,507 |
| Class 3 | |||||||
| Year Ended 12/31/2021 | $35.62 | 29.34% | 0.80%(c) | 0.80%(c) | 0.38% | 99% | $34,599 |
| Year Ended 12/31/2020 | $27.54 | 16.84% | 0.80% | 0.80% | 0.89% | 92% | $31,113 |
| Year Ended 12/31/2019 | $23.57 | 26.38% | 0.83% | 0.81% | 1.13% | 129% | $32,859 |
| Year Ended 12/31/2018 | $18.65 | (8.08%) | 0.83% | 0.82% | 1.00% | 55% | $31,196 |
| Year Ended 12/31/2017 | $20.29 | 20.27% | 0.87% | 0.87% | 0.96% | 51% | $42,254 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Variable Portfolio – Partners Core Equity Fund | Annual Report 2021 | 19 |
Notes to Financial Statements
December 31, 2021
December 31, 2021
Note 1. Organization
Variable Portfolio –
Partners Core Equity Fund (the Fund), a series of Columbia Funds Variable Series Trust II (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940
Act), as an open-end management investment company organized as a Massachusetts business trust.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers Class 1, Class 2 and Class 3 shares to separate accounts funding variable annuity contracts and variable life insurance policies (collectively, Contracts) issued
by affiliated and unaffiliated life insurance companies (Participating Insurance Companies) as well as qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors (Qualified
Investors) authorized by Columbia Management Investment Distributors, Inc. (the Distributor). You may not buy (nor will you own) shares of the Fund directly. You may invest by participating in a Qualified Plan or by
buying a Contract and making allocations to the Fund. Although all share classes generally have identical voting, dividend and liquidation rights, each share class votes separately when required by the Trust’s
organizational documents or by law. Different share classes pay different net investment income distribution amounts to the extent the expenses of such share classes differ, and distributions in liquidation will be
proportional to the net asset value of each share class. Each share class has its own cost structure and other features.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Equity securities listed on an
exchange are valued at the closing price or last trade price on their primary exchange at the close of business of the New York Stock Exchange. Securities with a closing price not readily available or not listed on
any exchange are valued at the mean between the closing bid and ask prices. Listed preferred stocks convertible into common stocks are valued using an evaluated price from a pricing service.
Foreign equity securities are
valued based on the closing price or last trade price on their primary exchange at the close of business of the New York Stock Exchange. If any foreign equity security closing prices are not readily available,
the securities are valued at the mean of the latest quoted bid and ask prices on such exchanges or markets. Foreign currency exchange rates are determined at the scheduled closing time of the New York Stock Exchange.
Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange; therefore, the closing prices for securities in such markets or on such exchanges may not fully reflect
events that occur after such close but before the close of the New York Stock Exchange. In those situations, foreign securities will be fair valued pursuant to a policy adopted by the Board of Trustees. Under the
policy, the Fund may utilize a third-party pricing service to determine these fair values. The third-party pricing service takes into account multiple factors, including, but not limited to, movements in the U.S.
securities markets, certain depositary receipts, futures contracts and foreign exchange rates that have occurred subsequent to the close of the foreign exchange or market, to determine a good faith estimate that
reasonably reflects the current market conditions as of the close of the New York Stock Exchange. The fair value of a security is likely to be different from the quoted or published price, if available.
Investments in open-end investment
companies (other than exchange-traded funds (ETFs)), are valued at the latest net asset value reported by those companies as of the valuation time.
| 20 | Variable Portfolio – Partners Core Equity Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Futures and options on futures
contracts are valued based upon the settlement price at the close of regular trading on their principal exchanges or, in the absence of a settlement price, at the mean of the latest quoted bid and ask prices.
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Derivative instruments
The Fund invests in certain
derivative instruments, as detailed below, in seeking to meet its investment objectives. Derivatives are instruments whose values depend on, or are derived from, in whole or in part, the value of one or more
securities, currencies, commodities, indices, or other assets or instruments. Derivatives may be used to increase investment flexibility (including to maintain cash reserves while maintaining desired exposure to
certain assets), for risk management (hedging) purposes, to facilitate trading, to reduce transaction costs and to pursue higher investment returns. The Fund may also use derivative instruments to mitigate certain
investment risks, such as foreign currency exchange rate risk, interest rate risk and credit risk. Derivatives may involve various risks, including the potential inability of the counterparty to fulfill its
obligations under the terms of the contract, the potential for an illiquid secondary market (making it difficult for the Fund to sell or terminate, including at favorable prices) and the potential for market movements
which may expose the Fund to gains or losses in excess of the amount shown in the Statement of Assets and Liabilities. The notional amounts of derivative instruments, if applicable, are not recorded in the financial
statements.
A derivative instrument may suffer
a marked-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform its
obligations under the contract. The Fund’s risk of loss from counterparty credit risk on over-the-counter derivatives is generally limited to the aggregate unrealized gain netted against any collateral held by
the Fund and the amount of any variation margin held by the counterparty, plus any replacement costs or related amounts. With exchange-traded or centrally cleared derivatives, there is reduced counterparty credit risk
to the Fund since the clearinghouse or central counterparty (CCP) provides some protection in the case of clearing member default. The clearinghouse or CCP stands between the buyer and the seller of the contract;
therefore, additional counterparty credit risk is failure of the clearinghouse or CCP. However, credit risk still exists in exchange-traded or centrally cleared derivatives with respect to initial and variation margin
that is held in a broker’s customer account. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy
and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients and such shortfall is remedied by the CCP or otherwise, U.S. bankruptcy laws will typically
allocate that shortfall on a pro-rata basis across all the clearing broker’s customers (including the Fund), potentially resulting in losses to the Fund.
In order to better define its
contractual rights and to secure rights that will help the Fund mitigate its counterparty risk, the Fund may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (ISDA Master Agreement)
or similar agreement with its derivatives counterparties. An ISDA Master Agreement is an agreement between the Fund and a counterparty that governs over-the-counter derivatives and foreign exchange forward contracts
and contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset
with the counterparty certain derivative instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically
permit a single net payment in the event of default (close-out netting), including the bankruptcy or insolvency of the counterparty. Note, however, that bankruptcy or insolvency laws of a particular jurisdiction may
impose restrictions on or prohibitions against the right of offset or netting in bankruptcy, insolvency or other events.
| Variable Portfolio – Partners Core Equity Fund | Annual Report 2021 | 21 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Collateral (margin) requirements
differ by type of derivative. Margin requirements are established by the clearinghouse or CCP for exchange-traded and centrally cleared derivatives. Brokers can ask for margin in excess of the minimum in certain
circumstances. Collateral terms for most over-the-counter derivatives are subject to regulatory requirements to exchange variation margin with trading counterparties and may have contract specific margin terms as
well. For over-the-counter derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the marked-to-market amount for each transaction under such agreement and
comparing that amount to the value of any variation margin currently pledged by the Fund and/or the counterparty. Generally, the amount of collateral due from or to a party has to exceed a minimum transfer amount
threshold (e.g., $250,000) before a transfer has to be made. To the extent amounts due to the Fund from its counterparties are not fully collateralized, contractually or otherwise, the Fund bears the risk of loss from
counterparty nonperformance. The Fund may also pay interest expense on cash collateral received from the broker. Any interest expense paid by the Fund is shown on the Statement of Operations. The Fund attempts to
mitigate counterparty risk by only entering into agreements with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those
counterparties.
Certain ISDA Master Agreements
allow counterparties of over-the-counter derivatives transactions to terminate derivatives contracts prior to maturity in the event the Fund’s net asset value declines by a stated percentage over a specified
time period or if the Fund fails to meet certain terms of the ISDA Master Agreement, which would cause the Fund to accelerate payment of any net liability owed to the counterparty. The Fund also has termination
rights if the counterparty fails to meet certain terms of the ISDA Master Agreement. In determining whether to exercise such termination rights, the Fund would consider, in addition to counterparty credit risk,
whether termination would result in a net liability owed from the counterparty.
For financial reporting purposes,
the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statement of Assets and Liabilities.
Futures contracts
Futures contracts are
exchange-traded and represent commitments for the future purchase or sale of an asset at a specified price on a specified date. The Fund bought and sold futures contracts to manage exposure to the securities market
and to maintain appropriate equity market exposure while keeping sufficient cash to accommodate daily redemptions. These instruments may be used for other purposes in future periods. Upon entering into futures
contracts, the Fund bears risks that it may not achieve the anticipated benefits of the futures contracts and may realize a loss. Additional risks include counterparty credit risk, the possibility of an illiquid
market, and that a change in the value of the contract or option may not correlate with changes in the value of the underlying asset.
Upon entering into a futures
contract, the Fund deposits cash or securities with the broker, known as a futures commission merchant (FCM), in an amount sufficient to meet the initial margin requirement. The initial margin deposit must be
maintained at an established level over the life of the contract. Cash deposited as initial margin is recorded in the Statement of Assets and Liabilities as margin deposits. Securities deposited as initial margin are
designated in the Portfolio of Investments. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily change in the contract value and are
recorded as variation margin receivable or payable and are offset in unrealized gains or losses. The Fund generally expects to earn interest income on its margin deposits. The Fund recognizes a realized gain or loss
when the contract is closed or expires. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities.
Effects of derivative transactions in
the financial statements
The following tables are intended
to provide additional information about the effect of derivatives on the financial statements of the Fund, including: the fair value of derivatives by risk category and the location of those fair values in the
Statement of Assets and Liabilities; and the impact of derivative transactions over the period in the Statement of Operations, including realized and unrealized gains (losses). The derivative instrument schedules
following the Portfolio of Investments present additional information regarding derivative instruments outstanding at the end of the period, if any.
| 22 | Variable Portfolio – Partners Core Equity Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
The following table indicates the
effect of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) in the Statement of Operations for the year ended December 31, 2021:
| Amount of realized gain (loss) on derivatives recognized in income | |
| Risk exposure category | Futures contracts ($) |
| Equity risk | 2,036,834 |
The following table is a summary
of the average outstanding volume by derivative instrument for the year ended December 31, 2021:
| Derivative instrument | Average notional amounts ($) |
| Futures contracts — long | 8,962,861* |
| Futures contracts — short | 129,861** |
| * | Based on the ending quarterly outstanding amounts for the year ended December 31, 2021. |
| ** | Based on the ending daily outstanding amounts for the year ended December 31, 2021. |
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
Income recognition
Corporate actions and dividend
income are generally recorded net of any non-reclaimable tax withholdings, on the ex-dividend date or upon receipt of an ex-dividend notification in the case of certain foreign securities.
The Fund may receive distributions
from holdings in equity securities, business development companies (BDCs), exchange-traded funds (ETFs), limited partnerships (LPs), other regulated investment companies (RICs), and real estate investment trusts
(REITs), which report information as to the tax character of their distributions annually. These distributions are allocated to dividend income, capital gain and return of capital based on actual information reported.
Return of capital is recorded as a reduction of the cost basis of securities held. If the Fund no longer owns the applicable securities, return of capital is recorded as a realized gain. With respect to REITs, to the
extent actual information has not yet been reported, estimates for return of capital are made by Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise
Financial, Inc. (Ameriprise Financial). The Investment Manager’s estimates are subsequently adjusted when the actual character of the distributions is disclosed by the REITs, which could result in a
proportionate change in return of capital to shareholders.
Awards from class action litigation
are recorded as a reduction of cost basis if the Fund still owns the applicable securities on the payment date. If the Fund no longer owns the applicable securities on the payment date, the proceeds are recorded as
realized gains.
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
| Variable Portfolio – Partners Core Equity Fund | Annual Report 2021 | 23 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Federal income tax status
The Fund is treated as a
partnership for federal income tax purposes, and the Fund does not expect to make regular distributions. The Fund will not be subject to federal income tax, and therefore, there is no provision for federal income
taxes. The partners of the Fund are subject to tax on their distributive share of the Fund’s income and loss. The components of the Fund’s net assets are reported at the partner-level for federal income
tax purposes, and therefore, are not presented in the Statement of Assets and Liabilities.
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Foreign taxes
The Fund may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries, as applicable, based upon its current interpretation of tax rules
and regulations that exist in the markets in which it invests.
Realized gains in certain countries
may be subject to foreign taxes at the Fund level, based on statutory rates. The Fund accrues for such foreign taxes on realized and unrealized gains at the appropriate rate for each jurisdiction, as applicable. The
amount, if any, is disclosed as a liability on the Statement of Assets and Liabilities.
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Under the Management Agreement, the
Investment Manager provides the Fund with investment research and advice, as well as administrative and accounting services. The Investment Manager is responsible for the ultimate oversight of investments made by the
Fund. The Fund’s subadvisers (see Subadvisory agreements below) have the primary responsibility for the day-to-day portfolio management of the Fund. The management services fee is an annual fee that is equal to
a percentage of the Fund’s daily net assets that declines from 0.77% to 0.57% as the Fund’s net assets increase. The effective management services fee rate for the year ended December 31, 2021 was 0.67% of
the Fund’s average daily net assets.
Subadvisory agreements
The Investment Manager has entered
into a Subadvisory Agreement with T. Rowe Price Associates, Inc., which subadvises a portion of the assets of the Fund. Effective May 1, 2021, the Investment Manager has entered into a Subadvisory Agreement with J.P.
Morgan Investment Management Inc., to serve as a subadviser to the Fund. Prior to May 1, 2021, Jacobs Levy Equity Management, Inc. served as a subadviser to the Fund. New investments in the Fund, net of redemptions,
are allocated in accordance with the Investment Manager’s determination. Each subadviser’s proportionate share of investments in the Fund will vary due to market fluctuations. The Investment Manager
compensates each subadviser to manage the investment of the Fund’s assets.
| 24 | Variable Portfolio – Partners Core Equity Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. Under a Deferred Compensation Plan (the
Deferred Plan), these members of the Board of Trustees may elect to defer payment of up to 100% of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of
certain funds managed by the Investment Manager. The Fund’s liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Deferred Plan. All
amounts payable under the Deferred Plan constitute a general unsecured obligation of the Fund. The expense for the Deferred Plan, which includes Trustees’ fees deferred during the current period as well as any
gains or losses on the Trustees’ deferred compensation balances as a result of market fluctuations, is included in "Compensation of board members" on the Statement of Operations.
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
Service fees
The Fund has entered into a
Shareholder Services Agreement with Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial. Under this
agreement, the Fund pays a service fee equal to the payments made by the Transfer Agent to Participating Insurance Companies and other financial intermediaries (together, Participating Organizations) for services each
such Participating Organization provides to its clients, customers and participants that are invested directly or indirectly in the Fund, up to a cap approved by the Board of Trustees from time to time. The effective
service fee rate for the year ended December 31, 2021, was 0.00% of the Fund’s average daily net assets.
The Transfer Agent may retain as
compensation for its services revenues from fees for wire, telephone and redemption orders, account transcripts due the Transfer Agent from Fund shareholders and interest (net of bank charges) earned with respect to
balances in accounts the Transfer Agent maintains in connection with its services to the Fund.
Distribution and/or service fees
The Fund has an agreement with the
Distributor, an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution services. Under a Plan and Agreement of Distribution, the Fund pays a fee at an annual rate
of up to 0.25% of the Fund’s average daily net assets attributable to Class 2 shares and an annual rate of up to 0.125% of the Fund’s average daily net assets attributable to Class 3 shares. The Fund pays
no distribution and service fees for Class 1 shares.
Expenses waived/reimbursed by the
Investment Manager and its affiliates
The Investment Manager and certain
of its affiliates have contractually agreed to waive fees and/or reimburse expenses (excluding certain fees and expenses described below) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, so that the Fund’s net operating expenses, after giving effect to fees waived/expenses reimbursed and any balance credits and/or overdraft charges from the Fund’s
custodian, do not exceed the following annual rate(s) as a percentage of the classes’ average daily net assets:
| Variable Portfolio – Partners Core Equity Fund | Annual Report 2021 | 25 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), expenses associated with investments in affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange-traded funds), transaction costs and
brokerage commissions, costs related to any securities lending program, dividend expenses associated with securities sold short, inverse floater program fees and expenses, transaction charges and interest on borrowed
money, interest, costs associated with certain shareholder meetings, infrequent and/or unusual expenses and any other expenses the exclusion of which is specifically approved by the Board of Trustees. This
agreement may be modified or amended only with approval from the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements
described above are not recoverable by the Investment Manager or its affiliates in future periods.
Note 4. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $2,909,200,532 and $3,447,729,719, respectively, for the year ended December 31, 2021. The amount of purchase
and sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 5. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes
referred to as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
Note 6. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund did not borrow or lend
money under the Interfund Program during the year ended December 31, 2021.
Note 7. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to an October 28, 2021 amendment and restatement, the credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment
Manager or an affiliated investment manager, severally and not jointly, permits collective borrowings up to $950 million. Interest is currently charged to each participating fund based on its borrowings at a rate
equal to the higher of (i) the federal funds effective rate, (ii) the secured overnight financing rate plus 0.11448% and (iii) the overnight bank funding rate, plus in each case, 1.00%. Each borrowing under the credit
facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The
commitment fee is included in other expenses in the Statement of Operations. This agreement expires annually in October unless extended or renewed. Prior to the October 28, 2021 amendment and restatement, the Fund had
access to a revolving
| 26 | Variable Portfolio – Partners Core Equity Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
credit facility with a syndicate of banks led by
JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. which permitted collective borrowings up to $950 million. Interest was charged to each participating fund based on its borrowings at a rate equal to
the higher of (i) the federal funds effective rate, (ii) the one-month London Interbank Offered Rate (LIBOR) rate and (iii) the overnight bank funding rate, plus in each case, 1.25%.
The Fund had no borrowings during
the year ended December 31, 2021.
Note 8. Significant
risks
Information technology sector
risk
The Fund is more susceptible to the
particular risks that may affect companies in the information technology sector than if it were invested in a wider variety of companies in unrelated sectors. Companies in the information technology sector are subject
to certain risks, including the risk that new services, equipment or technologies will not be accepted by consumers and businesses or will become rapidly obsolete. Performance of such companies may be affected by
factors including obtaining and protecting patents (or the failure to do so) and significant competitive pressures, including aggressive pricing of their products or services, new market entrants, competition for
market share and short product cycles due to an accelerated rate of technological developments. Such competitive pressures may lead to limited earnings and/or falling profit margins. As a result, the value of their
securities may fall or fail to rise. In addition, many information technology sector companies have limited operating histories and prices of these companies’ securities historically have been more volatile than
other securities, especially over the short term. Some companies in the information technology sector are facing increased government and regulatory scrutiny and may be subject to adverse government or regulatory
action, which could negatively impact the value of their securities.
Market risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
The coronavirus disease 2019 and
its variants (COVID-19) pandemic has resulted in, and may continue to result in, significant global economic and societal disruption and market volatility due to disruptions in market access, resource availability,
facilities operations, imposition of tariffs, export controls and supply chain disruption, among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement
and loss in human and other resources. The uncertainty surrounding the magnitude, duration, reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental
authorities or other third parties, present unknowns that are yet to unfold. The impacts, as well as the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and
pandemics that may arise in the future – could negatively affect global economies and markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in
emerging market countries may be greater due to generally less established healthcare systems, governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing
political, social and economic risks in certain countries or globally. The disruptions caused by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively
impact the Fund’s ability to achieve its investment objectives. Any such event(s) could have a significant adverse impact on the value and risk profile of the Fund.
| Variable Portfolio – Partners Core Equity Fund | Annual Report 2021 | 27 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Shareholder concentration risk
At December 31, 2021, affiliated
shareholders of record owned 100.0% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of
less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Note 9. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
Note 10. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in
connection with the conduct of their business activities. Ameriprise Financial believes that the Fund is not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject
of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with
the Fund. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (SEC) on legal and regulatory matters that relate to
Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that
these matters, or the adverse publicity associated with them, will not result in increased Fund redemptions, reduced sale of Fund shares or other adverse consequences to the Fund. Further, although we believe
proceedings are not likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines,
penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial or one or more of its affiliates that provides services to
the Fund.
| 28 | Variable Portfolio – Partners Core Equity Fund | Annual Report 2021 |
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees of Columbia
Funds Variable Series Trust II and Shareholders of Variable Portfolio – Partners Core Equity Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of Variable Portfolio – Partners Core Equity Fund (one of the funds constituting Columbia Funds Variable Series Trust II, referred to
hereafter as the "Fund") as of December 31, 2021, the related statement of operations for the year ended December 31, 2021, the statement of changes in net assets for each of the two years in the period ended December
31, 2021, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2021 (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, 2021, 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, 2021 and the financial highlights for each of the five years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in the
United States of America.
Basis for Opinion
These financial statements are the
responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these
financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2021 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.
/s/PricewaterhouseCoopers LLP
Minneapolis, Minnesota
February 22, 2022
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| Variable Portfolio – Partners Core Equity Fund | Annual Report 2021 | 29 |
TRUSTEES AND
OFFICERS
The Board oversees the
Fund’s operations and appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following table provides basic biographical information about the
Fund’s Trustees as of the printing of this report, including their principal occupations during the past five years, although specific titles for individuals may have varied over the period. The year set forth
beneath Length of Service in the table below is the year in which the Trustee was first appointed or elected as Trustee to any Fund currently in the Columbia Funds Complex or a predecessor thereof. Under current Board
policy, each Trustee generally serves until December 31 of the year such Trustee turns seventy-five (75).
Independent trustees
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| George S. Batejan c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1953 | Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 176 | Former Chairman of the Board, NICSA (National Investment Company Services Association) (Executive Committee, Nominating Committee and Governance Committee), 2014-2016; former Director, Intech Investment Management, 2011-2016; former Board Member, Metro Denver Chamber of Commerce, 2015-2016; former Advisory Board Member, University of Colorado Business School, 2015-2018 |
| Kathleen Blatz c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2006 | Attorney, specializing in arbitration and mediation; Chief Justice, Minnesota Supreme Court, 1998-2006; Associate Justice, Minnesota Supreme Court, 1996-1998; Fourth Judicial District Court Judge, Hennepin County, 1994-1996; Attorney in private practice and public service, 1984-1993; State Representative, Minnesota House of Representatives, 1979-1993, which included service on the Tax and Financial Institutions and Insurance Committees; Member and Interim Chair, Minnesota Sports Facilities Authority, January 2017-July 2017; Interim President and Chief Executive Officer, Blue Cross Blue Shield of Minnesota (health care insurance), February-July 2018, April-October 2021 | 176 | Former Trustee, Blue Cross Blue Shield of Minnesota, 2009-2021 (Chair of the Business Development Committee, 2014-2017; Chair of the Governance Committee, 2017-2019); former Member and Chair of the Board, Minnesota Sports Facilities Authority, January 2017-July 2017; former Director, Robina Foundation, 2009-2020 (Chair, 2014-2020); Director, Schulze Family Foundation, since 2021 |
| Pamela G. Carlton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2007 | President, Springboard — Partners in Cross Cultural Leadership (consulting company) since 2003; Managing Director of US Equity Research, JP Morgan Chase, 1999-2003; Director of US Equity Research, Chase Asset Management, 1996-1999; Co-Director Latin America Research, 1993-1996, COO Global Research, 1992-1996, Co-Director of US Research, 1991-1992, Investment Banker, Morgan Stanley, 1982-1991, Morgan Stanley; Attorney, Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 176 | Trustee, New York Presbyterian Hospital Board (Executive Committee and Chair of People Committee) since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee); Director, Apollo Commercial Real Estate Finance, Inc. since 2021; the Governing Council of the Independent Directors Council (IDC), since 2021 |
| 30 | Variable Portfolio – Partners Core Equity Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Janet Langford Carrig c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1957 | Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 174 | Director, EQT Corporation (natural gas producer) since 2019; Director, Whiting Petroleum Corporation (independent oil and gas company) since 2020 |
| J. Kevin Connaughton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2020 | Member, FINRA National Adjudicatory Council since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Consultant to Independent Trustees of CFVIT and CFST I from March 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Managing Director and General Manager of Mutual Fund Products, Columbia Management Investment Advisers, LLC, May 2010-February 2015; President, Columbia Funds, 2008-2015; and senior officer of Columbia Funds and affiliated funds, 2003-2015 | 174 | Former Director, The Autism Project, March 2015-December 2021; former Member of the Investment Committee, St. Michael’s College, November 2015-February 2020; former Trustee, St. Michael’s College, June 2017-September 2019; former Trustee, New Century Portfolios, January 2015-December 2017 |
| Olive M. Darragh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since 2020 | Managing Director of Darragh Inc. (strategy and talent management consulting firm) since 2010; Founder and CEO, Zolio, Inc. (investment management talent identification platform) since 2004; Consultant to Independent Trustees of CFVIT and CFST I from June 2019 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 2001-2004 | 174 | Former Director, University of Edinburgh Business School (Member of US Board); former Director, Boston Public Library Foundation |
| Patricia M. Flynn c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1950 | Trustee since 2004 | Trustee Professor of Economics and Management, Bentley University since 1976 (also teaches and conducts research on corporate governance); Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 176 | Trustee, MA Taxpayers Foundation since 1997; Board of Governors, Innovation Institute, MA Technology Collaborative, 2010-2020; former Board of Directors, The MA Business Roundtable, 2003-2019 |
| Brian J. Gallagher c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 176 | Trustee, Catholic Schools Foundation since 2004 |
| Variable Portfolio – Partners Core Equity Fund | Annual Report 2021 | 31 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Douglas A. Hacker c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1955 | Co-Chair since 2021; Chair of CFST I and CFVIT since 2014; Trustee of CFST I and CFVIT since 1996 and CFST, CFST II, CFVST II, CET I and CET II since 2021 | Independent business executive since May 2006; Executive Vice President – Strategy of United Airlines, December 2002 - May 2006; President of UAL Loyalty Services (airline marketing company), September 2001-December 2002; Executive Vice President and Chief Financial Officer of United Airlines, July 1999-September 2001 | 176 | Director, Spartan Nash Company (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing); former Director, Nash Finch Company (food distributor), 2005-2013; former Director, SeaCube Container Leasing Ltd. (container leasing), 2010-2013; and former Director, Travelport Worldwide Limited (travel information technology), 2014-2019 |
| Nancy T. Lukitsh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1956 | Trustee since 2011 | Senior Vice President, Partner and Director of Marketing, Wellington Management Company, LLP (investment adviser), 1997-2010; Chair, Wellington Management Portfolios (commingled non-U.S. investment pools), 2007 -2010; Director, Wellington Trust Company, NA and other Wellington affiliates, 1997-2010 | 174 | None |
| David M. Moffett c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2011 | Retired; Consultant to Bridgewater and Associates | 174 | Director, CSX Corporation (transportation suppliers); Director, Genworth Financial, Inc. (financial and insurance products and services); Director, PayPal Holdings Inc. (payment and data processing services); Trustee, University of Oklahoma Foundation; former Director, eBay Inc. (online trading community), 2007-2015; and former Director, CIT Bank, CIT Group Inc. (commercial and consumer finance), 2010-2016 |
| Catherine James Paglia c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Co-Chair since 2021; Chair of CFST, CFST II, CFVST II, CET I and CET II since 2020; Trustee of CFST, CFST II and CFVST II since 2004 and CFST I and CFVIT since 2021 | Director, Enterprise Asset Management, Inc. (private real estate and asset management company) since September 1998; Managing Director and Partner, Interlaken Capital, Inc., 1989-1997; Vice President, 1982-1985, Principal, 1985-1987, Managing Director, 1987-1989, Morgan Stanley; Vice President, Investment Banking, 1980-1982, Associate, Investment Banking, 1976-1980, Dean Witter Reynolds, Inc. | 176 | Director, Valmont Industries, Inc. (irrigation systems manufacturer) since 2012; Trustee, Carleton College (on the Investment Committee); Trustee, Carnegie Endowment for International Peace (on the Investment Committee) |
| 32 | Variable Portfolio – Partners Core Equity Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Minor M. Shaw c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1947 | Trustee since 2003 | President, Micco LLC (private investments) since 2011; President, Micco Corp. (family investment business), 1998-2011 | 176 | Director, Blue Cross Blue Shield of South Carolina (Chair of Compensation Committee) since April 2008; Trustee, Hollingsworth Funds (on the Investment Committee) since 2016 (previously Board Chair from 2016-2019); Former Advisory Board member, Duke Energy Corp., 2016-2020; Chair of the Duke Endowment; Chair of Greenville – Spartanburg Airport Commission; former Trustee, BofA Funds Series Trust (11 funds), 2003-2011; former Director, Piedmont Natural Gas, 2004-2016; former Director, National Association of Corporate Directors, Carolinas Chapter, 2013-2018; Chair, Daniel-Mickel Foundation since 1998 |
| Natalie A. Trunow c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1967 | Trustee since 2020 | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services), January 2016-January 2021; Non-executive Member of the Investment Committee and Valuation Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services), August 2018-January 2021; Advisor, Paradigm Asset Management, November 2016-December 2021; Consultant to Independent Trustees of CFVIT and CFST I from September 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Director of Investments/Consultant, Casey Family Programs, April 2016-November 2016; Senior Vice President and Chief Investment Officer, Calvert Investments, August 2008-January 2016; Section Head and Portfolio Manager, General Motors Asset Management, June 1997-August 2008 | 174 | Former Director, Investment Committee, Health Services for Children with Special Needs, Inc., 2012-2019; Director, Chair of Audit Committee, Consumer Credit Counseling Services (formerly Guidewell Financial Solutions), since 2019; Independent Director, Investment Committee and Valuation Committee, Sarona Asset Management, since 2019 |
| Sandra Yeager c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2017 | Retired; President and founder, Hanoverian Capital, LLC (SEC registered investment advisor firm), 2008-2016; Managing Director, DuPont Capital, 2006-2008; Managing Director, Morgan Stanley Investment Management, 2004-2006; Senior Vice President, Alliance Bernstein, 1990-2004 | 176 | Former Director, NAPE Education Foundation, October 2016-October 2020 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Fund Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I (CET I), Columbia ETF Trust II (CET II), Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Beckman, Gallagher and Hacker and Mses. Blatz, Carlton, Flynn, Paglia, Shaw and Yeager serve as Directors of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
| Variable Portfolio – Partners Core Equity Fund | Annual Report 2021 | 33 |
TRUSTEES AND OFFICERS (continued)
Interested trustee affiliated with Investment Manager*
Interested trustee affiliated with Investment Manager*
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during the past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex overseen | Other directorships held by Trustee during the past five years |
| Daniel J. Beckman c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since November 2021(a) | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC (since April 2015); officer of Columbia Funds and affiliated funds since 2020. | 176 | Director, Ameriprise Trust Company, since October 2016; Director, Columbia Management Investment Distributors, Inc. since November 2018; Board of Governors, Columbia Wanger Asset Management, LLC since January 2022 |
| * | Interested person (as defined under the 1940 Act) by reason of being an officer, director, security holder and/or employee of the Investment Manager or Ameriprise Financial. |
| (a) | Mr. Beckman serves as the President and Principal Executive Officer of the Columbia Funds (since 2021). |
The Statement of Additional
Information has additional information about the Fund’s Board members and is available, without charge, upon request by calling 800.345.6611 or contacting your financial intermediary.
The Board has appointed officers
who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. The following table provides basic information about the Officers of the
Fund, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Beckman, who is President and Principal Executive Officer, the
Fund’s other officers are:
Fund officers
| 34 | Variable Portfolio – Partners Core Equity Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Fund officers (continued)
Fund officers (continued)
| Variable Portfolio – Partners Core Equity Fund | Annual Report 2021 | 35 |
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For Fund and other investment product prospectuses, which contain this and other important information, contact your
financial advisor or insurance representative. Please read the prospectus carefully before you invest. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved. Columbia Management Investment Distributors, Inc., 290 Congress Street, Boston, MA 02210
© 2022 Columbia Management Investment
Advisers, LLC.
C-2070 AW (2/22)
Variable Portfolio
– Partners Small Cap Value Fund
Please remember that you may not
buy (nor will you own) shares of the Fund directly. The Fund is available through variable annuity contracts and variable life insurance policies offered by the separate accounts of participating insurance companies
as well as qualified pension and retirement plans. Please contact your financial advisor or insurance representative for more information.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
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Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which Variable Portfolio – Partners Small Cap Value Fund (the Fund) holds investments consistent with the procedures as stated in the Statement of Additional
Information (SAI). You may obtain a copy of the SAI without charge by calling 800.345.6611; contacting your financial intermediary or searching the website of the Securities and Exchange Commission (SEC) at sec.gov.
Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge
by visiting columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. The Fund’s Form N-PORT is available on the SEC’s website at sec.gov. The Fund’s complete
schedule of portfolio holdings, as filed on Form N-PORT, can also be obtained without charge, upon request, by calling 800.345.6611.
Additional Fund information
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
290 Congress Street
Boston, MA 02210
Fund distributor
Columbia Management Investment Distributors,
Inc.
290 Congress Street
Boston, MA 02210
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
Variable Portfolio – Partners Small Cap Value
Fund | Annual Report 2021
Fund at a Glance
Investment objective
The Fund
seeks to provide shareholders with long-term capital appreciation.
Portfolio management
Segall Bryant & Hamill, LLC
Mark Dickherber, CFA, CPA
Shaun Nicholson
William Blair Investment Management, LLC
William Heaphy, CFA
| Variable Portfolio – Partners Small Cap Value Fund | Annual Report 2021 | 3 |
Fund at a Glance (continued)
Performance of a hypothetical $10,000 investment (December 31, 2011 — December 31, 2021)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class 2 shares of Variable Portfolio – Partners Small Cap Value Fund during the stated time period, and does not reflect the deduction of taxes, if any, that a
shareholder may pay on Fund distributions or on the redemption of Fund shares. The returns also do not reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy or
qualified pension or retirement plan, if any.
| 4 | Variable Portfolio – Partners Small Cap Value Fund | Annual Report 2021 |
Manager Discussion of Fund Performance
During the annual period ended
December 31, 2021, the Fund was managed by four independent money management firms and each invested a portion of the portfolio’s assets. Effective April 30, 2021, Jacobs Levy Equity Management, Inc. (Jacobs
Levy) and Nuveen Asset Management, LLC (Nuveen) were terminated as subadvisers. As of December 31, 2021, the Fund was managed by two independent money management firms. Segall Bryant & Hamill LLC (Segall Bryant)
and William Blair Investment Management, LLC (William Blair) managed approximately 46.71% and 53.29% of the portfolio, respectively.
At December 31, 2021, approximately
85.72% of the Fund’s shares were owned in the aggregate by affiliated funds-of-funds managed by Columbia Management Investment Advisers, LLC (the Investment Manager). As a result of asset allocation decisions by
the Investment Manager, it is possible that the Fund may experience relatively large purchases or redemptions from affiliated funds-of-funds. The Investment Manager seeks to minimize the impact of these transactions
by structuring them over a reasonable period of time. The Fund may experience increased expenses as it buys and sells securities as a result of purchases or redemptions by affiliated funds-of-funds.
For the 12-month period that ended
December 31, 2021, the Fund’s Class 2 shares returned 23.75%. While posting solid double-digit absolute gains, the Fund underperformed its benchmark, the Russell 2000 Value Index, which returned 28.27% over the
same period.
Market overview
Several factors pressured the
U.S. economy during the annual period, including labor shortages, global supply-chain bottlenecks, the failure to pass a multi-trillion dollar federal investment package, and most prominently, the persistence,
including new variants, of COVID-19. Despite these setbacks to the economic backdrop, U.S. equity markets held up remarkably well, with most major indices posting positive performance for the annual period. In the
small-cap segment, however, the results among style indices were not even. The Russell 2000 Value Index returned 28.27% for the annual period, while the Russell 2000 Growth Index returned 2.83%. This was a
continuation of the outperformance of small-cap value shares that began in November 2020 after the announcement of effective COVID-19 vaccines and the resolution of the U.S. Presidential elections. Moreover, within
the small-cap value benchmark, there was a pronounced shift in investor preference for higher quality stocks with cheaper valuations during the second half of 2021. This shift can likely be attributed to the Federal
Reserve’s signaling in November 2021 of its then-upcoming pivot toward a less accommodative monetary policy.
The Fund’s notable
detractors during the period
Jacobs Levy
| • | From January 1, 2021 through April 30, 2021, when we managed a portion of the Fund (the initial reporting period), stock selection in consumer discretionary and energy detracted from our portion of the Fund’s relative results. |
| • | Having an overweighted allocation to the information technology sector also hurt. |
| • | Among the individual stocks that detracted most from our portion of the Fund’s relative results was a position not held, namely GameStop Corp., the world’s largest retailer of video game products and personal computer entertainment software. During the initial reporting period, the company was the target of a Reddit-driven trading frenzy comprised largely of retail investors. The company experienced a dramatic increase in its market capitalization as well as extreme volatility in its share price as a result of the coordinated trading. However, we did not believe that the elevated share price was supported by company fundamentals, and so our portion of the Fund did not hold a position in GameStop during the initial reporting period. |
| • | International Game Technology PLC designs, manufactures and markets electronic gaming equipment, software and network systems. Its share price declined during the initial reporting period versus a double-digit gain for the benchmark during the same time frame, and so our portion of the Fund’s overweight position detracted from relative performance. |
| • | Novavax, Inc. focuses on the discovery, development and commercialization of vaccines to prevent infectious diseases. In late January 2021, the company announced that its COVID-19 vaccine was more than 89% effective in clinical trials conducted in the U.K. The announcement resulted in its share price doubling in value during the next two trading days. |
| Variable Portfolio – Partners Small Cap Value Fund | Annual Report 2021 | 5 |
Manager Discussion of Fund Performance (continued)
| While its stock price retreated somewhat, it remained at elevated levels compared with its pre-announcement price history. Because our portion of the Fund did not hold a position in Novavax during the initial reporting period, it proved to be a detractor from relative results. |
Nuveen
| • | From January 1, 2021 through April 30, 2021, when we managed a portion of the Fund (the initial reporting period), our portion of the Fund outperformed the benchmark due primarily to stock selection. Stock selection in health care and consumer discretionary detracted most from our portion of the Fund’s relative results. |
| • | Having a position in cash during months when the benchmark rallied strongly also dampened relative results. |
| • | Among the individual stocks that detracted most from our portion of the Fund’s relative results was Air Transport Service Group, Inc., which engages in airline operations, leases, maintenance and other support services primarily to the cargo transportation and package delivery industries. Following a strong 2020, its share price declined in the early months of 2021, as investors viewed the company as benefiting less than other areas of the economy amid then-current pandemic-related trends. Also, Amazon.com, a then-customer of the company, decided to buy its own aircraft to expand its fleet, and the market initially viewed this negatively. |
| • | CIRCOR International Inc. provides flow control products and services to the industrial, aerospace and defense markets. During the pandemic, over the initial reporting period, the company’s fundamentals declined materially due to many of its end-markets coming under pressure, most notably commercial aerospace and energy. These markets had yet to notably inflect higher and recover during the initial reporting period, and the company’s share price declined. |
| • | Radware Ltd. is a provider of global applications and security solutions for virtual and cloud centers. The company saw some profit-taking during the initial reporting period after its shares had previously risen due to increased spending expectations from the SolarWinds data breach. Additionally, the company’s quarterly report released during the initial reporting period provided mixed results. |
William Blair
| • | From May 2, 2021 through December 31, 2021 (the latter reporting period), when we managed a portion of the Fund, our portion of the Fund underperformed the benchmark, driven by a combination of stock selection and style observations. |
| • | From a style perspective, lower quality stocks dramatically outperformed higher quality stocks during the latter reporting period, creating a substantial headwind to our portion of the Fund’s relative performance. More specifically, not owning stocks impacted by the “meme” flash mob-driven share price surge detracted. (The meme stock phenomenon is where a stock gains a cult-like following online and through social media platforms.) |
| • | Both stock selection in and having underweighted allocations to the strongly performing real estate and energy sectors detracted most from our portion of the Fund’s relative results. |
| • | Stock selection in the materials sector also hurt. |
| • | Among the individual stocks that detracted most from our portion of the Fund’s relative results was footwear retailer Designer Brands, Inc., which operates as DSW. Its shares fell, as the Omicron variant of COVID-19 surged in the second half of 2021 resulting in the market rotating back into companies that benefited from the jump in online commerce that occurred during the 2020 lockdowns and away from areas of the market that might benefit from a resumption of more normalized consumer spending patterns. In addition, the company was not able to shift its merchandise assortment quickly enough from fashion offerings to the athleisure styles that are currently popular. |
| • | Cognyte Software Ltd. experienced a share price decline, as its transition to a faster-growing stand-alone publicly-traded software company has taken longer than expected by market participants following its spinout from Verint Systems, Inc. A shortfall in recurring revenue, relative to market expectations, further dampened its performance. |
| • | Dril-Quip, Inc., an energy equipment and services provider, saw its shares fall, as the market did not reward offshore equipment companies as it did its exploration and production peers during the latter reporting period. |
| 6 | Variable Portfolio – Partners Small Cap Value Fund | Annual Report 2021 |
Manager Discussion of Fund Performance (continued)
Segall Bryant
| • | Our portion of the Fund underperformed the benchmark during the annual period, due predominantly to market dynamics that were at odds with our investment philosophy and process. For example, during the annual period, “zombie” stocks, or those that have not earned enough profit to cover interest costs for at least three years, companies with very high short interest and money losing businesses within the Russell Index markedly outperformed. Our strategy’s focus was on more asset-intensive versus asset-light businesses and those with management teams that may improve returns by becoming more efficient, divesting businesses not deemed core, and improving overall culture and governance matters. |
| • | More specifically, stock selection in real estate, information technology and consumer discretionary detracted most. |
| • | Having underweighted allocations to real estate and consumer discretionary, which each outpaced the benchmark during the annual period, further dampened relative performance. |
| • | Among the biggest individual detractors in our portion of the Fund during the annual period was Orthofix Medical, Inc., an orthopedic medical device developer and producer, which was impacted by delays and suspensions of elective surgeries, in turn slowing company growth materially. |
| • | eHealth, Inc., a health insurance marketplace operator, underperformed, primarily due to a change in its CEO during the company’s peak selling season. Further, specific market dynamics led to the company missing consensus earnings expectations. |
| • | Compass Minerals International, Inc. engages in the production of salt, plant nutrients and magnesium chloride. The company missed earnings before interest, taxes, depreciation and amortization (EBITDA) expectations given higher logistical costs. It also lowered its dividend to allocate more capital to its lithium project. |
The Fund’s notable
contributors during the period
Jacobs Levy
| • | As undervalued segments of the equity market rebounded during these months, our portion of the Fund’s positioning was significantly rewarded. |
| • | From a sector perspective, effective security selection in industrials, financials and utilities contributed most positively to relative results. |
| • | Having an underweighted allocation to utilities also boosted our portion of the Fund’s relative results. |
| • | Among the individual stocks that made the greatest positive contribution to our portion of the Fund was The Goodyear Tire & Rubber Company, which engages in the development, manufacture, distribution and sale of tires. The company’s stock price rose sharply following its announcement in late February 2021 that it was acquiring Cooper Tire & Rubber Co. for approximately $2.5 billion in a deal widely expected to be accretive to its financial results. |
| • | Green Plains, Inc. engages in the production, marketing and distribution of fuel-grade ethanol and corn oil, provision of grain handling, and storage commodity marketing and distribution services. Its share price benefited during the initial reporting period from its management’s decision to deploy proceeds from its then-recent asset sales to buy back shares and from the positive response to its acquisition of Fluid Quip Technologies LLC. |
| • | Houghton Mifflin Harcourt Company provides pre-K through grade 12 education solutions, delivering content, technology, services and media. Investors reacted positively during the initial reporting period to the company’s fourth quarter 2020 earnings release in which it reported financial results that exceeded its revised guidance for 2020. |
Nuveen
| • | Effective stock selection in the energy, materials and industrials sectors contributed most positively to our portion of the Fund’s relative results. |
| • | Among the individual stocks that made the greatest positive contribution to our portion of the Fund was Magnolia Oil & Gas Corp., an oil and gas exploration and production company. During the initial reporting period, the company reported |
| Variable Portfolio – Partners Small Cap Value Fund | Annual Report 2021 | 7 |
Manager Discussion of Fund Performance (continued)
| strong results, with production and free cash flow trends exceeding market expectations. Its management also announced the company’s intention to initiate a regular dividend payment to shareholders starting in mid-2021. | |
| • | Western Alliance Bancorp, a Western U.S.-focused regional bank, performed well, displaying above-average loan growth trends. Its shares also rose on its announcement of an accretive acquisition we believe that should benefit its earnings growth near term. |
| • | Matador Resources Co., an oil and gas exploration and production company, announced a strong quarter during which higher production volumes were met with lower capital expenditure requirements, resulting in solid free cash flow generation. |
William Blair
| • | From a style perspective, the value indices witnessed a pronounced shift in investor preference for higher quality stocks with cheaper valuations, which provided our strategy with a tailwind in the fourth calendar quarter. |
| • | Both stock selection and having an underweighted allocation in health care, including a lack of exposure to the weakly-performing biotechnology industry, contributed most to our portion of the Fund’s results. |
| • | Having an overweight to the information technology sector also added value. |
| • | Among the individual stocks that made the greatest positive contribution to our portion of the Fund was Matador Resources Co., an oil and gas exploration and production company. Its shares rose strongly as oil and commodity prices surged. For example, West Texas Intermediate crude oil prices reached nearly $80 per barrel by year-end 2021. |
| • | Tower Semiconductor Ltd.’s shares experienced robust double-digit gains, propelled by supply chain constraints, particularly the limited availability of semiconductors. The company also expanded its capacity on more profitable processes, which helped raise its gross margins. Additionally, the company saw high double-digit growth rates driven by the adoption of 5G phones and of electric vehicles and other automotive uses for its semiconductors. Tower Semiconductor’s announcement that it was partnering with STMicroelectronics N.V. to co-invest in a factory in Italy was also well-received by investors. |
| • | Belden Inc., an electronics component manufacturer, enjoyed an uptick in demand from its enterprise clients. The company also has a new management team that is focused more on operational improvements than on the unsuccessful acquisition strategy the company pursued in the past. |
Segall Bryant
| • | Having an overweight to and effective stock selection in the consumer staples sector contributed positively to relative results. |
| • | Having no exposure at all to the communication services sector, which lagged the benchmark during the annual period, also buoyed results. |
| • | Among the strongest individual positive contributors to our portion of the Fund’s relative results during the annual period was Coty Inc., a beauty products company, which saw recognition by the market of the transformation that had been unfolding for more than a year at the company, as its management met or beat consensus expectations. |
| • | PDC Energy, Inc., an oil and gas exploration and production company, benefited during the annual period, as it continued to focus on debt reduction while enjoying higher cash flows and returns as oil prices rose. |
| • | Regal Rexnord Corp. is a leading manufacturer of electric motors, electrical motion controls, power generation and power transmission products. During the annual period, the company saw its share price rise, as it continued to execute on its own transformation plan, while the closing of an important acquisition positioned the company to compound value, in our view. |
The views expressed in this report
reflect the current views of the respective parties who have contributed to this report. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult
to predict, so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective
| 8 | Variable Portfolio – Partners Small Cap Value Fund | Annual Report 2021 |
Manager Discussion of Fund Performance (continued)
parties disclaim any responsibility to update such
views. These views may not be relied on as investment advice and, because investment decisions for a Columbia fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of
any particular Columbia fund. References to specific securities should not be construed as a recommendation or investment advice.
| Variable Portfolio – Partners Small Cap Value Fund | Annual Report 2021 | 9 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur ongoing
costs, which generally include management fees, distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to help you compare these costs with the ongoing costs of investing in other mutual funds.
The information below does not
reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy (collectively, Contracts) or qualified pension and retirement plan (Qualified Plan), if any. The total fees
and expenses you bear may therefore be higher than those shown below.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount invested, to estimate the
expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as redemption or exchange fees, or expenses that apply to the subaccount or the Contract. Therefore, the
hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If the fees and expenses imposed under your Contract or
Qualified Plan, if any, were included, your costs would be higher.
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 365.
Expenses do not include fees and
expenses incurred indirectly by the Fund from its investment in underlying funds, including affiliated and non-affiliated pooled investment vehicles, such as mutual funds and exchange-traded funds.
Had Columbia Management Investment
Advisers, LLC and/or certain of its affiliates not waived/reimbursed certain fees and expenses, account value at the end of the period would have been reduced.
| 10 | Variable Portfolio – Partners Small Cap Value Fund | Annual Report 2021 |
Portfolio of Investments
December 31, 2021
December 31, 2021
(Percentages represent value of
investments compared to net assets)
Investments in securities
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Variable Portfolio – Partners Small Cap Value Fund | Annual Report 2021 | 11 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 12 | Variable Portfolio – Partners Small Cap Value Fund | Annual Report 2021 |
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Variable Portfolio – Partners Small Cap Value Fund | Annual Report 2021 | 13 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 14 | Variable Portfolio – Partners Small Cap Value Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
| Money Market Funds 2.3% | ||
| Shares | Value ($) | |
| Columbia Short-Term Cash Fund, 0.085%(e),(f) | 17,683,421 | 17,679,884 |
| Total Money Market Funds (Cost $17,680,521) | 17,679,884 | |
| Total Investments in Securities (Cost: $696,669,624) | 758,802,664 | |
| Other Assets & Liabilities, Net | (1,554,574) | |
| Net Assets | 757,248,090 | |
Notes to Portfolio of
Investments
| (a) | Non-income producing investment. |
| (b) | Represents fair value as determined in good faith under procedures approved by the Board of Trustees. At December 31, 2021, the total value of these securities amounted to $0, which represents less than 0.01% of total net assets. |
| (c) | Denotes a restricted security, which is subject to legal or contractual restrictions on resale under federal securities laws. Disposal of a restricted investment may involve time-consuming negotiations and expenses, and prompt sale at an acceptable price may be difficult to achieve. Private placement securities are generally considered to be restricted, although certain of those securities may be traded between qualified institutional investors under the provisions of Section 4(a)(2) and Rule 144A. The Fund will not incur any registration costs upon such a trade. These securities are valued at fair value determined in good faith under consistently applied procedures established by the Fund’s Board of Trustees. At December 31, 2021, the total market value of these securities amounted to $0, which represents less than 0.01% of total net assets. Additional information on these securities is as follows: |
| Security | Acquisition Dates | Shares | Cost ($) | Value ($) |
| Aduro Biotech CVR | 10/21/2020 | 4,550 | — | — |
| (d) | Valuation based on significant unobservable inputs. |
| (e) | The rate shown is the seven-day current annualized yield at December 31, 2021. |
| (f) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended December 31, 2021 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Realized gain (loss)($) | Dividends($) | End of period shares |
| Columbia Short-Term Cash Fund, 0.085% | ||||||||
| 25,872,839 | 356,298,075 | (364,490,393) | (637) | 17,679,884 | (452) | 16,530 | 17,683,421 | |
Abbreviation Legend
| CVR | Contingent Value Rights |
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Variable Portfolio – Partners Small Cap Value Fund | Annual Report 2021 | 15 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Fair value measurements (continued)
Inputs that are used in determining fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels within the hierarchy.
Inputs that are used in determining fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels within the hierarchy.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at December 31, 2021:
| * | Rounds to zero. |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The Fund does not hold any
significant investments (greater than one percent of net assets) categorized as Level 3.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 16 | Variable Portfolio – Partners Small Cap Value Fund | Annual Report 2021 |
Statement of Assets and Liabilities
December 31, 2021
December 31, 2021
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $678,989,103) | $741,122,780 |
| Affiliated issuers (cost $17,680,521) | 17,679,884 |
| Receivable for: | |
| Investments sold | 376,382 |
| Capital shares sold | 3,210 |
| Dividends | 612,748 |
| Foreign tax reclaims | 2,622 |
| Prepaid expenses | 11,838 |
| Total assets | 759,809,464 |
| Liabilities | |
| Due to custodian | 496 |
| Payable for: | |
| Investments purchased | 1,626,969 |
| Capital shares purchased | 741,360 |
| Management services fees | 17,680 |
| Distribution and/or service fees | 408 |
| Service fees | 5,384 |
| Compensation of board members | 147,066 |
| Compensation of chief compliance officer | 138 |
| Other expenses | 21,873 |
| Total liabilities | 2,561,374 |
| Net assets applicable to outstanding capital stock | $757,248,090 |
| Represented by | |
| Trust capital | $757,248,090 |
| Total - representing net assets applicable to outstanding capital stock | $757,248,090 |
| Class 1 | |
| Net assets | $651,131,558 |
| Shares outstanding | 17,339,074 |
| Net asset value per share | $37.55 |
| Class 2 | |
| Net assets | $13,159,303 |
| Shares outstanding | 360,842 |
| Net asset value per share | $36.47 |
| Class 3 | |
| Net assets | $92,957,229 |
| Shares outstanding | 2,513,658 |
| Net asset value per share | $36.98 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Variable Portfolio – Partners Small Cap Value Fund | Annual Report 2021 | 17 |
Statement of Operations
Year Ended December 31, 2021
Year Ended December 31, 2021
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $9,218,528 |
| Dividends — affiliated issuers | 16,530 |
| Interfund lending | 17 |
| Foreign taxes withheld | (14,181) |
| Total income | 9,220,894 |
| Expenses: | |
| Management services fees | 6,492,228 |
| Distribution and/or service fees | |
| Class 2 | 28,564 |
| Class 3 | 118,334 |
| Service fees | 63,938 |
| Compensation of board members | 50,500 |
| Custodian fees | 30,504 |
| Printing and postage fees | 26,936 |
| Audit fees | 29,500 |
| Legal fees | 17,152 |
| Interest on interfund lending | 53 |
| Compensation of chief compliance officer | 142 |
| Other | 19,408 |
| Total expenses | 6,877,259 |
| Fees waived or expenses reimbursed by Investment Manager and its affiliates | (24,890) |
| Total net expenses | 6,852,369 |
| Net investment income | 2,368,525 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 231,911,224 |
| Investments — affiliated issuers | (452) |
| Foreign currency translations | 21 |
| Net realized gain | 231,910,793 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | (47,793,383) |
| Investments — affiliated issuers | (637) |
| Foreign currency translations | (36) |
| Net change in unrealized appreciation (depreciation) | (47,794,056) |
| Net realized and unrealized gain | 184,116,737 |
| Net increase in net assets resulting from operations | $186,485,262 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 18 | Variable Portfolio – Partners Small Cap Value Fund | Annual Report 2021 |
Statement of Changes in Net Assets
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | |
| Operations | ||
| Net investment income | $2,368,525 | $3,827,645 |
| Net realized gain (loss) | 231,910,793 | (38,892,014) |
| Net change in unrealized appreciation (depreciation) | (47,794,056) | 82,369,434 |
| Net increase in net assets resulting from operations | 186,485,262 | 47,305,065 |
| Increase (decrease) in net assets from capital stock activity | (187,908,126) | 42,154,346 |
| Total increase (decrease) in net assets | (1,422,864) | 89,459,411 |
| Net assets at beginning of year | 758,670,954 | 669,211,543 |
| Net assets at end of year | $757,248,090 | $758,670,954 |
| Year Ended | Year Ended | |||
| December 31, 2021 | December 31, 2020 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class 1 | ||||
| Subscriptions | 2,975,268 | 102,803,357 | 3,415,856 | 80,775,507 |
| Redemptions | (7,484,942) | (277,462,924) | (1,082,276) | (29,723,796) |
| Net increase (decrease) | (4,509,674) | (174,659,567) | 2,333,580 | 51,051,711 |
| Class 2 | ||||
| Subscriptions | 176,557 | 6,277,270 | 42,138 | 1,015,287 |
| Redemptions | (91,680) | (3,249,897) | (58,232) | (1,367,078) |
| Net increase (decrease) | 84,877 | 3,027,373 | (16,094) | (351,791) |
| Class 3 | ||||
| Subscriptions | 63,120 | 2,226,610 | 230,490 | 4,597,287 |
| Redemptions | (532,846) | (18,502,542) | (536,145) | (13,142,861) |
| Net decrease | (469,726) | (16,275,932) | (305,655) | (8,545,574) |
| Total net increase (decrease) | (4,894,523) | (187,908,126) | 2,011,831 | 42,154,346 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Variable Portfolio – Partners Small Cap Value Fund | Annual Report 2021 | 19 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect any fees and expenses imposed under your
Contract and/or Qualified Plan, as applicable; such fees and expenses would reduce the total returns for all periods shown. Total return and portfolio turnover are not annualized for periods of less than one year. The
portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain derivatives, if any. If such transactions were included, the Fund’s portfolio
turnover rate may be higher.
| Net asset value, beginning of period | Net investment income | Net realized and unrealized gain (loss) | Total from investment operations | |
| Class 1 | ||||
| Year Ended 12/31/2021 | $30.28 | 0.12 | 7.15 | 7.27 |
| Year Ended 12/31/2020 | $29.04 | 0.16 | 1.08 | 1.24 |
| Year Ended 12/31/2019 | $24.24 | 0.28 | 4.52 | 4.80 |
| Year Ended 12/31/2018 | $28.01 | 0.25 | (4.02) | (3.77) |
| Year Ended 12/31/2017 | $26.14 | 0.19 | 1.68 | 1.87 |
| Class 2 | ||||
| Year Ended 12/31/2021 | $29.47 | 0.03 | 6.97 | 7.00 |
| Year Ended 12/31/2020 | $28.34 | 0.10 | 1.03 | 1.13 |
| Year Ended 12/31/2019 | $23.71 | 0.22 | 4.41 | 4.63 |
| Year Ended 12/31/2018 | $27.48 | 0.18 | (3.95) | (3.77) |
| Year Ended 12/31/2017 | $25.71 | 0.13 | 1.64 | 1.77 |
| Class 3 | ||||
| Year Ended 12/31/2021 | $29.85 | 0.07 | 7.06 | 7.13 |
| Year Ended 12/31/2020 | $28.67 | 0.13 | 1.05 | 1.18 |
| Year Ended 12/31/2019 | $23.96 | 0.25 | 4.46 | 4.71 |
| Year Ended 12/31/2018 | $27.73 | 0.21 | (3.98) | (3.77) |
| Year Ended 12/31/2017 | $25.91 | 0.15 | 1.67 | 1.82 |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Ratios include interfund lending expense which is less than 0.01%. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 20 | Variable Portfolio – Partners Small Cap Value Fund | Annual Report 2021 |
Financial Highlights (continued)
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets(a) | Total net expense ratio to average net assets(a),(b) | Net investment income ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Class 1 | |||||||
| Year Ended 12/31/2021 | $37.55 | 24.01% | 0.88%(c) | 0.88%(c) | 0.33% | 104% | $651,132 |
| Year Ended 12/31/2020 | $30.28 | 4.27% | 0.90% | 0.88% | 0.68% | 91% | $661,480 |
| Year Ended 12/31/2019 | $29.04 | 19.80% | 0.89% | 0.88% | 1.02% | 75% | $566,653 |
| Year Ended 12/31/2018 | $24.24 | (13.46%) | 0.88% | 0.88% | 0.88% | 60% | $574,250 |
| Year Ended 12/31/2017 | $28.01 | 7.16% | 0.91% | 0.91% | 0.72% | 115% | $686,191 |
| Class 2 | |||||||
| Year Ended 12/31/2021 | $36.47 | 23.75% | 1.14%(c) | 1.13%(c) | 0.10% | 104% | $13,159 |
| Year Ended 12/31/2020 | $29.47 | 3.99% | 1.15% | 1.13% | 0.41% | 91% | $8,133 |
| Year Ended 12/31/2019 | $28.34 | 19.53% | 1.14% | 1.13% | 0.81% | 75% | $8,276 |
| Year Ended 12/31/2018 | $23.71 | (13.72%) | 1.13% | 1.13% | 0.65% | 60% | $6,673 |
| Year Ended 12/31/2017 | $27.48 | 6.88% | 1.16% | 1.16% | 0.49% | 115% | $6,814 |
| Class 3 | |||||||
| Year Ended 12/31/2021 | $36.98 | 23.89% | 1.01%(c) | 1.01%(c) | 0.20% | 104% | $92,957 |
| Year Ended 12/31/2020 | $29.85 | 4.12% | 1.02% | 1.01% | 0.54% | 91% | $89,057 |
| Year Ended 12/31/2019 | $28.67 | 19.66% | 1.01% | 1.00% | 0.92% | 75% | $94,282 |
| Year Ended 12/31/2018 | $23.96 | (13.60%) | 1.01% | 1.00% | 0.74% | 60% | $89,379 |
| Year Ended 12/31/2017 | $27.73 | 7.02% | 1.04% | 1.04% | 0.59% | 115% | $120,392 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Variable Portfolio – Partners Small Cap Value Fund | Annual Report 2021 | 21 |
Notes to Financial Statements
December 31, 2021
December 31, 2021
Note 1. Organization
Variable Portfolio –
Partners Small Cap Value Fund (the Fund), a series of Columbia Funds Variable Series Trust II (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940
Act), as an open-end management investment company organized as a Massachusetts business trust.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers Class 1, Class 2 and Class 3 shares to separate accounts funding variable annuity contracts and variable life insurance policies (collectively, Contracts) issued
by affiliated and unaffiliated life insurance companies (Participating Insurance Companies) as well as qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors (Qualified
Investors) authorized by Columbia Management Investment Distributors, Inc. (the Distributor). You may not buy (nor will you own) shares of the Fund directly. You may invest by participating in a Qualified Plan or by
buying a Contract and making allocations to the Fund. Although all share classes generally have identical voting, dividend and liquidation rights, each share class votes separately when required by the Trust’s
organizational documents or by law. Different share classes pay different net investment income distribution amounts to the extent the expenses of such share classes differ, and distributions in liquidation will be
proportional to the net asset value of each share class. Each share class has its own cost structure and other features.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Equity securities listed on an
exchange are valued at the closing price or last trade price on their primary exchange at the close of business of the New York Stock Exchange. Securities with a closing price not readily available or not listed on
any exchange are valued at the mean between the closing bid and ask prices. Listed preferred stocks convertible into common stocks are valued using an evaluated price from a pricing service.
Foreign equity securities are
valued based on the closing price or last trade price on their primary exchange at the close of business of the New York Stock Exchange. If any foreign equity security closing prices are not readily available,
the securities are valued at the mean of the latest quoted bid and ask prices on such exchanges or markets. Foreign currency exchange rates are determined at the scheduled closing time of the New York Stock Exchange.
Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange; therefore, the closing prices for securities in such markets or on such exchanges may not fully reflect
events that occur after such close but before the close of the New York Stock Exchange. In those situations, foreign securities will be fair valued pursuant to a policy adopted by the Board of Trustees. Under the
policy, the Fund may utilize a third-party pricing service to determine these fair values. The third-party pricing service takes into account multiple factors, including, but not limited to, movements in the U.S.
securities markets, certain depositary receipts, futures contracts and foreign exchange rates that have occurred subsequent to the close of the foreign exchange or market, to determine a good faith estimate that
reasonably reflects the current market conditions as of the close of the New York Stock Exchange. The fair value of a security is likely to be different from the quoted or published price, if available.
Investments in open-end investment
companies (other than exchange-traded funds (ETFs)), are valued at the latest net asset value reported by those companies as of the valuation time.
| 22 | Variable Portfolio – Partners Small Cap Value Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Foreign currency transactions and
translations
The values of all assets and
liabilities denominated in foreign currencies are generally translated into U.S. dollars at exchange rates determined at the close of regular trading on the New York Stock Exchange. Net realized and unrealized gains
(losses) on foreign currency transactions and translations include gains (losses) arising from the fluctuation in exchange rates between trade and settlement dates on securities transactions, gains (losses) arising
from the disposition of foreign currency and currency gains (losses) between the accrual and payment dates on dividends, interest income and foreign withholding taxes.
For financial statement purposes,
the Fund does not distinguish that portion of gains (losses) on investments which is due to changes in foreign exchange rates from that which is due to changes in market prices of the investments. Such fluctuations
are included with the net realized and unrealized gains (losses) on investments in the Statement of Operations.
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
Income recognition
Corporate actions and dividend
income are generally recorded net of any non-reclaimable tax withholdings, on the ex-dividend date or upon receipt of an ex-dividend notification in the case of certain foreign securities.
The Fund may receive distributions
from holdings in equity securities, business development companies (BDCs), exchange-traded funds (ETFs), limited partnerships (LPs), other regulated investment companies (RICs), and real estate investment trusts
(REITs), which report information as to the tax character of their distributions annually. These distributions are allocated to dividend income, capital gain and return of capital based on actual information reported.
Return of capital is recorded as a reduction of the cost basis of securities held. If the Fund no longer owns the applicable securities, return of capital is recorded as a realized gain. With respect to REITs, to the
extent actual information has not yet been reported, estimates for return of capital are made by Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise
Financial, Inc. (Ameriprise Financial). The Investment Manager’s estimates are subsequently adjusted when the actual character of the distributions is disclosed by the REITs, which could result in a
proportionate change in return of capital to shareholders.
Awards from class action litigation
are recorded as a reduction of cost basis if the Fund still owns the applicable securities on the payment date. If the Fund no longer owns the applicable securities on the payment date, the proceeds are recorded as
realized gains.
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
| Variable Portfolio – Partners Small Cap Value Fund | Annual Report 2021 | 23 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
Federal income tax status
The Fund is treated as a
partnership for federal income tax purposes, and the Fund does not expect to make regular distributions. The Fund will not be subject to federal income tax, and therefore, there is no provision for federal income
taxes. The partners of the Fund are subject to tax on their distributive share of the Fund’s income and loss. The components of the Fund’s net assets are reported at the partner-level for federal income
tax purposes, and therefore, are not presented in the Statement of Assets and Liabilities.
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Foreign taxes
The Fund may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries, as applicable, based upon its current interpretation of tax rules
and regulations that exist in the markets in which it invests.
Realized gains in certain countries
may be subject to foreign taxes at the Fund level, based on statutory rates. The Fund accrues for such foreign taxes on realized and unrealized gains at the appropriate rate for each jurisdiction, as applicable. The
amount, if any, is disclosed as a liability on the Statement of Assets and Liabilities.
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Under the Management Agreement, the
Investment Manager provides the Fund with investment research and advice, as well as administrative and accounting services. The Investment Manager is responsible for the ultimate oversight of investments made by the
Fund. The Fund’s subadvisers (see Subadvisory agreements below) have the primary responsibility for the day-to-day portfolio management of the Fund. The management services fee is an annual fee that is equal to
a percentage of the Fund’s daily net assets that declines from 0.87% to 0.75% as the Fund’s net assets increase. The effective management services fee rate for the year ended December 31, 2021 was 0.85% of
the Fund’s average daily net assets.
Subadvisory agreements
The Investment Manager has entered
into a Subadvisory Agreement with Segal Bryant & Hamill, LLC, which subadvises a portion of the assets of the Fund. Effective May 1, 2021, the Investment Manager has entered into a Subadvisory Agreement with
William Blair Investment Management, LLC (William Blair) to serve as a subadviser to a portion of the assets of the Fund. Investment Counselors of Maryland, LLC (ICM), an affiliate of William Blair, assisted in
providing day-to-day portfolio management of the Fund pursuant to the Sub-Subadvisory Agreement between William Blair and ICM. Effective July 19, 2021,
| 24 | Variable Portfolio – Partners Small Cap Value Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
William Blair acquired ICM and therefore, ICM is
no longer serving as sub-subadvisor for the Fund under the Sub-Subadvisory Agreement. Prior to May 1, 2021, Jacobs Levy Equity Management, Inc. and Nuveen Asset Management, LLC served as subadvisers to the Fund. New
investments in the Fund, net of redemptions, are allocated in accordance with the Investment Manager’s determination. Each subadviser’s proportionate share of investments in the Fund will vary due to
market fluctuations. The Investment Manager compensates each subadviser to manage the investment of the Fund’s assets.
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. Under a Deferred Compensation Plan (the
Deferred Plan), these members of the Board of Trustees may elect to defer payment of up to 100% of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of
certain funds managed by the Investment Manager. The Fund’s liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Deferred Plan. All
amounts payable under the Deferred Plan constitute a general unsecured obligation of the Fund. The expense for the Deferred Plan, which includes Trustees’ fees deferred during the current period as well as any
gains or losses on the Trustees’ deferred compensation balances as a result of market fluctuations, is included in "Compensation of board members" on the Statement of Operations.
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
Service fees
The Fund has entered into a
Shareholder Services Agreement with Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial. Under this
agreement, the Fund pays a service fee equal to the payments made by the Transfer Agent to Participating Insurance Companies and other financial intermediaries (together, Participating Organizations) for services each
such Participating Organization provides to its clients, customers and participants that are invested directly or indirectly in the Fund, up to a cap approved by the Board of Trustees from time to time. The effective
service fee rate for the year ended December 31, 2021, was 0.01% of the Fund’s average daily net assets.
The Transfer Agent may retain as
compensation for its services revenues from fees for wire, telephone and redemption orders, account transcripts due the Transfer Agent from Fund shareholders and interest (net of bank charges) earned with respect to
balances in accounts the Transfer Agent maintains in connection with its services to the Fund.
Distribution and/or service fees
The Fund has an agreement with the
Distributor, an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution services. Under a Plan and Agreement of Distribution, the Fund pays a fee at an annual rate
of up to 0.25% of the Fund’s average daily net assets attributable to Class 2 shares and an annual rate of up to 0.125% of the Fund’s average daily net assets attributable to Class 3 shares. The Fund pays
no distribution and service fees for Class 1 shares.
| Variable Portfolio – Partners Small Cap Value Fund | Annual Report 2021 | 25 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Expenses waived/reimbursed by the
Investment Manager and its affiliates
The Investment Manager and certain
of its affiliates have contractually agreed to waive fees and/or reimburse expenses (excluding certain fees and expenses described below) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, so that the Fund’s net operating expenses, after giving effect to fees waived/expenses reimbursed and any balance credits and/or overdraft charges from the Fund’s
custodian, do not exceed the following annual rate(s) as a percentage of the classes’ average daily net assets:
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), expenses associated with investments in affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange-traded funds), transaction costs and
brokerage commissions, costs related to any securities lending program, dividend expenses associated with securities sold short, inverse floater program fees and expenses, transaction charges and interest on borrowed
money, interest, costs associated with certain shareholder meetings, infrequent and/or unusual expenses and any other expenses the exclusion of which is specifically approved by the Board of Trustees. This
agreement may be modified or amended only with approval from the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements
described above are not recoverable by the Investment Manager or its affiliates in future periods.
Note 4. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $758,834,415 and $932,659,285, respectively, for the year ended December 31, 2021. The amount of purchase and
sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 5. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes
referred to as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
Note 6. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
| 26 | Variable Portfolio – Partners Small Cap Value Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
The Fund’s activity in the
Interfund Program during the year ended December 31, 2021 was as follows:
| Borrower or lender | Average loan balance ($) | Weighted average interest rate (%) | Number of days with outstanding loans |
| Borrower | 1,400,000 | 0.69 | 2 |
| Lender | 450,000 | 0.69 | 2 |
Interest income earned and
interest expense incurred by the Fund is recorded as Interfund lending in the Statement of Operations. The Fund had no outstanding interfund loans at December 31, 2021.
Note 7. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to an October 28, 2021 amendment and restatement, the credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment
Manager or an affiliated investment manager, severally and not jointly, permits collective borrowings up to $950 million. Interest is currently charged to each participating fund based on its borrowings at a rate
equal to the higher of (i) the federal funds effective rate, (ii) the secured overnight financing rate plus 0.11448% and (iii) the overnight bank funding rate, plus in each case, 1.00%. Each borrowing under the credit
facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The
commitment fee is included in other expenses in the Statement of Operations. This agreement expires annually in October unless extended or renewed. Prior to the October 28, 2021 amendment and restatement, the Fund had
access to a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. which permitted collective borrowings up to $950 million. Interest was
charged to each participating fund based on its borrowings at a rate equal to the higher of (i) the federal funds effective rate, (ii) the one-month London Interbank Offered Rate (LIBOR) rate and (iii) the overnight
bank funding rate, plus in each case, 1.25%.
The Fund had no borrowings during
the year ended December 31, 2021.
Note 8. Significant
risks
Industrials sector risk
The Fund is more susceptible to the
particular risks that may affect companies in the industrials sector than if it were invested in a wider variety of companies in unrelated sectors. Companies in the industrials sector are subject to certain risks,
including changes in supply and demand for their specific product or service and for industrial sector products in general, including decline in demand for such products due to rapid technological developments and
frequent new product introduction. Performance of such companies may be affected by factors including government regulation, world events and economic conditions and risks for environmental damage and product
liability claims.
Market risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
| Variable Portfolio – Partners Small Cap Value Fund | Annual Report 2021 | 27 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
The coronavirus disease 2019 and
its variants (COVID-19) pandemic has resulted in, and may continue to result in, significant global economic and societal disruption and market volatility due to disruptions in market access, resource availability,
facilities operations, imposition of tariffs, export controls and supply chain disruption, among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement
and loss in human and other resources. The uncertainty surrounding the magnitude, duration, reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental
authorities or other third parties, present unknowns that are yet to unfold. The impacts, as well as the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and
pandemics that may arise in the future – could negatively affect global economies and markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in
emerging market countries may be greater due to generally less established healthcare systems, governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing
political, social and economic risks in certain countries or globally. The disruptions caused by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively
impact the Fund’s ability to achieve its investment objectives. Any such event(s) could have a significant adverse impact on the value and risk profile of the Fund.
Shareholder concentration risk
At December 31, 2021, affiliated
shareholders of record owned 100.0% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of
less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Small- and mid-cap company risk
Investments in small- and
mid-capitalization companies (small- and mid-cap companies) often involve greater risks than investments in larger, more established companies (larger companies) because small- and mid-cap companies tend to have less
predictable earnings and may lack the management experience, financial resources, product diversification and competitive strengths of larger companies. Securities of small- and mid-cap companies may be less liquid
and more volatile than the securities of larger companies.
Note 9. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
Note 10. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in
connection with the conduct of their business activities. Ameriprise Financial believes that the Fund is not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject
of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with
the Fund. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (SEC) on legal and regulatory matters that relate to
Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that
these matters, or the adverse publicity associated with them, will not result in increased Fund redemptions, reduced sale of Fund shares or other adverse consequences to the Fund. Further, although we believe
proceedings are not likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could
| 28 | Variable Portfolio – Partners Small Cap Value Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
result in adverse judgments, settlements, fines,
penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial or one or more of its affiliates that provides services to
the Fund.
| Variable Portfolio – Partners Small Cap Value Fund | Annual Report 2021 | 29 |
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees of Columbia
Funds Variable Series Trust II and Shareholders of Variable Portfolio – Partners Small Cap Value Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of Variable Portfolio – Partners Small Cap Value Fund (one of the funds constituting Columbia Funds Variable Series Trust II, referred
to hereafter as the "Fund") as of December 31, 2021, the related statement of operations for the year ended December 31, 2021, the statement of changes in net assets for each of the two years in the period ended
December 31, 2021, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2021 (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, 2021, 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, 2021 and the financial highlights for each of the five years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in
the United States of America.
Basis for Opinion
These financial statements are the
responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these
financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2021 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.
/s/PricewaterhouseCoopers LLP
Minneapolis, Minnesota
February 18, 2022
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| 30 | Variable Portfolio – Partners Small Cap Value Fund | Annual Report 2021 |
TRUSTEES AND
OFFICERS
The Board oversees the
Fund’s operations and appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following table provides basic biographical information about the
Fund’s Trustees as of the printing of this report, including their principal occupations during the past five years, although specific titles for individuals may have varied over the period. The year set forth
beneath Length of Service in the table below is the year in which the Trustee was first appointed or elected as Trustee to any Fund currently in the Columbia Funds Complex or a predecessor thereof. Under current Board
policy, each Trustee generally serves until December 31 of the year such Trustee turns seventy-five (75).
Independent trustees
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| George S. Batejan c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1953 | Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 176 | Former Chairman of the Board, NICSA (National Investment Company Services Association) (Executive Committee, Nominating Committee and Governance Committee), 2014-2016; former Director, Intech Investment Management, 2011-2016; former Board Member, Metro Denver Chamber of Commerce, 2015-2016; former Advisory Board Member, University of Colorado Business School, 2015-2018 |
| Kathleen Blatz c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2006 | Attorney, specializing in arbitration and mediation; Chief Justice, Minnesota Supreme Court, 1998-2006; Associate Justice, Minnesota Supreme Court, 1996-1998; Fourth Judicial District Court Judge, Hennepin County, 1994-1996; Attorney in private practice and public service, 1984-1993; State Representative, Minnesota House of Representatives, 1979-1993, which included service on the Tax and Financial Institutions and Insurance Committees; Member and Interim Chair, Minnesota Sports Facilities Authority, January 2017-July 2017; Interim President and Chief Executive Officer, Blue Cross Blue Shield of Minnesota (health care insurance), February-July 2018, April-October 2021 | 176 | Former Trustee, Blue Cross Blue Shield of Minnesota, 2009-2021 (Chair of the Business Development Committee, 2014-2017; Chair of the Governance Committee, 2017-2019); former Member and Chair of the Board, Minnesota Sports Facilities Authority, January 2017-July 2017; former Director, Robina Foundation, 2009-2020 (Chair, 2014-2020); Director, Schulze Family Foundation, since 2021 |
| Pamela G. Carlton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2007 | President, Springboard — Partners in Cross Cultural Leadership (consulting company) since 2003; Managing Director of US Equity Research, JP Morgan Chase, 1999-2003; Director of US Equity Research, Chase Asset Management, 1996-1999; Co-Director Latin America Research, 1993-1996, COO Global Research, 1992-1996, Co-Director of US Research, 1991-1992, Investment Banker, Morgan Stanley, 1982-1991, Morgan Stanley; Attorney, Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 176 | Trustee, New York Presbyterian Hospital Board (Executive Committee and Chair of People Committee) since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee); Director, Apollo Commercial Real Estate Finance, Inc. since 2021; the Governing Council of the Independent Directors Council (IDC), since 2021 |
| Variable Portfolio – Partners Small Cap Value Fund | Annual Report 2021 | 31 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Janet Langford Carrig c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1957 | Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 174 | Director, EQT Corporation (natural gas producer) since 2019; Director, Whiting Petroleum Corporation (independent oil and gas company) since 2020 |
| J. Kevin Connaughton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2020 | Member, FINRA National Adjudicatory Council since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Consultant to Independent Trustees of CFVIT and CFST I from March 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Managing Director and General Manager of Mutual Fund Products, Columbia Management Investment Advisers, LLC, May 2010-February 2015; President, Columbia Funds, 2008-2015; and senior officer of Columbia Funds and affiliated funds, 2003-2015 | 174 | Former Director, The Autism Project, March 2015-December 2021; former Member of the Investment Committee, St. Michael’s College, November 2015-February 2020; former Trustee, St. Michael’s College, June 2017-September 2019; former Trustee, New Century Portfolios, January 2015-December 2017 |
| Olive M. Darragh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since 2020 | Managing Director of Darragh Inc. (strategy and talent management consulting firm) since 2010; Founder and CEO, Zolio, Inc. (investment management talent identification platform) since 2004; Consultant to Independent Trustees of CFVIT and CFST I from June 2019 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 2001-2004 | 174 | Former Director, University of Edinburgh Business School (Member of US Board); former Director, Boston Public Library Foundation |
| Patricia M. Flynn c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1950 | Trustee since 2004 | Trustee Professor of Economics and Management, Bentley University since 1976 (also teaches and conducts research on corporate governance); Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 176 | Trustee, MA Taxpayers Foundation since 1997; Board of Governors, Innovation Institute, MA Technology Collaborative, 2010-2020; former Board of Directors, The MA Business Roundtable, 2003-2019 |
| Brian J. Gallagher c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 176 | Trustee, Catholic Schools Foundation since 2004 |
| 32 | Variable Portfolio – Partners Small Cap Value Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Douglas A. Hacker c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1955 | Co-Chair since 2021; Chair of CFST I and CFVIT since 2014; Trustee of CFST I and CFVIT since 1996 and CFST, CFST II, CFVST II, CET I and CET II since 2021 | Independent business executive since May 2006; Executive Vice President – Strategy of United Airlines, December 2002 - May 2006; President of UAL Loyalty Services (airline marketing company), September 2001-December 2002; Executive Vice President and Chief Financial Officer of United Airlines, July 1999-September 2001 | 176 | Director, Spartan Nash Company (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing); former Director, Nash Finch Company (food distributor), 2005-2013; former Director, SeaCube Container Leasing Ltd. (container leasing), 2010-2013; and former Director, Travelport Worldwide Limited (travel information technology), 2014-2019 |
| Nancy T. Lukitsh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1956 | Trustee since 2011 | Senior Vice President, Partner and Director of Marketing, Wellington Management Company, LLP (investment adviser), 1997-2010; Chair, Wellington Management Portfolios (commingled non-U.S. investment pools), 2007 -2010; Director, Wellington Trust Company, NA and other Wellington affiliates, 1997-2010 | 174 | None |
| David M. Moffett c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2011 | Retired; Consultant to Bridgewater and Associates | 174 | Director, CSX Corporation (transportation suppliers); Director, Genworth Financial, Inc. (financial and insurance products and services); Director, PayPal Holdings Inc. (payment and data processing services); Trustee, University of Oklahoma Foundation; former Director, eBay Inc. (online trading community), 2007-2015; and former Director, CIT Bank, CIT Group Inc. (commercial and consumer finance), 2010-2016 |
| Catherine James Paglia c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Co-Chair since 2021; Chair of CFST, CFST II, CFVST II, CET I and CET II since 2020; Trustee of CFST, CFST II and CFVST II since 2004 and CFST I and CFVIT since 2021 | Director, Enterprise Asset Management, Inc. (private real estate and asset management company) since September 1998; Managing Director and Partner, Interlaken Capital, Inc., 1989-1997; Vice President, 1982-1985, Principal, 1985-1987, Managing Director, 1987-1989, Morgan Stanley; Vice President, Investment Banking, 1980-1982, Associate, Investment Banking, 1976-1980, Dean Witter Reynolds, Inc. | 176 | Director, Valmont Industries, Inc. (irrigation systems manufacturer) since 2012; Trustee, Carleton College (on the Investment Committee); Trustee, Carnegie Endowment for International Peace (on the Investment Committee) |
| Variable Portfolio – Partners Small Cap Value Fund | Annual Report 2021 | 33 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Minor M. Shaw c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1947 | Trustee since 2003 | President, Micco LLC (private investments) since 2011; President, Micco Corp. (family investment business), 1998-2011 | 176 | Director, Blue Cross Blue Shield of South Carolina (Chair of Compensation Committee) since April 2008; Trustee, Hollingsworth Funds (on the Investment Committee) since 2016 (previously Board Chair from 2016-2019); Former Advisory Board member, Duke Energy Corp., 2016-2020; Chair of the Duke Endowment; Chair of Greenville – Spartanburg Airport Commission; former Trustee, BofA Funds Series Trust (11 funds), 2003-2011; former Director, Piedmont Natural Gas, 2004-2016; former Director, National Association of Corporate Directors, Carolinas Chapter, 2013-2018; Chair, Daniel-Mickel Foundation since 1998 |
| Natalie A. Trunow c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1967 | Trustee since 2020 | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services), January 2016-January 2021; Non-executive Member of the Investment Committee and Valuation Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services), August 2018-January 2021; Advisor, Paradigm Asset Management, November 2016-December 2021; Consultant to Independent Trustees of CFVIT and CFST I from September 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Director of Investments/Consultant, Casey Family Programs, April 2016-November 2016; Senior Vice President and Chief Investment Officer, Calvert Investments, August 2008-January 2016; Section Head and Portfolio Manager, General Motors Asset Management, June 1997-August 2008 | 174 | Former Director, Investment Committee, Health Services for Children with Special Needs, Inc., 2012-2019; Director, Chair of Audit Committee, Consumer Credit Counseling Services (formerly Guidewell Financial Solutions), since 2019; Independent Director, Investment Committee and Valuation Committee, Sarona Asset Management, since 2019 |
| Sandra Yeager c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2017 | Retired; President and founder, Hanoverian Capital, LLC (SEC registered investment advisor firm), 2008-2016; Managing Director, DuPont Capital, 2006-2008; Managing Director, Morgan Stanley Investment Management, 2004-2006; Senior Vice President, Alliance Bernstein, 1990-2004 | 176 | Former Director, NAPE Education Foundation, October 2016-October 2020 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Fund Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I (CET I), Columbia ETF Trust II (CET II), Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Beckman, Gallagher and Hacker and Mses. Blatz, Carlton, Flynn, Paglia, Shaw and Yeager serve as Directors of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
| 34 | Variable Portfolio – Partners Small Cap Value Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Interested trustee affiliated with Investment Manager*
Interested trustee affiliated with Investment Manager*
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during the past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex overseen | Other directorships held by Trustee during the past five years |
| Daniel J. Beckman c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since November 2021(a) | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC (since April 2015); officer of Columbia Funds and affiliated funds since 2020. | 176 | Director, Ameriprise Trust Company, since October 2016; Director, Columbia Management Investment Distributors, Inc. since November 2018; Board of Governors, Columbia Wanger Asset Management, LLC since January 2022 |
| * | Interested person (as defined under the 1940 Act) by reason of being an officer, director, security holder and/or employee of the Investment Manager or Ameriprise Financial. |
| (a) | Mr. Beckman serves as the President and Principal Executive Officer of the Columbia Funds (since 2021). |
The Statement of Additional
Information has additional information about the Fund’s Board members and is available, without charge, upon request by calling 800.345.6611 or contacting your financial intermediary.
The Board has appointed officers
who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. The following table provides basic information about the Officers of the
Fund, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Beckman, who is President and Principal Executive Officer, the
Fund’s other officers are:
Fund officers
| Variable Portfolio – Partners Small Cap Value Fund | Annual Report 2021 | 35 |
TRUSTEES AND OFFICERS (continued)
Fund officers (continued)
Fund officers (continued)
| 36 | Variable Portfolio – Partners Small Cap Value Fund | Annual Report 2021 |
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For Fund and other investment product prospectuses, which contain this and other important information, contact your
financial advisor or insurance representative. Please read the prospectus carefully before you invest. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved. Columbia Management Investment Distributors, Inc., 290 Congress Street, Boston, MA 02210
© 2022 Columbia Management Investment
Advisers, LLC.
C-2075 AW (2/22)
CTIVP® –
Morgan Stanley Advantage Fund
Please remember that you may not
buy (nor will you own) shares of the Fund directly. The Fund is available through variable annuity contracts and variable life insurance policies offered by the separate accounts of participating insurance companies
as well as qualified pension and retirement plans. Please contact your financial advisor or insurance representative for more information.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
| 3 | |
| 5 | |
| 7 | |
| 8 | |
| 11 | |
| 12 | |
| 13 | |
| 14 | |
| 16 | |
| 23 | |
| 24 |
Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which CTIVP® – Morgan Stanley Advantage Fund (the Fund) holds investments consistent with the procedures as stated in the Statement of Additional Information
(SAI). You may obtain a copy of the SAI without charge by calling 800.345.6611; contacting your financial intermediary or searching the website of the Securities and Exchange Commission (SEC) at sec.gov. Information
regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge by visiting
columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. The Fund’s Form N-PORT is available on the SEC’s website at sec.gov. The Fund’s complete
schedule of portfolio holdings, as filed on Form N-PORT, can also be obtained without charge, upon request, by calling 800.345.6611.
Additional Fund information
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
290 Congress Street
Boston, MA 02210
Fund distributor
Columbia Management Investment Distributors,
Inc.
290 Congress Street
Boston, MA 02210
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
CTIVP® – Morgan Stanley Advantage
Fund | Annual Report 2021
Fund at a Glance
Investment objective
The Fund
seeks to provide shareholders with long-term capital growth.
Portfolio management
Morgan Stanley Investment Management Inc.
Dennis Lynch
Sam Chainani, CFA
Jason Yeung, CFA
Armistead Nash
David Cohen
Alexander Norton
| CTIVP® – Morgan Stanley Advantage Fund | Annual Report 2021 | 3 |
Fund at a Glance (continued)
Performance of a hypothetical $10,000 investment (December 31, 2011 — December 31, 2021)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class 2 shares of CTIVP® – Morgan Stanley Advantage Fund during the stated time period, and does not reflect the deduction of taxes, if any, that a
shareholder may pay on Fund distributions or on the redemption of Fund shares. The returns also do not reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy or
qualified pension or retirement plan, if any.
| 4 | CTIVP® – Morgan Stanley Advantage Fund | Annual Report 2021 |
Manager Discussion of Fund Performance
At December 31, 2021,
approximately 97.44% of the Fund’s shares were owned in the aggregate by affiliated funds-of-funds managed by Columbia Management Investment Advisers, LLC (the Investment Manager). As a result of asset
allocation decisions by the Investment Manager, it is possible that the Fund may experience relatively large purchases or redemptions from affiliated funds-of-funds. The Investment Manager seeks to minimize the impact
of these transactions by structuring them over a reasonable period of time. The Fund may also experience increased expenses as it buys and sells securities as a result of purchases or redemptions by affiliated
funds-of-funds.
For the 12-month period that ended
December 31, 2021, the Fund’s Class 2 shares returned -4.35%. The Fund significantly underperformed its benchmark, the Russell 1000 Growth Index, which returned 27.60% over the same period.
Market overview
U.S. equity markets saw increased
short-term volatility in 2021 but ultimately overcame concerns about new COVID-19 variants, inflation, and fiscal and monetary policy uncertainties to end the annual period higher. The U.S. economic recovery
progressed due to easing lockdown restrictions and increasing COVID-19 vaccinations, along with support from the federal government’s pandemic relief and the U.S. Federal Reserve’s (Fed) accommodative
monetary policy. Inflation persisted longer than expected, in part due to pandemic-related supply-side disruptions and labor shortages, leading the Fed and other central banks around the world to begin withdrawing
monetary stimulus measures. The better clarity on monetary policy and early evidence that the highly contagious COVID-19 Omicron variant could be less deadly than originally thought helped drive the U.S. equity market
to rally at year end.
Amid this backdrop, U.S. large-cap
growth equities, as measured by the benchmark, advanced for the annual period overall. All sectors in the benchmark posted positive total returns, led by energy. Utilities had the smallest gain in the benchmark during
the annual period.
The Fund’s notable
detractors during the period
| • | During the annual period, the Fund underperformance against the benchmark was primarily due to stock selection. |
| ○ | The Fund usually underperforms when the equity market favors lower quality, more speculative securities or when the market is highly rotational or thematic. The Fund typically outperforms when high quality stocks are in favor and when stock selection, rather than themes or sectors, matters. Due to our investment philosophy and process, stock selection typically drives the majority of the Fund’s relative performance over most time periods. |
| ○ | Our stock selection focuses on finding high-quality companies, developing the insights around competitive advantage and niche characteristics that we believe can make them successful over time, and having the perspective to hold them when there are short-term disruptions, as long as those disruptions do not affect the investment thesis. |
| • | Stock selection in the information technology, communication services and consumer discretionary sectors detracted most during the annual period. |
| • | Having an overweighted allocation to health care, which underperformed the benchmark during the annual period, and having no exposure to real estate, which outperformed the benchmark during the annual period, also hurt performance. Having a position in cash, albeit modest, during a period when the benchmark rallied, further detracted from relative results. |
| • | Detracting most from the Fund’s results relative to the benchmark was a position in Coupa Software, Inc. Coupa Software provides cloud-based expense management software to enterprises. We attribute its share price weakness during the annual period to a broader selloff in high growth, high multiple businesses as well as to investor disappointment around its conservative financial outlook. |
| • | Block, Inc., formerly known as Square, provides payment, point-of-sale, capital and business management solutions to facilitate commerce between businesses and consumers. Its shares were affected during the annual period by heightened volatility across the payments industry and by a deceleration in the company’s gross profit growth following a span of strong performance earlier in the pandemic. |
| CTIVP® – Morgan Stanley Advantage Fund | Annual Report 2021 | 5 |
Manager Discussion of Fund Performance (continued)
| • | Zoom Video Communications, Inc. offers a proprietary cloud-based communications platform that connects users through frictionless video, voice, chat and content sharing. Following strong performance in 2020, its shares languished during the annual period on mixed results, characterized by solid revenue growth and ongoing traction with its Zoom phone offering on the one hand but by lower than consensus expected growth in billings and with smaller customers on the other hand. |
The Fund’s notable
contributors during the period
| • | Having an underweighted allocation to the consumer discretionary sector, which lagged the benchmark during the annual period, and having an overweighted allocation to the communication services sector, which outperformed the benchmark during the annual period, contributed positively, albeit modestly. |
| • | From an individual security perspective, the Fund benefited most relative to the benchmark from a position in Datadog, Inc., an application monitoring platform. Its shares advanced during the annual period as the company experienced healthy fundamentals overall, with expanding usage of its products and low customer churn, or turnover. |
| • | Snowflake, Inc. is a cloud-native data warehousing services provider. Its platform enables customers to consolidate data into a single source and therefore derive important business insights, build data-driven applications, and share data more effectively. Its shares advanced during the annual period on strong results, as the company saw strong demand for its Data Cloud, with a growing number of enterprises moving their data to the public cloud and looking to store, process and analyze more data in their business operations. |
| • | Intuitive Surgical, Inc. is a provider of robotic-assisted surgical technology and solutions. Its shares gained during the annual period based on a rebound in its fundamentals following a time of more challenged performance earlier in the pandemic. The company also benefited from improving procedure volume growth and solid new system placements. |
The views expressed in this report
reflect the current views of the respective parties who have contributed to this report. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult
to predict, so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective parties
disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Columbia fund are based on numerous factors, may not be relied on as an
indication of trading intent on behalf of any particular Columbia fund. References to specific securities should not be construed as a recommendation or investment advice.
| 6 | CTIVP® – Morgan Stanley Advantage Fund | Annual Report 2021 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur ongoing
costs, which generally include management fees, distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to help you compare these costs with the ongoing costs of investing in other mutual funds.
The information below does not
reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy (collectively, Contracts) or qualified pension and retirement plan (Qualified Plan), if any. The total fees
and expenses you bear may therefore be higher than those shown below.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount invested, to estimate the
expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as redemption or exchange fees, or expenses that apply to the subaccount or the Contract. Therefore, the
hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If the fees and expenses imposed under your Contract or
Qualified Plan, if any, were included, your costs would be higher.
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 365.
Expenses do not include fees and
expenses incurred indirectly by the Fund from its investment in underlying funds, including affiliated and non-affiliated pooled investment vehicles, such as mutual funds and exchange-traded funds.
| CTIVP® – Morgan Stanley Advantage Fund | Annual Report 2021 | 7 |
Portfolio of Investments
December 31, 2021
December 31, 2021
(Percentages represent value of
investments compared to net assets)
Investments in securities
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 8 | CTIVP® – Morgan Stanley Advantage Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
| Money Market Funds 7.6% | ||
| Shares | Value ($) | |
| Columbia Short-Term Cash Fund, 0.085%(b),(c) | 149,778,840 | 149,748,884 |
| Total Money Market Funds (Cost $149,759,184) | 149,748,884 | |
| Total Investments in Securities (Cost: $1,793,177,171) | 1,983,870,572 | |
| Other Assets & Liabilities, Net | 2,514,122 | |
| Net Assets | 1,986,384,694 | |
Notes to Portfolio of
Investments
| (a) | Non-income producing investment. |
| (b) | The rate shown is the seven-day current annualized yield at December 31, 2021. |
| (c) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended December 31, 2021 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Realized gain (loss)($) | Dividends($) | End of period shares |
| Columbia Short-Term Cash Fund, 0.085% | ||||||||
| 123,790,002 | 1,084,797,190 | (1,058,828,008) | (10,300) | 149,748,884 | (1,135) | 56,906 | 149,778,840 | |
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
Foreign equity securities actively
traded in markets where there is a significant delay in the local close relative to the New York Stock Exchange are classified as Level 2. The values of these securities may include an adjustment to reflect the impact
of market movements following the close of local trading, as described in Note 2 to the financial statements – Security valuation.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are
The accompanying Notes to Financial Statements are
an integral part of this statement.
| CTIVP® – Morgan Stanley Advantage Fund | Annual Report 2021 | 9 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Fair value measurements (continued)
illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at December 31, 2021:
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The Fund’s assets assigned to
the Level 2 input category are generally valued using the market approach, in which a security’s value is determined through reference to prices and information from market transactions for similar or identical
assets. These assets include certain foreign securities for which a third party statistical pricing service may be employed for purposes of fair market valuation. The model utilized by such third party statistical
pricing service takes into account a security’s correlation to available market data including, but not limited to, intraday index, ADR, and exchange-traded fund movements.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 10 | CTIVP® – Morgan Stanley Advantage Fund | Annual Report 2021 |
Statement of Assets and Liabilities
December 31, 2021
December 31, 2021
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $1,643,417,987) | $1,834,121,688 |
| Affiliated issuers (cost $149,759,184) | 149,748,884 |
| Foreign currency (cost $1,462) | 1,456 |
| Receivable for: | |
| Investments sold | 2,693,717 |
| Capital shares sold | 12,350 |
| Dividends | 8,298 |
| Prepaid expenses | 18,762 |
| Total assets | 1,986,605,155 |
| Liabilities | |
| Payable for: | |
| Capital shares purchased | 9,254 |
| Management services fees | 36,623 |
| Distribution and/or service fees | 313 |
| Service fees | 2,516 |
| Compensation of board members | 143,601 |
| Compensation of chief compliance officer | 404 |
| Audit fees | 14,750 |
| Other expenses | 13,000 |
| Total liabilities | 220,461 |
| Net assets applicable to outstanding capital stock | $1,986,384,694 |
| Represented by | |
| Trust capital | $1,986,384,694 |
| Total - representing net assets applicable to outstanding capital stock | $1,986,384,694 |
| Class 1 | |
| Net assets | $1,941,145,334 |
| Shares outstanding | 32,350,799 |
| Net asset value per share | $60.00 |
| Class 2 | |
| Net assets | $45,239,360 |
| Shares outstanding | 776,219 |
| Net asset value per share | $58.28 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| CTIVP® – Morgan Stanley Advantage Fund | Annual Report 2021 | 11 |
Statement of Operations
Year Ended December 31, 2021
Year Ended December 31, 2021
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $2,520,119 |
| Dividends — affiliated issuers | 56,906 |
| Interfund lending | 204 |
| Foreign taxes withheld | (43,476) |
| Total income | 2,533,753 |
| Expenses: | |
| Management services fees | 14,081,297 |
| Distribution and/or service fees | |
| Class 2 | 121,278 |
| Service fees | 31,202 |
| Compensation of board members | 65,295 |
| Custodian fees | 16,927 |
| Printing and postage fees | 9,838 |
| Audit fees | 43,938 |
| Legal fees | 29,510 |
| Compensation of chief compliance officer | 412 |
| Other | 26,998 |
| Total expenses | 14,426,695 |
| Net investment loss | (11,892,942) |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 361,863,818 |
| Investments — affiliated issuers | (1,135) |
| Foreign currency translations | (9,246) |
| Net realized gain | 361,853,437 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | (415,118,911) |
| Investments — affiliated issuers | (10,300) |
| Foreign currency translations | (134) |
| Net change in unrealized appreciation (depreciation) | (415,129,345) |
| Net realized and unrealized loss | (53,275,908) |
| Net decrease in net assets resulting from operations | $(65,168,850) |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 12 | CTIVP® – Morgan Stanley Advantage Fund | Annual Report 2021 |
Statement of Changes in Net Assets
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | |
| Operations | ||
| Net investment loss | $(11,892,942) | $(8,070,136) |
| Net realized gain | 361,853,437 | 950,338,226 |
| Net change in unrealized appreciation (depreciation) | (415,129,345) | 216,052,615 |
| Net increase (decrease) in net assets resulting from operations | (65,168,850) | 1,158,320,705 |
| Increase (decrease) in net assets from capital stock activity | 217,285,953 | (1,688,440,267) |
| Total increase (decrease) in net assets | 152,117,103 | (530,119,562) |
| Net assets at beginning of year | 1,834,267,591 | 2,364,387,153 |
| Net assets at end of year | $1,986,384,694 | $1,834,267,591 |
| Year Ended | Year Ended | |||
| December 31, 2021 | December 31, 2020 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class 1 | ||||
| Subscriptions | 7,298,747 | 447,072,798 | 790,314 | 29,867,011 |
| Redemptions | (3,593,672) | (235,388,856) | (38,085,886) | (1,725,252,267) |
| Net increase (decrease) | 3,705,075 | 211,683,942 | (37,295,572) | (1,695,385,256) |
| Class 2 | ||||
| Subscriptions | 227,756 | 14,336,865 | 249,331 | 12,053,025 |
| Redemptions | (139,424) | (8,734,854) | (113,012) | (5,108,036) |
| Net increase | 88,332 | 5,602,011 | 136,319 | 6,944,989 |
| Total net increase (decrease) | 3,793,407 | 217,285,953 | (37,159,253) | (1,688,440,267) |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| CTIVP® – Morgan Stanley Advantage Fund | Annual Report 2021 | 13 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect any fees and expenses imposed under your
Contract and/or Qualified Plan, as applicable; such fees and expenses would reduce the total returns for all periods shown. Total return and portfolio turnover are not annualized for periods of less than one year. The
portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain derivatives, if any. If such transactions were included, the Fund’s portfolio
turnover rate may be higher.
| Net asset value, beginning of period | Net investment income (loss) | Net realized and unrealized gain (loss) | Total from investment operations | |
| Class 1 | ||||
| Year Ended 12/31/2021 | $62.57 | (0.36) | (2.21) | (2.57) |
| Year Ended 12/31/2020 | $35.57 | (0.19) | 27.19 | 27.00 |
| Year Ended 12/31/2019 | $27.97 | (0.02) | 7.62 | 7.60 |
| Year Ended 12/31/2018 | $27.18 | 0.02 | 0.77 | 0.79 |
| Year Ended 12/31/2017 | $20.50 | (0.01) | 6.69 | 6.68 |
| Class 2 | ||||
| Year Ended 12/31/2021 | $60.93 | (0.51) | (2.14) | (2.65) |
| Year Ended 12/31/2020 | $34.72 | (0.30) | 26.51 | 26.21 |
| Year Ended 12/31/2019 | $27.37 | (0.10) | 7.45 | 7.35 |
| Year Ended 12/31/2018 | $26.67 | (0.06) | 0.76 | 0.70 |
| Year Ended 12/31/2017 | $20.17 | (0.06) | 6.56 | 6.50 |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Ratios include interfund lending expense which is less than 0.01%. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 14 | CTIVP® – Morgan Stanley Advantage Fund | Annual Report 2021 |
Financial Highlights (continued)
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets(a) | Total net expense ratio to average net assets(a),(b) | Net investment income (loss) ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Class 1 | |||||||
| Year Ended 12/31/2021 | $60.00 | (4.11%) | 0.67% | 0.67% | (0.55%) | 73% | $1,941,145 |
| Year Ended 12/31/2020 | $62.57 | 75.91% | 0.68%(c) | 0.68%(c) | (0.42%) | 70% | $1,792,357 |
| Year Ended 12/31/2019 | $35.57 | 27.17% | 0.66% | 0.66% | (0.05%) | 80% | $2,345,237 |
| Year Ended 12/31/2018 | $27.97 | 2.91% | 0.67% | 0.67% | 0.07% | 71% | $1,893,796 |
| Year Ended 12/31/2017 | $27.18 | 32.58% | 0.72% | 0.72% | (0.03%) | 68% | $1,804,566 |
| Class 2 | |||||||
| Year Ended 12/31/2021 | $58.28 | (4.35%) | 0.92% | 0.92% | (0.80%) | 73% | $45,239 |
| Year Ended 12/31/2020 | $60.93 | 75.49% | 0.93%(c) | 0.93%(c) | (0.66%) | 70% | $41,911 |
| Year Ended 12/31/2019 | $34.72 | 26.85% | 0.91% | 0.91% | (0.30%) | 80% | $19,150 |
| Year Ended 12/31/2018 | $27.37 | 2.62% | 0.92% | 0.92% | (0.19%) | 71% | $13,254 |
| Year Ended 12/31/2017 | $26.67 | 32.23% | 0.97% | 0.97% | (0.28%) | 68% | $9,269 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| CTIVP® – Morgan Stanley Advantage Fund | Annual Report 2021 | 15 |
Notes to Financial Statements
December 31, 2021
December 31, 2021
Note 1. Organization
CTIVP® – Morgan
Stanley Advantage Fund (the Fund), a series of Columbia Funds Variable Series Trust II (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act),
as an open-end management investment company organized as a Massachusetts business trust.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers Class 1 and Class 2 shares to separate accounts funding variable annuity contracts and variable life insurance policies (collectively, Contracts) issued by
affiliated and unaffiliated life insurance companies (Participating Insurance Companies) as well as qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors (Qualified
Investors) authorized by Columbia Management Investment Distributors, Inc. (the Distributor). You may not buy (nor will you own) shares of the Fund directly. You may invest by participating in a Qualified Plan or by
buying a Contract and making allocations to the Fund. Although all share classes generally have identical voting, dividend and liquidation rights, each share class votes separately when required by the Trust’s
organizational documents or by law. Different share classes pay different net investment income distribution amounts to the extent the expenses of such share classes differ, and distributions in liquidation will be
proportional to the net asset value of each share class. Each share class has its own cost structure and other features.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Equity securities listed on an
exchange are valued at the closing price or last trade price on their primary exchange at the close of business of the New York Stock Exchange. Securities with a closing price not readily available or not listed on
any exchange are valued at the mean between the closing bid and ask prices. Listed preferred stocks convertible into common stocks are valued using an evaluated price from a pricing service.
Foreign equity securities are
valued based on the closing price or last trade price on their primary exchange at the close of business of the New York Stock Exchange. If any foreign equity security closing prices are not readily available,
the securities are valued at the mean of the latest quoted bid and ask prices on such exchanges or markets. Foreign currency exchange rates are determined at the scheduled closing time of the New York Stock Exchange.
Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange; therefore, the closing prices for securities in such markets or on such exchanges may not fully reflect
events that occur after such close but before the close of the New York Stock Exchange. In those situations, foreign securities will be fair valued pursuant to a policy adopted by the Board of Trustees. Under the
policy, the Fund may utilize a third-party pricing service to determine these fair values. The third-party pricing service takes into account multiple factors, including, but not limited to, movements in the U.S.
securities markets, certain depositary receipts, futures contracts and foreign exchange rates that have occurred subsequent to the close of the foreign exchange or market, to determine a good faith estimate that
reasonably reflects the current market conditions as of the close of the New York Stock Exchange. The fair value of a security is likely to be different from the quoted or published price, if available.
Investments in open-end investment
companies (other than exchange-traded funds (ETFs)), are valued at the latest net asset value reported by those companies as of the valuation time.
| 16 | CTIVP® – Morgan Stanley Advantage Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Foreign currency transactions and
translations
The values of all assets and
liabilities denominated in foreign currencies are generally translated into U.S. dollars at exchange rates determined at the close of regular trading on the New York Stock Exchange. Net realized and unrealized gains
(losses) on foreign currency transactions and translations include gains (losses) arising from the fluctuation in exchange rates between trade and settlement dates on securities transactions, gains (losses) arising
from the disposition of foreign currency and currency gains (losses) between the accrual and payment dates on dividends, interest income and foreign withholding taxes.
For financial statement purposes,
the Fund does not distinguish that portion of gains (losses) on investments which is due to changes in foreign exchange rates from that which is due to changes in market prices of the investments. Such fluctuations
are included with the net realized and unrealized gains (losses) on investments in the Statement of Operations.
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
Income recognition
Corporate actions and dividend
income are generally recorded net of any non-reclaimable tax withholdings, on the ex-dividend date or upon receipt of an ex-dividend notification in the case of certain foreign securities.
The Fund may receive distributions
from holdings in equity securities, business development companies (BDCs), exchange-traded funds (ETFs), limited partnerships (LPs), other regulated investment companies (RICs), and real estate investment trusts
(REITs), which report information as to the tax character of their distributions annually. These distributions are allocated to dividend income, capital gain and return of capital based on actual information reported.
Return of capital is recorded as a reduction of the cost basis of securities held. If the Fund no longer owns the applicable securities, return of capital is recorded as a realized gain. With respect to REITs, to the
extent actual information has not yet been reported, estimates for return of capital are made by Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise
Financial, Inc. (Ameriprise Financial). The Investment Manager’s estimates are subsequently adjusted when the actual character of the distributions is disclosed by the REITs, which could result in a
proportionate change in return of capital to shareholders.
Awards from class action litigation
are recorded as a reduction of cost basis if the Fund still owns the applicable securities on the payment date. If the Fund no longer owns the applicable securities on the payment date, the proceeds are recorded as
realized gains.
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
| CTIVP® – Morgan Stanley Advantage Fund | Annual Report 2021 | 17 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
Federal income tax status
The Fund is treated as a
partnership for federal income tax purposes, and the Fund does not expect to make regular distributions. The Fund will not be subject to federal income tax, and therefore, there is no provision for federal income
taxes. The partners of the Fund are subject to tax on their distributive share of the Fund’s income and loss. The components of the Fund’s net assets are reported at the partner-level for federal income
tax purposes, and therefore, are not presented in the Statement of Assets and Liabilities.
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Foreign taxes
The Fund may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries, as applicable, based upon its current interpretation of tax rules
and regulations that exist in the markets in which it invests.
Realized gains in certain countries
may be subject to foreign taxes at the Fund level, based on statutory rates. The Fund accrues for such foreign taxes on realized and unrealized gains at the appropriate rate for each jurisdiction, as applicable. The
amount, if any, is disclosed as a liability on the Statement of Assets and Liabilities.
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Under the Management Agreement, the
Investment Manager provides the Fund with investment research and advice, as well as administrative and accounting services. The Investment Manager is responsible for the ultimate oversight of investments made by the
Fund. The Fund’s subadviser (see Subadvisory agreement below) has the primary responsibility for the day-to-day portfolio management of the Fund. The management services fee is an annual fee that is equal to a
percentage of the Fund’s daily net assets that declines from 0.71% to 0.53% as the Fund’s net assets increase. The effective management services fee rate for the year ended December 31, 2021 was 0.66% of
the Fund’s average daily net assets.
Subadvisory agreement
The Investment Manager has entered
into a Subadvisory Agreement with Morgan Stanley Investment Management Inc. to serve as the subadviser to the Fund. The Investment Manager compensates the subadviser to manage the investment of the Fund’s
assets.
| 18 | CTIVP® – Morgan Stanley Advantage Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. Under a Deferred Compensation Plan (the
Deferred Plan), these members of the Board of Trustees may elect to defer payment of up to 100% of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of
certain funds managed by the Investment Manager. The Fund’s liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Deferred Plan. All
amounts payable under the Deferred Plan constitute a general unsecured obligation of the Fund. The expense for the Deferred Plan, which includes Trustees’ fees deferred during the current period as well as any
gains or losses on the Trustees’ deferred compensation balances as a result of market fluctuations, is included in "Compensation of board members" on the Statement of Operations.
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
Service fees
The Fund has entered into a
Shareholder Services Agreement with Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial. Under this
agreement, the Fund pays a service fee equal to the payments made by the Transfer Agent to Participating Insurance Companies and other financial intermediaries (together, Participating Organizations) for services each
such Participating Organization provides to its clients, customers and participants that are invested directly or indirectly in the Fund, up to a cap approved by the Board of Trustees from time to time. The effective
service fee rate for the year ended December 31, 2021, was 0.00% of the Fund’s average daily net assets.
The Transfer Agent may retain as
compensation for its services revenues from fees for wire, telephone and redemption orders, account transcripts due the Transfer Agent from Fund shareholders and interest (net of bank charges) earned with respect to
balances in accounts the Transfer Agent maintains in connection with its services to the Fund.
Distribution and/or service fees
The Fund has an agreement with the
Distributor, an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution services. Under a Plan and Agreement of Distribution, the Fund pays a fee at an annual rate
of up to 0.25% of the Fund’s average daily net assets attributable to Class 2 shares. The Fund pays no distribution and service fees for Class 1 shares.
Expenses waived/reimbursed by the
Investment Manager and its affiliates
The Investment Manager and certain
of its affiliates have contractually agreed to waive fees and/or reimburse expenses (excluding certain fees and expenses described below) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, so that the Fund’s net operating expenses, after giving effect to fees waived/expenses reimbursed and any balance credits and/or overdraft charges from the Fund’s
custodian, do not exceed the following annual rate(s) as a percentage of the classes’ average daily net assets:
| CTIVP® – Morgan Stanley Advantage Fund | Annual Report 2021 | 19 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), expenses associated with investments in affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange-traded funds), transaction costs and
brokerage commissions, costs related to any securities lending program, dividend expenses associated with securities sold short, inverse floater program fees and expenses, transaction charges and interest on borrowed
money, interest, costs associated with certain shareholder meetings, infrequent and/or unusual expenses and any other expenses the exclusion of which is specifically approved by the Board of Trustees. This
agreement may be modified or amended only with approval from the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements
described above are not recoverable by the Investment Manager or its affiliates in future periods.
Note 4. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $1,660,078,726 and $1,485,605,019, respectively, for the year ended December 31, 2021. The amount of purchase
and sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 5. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes
referred to as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
Note 6. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund’s activity in the
Interfund Program during the year ended December 31, 2021 was as follows:
| Borrower or lender | Average loan balance ($) | Weighted average interest rate (%) | Number of days with outstanding loans |
| Lender | 1,140,000 | 0.66 | 10 |
Interest income earned by the Fund
is recorded as Interfund lending in the Statement of Operations. The Fund had no outstanding interfund loans at December 31, 2021.
Note 7. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to an October 28, 2021 amendment and restatement, the credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment
Manager or an affiliated investment manager, severally and not jointly, permits collective borrowings up to $950 million. Interest is currently charged
| 20 | CTIVP® – Morgan Stanley Advantage Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
to each participating fund based on its borrowings
at a rate equal to the higher of (i) the federal funds effective rate, (ii) the secured overnight financing rate plus 0.11448% and (iii) the overnight bank funding rate, plus in each case, 1.00%. Each borrowing under
the credit facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum.
The commitment fee is included in other expenses in the Statement of Operations. This agreement expires annually in October unless extended or renewed. Prior to the October 28, 2021 amendment and restatement, the Fund
had access to a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. which permitted collective borrowings up to $950 million. Interest was
charged to each participating fund based on its borrowings at a rate equal to the higher of (i) the federal funds effective rate, (ii) the one-month London Interbank Offered Rate (LIBOR) rate and (iii) the overnight
bank funding rate, plus in each case, 1.25%.
The Fund had no borrowings during
the year ended December 31, 2021.
Note 8. Significant
risks
Communication services sector
risk
The Fund is more susceptible to the
particular risks that may affect companies in the communication services sector than if it were invested in a wider variety of companies in unrelated sectors. Companies in the communication services sector are subject
to certain risks, including the risk that new services, equipment or technologies will not be accepted by consumers and businesses or will become rapidly obsolete. Performance of such companies may be affected by
factors including obtaining and protecting patents (or the failure to do so) and significant competitive pressures, including aggressive pricing of their products or services, new market entrants, competition for
market share and short product cycles due to an accelerated rate of technological developments. Such competitive pressures may lead to limited earnings and/or falling profit margins. As a result, the value of their
securities may fall or fail to rise. In addition, many communication services sector companies have limited operating histories and prices of these companies’ securities historically have been more volatile than
other securities, especially over the short term.
Information technology sector risk
The Fund is more susceptible to the
particular risks that may affect companies in the information technology sector than if it were invested in a wider variety of companies in unrelated sectors. Companies in the information technology sector are subject
to certain risks, including the risk that new services, equipment or technologies will not be accepted by consumers and businesses or will become rapidly obsolete. Performance of such companies may be affected by
factors including obtaining and protecting patents (or the failure to do so) and significant competitive pressures, including aggressive pricing of their products or services, new market entrants, competition for
market share and short product cycles due to an accelerated rate of technological developments. Such competitive pressures may lead to limited earnings and/or falling profit margins. As a result, the value of their
securities may fall or fail to rise. In addition, many information technology sector companies have limited operating histories and prices of these companies’ securities historically have been more volatile than
other securities, especially over the short term. Some companies in the information technology sector are facing increased government and regulatory scrutiny and may be subject to adverse government or regulatory
action, which could negatively impact the value of their securities.
Market risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events
| CTIVP® – Morgan Stanley Advantage Fund | Annual Report 2021 | 21 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
such as terrorism, war, natural disasters,
disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could have a significant negative impact on global economic
and market conditions.
The coronavirus disease 2019 and
its variants (COVID-19) pandemic has resulted in, and may continue to result in, significant global economic and societal disruption and market volatility due to disruptions in market access, resource availability,
facilities operations, imposition of tariffs, export controls and supply chain disruption, among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement
and loss in human and other resources. The uncertainty surrounding the magnitude, duration, reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental
authorities or other third parties, present unknowns that are yet to unfold. The impacts, as well as the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and
pandemics that may arise in the future – could negatively affect global economies and markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in
emerging market countries may be greater due to generally less established healthcare systems, governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing
political, social and economic risks in certain countries or globally. The disruptions caused by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively
impact the Fund’s ability to achieve its investment objectives. Any such event(s) could have a significant adverse impact on the value and risk profile of the Fund.
Shareholder concentration risk
At December 31, 2021, affiliated
shareholders of record owned 100.0% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of
less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Note 9. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
Note 10. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in
connection with the conduct of their business activities. Ameriprise Financial believes that the Fund is not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject
of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with
the Fund. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (SEC) on legal and regulatory matters that relate to
Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that
these matters, or the adverse publicity associated with them, will not result in increased Fund redemptions, reduced sale of Fund shares or other adverse consequences to the Fund. Further, although we believe
proceedings are not likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines,
penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial or one or more of its affiliates that provides services to
the Fund.
| 22 | CTIVP® – Morgan Stanley Advantage Fund | Annual Report 2021 |
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees of Columbia
Funds Variable Series Trust II and Shareholders of CTIVP® – Morgan Stanley Advantage Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of CTIVP® – Morgan Stanley Advantage Fund (one of the funds constituting Columbia Funds Variable Series Trust II, referred to
hereafter as the "Fund") as of December 31, 2021, the related statement of operations for the year ended December 31, 2021, the statement of changes in net assets for each of the two years in the period ended December
31, 2021, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2021 (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, 2021, 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, 2021 and the financial highlights for each of the five years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in the
United States of America.
Basis for Opinion
These financial statements are the
responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these
financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2021 by correspondence with the custodian and transfer agent. We believe that our
audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Minneapolis, Minnesota
February 18, 2022
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| CTIVP® – Morgan Stanley Advantage Fund | Annual Report 2021 | 23 |
TRUSTEES AND
OFFICERS
The Board oversees the
Fund’s operations and appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following table provides basic biographical information about the
Fund’s Trustees as of the printing of this report, including their principal occupations during the past five years, although specific titles for individuals may have varied over the period. The year set forth
beneath Length of Service in the table below is the year in which the Trustee was first appointed or elected as Trustee to any Fund currently in the Columbia Funds Complex or a predecessor thereof. Under current Board
policy, each Trustee generally serves until December 31 of the year such Trustee turns seventy-five (75).
Independent trustees
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| George S. Batejan c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1953 | Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 176 | Former Chairman of the Board, NICSA (National Investment Company Services Association) (Executive Committee, Nominating Committee and Governance Committee), 2014-2016; former Director, Intech Investment Management, 2011-2016; former Board Member, Metro Denver Chamber of Commerce, 2015-2016; former Advisory Board Member, University of Colorado Business School, 2015-2018 |
| Kathleen Blatz c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2006 | Attorney, specializing in arbitration and mediation; Chief Justice, Minnesota Supreme Court, 1998-2006; Associate Justice, Minnesota Supreme Court, 1996-1998; Fourth Judicial District Court Judge, Hennepin County, 1994-1996; Attorney in private practice and public service, 1984-1993; State Representative, Minnesota House of Representatives, 1979-1993, which included service on the Tax and Financial Institutions and Insurance Committees; Member and Interim Chair, Minnesota Sports Facilities Authority, January 2017-July 2017; Interim President and Chief Executive Officer, Blue Cross Blue Shield of Minnesota (health care insurance), February-July 2018, April-October 2021 | 176 | Former Trustee, Blue Cross Blue Shield of Minnesota, 2009-2021 (Chair of the Business Development Committee, 2014-2017; Chair of the Governance Committee, 2017-2019); former Member and Chair of the Board, Minnesota Sports Facilities Authority, January 2017-July 2017; former Director, Robina Foundation, 2009-2020 (Chair, 2014-2020); Director, Schulze Family Foundation, since 2021 |
| Pamela G. Carlton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2007 | President, Springboard — Partners in Cross Cultural Leadership (consulting company) since 2003; Managing Director of US Equity Research, JP Morgan Chase, 1999-2003; Director of US Equity Research, Chase Asset Management, 1996-1999; Co-Director Latin America Research, 1993-1996, COO Global Research, 1992-1996, Co-Director of US Research, 1991-1992, Investment Banker, Morgan Stanley, 1982-1991, Morgan Stanley; Attorney, Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 176 | Trustee, New York Presbyterian Hospital Board (Executive Committee and Chair of People Committee) since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee); Director, Apollo Commercial Real Estate Finance, Inc. since 2021; the Governing Council of the Independent Directors Council (IDC), since 2021 |
| 24 | CTIVP® – Morgan Stanley Advantage Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Janet Langford Carrig c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1957 | Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 174 | Director, EQT Corporation (natural gas producer) since 2019; Director, Whiting Petroleum Corporation (independent oil and gas company) since 2020 |
| J. Kevin Connaughton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2020 | Member, FINRA National Adjudicatory Council since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Consultant to Independent Trustees of CFVIT and CFST I from March 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Managing Director and General Manager of Mutual Fund Products, Columbia Management Investment Advisers, LLC, May 2010-February 2015; President, Columbia Funds, 2008-2015; and senior officer of Columbia Funds and affiliated funds, 2003-2015 | 174 | Former Director, The Autism Project, March 2015-December 2021; former Member of the Investment Committee, St. Michael’s College, November 2015-February 2020; former Trustee, St. Michael’s College, June 2017-September 2019; former Trustee, New Century Portfolios, January 2015-December 2017 |
| Olive M. Darragh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since 2020 | Managing Director of Darragh Inc. (strategy and talent management consulting firm) since 2010; Founder and CEO, Zolio, Inc. (investment management talent identification platform) since 2004; Consultant to Independent Trustees of CFVIT and CFST I from June 2019 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 2001-2004 | 174 | Former Director, University of Edinburgh Business School (Member of US Board); former Director, Boston Public Library Foundation |
| Patricia M. Flynn c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1950 | Trustee since 2004 | Trustee Professor of Economics and Management, Bentley University since 1976 (also teaches and conducts research on corporate governance); Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 176 | Trustee, MA Taxpayers Foundation since 1997; Board of Governors, Innovation Institute, MA Technology Collaborative, 2010-2020; former Board of Directors, The MA Business Roundtable, 2003-2019 |
| Brian J. Gallagher c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 176 | Trustee, Catholic Schools Foundation since 2004 |
| CTIVP® – Morgan Stanley Advantage Fund | Annual Report 2021 | 25 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Douglas A. Hacker c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1955 | Co-Chair since 2021; Chair of CFST I and CFVIT since 2014; Trustee of CFST I and CFVIT since 1996 and CFST, CFST II, CFVST II, CET I and CET II since 2021 | Independent business executive since May 2006; Executive Vice President – Strategy of United Airlines, December 2002 - May 2006; President of UAL Loyalty Services (airline marketing company), September 2001-December 2002; Executive Vice President and Chief Financial Officer of United Airlines, July 1999-September 2001 | 176 | Director, Spartan Nash Company (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing); former Director, Nash Finch Company (food distributor), 2005-2013; former Director, SeaCube Container Leasing Ltd. (container leasing), 2010-2013; and former Director, Travelport Worldwide Limited (travel information technology), 2014-2019 |
| Nancy T. Lukitsh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1956 | Trustee since 2011 | Senior Vice President, Partner and Director of Marketing, Wellington Management Company, LLP (investment adviser), 1997-2010; Chair, Wellington Management Portfolios (commingled non-U.S. investment pools), 2007 -2010; Director, Wellington Trust Company, NA and other Wellington affiliates, 1997-2010 | 174 | None |
| David M. Moffett c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2011 | Retired; Consultant to Bridgewater and Associates | 174 | Director, CSX Corporation (transportation suppliers); Director, Genworth Financial, Inc. (financial and insurance products and services); Director, PayPal Holdings Inc. (payment and data processing services); Trustee, University of Oklahoma Foundation; former Director, eBay Inc. (online trading community), 2007-2015; and former Director, CIT Bank, CIT Group Inc. (commercial and consumer finance), 2010-2016 |
| Catherine James Paglia c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Co-Chair since 2021; Chair of CFST, CFST II, CFVST II, CET I and CET II since 2020; Trustee of CFST, CFST II and CFVST II since 2004 and CFST I and CFVIT since 2021 | Director, Enterprise Asset Management, Inc. (private real estate and asset management company) since September 1998; Managing Director and Partner, Interlaken Capital, Inc., 1989-1997; Vice President, 1982-1985, Principal, 1985-1987, Managing Director, 1987-1989, Morgan Stanley; Vice President, Investment Banking, 1980-1982, Associate, Investment Banking, 1976-1980, Dean Witter Reynolds, Inc. | 176 | Director, Valmont Industries, Inc. (irrigation systems manufacturer) since 2012; Trustee, Carleton College (on the Investment Committee); Trustee, Carnegie Endowment for International Peace (on the Investment Committee) |
| 26 | CTIVP® – Morgan Stanley Advantage Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Minor M. Shaw c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1947 | Trustee since 2003 | President, Micco LLC (private investments) since 2011; President, Micco Corp. (family investment business), 1998-2011 | 176 | Director, Blue Cross Blue Shield of South Carolina (Chair of Compensation Committee) since April 2008; Trustee, Hollingsworth Funds (on the Investment Committee) since 2016 (previously Board Chair from 2016-2019); Former Advisory Board member, Duke Energy Corp., 2016-2020; Chair of the Duke Endowment; Chair of Greenville – Spartanburg Airport Commission; former Trustee, BofA Funds Series Trust (11 funds), 2003-2011; former Director, Piedmont Natural Gas, 2004-2016; former Director, National Association of Corporate Directors, Carolinas Chapter, 2013-2018; Chair, Daniel-Mickel Foundation since 1998 |
| Natalie A. Trunow c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1967 | Trustee since 2020 | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services), January 2016-January 2021; Non-executive Member of the Investment Committee and Valuation Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services), August 2018-January 2021; Advisor, Paradigm Asset Management, November 2016-December 2021; Consultant to Independent Trustees of CFVIT and CFST I from September 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Director of Investments/Consultant, Casey Family Programs, April 2016-November 2016; Senior Vice President and Chief Investment Officer, Calvert Investments, August 2008-January 2016; Section Head and Portfolio Manager, General Motors Asset Management, June 1997-August 2008 | 174 | Former Director, Investment Committee, Health Services for Children with Special Needs, Inc., 2012-2019; Director, Chair of Audit Committee, Consumer Credit Counseling Services (formerly Guidewell Financial Solutions), since 2019; Independent Director, Investment Committee and Valuation Committee, Sarona Asset Management, since 2019 |
| Sandra Yeager c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2017 | Retired; President and founder, Hanoverian Capital, LLC (SEC registered investment advisor firm), 2008-2016; Managing Director, DuPont Capital, 2006-2008; Managing Director, Morgan Stanley Investment Management, 2004-2006; Senior Vice President, Alliance Bernstein, 1990-2004 | 176 | Former Director, NAPE Education Foundation, October 2016-October 2020 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Fund Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I (CET I), Columbia ETF Trust II (CET II), Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Beckman, Gallagher and Hacker and Mses. Blatz, Carlton, Flynn, Paglia, Shaw and Yeager serve as Directors of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
| CTIVP® – Morgan Stanley Advantage Fund | Annual Report 2021 | 27 |
TRUSTEES AND OFFICERS (continued)
Interested trustee affiliated with Investment Manager*
Interested trustee affiliated with Investment Manager*
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during the past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex overseen | Other directorships held by Trustee during the past five years |
| Daniel J. Beckman c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since November 2021(a) | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC (since April 2015); officer of Columbia Funds and affiliated funds since 2020. | 176 | Director, Ameriprise Trust Company, since October 2016; Director, Columbia Management Investment Distributors, Inc. since November 2018; Board of Governors, Columbia Wanger Asset Management, LLC since January 2022 |
| * | Interested person (as defined under the 1940 Act) by reason of being an officer, director, security holder and/or employee of the Investment Manager or Ameriprise Financial. |
| (a) | Mr. Beckman serves as the President and Principal Executive Officer of the Columbia Funds (since 2021). |
The Statement of Additional
Information has additional information about the Fund’s Board members and is available, without charge, upon request by calling 800.345.6611 or contacting your financial intermediary.
The Board has appointed officers
who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. The following table provides basic information about the Officers of the
Fund, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Beckman, who is President and Principal Executive Officer, the
Fund’s other officers are:
Fund officers
| 28 | CTIVP® – Morgan Stanley Advantage Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Fund officers (continued)
Fund officers (continued)
| CTIVP® – Morgan Stanley Advantage Fund | Annual Report 2021 | 29 |
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For Fund and other investment product prospectuses, which contain this and other important information, contact your
financial advisor or insurance representative. Please read the prospectus carefully before you invest. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved. Columbia Management Investment Distributors, Inc., 290 Congress Street, Boston, MA 02210
© 2022 Columbia Management Investment
Advisers, LLC.
C-3000 AW (2/22)
CTIVP® –
American Century Diversified Bond Fund
Please remember that you may not
buy (nor will you own) shares of the Fund directly. The Fund is available through variable annuity contracts and variable life insurance policies offered by the separate accounts of participating insurance companies
as well as qualified pension and retirement plans. Please contact your financial advisor or insurance representative for more information.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
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Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which CTIVP® – American Century Diversified Bond Fund (the Fund) holds investments consistent with the procedures as stated in the Statement of Additional
Information (SAI). You may obtain a copy of the SAI without charge by calling 800.345.6611; contacting your financial intermediary or searching the website of the Securities and Exchange Commission (SEC) at sec.gov.
Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge
by visiting columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. The Fund’s Form N-PORT is available on the SEC’s website at sec.gov. The Fund’s complete
schedule of portfolio holdings, as filed on Form N-PORT, can also be obtained without charge, upon request, by calling 800.345.6611.
Additional Fund information
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
290 Congress Street
Boston, MA 02210
Fund distributor
Columbia Management Investment Distributors,
Inc.
290 Congress Street
Boston, MA 02210
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
CTIVP® – American Century Diversified
Bond Fund | Annual Report 2021
Fund at a Glance
Investment objective
The Fund
seeks to provide shareholders with a high level of current income.
Portfolio management
American Century Investment Management, Inc.
Robert Gahagan
Jeffrey Houston, CFA
Charles Tan
Peter Van Gelderen
Jason Greenblath
| CTIVP® – American Century Diversified Bond Fund | Annual Report 2021 | 3 |
Fund at a Glance (continued)
Performance of a hypothetical $10,000 investment (December 31, 2011 — December 31, 2021)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class 2 shares of CTIVP® – American Century Diversified Bond Fund during the stated time period, and does not reflect the deduction of taxes, if any, that
a shareholder may pay on Fund distributions or on the redemption of Fund shares. The returns also do not reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy or
qualified pension or retirement plan, if any.
| 4 | CTIVP® – American Century Diversified Bond Fund | Annual Report 2021 |
Fund at a Glance (continued)
| Market exposure through derivatives investments (% of notional exposure) (at December 31, 2021)(a) | |||
| Long | Short | Net | |
| Fixed Income Derivative Contracts | 264.7 | (118.0) | 146.7 |
| Foreign Currency Derivative Contracts | 39.3 | (86.0) | (46.7) |
| Total Notional Market Value of Derivative Contracts | 304.0 | (204.0) | 100.0 |
(a) The Fund has market exposure
(long and/or short) to fixed income and foreign currency through its investments in derivatives. The notional exposure of a financial instrument is the nominal or face amount that is used to calculate payments made on
that instrument and/or changes in value for the instrument. The notional exposure is a hypothetical underlying quantity upon which payment obligations are computed. Notional exposures provide a gauge for how the Fund
may behave given changes in individual markets. For a description of the Fund’s investments in derivatives, see Investments in derivatives following the Portfolio of Investments, and Note 2 of the Notes to
Financial Statements.
| CTIVP® – American Century Diversified Bond Fund | Annual Report 2021 | 5 |
Manager Discussion of Fund Performance
At December 31, 2021,
approximately 99.29% of the Fund’s shares were owned in the aggregate by affiliated funds-of-funds managed by Columbia Management Investment Advisers, LLC (the Investment Manager). As a result of asset
allocation decisions by the Investment Manager, it is possible that the Fund may experience relatively large purchases or redemptions from affiliated funds-of-funds. The Investment Manager seeks to minimize the impact
of these transactions by structuring them over a reasonable period of time. The Fund may also experience increased expenses as it buys and sells securities as a result of purchases or redemptions by affiliated
funds-of-funds.
For the 12-month period that ended
December 31, 2021, the Fund’s Class 2 shares returned 0.29%. The Fund outperformed its benchmark, the Bloomberg U.S. Aggregate Bond Index, which returned -1.54% over the same period.
Market overview
The annual period began on the
heels of emergency approval for two COVID-19 vaccines and the passage of another federal aid bill. The government delivered more fiscal relief in early 2021 and indicated additional spending would be forthcoming. The
combination of the massive monetary support already in place, mounting federal spending, expanding COVID-19 vaccine availability, and improving economic data boosted economic growth outlooks and sparked risk-on, or
reduced investor risk aversion, investing.
Amid the easing of certain COVID-19
restrictions and growing consumer demand, the U.S. economy grew 6.3% in the first quarter and 6.7% in the second quarter of 2021. By the third quarter, U.S. economic growth had moderated to 2.3%. The slowdown was
largely due to a resurgence in COVID-19 cases in some parts of the country and the scaling back of certain government assistance programs. The late-year emergence of the rapidly spreading, but less severe, Omicron
variant of COVID-19 was widely anticipated to play a role in fourth quarter economic growth. Meanwhile, manufacturing ebbed and flowed during 2021 but remained expansionary throughout. Home prices experienced solid
double-digit annual gains but moderated slightly in the second half of the year. The jobs market steadily recovered from the pandemic, adding a record number of positions in 2021. Furthermore, average hourly wages
rose 4.7% annually. However, at year-end, there were 3.6 million fewer jobs than before the pandemic, and the labor force participation rate remained below pre-pandemic levels.
Annual inflation rates began
accelerating in March 2021, largely due to base effects from the prior year’s pandemic-related shutdowns. But other factors quickly conspired to push consumer prices to multi-year highs. Supply chain
disruptions, along with pent-up consumer demand and labor shortages, sent prices soaring. Additionally, surging energy prices contributed to the rapidly rising inflation rate. The U.S. Federal Reserve (Fed), which had
initially labeled inflation’s rise as “transitory,” eventually admitted inflation would be higher and more persistent than it originally expected. By November, annual headline inflation climbed to
6.8%, the highest level in nearly 40 years. To compare, in November 2020, the annual headline inflation rate had been 1.2%. The 10-year breakeven inflation rate rose from 1.99% at the end of 2020 to 2.56% a year
later. As announced in September 2021, the Fed began tapering its asset purchases in November. By December, Fed policymakers indicated they would speed up the tapering process due to concerns about elevated inflation.
They also hinted that once tapering concludes, they may start hiking interest rates, suggesting three rate increases may be necessary in 2022.
As the economy improved and
inflation steadily rose, longer maturity U.S. Treasury yields increased. The 10-year U.S. Treasury note ended the annual period with a yield of 1.51%, up approximately 59 basis points from the end of December 2020.
The two-year U.S. Treasury yield rose from 0.12% at the end of December 2020 to 0.73% a year later, as the Fed turned more hawkish. (Hawkish suggests higher interest rates; and is the opposite of dovish.) The yield
curve between two and 10 years flattened slightly, meaning the differential in yields between shorter and longer term maturities narrowed.
Overall, the rising yield/rising
inflation environment pressured annual total returns for U.S. Treasuries, which declined and underperformed the benchmark, which also declined. Other U.S. bond market sectors, including investment-grade corporate
bonds and securitized securities, also retreated in the rising yield environment but outperformed U.S. Treasuries. High-yield corporate bonds, in contrast, rallied in the risk-on conditions that dominated. Treasury
inflation protected securities, or TIPS, also advanced, significantly outperforming nominal, or non-inflation-linked, U.S. Treasuries as well as the broad investment-grade bond market and high-yield corporate
bonds.
| 6 | CTIVP® – American Century Diversified Bond Fund | Annual Report 2021 |
Manager Discussion of Fund Performance (continued)
The Fund’s notable
contributors during the period
| • | Sector allocation decisions were the primary driver of the Fund’s outperformance during the annual period. |
| • | More specifically, an out-of-benchmark allocation to high-yield corporate bonds lifted results. Within the allocation, we focused on securities with BB credit ratings, where we expected several holdings to benefit from economic reopening trends. |
| • | The Fund’s out-of-benchmark allocation to inflation-linked securities also contributed positively. Early in the year, we increased exposure to inflation-linked bonds based on our belief that breakeven rates did not adequately reflect the range of inflationary pressures in the economy. |
| • | Security selection overall also contributed positively to the Fund’s relative results. In particular, our selections within the securitized sector, including non-agency collateralized mortgage obligations and asset-based securities, aided results. |
| • | Selections among investment-grade corporate bonds also delivered robust relative results. |
| • | Duration positioning added value. Given our expectations for U.S. Treasury yields to rise, we maintained a slightly shorter duration relative to the benchmark during the annual period. As yields did rise during the year, this strategy proved beneficial. Duration is a measure of a fund’s sensitivity to changes in interest rates. |
| • | Overall, yield curve positioning helped the Fund’s performance during the annual period, attributable primarily to positioning along the U.S. Treasury yield curve. |
The Fund’s notable
detractors during the period
| • | Security selection among agency mortgage-backed securities detracted slightly from relative performance, largely due to U.S. Treasury market volatility and expectations of Fed tapering. |
| • | Positioning along non-U.S. yield curves also detracted modestly. |
Derivatives usage
The Fund held U.S. Treasury
futures during the annual period as a method of managing duration and yield curve positioning. Overall, the Fund’s exposure to U.S. Treasury futures had a positive impact on performance for the annual period.
The views expressed in this report
reflect the current views of the respective parties who have contributed to this report. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult
to predict, so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective parties
disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Columbia fund are based on numerous factors, may not be relied on as an
indication of trading intent on behalf of any particular Columbia fund. References to specific securities should not be construed as a recommendation or investment advice.
| CTIVP® – American Century Diversified Bond Fund | Annual Report 2021 | 7 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur ongoing
costs, which generally include management fees, distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to help you compare these costs with the ongoing costs of investing in other mutual funds.
The information below does not
reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy (collectively, Contracts) or qualified pension and retirement plan (Qualified Plan), if any. The total fees
and expenses you bear may therefore be higher than those shown below.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount invested, to estimate the
expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as redemption or exchange fees, or expenses that apply to the subaccount or the Contract. Therefore, the
hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If the fees and expenses imposed under your Contract or
Qualified Plan, if any, were included, your costs would be higher.
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 365.
Expenses do not include fees and
expenses incurred indirectly by the Fund from its investment in underlying funds, including affiliated and non-affiliated pooled investment vehicles, such as mutual funds and exchange-traded funds.
| 8 | CTIVP® – American Century Diversified Bond Fund | Annual Report 2021 |
Portfolio of Investments
December 31, 2021
December 31, 2021
(Percentages represent value of
investments compared to net assets)
Investments in securities
The accompanying Notes to Financial
Statements are an integral part of this statement.
| CTIVP® – American Century Diversified Bond Fund | Annual Report 2021 | 9 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 10 | CTIVP® – American Century Diversified Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| CTIVP® – American Century Diversified Bond Fund | Annual Report 2021 | 11 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 12 | CTIVP® – American Century Diversified Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| CTIVP® – American Century Diversified Bond Fund | Annual Report 2021 | 13 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 14 | CTIVP® – American Century Diversified Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| CTIVP® – American Century Diversified Bond Fund | Annual Report 2021 | 15 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 16 | CTIVP® – American Century Diversified Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| CTIVP® – American Century Diversified Bond Fund | Annual Report 2021 | 17 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 18 | CTIVP® – American Century Diversified Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| CTIVP® – American Century Diversified Bond Fund | Annual Report 2021 | 19 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 20 | CTIVP® – American Century Diversified Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| CTIVP® – American Century Diversified Bond Fund | Annual Report 2021 | 21 |
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 22 | CTIVP® – American Century Diversified Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| CTIVP® – American Century Diversified Bond Fund | Annual Report 2021 | 23 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 24 | CTIVP® – American Century Diversified Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| CTIVP® – American Century Diversified Bond Fund | Annual Report 2021 | 25 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 26 | CTIVP® – American Century Diversified Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
At December 31, 2021,
securities and/or cash totaling $2,991,307 were pledged as collateral.
Investments in
derivatives
| Forward foreign currency exchange contracts | |||||
| Currency to be sold | Currency to be purchased | Counterparty | Settlement date | Unrealized appreciation ($) | Unrealized depreciation ($) |
| 44,261,382 EUR | 50,004,978 USD | JPMorgan | 03/16/2022 | — | (459,990) |
| 929,891,390 MXN | 43,659,333 USD | JPMorgan | 03/16/2022 | — | (1,192,040) |
| 42,817,071 USD | 906,313,226 MXN | JPMorgan | 03/16/2022 | 897,057 | — |
| Total | 897,057 | (1,652,030) | |||
| Long futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| U.S. Long Bond | 109 | 03/2022 | USD | 17,487,688 | 97,239 | — |
| U.S. Treasury 2-Year Note | 976 | 03/2022 | USD | 212,935,751 | 54,514 | — |
| U.S. Treasury 5-Year Note | 280 | 03/2022 | USD | 33,873,438 | — | (7,310) |
| U.S. Ultra Treasury Bond | 122 | 03/2022 | USD | 24,049,250 | 293,509 | — |
| Total | 445,262 | (7,310) | ||||
| Short futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| U.S. Treasury Ultra 10-Year Note | (878) | 03/2022 | USD | (128,572,125) | — | (237,978) |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| CTIVP® – American Century Diversified Bond Fund | Annual Report 2021 | 27 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Notes to Portfolio of
Investments
| (a) | Represents privately placed and other securities and instruments exempt from Securities and Exchange Commission registration (collectively, private placements), such as Section 4(a)(2) and Rule 144A eligible securities, which are often sold only to qualified institutional buyers. At December 31, 2021, the total value of these securities amounted to $1,355,755,737, which represents 46.19% of total net assets. |
| (b) | Variable rate security. The interest rate shown was the current rate as of December 31, 2021. |
| (c) | Variable or floating rate security, the interest rate of which adjusts periodically based on changes in current interest rates and prepayments on the underlying pool of assets. The interest rate shown was the current rate as of December 31, 2021. |
| (d) | Represents a variable rate security with a step coupon where the rate adjusts according to a schedule for a series of periods, typically lower for an initial period and then increasing to a higher coupon rate thereafter. The interest rate shown was the current rate as of December 31, 2021. |
| (e) | Principal and interest may not be guaranteed by a governmental entity. |
| (f) | Represents interest only securities which have the right to receive the monthly interest payments on an underlying pool of mortgage loans. |
| (g) | Represents a security purchased on a when-issued basis. |
| (h) | Represents fair value as determined in good faith under procedures approved by the Board of Trustees. At December 31, 2021, the total value of these securities amounted to $5,975,000, which represents 0.20% of total net assets. |
| (i) | Valuation based on significant unobservable inputs. |
| (j) | This security or a portion of this security has been pledged as collateral in connection with derivative contracts. |
| (k) | The rate shown is the seven-day current annualized yield at December 31, 2021. |
| (l) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended December 31, 2021 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Realized gain (loss)($) | Dividends($) | End of period shares |
| Columbia Short-Term Cash Fund, 0.085% | ||||||||
| 64,595,133 | 1,796,893,777 | (1,812,888,190) | — | 48,600,720 | (9,254) | 66,790 | 48,610,443 | |
Abbreviation Legend
| AGM | Assured Guaranty Municipal Corporation |
| BAM | Build America Mutual Assurance Co. |
| CMO | Collateralized Mortgage Obligation |
| CMT | Constant Maturity Treasury |
| LIBOR | London Interbank Offered Rate |
| SOFR | Secured Overnight Financing Rate |
| TBA | To Be Announced |
Currency Legend
| EUR | Euro |
| MXN | Mexican Peso |
| USD | US Dollar |
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 28 | CTIVP® – American Century Diversified Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Fair value measurements (continued)
Inputs that are used in determining fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels within the hierarchy.
Inputs that are used in determining fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels within the hierarchy.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at December 31, 2021:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Investments in Securities | ||||
| Asset-Backed Securities — Non-Agency | — | 384,667,568 | — | 384,667,568 |
| Commercial Mortgage-Backed Securities - Non-Agency | — | 111,736,352 | — | 111,736,352 |
| Convertible Bonds | — | 1,823,115 | — | 1,823,115 |
| Corporate Bonds & Notes | — | 1,229,572,199 | — | 1,229,572,199 |
| Exchange-Traded Fixed Income Funds | 15,297,824 | — | — | 15,297,824 |
| Foreign Government Obligations | — | 133,804,505 | — | 133,804,505 |
| Inflation-Indexed Bonds | — | 87,962,360 | — | 87,962,360 |
| Municipal Bonds | — | 56,765,597 | — | 56,765,597 |
| Residential Mortgage-Backed Securities - Agency | — | 352,918,717 | — | 352,918,717 |
| Residential Mortgage-Backed Securities - Non-Agency | — | 262,444,789 | 5,975,000 | 268,419,789 |
| U.S. Treasury Obligations | 286,843,406 | — | — | 286,843,406 |
| Money Market Funds | 48,600,720 | — | — | 48,600,720 |
| Total Investments in Securities | 350,741,950 | 2,621,695,202 | 5,975,000 | 2,978,412,152 |
| Investments in Derivatives | ||||
| Asset | ||||
| Forward Foreign Currency Exchange Contracts | — | 897,057 | — | 897,057 |
| Futures Contracts | 445,262 | — | — | 445,262 |
| Liability | ||||
| Forward Foreign Currency Exchange Contracts | — | (1,652,030) | — | (1,652,030) |
| Futures Contracts | (245,288) | — | — | (245,288) |
| Total | 350,941,924 | 2,620,940,229 | 5,975,000 | 2,977,857,153 |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The Fund’s assets assigned to
the Level 2 input category are generally valued using the market approach, in which a security’s value is determined through reference to prices and information from market transactions for similar or identical
assets.
Derivative instruments are valued at
unrealized appreciation (depreciation).
The Fund does not hold any
significant investments (greater than one percent of net assets) categorized as Level 3.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| CTIVP® – American Century Diversified Bond Fund | Annual Report 2021 | 29 |
Statement of Assets and Liabilities
December 31, 2021
December 31, 2021
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $2,907,803,729) | $2,929,811,432 |
| Affiliated issuers (cost $48,600,720) | 48,600,720 |
| Cash | 23,600 |
| Foreign currency (cost $3) | 3 |
| Unrealized appreciation on forward foreign currency exchange contracts | 897,057 |
| Receivable for: | |
| Investments sold | 9,581,624 |
| Capital shares sold | 2,499 |
| Dividends | 4,613 |
| Interest | 17,761,391 |
| Foreign tax reclaims | 58,169 |
| Variation margin for futures contracts | 281,098 |
| Prepaid expenses | 26,489 |
| Total assets | 3,007,048,695 |
| Liabilities | |
| Unrealized depreciation on forward foreign currency exchange contracts | 1,652,030 |
| Payable for: | |
| Investments purchased | 577,694 |
| Investments purchased on a delayed delivery basis | 67,632,565 |
| Capital shares purchased | 1,520,917 |
| Variation margin for futures contracts | 240,529 |
| Management services fees | 38,562 |
| Distribution and/or service fees | 138 |
| Service fees | 1,025 |
| Compensation of board members | 226,370 |
| Compensation of chief compliance officer | 565 |
| Other expenses | 60,892 |
| Total liabilities | 71,951,287 |
| Net assets applicable to outstanding capital stock | $2,935,097,408 |
| Represented by | |
| Paid in capital | 2,783,198,195 |
| Total distributable earnings (loss) | 151,899,213 |
| Total - representing net assets applicable to outstanding capital stock | $2,935,097,408 |
| Class 1 | |
| Net assets | $2,915,003,723 |
| Shares outstanding | 258,872,779 |
| Net asset value per share | $11.26 |
| Class 2 | |
| Net assets | $20,093,685 |
| Shares outstanding | 1,792,649 |
| Net asset value per share | $11.21 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 30 | CTIVP® – American Century Diversified Bond Fund | Annual Report 2021 |
Statement of Operations
Year Ended December 31, 2021
Year Ended December 31, 2021
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $121,351 |
| Dividends — affiliated issuers | 66,790 |
| Interest | 88,639,165 |
| Foreign taxes withheld | (4,849) |
| Total income | 88,822,457 |
| Expenses: | |
| Management services fees | 14,539,775 |
| Distribution and/or service fees | |
| Class 2 | 51,261 |
| Service fees | 12,685 |
| Compensation of board members | 92,305 |
| Custodian fees | 99,697 |
| Printing and postage fees | 14,056 |
| Audit fees | 39,500 |
| Legal fees | 37,352 |
| Interest on collateral | 6,306 |
| Compensation of chief compliance officer | 498 |
| Other | 14,573 |
| Total expenses | 14,908,008 |
| Net investment income | 73,914,449 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 52,705,078 |
| Investments — affiliated issuers | (9,254) |
| Foreign currency translations | 14,934 |
| Forward foreign currency exchange contracts | 1,558,038 |
| Futures contracts | 10,520,771 |
| Swap contracts | (1,819,348) |
| Net realized gain | 62,970,219 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | (118,189,953) |
| Foreign currency translations | 2,013 |
| Forward foreign currency exchange contracts | (939,334) |
| Futures contracts | (386,874) |
| Net change in unrealized appreciation (depreciation) | (119,514,148) |
| Net realized and unrealized loss | (56,543,929) |
| Net increase in net assets resulting from operations | $17,370,520 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| CTIVP® – American Century Diversified Bond Fund | Annual Report 2021 | 31 |
Statement of Changes in Net Assets
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | |
| Operations | ||
| Net investment income | $73,914,449 | $65,250,604 |
| Net realized gain | 62,970,219 | 104,071,484 |
| Net change in unrealized appreciation (depreciation) | (119,514,148) | 81,037,756 |
| Net increase in net assets resulting from operations | 17,370,520 | 250,359,844 |
| Distributions to shareholders | ||
| Net investment income and net realized gains | ||
| Class 1 | (134,005,891) | (59,885,156) |
| Class 2 | (843,022) | (333,903) |
| Total distributions to shareholders | (134,848,913) | (60,219,059) |
| Decrease in net assets from capital stock activity | (21,372,193) | (35,568,708) |
| Total increase (decrease) in net assets | (138,850,586) | 154,572,077 |
| Net assets at beginning of year | 3,073,947,994 | 2,919,375,917 |
| Net assets at end of year | $2,935,097,408 | $3,073,947,994 |
| Year Ended | Year Ended | |||
| December 31, 2021 | December 31, 2020 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class 1 | ||||
| Subscriptions | 26,745,015 | 307,565,641 | 32,758,646 | 366,378,840 |
| Distributions reinvested | 11,869,433 | 134,005,891 | 5,216,477 | 59,885,156 |
| Redemptions | (40,256,186) | (462,087,935) | (41,003,707) | (463,696,664) |
| Net decrease | (1,641,738) | (20,516,403) | (3,028,584) | (37,432,668) |
| Class 2 | ||||
| Subscriptions | 309,648 | 3,535,099 | 416,179 | 4,758,737 |
| Distributions reinvested | 74,935 | 843,022 | 29,187 | 333,903 |
| Redemptions | (458,601) | (5,233,911) | (285,846) | (3,228,680) |
| Net increase (decrease) | (74,018) | (855,790) | 159,520 | 1,863,960 |
| Total net decrease | (1,715,756) | (21,372,193) | (2,869,064) | (35,568,708) |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 32 | CTIVP® – American Century Diversified Bond Fund | Annual Report 2021 |
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BLANK]
| CTIVP® – American Century Diversified Bond Fund | Annual Report 2021 | 33 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect any fees and expenses imposed under your
Contract and/or Qualified Plan, as applicable; such fees and expenses would reduce the total returns for all periods shown. Total return and portfolio turnover are not annualized for periods of less than one year. The
portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain derivatives, if any. If such transactions were included, the Fund’s portfolio
turnover rate may be higher.
| Net asset value, beginning of period | Net investment income | Net realized and unrealized gain (loss) | Total from investment operations | Distributions from net investment income | Distributions from net realized gains | Total distributions to shareholders | |
| Class 1 | |||||||
| Year Ended 12/31/2021 | $11.72 | 0.28 | (0.23) | 0.05 | (0.26) | (0.25) | (0.51) |
| Year Ended 12/31/2020 | $11.01 | 0.24 | 0.70 | 0.94 | (0.23) | — | (0.23) |
| Year Ended 12/31/2019 | $10.65 | 0.31 | 0.71 | 1.02 | (0.66) | — | (0.66) |
| Year Ended 12/31/2018 | $11.15 | 0.37 | (0.49) | (0.12) | (0.31) | (0.07) | (0.38) |
| Year Ended 12/31/2017 | $10.95 | 0.30 | 0.23 | 0.53 | (0.26) | (0.07) | (0.33) |
| Class 2 | |||||||
| Year Ended 12/31/2021 | $11.66 | 0.25 | (0.21) | 0.04 | (0.24) | (0.25) | (0.49) |
| Year Ended 12/31/2020 | $10.96 | 0.21 | 0.69 | 0.90 | (0.20) | — | (0.20) |
| Year Ended 12/31/2019 | $10.61 | 0.28 | 0.70 | 0.98 | (0.63) | — | (0.63) |
| Year Ended 12/31/2018 | $11.11 | 0.34 | (0.49) | (0.15) | (0.28) | (0.07) | (0.35) |
| Year Ended 12/31/2017 | $10.91 | 0.27 | 0.23 | 0.50 | (0.23) | (0.07) | (0.30) |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Ratios include interest on collateral expense which is less than 0.01%. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 34 | CTIVP® – American Century Diversified Bond Fund | Annual Report 2021 |
Financial Highlights (continued)
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets(a) | Total net expense ratio to average net assets(a),(b) | Net investment income ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Class 1 | |||||||
| Year Ended 12/31/2021 | $11.26 | 0.45% | 0.49%(c) | 0.49%(c) | 2.44% | 218% | $2,915,004 |
| Year Ended 12/31/2020 | $11.72 | 8.55% | 0.49%(c) | 0.49%(c) | 2.12% | 226% | $3,052,174 |
| Year Ended 12/31/2019 | $11.01 | 9.73% | 0.50%(c) | 0.50%(c) | 2.84% | 94% | $2,900,664 |
| Year Ended 12/31/2018 | $10.65 | (1.05%) | 0.48%(c) | 0.48%(c) | 3.42% | 136% | $1,992,309 |
| Year Ended 12/31/2017 | $11.15 | 4.89% | 0.52% | 0.52% | 2.74% | 142% | $3,933,591 |
| Class 2 | |||||||
| Year Ended 12/31/2021 | $11.21 | 0.29% | 0.74%(c) | 0.74%(c) | 2.18% | 218% | $20,094 |
| Year Ended 12/31/2020 | $11.66 | 8.24% | 0.74%(c) | 0.74%(c) | 1.88% | 226% | $21,774 |
| Year Ended 12/31/2019 | $10.96 | 9.40% | 0.75%(c) | 0.75%(c) | 2.58% | 94% | $18,712 |
| Year Ended 12/31/2018 | $10.61 | (1.31%) | 0.73%(c) | 0.73%(c) | 3.17% | 136% | $13,100 |
| Year Ended 12/31/2017 | $11.11 | 4.65% | 0.77% | 0.77% | 2.50% | 142% | $11,701 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| CTIVP® – American Century Diversified Bond Fund | Annual Report 2021 | 35 |
Notes to Financial Statements
December 31, 2021
December 31, 2021
Note 1. Organization
CTIVP® – American
Century Diversified Bond Fund (the Fund), a series of Columbia Funds Variable Series Trust II (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940
Act), as an open-end management investment company organized as a Massachusetts business trust.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers Class 1 and Class 2 shares to separate accounts funding variable annuity contracts and variable life insurance policies (collectively, Contracts) issued by
affiliated and unaffiliated life insurance companies (Participating Insurance Companies) as well as qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors (Qualified
Investors) authorized by Columbia Management Investment Distributors, Inc. (the Distributor). You may not buy (nor will you own) shares of the Fund directly. You may invest by participating in a Qualified Plan or by
buying a Contract and making allocations to the Fund. Although all share classes generally have identical voting, dividend and liquidation rights, each share class votes separately when required by the Trust’s
organizational documents or by law. Different share classes pay different net investment income distribution amounts to the extent the expenses of such share classes differ, and distributions in liquidation will be
proportional to the net asset value of each share class. Each share class has its own cost structure and other features.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Other expenses on the Statement of Operations include adjustments as a result of a change in
estimated expenses.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Debt securities generally are
valued by pricing services approved by the Board of Trustees based upon market transactions for normal, institutional-size trading units of similar securities. The services may use various pricing techniques that take
into account, as applicable, factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data, as well as approved independent broker-dealer quotes. Debt securities for
which quotations are not readily available or not believed to be reflective of market value may also be valued based upon a bid quote from an approved independent broker-dealer. Debt securities maturing in 60 days or
less are valued primarily at amortized market value, unless this method results in a valuation that management believes does not approximate fair value.
Asset- and mortgage-backed
securities are generally valued by pricing services, which utilize pricing models that incorporate the securities’ cash flow and loan performance data. These models also take into account available market data,
including trades, market quotations, and benchmark yield curves for identical or similar securities. Factors used to identify similar securities may include, but are not limited to, issuer, collateral type, vintage,
prepayment speeds, collateral performance, credit ratings, credit enhancement and expected life. Asset-backed securities for which quotations are readily available may also be valued based upon an over-the-counter or
exchange bid quote from an approved independent broker-dealer. Debt securities maturing in 60 days or less are valued primarily at amortized market value, unless this method results in a valuation that management
believes does not approximate fair value.
Investments in open-end investment
companies (other than exchange-traded funds (ETFs)), are valued at the latest net asset value reported by those companies as of the valuation time.
| 36 | CTIVP® – American Century Diversified Bond Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Forward foreign currency exchange
contracts are marked-to-market based upon foreign currency exchange rates provided by a pricing service.
Futures and options on futures
contracts are valued based upon the settlement price at the close of regular trading on their principal exchanges or, in the absence of a settlement price, at the mean of the latest quoted bid and ask prices.
Swap transactions are valued
through an independent pricing service or broker, or if neither is available, through an internal model based upon observable inputs.
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Foreign currency transactions and
translations
The values of all assets and
liabilities denominated in foreign currencies are generally translated into U.S. dollars at exchange rates determined at the close of regular trading on the New York Stock Exchange. Net realized and unrealized gains
(losses) on foreign currency transactions and translations include gains (losses) arising from the fluctuation in exchange rates between trade and settlement dates on securities transactions, gains (losses) arising
from the disposition of foreign currency and currency gains (losses) between the accrual and payment dates on dividends, interest income and foreign withholding taxes.
For financial statement purposes,
the Fund does not distinguish that portion of gains (losses) on investments which is due to changes in foreign exchange rates from that which is due to changes in market prices of the investments. Such fluctuations
are included with the net realized and unrealized gains (losses) on investments in the Statement of Operations.
Derivative instruments
The Fund invests in certain
derivative instruments, as detailed below, in seeking to meet its investment objectives. Derivatives are instruments whose values depend on, or are derived from, in whole or in part, the value of one or more
securities, currencies, commodities, indices, or other assets or instruments. Derivatives may be used to increase investment flexibility (including to maintain cash reserves while maintaining desired exposure to
certain assets), for risk management (hedging) purposes, to facilitate trading, to reduce transaction costs and to pursue higher investment returns. The Fund may also use derivative instruments to mitigate certain
investment risks, such as foreign currency exchange rate risk, interest rate risk and credit risk. Derivatives may involve various risks, including the potential inability of the counterparty to fulfill its
obligations under the terms of the contract, the potential for an illiquid secondary market (making it difficult for the Fund to sell or terminate, including at favorable prices) and the potential for market movements
which may expose the Fund to gains or losses in excess of the amount shown in the Statement of Assets and Liabilities. The notional amounts of derivative instruments, if applicable, are not recorded in the financial
statements.
A derivative instrument may suffer
a marked-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform its
obligations under the contract. The Fund’s risk of loss from counterparty credit risk on over-the-counter derivatives is generally limited to the aggregate unrealized gain netted against any collateral held by
the Fund and the amount of any variation margin held by the counterparty, plus any replacement costs or related amounts. With exchange-traded or centrally cleared derivatives, there is reduced counterparty credit risk
to the Fund since the clearinghouse or central counterparty (CCP) provides some protection in the case of clearing member default. The clearinghouse or CCP stands between the buyer
| CTIVP® – American Century Diversified Bond Fund | Annual Report 2021 | 37 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
and the seller of the contract; therefore,
additional counterparty credit risk is failure of the clearinghouse or CCP. However, credit risk still exists in exchange-traded or centrally cleared derivatives with respect to initial and variation margin that is
held in a broker’s customer account. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy and at
that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients and such shortfall is remedied by the CCP or otherwise, U.S. bankruptcy laws will typically allocate
that shortfall on a pro-rata basis across all the clearing broker’s customers (including the Fund), potentially resulting in losses to the Fund.
In order to better define its
contractual rights and to secure rights that will help the Fund mitigate its counterparty risk, the Fund may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (ISDA Master Agreement)
or similar agreement with its derivatives counterparties. An ISDA Master Agreement is an agreement between the Fund and a counterparty that governs over-the-counter derivatives and foreign exchange forward contracts
and contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset
with the counterparty certain derivative instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically
permit a single net payment in the event of default (close-out netting), including the bankruptcy or insolvency of the counterparty. Note, however, that bankruptcy or insolvency laws of a particular jurisdiction may
impose restrictions on or prohibitions against the right of offset or netting in bankruptcy, insolvency or other events.
Collateral (margin) requirements
differ by type of derivative. Margin requirements are established by the clearinghouse or CCP for exchange-traded and centrally cleared derivatives. Brokers can ask for margin in excess of the minimum in certain
circumstances. Collateral terms for most over-the-counter derivatives are subject to regulatory requirements to exchange variation margin with trading counterparties and may have contract specific margin terms as
well. For over-the-counter derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the marked-to-market amount for each transaction under such agreement and
comparing that amount to the value of any variation margin currently pledged by the Fund and/or the counterparty. Generally, the amount of collateral due from or to a party has to exceed a minimum transfer amount
threshold (e.g., $250,000) before a transfer has to be made. To the extent amounts due to the Fund from its counterparties are not fully collateralized, contractually or otherwise, the Fund bears the risk of loss from
counterparty nonperformance. The Fund may also pay interest expense on cash collateral received from the broker. Any interest expense paid by the Fund is shown on the Statement of Operations. The Fund attempts to
mitigate counterparty risk by only entering into agreements with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those
counterparties.
Certain ISDA Master Agreements
allow counterparties of over-the-counter derivatives transactions to terminate derivatives contracts prior to maturity in the event the Fund’s net asset value declines by a stated percentage over a specified
time period or if the Fund fails to meet certain terms of the ISDA Master Agreement, which would cause the Fund to accelerate payment of any net liability owed to the counterparty. The Fund also has termination
rights if the counterparty fails to meet certain terms of the ISDA Master Agreement. In determining whether to exercise such termination rights, the Fund would consider, in addition to counterparty credit risk,
whether termination would result in a net liability owed from the counterparty.
For financial reporting purposes,
the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statement of Assets and Liabilities.
Forward foreign currency exchange
contracts
Forward foreign currency exchange
contracts are over-the-counter agreements between two parties to buy and sell a currency at a set price on a future date. The Fund utilized forward foreign currency exchange contracts to hedge the currency exposure
associated with some or all of the Fund’s securities, to shift foreign currency exposure back to U.S. dollars, to shift investment exposure from one currency to another, to generate total return through long and
short positions versus the U.S. dollar and to generate interest rate differential yield. These instruments may be used for other purposes in future periods.
| 38 | CTIVP® – American Century Diversified Bond Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
The values of forward foreign
currency exchange contracts fluctuate daily with changes in foreign currency exchange rates. Changes in the value of these contracts are recorded as unrealized appreciation or depreciation until the contract is
exercised or has expired. The Fund will realize a gain or loss when the forward foreign currency exchange contract is closed or expires. Non-deliverable forward foreign currency exchange contracts are settled with the
counterparty in U.S. dollars without delivery of foreign currency.
The use of forward foreign currency
exchange contracts does not eliminate fluctuations in the prices of the Fund’s portfolio securities. The risks of forward foreign currency exchange contracts include movement in the values of the foreign
currencies relative to the U.S. dollar (or other foreign currencies) and the possibility that counterparties will not complete their contractual obligations, which may be in excess of the amount reflected, if any, in
the Statement of Assets and Liabilities.
Futures contracts
Futures contracts are
exchange-traded and represent commitments for the future purchase or sale of an asset at a specified price on a specified date. The Fund bought and sold futures contracts to manage the duration and yield curve
exposure of the Fund versus the benchmark and to manage exposure to movements in interest rates. These instruments may be used for other purposes in future periods. Upon entering into futures contracts, the Fund bears
risks that it may not achieve the anticipated benefits of the futures contracts and may realize a loss. Additional risks include counterparty credit risk, the possibility of an illiquid market, and that a change in
the value of the contract or option may not correlate with changes in the value of the underlying asset.
Upon entering into a futures
contract, the Fund deposits cash or securities with the broker, known as a futures commission merchant (FCM), in an amount sufficient to meet the initial margin requirement. The initial margin deposit must be
maintained at an established level over the life of the contract. Cash deposited as initial margin is recorded in the Statement of Assets and Liabilities as margin deposits. Securities deposited as initial margin are
designated in the Portfolio of Investments. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily change in the contract value and are
recorded as variation margin receivable or payable and are offset in unrealized gains or losses. The Fund generally expects to earn interest income on its margin deposits. The Fund recognizes a realized gain or loss
when the contract is closed or expires. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities.
Swap contracts
Swap contracts are negotiated in
the over-the-counter market and may be entered into as a bilateral contract or centrally cleared (centrally cleared swap contract). In a centrally cleared swap contract, immediately following execution of the swap
contract with a broker, the swap contract is novated to a central counterparty (the CCP) and the CCP becomes the Fund’s counterparty to the centrally cleared swap contract. The Fund is required to deposit
initial margin with the futures commission merchant (FCM), which pledges it through to the CCP in the form of cash or securities in an amount that varies depending on the size and risk profile of the particular swap
contract. Securities deposited as initial margin are designated in the Portfolio of Investments and cash deposited is recorded in the Statement of Assets and Liabilities as margin deposits. For a bilateral swap
contract, the Fund has credit exposure to the broker, but exchanges daily variation margin with the broker based on the mark-to-market value of the swap contract to minimize that exposure. For centrally cleared swap
contracts, the Fund has minimal credit exposure to the FCM because the CCP stands between the Fund and the relevant buyer/seller on the other side of the contract. Swap contracts are marked-to-market daily and changes
in value are recorded as unrealized appreciation (depreciation). The daily change in valuation of centrally cleared swap contracts, if any, is recorded as a receivable or payable for variation margin in the Statement
of Assets and Liabilities.
Entering into these contracts
involves, to varying degrees, elements of interest, liquidity and counterparty credit risk in excess of the amounts recognized in the Statement of Assets and Liabilities. Such risks involve the possibility that there
may be unfavorable changes in interest rates, market conditions or other conditions, that it may be difficult to initiate a swap transaction or liquidate a position at an advantageous time or price which may result in
significant losses, and that the FCM or CCP may not fulfill its obligation under the contract.
| CTIVP® – American Century Diversified Bond Fund | Annual Report 2021 | 39 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Credit default swap contracts
The Fund entered into credit
default swap contracts to increase or decrease its credit exposure to a single issuer of debt securities, to hedge the Fund’s exposure on a debt security that it owns or in lieu of selling such debt security,
manage credit risk exposure, to increase or decrease its credit exposure to a credit sector, to increase or decrease its credit exposure to a specific debt security or a basket of debt securities as a protection buyer
or seller to reduce or increase overall credit exposure. These instruments may be used for other purposes in future periods. Credit default swap contracts are transactions in which one party pays fixed periodic
payments to a counterparty in consideration for an agreement from the counterparty to make a specific payment should a specified credit event(s) take place. Although specified credit events are contract specific,
credit events are typically bankruptcy, failure to pay, restructuring, obligation acceleration, obligation default, or repudiation/moratorium.
As the purchaser of a credit
default swap contract, the Fund purchases protection by paying a periodic interest rate on the notional amount to the counterparty. The interest amount is accrued daily as a component of unrealized appreciation
(depreciation) and is recorded as a realized loss upon payment. If a credit event as specified in the contract occurs, the Fund may have the option either to deliver the reference obligation to the seller in exchange
for a cash payment of its par amount, or to receive a net cash settlement equal to the par amount less an agreed-upon value of the reference obligation as of the date of the credit event. The difference between the
value of the obligation or cash delivered and the notional amount received will be recorded as a realized gain (loss).
Any upfront payment or receipt by
the Fund upon entering into a credit default swap contract is recorded as an asset or liability, respectively, and amortized daily as a component of realized gain (loss) in the Statement of Operations. Credit default
swap contracts are valued daily, and the change in value is recorded as unrealized appreciation (depreciation) until the termination of the swap, at which time a realized gain (loss) is recorded.
Credit default swap contracts can
involve greater risks than if a fund had invested in the reference obligation directly since, in addition to general market risks, credit default swaps are subject to counterparty credit risk, leverage risk, hedging
risk, correlation risk and liquidity risk.
Effects of derivative transactions in
the financial statements
The following tables are intended
to provide additional information about the effect of derivatives on the financial statements of the Fund, including: the fair value of derivatives by risk category and the location of those fair values in the
Statement of Assets and Liabilities; and the impact of derivative transactions over the period in the Statement of Operations, including realized and unrealized gains (losses). The derivative instrument schedules
following the Portfolio of Investments present additional information regarding derivative instruments outstanding at the end of the period, if any.
The following table is a summary of
the fair value of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) at December 31, 2021:
| Asset derivatives | ||
| Risk exposure category | Statement of assets and liabilities location | Fair value ($) |
| Foreign exchange risk | Unrealized appreciation on forward foreign currency exchange contracts | 897,057 |
| Interest rate risk | Component of total distributable earnings (loss) — unrealized appreciation on futures contracts | 445,262* |
| Total | 1,342,319 |
| Liability derivatives | ||
| Risk exposure category | Statement of assets and liabilities location | Fair value ($) |
| Foreign exchange risk | Unrealized depreciation on forward foreign currency exchange contracts | 1,652,030 |
| Interest rate risk | Component of total distributable earnings (loss) — unrealized depreciation on futures contracts | 245,288* |
| Total | 1,897,318 |
| 40 | CTIVP® – American Century Diversified Bond Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
| * | Includes cumulative appreciation (depreciation) as reported in the tables following the Portfolio of Investments. Only the current day’s variation margin is reported in receivables or payables in the Statement of Assets and Liabilities. |
The following table indicates the
effect of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) in the Statement of Operations for the year ended December 31, 2021:
The following table is a summary
of the average outstanding volume by derivative instrument for the year ended December 31, 2021:
| Derivative instrument | Average notional amounts ($) |
| Futures contracts — long | 378,258,942* |
| Futures contracts — short | 224,232,200* |
| Credit default swap contracts — buy protection | 26,282,671** |
| Derivative instrument | Average unrealized appreciation ($)* | Average unrealized depreciation ($)* |
| Forward foreign currency exchange contracts | 1,844,067 | (1,073,267) |
| * | Based on the ending quarterly outstanding amounts for the year ended December 31, 2021. |
| ** | Based on the ending daily outstanding amounts for the year ended December 31, 2021. |
Asset- and mortgage-backed
securities
The Fund may invest in asset-backed
and mortgage-backed securities. The maturity dates shown represent the original maturity of the underlying obligation. Actual maturity may vary based upon prepayment activity on these obligations. All, or a portion,
of the obligation may be prepaid at any time because the underlying asset may be prepaid. As a result, decreasing market interest rates could result in an increased level of prepayment. An increased prepayment rate
will have the effect of shortening the maturity of the security. Unless otherwise noted, the coupon rates presented are fixed rates.
Delayed delivery securities
The Fund may trade securities on
other than normal settlement terms, including securities purchased or sold on a “when-issued” or "forward commitment" basis. This may increase risk to the Fund since the other party to the transaction may
fail to deliver, which could cause the Fund to subsequently invest at less advantageous prices. The Fund designates cash or liquid securities in an amount equal to the delayed delivery commitment.
| CTIVP® – American Century Diversified Bond Fund | Annual Report 2021 | 41 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
To be announced securities
The Fund may trade securities on a
To Be Announced (TBA) basis. As with other delayed-delivery transactions, a seller agrees to issue a TBA security at a future date. However, the seller does not specify the particular securities to be delivered.
Instead, the Fund agrees to accept any security that meets specified terms.
In some cases, Master Securities
Forward Transaction Agreements (MSFTAs) may be used to govern transactions of certain forward-settling agency mortgage-backed securities, such as delayed-delivery and TBAs, between the Fund and counterparty. The MSFTA
maintains provisions for, among other things, initiation and confirmation, payment and transfer, events of default, termination, and maintenance of collateral relating to such transactions.
Treasury inflation protected
securities
The Fund may invest in treasury
inflation protected securities (TIPS). The principal amount of TIPS is adjusted periodically and is increased for inflation or decreased for deflation based on a monthly published index. These adjustments are recorded
as interest income in the Statement of Operations. Coupon payments are based on the adjusted principal at the time the interest is paid.
Interest only and principal only
securities
The Fund may invest in Interest
Only (IO) or Principal Only (PO) securities. IOs are stripped securities entitled to receive all of the security’s interest, but none of its principal. IOs are particularly sensitive to changes in interest rates
and therefore subject to greater fluctuations in price than typical interest bearing debt securities. IOs are also subject to credit risk because the Fund may not receive all or part of the interest payments if the
issuer, obligor, guarantor or counterparty defaults on its obligation. Payments received for IOs are included in interest income on the Statement of Operations. Because no principal will be received at the maturity of
an IO, adjustments are made to the cost of the security on a monthly basis until maturity. These adjustments are included in interest income on the Statement of Operations. POs are stripped securities entitled to
receive the principal from the underlying obligation, but not the interest. POs are particularly sensitive to changes in interest rates and therefore are subject to fluctuations in price. POs are also subject to
credit risk because the Fund may not receive all or part of its principal if the issuer, obligor, guarantor or counterparty defaults on its obligation. The Fund may also invest in IO or PO stripped mortgage-backed
securities. Payments received for POs are treated as reductions to the cost and par value of the securities.
Offsetting of assets and
liabilities
The following table presents the
Fund’s gross and net amount of assets and liabilities available for offset under netting arrangements as well as any related collateral received or pledged by the Fund as of December 31, 2021:
| JPMorgan ($) | ||
| Assets | ||
| Forward foreign currency exchange contracts | 897,057 | |
| Liabilities | ||
| Forward foreign currency exchange contracts | 1,652,030 | |
| Total financial and derivative net assets | (754,973) | |
| Total collateral received (pledged) (a) | - | |
| Net amount (b) | (754,973) |
| (a) | In some instances, the actual collateral received and/or pledged may be more than the amount shown due to overcollateralization. |
| (b) | Represents the net amount due from/(to) counterparties in the event of default. |
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
| 42 | CTIVP® – American Century Diversified Bond Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Income recognition
Interest income is recorded on an
accrual basis. Market premiums and discounts, including original issue discounts, are amortized and accreted, respectively, over the expected life of the security on all debt securities, unless otherwise noted. The
Fund classifies gains and losses realized on prepayments received on mortgage-backed securities as adjustments to interest income. For convertible securities, premiums attributable to the conversion feature are
not amortized.
The Fund may place a debt security
on non-accrual status and reduce related interest income when it becomes probable that the interest will not be collected and the amount of uncollectible interest can be reasonably estimated. A defaulted debt security
is removed from non-accrual status when the issuer resumes interest payments or when collectability of interest is reasonably assured.
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
Federal income tax status
The Fund intends to qualify each
year as a regulated investment company under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its investment company taxable income and net capital gain, if any, for its
tax year, and as such will not be subject to federal income taxes. In addition, because the Fund meets the exception under Internal Revenue Code Section 4982(f), the Fund expects not to be subject to federal excise
tax. Therefore, no federal income or excise tax provision is recorded.
Foreign taxes
The Fund may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries, as applicable, based upon its current interpretation of tax rules
and regulations that exist in the markets in which it invests.
Realized gains in certain countries
may be subject to foreign taxes at the Fund level, based on statutory rates. The Fund accrues for such foreign taxes on realized and unrealized gains at the appropriate rate for each jurisdiction, as applicable. The
amount, if any, is disclosed as a liability on the Statement of Assets and Liabilities.
Distributions to subaccounts
Distributions to the subaccounts of
Contracts, Qualified Plans and Qualified Investors are recorded at the close of business on the record date and are payable on the first business day following the record date. Dividends from net investment income, if
any, are declared and distributed annually. Capital gain distributions, when available, will be made annually. However, an additional capital gain distribution may be made during the fiscal year in order to comply
with the Internal Revenue Code, as applicable to registered investment companies. Income distributions and capital gain distributions are determined in accordance with federal income tax regulations, which may differ
from GAAP. All dividends and distributions are reinvested in additional shares of the applicable share class of the Fund at the net asset value as of the ex-dividend date of the distribution.
| CTIVP® – American Century Diversified Bond Fund | Annual Report 2021 | 43 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Under the Management Agreement, the
Investment Manager provides the Fund with investment research and advice, as well as administrative and accounting services. The Investment Manager is responsible for the ultimate oversight of investments made by the
Fund. The Fund’s subadviser (see Subadvisory agreement below) has the primary responsibility for the day-to-day portfolio management of the Fund. The management services fee is an annual fee that is equal to a
percentage of the Fund’s daily net assets that declines from 0.50% to 0.34% as the Fund’s net assets increase. The effective management services fee rate for the year ended December 31, 2021 was 0.48% of
the Fund’s average daily net assets.
Subadvisory agreement
The Investment Manager has entered
into a Subadvisory Agreement with American Century Investment Management, Inc. to serve as the subadviser to the Fund. The Investment Manager compensates the subadviser to manage the investment of the Fund’s
assets.
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. Under a Deferred Compensation Plan (the
Deferred Plan), these members of the Board of Trustees may elect to defer payment of up to 100% of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of
certain funds managed by the Investment Manager. The Fund’s liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Deferred Plan. All
amounts payable under the Deferred Plan constitute a general unsecured obligation of the Fund. The expense for the Deferred Plan, which includes Trustees’ fees deferred during the current period as well as any
gains or losses on the Trustees’ deferred compensation balances as a result of market fluctuations, is included in "Compensation of board members" on the Statement of Operations.
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
Service fees
The Fund has entered into a
Shareholder Services Agreement with Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial. Under this
agreement, the Fund pays a service fee equal to the payments made by the Transfer Agent to Participating Insurance Companies and other financial intermediaries (together, Participating Organizations) for services each
such Participating Organization provides to its clients, customers and participants that are invested directly or indirectly in the Fund, up to a cap approved by the Board of Trustees from time to time. The effective
service fee rate for the year ended December 31, 2021, was 0.00% of the Fund’s average daily net assets.
| 44 | CTIVP® – American Century Diversified Bond Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
The Transfer Agent may retain as
compensation for its services revenues from fees for wire, telephone and redemption orders, account transcripts due the Transfer Agent from Fund shareholders and interest (net of bank charges) earned with respect to
balances in accounts the Transfer Agent maintains in connection with its services to the Fund.
Distribution and/or service fees
The Fund has an agreement with the
Distributor, an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution services. Under a Plan and Agreement of Distribution, the Fund pays a fee at an annual rate
of up to 0.25% of the Fund’s average daily net assets attributable to Class 2 shares. The Fund pays no distribution and service fees for Class 1 shares.
Expenses waived/reimbursed by the
Investment Manager and its affiliates
The Investment Manager and certain
of its affiliates have contractually agreed to waive fees and/or reimburse expenses (excluding certain fees and expenses described below) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, so that the Fund’s net operating expenses, after giving effect to fees waived/expenses reimbursed and any balance credits and/or overdraft charges from the Fund’s
custodian, do not exceed the following annual rate(s) as a percentage of the classes’ average daily net assets:
| May 1, 2021 through April 30, 2022 | Prior to May 1, 2021 | |
| Class 1 | 0.54% | 0.56% |
| Class 2 | 0.79 | 0.81 |
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), expenses associated with investments in affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange-traded funds), transaction costs and
brokerage commissions, costs related to any securities lending program, dividend expenses associated with securities sold short, inverse floater program fees and expenses, transaction charges and interest on borrowed
money, interest, costs associated with certain shareholder meetings, infrequent and/or unusual expenses and any other expenses the exclusion of which is specifically approved by the Board of Trustees. This
agreement may be modified or amended only with approval from the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements
described above are not recoverable by the Investment Manager or its affiliates in future periods.
Note 4. Federal tax
information
The timing and character of
income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP because of temporary or permanent book to tax differences.
At December 31, 2021, these
differences were primarily due to differing treatment for deferral/reversal of wash sale losses, trustees’ deferred compensation, derivative investments, tax straddles, principal and/or interest of fixed income
securities and foreign currency transactions. To the extent these differences were permanent, reclassifications were made among the components of the Fund’s net assets. Temporary differences do not require
reclassifications.
The following reclassifications
were made:
| Undistributed net investment income ($) | Accumulated net realized gain ($) | Paid in capital ($) |
| 1,170,979 | (1,170,979) | — |
Net investment income (loss) and
net realized gains (losses), as disclosed in the Statement of Operations, and net assets were not affected by this reclassification.
| CTIVP® – American Century Diversified Bond Fund | Annual Report 2021 | 45 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
The tax character of distributions
paid during the years indicated was as follows:
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | ||||
| Ordinary income ($) | Long-term capital gains ($) | Total ($) | Ordinary income ($) | Long-term capital gains ($) | Total ($) |
| 134,848,913 | — | 134,848,913 | 60,219,059 | — | 60,219,059 |
Short-term capital gain
distributions, if any, are considered ordinary income distributions for tax purposes.
At December 31, 2021, the
components of distributable earnings on a tax basis were as follows:
| Undistributed ordinary income ($) | Undistributed long-term capital gains ($) | Capital loss carryforwards ($) | Net unrealized appreciation ($) |
| 109,439,374 | 28,777,011 | — | 13,905,947 |
At December 31, 2021, the cost of
all investments for federal income tax purposes along with the aggregate gross unrealized appreciation and depreciation based on that cost was:
| Federal tax cost ($) | Gross unrealized appreciation ($) | Gross unrealized (depreciation) ($) | Net unrealized appreciation ($) |
| 2,963,951,206 | 40,745,918 | (26,839,971) | 13,905,947 |
Tax cost of investments and
unrealized appreciation/(depreciation) may also include timing differences that do not constitute adjustments to tax basis.
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Note 5. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $6,843,598,898 and $7,264,991,974, respectively, for the year ended December 31, 2021, of which $3,698,121,699
and $4,187,349,132, respectively, were U.S. government securities. The amount of purchase and sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 6. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes
referred to as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
Note 7. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
| 46 | CTIVP® – American Century Diversified Bond Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund did not borrow or lend
money under the Interfund Program during the year ended December 31, 2021.
Note 8. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to an October 28, 2021 amendment and restatement, the credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment
Manager or an affiliated investment manager, severally and not jointly, permits collective borrowings up to $950 million. Interest is currently charged to each participating fund based on its borrowings at a rate
equal to the higher of (i) the federal funds effective rate, (ii) the secured overnight financing rate plus 0.11448% and (iii) the overnight bank funding rate, plus in each case, 1.00%. Each borrowing under the credit
facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The
commitment fee is included in other expenses in the Statement of Operations. This agreement expires annually in October unless extended or renewed. Prior to the October 28, 2021 amendment and restatement, the Fund had
access to a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. which permitted collective borrowings up to $950 million. Interest was
charged to each participating fund based on its borrowings at a rate equal to the higher of (i) the federal funds effective rate, (ii) the one-month London Interbank Offered Rate (LIBOR) rate and (iii) the overnight
bank funding rate, plus in each case, 1.25%.
The Fund had no borrowings during
the year ended December 31, 2021.
Note 9. Significant
risks
Credit risk
Credit risk is the risk that the
value of debt instruments in the Fund’s portfolio may decline because the issuer defaults or otherwise becomes unable or unwilling, or is perceived to be unable or unwilling, to honor its financial obligations,
such as making payments to the Fund when due. Credit rating agencies assign credit ratings to certain debt instruments to indicate their credit risk. Lower-rated or unrated debt instruments held by the Fund may
present increased credit risk as compared to higher-rated debt instruments.
Derivatives risk
Losses involving derivative
instruments may be substantial, because a relatively small movement in the underlying reference (which is generally the price, rate or other economic indicator associated with a security(ies), commodity, currency or
index or other instrument or asset) may result in a substantial loss for the Fund. In addition to the potential for increased losses, the use of derivative instruments may lead to increased volatility within the Fund.
Derivatives will typically increase the Fund’s exposure to principal risks to which it is otherwise exposed, and may expose the Fund to additional risks, including correlation risk, counterparty risk, hedging
risk, leverage risk, liquidity risk and pricing risk.
Foreign currency risk
The performance of the Fund may be
materially affected positively or negatively by foreign currency strength or weakness relative to the U.S. dollar, particularly if the Fund invests a significant percentage of its assets in foreign securities or other
assets denominated in currencies other than the U.S. dollar. Currency rates in foreign countries may fluctuate significantly over short or long periods of time for a number of reasons, including changes in interest
rates, imposition of currency controls and economic or political developments in the U.S. or abroad. The Fund may also incur currency conversion costs when converting foreign currencies into U.S. dollars and vice
versa.
| CTIVP® – American Century Diversified Bond Fund | Annual Report 2021 | 47 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Interest rate risk
Interest rate risk is the risk of
losses attributable to changes in interest rates. In general, if prevailing interest rates rise, the values of debt instruments tend to fall, and if interest rates fall, the values of debt instruments tend to rise.
Actions by governments and central banking authorities can result in increases or decreases in interest rates. Higher periods of inflation could lead such authorities to raise interest rates. Increasing interest rates
may negatively affect the value of debt securities held by the Fund, resulting in a negative impact on the Fund’s performance and net asset value per share. In general, the longer the maturity or duration of a
debt security, the greater its sensitivity to changes in interest rates. The Fund is subject to the risk that the income generated by its investments may not keep pace with inflation.
Liquidity risk
Liquidity risk is the risk
associated with a lack of marketability of investments which may make it difficult to sell the investment at a desirable time or price. Changing regulatory, market or other conditions or environments (for example, the
interest rate or credit environments) may adversely affect the liquidity of the Fund’s investments. The Fund may have to accept a lower selling price for the holding, sell other investments, or forego another,
more appealing investment opportunity. Generally, the less liquid the market at the time the Fund sells a portfolio investment, the greater the risk of loss or decline of value to the Fund. A less liquid market can
lead to an increase in Fund redemptions, which may negatively impact Fund performance and net asset value per share, including, for example, if the Fund is forced to sell securities in a down market.
Market risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
The coronavirus disease 2019 and
its variants (COVID-19) pandemic has resulted in, and may continue to result in, significant global economic and societal disruption and market volatility due to disruptions in market access, resource availability,
facilities operations, imposition of tariffs, export controls and supply chain disruption, among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement
and loss in human and other resources. The uncertainty surrounding the magnitude, duration, reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental
authorities or other third parties, present unknowns that are yet to unfold. The impacts, as well as the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and
pandemics that may arise in the future – could negatively affect global economies and markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in
emerging market countries may be greater due to generally less established healthcare systems, governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing
political, social and economic risks in certain countries or globally. The disruptions caused by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively
impact the Fund’s ability to achieve its investment objectives. Any such event(s) could have a significant adverse impact on the value and risk profile of the Fund.
Mortgage- and other asset-backed
securities risk
The value of any mortgage-backed
and other asset-backed securities including collateralized debt obligations, if any, held by the Fund may be affected by, among other things, changes or perceived changes in: interest rates; factors concerning the
interests in and structure of the issuer or the originator of the mortgages or other assets; the creditworthiness of the entities
| 48 | CTIVP® – American Century Diversified Bond Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
that provide any supporting letters of credit,
surety bonds or other credit enhancements; or the market’s assessment of the quality of underlying assets. Payment of principal and interest on some mortgage-backed securities (but not the market value of the
securities themselves) may be guaranteed by the full faith and credit of a particular U.S. Government agency, authority, enterprise or instrumentality, and some, but not all, are also insured or guaranteed by the U.S.
Government. Mortgage-backed securities issued by non-governmental issuers (such as commercial banks, savings and loan institutions, private mortgage insurance companies, mortgage bankers and other secondary market
issuers) may entail greater risk than obligations guaranteed by the U.S. Government. Mortgage- and other asset-backed securities are subject to liquidity risk and prepayment risk. A decline or flattening of housing
values may cause delinquencies in mortgages (especially sub-prime or non-prime mortgages) underlying mortgage-backed securities and thereby adversely affect the ability of the mortgage-backed securities issuer to make
principal and/or interest payments to mortgage-backed securities holders, including the Fund. Rising or high interest rates tend to extend the duration of mortgage- and other asset-backed securities, making their
prices more volatile and more sensitive to changes in interest rates.
Shareholder concentration risk
At December 31, 2021, affiliated
shareholders of record owned 100.0% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of
less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Note 10. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
Note 11. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in
connection with the conduct of their business activities. Ameriprise Financial believes that the Fund is not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject
of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with
the Fund. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (SEC) on legal and regulatory matters that relate to
Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that
these matters, or the adverse publicity associated with them, will not result in increased Fund redemptions, reduced sale of Fund shares or other adverse consequences to the Fund. Further, although we believe
proceedings are not likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines,
penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial or one or more of its affiliates that provides services to
the Fund.
| CTIVP® – American Century Diversified Bond Fund | Annual Report 2021 | 49 |
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees of Columbia
Funds Variable Series Trust II and Shareholders of CTIVP® – American Century Diversified Bond Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of CTIVP® – American Century Diversified Bond Fund (one of the funds constituting Columbia Funds Variable Series Trust II,
referred to hereafter as the "Fund") as of December 31, 2021, the related statement of operations for the year ended December 31, 2021, the statement of changes in net assets for each of the two years in the period
ended December 31, 2021, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2021 (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, 2021, 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, 2021 and the financial highlights for each of the five years in the period ended December 31, 2021 in conformity with accounting principles generally
accepted in the United States of America.
Basis for Opinion
These financial statements are the
responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these
financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2021 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.
/s/PricewaterhouseCoopers LLP
Minneapolis, Minnesota
February 22, 2022
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| 50 | CTIVP® – American Century Diversified Bond Fund | Annual Report 2021 |
Federal Income Tax
Information
(Unaudited)
The Fund hereby designates the
following tax attributes for the fiscal year ended December 31, 2021.
| Capital gain dividend | |
| $30,215,862 |
Capital gain dividend. The Fund
designates as a capital gain dividend the amount reflected above, or if subsequently determined to be different, the net capital gain of such fiscal period.
TRUSTEES AND
OFFICERS
The Board oversees the Fund’s
operations and appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following table provides basic biographical information about the Fund’s Trustees as
of the printing of this report, including their principal occupations during the past five years, although specific titles for individuals may have varied over the period. The year set forth beneath Length of Service
in the table below is the year in which the Trustee was first appointed or elected as Trustee to any Fund currently in the Columbia Funds Complex or a predecessor thereof. Under current Board policy, each Trustee
generally serves until December 31 of the year such Trustee turns seventy-five (75).
Independent trustees
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| George S. Batejan c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1953 | Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 176 | Former Chairman of the Board, NICSA (National Investment Company Services Association) (Executive Committee, Nominating Committee and Governance Committee), 2014-2016; former Director, Intech Investment Management, 2011-2016; former Board Member, Metro Denver Chamber of Commerce, 2015-2016; former Advisory Board Member, University of Colorado Business School, 2015-2018 |
| CTIVP® – American Century Diversified Bond Fund | Annual Report 2021 | 51 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Kathleen Blatz c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2006 | Attorney, specializing in arbitration and mediation; Chief Justice, Minnesota Supreme Court, 1998-2006; Associate Justice, Minnesota Supreme Court, 1996-1998; Fourth Judicial District Court Judge, Hennepin County, 1994-1996; Attorney in private practice and public service, 1984-1993; State Representative, Minnesota House of Representatives, 1979-1993, which included service on the Tax and Financial Institutions and Insurance Committees; Member and Interim Chair, Minnesota Sports Facilities Authority, January 2017-July 2017; Interim President and Chief Executive Officer, Blue Cross Blue Shield of Minnesota (health care insurance), February-July 2018, April-October 2021 | 176 | Former Trustee, Blue Cross Blue Shield of Minnesota, 2009-2021 (Chair of the Business Development Committee, 2014-2017; Chair of the Governance Committee, 2017-2019); former Member and Chair of the Board, Minnesota Sports Facilities Authority, January 2017-July 2017; former Director, Robina Foundation, 2009-2020 (Chair, 2014-2020); Director, Schulze Family Foundation, since 2021 |
| Pamela G. Carlton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2007 | President, Springboard — Partners in Cross Cultural Leadership (consulting company) since 2003; Managing Director of US Equity Research, JP Morgan Chase, 1999-2003; Director of US Equity Research, Chase Asset Management, 1996-1999; Co-Director Latin America Research, 1993-1996, COO Global Research, 1992-1996, Co-Director of US Research, 1991-1992, Investment Banker, Morgan Stanley, 1982-1991, Morgan Stanley; Attorney, Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 176 | Trustee, New York Presbyterian Hospital Board (Executive Committee and Chair of People Committee) since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee); Director, Apollo Commercial Real Estate Finance, Inc. since 2021; the Governing Council of the Independent Directors Council (IDC), since 2021 |
| Janet Langford Carrig c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1957 | Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 174 | Director, EQT Corporation (natural gas producer) since 2019; Director, Whiting Petroleum Corporation (independent oil and gas company) since 2020 |
| J. Kevin Connaughton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2020 | Member, FINRA National Adjudicatory Council since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Consultant to Independent Trustees of CFVIT and CFST I from March 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Managing Director and General Manager of Mutual Fund Products, Columbia Management Investment Advisers, LLC, May 2010-February 2015; President, Columbia Funds, 2008-2015; and senior officer of Columbia Funds and affiliated funds, 2003-2015 | 174 | Former Director, The Autism Project, March 2015-December 2021; former Member of the Investment Committee, St. Michael’s College, November 2015-February 2020; former Trustee, St. Michael’s College, June 2017-September 2019; former Trustee, New Century Portfolios, January 2015-December 2017 |
| 52 | CTIVP® – American Century Diversified Bond Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Olive M. Darragh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since 2020 | Managing Director of Darragh Inc. (strategy and talent management consulting firm) since 2010; Founder and CEO, Zolio, Inc. (investment management talent identification platform) since 2004; Consultant to Independent Trustees of CFVIT and CFST I from June 2019 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 2001-2004 | 174 | Former Director, University of Edinburgh Business School (Member of US Board); former Director, Boston Public Library Foundation |
| Patricia M. Flynn c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1950 | Trustee since 2004 | Trustee Professor of Economics and Management, Bentley University since 1976 (also teaches and conducts research on corporate governance); Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 176 | Trustee, MA Taxpayers Foundation since 1997; Board of Governors, Innovation Institute, MA Technology Collaborative, 2010-2020; former Board of Directors, The MA Business Roundtable, 2003-2019 |
| Brian J. Gallagher c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 176 | Trustee, Catholic Schools Foundation since 2004 |
| Douglas A. Hacker c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1955 | Co-Chair since 2021; Chair of CFST I and CFVIT since 2014; Trustee of CFST I and CFVIT since 1996 and CFST, CFST II, CFVST II, CET I and CET II since 2021 | Independent business executive since May 2006; Executive Vice President – Strategy of United Airlines, December 2002 - May 2006; President of UAL Loyalty Services (airline marketing company), September 2001-December 2002; Executive Vice President and Chief Financial Officer of United Airlines, July 1999-September 2001 | 176 | Director, Spartan Nash Company (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing); former Director, Nash Finch Company (food distributor), 2005-2013; former Director, SeaCube Container Leasing Ltd. (container leasing), 2010-2013; and former Director, Travelport Worldwide Limited (travel information technology), 2014-2019 |
| Nancy T. Lukitsh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1956 | Trustee since 2011 | Senior Vice President, Partner and Director of Marketing, Wellington Management Company, LLP (investment adviser), 1997-2010; Chair, Wellington Management Portfolios (commingled non-U.S. investment pools), 2007 -2010; Director, Wellington Trust Company, NA and other Wellington affiliates, 1997-2010 | 174 | None |
| CTIVP® – American Century Diversified Bond Fund | Annual Report 2021 | 53 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| David M. Moffett c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2011 | Retired; Consultant to Bridgewater and Associates | 174 | Director, CSX Corporation (transportation suppliers); Director, Genworth Financial, Inc. (financial and insurance products and services); Director, PayPal Holdings Inc. (payment and data processing services); Trustee, University of Oklahoma Foundation; former Director, eBay Inc. (online trading community), 2007-2015; and former Director, CIT Bank, CIT Group Inc. (commercial and consumer finance), 2010-2016 |
| Catherine James Paglia c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Co-Chair since 2021; Chair of CFST, CFST II, CFVST II, CET I and CET II since 2020; Trustee of CFST, CFST II and CFVST II since 2004 and CFST I and CFVIT since 2021 | Director, Enterprise Asset Management, Inc. (private real estate and asset management company) since September 1998; Managing Director and Partner, Interlaken Capital, Inc., 1989-1997; Vice President, 1982-1985, Principal, 1985-1987, Managing Director, 1987-1989, Morgan Stanley; Vice President, Investment Banking, 1980-1982, Associate, Investment Banking, 1976-1980, Dean Witter Reynolds, Inc. | 176 | Director, Valmont Industries, Inc. (irrigation systems manufacturer) since 2012; Trustee, Carleton College (on the Investment Committee); Trustee, Carnegie Endowment for International Peace (on the Investment Committee) |
| Minor M. Shaw c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1947 | Trustee since 2003 | President, Micco LLC (private investments) since 2011; President, Micco Corp. (family investment business), 1998-2011 | 176 | Director, Blue Cross Blue Shield of South Carolina (Chair of Compensation Committee) since April 2008; Trustee, Hollingsworth Funds (on the Investment Committee) since 2016 (previously Board Chair from 2016-2019); Former Advisory Board member, Duke Energy Corp., 2016-2020; Chair of the Duke Endowment; Chair of Greenville – Spartanburg Airport Commission; former Trustee, BofA Funds Series Trust (11 funds), 2003-2011; former Director, Piedmont Natural Gas, 2004-2016; former Director, National Association of Corporate Directors, Carolinas Chapter, 2013-2018; Chair, Daniel-Mickel Foundation since 1998 |
| 54 | CTIVP® – American Century Diversified Bond Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Natalie A. Trunow c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1967 | Trustee since 2020 | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services), January 2016-January 2021; Non-executive Member of the Investment Committee and Valuation Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services), August 2018-January 2021; Advisor, Paradigm Asset Management, November 2016-December 2021; Consultant to Independent Trustees of CFVIT and CFST I from September 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Director of Investments/Consultant, Casey Family Programs, April 2016-November 2016; Senior Vice President and Chief Investment Officer, Calvert Investments, August 2008-January 2016; Section Head and Portfolio Manager, General Motors Asset Management, June 1997-August 2008 | 174 | Former Director, Investment Committee, Health Services for Children with Special Needs, Inc., 2012-2019; Director, Chair of Audit Committee, Consumer Credit Counseling Services (formerly Guidewell Financial Solutions), since 2019; Independent Director, Investment Committee and Valuation Committee, Sarona Asset Management, since 2019 |
| Sandra Yeager c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2017 | Retired; President and founder, Hanoverian Capital, LLC (SEC registered investment advisor firm), 2008-2016; Managing Director, DuPont Capital, 2006-2008; Managing Director, Morgan Stanley Investment Management, 2004-2006; Senior Vice President, Alliance Bernstein, 1990-2004 | 176 | Former Director, NAPE Education Foundation, October 2016-October 2020 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Fund Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I (CET I), Columbia ETF Trust II (CET II), Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Beckman, Gallagher and Hacker and Mses. Blatz, Carlton, Flynn, Paglia, Shaw and Yeager serve as Directors of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
Interested trustee affiliated with
Investment Manager*
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during the past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex overseen | Other directorships held by Trustee during the past five years |
| Daniel J. Beckman c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since November 2021(a) | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC (since April 2015); officer of Columbia Funds and affiliated funds since 2020. | 176 | Director, Ameriprise Trust Company, since October 2016; Director, Columbia Management Investment Distributors, Inc. since November 2018; Board of Governors, Columbia Wanger Asset Management, LLC since January 2022 |
| * | Interested person (as defined under the 1940 Act) by reason of being an officer, director, security holder and/or employee of the Investment Manager or Ameriprise Financial. |
| (a) | Mr. Beckman serves as the President and Principal Executive Officer of the Columbia Funds (since 2021). |
The Statement of Additional
Information has additional information about the Fund’s Board members and is available, without charge, upon request by calling 800.345.6611 or contacting your financial intermediary.
| CTIVP® – American Century Diversified Bond Fund | Annual Report 2021 | 55 |
TRUSTEES AND OFFICERS (continued)
The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. The following table provides basic information about the Officers of the Fund, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Beckman, who is President and Principal Executive Officer, the Fund’s other officers are:
The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. The following table provides basic information about the Officers of the Fund, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Beckman, who is President and Principal Executive Officer, the Fund’s other officers are:
Fund officers
| 56 | CTIVP® – American Century Diversified Bond Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Fund officers (continued)
Fund officers (continued)
| Name, address and year of birth | Position and year first appointed to position for any Fund in the Columbia Funds Complex or a predecessor thereof | Principal occupation(s) during past five years |
| Lyn Kephart-Strong 5228 Ameriprise Financial Center Minneapolis, MN 55474 1960 | Vice President (2015) | President, Columbia Management Investment Services Corp. since October 2014; Vice President & Resolution Officer, Ameriprise Trust Company since August 2009. |
| CTIVP® – American Century Diversified Bond Fund | Annual Report 2021 | 57 |
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For Fund and other investment product prospectuses, which contain this and other important information, contact your
financial advisor or insurance representative. Please read the prospectus carefully before you invest. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved. Columbia Management Investment Distributors, Inc., 290 Congress Street, Boston, MA 02210
© 2022 Columbia Management Investment
Advisers, LLC.
C-2080 AW (2/22)
Variable Portfolio
– Partners Core Bond Fund
Please remember that you may not
buy (nor will you own) shares of the Fund directly. The Fund is available through variable annuity contracts and variable life insurance policies offered by the separate accounts of participating insurance companies
as well as qualified pension and retirement plans. Please contact your financial advisor or insurance representative for more information.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
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| 5 | |
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| 9 | |
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| 69 | |
| 70 | |
| 72 | |
| 86 | |
| 87 | |
| 87 | |
| 93 |
Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which Variable Portfolio – Partners Core Bond Fund (the Fund) holds investments consistent with the procedures as stated in the Statement of Additional Information
(SAI). You may obtain a copy of the SAI without charge by calling 800.345.6611; contacting your financial intermediary or searching the website of the Securities and Exchange Commission (SEC) at sec.gov. Information
regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge by visiting
columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. The Fund’s Form N-PORT is available on the SEC’s website at sec.gov. The Fund’s complete
schedule of portfolio holdings, as filed on Form N-PORT, can also be obtained without charge, upon request, by calling 800.345.6611.
Additional Fund information
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
290 Congress Street
Boston, MA 02210
Fund distributor
Columbia Management Investment Distributors,
Inc.
290 Congress Street
Boston, MA 02210
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
Variable Portfolio – Partners Core Bond
Fund | Annual Report 2021
Fund at a Glance
Investment objective
The Fund
seeks to provide shareholders with a high level of current income while conserving the value of the investment for the longest period of time.
Portfolio management
Allspring Global Investments, LLC
Maulik Bhansali, CFA
Jarad Vasquez
Wells Fargo & Company (Wells Fargo) entered into a definitive sale agreement whereby Wells Fargo Asset Management (WFAM) was sold to a holding company affiliated with private funds of GTCR
LLC and of Reverence Capital Partners, L.P and will no longer be an entity of Wells Fargo. The transaction closed on November 1, 2021, subject to customary closing conditions. Upon the closing of the sale transaction,
WFAM announced that it was changing its name to Allspring Global Investments.
J.P. Morgan Investment Management Inc.
Richard Figuly
Steven Lear, CFA
J. Andrew Norelli
Lisa Coleman, CFA
Thomas Hauser, CFA
| Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 | 3 |
Fund at a Glance (continued)
Performance of a hypothetical $10,000 investment (December 31, 2011 — December 31, 2021)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class 2 shares of Variable Portfolio – Partners Core Bond Fund during the stated time period, and does not reflect the deduction of taxes, if any, that a
shareholder may pay on Fund distributions or on the redemption of Fund shares. The returns also do not reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy or
qualified pension or retirement plan, if any.
| 4 | Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 |
Manager Discussion of Fund Performance
At December 31, 2021, approximately
99.71% of the Fund’s shares were owned in the aggregate by affiliated funds-of-funds managed by Columbia Management Investment Advisers, LLC (the Investment Manager). As a result of asset allocation decisions by
the Investment Manager, it is possible that the Fund may experience relatively large purchases or redemptions from affiliated funds-of-funds. The Investment Manager seeks to minimize the impact of these transactions
by structuring them over a reasonable period of time. The Fund may also experience increased expenses as it buys and sells securities as a result of purchases or redemptions by affiliated funds-of-funds.
As of December 31, 2021, the Fund
was managed by two independent money management firms. Allspring Global Investments, LLC (Allspring) managed 49.75% and J.P. Morgan Investment Management Inc. (JPMorgan) managed approximately 50.25% of the
Fund’s assets.
For the 12-month period that ended
December 31, 2021, Class 2 shares of the Fund returned -1.41%. The Fund outperformed its benchmark, the Bloomberg U.S. Aggregate Bond Index, which returned -1.54% for the same time period.
Market overview
The U.S. and global economies
performed particularly well during 2021, especially when considering the unique economic and human health challenges faced related to the COVID-19 pandemic and the inflationary combination of resurgent business
demand, supply-chain bottlenecks and labor shortages. Vaccination rates continued to accelerate in most developed economies throughout the first half of the year, while governments in most developed markets continued
to ease COVID-related mobility restrictions and activity levels picked up. While the pace of economic recovery was challenged at certain points throughout the year with the emergence of new COVID-19 variants, the
trend toward economic recovery ultimately continued. Alongside strong growth, inflation remained robust throughout the year with market participants and global monetary policymakers shifting inflation expectations
higher throughout the year. Higher inflation was brought about by a combination of base effects: a shift in demand from services to goods, and global supply chain disruptions. In the second half of the year, central
banks began shifting towards more hawkish rhetoric as the labor market tightened and inflation ran above target, with the Federal Open Market Committee (FOMC) announcing its plan to accelerate the pace of tapering its
asset purchase program by $30billion per month starting in mid-January 2022.
Congruent with a shift from
accommodative to tighter monetary policy in the United States, interest rates moved higher across the yield curve, with the yield curve bear flattening as short-term rates outpaced longer term rates in their move
higher. (A bear flattener is when the yield curve flattens as short-term rates start to rise in anticipation of the Fed tightening monetary policy.) Given the supportive risk-on backdrop, lower credit quality sectors
generally outperformed higher credit quality sectors. U.S. high yield was the best performing fixed-income sector. Returns from investment-grade sectors were more moderate, with most sectors generally producing
negative total returns due to the move higher in interest rates, with positive excess returns. From an excess returns perspective, agency mortgage-backed securities (MBS) underperformed other sectors, as the
combination of fast prepayment speeds and the commencement of Fed tapering challenged sector returns.
The Fund’s notable
contributors for the period
Allspring
Our portion of the Fund’s
portfolio outperformed the benchmark during the period.
| • | In credit, a relative sector overweight and especially security selection, were the largest contributors to performance during the year. |
| ○ | Contributors were concentrated in the non-bank financials, technology, insurance, and automotive subsectors. |
| ○ | Individual contributors included FS KKR Capital Corp. (non-bank financials), Oracle Corp. and Broadcom Corp. (technology), SBL Holdings, LLC and Brighthouse Financial, Inc. (insurance), and Ford Motor Co. (automotive). |
| • | In structured products, a sector overweight to the asset-backed securities (ABS) sector was a contributor to performance. |
| Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 | 5 |
Manager Discussion of Fund Performance (continued)
| ○ | Security selection in the asset-backed securities (ABS) sector also contributed, with positioning in Federal Family Education Loan Program (FFELP) and private credit student loan ABS, rental car ABS, and revolving prime auto ABS all outperforming. |
| • | Offsetting the negative contributions within MBS, dynamic sector positioning contributed positively to performance, as did positioning within 15-years, Ginnie Maes, and conventional 30-years. |
| ○ | In conventional 30-years, the overweight to 2.5% TBAs was the largest contributor this year as the coupon performed well in price terms and the “special” dollar rolls persisted throughout the year, which generated additional security-level opportunity. |
JPMorgan
Our portion of the Fund’s
portfolio outperformed the benchmark during the period.
| • | Our portion of the Fund was broadly underweight U.S. Government securities in favor of higher yielding, credit-oriented spread sectors, broadly including corporate credit, securitized credit, and emerging markets debt. As spread sectors generally outperformed, sector allocation overall contributed positively to returns. |
| • | The Fund’s overweight positioning in high-yield corporate credit contributed as the sector was the best performing fixed-income sector during the year. |
| • | The Fund’s overweight positioning in securitized credit (non-agency MBS, commercial mortgage-backed securities (CMBS), ABS) was a significant driver of returns, as these sectors were supported by the strength in the U.S. residential housing market, rebound in commercial real estate and the strength of the U.S. consumer. |
| • | Within investment-grade credit, security selection contributed positively, while the Fund’s underweight positioning in the second half of 2021 contributed positively, as spreads drifted wider from very tight levels in the second quarter of 2021. |
| • | Lastly, the Fund’s underweight positioning to agency MBS contributed positively, as the sector underperformed other U.S. fixed-income sectors on an excess returns basis. |
| ○ | Segment positioning within the agency MBS sector contributed positively, as the Fund retained a bias towards agency CMBS and securities with prepayment protection, amid the high prepayment backdrop. |
The Fund’s notable
detractors during the period
Allpring
| • | Detractors in credit were concentrated in the consumer, pipelines, local government, and utilities subsectors. |
| ○ | Individual detractors included an overweight to The Home Depot, Inc. and Altria Group, Inc. (consumer). |
| • | Positioning in collateralized mortgage obligations (CMOs), lower coupon 30-year collateral, and select higher coupons detracted this year. |
| • | After reducing exposure of lower coupon MBS to a relative underweight earlier in the year, robust Federal Reserve (Fed) purchases led to tighter spreads from already rich levels, which resulted in a net detractor from performance. |
| • | The relative overweight to high-coupon Ginnie Maes and conventional 30-year 5.0% coupon MBS detracted given elevated prepayment speeds and curve flattening. |
JPMorgan
| • | The Fund’s duration and yield curve positioning detracted from returns. |
| ○ | During the year, the Fund was short duration relative to the benchmark, generally with a yield curve steepening bias. While the Fund employed dynamic duration positioning, the magnitude of the short fluctuated between -0.2 years and -0.6 years short versus the benchmark, generally concentrated in the long end of the yield curve. |
| 6 | Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 |
Manager Discussion of Fund Performance (continued)
| ○ | While the Fund benefited from higher rates with a steeper yield curve in the first quarter, duration and yield curve performance generally detracted in the last three quarters of 2021, as Treasury yields retraced lower and the yield curve flattened due to the move higher in front end yields. |
| • | In addition, overweight positioning to emerging markets debt detracted, as spreads widened in the second half of the year due to contagion fears from a slowdown in the Chinese economy and volatility induced by headlines on the new COVID-19 Omicron variant. |
The views expressed in this report
reflect the current views of the respective parties who have contributed to this report. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult
to predict, so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective parties
disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Columbia fund are based on numerous factors, may not be relied on as an
indication of trading intent on behalf of any particular Columbia fund. References to specific securities should not be construed as a recommendation or investment advice.
| Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 | 7 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur ongoing
costs, which generally include management fees, distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to help you compare these costs with the ongoing costs of investing in other mutual funds.
The information below does not
reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy (collectively, Contracts) or qualified pension and retirement plan (Qualified Plan), if any. The total fees
and expenses you bear may therefore be higher than those shown below.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount invested, to estimate the
expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as redemption or exchange fees, or expenses that apply to the subaccount or the Contract. Therefore, the
hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If the fees and expenses imposed under your Contract or
Qualified Plan, if any, were included, your costs would be higher.
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 365.
Expenses do not include fees and
expenses incurred indirectly by the Fund from its investment in underlying funds, including affiliated and non-affiliated pooled investment vehicles, such as mutual funds and exchange-traded funds.
| 8 | Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 |
Portfolio of Investments
December 31, 2021
December 31, 2021
(Percentages represent value of
investments compared to net assets)
Investments in securities
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 | 9 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 10 | Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 | 11 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 12 | Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 | 13 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 14 | Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 | 15 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 16 | Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 | 17 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 18 | Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 | 19 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 20 | Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 | 21 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 22 | Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 | 23 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 24 | Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 | 25 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 26 | Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 | 27 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 28 | Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 | 29 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 30 | Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 | 31 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 32 | Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 | 33 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 34 | Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 | 35 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 36 | Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 | 37 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 38 | Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 | 39 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 40 | Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 | 41 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 42 | Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 | 43 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 44 | Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 | 45 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 46 | Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 | 47 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 48 | Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 | 49 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 50 | Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 | 51 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 52 | Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 | 53 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 54 | Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 | 55 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 56 | Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 | 57 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 58 | Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 | 59 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 60 | Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 | 61 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 62 | Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
At December 31, 2021,
securities and/or cash totaling $3,255,000 were pledged as collateral.
Investments in
derivatives
| Long futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| U.S. Treasury 10-Year Note | 253 | 03/2022 | USD | 33,008,594 | 254,445 | — |
| U.S. Treasury 2-Year Note | 199 | 03/2022 | USD | 43,416,203 | — | (31,481) |
| Total | 254,445 | (31,481) | ||||
| Short futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| U.S. Treasury Ultra 10-Year Note | (120) | 03/2022 | USD | (17,572,500) | — | (210,651) |
| Cleared credit default swap contracts - sell protection | ||||||||||||
| Reference entity | Counterparty | Maturity date | Receive fixed rate (%) | Payment frequency | Implied credit spread (%)* | Notional currency | Notional amount | Value ($) | Upfront payments ($) | Upfront receipts ($) | Unrealized appreciation ($) | Unrealized depreciation ($) |
| Markit CDX North America High Yield Index, Series 37 | Citi | 12/20/2026 | 5.000 | Quarterly | 2.931 | USD | 27,000,000 | 84,192 | — | — | 84,192 | — |
| * | Implied credit spreads, represented in absolute terms, utilized in determining the market value of credit default swap agreements on corporate or sovereign issues as of period end serve as an indicator of the current status of the payment/performance risk and represent the likelihood or risk of default for the credit derivative. The implied credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Wider credit spreads represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement. |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 | 63 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Notes to Portfolio of
Investments
| (a) | Represents privately placed and other securities and instruments exempt from Securities and Exchange Commission registration (collectively, private placements), such as Section 4(a)(2) and Rule 144A eligible securities, which are often sold only to qualified institutional buyers. At December 31, 2021, the total value of these securities amounted to $1,524,312,547, which represents 25.26% of total net assets. |
| (b) | Variable rate security. The interest rate shown was the current rate as of December 31, 2021. |
| (c) | Variable or floating rate security, the interest rate of which adjusts periodically based on changes in current interest rates and prepayments on the underlying pool of assets. The interest rate shown was the current rate as of December 31, 2021. |
| (d) | Represents fair value as determined in good faith under procedures approved by the Board of Trustees. At December 31, 2021, the total value of these securities amounted to $41,231,916, which represents 0.68% of total net assets. |
| (e) | Represents securities that have defaulted on payment of interest. The Fund has stopped accruing interest on these securities. At December 31, 2021, the total value of these securities amounted to $17,041, which represents less than 0.01% of total net assets. |
| (f) | Valuation based on significant unobservable inputs. |
| (g) | Represents interest only securities which have the right to receive the monthly interest payments on an underlying pool of mortgage loans. |
| (h) | Represents principal only securities which have the right to receive the principal portion only on an underlying pool of mortgage loans. |
| (i) | Represents a variable rate security with a step coupon where the rate adjusts according to a schedule for a series of periods, typically lower for an initial period and then increasing to a higher coupon rate thereafter. The interest rate shown was the current rate as of December 31, 2021. |
| (j) | Zero coupon bond. |
| (k) | Principal and interest may not be guaranteed by a governmental entity. |
| (l) | Represents a security purchased on a when-issued basis. |
| (m) | The rate shown is the seven-day current annualized yield at December 31, 2021. |
| (n) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended December 31, 2021 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Realized gain (loss)($) | Dividends($) | End of period shares |
| Columbia Short-Term Cash Fund, 0.085% | ||||||||
| 126,471,432 | 4,074,060,484 | (3,898,573,115) | (8,470) | 301,950,331 | (21,324) | 196,862 | 302,010,733 | |
Abbreviation Legend
| AID | Agency for International Development |
| AMBAC | Ambac Assurance Corporation |
| BAM | Build America Mutual Assurance Co. |
| CMO | Collateralized Mortgage Obligation |
| CMT | Constant Maturity Treasury |
| FHLMC | Federal Home Loan Mortgage Corporation |
| LIBOR | London Interbank Offered Rate |
| MTA | Monthly Treasury Average |
| SOFR | Secured Overnight Financing Rate |
| STRIPS | Separate Trading of Registered Interest and Principal Securities |
| TBA | To Be Announced |
Currency Legend
| USD | US Dollar |
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 64 | Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Fair value measurements (continued)
Fair value inputs are summarized in the three broad levels listed below:
Fair value inputs are summarized in the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at December 31, 2021:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Investments in Securities | ||||
| Asset-Backed Securities — Non-Agency | — | 456,528,865 | 21,457,203 | 477,986,068 |
| Commercial Mortgage-Backed Securities - Agency | — | 223,231,220 | — | 223,231,220 |
| Commercial Mortgage-Backed Securities - Non-Agency | — | 235,778,841 | 7,189,673 | 242,968,514 |
| Convertible Bonds | — | 2,034,543 | — | 2,034,543 |
| Corporate Bonds & Notes | — | 2,148,822,596 | 6,000,000 | 2,154,822,596 |
| Foreign Government Obligations | — | 80,918,352 | — | 80,918,352 |
| Inflation-Indexed Bonds | — | 2,871,936 | — | 2,871,936 |
| Municipal Bonds | — | 15,089,160 | — | 15,089,160 |
| Residential Mortgage-Backed Securities - Agency | — | 1,017,333,950 | — | 1,017,333,950 |
| Residential Mortgage-Backed Securities - Non-Agency | — | 222,155,423 | 61,142,686 | 283,298,109 |
| U.S. Government & Agency Obligations | — | 41,964,682 | — | 41,964,682 |
| U.S. Treasury Obligations | 1,480,423,550 | 120,572,914 | — | 1,600,996,464 |
| Money Market Funds | 301,950,331 | — | — | 301,950,331 |
| Total Investments in Securities | 1,782,373,881 | 4,567,302,482 | 95,789,562 | 6,445,465,925 |
| Investments in Derivatives | ||||
| Asset | ||||
| Futures Contracts | 254,445 | — | — | 254,445 |
| Swap Contracts | — | 84,192 | — | 84,192 |
| Liability | ||||
| Futures Contracts | (242,132) | — | — | (242,132) |
| Total | 1,782,386,194 | 4,567,386,674 | 95,789,562 | 6,445,562,430 |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The Fund’s assets assigned to
the Level 2 input category are generally valued using the market approach, in which a security’s value is determined through reference to prices and information from market transactions for similar or identical
assets.
Derivative instruments are valued at
unrealized appreciation (depreciation).
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 | 65 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Fair value measurements (continued)
The following table is a reconciliation of Level 3 assets for which significant observable and unobservable inputs were used to determine fair value:
The following table is a reconciliation of Level 3 assets for which significant observable and unobservable inputs were used to determine fair value:
| Balance as of 12/31/2020 ($) | Increase (decrease) in accrued discounts/ premiums ($) | Realized gain (loss) ($) | Change in unrealized appreciation (depreciation)(a) ($) | Purchases ($) | Sales ($) | Transfers into Level 3 ($) | Transfers out of Level 3 ($) | Balance as of 12/31/2021 ($) | |
| Asset-Backed Securities — Non-Agency | 17,924,395 | (14,790) | 299,561 | 283,615 | 14,379,472 | (6,646,640) | 44,628 | (4,813,038) | 21,457,203 |
| Commercial Mortgage-Backed Securities — Non-Agency | 12,579,517 | (67,946) | 2,569 | 165,623 | — | (5,490,090) | — | — | 7,189,673 |
| Corporate Bonds & Notes | — | — | — | — | 6,000,000 | — | — | — | 6,000,000 |
| Residential Mortgage-Backed Securities — Agency | 4,826,158 | — | — | — | — | — | — | (4,826,158) | — |
| Residential Mortgage-Backed Securities — Non-Agency | 5,011,650 | — | 5,000 | (159,979) | 64,619,979 | (3,322,314) | — | (5,011,650) | 61,142,686 |
| Total | 40,341,720 | (82,736) | 307,130 | 289,259 | 84,999,451 | (15,459,044) | 44,628 | (14,650,846) | 95,789,562 |
(a) Change in unrealized
appreciation (depreciation) relating to securities held at December 31, 2021 was $266,676, which is comprised of Asset-Backed Securities — Non-Agency of $310,326, Commercial Mortgage-Backed Securities —
Non-Agency of $116,329 and Residential Mortgage-Backed Securities — Non-Agency of $(159,979).
The Fund’s assets assigned to
the Level 3 category are valued utilizing the valuation technique deemed the most appropriate in the circumstances. Certain corporate bonds, commercial mortgage backed securities, residential mortgage backed
securities and asset backed securities classified as Level 3 securities are valued using the market approach. To determine fair value for these securities, management considered various factors which may have
included, but were not limited to, single market quotations from broker dealers, the distressed nature of the security and observable transactions for similar assets in the market. Significant increases (decreases) to
any of these inputs would have resulted in a significantly higher (lower) fair value measurement.
Financial assets were transferred
from Level 2 to Level 3 due to utilizing a single market quotation from a broker dealer. As a result, management concluded that the market input(s) were generally unobservable.
Financial assets were transferred
from Level 3 to Level 2 as observable market inputs were utilized and management determined that there was sufficient, reliable and observable market data to value these assets as of period end.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 66 | Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 |
Statement of Assets and Liabilities
December 31, 2021
December 31, 2021
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $6,083,611,309) | $6,143,515,594 |
| Affiliated issuers (cost $301,958,801) | 301,950,331 |
| Cash | 42,367 |
| Cash collateral held at broker for: | |
| TBA | 780,000 |
| Margin deposits on: | |
| Futures contracts | 360,000 |
| Swap contracts | 2,115,000 |
| Receivable for: | |
| Investments sold | 5,820,296 |
| Investments sold on a delayed delivery basis | 231,686,636 |
| Capital shares sold | 66,137 |
| Dividends | 20,175 |
| Interest | 26,921,689 |
| Foreign tax reclaims | 118,748 |
| Variation margin for futures contracts | 25,141 |
| Variation margin for swap contracts | 24,607 |
| Prepaid expenses | 37,900 |
| Total assets | 6,713,484,621 |
| Liabilities | |
| Payable for: | |
| Investments purchased | 48,551,159 |
| Investments purchased on a delayed delivery basis | 628,840,694 |
| Capital shares purchased | 730,033 |
| Variation margin for futures contracts | 31,875 |
| Management services fees | 76,334 |
| Distribution and/or service fees | 116 |
| Service fees | 918 |
| Compensation of board members | 241,562 |
| Compensation of chief compliance officer | 1,126 |
| Other expenses | 84,196 |
| Total liabilities | 678,558,013 |
| Net assets applicable to outstanding capital stock | $6,034,926,608 |
| Represented by | |
| Paid in capital | 5,871,916,883 |
| Total distributable earnings (loss) | 163,009,725 |
| Total - representing net assets applicable to outstanding capital stock | $6,034,926,608 |
| Class 1 | |
| Net assets | $6,017,964,399 |
| Shares outstanding | 540,950,291 |
| Net asset value per share | $11.12 |
| Class 2 | |
| Net assets | $16,962,209 |
| Shares outstanding | 1,532,864 |
| Net asset value per share | $11.07 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 | 67 |
Statement of Operations
Year Ended December 31, 2021
Year Ended December 31, 2021
| Net investment income | |
| Income: | |
| Dividends — affiliated issuers | $196,862 |
| Interest | 113,448,813 |
| Interfund lending | 649 |
| Foreign taxes withheld | (21,049) |
| Total income | 113,625,275 |
| Expenses: | |
| Management services fees | 26,070,925 |
| Distribution and/or service fees | |
| Class 2 | 42,024 |
| Service fees | 10,372 |
| Compensation of board members | 122,884 |
| Custodian fees | 85,298 |
| Printing and postage fees | 14,386 |
| Audit fees | 64,500 |
| Legal fees | 60,351 |
| Interest on collateral | 115 |
| Compensation of chief compliance officer | 1,025 |
| Other | 25,972 |
| Total expenses | 26,497,852 |
| Net investment income | 87,127,423 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 36,920,838 |
| Investments — affiliated issuers | (21,324) |
| Futures contracts | (1,357,252) |
| Swap contracts | 651,795 |
| Net realized gain | 36,194,057 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | (170,045,360) |
| Investments — affiliated issuers | (8,470) |
| Futures contracts | 12,313 |
| Swap contracts | 84,192 |
| Net change in unrealized appreciation (depreciation) | (169,957,325) |
| Net realized and unrealized loss | (133,763,268) |
| Net decrease in net assets resulting from operations | $(46,635,845) |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 68 | Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 |
Statement of Changes in Net Assets
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | |
| Operations | ||
| Net investment income | $87,127,423 | $87,355,641 |
| Net realized gain | 36,194,057 | 150,206,010 |
| Net change in unrealized appreciation (depreciation) | (169,957,325) | 118,776,070 |
| Net increase (decrease) in net assets resulting from operations | (46,635,845) | 356,337,721 |
| Distributions to shareholders | ||
| Net investment income and net realized gains | ||
| Class 1 | (239,558,439) | (140,098,468) |
| Class 2 | (616,889) | (415,070) |
| Total distributions to shareholders | (240,175,328) | (140,513,538) |
| Increase in net assets from capital stock activity | 1,539,965,680 | 794,603,548 |
| Total increase in net assets | 1,253,154,507 | 1,010,427,731 |
| Net assets at beginning of year | 4,781,772,101 | 3,771,344,370 |
| Net assets at end of year | $6,034,926,608 | $4,781,772,101 |
| Year Ended | Year Ended | |||
| December 31, 2021 | December 31, 2020 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class 1 | ||||
| Subscriptions | 143,744,612 | 1,647,133,113 | 91,783,808 | 1,049,354,387 |
| Distributions reinvested | 21,351,020 | 239,558,439 | 12,015,306 | 140,098,468 |
| Redemptions | (30,627,763) | (348,170,554) | (34,465,693) | (398,843,921) |
| Net increase | 134,467,869 | 1,538,520,998 | 69,333,421 | 790,608,934 |
| Class 2 | ||||
| Subscriptions | 327,529 | 3,713,472 | 528,781 | 6,070,806 |
| Distributions reinvested | 55,178 | 616,889 | 35,751 | 415,070 |
| Redemptions | (255,399) | (2,885,679) | (215,064) | (2,491,262) |
| Net increase | 127,308 | 1,444,682 | 349,468 | 3,994,614 |
| Total net increase | 134,595,177 | 1,539,965,680 | 69,682,889 | 794,603,548 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 | 69 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect any fees and expenses imposed under your
Contract and/or Qualified Plan, as applicable; such fees and expenses would reduce the total returns for all periods shown. Total return and portfolio turnover are not annualized for periods of less than one year. The
portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain derivatives, if any. If such transactions were included, the Fund’s portfolio
turnover rate may be higher.
| Net asset value, beginning of period | Net investment income | Net realized and unrealized gain (loss) | Total from investment operations | Distributions from net investment income | Distributions from net realized gains | Total distributions to shareholders | |
| Class 1 | |||||||
| Year Ended 12/31/2021 | $11.72 | 0.18 | (0.32) | (0.14) | (0.17) | (0.29) | (0.46) |
| Year Ended 12/31/2020 | $11.15 | 0.22 | 0.70 | 0.92 | (0.24) | (0.11) | (0.35) |
| Year Ended 12/31/2019 | $10.52 | 0.29 | 0.61 | 0.90 | (0.27) | — | (0.27) |
| Year Ended 12/31/2018 | $10.94 | 0.29 | (0.31) | (0.02) | (0.27) | (0.13) | (0.40) |
| Year Ended 12/31/2017 | $10.82 | 0.26 | 0.12 | 0.38 | (0.25) | (0.01) | (0.26) |
| Class 2 | |||||||
| Year Ended 12/31/2021 | $11.66 | 0.15 | (0.31) | (0.16) | (0.14) | (0.29) | (0.43) |
| Year Ended 12/31/2020 | $11.10 | 0.19 | 0.69 | 0.88 | (0.21) | (0.11) | (0.32) |
| Year Ended 12/31/2019 | $10.47 | 0.26 | 0.61 | 0.87 | (0.24) | — | (0.24) |
| Year Ended 12/31/2018 | $10.89 | 0.26 | (0.30) | (0.04) | (0.25) | (0.13) | (0.38) |
| Year Ended 12/31/2017 | $10.77 | 0.23 | 0.13 | 0.36 | (0.23) | (0.01) | (0.24) |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Ratios include interest on collateral expense which is less than 0.01%. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 70 | Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 |
Financial Highlights (continued)
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets(a) | Total net expense ratio to average net assets(a),(b) | Net investment income ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Class 1 | |||||||
| Year Ended 12/31/2021 | $11.12 | (1.24%) | 0.47%(c) | 0.47%(c) | 1.55% | 276% | $6,017,964 |
| Year Ended 12/31/2020 | $11.72 | 8.27% | 0.48%(c) | 0.48%(c) | 1.90% | 298% | $4,765,378 |
| Year Ended 12/31/2019 | $11.15 | 8.61% | 0.48% | 0.48% | 2.69% | 321% | $3,759,623 |
| Year Ended 12/31/2018 | $10.52 | (0.09%) | 0.49% | 0.49% | 2.75% | 309% | $3,535,290 |
| Year Ended 12/31/2017 | $10.94 | 3.58% | 0.52% | 0.52% | 2.39% | 240% | $3,284,310 |
| Class 2 | |||||||
| Year Ended 12/31/2021 | $11.07 | (1.41%) | 0.72%(c) | 0.72%(c) | 1.30% | 276% | $16,962 |
| Year Ended 12/31/2020 | $11.66 | 7.97% | 0.73%(c) | 0.73%(c) | 1.64% | 298% | $16,394 |
| Year Ended 12/31/2019 | $11.10 | 8.39% | 0.73% | 0.73% | 2.43% | 321% | $11,721 |
| Year Ended 12/31/2018 | $10.47 | (0.35%) | 0.74% | 0.74% | 2.50% | 309% | $9,303 |
| Year Ended 12/31/2017 | $10.89 | 3.34% | 0.77% | 0.77% | 2.15% | 240% | $10,669 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 | 71 |
Notes to Financial Statements
December 31, 2021
December 31, 2021
Note 1. Organization
Variable Portfolio –
Partners Core Bond Fund (the Fund), a series of Columbia Funds Variable Series Trust II (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act),
as an open-end management investment company organized as a Massachusetts business trust.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers Class 1 and Class 2 shares to separate accounts funding variable annuity contracts and variable life insurance policies (collectively, Contracts) issued by
affiliated and unaffiliated life insurance companies (Participating Insurance Companies) as well as qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors (Qualified
Investors) authorized by Columbia Management Investment Distributors, Inc. (the Distributor). You may not buy (nor will you own) shares of the Fund directly. You may invest by participating in a Qualified Plan or by
buying a Contract and making allocations to the Fund. Although all share classes generally have identical voting, dividend and liquidation rights, each share class votes separately when required by the Trust’s
organizational documents or by law. Different share classes pay different net investment income distribution amounts to the extent the expenses of such share classes differ, and distributions in liquidation will be
proportional to the net asset value of each share class. Each share class has its own cost structure and other features.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Debt securities generally are
valued by pricing services approved by the Board of Trustees based upon market transactions for normal, institutional-size trading units of similar securities. The services may use various pricing techniques that take
into account, as applicable, factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data, as well as approved independent broker-dealer quotes. Debt securities for
which quotations are not readily available or not believed to be reflective of market value may also be valued based upon a bid quote from an approved independent broker-dealer. Debt securities maturing in 60 days or
less are valued primarily at amortized market value, unless this method results in a valuation that management believes does not approximate fair value.
Asset- and mortgage-backed
securities are generally valued by pricing services, which utilize pricing models that incorporate the securities’ cash flow and loan performance data. These models also take into account available market data,
including trades, market quotations, and benchmark yield curves for identical or similar securities. Factors used to identify similar securities may include, but are not limited to, issuer, collateral type, vintage,
prepayment speeds, collateral performance, credit ratings, credit enhancement and expected life. Asset-backed securities for which quotations are readily available may also be valued based upon an over-the-counter or
exchange bid quote from an approved independent broker-dealer. Debt securities maturing in 60 days or less are valued primarily at amortized market value, unless this method results in a valuation that management
believes does not approximate fair value.
Investments in open-end investment
companies (other than exchange-traded funds (ETFs)), are valued at the latest net asset value reported by those companies as of the valuation time.
Futures and options on futures
contracts are valued based upon the settlement price at the close of regular trading on their principal exchanges or, in the absence of a settlement price, at the mean of the latest quoted bid and ask prices.
| 72 | Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Swap transactions are valued
through an independent pricing service or broker, or if neither is available, through an internal model based upon observable inputs.
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Derivative instruments
The Fund invests in certain
derivative instruments, as detailed below, in seeking to meet its investment objectives. Derivatives are instruments whose values depend on, or are derived from, in whole or in part, the value of one or more
securities, currencies, commodities, indices, or other assets or instruments. Derivatives may be used to increase investment flexibility (including to maintain cash reserves while maintaining desired exposure to
certain assets), for risk management (hedging) purposes, to facilitate trading, to reduce transaction costs and to pursue higher investment returns. The Fund may also use derivative instruments to mitigate certain
investment risks, such as foreign currency exchange rate risk, interest rate risk and credit risk. Derivatives may involve various risks, including the potential inability of the counterparty to fulfill its
obligations under the terms of the contract, the potential for an illiquid secondary market (making it difficult for the Fund to sell or terminate, including at favorable prices) and the potential for market movements
which may expose the Fund to gains or losses in excess of the amount shown in the Statement of Assets and Liabilities. The notional amounts of derivative instruments, if applicable, are not recorded in the financial
statements.
A derivative instrument may suffer
a marked-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform its
obligations under the contract. The Fund’s risk of loss from counterparty credit risk on over-the-counter derivatives is generally limited to the aggregate unrealized gain netted against any collateral held by
the Fund and the amount of any variation margin held by the counterparty, plus any replacement costs or related amounts. With exchange-traded or centrally cleared derivatives, there is reduced counterparty credit risk
to the Fund since the clearinghouse or central counterparty (CCP) provides some protection in the case of clearing member default. The clearinghouse or CCP stands between the buyer and the seller of the contract;
therefore, additional counterparty credit risk is failure of the clearinghouse or CCP. However, credit risk still exists in exchange-traded or centrally cleared derivatives with respect to initial and variation margin
that is held in a broker’s customer account. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy
and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients and such shortfall is remedied by the CCP or otherwise, U.S. bankruptcy laws will typically
allocate that shortfall on a pro-rata basis across all the clearing broker’s customers (including the Fund), potentially resulting in losses to the Fund.
In order to better define its
contractual rights and to secure rights that will help the Fund mitigate its counterparty risk, the Fund may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (ISDA Master Agreement)
or similar agreement with its derivatives counterparties. An ISDA Master Agreement is an agreement between the Fund and a counterparty that governs over-the-counter derivatives and foreign exchange forward contracts
and contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset
with the counterparty certain derivative instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically
permit a single net payment in the event of default (close-out netting), including the bankruptcy or insolvency of the counterparty. Note, however, that bankruptcy or insolvency laws of a particular jurisdiction may
impose restrictions on or prohibitions against the right of offset or netting in bankruptcy, insolvency or other events.
| Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 | 73 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Collateral (margin) requirements
differ by type of derivative. Margin requirements are established by the clearinghouse or CCP for exchange-traded and centrally cleared derivatives. Brokers can ask for margin in excess of the minimum in certain
circumstances. Collateral terms for most over-the-counter derivatives are subject to regulatory requirements to exchange variation margin with trading counterparties and may have contract specific margin terms as
well. For over-the-counter derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the marked-to-market amount for each transaction under such agreement and
comparing that amount to the value of any variation margin currently pledged by the Fund and/or the counterparty. Generally, the amount of collateral due from or to a party has to exceed a minimum transfer amount
threshold (e.g., $250,000) before a transfer has to be made. To the extent amounts due to the Fund from its counterparties are not fully collateralized, contractually or otherwise, the Fund bears the risk of loss from
counterparty nonperformance. The Fund may also pay interest expense on cash collateral received from the broker. Any interest expense paid by the Fund is shown on the Statement of Operations. The Fund attempts to
mitigate counterparty risk by only entering into agreements with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those
counterparties.
Certain ISDA Master Agreements
allow counterparties of over-the-counter derivatives transactions to terminate derivatives contracts prior to maturity in the event the Fund’s net asset value declines by a stated percentage over a specified
time period or if the Fund fails to meet certain terms of the ISDA Master Agreement, which would cause the Fund to accelerate payment of any net liability owed to the counterparty. The Fund also has termination
rights if the counterparty fails to meet certain terms of the ISDA Master Agreement. In determining whether to exercise such termination rights, the Fund would consider, in addition to counterparty credit risk,
whether termination would result in a net liability owed from the counterparty.
For financial reporting purposes,
the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statement of Assets and Liabilities.
Futures contracts
Futures contracts are
exchange-traded and represent commitments for the future purchase or sale of an asset at a specified price on a specified date. The Fund bought and sold futures contracts to produce incremental earnings, to manage the
duration and yield curve exposure of the Fund versus the benchmark and to manage exposure to movements in interest rates. These instruments may be used for other purposes in future periods. Upon entering into futures
contracts, the Fund bears risks that it may not achieve the anticipated benefits of the futures contracts and may realize a loss. Additional risks include counterparty credit risk, the possibility of an illiquid
market, and that a change in the value of the contract or option may not correlate with changes in the value of the underlying asset.
Upon entering into a futures
contract, the Fund deposits cash or securities with the broker, known as a futures commission merchant (FCM), in an amount sufficient to meet the initial margin requirement. The initial margin deposit must be
maintained at an established level over the life of the contract. Cash deposited as initial margin is recorded in the Statement of Assets and Liabilities as margin deposits. Securities deposited as initial margin are
designated in the Portfolio of Investments. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily change in the contract value and are
recorded as variation margin receivable or payable and are offset in unrealized gains or losses. The Fund generally expects to earn interest income on its margin deposits. The Fund recognizes a realized gain or loss
when the contract is closed or expires. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities.
Swap contracts
Swap contracts are negotiated in
the over-the-counter market and may be entered into as a bilateral contract or centrally cleared (centrally cleared swap contract). In a centrally cleared swap contract, immediately following execution of the swap
contract with a broker, the swap contract is novated to a central counterparty (the CCP) and the CCP becomes the Fund’s counterparty to the centrally cleared swap contract. The Fund is required to deposit
initial margin with the futures commission merchant (FCM), which pledges it through to the CCP in the form of cash or securities in an amount that varies depending on the size and risk profile of the particular swap
contract. Securities deposited as initial margin are designated in the Portfolio of Investments and cash deposited is recorded in the Statement of Assets and Liabilities as margin deposits. For a bilateral swap
contract, the Fund has credit exposure to the broker, but exchanges daily variation margin with the broker based on the mark-to-market value of the swap contract to minimize that exposure. For centrally cleared swap
contracts, the Fund has
| 74 | Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
minimal credit exposure to the FCM because the CCP
stands between the Fund and the relevant buyer/seller on the other side of the contract. Swap contracts are marked-to-market daily and changes in value are recorded as unrealized appreciation (depreciation). The daily
change in valuation of centrally cleared swap contracts, if any, is recorded as a receivable or payable for variation margin in the Statement of Assets and Liabilities.
Entering into these contracts
involves, to varying degrees, elements of interest, liquidity and counterparty credit risk in excess of the amounts recognized in the Statement of Assets and Liabilities. Such risks involve the possibility that there
may be unfavorable changes in interest rates, market conditions or other conditions, that it may be difficult to initiate a swap transaction or liquidate a position at an advantageous time or price which may result in
significant losses, and that the FCM or CCP may not fulfill its obligation under the contract.
Credit default swap contracts
The Fund entered into credit
default swap contracts to increase or decrease its credit exposure to an index and to manage credit risk exposure. These instruments may be used for other purposes in future periods. Credit default swap contracts are
transactions in which one party pays fixed periodic payments to a counterparty in consideration for an agreement from the counterparty to make a specific payment should a specified credit event(s) take place. Although
specified credit events are contract specific, credit events are typically bankruptcy, failure to pay, restructuring, obligation acceleration, obligation default, or repudiation/moratorium.
As the purchaser of a credit
default swap contract, the Fund purchases protection by paying a periodic interest rate on the notional amount to the counterparty. The interest amount is accrued daily as a component of unrealized appreciation
(depreciation) and is recorded as a realized loss upon payment. If a credit event as specified in the contract occurs, the Fund may have the option either to deliver the reference obligation to the seller in exchange
for a cash payment of its par amount, or to receive a net cash settlement equal to the par amount less an agreed-upon value of the reference obligation as of the date of the credit event. The difference between the
value of the obligation or cash delivered and the notional amount received will be recorded as a realized gain (loss).
As the seller of a credit default
swap contract, the Fund sells protection to a buyer and will generally receive a periodic interest rate on a notional amount. The interest amount is accrued daily as a component of unrealized appreciation
(depreciation) and is recorded as a realized gain upon receipt of the payment. If a credit event as specified in the contract with the counterparty occurs, the Fund may either be required to accept the reference
obligation from the buyer in exchange for a cash payment of its notional amount, or to pay the buyer a net cash settlement equal to the notional amount less an agreed-upon value of the reference obligation (recovery
value) as of the date of the credit event. The difference between the value of the obligation or cash received and the notional amount paid will be recorded as a realized gain (loss). The maximum potential amount of
undiscounted future payments the Fund could be required to make as the seller of protection under a credit default swap contract is equal to the notional amount of the reference obligation. These potential amounts may
be partially offset by any recovery values of the respective reference obligations or upfront receipts upon entering into the agreement. The notional amounts and market values of all credit default swap contracts in
which the Fund is the seller of protection, if any, are disclosed in the Credit Default Swap Contracts Outstanding schedule following the Portfolio of Investments.
As a protection seller, the Fund
bears the risk of loss from the credit events specified in the contract with the counterparty. For credit default swap contracts on credit indices, quoted market prices and resulting market values serve as an
indicator of the current status of the payment/performance risk. Increasing market values, in absolute terms when compared to the notional amount of the swap, represent a deterioration of the reference entity’s
credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the contract.
Any upfront payment or receipt by
the Fund upon entering into a credit default swap contract is recorded as an asset or liability, respectively, and amortized daily as a component of realized gain (loss) in the Statement of Operations. Credit default
swap contracts are valued daily, and the change in value is recorded as unrealized appreciation (depreciation) until the termination of the swap, at which time a realized gain (loss) is recorded.
| Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 | 75 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Credit default swap contracts can
involve greater risks than if a fund had invested in the reference obligation directly since, in addition to general market risks, credit default swaps are subject to counterparty credit risk, leverage risk, hedging
risk, correlation risk and liquidity risk.
Effects of derivative transactions in
the financial statements
The following tables are intended
to provide additional information about the effect of derivatives on the financial statements of the Fund, including: the fair value of derivatives by risk category and the location of those fair values in the
Statement of Assets and Liabilities; and the impact of derivative transactions over the period in the Statement of Operations, including realized and unrealized gains (losses). The derivative instrument schedules
following the Portfolio of Investments present additional information regarding derivative instruments outstanding at the end of the period, if any.
The following table is a summary of
the fair value of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) at December 31, 2021:
| Asset derivatives | ||
| Risk exposure category | Statement of assets and liabilities location | Fair value ($) |
| Credit risk | Component of total distributable earnings (loss) — unrealized appreciation on swap contracts | 84,192* |
| Interest rate risk | Component of total distributable earnings (loss) — unrealized appreciation on futures contracts | 254,445* |
| Total | 338,637 |
| Liability derivatives | ||
| Risk exposure category | Statement of assets and liabilities location | Fair value ($) |
| Interest rate risk | Component of total distributable earnings (loss) — unrealized depreciation on futures contracts | 242,132* |
| * | Includes cumulative appreciation (depreciation) as reported in the tables following the Portfolio of Investments. Only the current day’s variation margin is reported in receivables or payables in the Statement of Assets and Liabilities. |
The following table indicates the
effect of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) in the Statement of Operations for the year ended December 31, 2021:
| 76 | Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
The following table is a summary
of the average outstanding volume by derivative instrument for the year ended December 31, 2021:
| Derivative instrument | Average notional amounts ($)* |
| Futures contracts — long | 45,992,770 |
| Futures contracts — short | 29,034,785 |
| Credit default swap contracts — sell protection | 20,250,000 |
| * | Based on the ending quarterly outstanding amounts for the year ended December 31, 2021. |
Asset- and mortgage-backed
securities
The Fund may invest in asset-backed
and mortgage-backed securities. The maturity dates shown represent the original maturity of the underlying obligation. Actual maturity may vary based upon prepayment activity on these obligations. All, or a portion,
of the obligation may be prepaid at any time because the underlying asset may be prepaid. As a result, decreasing market interest rates could result in an increased level of prepayment. An increased prepayment rate
will have the effect of shortening the maturity of the security. Unless otherwise noted, the coupon rates presented are fixed rates.
Delayed delivery securities
The Fund may trade securities on
other than normal settlement terms, including securities purchased or sold on a “when-issued” or "forward commitment" basis. This may increase risk to the Fund since the other party to the transaction may
fail to deliver, which could cause the Fund to subsequently invest at less advantageous prices. The Fund designates cash or liquid securities in an amount equal to the delayed delivery commitment.
To be announced securities
The Fund may trade securities on a
To Be Announced (TBA) basis. As with other delayed-delivery transactions, a seller agrees to issue a TBA security at a future date. However, the seller does not specify the particular securities to be delivered.
Instead, the Fund agrees to accept any security that meets specified terms.
In some cases, Master Securities
Forward Transaction Agreements (MSFTAs) may be used to govern transactions of certain forward-settling agency mortgage-backed securities, such as delayed-delivery and TBAs, between the Fund and counterparty. The MSFTA
maintains provisions for, among other things, initiation and confirmation, payment and transfer, events of default, termination, and maintenance of collateral relating to such transactions.
Mortgage dollar roll transactions
The Fund may enter into mortgage
“dollar rolls” in which the Fund sells securities for delivery in the current month and simultaneously contracts with the same counterparty to repurchase similar but not identical securities (same type,
coupon and maturity) on a specified future date. During the roll period, the Fund loses the right to receive principal and interest paid on the securities sold. However, the Fund may benefit because it receives
negotiated amounts in the form of reductions of the purchase price for the future purchase plus the interest earned on the cash proceeds of the securities sold until the settlement date of the forward purchase. The
Fund records the incremental difference between the forward purchase and sale of each forward roll as a realized gain or loss. Unless any realized gains exceed the income, capital appreciation, and gain or loss due to
mortgage prepayments that would have been realized on the securities sold as part of the mortgage dollar roll, the use of this technique may diminish the investment performance of the Fund compared to what the
performance would have been without the use of mortgage dollar rolls. All cash proceeds will be invested in instruments that are permissible investments for the Fund. The Fund identifies cash or liquid securities in
an amount equal to the forward purchase price.
For financial reporting and tax
purposes, the Fund treats “to be announced” mortgage dollar rolls as two separate transactions, one involving the purchase of a security and a separate transaction involving a sale. These transactions may
increase the Fund’s portfolio turnover rate. The Fund does not currently enter into mortgage dollar rolls that are accounted for as financing transactions.
| Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 | 77 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Mortgage dollar rolls involve the
risk that the market value of the securities the Fund is obligated to repurchase may decline below the repurchase price, or that the counterparty may default on its obligations.
Treasury inflation protected
securities
The Fund may invest in treasury
inflation protected securities (TIPS). The principal amount of TIPS is adjusted periodically and is increased for inflation or decreased for deflation based on a monthly published index. These adjustments are recorded
as interest income in the Statement of Operations. Coupon payments are based on the adjusted principal at the time the interest is paid.
Interest only and principal only
securities
The Fund may invest in Interest
Only (IO) or Principal Only (PO) securities. IOs are stripped securities entitled to receive all of the security’s interest, but none of its principal. IOs are particularly sensitive to changes in interest rates
and therefore subject to greater fluctuations in price than typical interest bearing debt securities. IOs are also subject to credit risk because the Fund may not receive all or part of the interest payments if the
issuer, obligor, guarantor or counterparty defaults on its obligation. Payments received for IOs are included in interest income on the Statement of Operations. Because no principal will be received at the maturity of
an IO, adjustments are made to the cost of the security on a monthly basis until maturity. These adjustments are included in interest income on the Statement of Operations. POs are stripped securities entitled to
receive the principal from the underlying obligation, but not the interest. POs are particularly sensitive to changes in interest rates and therefore are subject to fluctuations in price. POs are also subject to
credit risk because the Fund may not receive all or part of its principal if the issuer, obligor, guarantor or counterparty defaults on its obligation. The Fund may also invest in IO or PO stripped mortgage-backed
securities. Payments received for POs are treated as reductions to the cost and par value of the securities.
Offsetting of assets and
liabilities
The following table presents the
Fund’s gross and net amount of assets and liabilities available for offset under netting arrangements as well as any related collateral received or pledged by the Fund as of December 31, 2021:
| Citi ($) | |
| Assets | |
| Centrally cleared credit default swap contracts (a) | 24,607 |
| Total financial and derivative net assets | 24,607 |
| Total collateral received (pledged) (b) | - |
| Net amount (c) | 24,607 |
| (a) | Centrally cleared swaps are included within payable/receivable for variation margin on the Statement of Assets and Liabilities. |
| (b) | In some instances, the actual collateral received and/or pledged may be more than the amount shown due to overcollateralization. |
| (c) | Represents the net amount due from/(to) counterparties in the event of default. |
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
Income recognition
Interest income is recorded on an
accrual basis. Market premiums and discounts, including original issue discounts, are amortized and accreted, respectively, over the expected life of the security on all debt securities, unless otherwise noted. The
Fund classifies gains and losses realized on prepayments received on mortgage-backed securities as adjustments to interest income. For convertible securities, premiums attributable to the conversion feature are
not amortized.
The Fund may place a debt security
on non-accrual status and reduce related interest income when it becomes probable that the interest will not be collected and the amount of uncollectible interest can be reasonably estimated. A defaulted debt security
is removed from non-accrual status when the issuer resumes interest payments or when collectability of interest is reasonably assured.
| 78 | Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Dividend income is recorded on the
ex-dividend date.
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
Federal income tax status
The Fund intends to qualify each
year as a regulated investment company under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its investment company taxable income and net capital gain, if any, for its
tax year, and as such will not be subject to federal income taxes. In addition, because the Fund meets the exception under Internal Revenue Code Section 4982(f), the Fund expects not to be subject to federal excise
tax. Therefore, no federal income or excise tax provision is recorded.
Foreign taxes
The Fund may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries, as applicable, based upon its current interpretation of tax rules
and regulations that exist in the markets in which it invests.
Realized gains in certain countries
may be subject to foreign taxes at the Fund level, based on statutory rates. The Fund accrues for such foreign taxes on realized and unrealized gains at the appropriate rate for each jurisdiction, as applicable. The
amount, if any, is disclosed as a liability on the Statement of Assets and Liabilities.
Distributions to subaccounts
Distributions to the subaccounts of
Contracts, Qualified Plans and Qualified Investors are recorded at the close of business on the record date and are payable on the first business day following the record date. Dividends from net investment income, if
any, are declared and distributed annually. Capital gain distributions, when available, will be made annually. However, an additional capital gain distribution may be made during the fiscal year in order to comply
with the Internal Revenue Code, as applicable to registered investment companies. Income distributions and capital gain distributions are determined in accordance with federal income tax regulations, which may differ
from GAAP. All dividends and distributions are reinvested in additional shares of the applicable share class of the Fund at the net asset value as of the ex-dividend date of the distribution.
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Under the Management Agreement, the
Investment Manager provides the Fund with investment research and advice, as well as administrative and accounting
| Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 | 79 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
services. The Investment Manager is responsible
for the ultimate oversight of investments made by the Fund. The Fund’s subadvisers (see Subadvisory agreements below) have the primary responsibility for the day-to-day portfolio management of the Fund. The
management services fee is an annual fee that is equal to a percentage of the Fund’s daily net assets that declines from 0.50% to 0.34% as the Fund’s net assets increase. The effective management services
fee rate for the year ended December 31, 2021 was 0.46% of the Fund’s average daily net assets.
Subadvisory agreements
The Investment Manager has entered
into Subadvisory Agreements with Allspring Global Investments, LLC and J.P. Morgan Investment Management Inc., each of which subadvises a portion of the assets of the Fund. Prior to November 1, 2021, Allspring Global
Investments, LLC was known as Wells Capital Management Incorporated. New investments in the Fund, net of redemptions, are allocated in accordance with the Investment Manager’s determination. Each
subadviser’s proportionate share of investments in the Fund will vary due to market fluctuations. The Investment Manager compensates each subadviser to manage the investment of the Fund’s assets.
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. Under a Deferred Compensation Plan (the
Deferred Plan), these members of the Board of Trustees may elect to defer payment of up to 100% of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of
certain funds managed by the Investment Manager. The Fund’s liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Deferred Plan. All
amounts payable under the Deferred Plan constitute a general unsecured obligation of the Fund. The expense for the Deferred Plan, which includes Trustees’ fees deferred during the current period as well as any
gains or losses on the Trustees’ deferred compensation balances as a result of market fluctuations, is included in "Compensation of board members" on the Statement of Operations.
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
Service fees
The Fund has entered into a
Shareholder Services Agreement with Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial. Under this
agreement, the Fund pays a service fee equal to the payments made by the Transfer Agent to Participating Insurance Companies and other financial intermediaries (together, Participating Organizations) for services each
such Participating Organization provides to its clients, customers and participants that are invested directly or indirectly in the Fund, up to a cap approved by the Board of Trustees from time to time. The effective
service fee rate for the year ended December 31, 2021, was 0.00% of the Fund’s average daily net assets.
The Transfer Agent may retain as
compensation for its services revenues from fees for wire, telephone and redemption orders, account transcripts due the Transfer Agent from Fund shareholders and interest (net of bank charges) earned with respect to
balances in accounts the Transfer Agent maintains in connection with its services to the Fund.
Distribution and/or service fees
The Fund has an agreement with the
Distributor, an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution services. Under a Plan and Agreement of Distribution, the Fund pays a fee at an annual rate
of up to 0.25% of the Fund’s average daily net assets attributable to Class 2 shares. The Fund pays no distribution and service fees for Class 1 shares.
| 80 | Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Expenses waived/reimbursed by the
Investment Manager and its affiliates
The Investment Manager and certain
of its affiliates have contractually agreed to waive fees and/or reimburse expenses (excluding certain fees and expenses described below) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, so that the Fund’s net operating expenses, after giving effect to fees waived/expenses reimbursed and any balance credits and/or overdraft charges from the Fund’s
custodian, do not exceed the following annual rate(s) as a percentage of the classes’ average daily net assets:
| May 1, 2021 through April 30, 2022 | Prior to May 1, 2021 | |
| Class 1 | 0.54% | 0.56% |
| Class 2 | 0.79 | 0.81 |
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), expenses associated with investments in affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange-traded funds), transaction costs and
brokerage commissions, costs related to any securities lending program, dividend expenses associated with securities sold short, inverse floater program fees and expenses, transaction charges and interest on borrowed
money, interest, costs associated with certain shareholder meetings, infrequent and/or unusual expenses and any other expenses the exclusion of which is specifically approved by the Board of Trustees. This
agreement may be modified or amended only with approval from the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements
described above are not recoverable by the Investment Manager or its affiliates in future periods.
Note 4. Federal tax
information
The timing and character of
income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP because of temporary or permanent book to tax differences.
At December 31, 2021, these
differences were primarily due to differing treatment for deferral/reversal of wash sale losses, trustees’ deferred compensation, derivative investments, tax straddles, principal and/or interest of fixed income
securities and distribution reclassifications. To the extent these differences were permanent, reclassifications were made among the components of the Fund’s net assets. Temporary differences do not require
reclassifications.
The following reclassifications
were made:
| Undistributed net investment income ($) | Accumulated net realized gain ($) | Paid in capital ($) |
| 1,239,807 | (1,239,807) | — |
Net investment income (loss) and
net realized gains (losses), as disclosed in the Statement of Operations, and net assets were not affected by this reclassification.
The tax character of distributions
paid during the years indicated was as follows:
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | ||||
| Ordinary income ($) | Long-term capital gains ($) | Total ($) | Ordinary income ($) | Long-term capital gains ($) | Total ($) |
| 195,554,175 | 44,621,153 | 240,175,328 | 140,513,538 | — | 140,513,538 |
Short-term capital gain
distributions, if any, are considered ordinary income distributions for tax purposes.
| Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 | 81 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
At December 31, 2021, the
components of distributable earnings on a tax basis were as follows:
| Undistributed ordinary income ($) | Undistributed long-term capital gains ($) | Capital loss carryforwards ($) | Net unrealized appreciation ($) |
| 88,245,149 | 38,623,125 | — | 36,381,610 |
At December 31, 2021, the cost of
all investments for federal income tax purposes along with the aggregate gross unrealized appreciation and depreciation based on that cost was:
| Federal tax cost ($) | Gross unrealized appreciation ($) | Gross unrealized (depreciation) ($) | Net unrealized appreciation ($) |
| 6,409,180,820 | 89,742,284 | (53,360,674) | 36,381,610 |
Tax cost of investments and
unrealized appreciation/(depreciation) may also include timing differences that do not constitute adjustments to tax basis.
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Note 5. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $17,026,696,811 and $15,611,472,859, respectively, for the year ended December 31, 2021, of which
$13,718,880,321 and $13,339,057,252, respectively, were U.S. government securities. The amount of purchase and sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 6. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes
referred to as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
Note 7. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund’s activity in the
Interfund Program during the year ended December 31, 2021 was as follows:
| Borrower or lender | Average loan balance ($) | Weighted average interest rate (%) | Number of days with outstanding loans |
| Lender | 2,571,429 | 0.66 | 14 |
| 82 | Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Interest income earned by the Fund
is recorded as Interfund lending in the Statement of Operations. The Fund had no outstanding interfund loans at December 31, 2021.
Note 8. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to an October 28, 2021 amendment and restatement, the credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment
Manager or an affiliated investment manager, severally and not jointly, permits collective borrowings up to $950 million. Interest is currently charged to each participating fund based on its borrowings at a rate
equal to the higher of (i) the federal funds effective rate, (ii) the secured overnight financing rate plus 0.11448% and (iii) the overnight bank funding rate, plus in each case, 1.00%. Each borrowing under the credit
facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The
commitment fee is included in other expenses in the Statement of Operations. This agreement expires annually in October unless extended or renewed. Prior to the October 28, 2021 amendment and restatement, the Fund had
access to a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. which permitted collective borrowings up to $950 million. Interest was
charged to each participating fund based on its borrowings at a rate equal to the higher of (i) the federal funds effective rate, (ii) the one-month London Interbank Offered Rate (LIBOR) rate and (iii) the overnight
bank funding rate, plus in each case, 1.25%.
The Fund had no borrowings during
the year ended December 31, 2021.
Note 9. Significant
risks
Credit risk
Credit risk is the risk that the
value of debt instruments in the Fund’s portfolio may decline because the issuer defaults or otherwise becomes unable or unwilling, or is perceived to be unable or unwilling, to honor its financial obligations,
such as making payments to the Fund when due. Credit rating agencies assign credit ratings to certain debt instruments to indicate their credit risk. Lower-rated or unrated debt instruments held by the Fund may
present increased credit risk as compared to higher-rated debt instruments.
Interest rate risk
Interest rate risk is the risk of
losses attributable to changes in interest rates. In general, if prevailing interest rates rise, the values of debt instruments tend to fall, and if interest rates fall, the values of debt instruments tend to rise.
Actions by governments and central banking authorities can result in increases or decreases in interest rates. Higher periods of inflation could lead such authorities to raise interest rates. Increasing interest rates
may negatively affect the value of debt securities held by the Fund, resulting in a negative impact on the Fund’s performance and net asset value per share. In general, the longer the maturity or duration of a
debt security, the greater its sensitivity to changes in interest rates. The Fund is subject to the risk that the income generated by its investments may not keep pace with inflation.
Liquidity risk
Liquidity risk is the risk
associated with a lack of marketability of investments which may make it difficult to sell the investment at a desirable time or price. Changing regulatory, market or other conditions or environments (for example, the
interest rate or credit environments) may adversely affect the liquidity of the Fund’s investments. The Fund may have to accept a lower selling price for the holding, sell other investments, or forego another,
more appealing investment opportunity. Generally, the less liquid the market at the time the Fund sells a portfolio investment, the greater the risk of loss or decline of value to the Fund. A less liquid market can
lead to an increase in Fund redemptions, which may negatively impact Fund performance and net asset value per share, including, for example, if the Fund is forced to sell securities in a down market.
| Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 | 83 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Market risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
The coronavirus disease 2019 and
its variants (COVID-19) pandemic has resulted in, and may continue to result in, significant global economic and societal disruption and market volatility due to disruptions in market access, resource availability,
facilities operations, imposition of tariffs, export controls and supply chain disruption, among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement
and loss in human and other resources. The uncertainty surrounding the magnitude, duration, reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental
authorities or other third parties, present unknowns that are yet to unfold. The impacts, as well as the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and
pandemics that may arise in the future – could negatively affect global economies and markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in
emerging market countries may be greater due to generally less established healthcare systems, governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing
political, social and economic risks in certain countries or globally. The disruptions caused by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively
impact the Fund’s ability to achieve its investment objectives. Any such event(s) could have a significant adverse impact on the value and risk profile of the Fund.
Mortgage- and other asset-backed
securities risk
The value of any mortgage-backed
and other asset-backed securities including collateralized debt obligations, if any, held by the Fund may be affected by, among other things, changes or perceived changes in: interest rates; factors concerning the
interests in and structure of the issuer or the originator of the mortgages or other assets; the creditworthiness of the entities that provide any supporting letters of credit, surety bonds or other credit enhancements;
or the market’s assessment of the quality of underlying assets. Payment of principal and interest on some mortgage-backed securities (but not the market value of the securities themselves) may be guaranteed by
the full faith and credit of a particular U.S. Government agency, authority, enterprise or instrumentality, and some, but not all, are also insured or guaranteed by the U.S. Government. Mortgage-backed securities
issued by non-governmental issuers (such as commercial banks, savings and loan institutions, private mortgage insurance companies, mortgage bankers and other secondary market issuers) may entail greater risk than
obligations guaranteed by the U.S. Government. Mortgage- and other asset-backed securities are subject to liquidity risk and prepayment risk. A decline or flattening of housing values may cause delinquencies in
mortgages (especially sub-prime or non-prime mortgages) underlying mortgage-backed securities and thereby adversely affect the ability of the mortgage-backed securities issuer to make principal and/or interest
payments to mortgage-backed securities holders, including the Fund. Rising or high interest rates tend to extend the duration of mortgage- and other asset-backed securities, making their prices more volatile and more
sensitive to changes in interest rates.
Shareholder concentration risk
At December 31, 2021, affiliated
shareholders of record owned 100.0% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its
| 84 | Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
liquid positions, which may result in Fund losses
and the Fund holding a higher percentage of less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Note 10. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
Note 11. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in
connection with the conduct of their business activities. Ameriprise Financial believes that the Fund is not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject
of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with
the Fund. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (SEC) on legal and regulatory matters that relate to
Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that
these matters, or the adverse publicity associated with them, will not result in increased Fund redemptions, reduced sale of Fund shares or other adverse consequences to the Fund. Further, although we believe
proceedings are not likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines,
penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial or one or more of its affiliates that provides services to
the Fund.
| Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 | 85 |
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees of Columbia
Funds Variable Series Trust II and Shareholders of Variable Portfolio – Partners Core Bond Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of Variable Portfolio – Partners Core Bond Fund (one of the funds constituting Columbia Funds Variable Series Trust II, referred to
hereafter as the "Fund") as of December 31, 2021, the related statement of operations for the year ended December 31, 2021, the statement of changes in net assets for each of the two years in the period ended December
31, 2021, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2021 (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, 2021, 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, 2021 and the financial highlights for each of the five years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in the
United States of America.
Basis for Opinion
These financial statements are the
responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these
financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2021 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.
/s/PricewaterhouseCoopers LLP
Minneapolis, Minnesota
February 22, 2022
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| 86 | Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 |
Federal Income Tax
Information
(Unaudited)
The Fund hereby designates the
following tax attributes for the fiscal year ended December 31, 2021.
| Capital gain dividend | |
| $40,974,996 |
Capital gain dividend. The Fund
designates as a capital gain dividend the amount reflected above, or if subsequently determined to be different, the net capital gain of such fiscal period.
TRUSTEES AND
OFFICERS
The Board oversees the Fund’s
operations and appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following table provides basic biographical information about the Fund’s Trustees as
of the printing of this report, including their principal occupations during the past five years, although specific titles for individuals may have varied over the period. The year set forth beneath Length of Service
in the table below is the year in which the Trustee was first appointed or elected as Trustee to any Fund currently in the Columbia Funds Complex or a predecessor thereof. Under current Board policy, each Trustee
generally serves until December 31 of the year such Trustee turns seventy-five (75).
Independent trustees
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| George S. Batejan c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1953 | Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 176 | Former Chairman of the Board, NICSA (National Investment Company Services Association) (Executive Committee, Nominating Committee and Governance Committee), 2014-2016; former Director, Intech Investment Management, 2011-2016; former Board Member, Metro Denver Chamber of Commerce, 2015-2016; former Advisory Board Member, University of Colorado Business School, 2015-2018 |
| Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 | 87 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Kathleen Blatz c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2006 | Attorney, specializing in arbitration and mediation; Chief Justice, Minnesota Supreme Court, 1998-2006; Associate Justice, Minnesota Supreme Court, 1996-1998; Fourth Judicial District Court Judge, Hennepin County, 1994-1996; Attorney in private practice and public service, 1984-1993; State Representative, Minnesota House of Representatives, 1979-1993, which included service on the Tax and Financial Institutions and Insurance Committees; Member and Interim Chair, Minnesota Sports Facilities Authority, January 2017-July 2017; Interim President and Chief Executive Officer, Blue Cross Blue Shield of Minnesota (health care insurance), February-July 2018, April-October 2021 | 176 | Former Trustee, Blue Cross Blue Shield of Minnesota, 2009-2021 (Chair of the Business Development Committee, 2014-2017; Chair of the Governance Committee, 2017-2019); former Member and Chair of the Board, Minnesota Sports Facilities Authority, January 2017-July 2017; former Director, Robina Foundation, 2009-2020 (Chair, 2014-2020); Director, Schulze Family Foundation, since 2021 |
| Pamela G. Carlton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2007 | President, Springboard — Partners in Cross Cultural Leadership (consulting company) since 2003; Managing Director of US Equity Research, JP Morgan Chase, 1999-2003; Director of US Equity Research, Chase Asset Management, 1996-1999; Co-Director Latin America Research, 1993-1996, COO Global Research, 1992-1996, Co-Director of US Research, 1991-1992, Investment Banker, Morgan Stanley, 1982-1991, Morgan Stanley; Attorney, Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 176 | Trustee, New York Presbyterian Hospital Board (Executive Committee and Chair of People Committee) since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee); Director, Apollo Commercial Real Estate Finance, Inc. since 2021; the Governing Council of the Independent Directors Council (IDC), since 2021 |
| Janet Langford Carrig c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1957 | Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 174 | Director, EQT Corporation (natural gas producer) since 2019; Director, Whiting Petroleum Corporation (independent oil and gas company) since 2020 |
| J. Kevin Connaughton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2020 | Member, FINRA National Adjudicatory Council since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Consultant to Independent Trustees of CFVIT and CFST I from March 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Managing Director and General Manager of Mutual Fund Products, Columbia Management Investment Advisers, LLC, May 2010-February 2015; President, Columbia Funds, 2008-2015; and senior officer of Columbia Funds and affiliated funds, 2003-2015 | 174 | Former Director, The Autism Project, March 2015-December 2021; former Member of the Investment Committee, St. Michael’s College, November 2015-February 2020; former Trustee, St. Michael’s College, June 2017-September 2019; former Trustee, New Century Portfolios, January 2015-December 2017 |
| 88 | Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Olive M. Darragh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since 2020 | Managing Director of Darragh Inc. (strategy and talent management consulting firm) since 2010; Founder and CEO, Zolio, Inc. (investment management talent identification platform) since 2004; Consultant to Independent Trustees of CFVIT and CFST I from June 2019 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 2001-2004 | 174 | Former Director, University of Edinburgh Business School (Member of US Board); former Director, Boston Public Library Foundation |
| Patricia M. Flynn c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1950 | Trustee since 2004 | Trustee Professor of Economics and Management, Bentley University since 1976 (also teaches and conducts research on corporate governance); Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 176 | Trustee, MA Taxpayers Foundation since 1997; Board of Governors, Innovation Institute, MA Technology Collaborative, 2010-2020; former Board of Directors, The MA Business Roundtable, 2003-2019 |
| Brian J. Gallagher c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 176 | Trustee, Catholic Schools Foundation since 2004 |
| Douglas A. Hacker c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1955 | Co-Chair since 2021; Chair of CFST I and CFVIT since 2014; Trustee of CFST I and CFVIT since 1996 and CFST, CFST II, CFVST II, CET I and CET II since 2021 | Independent business executive since May 2006; Executive Vice President – Strategy of United Airlines, December 2002 - May 2006; President of UAL Loyalty Services (airline marketing company), September 2001-December 2002; Executive Vice President and Chief Financial Officer of United Airlines, July 1999-September 2001 | 176 | Director, Spartan Nash Company (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing); former Director, Nash Finch Company (food distributor), 2005-2013; former Director, SeaCube Container Leasing Ltd. (container leasing), 2010-2013; and former Director, Travelport Worldwide Limited (travel information technology), 2014-2019 |
| Nancy T. Lukitsh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1956 | Trustee since 2011 | Senior Vice President, Partner and Director of Marketing, Wellington Management Company, LLP (investment adviser), 1997-2010; Chair, Wellington Management Portfolios (commingled non-U.S. investment pools), 2007 -2010; Director, Wellington Trust Company, NA and other Wellington affiliates, 1997-2010 | 174 | None |
| Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 | 89 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| David M. Moffett c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2011 | Retired; Consultant to Bridgewater and Associates | 174 | Director, CSX Corporation (transportation suppliers); Director, Genworth Financial, Inc. (financial and insurance products and services); Director, PayPal Holdings Inc. (payment and data processing services); Trustee, University of Oklahoma Foundation; former Director, eBay Inc. (online trading community), 2007-2015; and former Director, CIT Bank, CIT Group Inc. (commercial and consumer finance), 2010-2016 |
| Catherine James Paglia c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Co-Chair since 2021; Chair of CFST, CFST II, CFVST II, CET I and CET II since 2020; Trustee of CFST, CFST II and CFVST II since 2004 and CFST I and CFVIT since 2021 | Director, Enterprise Asset Management, Inc. (private real estate and asset management company) since September 1998; Managing Director and Partner, Interlaken Capital, Inc., 1989-1997; Vice President, 1982-1985, Principal, 1985-1987, Managing Director, 1987-1989, Morgan Stanley; Vice President, Investment Banking, 1980-1982, Associate, Investment Banking, 1976-1980, Dean Witter Reynolds, Inc. | 176 | Director, Valmont Industries, Inc. (irrigation systems manufacturer) since 2012; Trustee, Carleton College (on the Investment Committee); Trustee, Carnegie Endowment for International Peace (on the Investment Committee) |
| Minor M. Shaw c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1947 | Trustee since 2003 | President, Micco LLC (private investments) since 2011; President, Micco Corp. (family investment business), 1998-2011 | 176 | Director, Blue Cross Blue Shield of South Carolina (Chair of Compensation Committee) since April 2008; Trustee, Hollingsworth Funds (on the Investment Committee) since 2016 (previously Board Chair from 2016-2019); Former Advisory Board member, Duke Energy Corp., 2016-2020; Chair of the Duke Endowment; Chair of Greenville – Spartanburg Airport Commission; former Trustee, BofA Funds Series Trust (11 funds), 2003-2011; former Director, Piedmont Natural Gas, 2004-2016; former Director, National Association of Corporate Directors, Carolinas Chapter, 2013-2018; Chair, Daniel-Mickel Foundation since 1998 |
| 90 | Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Natalie A. Trunow c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1967 | Trustee since 2020 | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services), January 2016-January 2021; Non-executive Member of the Investment Committee and Valuation Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services), August 2018-January 2021; Advisor, Paradigm Asset Management, November 2016-December 2021; Consultant to Independent Trustees of CFVIT and CFST I from September 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Director of Investments/Consultant, Casey Family Programs, April 2016-November 2016; Senior Vice President and Chief Investment Officer, Calvert Investments, August 2008-January 2016; Section Head and Portfolio Manager, General Motors Asset Management, June 1997-August 2008 | 174 | Former Director, Investment Committee, Health Services for Children with Special Needs, Inc., 2012-2019; Director, Chair of Audit Committee, Consumer Credit Counseling Services (formerly Guidewell Financial Solutions), since 2019; Independent Director, Investment Committee and Valuation Committee, Sarona Asset Management, since 2019 |
| Sandra Yeager c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2017 | Retired; President and founder, Hanoverian Capital, LLC (SEC registered investment advisor firm), 2008-2016; Managing Director, DuPont Capital, 2006-2008; Managing Director, Morgan Stanley Investment Management, 2004-2006; Senior Vice President, Alliance Bernstein, 1990-2004 | 176 | Former Director, NAPE Education Foundation, October 2016-October 2020 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Fund Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I (CET I), Columbia ETF Trust II (CET II), Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Beckman, Gallagher and Hacker and Mses. Blatz, Carlton, Flynn, Paglia, Shaw and Yeager serve as Directors of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
Interested trustee affiliated with
Investment Manager*
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during the past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex overseen | Other directorships held by Trustee during the past five years |
| Daniel J. Beckman c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since November 2021(a) | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC (since April 2015); officer of Columbia Funds and affiliated funds since 2020. | 176 | Director, Ameriprise Trust Company, since October 2016; Director, Columbia Management Investment Distributors, Inc. since November 2018; Board of Governors, Columbia Wanger Asset Management, LLC since January 2022 |
| * | Interested person (as defined under the 1940 Act) by reason of being an officer, director, security holder and/or employee of the Investment Manager or Ameriprise Financial. |
| (a) | Mr. Beckman serves as the President and Principal Executive Officer of the Columbia Funds (since 2021). |
The Statement of Additional
Information has additional information about the Fund’s Board members and is available, without charge, upon request by calling 800.345.6611 or contacting your financial intermediary.
| Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 | 91 |
TRUSTEES AND OFFICERS (continued)
The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. The following table provides basic information about the Officers of the Fund, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Beckman, who is President and Principal Executive Officer, the Fund’s other officers are:
The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. The following table provides basic information about the Officers of the Fund, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Beckman, who is President and Principal Executive Officer, the Fund’s other officers are:
Fund officers
| 92 | Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Fund officers (continued)
Fund officers (continued)
| Name, address and year of birth | Position and year first appointed to position for any Fund in the Columbia Funds Complex or a predecessor thereof | Principal occupation(s) during past five years |
| Lyn Kephart-Strong 5228 Ameriprise Financial Center Minneapolis, MN 55474 1960 | Vice President (2015) | President, Columbia Management Investment Services Corp. since October 2014; Vice President & Resolution Officer, Ameriprise Trust Company since August 2009. |
Approval of Management
and Subadvisory
Agreements
Columbia Management Investment
Advisers, LLC (the Investment Manager, and together with its domestic and global affiliates, Columbia Threadneedle Investments), a wholly-owned subsidiary of Ameriprise Financial, Inc., serves as the investment
manager to Variable Portfolio - Partners Core Bond Fund (the “Fund”). On June 15, 2021, the Fund’s Board of Trustees (the “Board”), including a majority of the Board members who are not
interested persons of the Fund within the meaning of the Investment Company Act of 1940 (the “Independent Trustees”), upon the recommendation of the Investment Manager, unanimously approved the Subadvisory
Agreement (the “Subadvisory Agreement”) between the Investment Manager and Allspring Global Investments, LLC (“Allspring”), with respect to the Fund.
At meetings held on June 2, 2021,
June 4, 2021, and June 15, 2021, independent legal counsel to the Independent Trustees reviewed with the Board the legal standards for consideration by directors/trustees of advisory and subadvisory agreements and
referred to the various written materials and oral presentations received by the Board, its Contracts and Compliance Committees, and its Investment Oversight Committee subcommittees in connection with the
Board’s evaluation of Allspring’s proposed services.
The Trustees held discussions with
the Investment Manager and Allspring and reviewed and considered various written materials and oral presentations in connection with the evaluation of Allspring’s proposed services, including the reports from
management with respect to the fees and terms of the proposed Subadvisory Agreement and Allspring’s investment strategy/style and performance and from the Compliance Committee, with respect to the code of ethics
and compliance program of Allspring. In considering the Subadvisory Agreement, the Board reviewed, among other things:
| • | Terms of the Subadvisory Agreement; |
| • | Subadvisory fees payable by the Investment Manager under the Subadvisory Agreement; |
| • | Descriptions of various services proposed to be performed by Allspring under the Subadvisory Agreement, including portfolio management and portfolio trading practices; |
| • | Information regarding the Transaction and the experience and resources of Allspring, including information regarding senior management, portfolio managers, and other personnel; |
| • | Information regarding the capabilities of Allspring’s compliance program; and |
| • | The profitability of the Investment Manager and its affiliates from their relationships with the fund. |
Following an analysis and
discussion of the foregoing, and the factors identified below, the Board, including all of the Independent Trustees, approved the Subadvisory Agreement on June 15, 2021.
| Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 | 93 |
Approval of Management and Subadvisory
Agreements (continued)
Nature, Extent and Quality of Services
The Board considered its analysis
of the reports and presentations received by it, detailing the services proposed to be performed by Allspring as a subadviser for the Fund, as well as the history, expertise, resources and capabilities, and the
qualifications of the personnel of Allspring. The Board considered the diligence and selection process undertaken by the Investment Manager to select Allspring, including the Investment Manager’s rationale for
recommending Allspring, and the process for monitoring Allspring’s ongoing performance of services for the Fund. The Board observed that Allspring’s compliance program had been reviewed by the Fund’s
Chief Compliance Officer and was determined by him to be reasonably designed to prevent violation of the federal securities laws by the Fund. The Board also observed that information had been presented regarding
Allspring’s ability to carry out its responsibilities under the proposed Subadvisory Agreement. The Board also considered the information provided by management regarding the personnel, risk controls,
philosophy, and investment processes of Allspring. The Board also noted the presentation by Allspring to the Board’s Contracts Committee.
The Board also discussed the
acceptability of the terms of the proposed Subadvisory Agreement. Independent legal counsel noted that the proposed Subadvisory Agreement was generally similar in scope and form to subadvisory agreements applicable to
other subadvised Funds. The Board noted the Investment Manager’s representation that Allspring has experience subadvising registered mutual funds.
After reviewing these and related
factors, the Board concluded, within the context of their overall conclusions, that the expected nature, extent and quality of the services to be provided to the Fund supported the approval of the Subadvisory
Agreement.
Investment Performance of
Allspring
The Board observed
Allspring’s relevant performance results versus the Fund’s benchmark and versus peers over various periods.
After reviewing these and related
factors, the Board concluded, within the context of their overall conclusions, that the performance of Allspring, in light of other considerations, supported the approval of the Subadvisory Agreement.
Comparative Fees, Costs of
Services Provided and Profitability
The Board reviewed the proposed
level of subadvisory fees under the proposed Subadvisory Agreement, noting that the proposed subadvisory fees payable to Allspring would be paid by the Investment Manager and would not impact the fees paid by the
Fund. The Board observed that the proposed subadvisory fees for Allspring were within a reasonable range of subadvisory fees paid by the Investment Manager to the subadvisers of other Funds with similar strategies.
The Trustees observed that management fees, which were not proposed to change, remained within the range of other peers and that the Fund’s expense ratio also remained within the range of other peers.
Additionally, the Board considered
that no change was expected in the total profitability of the Investment Manager and its affiliates in connection with the hiring of Allspring. Because the Subadvisory Agreement was negotiated at arms-length by the
Investment Manager, which is responsible for payments to Allspring thereunder, the Board did not consider the profitability to Allspring from its relationship with the Fund.
After reviewing these and related
factors, the Board concluded, within the context of their overall conclusions, that the proposed level of subadvisory fees, anticipated costs of services provided and the expected profitability to the Investment
Manager and its affiliates from their relationships with the Fund supported the approval of the Subadvisory Agreement.
Economies of Scale
The Board also considered the
economies of scale that may be realized by the Investment Manager and its affiliates as the Fund grows and took note of the extent to which shareholders might also benefit from such growth. The Board considered, in
this regard, no expected change in profitability to the Investment Manager from its management agreement with the Fund as a result of the proposed Subadvisory Agreement. The Board took into account, in this regard,
the significant oversight services provided by the Investment Manager to the Fund. The Board also observed that fees to be paid under the
| 94 | Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 |
Approval of Management and Subadvisory
Agreements (continued)
Subadvisory Agreement would not impact fees paid
by the Fund (as subadvisory fees are paid by the Investment Manager and not the Fund). The Board observed that the Fund’s management agreement with the Investment Manager continues to provide for sharing of
economies of scale as management fees decline as assets increase at pre-established breakpoints.
Conclusion
The Board reviewed all of the
above considerations in reaching its decision to approve the Subadvisory Agreement. In reaching its conclusions, no single factor was determinative.
On June 15, 2021, the Board,
including all of the Independent Trustees, determined that fees payable under the Subadvisory Agreement appeared fair and reasonable in light of the services proposed to be provided and approved the Subadvisory
Agreement. On June 15, 2021, the Board, including all of the Independent Trustees, took into account these factors and approved the Subadvisory Agreement.
| Variable Portfolio – Partners Core Bond Fund | Annual Report 2021 | 95 |
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For Fund and other investment product prospectuses, which contain this and other important information, contact your
financial advisor or insurance representative. Please read the prospectus carefully before you invest. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved. Columbia Management Investment Distributors, Inc., 290 Congress Street, Boston, MA 02210
© 2022 Columbia Management Investment
Advisers, LLC.
C-3025 AW (2/22)
CTIVP® –
Allspring Short Duration Government Fund
(formerly CTIVP® -
Wells Fargo Short Duration Government Fund)
Please remember that you may not
buy (nor will you own) shares of the Fund directly. The Fund is available through variable annuity contracts and variable life insurance policies offered by the separate accounts of participating insurance companies
as well as qualified pension and retirement plans. Please contact your financial advisor or insurance representative for more information.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
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| 36 |
Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which CTIVP® – Allspring Short Duration Government Fund (the Fund) holds investments consistent with the procedures as stated in the Statement of Additional
Information (SAI). You may obtain a copy of the SAI without charge by calling 800.345.6611; contacting your financial intermediary or searching the website of the Securities and Exchange Commission (SEC) at sec.gov.
Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge
by visiting columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. The Fund’s Form N-PORT is available on the SEC’s website at sec.gov. The Fund’s complete
schedule of portfolio holdings, as filed on Form N-PORT, can also be obtained without charge, upon request, by calling 800.345.6611.
Additional Fund information
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
290 Congress Street
Boston, MA 02210
Fund distributor
Columbia Management Investment Distributors,
Inc.
290 Congress Street
Boston, MA 02210
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
CTIVP® – Allspring Short Duration
Government Fund | Annual Report 2021
Fund at a Glance
Investment objective
The Fund
seeks to provide shareholders with current income consistent with capital preservation.
Portfolio management
Allspring Global Investments, LLC
Maulik Bhansali, CFA
Jarad Vasquez
Wells Fargo & Company (Wells Fargo) entered into a definitive sale agreement whereby Wells Fargo Asset Management (WFAM) was sold to a holding company affiliated with private funds of GTCR
LLC and of Reverence Capital Partners, L.P and will no longer be an entity of Wells Fargo. The transaction closed on November 1, 2021, subject to customary closing conditions. Upon the closing of the sale transaction,
WFAM announced that it was changing its name to Allspring Global Investments.
| CTIVP® – Allspring Short Duration Government Fund | Annual Report 2021 | 3 |
Fund at a Glance (continued)
Performance of a hypothetical $10,000 investment (December 31, 2011 — December 31, 2021)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class 2 shares of CTIVP® – Allspring Short Duration Government Fund during the stated time period, and does not reflect the deduction of taxes, if any,
that a shareholder may pay on Fund distributions or on the redemption of Fund shares. The returns also do not reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance
policy or qualified pension or retirement plan, if any.
| 4 | CTIVP® – Allspring Short Duration Government Fund | Annual Report 2021 |
Manager Discussion of Fund Performance
At December 31, 2021, approximately
95.82% of the Fund’s shares were owned in the aggregate by affiliated funds-of-funds managed by Columbia Management Investment Advisers, LLC (the Investment Manager). As a result of asset allocation decisions by
the Investment Manager, it is possible that the Fund may experience relatively large purchases or redemptions from affiliated funds-of-funds. The Investment Manager seeks to minimize the impact of these transactions
by structuring them over a reasonable period of time. The Fund may also experience increased expenses as it buys and sells securities as a result of purchases or redemptions by affiliated funds-of-funds.
For the 12-month period that ended
December 31, 2021, the Fund’s Class 2 shares returned -1.70%. The Fund underperformed its benchmark, the Bloomberg U.S. 1-3 Year Government Bond Index, which returned -0.60% over the same period.
Market overview
The U.S. and global economies
performed particularly well during 2021, especially when considering the unique economic and human health challenges faced amid the inflationary combination of resurgent business demand, supply-chain bottlenecks and
labor shortages. Inflation expectations and interest rates took off early into 2021 and never recovered despite lively debates over whether the numbers were “real” or “transitory.” Rate
volatility also persisted throughout the year, along with a significant flattening of the U.S. yield curve, meaning the differential in yields between shorter-term and longer-term maturities narrowed. Credit performed
well against the backdrop of strong global demand for U.S. credit and improving corporate fundamentals and credit ratings.
Despite ongoing supply-chain issues
and the emergence of the Omicron variant of COVID-19, the U.S. economy appeared to perform above economists’ expectations in the fourth calendar quarter, with momentum, albeit slowing, into the new year. For the
fourth quarter of 2021, consumer spending, housing and industrial production all appeared to exceed expectations, supporting Gross Domestic Product growth. Measures of inflation also rose toward year end, suggesting
persistency in producer prices, despite a flattening of commodities prices and nascent signs of easing supply-chain issues, as increases in input costs flowed through into final prices. At the same time, real wage
gains slowed, suggesting weakness in productivity.
At the end of the annual period,
global policymakers appeared fully aligned with the view that inflation had been higher than expected, and even alarming, with risks still pointed to the upside. Indeed, fiscal stimulus, and the resulting high
deficits, as well as still highly accommodative monetary policy, supported the global economy during the pandemic but now could be creating imbalances. Inflation, rather than employment, seemed at the end of 2021 to
be the salient social risk, especially among middle and lower income workers. As a result, a forceful normalization of policy was underway in many countries, as seen in a set of generally hawkish monetary policy
decision by global central banks in December. (Hawkish suggests higher interest rates; opposite of dovish.)
The Fund’s notable
detractors during the period
| • | In agency mortgage-backed securities, positioning in fixed-rate pools and collateralized mortgage obligations detracted most from the Fund’s relative results, as mortgage spreads widened from historically tight levels. (Spread widening or tightening reflects the differential in yields between U.S. Treasuries and duration-equivalent yields in another sector.) |
| • | Positioning in higher coupon mortgage-backed securities detracted, as the sector struggled with elevated prepayment speeds and heavy selling in the second calendar quarter, along with a rise in front-end, or short-term, yields to finish the year. |
| • | An overweight to AAA-rated non-qualified mortgage (QM) residential mortgage-backed securities modestly detracted, as spreads widened in the second half of the annual period on new issue supply pressures. (A qualified mortgage is a defined class of mortgages that meets certain borrower and lender standards outlined in the Dodd-Frank regulations.) |
The Fund’s notable
contributors during the period
| • | Positioning in hybrid adjustable-rate mortgages and security selection in lower coupon 10-year and 15-year collateral contributed positively to the Fund’s relative results during the annual period. These shorter duration and lower dollar price securities held up well against weakness in fixed-income markets broadly, driven by the flattening U.S. yield curve. |
| CTIVP® – Allspring Short Duration Government Fund | Annual Report 2021 | 5 |
Manager Discussion of Fund Performance (continued)
| • | Security selection in non-government sectors proved beneficial, with Federal Family Education Loan Program (FFELP) student loan asset-backed securities, private student loan asset-backed securities, rental car asset-backed securities, and high-quality corporate securities contributing positively. |
| • | A sector overweight to the asset-backed securities sector also added value. |
| • | Duration and yield curve positioning had no material effect on the Fund’s performance during the annual period, as the Fund’s duration and yield curve positioning was neutral to that of the benchmark throughout. |
The views expressed in this report
reflect the current views of the respective parties who have contributed to this report. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult
to predict, so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective parties
disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Columbia fund are based on numerous factors, may not be relied on as an
indication of trading intent on behalf of any particular Columbia fund. References to specific securities should not be construed as a recommendation or investment advice.
| 6 | CTIVP® – Allspring Short Duration Government Fund | Annual Report 2021 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur ongoing
costs, which generally include management fees, distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to help you compare these costs with the ongoing costs of investing in other mutual funds.
The information below does not
reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy (collectively, Contracts) or qualified pension and retirement plan (Qualified Plan), if any. The total fees
and expenses you bear may therefore be higher than those shown below.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount invested, to estimate the
expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as redemption or exchange fees, or expenses that apply to the subaccount or the Contract. Therefore, the
hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If the fees and expenses imposed under your Contract or
Qualified Plan, if any, were included, your costs would be higher.
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 365.
Expenses do not include fees and
expenses incurred indirectly by the Fund from its investment in underlying funds, including affiliated and non-affiliated pooled investment vehicles, such as mutual funds and exchange-traded funds.
| CTIVP® – Allspring Short Duration Government Fund | Annual Report 2021 | 7 |
Portfolio of Investments
December 31, 2021
December 31, 2021
(Percentages represent value of
investments compared to net assets)
Investments in securities
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 8 | CTIVP® – Allspring Short Duration Government Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| CTIVP® – Allspring Short Duration Government Fund | Annual Report 2021 | 9 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 10 | CTIVP® – Allspring Short Duration Government Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
At December 31, 2021, securities
and/or cash totaling $2,042,000 were pledged as collateral.
Investments in derivatives
| Long futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| U.S. Treasury 2-Year Note | 1,902 | 03/2022 | USD | 414,962,908 | — | (518,352) |
| Short futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| U.S. Treasury 5-Year Note | (725) | 03/2022 | USD | (87,708,008) | — | (347,110) |
| U.S. Treasury Ultra 10-Year Note | (221) | 03/2022 | USD | (32,362,688) | — | (526,322) |
| Total | — | (873,432) | ||||
Notes to Portfolio of
Investments
| (a) | Represents privately placed and other securities and instruments exempt from Securities and Exchange Commission registration (collectively, private placements), such as Section 4(a)(2) and Rule 144A eligible securities, which are often sold only to qualified institutional buyers. At December 31, 2021, the total value of these securities amounted to $182,129,871, which represents 15.90% of total net assets. |
| (b) | Variable rate security. The interest rate shown was the current rate as of December 31, 2021. |
| (c) | Variable or floating rate security, the interest rate of which adjusts periodically based on changes in current interest rates and prepayments on the underlying pool of assets. The interest rate shown was the current rate as of December 31, 2021. |
| (d) | The rate shown is the seven-day current annualized yield at December 31, 2021. |
| (e) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended December 31, 2021 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Realized gain (loss)($) | Dividends($) | End of period shares |
| Columbia Short-Term Cash Fund, 0.085% | ||||||||
| 15,603,818 | 1,302,317,089 | (1,292,146,374) | — | 25,774,533 | (3,293) | 21,224 | 25,779,689 | |
Abbreviation Legend
| CMO | Collateralized Mortgage Obligation |
| CMT | Constant Maturity Treasury |
| LIBOR | London Interbank Offered Rate |
Currency Legend
| USD | US Dollar |
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| CTIVP® – Allspring Short Duration Government Fund | Annual Report 2021 | 11 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Fair value measurements (continued)
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at December 31, 2021:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Investments in Securities | ||||
| Asset-Backed Securities — Non-Agency | — | 84,803,743 | — | 84,803,743 |
| Commercial Mortgage-Backed Securities - Non-Agency | — | 21,257,830 | — | 21,257,830 |
| Residential Mortgage-Backed Securities - Agency | — | 468,973,594 | — | 468,973,594 |
| Residential Mortgage-Backed Securities - Non-Agency | — | 91,781,725 | — | 91,781,725 |
| U.S. Treasury Obligations | 467,445,747 | — | — | 467,445,747 |
| Money Market Funds | 25,774,533 | — | — | 25,774,533 |
| Total Investments in Securities | 493,220,280 | 666,816,892 | — | 1,160,037,172 |
| Investments in Derivatives | ||||
| Liability | ||||
| Futures Contracts | (1,391,784) | — | — | (1,391,784) |
| Total | 491,828,496 | 666,816,892 | — | 1,158,645,388 |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The Fund’s assets assigned to
the Level 2 input category are generally valued using the market approach, in which a security’s value is determined through reference to prices and information from market transactions for similar or identical
assets.
Derivative instruments are valued at
unrealized appreciation (depreciation).
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 12 | CTIVP® – Allspring Short Duration Government Fund | Annual Report 2021 |
Statement of Assets and Liabilities
December 31, 2021
December 31, 2021
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $1,135,789,575) | $1,134,262,639 |
| Affiliated issuers (cost $25,774,533) | 25,774,533 |
| Cash | 246 |
| Margin deposits on: | |
| Futures contracts | 2,042,000 |
| Receivable for: | |
| Investments sold | 2,345,427 |
| Capital shares sold | 21,327 |
| Dividends | 1,988 |
| Interest | 1,592,088 |
| Variation margin for futures contracts | 89,158 |
| Prepaid expenses | 15,276 |
| Total assets | 1,166,144,682 |
| Liabilities | |
| Payable for: | |
| Investments purchased | 20,078,947 |
| Capital shares purchased | 39,034 |
| Variation margin for futures contracts | 109,680 |
| Management services fees | 13,366 |
| Distribution and/or service fees | 321 |
| Service fees | 2,484 |
| Compensation of board members | 145,764 |
| Compensation of chief compliance officer | 215 |
| Other expenses | 26,380 |
| Total liabilities | 20,416,191 |
| Net assets applicable to outstanding capital stock | $1,145,728,491 |
| Represented by | |
| Paid in capital | 1,142,047,748 |
| Total distributable earnings (loss) | 3,680,743 |
| Total - representing net assets applicable to outstanding capital stock | $1,145,728,491 |
| Class 1 | |
| Net assets | $1,098,913,072 |
| Shares outstanding | 111,871,125 |
| Net asset value per share | $9.82 |
| Class 2 | |
| Net assets | $46,815,419 |
| Shares outstanding | 4,787,775 |
| Net asset value per share | $9.78 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| CTIVP® – Allspring Short Duration Government Fund | Annual Report 2021 | 13 |
Statement of Operations
Year Ended December 31, 2021
Year Ended December 31, 2021
| Net investment income | |
| Income: | |
| Dividends — affiliated issuers | $21,224 |
| Interest | 6,665,008 |
| Total income | 6,686,232 |
| Expenses: | |
| Management services fees | 5,117,270 |
| Distribution and/or service fees | |
| Class 2 | 134,274 |
| Service fees | 32,698 |
| Compensation of board members | 56,129 |
| Custodian fees | 13,888 |
| Printing and postage fees | 17,455 |
| Audit fees | 29,500 |
| Legal fees | 20,760 |
| Interest on collateral | 4 |
| Compensation of chief compliance officer | 183 |
| Other | 7,394 |
| Total expenses | 5,429,555 |
| Net investment income | 1,256,677 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 6,075,600 |
| Investments — affiliated issuers | (3,293) |
| Futures contracts | 2,146,500 |
| Net realized gain | 8,218,807 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | (25,411,984) |
| Futures contracts | (1,702,697) |
| Net change in unrealized appreciation (depreciation) | (27,114,681) |
| Net realized and unrealized loss | (18,895,874) |
| Net decrease in net assets resulting from operations | $(17,639,197) |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 14 | CTIVP® – Allspring Short Duration Government Fund | Annual Report 2021 |
Statement of Changes in Net Assets
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | |
| Operations | ||
| Net investment income | $1,256,677 | $18,627,160 |
| Net realized gain | 8,218,807 | 18,367,922 |
| Net change in unrealized appreciation (depreciation) | (27,114,681) | 19,067,163 |
| Net increase (decrease) in net assets resulting from operations | (17,639,197) | 56,062,245 |
| Distributions to shareholders | ||
| Net investment income and net realized gains | ||
| Class 1 | (37,486,497) | (48,603,446) |
| Class 2 | (1,616,332) | (1,607,054) |
| Total distributions to shareholders | (39,102,829) | (50,210,500) |
| Increase (decrease) in net assets from capital stock activity | (360,965,256) | 23,171,144 |
| Total increase (decrease) in net assets | (417,707,282) | 29,022,889 |
| Net assets at beginning of year | 1,563,435,773 | 1,534,412,884 |
| Net assets at end of year | $1,145,728,491 | $1,563,435,773 |
| Year Ended | Year Ended | |||
| December 31, 2021 | December 31, 2020 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class 1 | ||||
| Subscriptions | 12,982,221 | 133,582,893 | 1,809,967 | 18,798,757 |
| Distributions reinvested | 3,782,694 | 37,486,497 | 4,737,178 | 48,603,446 |
| Redemptions | (50,408,969) | (519,047,194) | (7,416,243) | (77,160,857) |
| Net decrease | (33,644,054) | (347,977,804) | (869,098) | (9,758,654) |
| Class 2 | ||||
| Subscriptions | 781,173 | 7,875,459 | 4,041,833 | 41,915,489 |
| Distributions reinvested | 163,596 | 1,616,332 | 157,092 | 1,607,054 |
| Redemptions | (2,224,010) | (22,479,243) | (1,027,125) | (10,592,745) |
| Net increase (decrease) | (1,279,241) | (12,987,452) | 3,171,800 | 32,929,798 |
| Total net increase (decrease) | (34,923,295) | (360,965,256) | 2,302,702 | 23,171,144 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| CTIVP® – Allspring Short Duration Government Fund | Annual Report 2021 | 15 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect any fees and expenses imposed under your
Contract and/or Qualified Plan, as applicable; such fees and expenses would reduce the total returns for all periods shown. Total return and portfolio turnover are not annualized for periods of less than one year. The
portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain derivatives, if any. If such transactions were included, the Fund’s portfolio
turnover rate may be higher.
| Net asset value, beginning of period | Net investment income (loss) | Net realized and unrealized gain (loss) | Total from investment operations | Distributions from net investment income | Distributions from net realized gains | Total distributions to shareholders | |
| Class 1 | |||||||
| Year Ended 12/31/2021 | $10.32 | 0.01 | (0.17) | (0.16) | (0.16) | (0.18) | (0.34) |
| Year Ended 12/31/2020 | $10.28 | 0.13 | 0.25 | 0.38 | (0.31) | (0.03) | (0.34) |
| Year Ended 12/31/2019 | $10.03 | 0.24 | 0.12 | 0.36 | (0.11) | — | (0.11) |
| Year Ended 12/31/2018 | $10.06 | 0.20 | (0.10) | 0.10 | (0.13) | — | (0.13) |
| Year Ended 12/31/2017 | $10.08 | 0.12 | (0.04) | 0.08 | (0.10) | (0.00)(d) | (0.10) |
| Class 2 | |||||||
| Year Ended 12/31/2021 | $10.27 | (0.01) | (0.16) | (0.17) | (0.14) | (0.18) | (0.32) |
| Year Ended 12/31/2020 | $10.24 | 0.09 | 0.26 | 0.35 | (0.29) | (0.03) | (0.32) |
| Year Ended 12/31/2019 | $9.99 | 0.21 | 0.12 | 0.33 | (0.08) | — | (0.08) |
| Year Ended 12/31/2018 | $10.01 | 0.17 | (0.09) | 0.08 | (0.10) | — | (0.10) |
| Year Ended 12/31/2017 | $10.04 | 0.09 | (0.05) | 0.04 | (0.07) | (0.00)(d) | (0.07) |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Ratios include interest on collateral expense which is less than 0.01%. |
| (d) | Rounds to zero. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 16 | CTIVP® – Allspring Short Duration Government Fund | Annual Report 2021 |
Financial Highlights (continued)
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets(a) | Total net expense ratio to average net assets(a),(b) | Net investment income (loss) ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Class 1 | |||||||
| Year Ended 12/31/2021 | $9.82 | (1.54%) | 0.44%(c) | 0.44%(c) | 0.11% | 290% | $1,098,913 |
| Year Ended 12/31/2020 | $10.32 | 3.73% | 0.44%(c) | 0.44%(c) | 1.21% | 296% | $1,501,130 |
| Year Ended 12/31/2019 | $10.28 | 3.57% | 0.43% | 0.43% | 2.31% | 632% | $1,504,778 |
| Year Ended 12/31/2018 | $10.03 | 0.96% | 0.44% | 0.44% | 1.97% | 414% | $1,944,337 |
| Year Ended 12/31/2017 | $10.06 | 0.80% | 0.47% | 0.47% | 1.15% | 290% | $956,370 |
| Class 2 | |||||||
| Year Ended 12/31/2021 | $9.78 | (1.70%) | 0.69%(c) | 0.69%(c) | (0.12%) | 290% | $46,815 |
| Year Ended 12/31/2020 | $10.27 | 3.39% | 0.69%(c) | 0.69%(c) | 0.84% | 296% | $62,306 |
| Year Ended 12/31/2019 | $10.24 | 3.33% | 0.68% | 0.68% | 2.04% | 632% | $29,635 |
| Year Ended 12/31/2018 | $9.99 | 0.81% | 0.69% | 0.69% | 1.68% | 414% | $25,361 |
| Year Ended 12/31/2017 | $10.01 | 0.45% | 0.72% | 0.72% | 0.91% | 290% | $22,203 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| CTIVP® – Allspring Short Duration Government Fund | Annual Report 2021 | 17 |
Notes to Financial Statements
December 31, 2021
December 31, 2021
Note 1. Organization
CTIVP® – Allspring
Short Duration Government Fund (formerly known as CTIVP® – Wells Fargo Short Duration Government Fund) (the Fund), a series of Columbia Funds Variable Series Trust II (the Trust), is a diversified fund. The
Trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust.
Effective December 6, 2021,
CTIVP® – Wells Fargo Short Duration Government Fund was renamed CTIVP® – Allspring Short Duration Government Fund.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers Class 1 and Class 2 shares to separate accounts funding variable annuity contracts and variable life insurance policies (collectively, Contracts) issued by
affiliated and unaffiliated life insurance companies (Participating Insurance Companies) as well as qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors (Qualified
Investors) authorized by Columbia Management Investment Distributors, Inc. (the Distributor). You may not buy (nor will you own) shares of the Fund directly. You may invest by participating in a Qualified Plan or by
buying a Contract and making allocations to the Fund. Although all share classes generally have identical voting, dividend and liquidation rights, each share class votes separately when required by the Trust’s
organizational documents or by law. Different share classes pay different net investment income distribution amounts to the extent the expenses of such share classes differ, and distributions in liquidation will be
proportional to the net asset value of each share class. Each share class has its own cost structure and other features.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Other expenses on the Statement of Operations include adjustments as a result of a change in
estimated expenses.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Debt securities generally are
valued by pricing services approved by the Board of Trustees based upon market transactions for normal, institutional-size trading units of similar securities. The services may use various pricing techniques that take
into account, as applicable, factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data, as well as approved independent broker-dealer quotes. Debt securities for
which quotations are not readily available or not believed to be reflective of market value may also be valued based upon a bid quote from an approved independent broker-dealer. Debt securities maturing in 60 days or
less are valued primarily at amortized market value, unless this method results in a valuation that management believes does not approximate fair value.
Asset- and mortgage-backed
securities are generally valued by pricing services, which utilize pricing models that incorporate the securities’ cash flow and loan performance data. These models also take into account available market data,
including trades, market quotations, and benchmark yield curves for identical or similar securities. Factors used to identify similar securities may include, but are not limited to, issuer, collateral type, vintage,
prepayment speeds, collateral performance, credit ratings, credit enhancement and expected life. Asset-backed securities for which quotations are readily available may also be valued based upon an over-the-counter or
exchange bid quote from an approved independent broker-dealer. Debt securities maturing in 60 days or less are valued primarily at amortized market value, unless this method results in a valuation that management
believes does not approximate fair value.
| 18 | CTIVP® – Allspring Short Duration Government Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Investments in open-end investment
companies (other than exchange-traded funds (ETFs)), are valued at the latest net asset value reported by those companies as of the valuation time.
Futures and options on futures
contracts are valued based upon the settlement price at the close of regular trading on their principal exchanges or, in the absence of a settlement price, at the mean of the latest quoted bid and ask prices.
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Derivative instruments
The Fund invests in certain
derivative instruments, as detailed below, in seeking to meet its investment objectives. Derivatives are instruments whose values depend on, or are derived from, in whole or in part, the value of one or more
securities, currencies, commodities, indices, or other assets or instruments. Derivatives may be used to increase investment flexibility (including to maintain cash reserves while maintaining desired exposure to
certain assets), for risk management (hedging) purposes, to facilitate trading, to reduce transaction costs and to pursue higher investment returns. The Fund may also use derivative instruments to mitigate certain
investment risks, such as foreign currency exchange rate risk, interest rate risk and credit risk. Derivatives may involve various risks, including the potential inability of the counterparty to fulfill its
obligations under the terms of the contract, the potential for an illiquid secondary market (making it difficult for the Fund to sell or terminate, including at favorable prices) and the potential for market movements
which may expose the Fund to gains or losses in excess of the amount shown in the Statement of Assets and Liabilities. The notional amounts of derivative instruments, if applicable, are not recorded in the financial
statements.
A derivative instrument may suffer
a marked-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform its
obligations under the contract. The Fund’s risk of loss from counterparty credit risk on over-the-counter derivatives is generally limited to the aggregate unrealized gain netted against any collateral held by
the Fund and the amount of any variation margin held by the counterparty, plus any replacement costs or related amounts. With exchange-traded or centrally cleared derivatives, there is reduced counterparty credit risk
to the Fund since the clearinghouse or central counterparty (CCP) provides some protection in the case of clearing member default. The clearinghouse or CCP stands between the buyer and the seller of the contract;
therefore, additional counterparty credit risk is failure of the clearinghouse or CCP. However, credit risk still exists in exchange-traded or centrally cleared derivatives with respect to initial and variation margin
that is held in a broker’s customer account. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy
and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients and such shortfall is remedied by the CCP or otherwise, U.S. bankruptcy laws will typically
allocate that shortfall on a pro-rata basis across all the clearing broker’s customers (including the Fund), potentially resulting in losses to the Fund.
In order to better define its
contractual rights and to secure rights that will help the Fund mitigate its counterparty risk, the Fund may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (ISDA Master Agreement)
or similar agreement with its derivatives counterparties. An ISDA Master Agreement is an agreement between the Fund and a counterparty that governs over-the-counter derivatives and foreign exchange forward contracts
and contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset
with the counterparty certain derivative instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the
| CTIVP® – Allspring Short Duration Government Fund | Annual Report 2021 | 19 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
ISDA Master Agreement typically permit a single
net payment in the event of default (close-out netting), including the bankruptcy or insolvency of the counterparty. Note, however, that bankruptcy or insolvency laws of a particular jurisdiction may impose
restrictions on or prohibitions against the right of offset or netting in bankruptcy, insolvency or other events.
Collateral (margin) requirements
differ by type of derivative. Margin requirements are established by the clearinghouse or CCP for exchange-traded and centrally cleared derivatives. Brokers can ask for margin in excess of the minimum in certain
circumstances. Collateral terms for most over-the-counter derivatives are subject to regulatory requirements to exchange variation margin with trading counterparties and may have contract specific margin terms as
well. For over-the-counter derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the marked-to-market amount for each transaction under such agreement and
comparing that amount to the value of any variation margin currently pledged by the Fund and/or the counterparty. Generally, the amount of collateral due from or to a party has to exceed a minimum transfer amount
threshold (e.g., $250,000) before a transfer has to be made. To the extent amounts due to the Fund from its counterparties are not fully collateralized, contractually or otherwise, the Fund bears the risk of loss from
counterparty nonperformance. The Fund may also pay interest expense on cash collateral received from the broker. Any interest expense paid by the Fund is shown on the Statement of Operations. The Fund attempts to
mitigate counterparty risk by only entering into agreements with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those
counterparties.
Certain ISDA Master Agreements
allow counterparties of over-the-counter derivatives transactions to terminate derivatives contracts prior to maturity in the event the Fund’s net asset value declines by a stated percentage over a specified
time period or if the Fund fails to meet certain terms of the ISDA Master Agreement, which would cause the Fund to accelerate payment of any net liability owed to the counterparty. The Fund also has termination
rights if the counterparty fails to meet certain terms of the ISDA Master Agreement. In determining whether to exercise such termination rights, the Fund would consider, in addition to counterparty credit risk,
whether termination would result in a net liability owed from the counterparty.
For financial reporting purposes,
the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statement of Assets and Liabilities.
Futures contracts
Futures contracts are
exchange-traded and represent commitments for the future purchase or sale of an asset at a specified price on a specified date. The Fund bought and sold futures contracts to manage the duration and yield curve
exposure of the Fund versus the benchmark and to manage exposure to movements in interest rates. These instruments may be used for other purposes in future periods. Upon entering into futures contracts, the Fund bears
risks that it may not achieve the anticipated benefits of the futures contracts and may realize a loss. Additional risks include counterparty credit risk, the possibility of an illiquid market, and that a change in
the value of the contract or option may not correlate with changes in the value of the underlying asset.
Upon entering into a futures
contract, the Fund deposits cash or securities with the broker, known as a futures commission merchant (FCM), in an amount sufficient to meet the initial margin requirement. The initial margin deposit must be
maintained at an established level over the life of the contract. Cash deposited as initial margin is recorded in the Statement of Assets and Liabilities as margin deposits. Securities deposited as initial margin are
designated in the Portfolio of Investments. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily change in the contract value and are
recorded as variation margin receivable or payable and are offset in unrealized gains or losses. The Fund generally expects to earn interest income on its margin deposits. The Fund recognizes a realized gain or loss
when the contract is closed or expires. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities.
Effects of derivative transactions in
the financial statements
The following tables are intended
to provide additional information about the effect of derivatives on the financial statements of the Fund, including: the fair value of derivatives by risk category and the location of those fair values in the
Statement of Assets and Liabilities; and the impact of derivative transactions over the period in the Statement of Operations, including realized and unrealized gains (losses). The derivative instrument schedules
following the Portfolio of Investments present additional information regarding derivative instruments outstanding at the end of the period, if any.
| 20 | CTIVP® – Allspring Short Duration Government Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
The following table is a summary of
the fair value of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) at December 31, 2021:
| Liability derivatives | ||
| Risk exposure category | Statement of assets and liabilities location | Fair value ($) |
| Interest rate risk | Component of total distributable earnings (loss) — unrealized depreciation on futures contracts | 1,391,784* |
| * | Includes cumulative appreciation (depreciation) as reported in the tables following the Portfolio of Investments. Only the current day’s variation margin is reported in receivables or payables in the Statement of Assets and Liabilities. |
The following table indicates the
effect of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) in the Statement of Operations for the year ended December 31, 2021:
The following table is a summary
of the average outstanding volume by derivative instrument for the year ended December 31, 2021:
| Derivative instrument | Average notional amounts ($)* |
| Futures contracts — long | 408,348,510 |
| Futures contracts — short | 129,471,921 |
| * | Based on the ending quarterly outstanding amounts for the year ended December 31, 2021. |
Asset- and mortgage-backed
securities
The Fund may invest in asset-backed
and mortgage-backed securities. The maturity dates shown represent the original maturity of the underlying obligation. Actual maturity may vary based upon prepayment activity on these obligations. All, or a portion,
of the obligation may be prepaid at any time because the underlying asset may be prepaid. As a result, decreasing market interest rates could result in an increased level of prepayment. An increased prepayment rate
will have the effect of shortening the maturity of the security. Unless otherwise noted, the coupon rates presented are fixed rates.
Mortgage dollar roll transactions
The Fund may enter into mortgage
“dollar rolls” in which the Fund sells securities for delivery in the current month and simultaneously contracts with the same counterparty to repurchase similar but not identical securities (same type,
coupon and maturity) on a specified future date. During the roll period, the Fund loses the right to receive principal and interest paid on the securities sold. However, the Fund may benefit because it receives
negotiated amounts in the form of reductions of the purchase price for the future purchase plus the interest earned on the cash proceeds of the securities sold until the settlement date of the forward purchase. The
Fund records the incremental difference between the forward purchase and sale of each forward roll as a realized gain or loss. Unless any realized gains exceed the income, capital appreciation, and gain or loss due to
mortgage prepayments that would have been realized on the securities sold as part of the mortgage dollar roll, the use of this technique may diminish the investment performance of the Fund compared to what the
performance would have been without the use of mortgage dollar rolls. All cash proceeds will be invested in instruments that are permissible investments for the Fund. The Fund identifies cash or liquid securities in
an amount equal to the forward purchase price.
| CTIVP® – Allspring Short Duration Government Fund | Annual Report 2021 | 21 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
For financial reporting and tax
purposes, the Fund treats “to be announced” mortgage dollar rolls as two separate transactions, one involving the purchase of a security and a separate transaction involving a sale. These transactions may
increase the Fund’s portfolio turnover rate. The Fund does not currently enter into mortgage dollar rolls that are accounted for as financing transactions.
Mortgage dollar rolls involve the
risk that the market value of the securities the Fund is obligated to repurchase may decline below the repurchase price, or that the counterparty may default on its obligations.
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
Income recognition
Interest income is recorded on an
accrual basis. Market premiums and discounts, including original issue discounts, are amortized and accreted, respectively, over the expected life of the security on all debt securities, unless otherwise noted. The
Fund classifies gains and losses realized on prepayments received on mortgage-backed securities as adjustments to interest income.
The Fund may place a debt security
on non-accrual status and reduce related interest income when it becomes probable that the interest will not be collected and the amount of uncollectible interest can be reasonably estimated. A defaulted debt security
is removed from non-accrual status when the issuer resumes interest payments or when collectability of interest is reasonably assured.
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
Federal income tax status
The Fund intends to qualify each
year as a regulated investment company under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its investment company taxable income and net capital gain, if any, for its
tax year, and as such will not be subject to federal income taxes. In addition, because the Fund meets the exception under Internal Revenue Code Section 4982(f), the Fund expects not to be subject to federal excise
tax. Therefore, no federal income or excise tax provision is recorded.
Distributions to subaccounts
Distributions to the subaccounts of
Contracts, Qualified Plans and Qualified Investors are recorded at the close of business on the record date and are payable on the first business day following the record date. Dividends from net investment income, if
any, are declared and distributed annually. Capital gain distributions, when available, will be made annually. However, an additional capital gain distribution may be made during the fiscal year in order to comply
with the Internal Revenue Code, as applicable to registered investment companies. Income distributions and capital gain distributions are determined in accordance with federal income tax regulations, which may differ
from GAAP. All dividends and distributions are reinvested in additional shares of the applicable share class of the Fund at the net asset value as of the ex-dividend date of the distribution.
| 22 | CTIVP® – Allspring Short Duration Government Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Under the Management Agreement, the
Investment Manager provides the Fund with investment research and advice, as well as administrative and accounting services. The Investment Manager is responsible for the ultimate oversight of investments made by the
Fund. The Fund’s subadviser (see Subadvisory agreement below) has the primary responsibility for the day-to-day portfolio management of the Fund. The management services fee is an annual fee that is equal to a
percentage of the Fund’s daily net assets that declines from 0.43% to 0.28% as the Fund’s net assets increase. The effective management services fee rate for the year ended December 31, 2021 was 0.43% of
the Fund’s average daily net assets.
Subadvisory agreement
The Investment Manager has entered
into a Subadvisory Agreement with Allspring Global Investments, LLC to serve as the subadvisor to Fund. Prior to November 1, 2021, Allspring Global Investments, LLC was known as Wells Capital Management
Incorporated. The Investment Manager compensates the subadviser to manage the investment of the Fund’s assets.
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. Under a Deferred Compensation Plan (the
Deferred Plan), these members of the Board of Trustees may elect to defer payment of up to 100% of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of
certain funds managed by the Investment Manager. The Fund’s liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Deferred Plan. All
amounts payable under the Deferred Plan constitute a general unsecured obligation of the Fund. The expense for the Deferred Plan, which includes Trustees’ fees deferred during the current period as well as any
gains or losses on the Trustees’ deferred compensation balances as a result of market fluctuations, is included in "Compensation of board members" on the Statement of Operations.
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
Service fees
The Fund has entered into a
Shareholder Services Agreement with Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial. Under this
agreement, the Fund pays a service fee equal to the payments made by the Transfer Agent to Participating Insurance Companies and other financial intermediaries (together, Participating Organizations) for services each
such Participating Organization provides to its clients, customers and participants that are invested directly or indirectly in the Fund, up to a cap approved by the Board of Trustees from time to time. The effective
service fee rate for the year ended December 31, 2021, was 0.00% of the Fund’s average daily net assets.
| CTIVP® – Allspring Short Duration Government Fund | Annual Report 2021 | 23 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
The Transfer Agent may retain as
compensation for its services revenues from fees for wire, telephone and redemption orders, account transcripts due the Transfer Agent from Fund shareholders and interest (net of bank charges) earned with respect to
balances in accounts the Transfer Agent maintains in connection with its services to the Fund.
Distribution and/or service fees
The Fund has an agreement with the
Distributor, an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution services. Under a Plan and Agreement of Distribution, the Fund pays a fee at an annual rate
of up to 0.25% of the Fund’s average daily net assets attributable to Class 2 shares. The Fund pays no distribution and service fees for Class 1 shares.
Expenses waived/reimbursed by the
Investment Manager and its affiliates
The Investment Manager and certain
of its affiliates have contractually agreed to waive fees and/or reimburse expenses (excluding certain fees and expenses described below) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, so that the Fund’s net operating expenses, after giving effect to fees waived/expenses reimbursed and any balance credits and/or overdraft charges from the Fund’s
custodian, do not exceed the following annual rate(s) as a percentage of the classes’ average daily net assets:
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), expenses associated with investments in affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange-traded funds), transaction costs and
brokerage commissions, costs related to any securities lending program, dividend expenses associated with securities sold short, inverse floater program fees and expenses, transaction charges and interest on borrowed
money, interest, costs associated with certain shareholder meetings, infrequent and/or unusual expenses and any other expenses the exclusion of which is specifically approved by the Board of Trustees. This
agreement may be modified or amended only with approval from the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements
described above are not recoverable by the Investment Manager or its affiliates in future periods.
Note 4. Federal tax
information
The timing and character of
income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP because of temporary or permanent book to tax differences.
At December 31, 2021, these
differences were primarily due to differing treatment for deferral/reversal of wash sale losses, trustees’ deferred compensation, derivative investments and tax straddles. To the extent these differences were
permanent, reclassifications were made among the components of the Fund’s net assets. Temporary differences do not require reclassifications.
The Fund did not have any permanent
differences; therefore, no reclassifications were made.
The tax character of distributions
paid during the years indicated was as follows:
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | ||||
| Ordinary income ($) | Long-term capital gains ($) | Total ($) | Ordinary income ($) | Long-term capital gains ($) | Total ($) |
| 29,513,055 | 9,589,774 | 39,102,829 | 50,210,500 | — | 50,210,500 |
Short-term capital gain
distributions, if any, are considered ordinary income distributions for tax purposes.
| 24 | CTIVP® – Allspring Short Duration Government Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
At December 31, 2021, the
components of distributable earnings on a tax basis were as follows:
| Undistributed ordinary income ($) | Undistributed long-term capital gains ($) | Capital loss carryforwards ($) | Net unrealized (depreciation) ($) |
| 2,068,021 | 4,589,246 | — | (2,831,894) |
At December 31, 2021, the cost of
all investments for federal income tax purposes along with the aggregate gross unrealized appreciation and depreciation based on that cost was:
| Federal tax cost ($) | Gross unrealized appreciation ($) | Gross unrealized (depreciation) ($) | Net unrealized (depreciation) ($) |
| 1,161,477,282 | 3,191,223 | (6,023,117) | (2,831,894) |
Tax cost of investments and
unrealized appreciation/(depreciation) may also include timing differences that do not constitute adjustments to tax basis.
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Note 5. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $3,458,342,200 and $3,846,171,220, respectively, for the year ended December 31, 2021, of which $3,319,427,787
and $3,611,210,232, respectively, were U.S. government securities. The amount of purchase and sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 6. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes
referred to as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
Note 7. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund did not borrow or lend
money under the Interfund Program during the year ended December 31, 2021.
| CTIVP® – Allspring Short Duration Government Fund | Annual Report 2021 | 25 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Note 8. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to an October 28, 2021 amendment and restatement, the credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment
Manager or an affiliated investment manager, severally and not jointly, permits collective borrowings up to $950 million. Interest is currently charged to each participating fund based on its borrowings at a rate
equal to the higher of (i) the federal funds effective rate, (ii) the secured overnight financing rate plus 0.11448% and (iii) the overnight bank funding rate, plus in each case, 1.00%. Each borrowing under the credit
facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The
commitment fee is included in other expenses in the Statement of Operations. This agreement expires annually in October unless extended or renewed. Prior to the October 28, 2021 amendment and restatement, the Fund had
access to a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. which permitted collective borrowings up to $950 million. Interest was
charged to each participating fund based on its borrowings at a rate equal to the higher of (i) the federal funds effective rate, (ii) the one-month London Interbank Offered Rate (LIBOR) rate and (iii) the overnight
bank funding rate, plus in each case, 1.25%.
The Fund had no borrowings during
the year ended December 31, 2021.
Note 9. Significant
risks
Credit risk
Credit risk is the risk that the
value of debt instruments in the Fund’s portfolio may decline because the issuer defaults or otherwise becomes unable or unwilling, or is perceived to be unable or unwilling, to honor its financial obligations,
such as making payments to the Fund when due. Credit rating agencies assign credit ratings to certain debt instruments to indicate their credit risk. Lower-rated or unrated debt instruments held by the Fund may
present increased credit risk as compared to higher-rated debt instruments.
Derivatives risk
Losses involving derivative
instruments may be substantial, because a relatively small movement in the underlying reference (which is generally the price, rate or other economic indicator associated with a security(ies), commodity, currency or
index or other instrument or asset) may result in a substantial loss for the Fund. In addition to the potential for increased losses, the use of derivative instruments may lead to increased volatility within the Fund.
Derivatives will typically increase the Fund’s exposure to principal risks to which it is otherwise exposed, and may expose the Fund to additional risks, including correlation risk, counterparty risk, hedging
risk, leverage risk, liquidity risk and pricing risk.
Interest rate risk
Interest rate risk is the risk of
losses attributable to changes in interest rates. In general, if prevailing interest rates rise, the values of debt instruments tend to fall, and if interest rates fall, the values of debt instruments tend to rise.
Actions by governments and central banking authorities can result in increases or decreases in interest rates. Higher periods of inflation could lead such authorities to raise interest rates. Increasing interest rates
may negatively affect the value of debt securities held by the Fund, resulting in a negative impact on the Fund’s performance and net asset value per share. In general, the longer the maturity or duration of a
debt security, the greater its sensitivity to changes in interest rates. The Fund is subject to the risk that the income generated by its investments may not keep pace with inflation.
Liquidity risk
Liquidity risk is the risk
associated with a lack of marketability of investments which may make it difficult to sell the investment at a desirable time or price. Changing regulatory, market or other conditions or environments (for example, the
interest rate or credit environments) may adversely affect the liquidity of the Fund’s investments. The Fund may have to accept a lower selling price for the holding, sell other investments, or forego another,
more appealing investment opportunity.
| 26 | CTIVP® – Allspring Short Duration Government Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Generally, the less liquid the market at the time
the Fund sells a portfolio investment, the greater the risk of loss or decline of value to the Fund. A less liquid market can lead to an increase in Fund redemptions, which may negatively impact Fund performance and
net asset value per share, including, for example, if the Fund is forced to sell securities in a down market.
Market risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
The coronavirus disease 2019 and
its variants (COVID-19) pandemic has resulted in, and may continue to result in, significant global economic and societal disruption and market volatility due to disruptions in market access, resource availability,
facilities operations, imposition of tariffs, export controls and supply chain disruption, among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement
and loss in human and other resources. The uncertainty surrounding the magnitude, duration, reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental
authorities or other third parties, present unknowns that are yet to unfold. The impacts, as well as the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and
pandemics that may arise in the future – could negatively affect global economies and markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in
emerging market countries may be greater due to generally less established healthcare systems, governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing
political, social and economic risks in certain countries or globally. The disruptions caused by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively
impact the Fund’s ability to achieve its investment objectives. Any such event(s) could have a significant adverse impact on the value and risk profile of the Fund.
Mortgage- and other asset-backed
securities risk
The value of any mortgage-backed
and other asset-backed securities including collateralized debt obligations, if any, held by the Fund may be affected by, among other things, changes or perceived changes in: interest rates; factors concerning the
interests in and structure of the issuer or the originator of the mortgages or other assets; the creditworthiness of the entities that provide any supporting letters of credit, surety bonds or other credit enhancements;
or the market’s assessment of the quality of underlying assets. Payment of principal and interest on some mortgage-backed securities (but not the market value of the securities themselves) may be guaranteed by
the full faith and credit of a particular U.S. Government agency, authority, enterprise or instrumentality, and some, but not all, are also insured or guaranteed by the U.S. Government. Mortgage-backed securities
issued by non-governmental issuers (such as commercial banks, savings and loan institutions, private mortgage insurance companies, mortgage bankers and other secondary market issuers) may entail greater risk than
obligations guaranteed by the U.S. Government. Mortgage- and other asset-backed securities are subject to liquidity risk and prepayment risk. A decline or flattening of housing values may cause delinquencies in
mortgages (especially sub-prime or non-prime mortgages) underlying mortgage-backed securities and thereby adversely affect the ability of the mortgage-backed securities issuer to make principal and/or interest
payments to mortgage-backed securities holders, including the Fund. Rising or high interest rates tend to extend the duration of mortgage- and other asset-backed securities, making their prices more volatile and more
sensitive to changes in interest rates.
| CTIVP® – Allspring Short Duration Government Fund | Annual Report 2021 | 27 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Shareholder concentration risk
At December 31, 2021, affiliated
shareholders of record owned 100.0% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of
less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Note 10. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued. Other than as noted below, there were no items requiring adjustment of the financial statements or additional
disclosure.
The Fund’s Board of Trustees
approved the liquidation and termination of the Fund. Completion of a transaction (the Transaction) involving the liquidation of the Fund and the substitution of shares of another fund for shares of the Fund held by
RiverSource Life Insurance Company and RiverSource Life Insurance Co. of New York (the RiverSource Life Insurance Companies) on behalf of variable annuity and variable life insurance contract owners (that is, the
reinvestment of liquidation proceeds into another fund) is subject to shareholder approval of the Transaction. If shareholder approval is obtained, it is anticipated that the Fund will be liquidated on or about April
22, 2022 (the Liquidation Date) at which time the Fund’s shareholders will receive a liquidating distribution in an amount equal to the net asset value of their Fund shares. As of the close of business on the
business day preceding the Liquidation Date, the Fund will not accept any orders for the purchase of shares of the Fund.
Note 11. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in
connection with the conduct of their business activities. Ameriprise Financial believes that the Fund is not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject
of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with
the Fund. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (SEC) on legal and regulatory matters that relate to
Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that
these matters, or the adverse publicity associated with them, will not result in increased Fund redemptions, reduced sale of Fund shares or other adverse consequences to the Fund. Further, although we believe
proceedings are not likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines,
penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial or one or more of its affiliates that provides services to
the Fund.
| 28 | CTIVP® – Allspring Short Duration Government Fund | Annual Report 2021 |
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees of Columbia
Funds Variable Series Trust II and Shareholders of CTIVP® – Allspring Short Duration Government Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of CTIVP® – Allspring Short Duration Government Fund (one of the funds constituting Columbia Funds Variable Series Trust II,
referred to hereafter as the "Fund") as of December 31, 2021, the related statement of operations for the year ended December 31, 2021, the statement of changes in net assets for each of the two years in the period
ended December 31, 2021, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2021 (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, 2021, 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, 2021 and the financial highlights for each of the five years in the period ended December 31, 2021 in conformity with accounting principles generally
accepted in the United States of America.
Basis for Opinion
These financial statements are the
responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these
financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2021 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.
/s/PricewaterhouseCoopers LLP
Minneapolis, Minnesota
February 22, 2022
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| CTIVP® – Allspring Short Duration Government Fund | Annual Report 2021 | 29 |
Federal Income Tax
Information
(Unaudited)
The Fund hereby designates the
following tax attributes for the fiscal year ended December 31, 2021.
| Capital gain dividend | |
| $4,923,178 |
Capital gain dividend. The Fund
designates as a capital gain dividend the amount reflected above, or if subsequently determined to be different, the net capital gain of such fiscal period.
TRUSTEES AND
OFFICERS
The Board oversees the Fund’s
operations and appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following table provides basic biographical information about the Fund’s Trustees as
of the printing of this report, including their principal occupations during the past five years, although specific titles for individuals may have varied over the period. The year set forth beneath Length of Service
in the table below is the year in which the Trustee was first appointed or elected as Trustee to any Fund currently in the Columbia Funds Complex or a predecessor thereof. Under current Board policy, each Trustee
generally serves until December 31 of the year such Trustee turns seventy-five (75).
Independent trustees
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| George S. Batejan c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1953 | Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 176 | Former Chairman of the Board, NICSA (National Investment Company Services Association) (Executive Committee, Nominating Committee and Governance Committee), 2014-2016; former Director, Intech Investment Management, 2011-2016; former Board Member, Metro Denver Chamber of Commerce, 2015-2016; former Advisory Board Member, University of Colorado Business School, 2015-2018 |
| 30 | CTIVP® – Allspring Short Duration Government Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Kathleen Blatz c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2006 | Attorney, specializing in arbitration and mediation; Chief Justice, Minnesota Supreme Court, 1998-2006; Associate Justice, Minnesota Supreme Court, 1996-1998; Fourth Judicial District Court Judge, Hennepin County, 1994-1996; Attorney in private practice and public service, 1984-1993; State Representative, Minnesota House of Representatives, 1979-1993, which included service on the Tax and Financial Institutions and Insurance Committees; Member and Interim Chair, Minnesota Sports Facilities Authority, January 2017-July 2017; Interim President and Chief Executive Officer, Blue Cross Blue Shield of Minnesota (health care insurance), February-July 2018, April-October 2021 | 176 | Former Trustee, Blue Cross Blue Shield of Minnesota, 2009-2021 (Chair of the Business Development Committee, 2014-2017; Chair of the Governance Committee, 2017-2019); former Member and Chair of the Board, Minnesota Sports Facilities Authority, January 2017-July 2017; former Director, Robina Foundation, 2009-2020 (Chair, 2014-2020); Director, Schulze Family Foundation, since 2021 |
| Pamela G. Carlton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2007 | President, Springboard — Partners in Cross Cultural Leadership (consulting company) since 2003; Managing Director of US Equity Research, JP Morgan Chase, 1999-2003; Director of US Equity Research, Chase Asset Management, 1996-1999; Co-Director Latin America Research, 1993-1996, COO Global Research, 1992-1996, Co-Director of US Research, 1991-1992, Investment Banker, Morgan Stanley, 1982-1991, Morgan Stanley; Attorney, Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 176 | Trustee, New York Presbyterian Hospital Board (Executive Committee and Chair of People Committee) since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee); Director, Apollo Commercial Real Estate Finance, Inc. since 2021; the Governing Council of the Independent Directors Council (IDC), since 2021 |
| Janet Langford Carrig c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1957 | Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 174 | Director, EQT Corporation (natural gas producer) since 2019; Director, Whiting Petroleum Corporation (independent oil and gas company) since 2020 |
| J. Kevin Connaughton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2020 | Member, FINRA National Adjudicatory Council since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Consultant to Independent Trustees of CFVIT and CFST I from March 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Managing Director and General Manager of Mutual Fund Products, Columbia Management Investment Advisers, LLC, May 2010-February 2015; President, Columbia Funds, 2008-2015; and senior officer of Columbia Funds and affiliated funds, 2003-2015 | 174 | Former Director, The Autism Project, March 2015-December 2021; former Member of the Investment Committee, St. Michael’s College, November 2015-February 2020; former Trustee, St. Michael’s College, June 2017-September 2019; former Trustee, New Century Portfolios, January 2015-December 2017 |
| CTIVP® – Allspring Short Duration Government Fund | Annual Report 2021 | 31 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Olive M. Darragh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since 2020 | Managing Director of Darragh Inc. (strategy and talent management consulting firm) since 2010; Founder and CEO, Zolio, Inc. (investment management talent identification platform) since 2004; Consultant to Independent Trustees of CFVIT and CFST I from June 2019 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 2001-2004 | 174 | Former Director, University of Edinburgh Business School (Member of US Board); former Director, Boston Public Library Foundation |
| Patricia M. Flynn c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1950 | Trustee since 2004 | Trustee Professor of Economics and Management, Bentley University since 1976 (also teaches and conducts research on corporate governance); Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 176 | Trustee, MA Taxpayers Foundation since 1997; Board of Governors, Innovation Institute, MA Technology Collaborative, 2010-2020; former Board of Directors, The MA Business Roundtable, 2003-2019 |
| Brian J. Gallagher c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 176 | Trustee, Catholic Schools Foundation since 2004 |
| Douglas A. Hacker c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1955 | Co-Chair since 2021; Chair of CFST I and CFVIT since 2014; Trustee of CFST I and CFVIT since 1996 and CFST, CFST II, CFVST II, CET I and CET II since 2021 | Independent business executive since May 2006; Executive Vice President – Strategy of United Airlines, December 2002 - May 2006; President of UAL Loyalty Services (airline marketing company), September 2001-December 2002; Executive Vice President and Chief Financial Officer of United Airlines, July 1999-September 2001 | 176 | Director, Spartan Nash Company (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing); former Director, Nash Finch Company (food distributor), 2005-2013; former Director, SeaCube Container Leasing Ltd. (container leasing), 2010-2013; and former Director, Travelport Worldwide Limited (travel information technology), 2014-2019 |
| Nancy T. Lukitsh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1956 | Trustee since 2011 | Senior Vice President, Partner and Director of Marketing, Wellington Management Company, LLP (investment adviser), 1997-2010; Chair, Wellington Management Portfolios (commingled non-U.S. investment pools), 2007 -2010; Director, Wellington Trust Company, NA and other Wellington affiliates, 1997-2010 | 174 | None |
| 32 | CTIVP® – Allspring Short Duration Government Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| David M. Moffett c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2011 | Retired; Consultant to Bridgewater and Associates | 174 | Director, CSX Corporation (transportation suppliers); Director, Genworth Financial, Inc. (financial and insurance products and services); Director, PayPal Holdings Inc. (payment and data processing services); Trustee, University of Oklahoma Foundation; former Director, eBay Inc. (online trading community), 2007-2015; and former Director, CIT Bank, CIT Group Inc. (commercial and consumer finance), 2010-2016 |
| Catherine James Paglia c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Co-Chair since 2021; Chair of CFST, CFST II, CFVST II, CET I and CET II since 2020; Trustee of CFST, CFST II and CFVST II since 2004 and CFST I and CFVIT since 2021 | Director, Enterprise Asset Management, Inc. (private real estate and asset management company) since September 1998; Managing Director and Partner, Interlaken Capital, Inc., 1989-1997; Vice President, 1982-1985, Principal, 1985-1987, Managing Director, 1987-1989, Morgan Stanley; Vice President, Investment Banking, 1980-1982, Associate, Investment Banking, 1976-1980, Dean Witter Reynolds, Inc. | 176 | Director, Valmont Industries, Inc. (irrigation systems manufacturer) since 2012; Trustee, Carleton College (on the Investment Committee); Trustee, Carnegie Endowment for International Peace (on the Investment Committee) |
| Minor M. Shaw c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1947 | Trustee since 2003 | President, Micco LLC (private investments) since 2011; President, Micco Corp. (family investment business), 1998-2011 | 176 | Director, Blue Cross Blue Shield of South Carolina (Chair of Compensation Committee) since April 2008; Trustee, Hollingsworth Funds (on the Investment Committee) since 2016 (previously Board Chair from 2016-2019); Former Advisory Board member, Duke Energy Corp., 2016-2020; Chair of the Duke Endowment; Chair of Greenville – Spartanburg Airport Commission; former Trustee, BofA Funds Series Trust (11 funds), 2003-2011; former Director, Piedmont Natural Gas, 2004-2016; former Director, National Association of Corporate Directors, Carolinas Chapter, 2013-2018; Chair, Daniel-Mickel Foundation since 1998 |
| CTIVP® – Allspring Short Duration Government Fund | Annual Report 2021 | 33 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Natalie A. Trunow c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1967 | Trustee since 2020 | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services), January 2016-January 2021; Non-executive Member of the Investment Committee and Valuation Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services), August 2018-January 2021; Advisor, Paradigm Asset Management, November 2016-December 2021; Consultant to Independent Trustees of CFVIT and CFST I from September 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Director of Investments/Consultant, Casey Family Programs, April 2016-November 2016; Senior Vice President and Chief Investment Officer, Calvert Investments, August 2008-January 2016; Section Head and Portfolio Manager, General Motors Asset Management, June 1997-August 2008 | 174 | Former Director, Investment Committee, Health Services for Children with Special Needs, Inc., 2012-2019; Director, Chair of Audit Committee, Consumer Credit Counseling Services (formerly Guidewell Financial Solutions), since 2019; Independent Director, Investment Committee and Valuation Committee, Sarona Asset Management, since 2019 |
| Sandra Yeager c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2017 | Retired; President and founder, Hanoverian Capital, LLC (SEC registered investment advisor firm), 2008-2016; Managing Director, DuPont Capital, 2006-2008; Managing Director, Morgan Stanley Investment Management, 2004-2006; Senior Vice President, Alliance Bernstein, 1990-2004 | 176 | Former Director, NAPE Education Foundation, October 2016-October 2020 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Fund Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I (CET I), Columbia ETF Trust II (CET II), Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Beckman, Gallagher and Hacker and Mses. Blatz, Carlton, Flynn, Paglia, Shaw and Yeager serve as Directors of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
Interested trustee affiliated with
Investment Manager*
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during the past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex overseen | Other directorships held by Trustee during the past five years |
| Daniel J. Beckman c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since November 2021(a) | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC (since April 2015); officer of Columbia Funds and affiliated funds since 2020. | 176 | Director, Ameriprise Trust Company, since October 2016; Director, Columbia Management Investment Distributors, Inc. since November 2018; Board of Governors, Columbia Wanger Asset Management, LLC since January 2022 |
| * | Interested person (as defined under the 1940 Act) by reason of being an officer, director, security holder and/or employee of the Investment Manager or Ameriprise Financial. |
| (a) | Mr. Beckman serves as the President and Principal Executive Officer of the Columbia Funds (since 2021). |
The Statement of Additional
Information has additional information about the Fund’s Board members and is available, without charge, upon request by calling 800.345.6611 or contacting your financial intermediary.
| 34 | CTIVP® – Allspring Short Duration Government Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. The following table provides basic information about the Officers of the Fund, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Beckman, who is President and Principal Executive Officer, the Fund’s other officers are:
The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. The following table provides basic information about the Officers of the Fund, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Beckman, who is President and Principal Executive Officer, the Fund’s other officers are:
Fund officers
| CTIVP® – Allspring Short Duration Government Fund | Annual Report 2021 | 35 |
TRUSTEES AND OFFICERS (continued)
Fund officers (continued)
Fund officers (continued)
| Name, address and year of birth | Position and year first appointed to position for any Fund in the Columbia Funds Complex or a predecessor thereof | Principal occupation(s) during past five years |
| Lyn Kephart-Strong 5228 Ameriprise Financial Center Minneapolis, MN 55474 1960 | Vice President (2015) | President, Columbia Management Investment Services Corp. since October 2014; Vice President & Resolution Officer, Ameriprise Trust Company since August 2009. |
Approval of Management
and Subadvisory
Agreements
Columbia Management Investment
Advisers, LLC (the Investment Manager, and together with its domestic and global affiliates, Columbia Threadneedle Investments), a wholly-owned subsidiary of Ameriprise Financial, Inc., serves as the investment
manager to CTIVP® - Allspring Short Duration Government Fund (the “Fund”). On June 15, 2021, the Fund’s Board of Trustees (the “Board”), including a majority of the Board members who
are not interested persons of the Fund within the meaning of the Investment Company Act of 1940 (the “Independent Trustees”), upon the recommendation of the Investment Manager, unanimously approved the
Subadvisory Agreement (the “Subadvisory Agreement”) between the Investment Manager and Allspring Global Investments, LLC (“Allspring”), with respect to the Fund.
At meetings held on June 2, 2021,
June 4, 2021, and June 15, 2021, independent legal counsel to the Independent Trustees reviewed with the Board the legal standards for consideration by directors/trustees of advisory and subadvisory agreements and
referred to the various written materials and oral presentations received by the Board, its Contracts and Compliance Committees, and its Investment Oversight Committee subcommittees in connection with the
Board’s evaluation of Allspring’s proposed services.
The Trustees held discussions with
the Investment Manager and Allspring and reviewed and considered various written materials and oral presentations in connection with the evaluation of Allspring’s proposed services, including the reports from
management with respect to the fees and terms of the proposed Subadvisory Agreement and Allspring’s investment strategy/style and performance and from the Compliance Committee, with respect to the code of ethics
and compliance program of Allspring. In considering the Subadvisory Agreement, the Board reviewed, among other things:
| • | Terms of the Subadvisory Agreement; |
| • | Subadvisory fees payable by the Investment Manager under the Subadvisory Agreement; |
| • | Descriptions of various services proposed to be performed by Allspring under the Subadvisory Agreement, including portfolio management and portfolio trading practices; |
| • | Information regarding the Transaction and the experience and resources of Allspring, including information regarding senior management, portfolio managers, and other personnel; |
| • | Information regarding the capabilities of Allspring’s compliance program; and |
| • | The profitability of the Investment Manager and its affiliates from their relationships with the fund. |
Following an analysis and
discussion of the foregoing, and the factors identified below, the Board, including all of the Independent Trustees, approved the Subadvisory Agreement on June 15, 2021.
| 36 | CTIVP® – Allspring Short Duration Government Fund | Annual Report 2021 |
Approval of Management and Subadvisory
Agreements (continued)
Nature, Extent and Quality of Services
The Board considered its analysis
of the reports and presentations received by it, detailing the services proposed to be performed by Allspring as a subadviser for the Fund, as well as the history, expertise, resources and capabilities, and the
qualifications of the personnel of Allspring. The Board considered the diligence and selection process undertaken by the Investment Manager to select Allspring, including the Investment Manager’s rationale for
recommending Allspring, and the process for monitoring Allspring’s ongoing performance of services for the Fund. The Board observed that Allspring’s compliance program had been reviewed by the Fund’s
Chief Compliance Officer and was determined by him to be reasonably designed to prevent violation of the federal securities laws by the Fund. The Board also observed that information had been presented regarding
Allspring’s ability to carry out its responsibilities under the proposed Subadvisory Agreement. The Board also considered the information provided by management regarding the personnel, risk controls,
philosophy, and investment processes of Allspring. The Board also noted the presentation by Allspring to the Board’s Contracts Committee.
The Board also discussed the
acceptability of the terms of the proposed Subadvisory Agreement. Independent legal counsel noted that the proposed Subadvisory Agreement was generally similar in scope and form to subadvisory agreements applicable to
other subadvised Funds. The Board noted the Investment Manager’s representation that Allspring has experience subadvising registered mutual funds.
After reviewing these and related
factors, the Board concluded, within the context of their overall conclusions, that the expected nature, extent and quality of the services to be provided to the Fund supported the approval of the Subadvisory
Agreement.
Investment Performance of
Allspring
The Board observed
Allspring’s relevant performance results versus the Fund’s benchmark and versus peers over various periods.
After reviewing these and related
factors, the Board concluded, within the context of their overall conclusions, that the performance of Allspring, in light of other considerations, supported the approval of the Subadvisory Agreement.
Comparative Fees, Costs of
Services Provided and Profitability
The Board reviewed the proposed
level of subadvisory fees under the proposed Subadvisory Agreement, noting that the proposed subadvisory fees payable to Allspring would be paid by the Investment Manager and would not impact the fees paid by the
Fund. The Board observed that the proposed subadvisory fees for Allspring were within a reasonable range of subadvisory fees paid by the Investment Manager to the subadvisers of other Funds with similar strategies.
The Trustees observed that management fees, which were not proposed to change, remained within the range of other peers and that the Fund’s expense ratio also remained within the range of other peers.
Additionally, the Board considered
that no change was expected in the total profitability of the Investment Manager and its affiliates in connection with the hiring of Allspring. Because the Subadvisory Agreement was negotiated at arms-length by the
Investment Manager, which is responsible for payments to Allspring thereunder, the Board did not consider the profitability to Allspring from its relationship with the Fund.
After reviewing these and related
factors, the Board concluded, within the context of their overall conclusions, that the proposed level of subadvisory fees, anticipated costs of services provided and the expected profitability to the Investment
Manager and its affiliates from their relationships with the Fund supported the approval of the Subadvisory Agreement.
Economies of Scale
The Board also considered the
economies of scale that may be realized by the Investment Manager and its affiliates as the Fund grows and took note of the extent to which shareholders might also benefit from such growth. The Board considered, in
this regard, no expected change in profitability to the Investment Manager from its management agreement with the Fund as a result of the proposed Subadvisory Agreement. The Board took into account, in this regard,
the significant oversight services provided by the Investment Manager to the Fund. The Board also observed that fees to be paid under the
| CTIVP® – Allspring Short Duration Government Fund | Annual Report 2021 | 37 |
Approval of Management and Subadvisory
Agreements (continued)
Subadvisory Agreement would not impact fees paid
by the Fund (as subadvisory fees are paid by the Investment Manager and not the Fund). The Board observed that the Fund’s management agreement with the Investment Manager continues to provide for sharing of
economies of scale as management fees decline as assets increase at pre-established breakpoints.
Conclusion
The Board reviewed all of the
above considerations in reaching its decision to approve the Subadvisory Agreement. In reaching its conclusions, no single factor was determinative.
On June 15, 2021, the Board,
including all of the Independent Trustees, determined that fees payable under the Subadvisory Agreement appeared fair and reasonable in light of the services proposed to be provided and approved the Subadvisory
Agreement. On June 15, 2021, the Board, including all of the Independent Trustees, took into account these factors and approved the Subadvisory Agreement.
| 38 | CTIVP® – Allspring Short Duration Government Fund | Annual Report 2021 |
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For Fund and other investment product prospectuses, which contain this and other important information, contact your
financial advisor or insurance representative. Please read the prospectus carefully before you invest. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved. Columbia Management Investment Distributors, Inc., 290 Congress Street, Boston, MA 02210
© 2022 Columbia Management Investment
Advisers, LLC.
C-3015 AW (2/22)
Variable Portfolio
– Partners International Value Fund
Please remember that you may not
buy (nor will you own) shares of the Fund directly. The Fund is available through variable annuity contracts and variable life insurance policies offered by the separate accounts of participating insurance companies
as well as qualified pension and retirement plans. Please contact your financial advisor or insurance representative for more information.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
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Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which Variable Portfolio – Partners International Value Fund (the Fund) holds investments consistent with the procedures as stated in the Statement of Additional
Information (SAI). You may obtain a copy of the SAI without charge by calling 800.345.6611; contacting your financial intermediary or searching the website of the Securities and Exchange Commission (SEC) at sec.gov.
Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge
by visiting columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. The Fund’s Form N-PORT is available on the SEC’s website at sec.gov. The Fund’s complete
schedule of portfolio holdings, as filed on Form N-PORT, can also be obtained without charge, upon request, by calling 800.345.6611.
Additional Fund information
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
290 Congress Street
Boston, MA 02210
Fund distributor
Columbia Management Investment Distributors,
Inc.
290 Congress Street
Boston, MA 02210
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
Variable Portfolio – Partners International
Value Fund | Annual Report 2021
Fund at a Glance
Investment objective
The Fund
seeks to provide shareholders with long-term capital growth.
Portfolio management
Pzena Investment Management, LLC
John Goetz
Caroline Cai, CFA
Allison Fisch
Thompson, Siegel & Walmsley LLC
Brandon Harrell, CFA
| Variable Portfolio – Partners International Value Fund | Annual Report 2021 | 3 |
Fund at a Glance (continued)
Performance of a hypothetical $10,000 investment (December 31, 2011 — December 31, 2021)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class 2 shares of Variable Portfolio – Partners International Value Fund during the stated time period, and does not reflect the deduction of taxes, if any,
that a shareholder may pay on Fund distributions or on the redemption of Fund shares. The returns also do not reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance
policy or qualified pension or retirement plan, if any.
| 4 | Variable Portfolio – Partners International Value Fund | Annual Report 2021 |
Fund at a Glance (continued)
| Variable Portfolio – Partners International Value Fund | Annual Report 2021 | 5 |
Manager Discussion of Fund Performance
At December 31, 2021,
approximately 98.13% of the Fund’s shares were owned in the aggregate by affiliated funds-of-funds managed by Columbia Management Investment Advisers, LLC (the Investment Manager). As a result of asset
allocation decisions by the Investment Manager, it is possible that the Fund may experience relatively large purchases or redemptions from affiliated funds-of-funds. The Investment Manager seeks to minimize the impact
of these transactions by structuring them over a reasonable period of time. The Fund may also experience increased expenses as it buys and sells securities as a result of purchases or redemptions by affiliated
funds-of-funds.
During the annual period ended
December 31, 2021, the Fund was managed by three subadvisers and each invested a portion of the Fund’s assets. Effective April 30, 2021, Dimensional Fund Advisors LP was terminated as a subadviser to the Fund
and, effective May 3, 2021, Pzena Investment Management, LLC (Pzena) was added as a subadviser to the Fund. As of December 31, 2021, Pzena managed approximately 48.82% and Thompson, Siegel & Walmsley LLC (TSW)
managed approximately 51.18% of the Fund’s assets.
For the 12-month period that ended
December 31, 2021, Class 2 shares of the Fund returned 11.64%. The Fund outperformed its benchmark, the MSCI EAFE Value Index (Net), which returned 10.89% for the same time period.
Market overview
Equity markets continued their
robust recovery from the pandemic-induced lows of March 2020, although the year saw periodic bouts of volatility. At the start of the year, international stock markets posted gains as investors maintained a positive
outlook on recovery prospects despite the resurgence of COVID-19 infection rates in parts of the world. Although many countries remained in a fragile state of recovery, sentiment was bolstered by supportive monetary
and fiscal stimuli which showed little sign of being brought to an end.
Most international equities posted
further gains over the second quarter, against a backdrop of improving vaccine roll outs and expectations of a broadening economic recovery, although U.S. dollar returns in several markets were bolstered by the
weakness of the dollar. Several countries remained deeply affected by the pandemic, but as demonstrated by an encouraging results season, many leading, global-facing companies positioned themselves well for recovery,
and the robust earnings outlook underpinned the positive equity environment. Corporate confidence was on the mend in Europe, with companies benefiting from the gradual reopening of European economies and the buoyant
growth in the region’s trading partners. In Asia, the Chinese economy continued to grow strongly, with first-quarter GDP growth coming in at over 18% year on year. Pre-Olympic Japan continued to battle with
COVID-19 outbreaks, however, which did not help the moribund economy, nor investor sentiment, although Japanese companies were upbeat about the prospects for global growth, judging by the Tankan, a quarterly business
survey, which saw corporate confidence hit a two-year high.
However, emerging doubts regarding
the durability of a recovery amidst a pick-up in COVID-19 infection rates and renewed containment measures were evidenced by the September market pull-back in most countries. Also troubling investors was the onward
march of inflation. Central banks attributed this to pandemic-induced supply/demand mismatches, and were anxious to maintain their policies of monetary largesse and not risk impeding economic recovery. China’s
policy moves to rein in perceived excesses in the economy added to investor concerns.
The final quarter of the year was
marked by considerable volatility and performance disparity between regions and stock markets, with Europe showing solid returns while much of Asia was lackluster. Equities were periodically buffeted by concerns over
the emergence of the Omicron variant of COVID-19 and its impact on economic growth and supply chains. Investor nerves were also tested by the tilt towards monetary tightening by the U.S. Federal Reserve, with Chairman
Powell ditching the ‘transitory’ element of his view on inflation, accelerating the planned reduction in asset buying, and touting the likelihood of three interest rate increases in 2022. The eurozone,
Japan and subsequently China, (where domestic recovery slowed in the wake of the persistence of COVID-19 outbreaks), kept to the stimulus playbook given the uncertainty over the effects of the Omicron outbreak and the
belief that price pressures would eventually ease.
| 6 | Variable Portfolio – Partners International Value Fund | Annual Report 2021 |
Manager Discussion of Fund Performance (continued)
The Fund’s notable
contributors during the period
DFA
We managed a portion of the
Fund’s assets from the start of the reporting period through April 30, 2021 (our reporting period). During that time period, our portion of the portfolio outperformed the benchmark.
| • | Our greater emphasis on deep value stocks contributed positively to relative performance in our portion of performance during our reporting period, as these stocks outperformed. |
| • | At the sector level, our exclusion of real estate investment trusts (REITs) and highly regulated utilities also contributed positively as REITs and utilities underperformed the overall benchmark during the period. |
| • | Stock selection within the consumer discretionary, financials and industrials sectors contributed to performance. |
| • | Individual securities that contributed most to performance during the period included overweight positions in German automakers Daimler AG and Volkswagen AG, which delivered strong performance during our reporting period and an underweight to U.K. household and personal products company Unilever, which underperformed during our reporting period. |
| • | Security selection within the United Kingdom, Japan and Germany contributed to results in our portion of the portfolio. |
Pzena
We began managing our portion of
the Fund’s assets on May 3, 2021. From that time through the close of the reporting period, our portion of the Fund underperformed the benchmark.
| • | The consumer staples, industrials, and communication services sectors were the top three contributing sectors on a relative basis. |
| ○ | Both consumer staples and industrials were overweight versus the benchmark, and their outperformance was almost entirely the result of stock selection. |
| ○ | The communication services sector declined over the period, and the portfolio’s underweight position, in conjunction with stock selection, resulted in relative outperformance. |
| • | The top three individual contributors were Danish container shipping giant A.P. Moller – Maersk, Finnish telecom equipment company Nokia, and Swiss biopharma company Roche Holding (all relative outperformers, as well). |
| ○ | Maersk was up after announcing an additional $5 billion share buyback authorization on top of the one already in place, as well as on management’s expectations for the strong freight rate environment to persist into the first half of 2022 – a dynamic that has resulted in record profits for the company. We trimmed back our position in Maersk on strength. |
| ○ | Nokia was up after demonstrating continued solid progress on executing its turnaround plan. |
| ○ | Roche’s shares trended higher throughout the summer, helped by positive sentiment surrounding the FDA’s approval of Biogen’s Alzheimer’s drug, which boosted the sector, as a whole. Roche later bought back its own shares from rival Novartis, which is accretive to earnings, while its diagnostics business continued to benefit from COVID-19 testing demand. |
| • | The top three relative contributing countries were Denmark, Finland, and Switzerland – all due to stock selection, as the portfolio’s three best individual performers were domiciled in those countries. |
TSW
Our portion of the Fund
outperformed the benchmark during the 12-month period that ended December 31, 2021.
| • | The consumer discretionary sector contributed the most to relative return, driven by stock selection. Sony Group Corporation and Entain PLC were among the top performers in the sector. |
| Variable Portfolio – Partners International Value Fund | Annual Report 2021 | 7 |
Manager Discussion of Fund Performance (continued)
| ○ | Japanese electronics company Sony reported strong results across its Games, Music and Image Sensor businesses and raised full year guidance. The holding was one of the top contributors to performance in our portion of the portfolio during the period. |
| ○ | U.K. gambling company Entain PLC outperformed after receiving multiple takeover offers from gaming peers MGM and DraftKings. The acquisition offers represented significant premiums to the recent share price and highlighted the value of Entain’s operations. The company ultimately rejected the offers and remained independent. |
| • | Allocation and stock selection drove outperformance in the utilities sector. The portfolio’s underweight in one of the benchmark’s worst performing sectors contributed to relative return. |
| ○ | From a stock perspective, French water and waste utility Veolia Environnement SA was an outperformer and one of the top contributors to performance during the period. The company reported strong operational performance during the period. Additionally, after a prolonged negotiation Veolia and Suez Environnement announced a finalized merger agreement. The transaction is set to close in early 2022. We believe the combined entity’s operational profile and synergy potential is undervalued by the market. |
| • | The industrials sector also contributed to relative return, driven predominantly by stock selection. The portfolio averaged an overweight position in the sector, one of the benchmark’s best performing groups. From a stock perspective, Toshiba Corporation and Ashtead Group plc performed well. |
| ○ | Multinational conglomerate Toshiba took steps to address corporate governance issues. The company announced the resignation of the CEO and multiple board members following an investigation into shareholder voting practices. Management subsequently announced its intention to split the company into three parts: Infrastructure Services, Devices and Semiconductors. We believe these steps push Toshiba toward meaningful corporate governance reform. |
| ○ | U.K. rental equipment company Ashtead Group performed well after releasing a series of satisfactory results. The company reported strong free cash flow growth and increased guidance. |
| • | ASML Holding NV was a top contributor to absolute and relative return during the period. The Dutch semiconductor equipment manufacturer reported a series of strong results and continues to benefit from increased capital expenditures by key customers. The company reported record order intake and maintains a significant order backlog representing almost all of its fiscal year 2022 manufacturing capacity. We trimmed our position on strength. |
| • | From a country perspective, Switzerland, Japan and the United Kingdom were the strongest areas of contribution. |
| ○ | Switzerland contributed the most to portfolio relative return due to stock selection. The country’s health care and financial sectors performed particularly well. |
| ○ | Japan also contributed to relative return due to stock selection and an underweight in one of the benchmark’s underperforming countries. COVID-19 restrictions continued to weigh on Japan’s equity markets. |
| ○ | The United Kingdom contributed to relative return due to stock selection. The U.K. government was perceived to have effectively rolled out vaccines to combat the COVID-19 pandemic. |
The Fund’s notable
detractors during the period
DFA
| • | The largest individual detractors from performance in our portion of the Fund during our reporting period included Vestas Wind Systems A/S, AtoS SE and Lonza Group AG. |
| ○ | Vestas Wind Systems is a Danish industrials company that specializes in the manufacture, installation and servicing of wind turbines globally. The company is not held in the benchmark. Shares of Vestas fell on rising costs and supply constraints. |
| ○ | AtoS is a French technology company that offers cloud, cybersecurity and computing solutions. The company found itself in the spotlight over accounting concerns at two of its U.S. units. |
| 8 | Variable Portfolio – Partners International Value Fund | Annual Report 2021 |
Manager Discussion of Fund Performance (continued)
| ○ | An out-of-benchmark position in Swiss health care diagnostics and research company Lonza Group weighed on results in our portion of the Fund’s portfolio. |
| • | From a country standpoint, security selection within Denmark and the Netherlands weighed on results, as did an underweight allocation to Italy during our reporting period. |
Pzena
| • | The three largest relative sector detractors in the period were consumer discretionary, energy, and materials, with all three posting absolute losses. Each sector’s underperformance was due to stock selection, and the portfolio was overweight across the board. |
| ○ | Within energy – a clear standout performer in the benchmark – the portfolio was more exposed to oil servicers than drillers, and investors determined that the benefits of higher crude prices would predominately accrue to the exploration and production companies, disregarding the servicers who are vital to producers’ operations. |
| • | The three major absolute detractors were Chinese e-commerce company Alibaba Group, South Korean steel manufacturer POSCO, and U.K. oil service company John Wood Group – all of which detracted on a relative basis as well. |
| ○ | Alibaba – a relatively new holding – was impacted after investors frantically dumped shares of Chinese tech companies on concerns about the Chinese Communist Party’s new policy stance regarding antitrust and internet data security. Despite the serious nature of the headlines coming out of China, we did not feel that our normal earnings estimates – which represent the long-term earnings power of a business – warranted a downward revision for Alibaba, and we have continued to build our full position in the name. |
| ○ | POSCO shares took a breather after a several-month period of strong performance, as the company’s core steel business continued to benefit from improvement in volumes and profitability, with steel prices remaining strong amid a tight market. More recently, general concerns over a potential economic slowdown negatively impacted POSCO’s share price despite the company reporting record earnings. Management’s plan to allocate capital to non-steel areas was met with skepticism as well. |
| ○ | John Wood Group underperformed after management provided investors with a disappointing first half trading statement earlier in the year, which hurt the stock. Management also recently lowered its full-year guidance due to deferrals of specific projects, particularly in the solar area. While the company’s order book continues to grow, reflecting strong momentum in its core businesses, the lack of consistent execution weighed on investor sentiment. |
| • | South Korea and China were major relative detractors, with both affected by the Chinese tech selloff and resulting contagion (neither China nor South Korea are in the MSCI EAFE Value Index (Net)). Germany was another relative underperformer due to stock selection. |
TSW
| • | The energy sector detracted the most from portfolio relative return as the portfolio was underweight the benchmark’s best performing sector. Ultimately, the allocation effect is driven by stock selection as we found more compelling opportunities outside of the energy sector. More broadly, energy stocks performed well during the year due to a more favorable supply and demand environment. |
| • | Stock selection within the communication services sector detracted from portfolio relative return. Ubisoft Entertainment SA and Nintendo Co., Ltd. were two of the largest individual detractors in our portion of the portfolio during the period. These businesses were COVID-19 beneficiaries and despite their improving fundamentals and strong growth outlook, investor focus rotated toward companies more exposed to economies re-opening. |
| ○ | French videogame creator Ubisoft underperformed after mixed results throughout the period. Management lowered full-year guidance as certain content releases slated for 2021 were pushed back into 2022. |
| ○ | Shares of Nintendo declined after underwhelming analysts in August 2021 with its first quarter fiscal year 2022 results. (Nintendo’s fiscal year 2022 runs from April 1, 2021 through March 31, 2022.) The company faced |
| Variable Portfolio – Partners International Value Fund | Annual Report 2021 | 9 |
Manager Discussion of Fund Performance (continued)
| difficult year-over-year comparisons and came up short of expectations. However, management announced a new share repurchase program, with all repurchased shares to be cancelled. To combat eventual hardware sales decline, Nintendo continues to develop its subscription services. | |
| ○ | We believe Ubisoft and Nintendo remain undervalued given their IP and market position in the videogame industry. |
| • | The health care sector also detracted from portfolio relative return due to portfolio allocation. The portfolio’s overweight position in the benchmark’s largest-underperforming region weighed on performance. |
| • | Dutch health care technology company Philips was a top detractor for our portion of the portfolio during the period after reporting mixed results during the period. The company experienced strong revenue growth in both its Personal Health and Diagnosis & Treatment segments. However, the recall of certain legacy sleep care products continued to overshadow these positives. We believe Philips remains undervalued. |
| • | From a country perspective, exposures to South Korea, Israel and Australia detracted most from performance. |
| ○ | South Korea had a modestly positive absolute return but detracted the most from portfolio relative return. The country deployed a rapid vaccination campaign and avoided strict lockdown measures. However, global supply chain disruptions hampered South Korea’s economic recovery. |
| ○ | The portfolio’s stock selection in Israel detracted from relative return. Israel maintains a number of cybersecurity and technology companies which performed well during the year. |
| ○ | Australia detracted from portfolio relative return. The island nation imposed strict COVID-19 containment measures including travel bans and social restrictions. |
The views expressed in this report
reflect the current views of the respective parties who have contributed to this report. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult
to predict, so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective parties
disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Columbia fund are based on numerous factors, may not be relied on as an
indication of trading intent on behalf of any particular Columbia fund. References to specific securities should not be construed as a recommendation or investment advice.
| 10 | Variable Portfolio – Partners International Value Fund | Annual Report 2021 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur ongoing
costs, which generally include management fees, distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to help you compare these costs with the ongoing costs of investing in other mutual funds.
The information below does not
reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy (collectively, Contracts) or qualified pension and retirement plan (Qualified Plan), if any. The total fees
and expenses you bear may therefore be higher than those shown below.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount invested, to estimate the
expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as redemption or exchange fees, or expenses that apply to the subaccount or the Contract. Therefore, the
hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If the fees and expenses imposed under your Contract or
Qualified Plan, if any, were included, your costs would be higher.
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 365.
Expenses do not include fees and
expenses incurred indirectly by the Fund from its investment in underlying funds, including affiliated and non-affiliated pooled investment vehicles, such as mutual funds and exchange-traded funds.
Had Columbia Management Investment
Advisers, LLC and/or certain of its affiliates not waived/reimbursed certain fees and expenses, account value at the end of the period would have been reduced.
| Variable Portfolio – Partners International Value Fund | Annual Report 2021 | 11 |
Portfolio of Investments
December 31, 2021
December 31, 2021
(Percentages represent value of
investments compared to net assets)
Investments in securities
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 12 | Variable Portfolio – Partners International Value Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Variable Portfolio – Partners International Value Fund | Annual Report 2021 | 13 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 14 | Variable Portfolio – Partners International Value Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Notes to Portfolio of
Investments
| (a) | Non-income producing investment. |
| (b) | Represents fair value as determined in good faith under procedures approved by the Board of Trustees. At December 31, 2021, the total value of these securities amounted to $1, which represents less than 0.01% of total net assets. |
| (c) | Valuation based on significant unobservable inputs. |
| (d) | The rate shown is the seven-day current annualized yield at December 31, 2021. |
| (e) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended December 31, 2021 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Realized gain (loss)($) | Dividends($) | End of period shares |
| Columbia Short-Term Cash Fund, 0.085% | ||||||||
| 8,941,192 | 1,276,233,602 | (1,260,567,224) | (1,653) | 24,605,917 | (1,508) | 20,392 | 24,610,839 | |
Abbreviation Legend
| ADR | American Depositary Receipt |
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
Foreign equity securities actively
traded in markets where there is a significant delay in the local close relative to the New York Stock Exchange are classified as Level 2. The values of these securities may include an adjustment to reflect the impact
of market movements following the close of local trading, as described in Note 2 to the financial statements – Security valuation.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Variable Portfolio – Partners International Value Fund | Annual Report 2021 | 15 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Fair value measurements (continued)
The following table is a summary of the inputs used to value the Fund’s investments at December 31, 2021:
The following table is a summary of the inputs used to value the Fund’s investments at December 31, 2021:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Investments in Securities | ||||
| Common Stocks | ||||
| Australia | — | 20,745,516 | — | 20,745,516 |
| Austria | — | 2,234,791 | — | 2,234,791 |
| Belgium | — | 26,889,979 | — | 26,889,979 |
| Brazil | 18,063,547 | — | — | 18,063,547 |
| China | — | 17,689,073 | — | 17,689,073 |
| Denmark | — | 31,641,283 | — | 31,641,283 |
| Finland | — | 33,082,659 | — | 33,082,659 |
| France | — | 172,787,809 | — | 172,787,809 |
| Germany | — | 161,102,146 | — | 161,102,146 |
| Hong Kong | — | 24,186,305 | — | 24,186,305 |
| Ireland | 1,708,911 | 16,880,466 | — | 18,589,377 |
| Isle of Man | — | 4,374,769 | — | 4,374,769 |
| Israel | 6,842,072 | — | — | 6,842,072 |
| Italy | — | 16,352,733 | — | 16,352,733 |
| Japan | — | 286,985,485 | — | 286,985,485 |
| Netherlands | 8,403,718 | 68,754,320 | — | 77,158,038 |
| Norway | — | 8,007,372 | — | 8,007,372 |
| Portugal | — | — | 1 | 1 |
| Singapore | — | 25,954,253 | — | 25,954,253 |
| South Korea | 477,070 | 42,145,298 | — | 42,622,368 |
| Spain | — | 7,653,995 | — | 7,653,995 |
| Sweden | — | 20,042,610 | — | 20,042,610 |
| Switzerland | 1,111,859 | 147,953,373 | — | 149,065,232 |
| Taiwan | — | 25,619,449 | — | 25,619,449 |
| United Kingdom | 56,421,163 | 261,475,726 | — | 317,896,889 |
| Total Common Stocks | 93,028,340 | 1,422,559,410 | 1 | 1,515,587,751 |
| Preferred Stocks | ||||
| Germany | — | 14,507,593 | — | 14,507,593 |
| Total Preferred Stocks | — | 14,507,593 | — | 14,507,593 |
| Money Market Funds | 24,605,917 | — | — | 24,605,917 |
| Total Investments in Securities | 117,634,257 | 1,437,067,003 | 1 | 1,554,701,261 |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The Fund’s assets assigned to
the Level 2 input category are generally valued using the market approach, in which a security’s value is determined through reference to prices and information from market transactions for similar or identical
assets. These assets include certain foreign securities for which a third party statistical pricing service may be employed for purposes of fair market valuation. The model utilized by such third party statistical
pricing service takes into account a security’s correlation to available market data including, but not limited to, intraday index, ADR, and exchange-traded fund movements.
The Fund does not hold any
significant investments (greater than one percent of net assets) categorized as Level 3.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 16 | Variable Portfolio – Partners International Value Fund | Annual Report 2021 |
Statement of Assets and Liabilities
December 31, 2021
December 31, 2021
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $1,472,696,435) | $1,530,095,344 |
| Affiliated issuers (cost $24,607,570) | 24,605,917 |
| Foreign currency (cost $532,679) | 543,993 |
| Receivable for: | |
| Investments sold | 274,329 |
| Capital shares sold | 5,530 |
| Dividends | 1,017,650 |
| Foreign tax reclaims | 4,419,707 |
| Prepaid expenses | 14,320 |
| Total assets | 1,560,976,790 |
| Liabilities | |
| Payable for: | |
| Investments purchased | 559,449 |
| Capital shares purchased | 33,631 |
| Management services fees | 34,853 |
| Distribution and/or service fees | 191 |
| Service fees | 1,399 |
| Compensation of board members | 126,043 |
| Compensation of chief compliance officer | 288 |
| Custodian fees | 68,495 |
| Other expenses | 17,401 |
| Total liabilities | 841,750 |
| Net assets applicable to outstanding capital stock | $1,560,135,040 |
| Represented by | |
| Paid in capital | 1,508,266,424 |
| Total distributable earnings (loss) | 51,868,616 |
| Total - representing net assets applicable to outstanding capital stock | $1,560,135,040 |
| Class 1 | |
| Net assets | $1,532,143,218 |
| Shares outstanding | 151,403,097 |
| Net asset value per share | $10.12 |
| Class 2 | |
| Net assets | $27,991,822 |
| Shares outstanding | 2,780,686 |
| Net asset value per share | $10.07 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Variable Portfolio – Partners International Value Fund | Annual Report 2021 | 17 |
Statement of Operations
Year Ended December 31, 2021
Year Ended December 31, 2021
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $41,668,806 |
| Dividends — affiliated issuers | 20,392 |
| Interfund lending | 106 |
| Foreign taxes withheld | (3,361,608) |
| Total income | 38,327,696 |
| Expenses: | |
| Management services fees | 11,312,652 |
| Distribution and/or service fees | |
| Class 2 | 63,174 |
| Service fees | 15,632 |
| Compensation of board members | 52,652 |
| Custodian fees | 242,277 |
| Printing and postage fees | 20,124 |
| Audit fees | 66,597 |
| Legal fees | 22,405 |
| Compensation of chief compliance officer | 288 |
| Other | 101,152 |
| Total expenses | 11,896,953 |
| Fees waived or expenses reimbursed by Investment Manager and its affiliates | (294,899) |
| Total net expenses | 11,602,054 |
| Net investment income | 26,725,642 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 106,249,895 |
| Investments — affiliated issuers | (1,508) |
| Foreign currency translations | (330,942) |
| Net realized gain | 105,917,445 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | (27,444,054) |
| Investments — affiliated issuers | (1,653) |
| Foreign currency translations | (427,939) |
| Net change in unrealized appreciation (depreciation) | (27,873,646) |
| Net realized and unrealized gain | 78,043,799 |
| Net increase in net assets resulting from operations | $104,769,441 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 18 | Variable Portfolio – Partners International Value Fund | Annual Report 2021 |
Statement of Changes in Net Assets
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | |
| Operations | ||
| Net investment income | $26,725,642 | $16,332,944 |
| Net realized gain (loss) | 105,917,445 | (120,587,778) |
| Net change in unrealized appreciation (depreciation) | (27,873,646) | 98,010,775 |
| Net increase (decrease) in net assets resulting from operations | 104,769,441 | (6,244,059) |
| Distributions to shareholders | ||
| Net investment income and net realized gains | ||
| Class 1 | (27,325,440) | (5,850,749) |
| Class 2 | (485,576) | (136,870) |
| Total distributions to shareholders | (27,811,016) | (5,987,619) |
| Increase in net assets from capital stock activity | 340,649,920 | 102,952,439 |
| Total increase in net assets | 417,608,345 | 90,720,761 |
| Net assets at beginning of year | 1,142,526,695 | 1,051,805,934 |
| Net assets at end of year | $1,560,135,040 | $1,142,526,695 |
| Year Ended | Year Ended | |||
| December 31, 2021 | December 31, 2020 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class 1 | ||||
| Subscriptions | 60,886,063 | 621,648,130 | 33,309,858 | 247,668,012 |
| Distributions reinvested | 2,769,397 | 27,325,440 | 877,174 | 5,850,749 |
| Redemptions | (33,410,457) | (313,506,452) | (18,901,907) | (149,139,399) |
| Net increase | 30,245,003 | 335,467,118 | 15,285,125 | 104,379,362 |
| Class 2 | ||||
| Subscriptions | 648,347 | 6,527,468 | 239,975 | 1,859,382 |
| Distributions reinvested | 49,365 | 485,576 | 20,582 | 136,870 |
| Redemptions | (184,329) | (1,830,242) | (435,467) | (3,423,175) |
| Net increase (decrease) | 513,383 | 5,182,802 | (174,910) | (1,426,923) |
| Total net increase | 30,758,386 | 340,649,920 | 15,110,215 | 102,952,439 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Variable Portfolio – Partners International Value Fund | Annual Report 2021 | 19 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect any fees and expenses imposed under your
Contract and/or Qualified Plan, as applicable; such fees and expenses would reduce the total returns for all periods shown. Total return and portfolio turnover are not annualized for periods of less than one year. The
portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain derivatives, if any. If such transactions were included, the Fund’s portfolio
turnover rate may be higher.
| Net asset value, beginning of period | Net investment income | Net realized and unrealized gain (loss) | Total from investment operations | Distributions from net investment income | Distributions from net realized gains | Total distributions to shareholders | |
| Class 1 | |||||||
| Year Ended 12/31/2021 | $9.26 | 0.20 | 0.89 | 1.09 | (0.23) | — | (0.23) |
| Year Ended 12/31/2020 | $9.71 | 0.14 | (0.53) | (0.39) | (0.06) | — | (0.06) |
| Year Ended 12/31/2019 | $9.17 | 0.30 | 0.91 | 1.21 | (0.38) | (0.29) | (0.67) |
| Year Ended 12/31/2018 | $11.47 | 0.29 | (2.23) | (1.94) | (0.31) | (0.05) | (0.36) |
| Year Ended 12/31/2017 | $9.34 | 0.26 | 2.09 | 2.35 | (0.22) | — | (0.22) |
| Class 2 | |||||||
| Year Ended 12/31/2021 | $9.21 | 0.18 | 0.89 | 1.07 | (0.21) | — | (0.21) |
| Year Ended 12/31/2020 | $9.69 | 0.12 | (0.54) | (0.42) | (0.06) | — | (0.06) |
| Year Ended 12/31/2019 | $9.15 | 0.28 | 0.90 | 1.18 | (0.35) | (0.29) | (0.64) |
| Year Ended 12/31/2018 | $11.44 | 0.26 | (2.22) | (1.96) | (0.28) | (0.05) | (0.33) |
| Year Ended 12/31/2017 | $9.33 | 0.23 | 2.08 | 2.31 | (0.20) | — | (0.20) |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Ratios include interfund lending expense which is less than 0.01%. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 20 | Variable Portfolio – Partners International Value Fund | Annual Report 2021 |
Financial Highlights (continued)
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets(a) | Total net expense ratio to average net assets(a),(b) | Net investment income ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Class 1 | |||||||
| Year Ended 12/31/2021 | $10.12 | 11.80% | 0.86% | 0.84% | 1.95% | 73% | $1,532,143 |
| Year Ended 12/31/2020 | $9.26 | (3.82%) | 0.88%(c) | 0.85%(c) | 1.72% | 77% | $1,121,635 |
| Year Ended 12/31/2019 | $9.71 | 13.53% | 0.88%(c) | 0.88%(c) | 3.17% | 22% | $1,028,139 |
| Year Ended 12/31/2018 | $9.17 | (17.30%) | 0.83% | 0.83% | 2.70% | 16% | $821,718 |
| Year Ended 12/31/2017 | $11.47 | 25.44% | 0.86% | 0.86% | 2.48% | 9% | $1,759,557 |
| Class 2 | |||||||
| Year Ended 12/31/2021 | $10.07 | 11.64% | 1.11% | 1.09% | 1.80% | 73% | $27,992 |
| Year Ended 12/31/2020 | $9.21 | (4.14%) | 1.13%(c) | 1.10%(c) | 1.54% | 77% | $20,892 |
| Year Ended 12/31/2019 | $9.69 | 13.20% | 1.13%(c) | 1.13%(c) | 2.93% | 22% | $23,667 |
| Year Ended 12/31/2018 | $9.15 | (17.48%) | 1.09% | 1.09% | 2.41% | 16% | $19,537 |
| Year Ended 12/31/2017 | $11.44 | 25.02% | 1.11% | 1.11% | 2.18% | 9% | $20,666 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Variable Portfolio – Partners International Value Fund | Annual Report 2021 | 21 |
Notes to Financial Statements
December 31, 2021
December 31, 2021
Note 1. Organization
Variable Portfolio –
Partners International Value Fund (the Fund), a series of Columbia Funds Variable Series Trust II (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended (the
1940 Act), as an open-end management investment company organized as a Massachusetts business trust.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers Class 1 and Class 2 shares to separate accounts funding variable annuity contracts and variable life insurance policies (collectively, Contracts) issued by
affiliated and unaffiliated life insurance companies (Participating Insurance Companies) as well as qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors (Qualified
Investors) authorized by Columbia Management Investment Distributors, Inc. (the Distributor). You may not buy (nor will you own) shares of the Fund directly. You may invest by participating in a Qualified Plan or by
buying a Contract and making allocations to the Fund. Although all share classes generally have identical voting, dividend and liquidation rights, each share class votes separately when required by the Trust’s
organizational documents or by law. Different share classes pay different net investment income distribution amounts to the extent the expenses of such share classes differ, and distributions in liquidation will be
proportional to the net asset value of each share class. Each share class has its own cost structure and other features.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Equity securities listed on an
exchange are valued at the closing price or last trade price on their primary exchange at the close of business of the New York Stock Exchange. Securities with a closing price not readily available or not listed on
any exchange are valued at the mean between the closing bid and ask prices. Listed preferred stocks convertible into common stocks are valued using an evaluated price from a pricing service.
Foreign equity securities are
valued based on the closing price or last trade price on their primary exchange at the close of business of the New York Stock Exchange. If any foreign equity security closing prices are not readily available,
the securities are valued at the mean of the latest quoted bid and ask prices on such exchanges or markets. Foreign currency exchange rates are determined at the scheduled closing time of the New York Stock Exchange.
Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange; therefore, the closing prices for securities in such markets or on such exchanges may not fully reflect
events that occur after such close but before the close of the New York Stock Exchange. In those situations, foreign securities will be fair valued pursuant to a policy adopted by the Board of Trustees. Under the
policy, the Fund may utilize a third-party pricing service to determine these fair values. The third-party pricing service takes into account multiple factors, including, but not limited to, movements in the U.S.
securities markets, certain depositary receipts, futures contracts and foreign exchange rates that have occurred subsequent to the close of the foreign exchange or market, to determine a good faith estimate that
reasonably reflects the current market conditions as of the close of the New York Stock Exchange. The fair value of a security is likely to be different from the quoted or published price, if available.
Investments in open-end investment
companies (other than exchange-traded funds (ETFs)), are valued at the latest net asset value reported by those companies as of the valuation time.
| 22 | Variable Portfolio – Partners International Value Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Foreign currency transactions and
translations
The values of all assets and
liabilities denominated in foreign currencies are generally translated into U.S. dollars at exchange rates determined at the close of regular trading on the New York Stock Exchange. Net realized and unrealized gains
(losses) on foreign currency transactions and translations include gains (losses) arising from the fluctuation in exchange rates between trade and settlement dates on securities transactions, gains (losses) arising
from the disposition of foreign currency and currency gains (losses) between the accrual and payment dates on dividends, interest income and foreign withholding taxes.
For financial statement purposes,
the Fund does not distinguish that portion of gains (losses) on investments which is due to changes in foreign exchange rates from that which is due to changes in market prices of the investments. Such fluctuations
are included with the net realized and unrealized gains (losses) on investments in the Statement of Operations.
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
Income recognition
Corporate actions and dividend
income are generally recorded net of any non-reclaimable tax withholdings, on the ex-dividend date or upon receipt of an ex-dividend notification in the case of certain foreign securities.
The Fund may receive distributions
from holdings in equity securities, business development companies (BDCs), exchange-traded funds (ETFs), limited partnerships (LPs), other regulated investment companies (RICs), and real estate investment trusts
(REITs), which report information as to the tax character of their distributions annually. These distributions are allocated to dividend income, capital gain and return of capital based on actual information reported.
Return of capital is recorded as a reduction of the cost basis of securities held. If the Fund no longer owns the applicable securities, return of capital is recorded as a realized gain. With respect to REITs, to the
extent actual information has not yet been reported, estimates for return of capital are made by Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise
Financial, Inc. (Ameriprise Financial). The Investment Manager’s estimates are subsequently adjusted when the actual character of the distributions is disclosed by the REITs, which could result in a
proportionate change in return of capital to shareholders.
Awards from class action litigation
are recorded as a reduction of cost basis if the Fund still owns the applicable securities on the payment date. If the Fund no longer owns the applicable securities on the payment date, the proceeds are recorded as
realized gains.
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
| Variable Portfolio – Partners International Value Fund | Annual Report 2021 | 23 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
Federal income tax status
The Fund intends to qualify each
year as a regulated investment company under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its investment company taxable income and net capital gain, if any, for its
tax year, and as such will not be subject to federal income taxes. In addition, because the Fund meets the exception under Internal Revenue Code Section 4982(f), the Fund expects not to be subject to federal excise
tax. Therefore, no federal income or excise tax provision is recorded.
Foreign taxes
The Fund may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries, as applicable, based upon its current interpretation of tax rules
and regulations that exist in the markets in which it invests.
Realized gains in certain countries
may be subject to foreign taxes at the Fund level, based on statutory rates. The Fund accrues for such foreign taxes on realized and unrealized gains at the appropriate rate for each jurisdiction, as applicable. The
amount, if any, is disclosed as a liability on the Statement of Assets and Liabilities.
Distributions to subaccounts
Distributions to the subaccounts of
Contracts, Qualified Plans and Qualified Investors are recorded at the close of business on the record date and are payable on the first business day following the record date. Dividends from net investment income, if
any, are declared and distributed quarterly. Capital gain distributions, when available, will be made annually. However, an additional capital gain distribution may be made during the fiscal year in order to comply
with the Internal Revenue Code, as applicable to registered investment companies. Income distributions and capital gain distributions are determined in accordance with federal income tax regulations, which may differ
from GAAP. All dividends and distributions are reinvested in additional shares of the applicable share class of the Fund at the net asset value as of the ex-dividend date of the distribution.
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Under the Management Agreement, the
Investment Manager provides the Fund with investment research and advice, as well as administrative and accounting services. The Investment Manager is responsible for the ultimate oversight of investments made by the
Fund. The Fund’s subadvisers (see Subadvisory agreements below) have the primary responsibility for the day-to-day portfolio management of the Fund. The management services fee is an annual fee that is equal to
a percentage of the Fund’s daily net assets that declines from 0.87% to 0.67% as the Fund’s net assets increase. The effective management services fee rate for the year ended December 31, 2021 was 0.82% of
the Fund’s average daily net assets.
| 24 | Variable Portfolio – Partners International Value Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Subadvisory agreements
The Investment Manager has entered
into a Subadvisory Agreement with Thompson, Siegel & Walmsley LLC, which subadvises a portion of the assets of the Fund. Effective May 1, 2021, the Investment Manager has entered into a Subadvisory Agreement with
Pzena Investment Management, LLC, to serve as a subadviser to the Fund. Prior to May 1, 2021, Dimensional Fund Advisors LP served as a subadviser to the Fund. New investments in the Fund, net of redemptions, are
allocated in accordance with the Investment Manager’s determination. Each subadviser’s proportionate share of investments in the Fund will vary due to market fluctuations. The Investment Manager
compensates each subadviser to manage the investment of the Fund’s assets.
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. Under a Deferred Compensation Plan (the
Deferred Plan), these members of the Board of Trustees may elect to defer payment of up to 100% of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of
certain funds managed by the Investment Manager. The Fund’s liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Deferred Plan. All
amounts payable under the Deferred Plan constitute a general unsecured obligation of the Fund. The expense for the Deferred Plan, which includes Trustees’ fees deferred during the current period as well as any
gains or losses on the Trustees’ deferred compensation balances as a result of market fluctuations, is included in "Compensation of board members" on the Statement of Operations.
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
Service fees
The Fund has entered into a
Shareholder Services Agreement with Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial. Under this
agreement, the Fund pays a service fee equal to the payments made by the Transfer Agent to Participating Insurance Companies and other financial intermediaries (together, Participating Organizations) for services each
such Participating Organization provides to its clients, customers and participants that are invested directly or indirectly in the Fund, up to a cap approved by the Board of Trustees from time to time. The effective
service fee rate for the year ended December 31, 2021, was 0.00% of the Fund’s average daily net assets.
The Transfer Agent may retain as
compensation for its services revenues from fees for wire, telephone and redemption orders, account transcripts due the Transfer Agent from Fund shareholders and interest (net of bank charges) earned with respect to
balances in accounts the Transfer Agent maintains in connection with its services to the Fund.
Distribution and/or service fees
The Fund has an agreement with the
Distributor, an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution services. Under a Plan and Agreement of Distribution, the Fund pays a fee at an annual rate
of up to 0.25% of the Fund’s average daily net assets attributable to Class 2 shares. The Fund pays no distribution and service fees for Class 1 shares.
| Variable Portfolio – Partners International Value Fund | Annual Report 2021 | 25 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Expenses waived/reimbursed by the
Investment Manager and its affiliates
The Investment Manager and certain
of its affiliates have contractually agreed to waive fees and/or reimburse expenses (excluding certain fees and expenses described below) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, so that the Fund’s net operating expenses, after giving effect to fees waived/expenses reimbursed and any balance credits and/or overdraft charges from the Fund’s
custodian, do not exceed the following annual rate(s) as a percentage of the classes’ average daily net assets:
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), expenses associated with investments in affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange-traded funds), transaction costs and
brokerage commissions, costs related to any securities lending program, dividend expenses associated with securities sold short, inverse floater program fees and expenses, transaction charges and interest on borrowed
money, interest, costs associated with certain shareholder meetings, infrequent and/or unusual expenses and any other expenses the exclusion of which is specifically approved by the Board of Trustees. This
agreement may be modified or amended only with approval from the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements
described above are not recoverable by the Investment Manager or its affiliates in future periods.
Note 4. Federal tax
information
The timing and character of
income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP because of temporary or permanent book to tax differences.
At December 31, 2021, these
differences were primarily due to differing treatment for deferral/reversal of wash sale losses, trustees’ deferred compensation, derivative investments, capital loss carryforward, re-characterization of
distributions for investments, foreign currency transactions, passive foreign investment company (PFIC) holdings and foreign tax reclaims refunded. To the extent these differences were permanent, reclassifications
were made among the components of the Fund’s net assets. Temporary differences do not require reclassifications.
The following reclassifications
were made:
| Undistributed net investment income ($) | Accumulated net realized (loss) ($) | Paid in capital ($) |
| 7,385,895 | (7,869,046) | 483,151 |
Net investment income (loss) and
net realized gains (losses), as disclosed in the Statement of Operations, and net assets were not affected by this reclassification.
The tax character of distributions
paid during the years indicated was as follows:
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | ||||
| Ordinary income ($) | Long-term capital gains ($) | Total ($) | Ordinary income ($) | Long-term capital gains ($) | Total ($) |
| 27,811,016 | — | 27,811,016 | 5,987,619 | — | 5,987,619 |
Short-term capital gain
distributions, if any, are considered ordinary income distributions for tax purposes.
| 26 | Variable Portfolio – Partners International Value Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
At December 31, 2021, the
components of distributable earnings on a tax basis were as follows:
| Undistributed ordinary income ($) | Undistributed long-term capital gains ($) | Capital loss carryforwards ($) | Net unrealized appreciation ($) |
| 31,821,675 | — | (19,464,530) | 39,670,586 |
At December 31, 2021, the cost of
all investments for federal income tax purposes along with the aggregate gross unrealized appreciation and depreciation based on that cost was:
| Federal tax cost ($) | Gross unrealized appreciation ($) | Gross unrealized (depreciation) ($) | Net unrealized appreciation ($) |
| 1,515,030,676 | 140,073,358 | (100,402,772) | 39,670,586 |
Tax cost of investments and
unrealized appreciation/(depreciation) may also include timing differences that do not constitute adjustments to tax basis.
The following capital loss
carryforwards, determined at December 31, 2021, may be available to reduce future net realized gains on investments, if any, to the extent permitted by the Internal Revenue Code. In addition, for the year ended
December 31, 2021, capital loss carryforwards utilized, if any, were as follows:
| No expiration short-term ($) | No expiration long-term ($) | Total ($) | Utilized ($) |
| — | (19,464,530) | (19,464,530) | 90,679,091 |
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Note 5. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $1,288,067,967 and $963,959,800, respectively, for the year ended December 31, 2021. The amount of purchase
and sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 6. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes
referred to as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
Note 7. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
| Variable Portfolio – Partners International Value Fund | Annual Report 2021 | 27 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund’s activity in the
Interfund Program during the year ended December 31, 2021 was as follows:
| Borrower or lender | Average loan balance ($) | Weighted average interest rate (%) | Number of days with outstanding loans |
| Lender | 814,286 | 0.67 | 7 |
Interest income earned by the Fund
is recorded as Interfund lending in the Statement of Operations. The Fund had no outstanding interfund loans at December 31, 2021.
Note 8. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to an October 28, 2021 amendment and restatement, the credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment
Manager or an affiliated investment manager, severally and not jointly, permits collective borrowings up to $950 million. Interest is currently charged to each participating fund based on its borrowings at a rate
equal to the higher of (i) the federal funds effective rate, (ii) the secured overnight financing rate plus 0.11448% and (iii) the overnight bank funding rate, plus in each case, 1.00%. Each borrowing under the credit
facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The
commitment fee is included in other expenses in the Statement of Operations. This agreement expires annually in October unless extended or renewed. Prior to the October 28, 2021 amendment and restatement, the Fund had
access to a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. which permitted collective borrowings up to $950 million. Interest was
charged to each participating fund based on its borrowings at a rate equal to the higher of (i) the federal funds effective rate, (ii) the one-month London Interbank Offered Rate (LIBOR) rate and (iii) the overnight
bank funding rate, plus in each case, 1.25%.
The Fund had no borrowings during
the year ended December 31, 2021.
Note 9. Significant
risks
Foreign securities and emerging
market countries risk
Investing in foreign securities may
involve certain risks not typically associated with investing in U.S. securities, such as increased currency volatility and risks associated with political, regulatory, economic, social, diplomatic and other
conditions or events occurring in the country or region, which may result in significant market volatility. In addition, certain foreign securities may not be as liquid as U.S. securities. Investing in emerging
markets may increase these risks and expose the Fund to elevated risks associated with increased inflation, deflation or currency devaluation. To the extent that the Fund concentrates its investment exposure to any
one or a few specific countries, the Fund will be particularly susceptible to the risks associated with the conditions, events or other factors impacting those countries or regions and may, therefore, have a greater
risk than that of a fund that is more geographically diversified.
Geographic focus risk
The Fund may be particularly
susceptible to economic, political, regulatory or other events or conditions affecting issuers and countries within the specific geographic regions in which the Fund invests. The Fund’s NAV may be more volatile
than the NAV of a more geographically diversified fund.
Asia Pacific Region. The Fund is particularly susceptible to economic, political, regulatory or other events or conditions affecting issuers and countries in the Asia Pacific region. Many of the countries in
the region are considered underdeveloped or developing, including from a political, economic and/or social perspective, and may have relatively unstable governments
| 28 | Variable Portfolio – Partners International Value Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
and economies based on limited business,
industries and/or natural resources or commodities. Events in any one country within the region may impact other countries in the region or the region as a whole. As a result, events in the region will generally have
a greater effect on the Fund than if the Fund were more geographically diversified. This could result in increased volatility in the value of the Fund’s investments and losses for the Fund. Also, securities of
some companies in the region can be less liquid than U.S. or other foreign securities, potentially making it difficult for the Fund to sell such securities at a desirable time and price.
Europe. The Fund is particularly susceptible to economic, political, regulatory or other events or conditions affecting issuers and countries in Europe which are often closely connected and
interdependent, and events in one European country can have an adverse impact on other European countries. In addition, the private and public sectors’ debt problems of a single European Union (EU) country can
pose significant economic risks to the EU as a whole. As a result, the Fund’s NAV may be more volatile than the NAV of a more geographically diversified fund. If securities of issuers in Europe fall out of
favor, it may cause the Fund to underperform other funds that do not focus their investments in this region of the world. The UK’s departure from the EU single market became effective January 1, 2021 with the
end of the Brexit transition period and the post-Brexit trade deal between the UK and EU taking effect on December 31, 2020. The impact of Brexit on the UK and European economies and the broader global economy could
be significant, resulting in negative impacts on currency and financial markets generally, such as increased volatility and illiquidity, and potentially lower economic growth in markets in Europe, which may adversely
affect the value of your investment in the Fund.
Market risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
The coronavirus disease 2019 and
its variants (COVID-19) pandemic has resulted in, and may continue to result in, significant global economic and societal disruption and market volatility due to disruptions in market access, resource availability,
facilities operations, imposition of tariffs, export controls and supply chain disruption, among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement
and loss in human and other resources. The uncertainty surrounding the magnitude, duration, reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental
authorities or other third parties, present unknowns that are yet to unfold. The impacts, as well as the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and
pandemics that may arise in the future – could negatively affect global economies and markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in
emerging market countries may be greater due to generally less established healthcare systems, governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing
political, social and economic risks in certain countries or globally. The disruptions caused by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively
impact the Fund’s ability to achieve its investment objectives. Any such event(s) could have a significant adverse impact on the value and risk profile of the Fund.
Shareholder concentration risk
At December 31, 2021, affiliated
shareholders of record owned 100.0% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its
| Variable Portfolio – Partners International Value Fund | Annual Report 2021 | 29 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
liquid positions, which may result in Fund losses
and the Fund holding a higher percentage of less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Note 10. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
Note 11. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in
connection with the conduct of their business activities. Ameriprise Financial believes that the Fund is not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject
of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with
the Fund. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (SEC) on legal and regulatory matters that relate to
Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that
these matters, or the adverse publicity associated with them, will not result in increased Fund redemptions, reduced sale of Fund shares or other adverse consequences to the Fund. Further, although we believe
proceedings are not likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines,
penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial or one or more of its affiliates that provides services to
the Fund.
| 30 | Variable Portfolio – Partners International Value Fund | Annual Report 2021 |
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees of Columbia
Funds Variable Series Trust II and Shareholders of Variable Portfolio – Partners International Value Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of Variable Portfolio – Partners International Value Fund (one of the funds constituting Columbia Funds Variable Series Trust II,
referred to hereafter as the "Fund") as of December 31, 2021, the related statement of operations for the year ended December 31, 2021, the statement of changes in net assets for each of the two years in the period
ended December 31, 2021, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2021 (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, 2021, 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, 2021 and the financial highlights for each of the five years in the period ended December 31, 2021 in conformity with accounting principles generally
accepted in the United States of America.
Basis for Opinion
These financial statements are the
responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these
financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2021 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.
/s/PricewaterhouseCoopers LLP
Minneapolis, Minnesota
February 22, 2022
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| Variable Portfolio – Partners International Value Fund | Annual Report 2021 | 31 |
Federal Income Tax
Information
(Unaudited)
The Fund hereby designates the
following tax attributes for the fiscal year ended December 31, 2021.
| Foreign taxes paid to foreign countries | Foreign taxes paid per share to foreign countries | Foreign source income | Foreign source income per share |
| $3,817,160 | $0.02 | $41,641,217 | $0.27 |
Foreign taxes. The Fund makes the
election to pass through to shareholders the foreign taxes paid. Eligible shareholders may claim a foreign tax credit. These taxes, and the corresponding foreign source income, are provided.
The Fund (or fund in which the fund
invests) has received a refund of foreign taxes previously reported and passed through in prior years (a “foreign tax redetermination”). Shareholders who claimed foreign tax credits with respect to such
foreign taxes previously reported in prior years may also have a foreign tax redetermination and may need to file amended tax returns to account for such taxes refunded to the Fund. The amount of tax refunded, and
years to which the tax relates, are available on the Tax Center page of ColumbiaThreadneedle.com, along with certain other information about the refunded tax. See your tax advisor. The amounts reported in the table
above have not been reduced for any foreign tax redeterminations.
Foreign taxes are deemed to be
passed through to shareholders with dividends paid after the close of the taxable year, on the next regularly scheduled distribution date of March 30, 2022.
TRUSTEES AND
OFFICERS
The Board oversees the Fund’s
operations and appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following table provides basic biographical information about the Fund’s Trustees as
of the printing of this report, including their principal occupations during the past five years, although specific titles for individuals may have varied over the period. The year set forth beneath Length of Service
in the table below is the year in which the Trustee was first appointed or elected as Trustee to any Fund currently in the Columbia Funds Complex or a predecessor thereof. Under current Board policy, each Trustee
generally serves until December 31 of the year such Trustee turns seventy-five (75).
Independent trustees
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| George S. Batejan c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1953 | Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 176 | Former Chairman of the Board, NICSA (National Investment Company Services Association) (Executive Committee, Nominating Committee and Governance Committee), 2014-2016; former Director, Intech Investment Management, 2011-2016; former Board Member, Metro Denver Chamber of Commerce, 2015-2016; former Advisory Board Member, University of Colorado Business School, 2015-2018 |
| 32 | Variable Portfolio – Partners International Value Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Kathleen Blatz c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2006 | Attorney, specializing in arbitration and mediation; Chief Justice, Minnesota Supreme Court, 1998-2006; Associate Justice, Minnesota Supreme Court, 1996-1998; Fourth Judicial District Court Judge, Hennepin County, 1994-1996; Attorney in private practice and public service, 1984-1993; State Representative, Minnesota House of Representatives, 1979-1993, which included service on the Tax and Financial Institutions and Insurance Committees; Member and Interim Chair, Minnesota Sports Facilities Authority, January 2017-July 2017; Interim President and Chief Executive Officer, Blue Cross Blue Shield of Minnesota (health care insurance), February-July 2018, April-October 2021 | 176 | Former Trustee, Blue Cross Blue Shield of Minnesota, 2009-2021 (Chair of the Business Development Committee, 2014-2017; Chair of the Governance Committee, 2017-2019); former Member and Chair of the Board, Minnesota Sports Facilities Authority, January 2017-July 2017; former Director, Robina Foundation, 2009-2020 (Chair, 2014-2020); Director, Schulze Family Foundation, since 2021 |
| Pamela G. Carlton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2007 | President, Springboard — Partners in Cross Cultural Leadership (consulting company) since 2003; Managing Director of US Equity Research, JP Morgan Chase, 1999-2003; Director of US Equity Research, Chase Asset Management, 1996-1999; Co-Director Latin America Research, 1993-1996, COO Global Research, 1992-1996, Co-Director of US Research, 1991-1992, Investment Banker, Morgan Stanley, 1982-1991, Morgan Stanley; Attorney, Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 176 | Trustee, New York Presbyterian Hospital Board (Executive Committee and Chair of People Committee) since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee); Director, Apollo Commercial Real Estate Finance, Inc. since 2021; the Governing Council of the Independent Directors Council (IDC), since 2021 |
| Janet Langford Carrig c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1957 | Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 174 | Director, EQT Corporation (natural gas producer) since 2019; Director, Whiting Petroleum Corporation (independent oil and gas company) since 2020 |
| J. Kevin Connaughton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2020 | Member, FINRA National Adjudicatory Council since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Consultant to Independent Trustees of CFVIT and CFST I from March 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Managing Director and General Manager of Mutual Fund Products, Columbia Management Investment Advisers, LLC, May 2010-February 2015; President, Columbia Funds, 2008-2015; and senior officer of Columbia Funds and affiliated funds, 2003-2015 | 174 | Former Director, The Autism Project, March 2015-December 2021; former Member of the Investment Committee, St. Michael’s College, November 2015-February 2020; former Trustee, St. Michael’s College, June 2017-September 2019; former Trustee, New Century Portfolios, January 2015-December 2017 |
| Variable Portfolio – Partners International Value Fund | Annual Report 2021 | 33 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Olive M. Darragh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since 2020 | Managing Director of Darragh Inc. (strategy and talent management consulting firm) since 2010; Founder and CEO, Zolio, Inc. (investment management talent identification platform) since 2004; Consultant to Independent Trustees of CFVIT and CFST I from June 2019 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 2001-2004 | 174 | Former Director, University of Edinburgh Business School (Member of US Board); former Director, Boston Public Library Foundation |
| Patricia M. Flynn c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1950 | Trustee since 2004 | Trustee Professor of Economics and Management, Bentley University since 1976 (also teaches and conducts research on corporate governance); Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 176 | Trustee, MA Taxpayers Foundation since 1997; Board of Governors, Innovation Institute, MA Technology Collaborative, 2010-2020; former Board of Directors, The MA Business Roundtable, 2003-2019 |
| Brian J. Gallagher c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 176 | Trustee, Catholic Schools Foundation since 2004 |
| Douglas A. Hacker c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1955 | Co-Chair since 2021; Chair of CFST I and CFVIT since 2014; Trustee of CFST I and CFVIT since 1996 and CFST, CFST II, CFVST II, CET I and CET II since 2021 | Independent business executive since May 2006; Executive Vice President – Strategy of United Airlines, December 2002 - May 2006; President of UAL Loyalty Services (airline marketing company), September 2001-December 2002; Executive Vice President and Chief Financial Officer of United Airlines, July 1999-September 2001 | 176 | Director, Spartan Nash Company (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing); former Director, Nash Finch Company (food distributor), 2005-2013; former Director, SeaCube Container Leasing Ltd. (container leasing), 2010-2013; and former Director, Travelport Worldwide Limited (travel information technology), 2014-2019 |
| Nancy T. Lukitsh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1956 | Trustee since 2011 | Senior Vice President, Partner and Director of Marketing, Wellington Management Company, LLP (investment adviser), 1997-2010; Chair, Wellington Management Portfolios (commingled non-U.S. investment pools), 2007 -2010; Director, Wellington Trust Company, NA and other Wellington affiliates, 1997-2010 | 174 | None |
| 34 | Variable Portfolio – Partners International Value Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| David M. Moffett c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2011 | Retired; Consultant to Bridgewater and Associates | 174 | Director, CSX Corporation (transportation suppliers); Director, Genworth Financial, Inc. (financial and insurance products and services); Director, PayPal Holdings Inc. (payment and data processing services); Trustee, University of Oklahoma Foundation; former Director, eBay Inc. (online trading community), 2007-2015; and former Director, CIT Bank, CIT Group Inc. (commercial and consumer finance), 2010-2016 |
| Catherine James Paglia c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Co-Chair since 2021; Chair of CFST, CFST II, CFVST II, CET I and CET II since 2020; Trustee of CFST, CFST II and CFVST II since 2004 and CFST I and CFVIT since 2021 | Director, Enterprise Asset Management, Inc. (private real estate and asset management company) since September 1998; Managing Director and Partner, Interlaken Capital, Inc., 1989-1997; Vice President, 1982-1985, Principal, 1985-1987, Managing Director, 1987-1989, Morgan Stanley; Vice President, Investment Banking, 1980-1982, Associate, Investment Banking, 1976-1980, Dean Witter Reynolds, Inc. | 176 | Director, Valmont Industries, Inc. (irrigation systems manufacturer) since 2012; Trustee, Carleton College (on the Investment Committee); Trustee, Carnegie Endowment for International Peace (on the Investment Committee) |
| Minor M. Shaw c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1947 | Trustee since 2003 | President, Micco LLC (private investments) since 2011; President, Micco Corp. (family investment business), 1998-2011 | 176 | Director, Blue Cross Blue Shield of South Carolina (Chair of Compensation Committee) since April 2008; Trustee, Hollingsworth Funds (on the Investment Committee) since 2016 (previously Board Chair from 2016-2019); Former Advisory Board member, Duke Energy Corp., 2016-2020; Chair of the Duke Endowment; Chair of Greenville – Spartanburg Airport Commission; former Trustee, BofA Funds Series Trust (11 funds), 2003-2011; former Director, Piedmont Natural Gas, 2004-2016; former Director, National Association of Corporate Directors, Carolinas Chapter, 2013-2018; Chair, Daniel-Mickel Foundation since 1998 |
| Variable Portfolio – Partners International Value Fund | Annual Report 2021 | 35 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Natalie A. Trunow c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1967 | Trustee since 2020 | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services), January 2016-January 2021; Non-executive Member of the Investment Committee and Valuation Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services), August 2018-January 2021; Advisor, Paradigm Asset Management, November 2016-December 2021; Consultant to Independent Trustees of CFVIT and CFST I from September 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Director of Investments/Consultant, Casey Family Programs, April 2016-November 2016; Senior Vice President and Chief Investment Officer, Calvert Investments, August 2008-January 2016; Section Head and Portfolio Manager, General Motors Asset Management, June 1997-August 2008 | 174 | Former Director, Investment Committee, Health Services for Children with Special Needs, Inc., 2012-2019; Director, Chair of Audit Committee, Consumer Credit Counseling Services (formerly Guidewell Financial Solutions), since 2019; Independent Director, Investment Committee and Valuation Committee, Sarona Asset Management, since 2019 |
| Sandra Yeager c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2017 | Retired; President and founder, Hanoverian Capital, LLC (SEC registered investment advisor firm), 2008-2016; Managing Director, DuPont Capital, 2006-2008; Managing Director, Morgan Stanley Investment Management, 2004-2006; Senior Vice President, Alliance Bernstein, 1990-2004 | 176 | Former Director, NAPE Education Foundation, October 2016-October 2020 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Fund Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I (CET I), Columbia ETF Trust II (CET II), Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Beckman, Gallagher and Hacker and Mses. Blatz, Carlton, Flynn, Paglia, Shaw and Yeager serve as Directors of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
Interested trustee affiliated with
Investment Manager*
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during the past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex overseen | Other directorships held by Trustee during the past five years |
| Daniel J. Beckman c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since November 2021(a) | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC (since April 2015); officer of Columbia Funds and affiliated funds since 2020. | 176 | Director, Ameriprise Trust Company, since October 2016; Director, Columbia Management Investment Distributors, Inc. since November 2018; Board of Governors, Columbia Wanger Asset Management, LLC since January 2022 |
| * | Interested person (as defined under the 1940 Act) by reason of being an officer, director, security holder and/or employee of the Investment Manager or Ameriprise Financial. |
| (a) | Mr. Beckman serves as the President and Principal Executive Officer of the Columbia Funds (since 2021). |
The Statement of Additional
Information has additional information about the Fund’s Board members and is available, without charge, upon request by calling 800.345.6611 or contacting your financial intermediary.
| 36 | Variable Portfolio – Partners International Value Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. The following table provides basic information about the Officers of the Fund, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Beckman, who is President and Principal Executive Officer, the Fund’s other officers are:
The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. The following table provides basic information about the Officers of the Fund, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Beckman, who is President and Principal Executive Officer, the Fund’s other officers are:
Fund officers
| Variable Portfolio – Partners International Value Fund | Annual Report 2021 | 37 |
TRUSTEES AND OFFICERS (continued)
Fund officers (continued)
Fund officers (continued)
| Name, address and year of birth | Position and year first appointed to position for any Fund in the Columbia Funds Complex or a predecessor thereof | Principal occupation(s) during past five years |
| Lyn Kephart-Strong 5228 Ameriprise Financial Center Minneapolis, MN 55474 1960 | Vice President (2015) | President, Columbia Management Investment Services Corp. since October 2014; Vice President & Resolution Officer, Ameriprise Trust Company since August 2009. |
Approval of
Subadvisory Agreement
Columbia Management Investment
Advisers, LLC (the Investment Manager, and together with its domestic and global affiliates, Columbia Threadneedle Investments), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial), serves
as the investment manager to Variable Portfolio – Partners International Value Fund (the Fund). On June 15, 2021, the Fund’s Board of Trustees (the Board), including a majority of the Board members who are
not interested persons of the Fund within the meaning of the Investment Company Act of 1940 (the Independent Trustees), upon the recommendation of the Investment Manager, unanimously approved the Subadvisory Agreement
(the Subadvisory Agreement) between the Investment Manager and Thompson, Siegel & Walmsley LLC (TSW), with respect to the Fund. On June 15, 2021, the Board, including all of the Independent Trustees, approved the
renewal of the Subadvisory Agreement.
At meetings held on March 12, 2021,
March 19, 2021, March 22, 2021, April 19, 2021 and June 15, 2021, independent legal counsel to the Independent Trustees reviewed with the Board the legal standards for consideration by directors/trustees of advisory
and subadvisory agreements and referred to the various written materials and oral presentations received by the Board and its Contracts, Compliance, and Investment Oversight Committees in connection with the
Board’s evaluation of TSW’s proposed services.
The Trustees held discussions with
the Investment Manager and TSW and reviewed and considered various written materials and oral presentations in connection with the evaluation of TSW’s proposed services, including the reports from management
with respect to the fees and terms of the proposed Subadvisory Agreement and TSW’s investment strategy/style and performance and from the Compliance Committee, with respect to the code of ethics and compliance
program of TSW. The Trustees considered the pending acquisition of TSW by Pendal Group Limited. In considering the Subadvisory Agreement, the Board reviewed, among other things:
| • | Terms of the Subadvisory Agreement; |
| • | Subadvisory fees payable by the Investment Manager under the Subadvisory Agreement; |
| • | Descriptions of various services proposed to be performed by TSW under the Subadvisory Agreement, including portfolio management and portfolio trading practices; |
| • | Information regarding the experience and resources of TSW, including information regarding senior management, portfolio managers and other personnel; |
| • | Information regarding the capabilities of TSW’s compliance program; and |
| • | The profitability to the Investment Manager and its affiliates from their relationships with the Fund. |
Following an analysis and
discussion of the foregoing, and the factors identified below, the Board, including all of the Independent Trustees, approved the Subadvisory Agreement on June 25, 2021 and the renewal of the Subadvisory Agreement on
June 15, 2021.
| 38 | Variable Portfolio – Partners International Value Fund | Annual Report 2021 |
Approval of Subadvisory Agreement (continued)
Nature, Extent and Quality of Services
Nature, Extent and Quality of Services
The Board considered its analysis
of the reports and presentations received by it, detailing the services proposed to be performed by TSW as a subadviser for the Fund, as well as the history, expertise, resources and capabilities, and the
qualifications of the personnel of TSW. The Board considered the diligence and selection process undertaken by the Investment Manager to select TSW, including the Investment Manager’s rationale for recommending
TSW, and the process for monitoring TSW’s ongoing performance of services for the Fund. The Board observed that TSW’s compliance program had been reviewed by the Fund’s Chief Compliance Officer and
was determined by him to be reasonably designed to prevent violation of the federal securities laws by the Fund. The Board also observed that information had been presented regarding TSW’s ability to carry out
its responsibilities under the proposed Subadvisory Agreement. The Board also considered the information provided by management regarding the personnel, risk controls, philosophy, and investment processes of TSW. The
Board also noted the presentation by TSW to the Board’s Contracts Committee.
The Board also discussed the
acceptability of the terms of the proposed Subadvisory Agreement. Independent legal counsel noted that the proposed Subadvisory Agreement was generally similar in scope and form to subadvisory agreements applicable to
other subadvised Funds. The Board noted the Investment Manager’s representation that TSW has experience subadvising registered mutual funds.
After reviewing these and related
factors, the Board concluded, within the context of their overall conclusions, that the expected nature, extent and quality of the services to be provided to the Fund supported the approval of the Subadvisory
Agreement.
Investment Performance of TSW
The Board observed TSW’s
relevant performance results versus the Fund’s benchmark and versus peers over various periods.
After reviewing these and related
factors, the Board concluded, within the context of their overall conclusions, that the performance of TSW, in light of other considerations, supported the approval of the Subadvisory Agreement.
Comparative Fees, Costs of
Services Provided and Profitability
The Board reviewed the proposed
level of subadvisory fees under the proposed Subadvisory Agreement, noting that the proposed subadvisory fees payable to TSW would be paid by the Investment Manager and would not impact the fees paid by the Fund. The
Board observed that the proposed subadvisory fees for TSW were within a reasonable range of subadvisory fees paid by the Investment Manager to the subadvisers of other Funds with similar strategies. The Trustees
observed that management fees, which were not proposed to change, remained within the range of other peers and that the Fund’s expense ratio also remained within the range of other peers. Additionally, the Board
considered that no change was expected in the total profitability of the Investment Manager and its affiliates in connection with the hiring of TSW. Because the Subadvisory Agreement was negotiated at arms-length by
the Investment Manager, which is responsible for payments to TSW thereunder, the Board did not consider the profitability to TSW from its relationship with the Fund.
After reviewing these and related
factors, the Board concluded, within the context of their overall conclusions, that the proposed level of subadvisory fees, anticipated costs of services provided and the expected profitability to the Investment
Manager and its affiliates from their relationships with the Fund supported the approval of the Subadvisory Agreement.
Economies of Scale
The Board also considered the
economies of scale that may be realized by the Investment Manager and its affiliates as the Fund grows and took note of the extent to which shareholders might also benefit from such growth. The Board considered, in
this regard, no expected change in profitability to the Investment Manager from its management agreement with the Fund as a result of the proposed engagement of TSW. The Board took into account, in this regard, the
significant oversight services provided by the Investment Manager to the Fund. The Board also observed that fees to be paid under the Subadvisory Agreement would not impact fees paid by the Fund (as subadvisory fees
are paid by the Investment Manager and not the Fund). The Board observed that the Fund’s management agreement with the Investment Manager continues to provide for sharing of economies of scale as management fees
decline as assets increase at pre-established breakpoints.
| Variable Portfolio – Partners International Value Fund | Annual Report 2021 | 39 |
Approval of Subadvisory Agreement (continued)
Conclusion
Conclusion
The Board reviewed all of the
above considerations in reaching its decision to approve the Subadvisory Agreement. In reaching its conclusions, no single factor was determinative.
On June 15, 2021, the Board,
including all of the Independent Trustees, determined that fees payable under the Subadvisory Agreement appeared fair and reasonable in light of the services proposed to be provided and approved the Subadvisory
Agreement. On June 15, 2021, the Board, including all of the Independent Trustees, took into account the factors that it had considered in approving the Subadvisory Agreement and approved the renewal of the
Subadvisory Agreement.
| 40 | Variable Portfolio – Partners International Value Fund | Annual Report 2021 |
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For Fund and other investment product prospectuses, which contain this and other important information, contact your
financial advisor or insurance representative. Please read the prospectus carefully before you invest. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved. Columbia Management Investment Distributors, Inc., 290 Congress Street, Boston, MA 02210
© 2022 Columbia Management Investment
Advisers, LLC.
C-3040 AW (2/22)
Variable Portfolio
– Partners International Core Equity Fund
Please remember that you may not
buy (nor will you own) shares of the Fund directly. The Fund is available through variable annuity contracts and variable life insurance policies offered by the separate accounts of participating insurance companies
as well as qualified pension and retirement plans. Please contact your financial advisor or insurance representative for more information.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
| 3 | |
| 5 | |
| 7 | |
| 8 | |
| 12 | |
| 13 | |
| 14 | |
| 16 | |
| 18 | |
| 29 | |
| 30 | |
| 30 |
Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which Variable Portfolio – Partners International Core Equity Fund (the Fund) holds investments consistent with the procedures as stated in the Statement of Additional
Information (SAI). You may obtain a copy of the SAI without charge by calling 800.345.6611; contacting your financial intermediary or searching the website of the Securities and Exchange Commission (SEC) at sec.gov.
Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge
by visiting columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. The Fund’s Form N-PORT is available on the SEC’s website at sec.gov. The Fund’s complete
schedule of portfolio holdings, as filed on Form N-PORT, can also be obtained without charge, upon request, by calling 800.345.6611.
Additional Fund information
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
290 Congress Street
Boston, MA 02210
Fund distributor
Columbia Management Investment Distributors,
Inc.
290 Congress Street
Boston, MA 02210
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
Variable Portfolio – Partners International
Core Equity Fund | Annual Report 2021
Fund at a Glance
Investment objective
The Fund
seeks to provide shareholders with long-term growth of capital.
Portfolio management
Schroder Investment Management North America Inc. (subadviser)
Schroder Investment Management North America Limited (sub-subadviser)
Schroder Investment Management North America Limited (sub-subadviser)
James Gautrey, CFA
Simon Webber, CFA
| Variable Portfolio – Partners International Core Equity Fund | Annual Report 2021 | 3 |
Fund at a Glance (continued)
Performance of a hypothetical $10,000 investment (December 31, 2011 — December 31, 2021)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class 2 shares of Variable Portfolio – Partners International Core Equity Fund during the stated time period, and does not reflect the deduction of taxes, if
any, that a shareholder may pay on Fund distributions or on the redemption of Fund shares. The returns also do not reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance
policy or qualified pension or retirement plan, if any.
| 4 | Variable Portfolio – Partners International Core Equity Fund | Annual Report 2021 |
Manager Discussion of Fund Performance
At December 31, 2021,
approximately 99.10% of the Fund’s shares were owned in the aggregate by affiliated funds-of-funds managed by Columbia Management Investment Advisers, LLC (the Investment Manager). As a result of asset
allocation decisions by the Investment Manager, it is possible that the Fund may experience relatively large purchases or redemptions from affiliated funds-of-funds. The Investment Manager seeks to minimize the impact
of these transactions by structuring them over a reasonable period of time. The Fund may experience increased expenses as it buys and sells securities as a result of purchases or redemptions by affiliated
funds-of-funds.
At the beginning of the period
ended December 31, 2021, the Fund was managed by two subadvisers, AQR Capital Management, LLC, and Schroder Investment Management North America Inc. (Schroder). On April 30, 2021, the AQR portion of the Fund was
terminated and, effective May 3, 2021, Schroder managed the full portfolio for the remainder of the year.
For the 12-month period that ended
December 31, 2021, the Fund’s Class 2 shares returned 13.18%. The Fund outperformed its benchmark, the MSCI EAFE Index (Net), which returned 11.26% over the same time period.
Market overview
International equities gained
throughout 2021 as COVID-19 vaccine rollouts and fiscal stimulus continued to support the economic recovery. Global markets were further supported by strong corporate earnings. Some of the market optimism, however,
was challenged by ongoing supply chain disruptions and inflationary pressures. Energy and commodity prices continued to surge, supporting the energy and materials sectors. Technology stocks continued to perform well
across all regions, led by the semiconductor industry, which continued to benefit from favorable underlying industry conditions with tight supply, rebounding demand, and resulting pricing power. Financial stocks also
performed strongly as fears of a credit cycle (poor performing loans) from 2020 proved unfounded. The emergence of a new COVID-19 variant, Omicron, in November led to increased market volatility, while investors grew
more anxious about a new wave of regulations in China, which weighed on emerging markets performance. On balance, value stocks slightly outperformed growth over the year. There was, however, a fair amount of rotation
in style leadership as changes in interest rate expectations seemed to periodically drive the value trade throughout the year.
AQR
We managed a portion of the Fund
from January 1, 2021 through April 30, 2021 (the reporting period). During that time period, our portion of the Fund outperformed the benchmark.
Notable contributors in our
portion of the Fund during the reporting period
| • | Stock selection within the consumer discretionary, industrials, and materials sectors contributed to performance. |
| • | Sector allocation was also additive to returns due to an overweight position to the materials sector and underweights in the health care and consumer staples sectors. |
| • | The three top individual contributors to performance in our portion of the portfolio were German automaker Volkswagen, French construction materials company Cie de Saint-Gobain, and U.K. insurer Aviva. |
| • | Stock selection within Japan and the United Kingdom provided the largest gains over the period. |
Notable detractors in our portion
of the Fund during the reporting period
| • | Stock selection within the utilities and energy sectors detracted from performance in our portion of the Fund’s portfolio during the reporting period. |
| • | The three top individual detractors in our portion of the portfolio during the reporting period were Italian biotech DiaSorin SpA, French technology company AtoS, and Australian iron ore company Fortescue Metals Group Ltd. |
| • | Stock selection within Australia and Italy detracted slightly. |
Schroder
Our portion of the Fund
outperformed during the 12-month period that ended December 31, 2021.
| Variable Portfolio – Partners International Core Equity Fund | Annual Report 2021 | 5 |
Manager Discussion of Fund Performance (continued)
Notable contributors in our
portion of the Fund during the period
| • | The modest outperformance of our portion of the Fund relative to the benchmark was led by a combination of stock selection and sector allocation effects. |
| ○ | Stock selection within the consumer staples, health care, energy and materials sectors helped offset weaker performance among our holdings in consumer discretionary and financials. |
| ○ | In terms of regions, the Fund benefited from holdings in Japan, Europe and the United Kingdom. |
| • | Our holding in Dutch multinational ASML was a stand-out performer throughout 2021 as the company increased capacity in response to the global shortage of computer chips. Demand for ASML’s lithography systems for use in semi-conductor production remains strong as their extreme ultraviolet (EUV) lithography systems are the key enabler for advancing high performance computing, allowing semiconductor manufacturers to further shrink chip sizes. ASML has developed a monopolistic position with an over 80% global market share in lithography, providing them with strong pricing power. |
| • | Our position in Swiss luxury goods company Richemont was a strong performer as the group continued to report impressive results led by its Cartier and Van Cleef businesses. Management also disclosed that they had been approached by Kering, a French luxury goods company. While Richemont Chairman Johann Rupert assured investors that he has no intention in selling the group, it raised speculation in the market about it being an acquisition target, further supporting the share price. |
| • | Equinor was also a strong performer, benefitting from the rotational switch into the energy sector and rising oil and gas prices. We believe the Norwegian company is better prepared for the transition to a low-emission economy than most oil majors, with a decent offshore wind pipeline including a local advantage in the Norwegian Continental Shelf, and strong gas portfolio. As the market normalizes, we believe Equinor will be well positioned to deploy its free cash flow into such areas as the development of sustainable fuel. |
Notable detractors in our portion
of the Fund during the period
| • | The Fund’s off-benchmark exposure to emerging markets was the largest detractor as our Chinese technology holdings faced increased regulation and selling pressure throughout the year. |
| • | Specifically, our position in Chinese internet platform Alibaba detracted after the Chinese government announced more hardline policies on antitrust, internet security, and education. This news weakened investor sentiment due to concerns over the long-term profitability of Chinese internet platforms. Although the stock has been under considerable pressure, with significantly increased risks, Alibaba’s e-commerce and cloud arms continue to demonstrate robust growth. We also believe that its cloud business – as well as areas such as payments and video – have been underestimated as long-term earnings drivers. As the trajectory of the regulatory environment in China remains unclear, however, we took the decision to sell our position. |
| • | Our holding in Danish wind turbine supplier Vestas Wind Systems also detracted from performance. The company faced a challenging environment, with supply chain constraints and higher raw material costs pressuring margins. Although the company faces a number of short-term challenges, we remain confident of its long-term growth potential given its leading position within the expanding wind energy market and the increasing policy support for renewables. |
| • | German brake maker Knorr Bremse sold off after rumors leaked that they were looking to acquire Hella, a German automotive lighting group, for approximately $7.5 billion. The stock reacted negatively to the news. We believe the stock can re-rate in time. |
The views expressed in this report
reflect the current views of the respective parties who have contributed to this report. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult
to predict, so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective parties
disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Columbia fund are based on numerous factors, may not be relied on as an
indication of trading intent on behalf of any particular Columbia fund. References to specific securities should not be construed as a recommendation or investment advice.
| 6 | Variable Portfolio – Partners International Core Equity Fund | Annual Report 2021 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur ongoing
costs, which generally include management fees, distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to help you compare these costs with the ongoing costs of investing in other mutual funds.
The information below does not
reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy (collectively, Contracts) or qualified pension and retirement plan (Qualified Plan), if any. The total fees
and expenses you bear may therefore be higher than those shown below.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount invested, to estimate the
expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as redemption or exchange fees, or expenses that apply to the subaccount or the Contract. Therefore, the
hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If the fees and expenses imposed under your Contract or
Qualified Plan, if any, were included, your costs would be higher.
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 365.
Expenses do not include fees and
expenses incurred indirectly by the Fund from its investment in underlying funds, including affiliated and non-affiliated pooled investment vehicles, such as mutual funds and exchange-traded funds.
| Variable Portfolio – Partners International Core Equity Fund | Annual Report 2021 | 7 |
Portfolio of Investments
December 31, 2021
December 31, 2021
(Percentages represent value of
investments compared to net assets)
Investments in securities
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 8 | Variable Portfolio – Partners International Core Equity Fund | Annual Report 2021 |
Notes to Portfolio of
Investments
| (a) | Non-income producing investment. |
| (b) | Represents fair value as determined in good faith under procedures approved by the Board of Trustees. At December 31, 2021, the total value of these securities amounted to $0, which represents less than 0.01% of total net assets. |
| (c) | Valuation based on significant unobservable inputs. |
| (d) | The rate shown is the seven-day current annualized yield at December 31, 2021. |
| (e) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended December 31, 2021 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Realized gain (loss)($) | Dividends($) | End of period shares |
| Columbia Short-Term Cash Fund, 0.085% | ||||||||
| 46,484,628 | 1,225,942,872 | (1,230,342,942) | — | 42,084,558 | (1,915) | 21,620 | 42,092,977 | |
Abbreviation Legend
| ADR | American Depositary Receipt |
Fair value
measurements
The Fund categorizes
its fair value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when
available. Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that
reflect the Fund’s assumptions about the information market participants would use in
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Variable Portfolio – Partners International Core Equity Fund | Annual Report 2021 | 9 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Fair value measurements (continued)
pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example, certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example, certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
Foreign equity securities actively
traded in markets where there is a significant delay in the local close relative to the New York Stock Exchange are classified as Level 2. The values of these securities may include an adjustment to reflect the impact
of market movements following the close of local trading, as described in Note 2 to the financial statements – Security valuation.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at December 31, 2021:
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 10 | Variable Portfolio – Partners International Core Equity Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Fair value measurements (continued)
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| United Kingdom | — | 409,752,605 | 0* | 409,752,605 |
| United States | 75,126,830 | — | — | 75,126,830 |
| Total Common Stocks | 256,476,038 | 1,867,819,419 | 0* | 2,124,295,457 |
| Money Market Funds | 42,084,558 | — | — | 42,084,558 |
| Total Investments in Securities | 298,560,596 | 1,867,819,419 | 0* | 2,166,380,015 |
| * | Rounds to zero. |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The Fund’s assets assigned to
the Level 2 input category are generally valued using the market approach, in which a security’s value is determined through reference to prices and information from market transactions for similar or identical
assets. These assets include certain foreign securities for which a third party statistical pricing service may be employed for purposes of fair market valuation. The model utilized by such third party statistical
pricing service takes into account a security’s correlation to available market data including, but not limited to, intraday index, ADR, and exchange-traded fund movements.
The Fund does not hold any
significant investments (greater than one percent of net assets) categorized as Level 3.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Variable Portfolio – Partners International Core Equity Fund | Annual Report 2021 | 11 |
Statement of Assets and Liabilities
December 31, 2021
December 31, 2021
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $1,732,782,115) | $2,124,295,457 |
| Affiliated issuers (cost $42,084,558) | 42,084,558 |
| Cash | 659 |
| Foreign currency (cost $698) | 700 |
| Receivable for: | |
| Capital shares sold | 45 |
| Dividends | 2,635,585 |
| Foreign tax reclaims | 11,400,054 |
| Prepaid expenses | 29,527 |
| Total assets | 2,180,446,585 |
| Liabilities | |
| Payable for: | |
| Investments purchased | 10,711,215 |
| Capital shares purchased | 858,890 |
| Management services fees | 46,886 |
| Distribution and/or service fees | 122 |
| Service fees | 858 |
| Compensation of board members | 158,827 |
| Compensation of chief compliance officer | 402 |
| Other expenses | 95,156 |
| Total liabilities | 11,872,356 |
| Net assets applicable to outstanding capital stock | $2,168,574,229 |
| Represented by | |
| Paid in capital | 1,402,321,943 |
| Total distributable earnings (loss) | 766,252,286 |
| Total - representing net assets applicable to outstanding capital stock | $2,168,574,229 |
| Class 1 | |
| Net assets | $2,150,660,808 |
| Shares outstanding | 158,512,592 |
| Net asset value per share | $13.57 |
| Class 2 | |
| Net assets | $17,913,421 |
| Shares outstanding | 1,332,485 |
| Net asset value per share | $13.44 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 12 | Variable Portfolio – Partners International Core Equity Fund | Annual Report 2021 |
Statement of Operations
Year Ended December 31, 2021
Year Ended December 31, 2021
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $62,655,609 |
| Dividends — affiliated issuers | 21,620 |
| Interfund lending | 5 |
| Foreign taxes withheld | (5,525,627) |
| Total income | 57,151,607 |
| Expenses: | |
| Management services fees | 18,893,766 |
| Distribution and/or service fees | |
| Class 2 | 36,148 |
| Service fees | 9,185 |
| Compensation of board members | 73,721 |
| Custodian fees | 287,183 |
| Printing and postage fees | 13,932 |
| Audit fees | 87,436 |
| Legal fees | 32,260 |
| Interest on interfund lending | 2,038 |
| Compensation of chief compliance officer | 411 |
| Other | 21,541 |
| Total expenses | 19,457,621 |
| Net investment income | 37,693,986 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 453,070,595 |
| Investments — affiliated issuers | (1,915) |
| Foreign currency translations | (2,600,101) |
| Futures contracts | 1,014,690 |
| Net realized gain | 451,483,269 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | (160,293,313) |
| Foreign currency translations | (623,875) |
| Futures contracts | (310,438) |
| Net change in unrealized appreciation (depreciation) | (161,227,626) |
| Net realized and unrealized gain | 290,255,643 |
| Net increase in net assets resulting from operations | $327,949,629 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| Variable Portfolio – Partners International Core Equity Fund | Annual Report 2021 | 13 |
Statement of Changes in Net Assets
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | |
| Operations | ||
| Net investment income | $37,693,986 | $42,743,314 |
| Net realized gain (loss) | 451,483,269 | (87,804,655) |
| Net change in unrealized appreciation (depreciation) | (161,227,626) | 364,187,457 |
| Net increase in net assets resulting from operations | 327,949,629 | 319,126,116 |
| Distributions to shareholders | ||
| Net investment income and net realized gains | ||
| Class 1 | (48,867,259) | (14,014,160) |
| Class 2 | (224,826) | (40,703) |
| Total distributions to shareholders | (49,092,085) | (14,054,863) |
| Decrease in net assets from capital stock activity | (1,250,633,312) | (66,855,044) |
| Total increase (decrease) in net assets | (971,775,768) | 238,216,209 |
| Net assets at beginning of year | 3,140,349,997 | 2,902,133,788 |
| Net assets at end of year | $2,168,574,229 | $3,140,349,997 |
| Year Ended | Year Ended | |||
| December 31, 2021 | December 31, 2020 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class 1 | ||||
| Subscriptions | 22,834,420 | 291,109,718 | 17,786,329 | 184,684,505 |
| Distributions reinvested | 3,880,104 | 48,867,259 | 1,520,719 | 14,014,160 |
| Redemptions | (124,994,532) | (1,597,873,548) | (24,905,178) | (265,710,298) |
| Net decrease | (98,280,008) | (1,257,896,571) | (5,598,130) | (67,011,633) |
| Class 2 | ||||
| Subscriptions | 588,001 | 7,629,194 | 126,108 | 1,245,174 |
| Distributions reinvested | 17,941 | 224,826 | 4,449 | 40,703 |
| Redemptions | (45,193) | (590,761) | (114,016) | (1,129,288) |
| Net increase | 560,749 | 7,263,259 | 16,541 | 156,589 |
| Total net decrease | (97,719,259) | (1,250,633,312) | (5,581,589) | (66,855,044) |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 14 | Variable Portfolio – Partners International Core Equity Fund | Annual Report 2021 |
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| Variable Portfolio – Partners International Core Equity Fund | Annual Report 2021 | 15 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect any fees and expenses imposed under your
Contract and/or Qualified Plan, as applicable; such fees and expenses would reduce the total returns for all periods shown. Total return and portfolio turnover are not annualized for periods of less than one year. The
portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain derivatives, if any. If such transactions were included, the Fund’s portfolio
turnover rate may be higher.
| Net asset value, beginning of period | Net investment income | Net realized and unrealized gain (loss) | Total from investment operations | Distributions from net investment income | Distributions from net realized gains | Total distributions to shareholders | |
| Class 1 | |||||||
| Year Ended 12/31/2021 | $12.19 | 0.20 | 1.43 | 1.63 | (0.25) | — | (0.25) |
| Year Ended 12/31/2020 | $11.03 | 0.16 | 1.05 | 1.21 | (0.02) | (0.03) | (0.05) |
| Year Ended 12/31/2019 | $9.70 | 0.29 | 1.50 | 1.79 | (0.30) | (0.16) | (0.46) |
| Year Ended 12/31/2018 | $11.92 | 0.25 | (2.18) | (1.93) | (0.26) | (0.03) | (0.29) |
| Year Ended 12/31/2017 | $9.91 | 0.20 | 2.02 | 2.22 | (0.21) | — | (0.21) |
| Class 2 | |||||||
| Year Ended 12/31/2021 | $12.09 | 0.18 | 1.40 | 1.58 | (0.23) | — | (0.23) |
| Year Ended 12/31/2020 | $10.96 | 0.14 | 1.04 | 1.18 | (0.02) | (0.03) | (0.05) |
| Year Ended 12/31/2019 | $9.64 | 0.25 | 1.50 | 1.75 | (0.27) | (0.16) | (0.43) |
| Year Ended 12/31/2018 | $11.84 | 0.22 | (2.16) | (1.94) | (0.23) | (0.03) | (0.26) |
| Year Ended 12/31/2017 | $9.86 | 0.17 | 2.00 | 2.17 | (0.19) | — | (0.19) |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Ratios include interfund lending expense which is less than 0.01%. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 16 | Variable Portfolio – Partners International Core Equity Fund | Annual Report 2021 |
Financial Highlights (continued)
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets(a) | Total net expense ratio to average net assets(a),(b) | Net investment income ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Class 1 | |||||||
| Year Ended 12/31/2021 | $13.57 | 13.55% | 0.80%(c) | 0.80%(c) | 1.56% | 57% | $2,150,661 |
| Year Ended 12/31/2020 | $12.19 | 11.16% | 0.80% | 0.80% | 1.59% | 163% | $3,131,021 |
| Year Ended 12/31/2019 | $11.03 | 18.76% | 0.79% | 0.79% | 2.74% | 94% | $2,893,855 |
| Year Ended 12/31/2018 | $9.70 | (16.53%) | 0.83% | 0.83% | 2.23% | 105% | $2,766,782 |
| Year Ended 12/31/2017 | $11.92 | 22.56% | 0.92% | 0.92% | 1.79% | 68% | $2,606,365 |
| Class 2 | |||||||
| Year Ended 12/31/2021 | $13.44 | 13.18% | 1.06%(c) | 1.06%(c) | 1.40% | 57% | $17,913 |
| Year Ended 12/31/2020 | $12.09 | 10.96% | 1.05% | 1.05% | 1.33% | 163% | $9,329 |
| Year Ended 12/31/2019 | $10.96 | 18.41% | 1.04% | 1.04% | 2.45% | 94% | $8,279 |
| Year Ended 12/31/2018 | $9.64 | (16.69%) | 1.08% | 1.08% | 1.99% | 105% | $6,925 |
| Year Ended 12/31/2017 | $11.84 | 22.14% | 1.17% | 1.17% | 1.50% | 68% | $8,554 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Variable Portfolio – Partners International Core Equity Fund | Annual Report 2021 | 17 |
Notes to Financial Statements
December 31, 2021
December 31, 2021
Note 1. Organization
Variable Portfolio –
Partners International Core Equity Fund (the Fund), a series of Columbia Funds Variable Series Trust II (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended
(the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers Class 1 and Class 2 shares to separate accounts funding variable annuity contracts and variable life insurance policies (collectively, Contracts) issued by
affiliated and unaffiliated life insurance companies (Participating Insurance Companies) as well as qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors (Qualified
Investors) authorized by Columbia Management Investment Distributors, Inc. (the Distributor). You may not buy (nor will you own) shares of the Fund directly. You may invest by participating in a Qualified Plan or by
buying a Contract and making allocations to the Fund. Although all share classes generally have identical voting, dividend and liquidation rights, each share class votes separately when required by the Trust’s
organizational documents or by law. Different share classes pay different net investment income distribution amounts to the extent the expenses of such share classes differ, and distributions in liquidation will be
proportional to the net asset value of each share class. Each share class has its own cost structure and other features.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Other expenses on the Statement of Operations include adjustments as a result of a change in
estimated expenses.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Equity securities listed on an
exchange are valued at the closing price or last trade price on their primary exchange at the close of business of the New York Stock Exchange. Securities with a closing price not readily available or not listed on
any exchange are valued at the mean between the closing bid and ask prices. Listed preferred stocks convertible into common stocks are valued using an evaluated price from a pricing service.
Foreign equity securities are
valued based on the closing price or last trade price on their primary exchange at the close of business of the New York Stock Exchange. If any foreign equity security closing prices are not readily available,
the securities are valued at the mean of the latest quoted bid and ask prices on such exchanges or markets. Foreign currency exchange rates are determined at the scheduled closing time of the New York Stock Exchange.
Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange; therefore, the closing prices for securities in such markets or on such exchanges may not fully reflect
events that occur after such close but before the close of the New York Stock Exchange. In those situations, foreign securities will be fair valued pursuant to a policy adopted by the Board of Trustees. Under the
policy, the Fund may utilize a third-party pricing service to determine these fair values. The third-party pricing service takes into account multiple factors, including, but not limited to, movements in the U.S.
securities markets, certain depositary receipts, futures contracts and foreign exchange rates that have occurred subsequent to the close of the foreign exchange or market, to determine a good faith estimate that
reasonably reflects the current market conditions as of the close of the New York Stock Exchange. The fair value of a security is likely to be different from the quoted or published price, if available.
| 18 | Variable Portfolio – Partners International Core Equity Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Investments in open-end investment
companies (other than exchange-traded funds (ETFs)), are valued at the latest net asset value reported by those companies as of the valuation time.
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Foreign currency transactions and
translations
The values of all assets and
liabilities denominated in foreign currencies are generally translated into U.S. dollars at exchange rates determined at the close of regular trading on the New York Stock Exchange. Net realized and unrealized gains
(losses) on foreign currency transactions and translations include gains (losses) arising from the fluctuation in exchange rates between trade and settlement dates on securities transactions, gains (losses) arising
from the disposition of foreign currency and currency gains (losses) between the accrual and payment dates on dividends, interest income and foreign withholding taxes.
For financial statement purposes,
the Fund does not distinguish that portion of gains (losses) on investments which is due to changes in foreign exchange rates from that which is due to changes in market prices of the investments. Such fluctuations
are included with the net realized and unrealized gains (losses) on investments in the Statement of Operations.
Derivative instruments
The Fund invests in certain
derivative instruments, as detailed below, in seeking to meet its investment objectives. Derivatives are instruments whose values depend on, or are derived from, in whole or in part, the value of one or more
securities, currencies, commodities, indices, or other assets or instruments. Derivatives may be used to increase investment flexibility (including to maintain cash reserves while maintaining desired exposure to
certain assets), for risk management (hedging) purposes, to facilitate trading, to reduce transaction costs and to pursue higher investment returns. The Fund may also use derivative instruments to mitigate certain
investment risks, such as foreign currency exchange rate risk, interest rate risk and credit risk. Derivatives may involve various risks, including the potential inability of the counterparty to fulfill its
obligations under the terms of the contract, the potential for an illiquid secondary market (making it difficult for the Fund to sell or terminate, including at favorable prices) and the potential for market movements
which may expose the Fund to gains or losses in excess of the amount shown in the Statement of Assets and Liabilities. The notional amounts of derivative instruments, if applicable, are not recorded in the financial
statements.
A derivative instrument may suffer
a marked-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform its
obligations under the contract. The Fund’s risk of loss from counterparty credit risk on over-the-counter derivatives is generally limited to the aggregate unrealized gain netted against any collateral held by
the Fund and the amount of any variation margin held by the counterparty, plus any replacement costs or related amounts. With exchange-traded or centrally cleared derivatives, there is reduced counterparty credit risk
to the Fund since the clearinghouse or central counterparty (CCP) provides some protection in the case of clearing member default. The clearinghouse or CCP stands between the buyer and the seller of the contract;
therefore, additional counterparty credit risk is failure of the clearinghouse or CCP. However, credit risk still exists in exchange-traded or centrally cleared derivatives with respect to initial and variation margin
that is held in a broker’s customer account. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy
and at that time there is a shortfall in the
| Variable Portfolio – Partners International Core Equity Fund | Annual Report 2021 | 19 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
aggregate amount of margin held by the clearing
broker for all its clients and such shortfall is remedied by the CCP or otherwise, U.S. bankruptcy laws will typically allocate that shortfall on a pro-rata basis across all the clearing broker’s customers
(including the Fund), potentially resulting in losses to the Fund.
In order to better define its
contractual rights and to secure rights that will help the Fund mitigate its counterparty risk, the Fund may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (ISDA Master Agreement)
or similar agreement with its derivatives counterparties. An ISDA Master Agreement is an agreement between the Fund and a counterparty that governs over-the-counter derivatives and foreign exchange forward contracts
and contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset
with the counterparty certain derivative instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically
permit a single net payment in the event of default (close-out netting), including the bankruptcy or insolvency of the counterparty. Note, however, that bankruptcy or insolvency laws of a particular jurisdiction may
impose restrictions on or prohibitions against the right of offset or netting in bankruptcy, insolvency or other events.
Collateral (margin) requirements
differ by type of derivative. Margin requirements are established by the clearinghouse or CCP for exchange-traded and centrally cleared derivatives. Brokers can ask for margin in excess of the minimum in certain
circumstances. Collateral terms for most over-the-counter derivatives are subject to regulatory requirements to exchange variation margin with trading counterparties and may have contract specific margin terms as
well. For over-the-counter derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the marked-to-market amount for each transaction under such agreement and
comparing that amount to the value of any variation margin currently pledged by the Fund and/or the counterparty. Generally, the amount of collateral due from or to a party has to exceed a minimum transfer amount
threshold (e.g., $250,000) before a transfer has to be made. To the extent amounts due to the Fund from its counterparties are not fully collateralized, contractually or otherwise, the Fund bears the risk of loss from
counterparty nonperformance. The Fund may also pay interest expense on cash collateral received from the broker. Any interest expense paid by the Fund is shown on the Statement of Operations. The Fund attempts to
mitigate counterparty risk by only entering into agreements with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those
counterparties.
Certain ISDA Master Agreements
allow counterparties of over-the-counter derivatives transactions to terminate derivatives contracts prior to maturity in the event the Fund’s net asset value declines by a stated percentage over a specified
time period or if the Fund fails to meet certain terms of the ISDA Master Agreement, which would cause the Fund to accelerate payment of any net liability owed to the counterparty. The Fund also has termination
rights if the counterparty fails to meet certain terms of the ISDA Master Agreement. In determining whether to exercise such termination rights, the Fund would consider, in addition to counterparty credit risk,
whether termination would result in a net liability owed from the counterparty.
For financial reporting purposes,
the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statement of Assets and Liabilities.
Futures contracts
Futures contracts are
exchange-traded and represent commitments for the future purchase or sale of an asset at a specified price on a specified date. The Fund bought and sold futures contracts to maintain appropriate equity market exposure
while keeping sufficient cash to accommodate daily redemptions. These instruments may be used for other purposes in future periods. Upon entering into futures contracts, the Fund bears risks that it may not achieve
the anticipated benefits of the futures contracts and may realize a loss. Additional risks include counterparty credit risk, the possibility of an illiquid market, and that a change in the value of the contract or
option may not correlate with changes in the value of the underlying asset.
Upon entering into a futures
contract, the Fund deposits cash or securities with the broker, known as a futures commission merchant (FCM), in an amount sufficient to meet the initial margin requirement. The initial margin deposit must be
maintained at an established level over the life of the contract. Cash deposited as initial margin is recorded in the Statement of Assets and Liabilities as margin deposits. Securities deposited as initial margin are
designated in the Portfolio of Investments. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily change in the contract value and are
recorded as variation margin receivable or payable and are offset in
| 20 | Variable Portfolio – Partners International Core Equity Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
unrealized gains or losses. The Fund generally
expects to earn interest income on its margin deposits. The Fund recognizes a realized gain or loss when the contract is closed or expires. Futures contracts involve, to varying degrees, risk of loss in excess of the
variation margin disclosed in the Statement of Assets and Liabilities.
Effects of derivative transactions in
the financial statements
The following tables are intended
to provide additional information about the effect of derivatives on the financial statements of the Fund, including: the fair value of derivatives by risk category and the location of those fair values in the
Statement of Assets and Liabilities; and the impact of derivative transactions over the period in the Statement of Operations, including realized and unrealized gains (losses). The derivative instrument schedules
following the Portfolio of Investments present additional information regarding derivative instruments outstanding at the end of the period, if any.
The following table indicates the
effect of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) in the Statement of Operations for the year ended December 31, 2021:
The following table is a summary
of the average outstanding volume by derivative instrument for the year ended December 31, 2021:
| Derivative instrument | Average notional amounts ($) |
| Futures contracts — long | 3,222,706* |
| Futures contracts — short | —** |
| * | Based on the ending daily outstanding amounts for the year ended December 31, 2021. |
| ** | There were no ending daily outstanding amounts for the year ended December 31, 2021. The average notional amount of futures contracts opened (and closed) during the period was $6,686,571. |
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
Income recognition
Corporate actions and dividend
income are generally recorded net of any non-reclaimable tax withholdings, on the ex-dividend date or upon receipt of an ex-dividend notification in the case of certain foreign securities.
The Fund may receive distributions
from holdings in equity securities, business development companies (BDCs), exchange-traded funds (ETFs), limited partnerships (LPs), other regulated investment companies (RICs), and real estate investment trusts
(REITs), which report information as to the tax character of their distributions annually. These distributions are allocated to dividend income, capital gain and return of capital based on actual information reported.
Return of capital is recorded as a reduction of the cost basis of securities held. If the Fund no longer owns the applicable securities, return of capital is recorded as a realized gain. With respect to REITs, to the
extent actual information has not yet been reported, estimates for return of capital are made by Columbia Management Investment Advisers, LLC (the Investment Manager), a
| Variable Portfolio – Partners International Core Equity Fund | Annual Report 2021 | 21 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
wholly-owned subsidiary of Ameriprise Financial,
Inc. (Ameriprise Financial). The Investment Manager’s estimates are subsequently adjusted when the actual character of the distributions is disclosed by the REITs, which could result in a proportionate change in
return of capital to shareholders.
Awards from class action litigation
are recorded as a reduction of cost basis if the Fund still owns the applicable securities on the payment date. If the Fund no longer owns the applicable securities on the payment date, the proceeds are recorded as
realized gains.
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
Federal income tax status
The Fund intends to qualify each
year as a regulated investment company under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its investment company taxable income and net capital gain, if any, for its
tax year, and as such will not be subject to federal income taxes. In addition, because the Fund meets the exception under Internal Revenue Code Section 4982(f), the Fund expects not to be subject to federal excise
tax. Therefore, no federal income or excise tax provision is recorded.
Foreign taxes
The Fund may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries, as applicable, based upon its current interpretation of tax rules
and regulations that exist in the markets in which it invests.
Realized gains in certain countries
may be subject to foreign taxes at the Fund level, based on statutory rates. The Fund accrues for such foreign taxes on realized and unrealized gains at the appropriate rate for each jurisdiction, as applicable. The
amount, if any, is disclosed as a liability on the Statement of Assets and Liabilities.
Distributions to subaccounts
Distributions to the subaccounts of
Contracts, Qualified Plans and Qualified Investors are recorded at the close of business on the record date and are payable on the first business day following the record date. Dividends from net investment income, if
any, are declared and distributed quarterly. Capital gain distributions, when available, will be made annually. However, an additional capital gain distribution may be made during the fiscal year in order to comply
with the Internal Revenue Code, as applicable to registered investment companies. Income distributions and capital gain distributions are determined in accordance with federal income tax regulations, which may differ
from GAAP. All dividends and distributions are reinvested in additional shares of the applicable share class of the Fund at the net asset value as of the ex-dividend date of the distribution.
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
| 22 | Variable Portfolio – Partners International Core Equity Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Note 3. Fees and other
transactions with affiliates
Management services fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Under the Management Agreement, the
Investment Manager provides the Fund with investment research and advice, as well as administrative and accounting services. The Investment Manager is responsible for the ultimate oversight of investments made by the
Fund. The Fund’s subadviser (see Subadvisory agreement below) has the primary responsibility for the day-to-day portfolio management of the Fund. The management services fee is an annual fee that is equal to a
percentage of the Fund’s daily net assets that declines from 0.87% to 0.67% as the Fund’s net assets increase. The effective management services fee rate for the year ended December 31, 2021 was 0.78% of
the Fund’s average daily net assets.
Subadvisory agreement
The Investment Manager has entered
into a Subadvisory Agreement with Schroder Investment Management North America Inc. (SIMNA Inc.) to serve as a subadviser to the Fund. Schroder Investment Management North America Limited (SIMNA Ltd.), an affiliate of
SIMNA Inc., assists in providing day-to-day portfolio management of the Fund pursuant to a Sub-Subadvisory Agreement between SIMNA Inc. and SIMNA Ltd. Prior to May 1, 2021, AQR Capital Management, LLC served as a
subadviser to the Fund. The Investment Manager compensates the subadviser to manage the investment of the Fund’s assets.
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. Under a Deferred Compensation Plan (the
Deferred Plan), these members of the Board of Trustees may elect to defer payment of up to 100% of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of
certain funds managed by the Investment Manager. The Fund’s liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Deferred Plan. All
amounts payable under the Deferred Plan constitute a general unsecured obligation of the Fund. The expense for the Deferred Plan, which includes Trustees’ fees deferred during the current period as well as any
gains or losses on the Trustees’ deferred compensation balances as a result of market fluctuations, is included in "Compensation of board members" on the Statement of Operations.
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
Service fees
The Fund has entered into a
Shareholder Services Agreement with Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial. Under this
agreement, the Fund pays a service fee equal to the payments made by the Transfer Agent to Participating Insurance Companies and other financial intermediaries (together, Participating Organizations) for services each
such Participating Organization provides to its clients, customers and participants that are invested directly or indirectly in the Fund, up to a cap approved by the Board of Trustees from time to time. The effective
service fee rate for the year ended December 31, 2021, was 0.00% of the Fund’s average daily net assets.
The Transfer Agent may retain as
compensation for its services revenues from fees for wire, telephone and redemption orders, account transcripts due the Transfer Agent from Fund shareholders and interest (net of bank charges) earned with respect to
balances in accounts the Transfer Agent maintains in connection with its services to the Fund.
| Variable Portfolio – Partners International Core Equity Fund | Annual Report 2021 | 23 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Distribution and/or service fees
The Fund has an agreement with the
Distributor, an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution services. Under a Plan and Agreement of Distribution, the Fund pays a fee at an annual rate
of up to 0.25% of the Fund’s average daily net assets attributable to Class 2 shares. The Fund pays no distribution and service fees for Class 1 shares.
Expenses waived/reimbursed by the
Investment Manager and its affiliates
The Investment Manager and certain
of its affiliates have contractually agreed to waive fees and/or reimburse expenses (excluding certain fees and expenses described below) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, so that the Fund’s net operating expenses, after giving effect to fees waived/expenses reimbursed and any balance credits and/or overdraft charges from the Fund’s
custodian, do not exceed the following annual rate(s) as a percentage of the classes’ average daily net assets:
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), expenses associated with investments in affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange-traded funds), transaction costs and
brokerage commissions, costs related to any securities lending program, dividend expenses associated with securities sold short, inverse floater program fees and expenses, transaction charges and interest on borrowed
money, interest, costs associated with certain shareholder meetings, infrequent and/or unusual expenses and any other expenses the exclusion of which is specifically approved by the Board of Trustees. This
agreement may be modified or amended only with approval from the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements
described above are not recoverable by the Investment Manager or its affiliates in future periods.
Note 4. Federal tax
information
The timing and character of
income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP because of temporary or permanent book to tax differences.
At December 31, 2021, these
differences were primarily due to differing treatment for deferral/reversal of wash sale losses, trustees’ deferred compensation, re-characterization of distributions for investments, investments in
partnerships, foreign currency transactions, passive foreign investment company (PFIC) holdings and foreign tax reclaims refunded. To the extent these differences were permanent, reclassifications were made among the
components of the Fund’s net assets. Temporary differences do not require reclassifications.
The following reclassifications
were made:
| Undistributed net investment income ($) | Accumulated net realized gain ($) | Paid in capital ($) |
| 8,087,255 | (8,886,135) | 798,880 |
Net investment income (loss) and
net realized gains (losses), as disclosed in the Statement of Operations, and net assets were not affected by this reclassification.
| 24 | Variable Portfolio – Partners International Core Equity Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
The tax character of distributions
paid during the years indicated was as follows:
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | ||||
| Ordinary income ($) | Long-term capital gains ($) | Total ($) | Ordinary income ($) | Long-term capital gains ($) | Total ($) |
| 49,092,085 | — | 49,092,085 | 5,873,590 | 8,181,273 | 14,054,863 |
Short-term capital gain
distributions, if any, are considered ordinary income distributions for tax purposes.
At December 31, 2021, the
components of distributable earnings on a tax basis were as follows:
| Undistributed ordinary income ($) | Undistributed long-term capital gains ($) | Capital loss carryforwards ($) | Net unrealized appreciation ($) |
| 234,515,295 | 143,628,572 | — | 387,989,114 |
At December 31, 2021, the cost of
all investments for federal income tax purposes along with the aggregate gross unrealized appreciation and depreciation based on that cost was:
| Federal tax cost ($) | Gross unrealized appreciation ($) | Gross unrealized (depreciation) ($) | Net unrealized appreciation ($) |
| 1,778,390,901 | 423,680,273 | (35,691,159) | 387,989,114 |
Tax cost of investments and
unrealized appreciation/(depreciation) may also include timing differences that do not constitute adjustments to tax basis.
The following capital loss
carryforwards, determined at December 31, 2021, may be available to reduce future net realized gains on investments, if any, to the extent permitted by the Internal Revenue Code. In addition, for the year ended
December 31, 2021, capital loss carryforwards utilized, if any, were as follows:
| No expiration short-term ($) | No expiration long-term ($) | Total ($) | Utilized ($) |
| — | — | — | 60,583,970 |
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Note 5. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $1,344,503,863 and $2,597,777,270, respectively, for the year ended December 31, 2021. The amount of purchase
and sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 6. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes
referred to as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
| Variable Portfolio – Partners International Core Equity Fund | Annual Report 2021 | 25 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Note 7. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund’s activity in the
Interfund Program during the year ended December 31, 2021 was as follows:
| Borrower or lender | Average loan balance ($) | Weighted average interest rate (%) | Number of days with outstanding loans |
| Borrower | 3,543,333 | 0.69 | 30 |
| Lender | 300,000 | 0.61 | 1 |
Interest income earned and
interest expense incurred by the Fund is recorded as Interfund lending in the Statement of Operations. The Fund had no outstanding interfund loans at December 31, 2021.
Note 8. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to an October 28, 2021 amendment and restatement, the credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment
Manager or an affiliated investment manager, severally and not jointly, permits collective borrowings up to $950 million. Interest is currently charged to each participating fund based on its borrowings at a rate
equal to the higher of (i) the federal funds effective rate, (ii) the secured overnight financing rate plus 0.11448% and (iii) the overnight bank funding rate, plus in each case, 1.00%. Each borrowing under the credit
facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The
commitment fee is included in other expenses in the Statement of Operations. This agreement expires annually in October unless extended or renewed. Prior to the October 28, 2021 amendment and restatement, the Fund had
access to a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. which permitted collective borrowings up to $950 million. Interest was
charged to each participating fund based on its borrowings at a rate equal to the higher of (i) the federal funds effective rate, (ii) the one-month London Interbank Offered Rate (LIBOR) rate and (iii) the overnight
bank funding rate, plus in each case, 1.25%.
The Fund had no borrowings during
the year ended December 31, 2021.
Note 9. Significant
risks
Foreign securities and emerging
market countries risk
Investing in foreign securities may
involve certain risks not typically associated with investing in U.S. securities, such as increased currency volatility and risks associated with political, regulatory, economic, social, diplomatic and other
conditions or events occurring in the country or region, which may result in significant market volatility. In addition, certain foreign securities may not be as liquid as U.S. securities. Investing in emerging
markets may increase these risks and expose the Fund to elevated risks associated with increased inflation, deflation or currency devaluation. To the extent that the Fund concentrates its investment exposure to any
one or a few specific countries, the Fund will be particularly susceptible to the risks associated with the conditions, events or other factors impacting those countries or regions and may, therefore, have a greater
risk than that of a fund that is more geographically diversified.
| 26 | Variable Portfolio – Partners International Core Equity Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Geographic focus risk
The Fund may be particularly
susceptible to economic, political, regulatory or other events or conditions affecting issuers and countries within the specific geographic regions in which the Fund invests. The Fund’s NAV may be more volatile
than the NAV of a more geographically diversified fund.
Asia Pacific Region. The Fund is particularly susceptible to economic, political, regulatory or other events or conditions affecting issuers and countries in the Asia Pacific region. Many of the countries in
the region are considered underdeveloped or developing, including from a political, economic and/or social perspective, and may have relatively unstable governments and economies based on limited business, industries
and/or natural resources or commodities. Events in any one country within the region may impact other countries in the region or the region as a whole. As a result, events in the region will generally have a greater
effect on the Fund than if the Fund were more geographically diversified. This could result in increased volatility in the value of the Fund’s investments and losses for the Fund. Also, securities of some
companies in the region can be less liquid than U.S. or other foreign securities, potentially making it difficult for the Fund to sell such securities at a desirable time and price.
Europe. The Fund is particularly susceptible to economic, political, regulatory or other events or conditions affecting issuers and countries in Europe which are often closely connected and
interdependent, and events in one European country can have an adverse impact on other European countries. In addition, the private and public sectors’ debt problems of a single European Union (EU) country can
pose significant economic risks to the EU as a whole. As a result, the Fund’s NAV may be more volatile than the NAV of a more geographically diversified fund. If securities of issuers in Europe fall out of
favor, it may cause the Fund to underperform other funds that do not focus their investments in this region of the world. The UK’s departure from the EU single market became effective January 1, 2021 with the
end of the Brexit transition period and the post-Brexit trade deal between the UK and EU taking effect on December 31, 2020. The impact of Brexit on the UK and European economies and the broader global economy could
be significant, resulting in negative impacts on currency and financial markets generally, such as increased volatility and illiquidity, and potentially lower economic growth in markets in Europe, which may adversely
affect the value of your investment in the Fund.
Market risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
The coronavirus disease 2019 and
its variants (COVID-19) pandemic has resulted in, and may continue to result in, significant global economic and societal disruption and market volatility due to disruptions in market access, resource availability,
facilities operations, imposition of tariffs, export controls and supply chain disruption, among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement
and loss in human and other resources. The uncertainty surrounding the magnitude, duration, reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental
authorities or other third parties, present unknowns that are yet to unfold. The impacts, as well as the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and
pandemics that may arise in the future – could negatively affect global economies and markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in
emerging market countries may be greater due to generally less established healthcare systems, governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other
pre-existing
| Variable Portfolio – Partners International Core Equity Fund | Annual Report 2021 | 27 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
political, social and economic risks in certain
countries or globally. The disruptions caused by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively impact the Fund’s ability to achieve its
investment objectives. Any such event(s) could have a significant adverse impact on the value and risk profile of the Fund.
Shareholder concentration risk
At December 31, 2021, affiliated
shareholders of record owned 100.0% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of
less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Note 10. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
Note 11. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in
connection with the conduct of their business activities. Ameriprise Financial believes that the Fund is not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject
of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with
the Fund. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (SEC) on legal and regulatory matters that relate to
Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that
these matters, or the adverse publicity associated with them, will not result in increased Fund redemptions, reduced sale of Fund shares or other adverse consequences to the Fund. Further, although we believe
proceedings are not likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines,
penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial or one or more of its affiliates that provides services to
the Fund.
| 28 | Variable Portfolio – Partners International Core Equity Fund | Annual Report 2021 |
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees of Columbia
Funds Variable Series Trust II and Shareholders of Variable Portfolio – Partners International Core Equity Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of Variable Portfolio – Partners International Core Equity Fund (one of the funds constituting Columbia Funds Variable Series Trust
II, referred to hereafter as the "Fund") as of December 31, 2021, the related statement of operations for the year ended December 31, 2021, the statement of changes in net assets for each of the two years in the
period ended December 31, 2021, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2021 (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, 2021, 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, 2021 and the financial highlights for each of the five years in the period ended December 31, 2021 in conformity with accounting principles generally
accepted in the United States of America.
Basis for Opinion
These financial statements are the
responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these
financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2021 by correspondence with the custodian, transfer agent and broker; when a reply was
not received from the broker, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Minneapolis, Minnesota
February 22, 2022
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| Variable Portfolio – Partners International Core Equity Fund | Annual Report 2021 | 29 |
Federal Income Tax
Information
(Unaudited)
The Fund hereby designates the
following tax attributes for the fiscal year ended December 31, 2021.
| Capital gain dividend | Foreign taxes paid to foreign countries | Foreign taxes paid per share to foreign countries | Foreign source income | Foreign source income per share |
| $150,810,001 | $5,955,660 | $0.04 | $56,428,635 | $0.35 |
Capital gain dividend. The Fund
designates as a capital gain dividend the amount reflected above, or if subsequently determined to be different, the net capital gain of such fiscal period.
Foreign taxes. The Fund makes the
election to pass through to shareholders the foreign taxes paid. Eligible shareholders may claim a foreign tax credit. These taxes, and the corresponding foreign source income, are provided in the table above.
The Fund (or fund in which the fund
invests) has received a refund of foreign taxes previously reported and passed through in prior years (a “foreign tax redetermination”). Shareholders who claimed foreign tax credits with respect to such
foreign taxes previously reported in prior years may also have a foreign tax redetermination and may need to file amended tax returns to account for such taxes refunded to the Fund. The amount of tax refunded, and
years to which the tax relates, are available on the Tax Center page of ColumbiaThreadneedle.com, along with certain other information about the refunded tax. See your tax advisor. The amounts reported in the table
above have not been reduced for any foreign tax redeterminations.
Foreign taxes are deemed to be
passed through to shareholders with dividends paid after the close of the taxable year, on the next regularly scheduled distribution date of March 30, 2022.
TRUSTEES AND
OFFICERS
The Board oversees the Fund’s
operations and appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following table provides basic biographical information about the Fund’s Trustees as
of the printing of this report, including their principal occupations during the past five years, although specific titles for individuals may have varied over the period. The year set forth beneath Length of Service
in the table below is the year in which the Trustee was first appointed or elected as Trustee to any Fund currently in the Columbia Funds Complex or a predecessor thereof. Under current Board policy, each Trustee
generally serves until December 31 of the year such Trustee turns seventy-five (75).
| 30 | Variable Portfolio – Partners International Core Equity Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees
Independent trustees
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| George S. Batejan c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1953 | Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 176 | Former Chairman of the Board, NICSA (National Investment Company Services Association) (Executive Committee, Nominating Committee and Governance Committee), 2014-2016; former Director, Intech Investment Management, 2011-2016; former Board Member, Metro Denver Chamber of Commerce, 2015-2016; former Advisory Board Member, University of Colorado Business School, 2015-2018 |
| Kathleen Blatz c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2006 | Attorney, specializing in arbitration and mediation; Chief Justice, Minnesota Supreme Court, 1998-2006; Associate Justice, Minnesota Supreme Court, 1996-1998; Fourth Judicial District Court Judge, Hennepin County, 1994-1996; Attorney in private practice and public service, 1984-1993; State Representative, Minnesota House of Representatives, 1979-1993, which included service on the Tax and Financial Institutions and Insurance Committees; Member and Interim Chair, Minnesota Sports Facilities Authority, January 2017-July 2017; Interim President and Chief Executive Officer, Blue Cross Blue Shield of Minnesota (health care insurance), February-July 2018, April-October 2021 | 176 | Former Trustee, Blue Cross Blue Shield of Minnesota, 2009-2021 (Chair of the Business Development Committee, 2014-2017; Chair of the Governance Committee, 2017-2019); former Member and Chair of the Board, Minnesota Sports Facilities Authority, January 2017-July 2017; former Director, Robina Foundation, 2009-2020 (Chair, 2014-2020); Director, Schulze Family Foundation, since 2021 |
| Pamela G. Carlton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2007 | President, Springboard — Partners in Cross Cultural Leadership (consulting company) since 2003; Managing Director of US Equity Research, JP Morgan Chase, 1999-2003; Director of US Equity Research, Chase Asset Management, 1996-1999; Co-Director Latin America Research, 1993-1996, COO Global Research, 1992-1996, Co-Director of US Research, 1991-1992, Investment Banker, Morgan Stanley, 1982-1991, Morgan Stanley; Attorney, Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 176 | Trustee, New York Presbyterian Hospital Board (Executive Committee and Chair of People Committee) since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee); Director, Apollo Commercial Real Estate Finance, Inc. since 2021; the Governing Council of the Independent Directors Council (IDC), since 2021 |
| Janet Langford Carrig c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1957 | Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 174 | Director, EQT Corporation (natural gas producer) since 2019; Director, Whiting Petroleum Corporation (independent oil and gas company) since 2020 |
| Variable Portfolio – Partners International Core Equity Fund | Annual Report 2021 | 31 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| J. Kevin Connaughton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2020 | Member, FINRA National Adjudicatory Council since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Consultant to Independent Trustees of CFVIT and CFST I from March 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Managing Director and General Manager of Mutual Fund Products, Columbia Management Investment Advisers, LLC, May 2010-February 2015; President, Columbia Funds, 2008-2015; and senior officer of Columbia Funds and affiliated funds, 2003-2015 | 174 | Former Director, The Autism Project, March 2015-December 2021; former Member of the Investment Committee, St. Michael’s College, November 2015-February 2020; former Trustee, St. Michael’s College, June 2017-September 2019; former Trustee, New Century Portfolios, January 2015-December 2017 |
| Olive M. Darragh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since 2020 | Managing Director of Darragh Inc. (strategy and talent management consulting firm) since 2010; Founder and CEO, Zolio, Inc. (investment management talent identification platform) since 2004; Consultant to Independent Trustees of CFVIT and CFST I from June 2019 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 2001-2004 | 174 | Former Director, University of Edinburgh Business School (Member of US Board); former Director, Boston Public Library Foundation |
| Patricia M. Flynn c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1950 | Trustee since 2004 | Trustee Professor of Economics and Management, Bentley University since 1976 (also teaches and conducts research on corporate governance); Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 176 | Trustee, MA Taxpayers Foundation since 1997; Board of Governors, Innovation Institute, MA Technology Collaborative, 2010-2020; former Board of Directors, The MA Business Roundtable, 2003-2019 |
| Brian J. Gallagher c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 176 | Trustee, Catholic Schools Foundation since 2004 |
| Douglas A. Hacker c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1955 | Co-Chair since 2021; Chair of CFST I and CFVIT since 2014; Trustee of CFST I and CFVIT since 1996 and CFST, CFST II, CFVST II, CET I and CET II since 2021 | Independent business executive since May 2006; Executive Vice President – Strategy of United Airlines, December 2002 - May 2006; President of UAL Loyalty Services (airline marketing company), September 2001-December 2002; Executive Vice President and Chief Financial Officer of United Airlines, July 1999-September 2001 | 176 | Director, Spartan Nash Company (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing); former Director, Nash Finch Company (food distributor), 2005-2013; former Director, SeaCube Container Leasing Ltd. (container leasing), 2010-2013; and former Director, Travelport Worldwide Limited (travel information technology), 2014-2019 |
| 32 | Variable Portfolio – Partners International Core Equity Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Nancy T. Lukitsh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1956 | Trustee since 2011 | Senior Vice President, Partner and Director of Marketing, Wellington Management Company, LLP (investment adviser), 1997-2010; Chair, Wellington Management Portfolios (commingled non-U.S. investment pools), 2007 -2010; Director, Wellington Trust Company, NA and other Wellington affiliates, 1997-2010 | 174 | None |
| David M. Moffett c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2011 | Retired; Consultant to Bridgewater and Associates | 174 | Director, CSX Corporation (transportation suppliers); Director, Genworth Financial, Inc. (financial and insurance products and services); Director, PayPal Holdings Inc. (payment and data processing services); Trustee, University of Oklahoma Foundation; former Director, eBay Inc. (online trading community), 2007-2015; and former Director, CIT Bank, CIT Group Inc. (commercial and consumer finance), 2010-2016 |
| Catherine James Paglia c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Co-Chair since 2021; Chair of CFST, CFST II, CFVST II, CET I and CET II since 2020; Trustee of CFST, CFST II and CFVST II since 2004 and CFST I and CFVIT since 2021 | Director, Enterprise Asset Management, Inc. (private real estate and asset management company) since September 1998; Managing Director and Partner, Interlaken Capital, Inc., 1989-1997; Vice President, 1982-1985, Principal, 1985-1987, Managing Director, 1987-1989, Morgan Stanley; Vice President, Investment Banking, 1980-1982, Associate, Investment Banking, 1976-1980, Dean Witter Reynolds, Inc. | 176 | Director, Valmont Industries, Inc. (irrigation systems manufacturer) since 2012; Trustee, Carleton College (on the Investment Committee); Trustee, Carnegie Endowment for International Peace (on the Investment Committee) |
| Variable Portfolio – Partners International Core Equity Fund | Annual Report 2021 | 33 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Minor M. Shaw c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1947 | Trustee since 2003 | President, Micco LLC (private investments) since 2011; President, Micco Corp. (family investment business), 1998-2011 | 176 | Director, Blue Cross Blue Shield of South Carolina (Chair of Compensation Committee) since April 2008; Trustee, Hollingsworth Funds (on the Investment Committee) since 2016 (previously Board Chair from 2016-2019); Former Advisory Board member, Duke Energy Corp., 2016-2020; Chair of the Duke Endowment; Chair of Greenville – Spartanburg Airport Commission; former Trustee, BofA Funds Series Trust (11 funds), 2003-2011; former Director, Piedmont Natural Gas, 2004-2016; former Director, National Association of Corporate Directors, Carolinas Chapter, 2013-2018; Chair, Daniel-Mickel Foundation since 1998 |
| Natalie A. Trunow c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1967 | Trustee since 2020 | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services), January 2016-January 2021; Non-executive Member of the Investment Committee and Valuation Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services), August 2018-January 2021; Advisor, Paradigm Asset Management, November 2016-December 2021; Consultant to Independent Trustees of CFVIT and CFST I from September 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Director of Investments/Consultant, Casey Family Programs, April 2016-November 2016; Senior Vice President and Chief Investment Officer, Calvert Investments, August 2008-January 2016; Section Head and Portfolio Manager, General Motors Asset Management, June 1997-August 2008 | 174 | Former Director, Investment Committee, Health Services for Children with Special Needs, Inc., 2012-2019; Director, Chair of Audit Committee, Consumer Credit Counseling Services (formerly Guidewell Financial Solutions), since 2019; Independent Director, Investment Committee and Valuation Committee, Sarona Asset Management, since 2019 |
| Sandra Yeager c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2017 | Retired; President and founder, Hanoverian Capital, LLC (SEC registered investment advisor firm), 2008-2016; Managing Director, DuPont Capital, 2006-2008; Managing Director, Morgan Stanley Investment Management, 2004-2006; Senior Vice President, Alliance Bernstein, 1990-2004 | 176 | Former Director, NAPE Education Foundation, October 2016-October 2020 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Fund Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I (CET I), Columbia ETF Trust II (CET II), Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Beckman, Gallagher and Hacker and Mses. Blatz, Carlton, Flynn, Paglia, Shaw and Yeager serve as Directors of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
| 34 | Variable Portfolio – Partners International Core Equity Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Interested trustee affiliated with Investment Manager*
Interested trustee affiliated with Investment Manager*
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during the past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex overseen | Other directorships held by Trustee during the past five years |
| Daniel J. Beckman c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since November 2021(a) | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC (since April 2015); officer of Columbia Funds and affiliated funds since 2020. | 176 | Director, Ameriprise Trust Company, since October 2016; Director, Columbia Management Investment Distributors, Inc. since November 2018; Board of Governors, Columbia Wanger Asset Management, LLC since January 2022 |
| * | Interested person (as defined under the 1940 Act) by reason of being an officer, director, security holder and/or employee of the Investment Manager or Ameriprise Financial. |
| (a) | Mr. Beckman serves as the President and Principal Executive Officer of the Columbia Funds (since 2021). |
The Statement of Additional
Information has additional information about the Fund’s Board members and is available, without charge, upon request by calling 800.345.6611 or contacting your financial intermediary.
The Board has appointed officers
who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. The following table provides basic information about the Officers of the
Fund, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Beckman, who is President and Principal Executive Officer, the
Fund’s other officers are:
Fund officers
| Variable Portfolio – Partners International Core Equity Fund | Annual Report 2021 | 35 |
TRUSTEES AND OFFICERS (continued)
Fund officers (continued)
Fund officers (continued)
| 36 | Variable Portfolio – Partners International Core Equity Fund | Annual Report 2021 |
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For Fund and other investment product prospectuses, which contain this and other important information, contact your
financial advisor or insurance representative. Please read the prospectus carefully before you invest. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved. Columbia Management Investment Distributors, Inc., 290 Congress Street, Boston, MA 02210
© 2022 Columbia Management Investment
Advisers, LLC.
C-3030 AW (2/22)
CTIVP® –
MFS® Value Fund
Please remember that you may not
buy (nor will you own) shares of the Fund directly. The Fund is available through variable annuity contracts and variable life insurance policies offered by the separate accounts of participating insurance companies
as well as qualified pension and retirement plans. Please contact your financial advisor or insurance representative for more information.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
| 3 | |
| 5 | |
| 7 | |
| 8 | |
| 12 | |
| 13 | |
| 14 | |
| 16 | |
| 18 | |
| 25 | |
| 26 |
Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which CTIVP® – MFS® Value Fund (the Fund) holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may
obtain a copy of the SAI without charge by calling 800.345.6611; contacting your financial intermediary or searching the website of the Securities and Exchange Commission (SEC) at sec.gov. Information regarding how
the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge by visiting
columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. The Fund’s Form N-PORT is available on the SEC’s website at sec.gov. The Fund’s complete
schedule of portfolio holdings, as filed on Form N-PORT, can also be obtained without charge, upon request, by calling 800.345.6611.
Additional Fund information
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
290 Congress Street
Boston, MA 02210
Fund distributor
Columbia Management Investment Distributors,
Inc.
290 Congress Street
Boston, MA 02210
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
CTIVP® – MFS® Value
Fund | Annual Report 2021
Fund at a Glance
Investment objective
The Fund
seeks to provide shareholders with long-term capital growth.
| CTIVP® – MFS® Value Fund | Annual Report 2021 | 3 |
Fund at a Glance (continued)
Performance of a hypothetical $10,000 investment (December 31, 2011 — December 31, 2021)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class 2 shares of CTIVP® – MFS® Value Fund during the stated time period, and does not reflect the deduction of taxes, if any, that a shareholder may
pay on Fund distributions or on the redemption of Fund shares. The returns also do not reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy or qualified pension
or retirement plan, if any.
| 4 | CTIVP® – MFS® Value Fund | Annual Report 2021 |
Manager Discussion of Fund Performance
At December 31, 2021,
approximately 95.13% of the Fund’s shares were owned in the aggregate by affiliated funds-of-funds managed by Columbia Management Investment Advisers, LLC (the Investment Manager). As a result of asset
allocation decisions by the Investment Manager, it is possible that the Fund may experience relatively large purchases or redemptions from affiliated funds-of-funds. The Investment Manager seeks to minimize the impact
of these transactions by structuring them over a reasonable period of time. The Fund may also experience increased expenses as it buys and sells securities as a result of purchases or redemptions by affiliated
funds-of-funds.
For the 12-month period that ended
December 31, 2021, the Fund’s Class 2 shares returned 25.11%. The Fund performed in line with its benchmark, the Russell 1000 Value Index, which returned 25.16% over the same period.
Market overview
The year 2021 was another banner
annual period for global equity markets, with many of the major U.S. and international equity indices finishing the year with double-digit gains. Positive earnings momentum — the best seen since 1994 by a wide
margin — fueled the markets’ strong performance, even as multiples, or price/earnings ratios, remained rather flat. Indeed, despite the global lockdowns and all the disruptions that have occurred,
corporate earnings appreciated more than 20% in the U.S. from pre-pandemic levels in 2019. As for profitability, corporate margins reached all-time high levels by the end of 2021.
Inflation was a consistent theme in
2021. At the end of the annual period, the debate over whether these trends are transitory or persistent remained, with more areas of the economy — although not all — appearing to be less temporarily
affected than originally assumed. The year ended with headline inflation numbers at the highest levels seen in decades. Some of the raw materials input costs, such as lumber and iron ore, which saw significant price
appreciation early in the annual period, began to normalize by year end. However, other areas, such as semiconductors, continued to experience shortages and stickier prices. Many companies took proactive steps to
offset these inflationary pressures.
The Fund’s notable
contributors during the period
| • | Stock selection was the primary positive contributor to the Fund’s relative performance during the annual period, especially in industrials and information technology. |
| • | Having an underweight to the communication services sector, which lagged the benchmark during the annual period, also helped. |
| • | Notably, an emphasis within the Fund on quality also added value. The high beta, lower quality rally that began in November 2020 continued into the first quarter of 2021. However, those trends started to broaden out in the second quarter, and by mid-year, the market had fully transitioned into high quality leadership. Given our consistent, disciplined focus on investing in durable businesses trading at reasonable valuation, the period of quality leadership was a more favorable one for the Fund’s strategy from a relative performance perspective. |
| • | From an individual security perspective, among the top positive contributors to the Fund’s results was Accenture plc, a technology and consulting company. Its stock price rose after it reported solid fourth fiscal quarter earnings results, as its forward sales guidance came in well ahead of consensus expectations. The company also saw strong customer demand during the annual period. |
| • | Having no position in media and entertainment conglomerate The Walt Disney Co., Inc. added value. Its stock price declined, as concerns regarding the spread of the COVID-19 Omicron variant appeared to weigh on investor sentiment. |
| • | Lowe’s Companies, Inc., a home improvement retailer, was a notable positive contributor. The company posted earnings per share results above consensus estimates due to increased digital investments in and consumer spending toward home improvement projects. |
The Fund’s notable
detractors during the period
| • | Relative sector positioning, which is a result of our bottom-up stock selection process, detracted from the Fund’s results during the annual period. |
| CTIVP® – MFS® Value Fund | Annual Report 2021 | 5 |
Manager Discussion of Fund Performance (continued)
| • | More specifically, having underweighted allocations to the health care, real estate and energy sectors, each of which outpaced the benchmark during the annual period, detracted. |
| • | Stock selection within the health care sector further dampened relative results. |
| • | Among the Fund’s biggest individual detractors was Medtronic plc, a medical device company, owing to setbacks to the company’s most significant pipeline products. The company also reported weaker revenue, led by the impact of COVID-19 to its cardiovascular and neuroscience segments. As a result, the company reduced its organic growth guidance, further pressuring its stock price. |
| • | A position in Honeywell International, Inc., a diversified technology and manufacturing company, detracted. While the company performed well during the annual period, softer than expected organic growth guidance for the fourth quarter of 2021 led to its share price underperformance. |
| • | Comcast Corp., a media and technology company, hindered relative returns as well. After reporting above-average subscriber growth through the pandemic, slower net additions toward the second half of 2021 and prospects for an increasingly competitive environment pressured its shares. |
The views expressed in this report
reflect the current views of the respective parties who have contributed to this report. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult
to predict, so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective parties
disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Columbia fund are based on numerous factors, may not be relied on as an
indication of trading intent on behalf of any particular Columbia fund. References to specific securities should not be construed as a recommendation or investment advice.
| 6 | CTIVP® – MFS® Value Fund | Annual Report 2021 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur ongoing
costs, which generally include management fees, distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to help you compare these costs with the ongoing costs of investing in other mutual funds.
The information below does not
reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy (collectively, Contracts) or qualified pension and retirement plan (Qualified Plan), if any. The total fees
and expenses you bear may therefore be higher than those shown below.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount invested, to estimate the
expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as redemption or exchange fees, or expenses that apply to the subaccount or the Contract. Therefore, the
hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If the fees and expenses imposed under your Contract or
Qualified Plan, if any, were included, your costs would be higher.
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 365.
Expenses do not include fees and
expenses incurred indirectly by the Fund from its investment in underlying funds, including affiliated and non-affiliated pooled investment vehicles, such as mutual funds and exchange-traded funds.
| CTIVP® – MFS® Value Fund | Annual Report 2021 | 7 |
Portfolio of Investments
December 31, 2021
December 31, 2021
(Percentages represent value of
investments compared to net assets)
Investments in securities
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 8 | CTIVP® – MFS® Value Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| CTIVP® – MFS® Value Fund | Annual Report 2021 | 9 |
| Common Stocks (continued) | ||
| Issuer | Shares | Value ($) |
| Multi-Utilities 1.5% | ||
| Dominion Energy, Inc. | 360,038 | 28,284,585 |
| Total Utilities | 119,892,367 | |
| Total Common Stocks (Cost $1,295,045,485) | 1,932,963,756 | |
| Money Market Funds 0.4% | ||
| Shares | Value ($) | |
| Columbia Short-Term Cash Fund, 0.085%(b),(c) | 8,589,574 | 8,587,856 |
| Total Money Market Funds (Cost $8,588,709) | 8,587,856 | |
| Total Investments in Securities (Cost: $1,303,634,194) | 1,941,551,612 | |
| Other Assets & Liabilities, Net | (2,815,604) | |
| Net Assets | 1,938,736,008 | |
Notes to Portfolio of
Investments
| (a) | Non-income producing investment. |
| (b) | The rate shown is the seven-day current annualized yield at December 31, 2021. |
| (c) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended December 31, 2021 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Realized gain (loss)($) | Dividends($) | End of period shares |
| Columbia Short-Term Cash Fund, 0.085% | ||||||||
| 21,944,648 | 266,474,870 | (279,830,809) | (853) | 8,587,856 | (1,382) | 12,142 | 8,589,574 | |
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
Foreign equity securities actively
traded in markets where there is a significant delay in the local close relative to the New York Stock Exchange are classified as Level 2. The values of these securities may include an adjustment to reflect the impact
of market movements following the close of local trading, as described in Note 2 to the financial statements – Security valuation.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 10 | CTIVP® – MFS® Value Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Fair value measurements (continued)
Investments falling into the Level 3 category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and estimated cash flows, and comparable company data.
Investments falling into the Level 3 category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at December 31, 2021:
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The Fund’s assets assigned to
the Level 2 input category are generally valued using the market approach, in which a security’s value is determined through reference to prices and information from market transactions for similar or identical
assets. These assets include certain foreign securities for which a third party statistical pricing service may be employed for purposes of fair market valuation. The model utilized by such third party statistical
pricing service takes into account a security’s correlation to available market data including, but not limited to, intraday index, ADR, and exchange-traded fund movements.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| CTIVP® – MFS® Value Fund | Annual Report 2021 | 11 |
Statement of Assets and Liabilities
December 31, 2021
December 31, 2021
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $1,295,045,485) | $1,932,963,756 |
| Affiliated issuers (cost $8,588,709) | 8,587,856 |
| Receivable for: | |
| Capital shares sold | 2,925 |
| Dividends | 1,759,438 |
| Foreign tax reclaims | 105,973 |
| Prepaid expenses | 18,389 |
| Total assets | 1,943,438,337 |
| Liabilities | |
| Due to custodian | 17,178 |
| Payable for: | |
| Capital shares purchased | 4,458,991 |
| Management services fees | 36,172 |
| Distribution and/or service fees | 591 |
| Service fees | 4,335 |
| Compensation of board members | 155,492 |
| Compensation of chief compliance officer | 354 |
| Other expenses | 29,216 |
| Total liabilities | 4,702,329 |
| Net assets applicable to outstanding capital stock | $1,938,736,008 |
| Represented by | |
| Trust capital | $1,938,736,008 |
| Total - representing net assets applicable to outstanding capital stock | $1,938,736,008 |
| Class 1 | |
| Net assets | $1,852,471,834 |
| Shares outstanding | 48,901,555 |
| Net asset value per share | $37.88 |
| Class 2 | |
| Net assets | $86,264,174 |
| Shares outstanding | 2,343,176 |
| Net asset value per share | $36.82 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 12 | CTIVP® – MFS® Value Fund | Annual Report 2021 |
Statement of Operations
Year Ended December 31, 2021
Year Ended December 31, 2021
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $38,902,183 |
| Dividends — affiliated issuers | 12,142 |
| Foreign taxes withheld | (406,956) |
| Total income | 38,507,369 |
| Expenses: | |
| Management services fees | 12,978,877 |
| Distribution and/or service fees | |
| Class 2 | 195,159 |
| Service fees | 49,130 |
| Compensation of board members | 65,221 |
| Custodian fees | 20,872 |
| Printing and postage fees | 18,578 |
| Audit fees | 29,500 |
| Legal fees | 27,360 |
| Interest on interfund lending | 73 |
| Compensation of chief compliance officer | 336 |
| Other | 25,037 |
| Total expenses | 13,410,143 |
| Net investment income | 25,097,226 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 172,568,076 |
| Investments — affiliated issuers | (1,382) |
| Foreign currency translations | (20,458) |
| Net realized gain | 172,546,236 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | 233,410,022 |
| Investments — affiliated issuers | (853) |
| Net change in unrealized appreciation (depreciation) | 233,409,169 |
| Net realized and unrealized gain | 405,955,405 |
| Net increase in net assets resulting from operations | $431,052,631 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| CTIVP® – MFS® Value Fund | Annual Report 2021 | 13 |
Statement of Changes in Net Assets
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | |
| Operations | ||
| Net investment income | $25,097,226 | $22,055,293 |
| Net realized gain | 172,546,236 | 130,091,610 |
| Net change in unrealized appreciation (depreciation) | 233,409,169 | (89,452,422) |
| Net increase in net assets resulting from operations | 431,052,631 | 62,694,481 |
| Increase (decrease) in net assets from capital stock activity | (279,254,817) | 166,668,374 |
| Total increase in net assets | 151,797,814 | 229,362,855 |
| Net assets at beginning of year | 1,786,938,194 | 1,557,575,339 |
| Net assets at end of year | $1,938,736,008 | $1,786,938,194 |
| Year Ended | Year Ended | |||
| December 31, 2021 | December 31, 2020 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class 1 | ||||
| Subscriptions | 11,549,033 | 359,209,880 | 32,285,598 | 907,884,011 |
| Redemptions | (19,571,121) | (639,860,567) | (26,577,401) | (742,717,821) |
| Net increase (decrease) | (8,022,088) | (280,650,687) | 5,708,197 | 165,166,190 |
| Class 2 | ||||
| Subscriptions | 243,166 | 8,139,195 | 296,803 | 7,684,362 |
| Redemptions | (201,877) | (6,743,325) | (240,938) | (6,182,178) |
| Net increase | 41,289 | 1,395,870 | 55,865 | 1,502,184 |
| Total net increase (decrease) | (7,980,799) | (279,254,817) | 5,764,062 | 166,668,374 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 14 | CTIVP® – MFS® Value Fund | Annual Report 2021 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect any fees and expenses imposed under your
Contract and/or Qualified Plan, as applicable; such fees and expenses would reduce the total returns for all periods shown. Total return and portfolio turnover are not annualized for periods of less than one year. The
portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain derivatives, if any. If such transactions were included, the Fund’s portfolio
turnover rate may be higher.
| Net asset value, beginning of period | Net investment income | Net realized and unrealized gain (loss) | Total from investment operations | |
| Class 1 | ||||
| Year Ended 12/31/2021 | $30.20 | 0.46 | 7.22 | 7.68 |
| Year Ended 12/31/2020 | $29.16 | 0.43 | 0.61 | 1.04 |
| Year Ended 12/31/2019 | $22.46 | 0.42 | 6.28 | 6.70 |
| Year Ended 12/31/2018 | $24.96 | 0.50 | (3.00) | (2.50) |
| Year Ended 12/31/2017 | $21.22 | 0.42 | 3.32 | 3.74 |
| Class 2 | ||||
| Year Ended 12/31/2021 | $29.43 | 0.36 | 7.03 | 7.39 |
| Year Ended 12/31/2020 | $28.48 | 0.36 | 0.59 | 0.95 |
| Year Ended 12/31/2019 | $21.99 | 0.35 | 6.14 | 6.49 |
| Year Ended 12/31/2018 | $24.50 | 0.44 | (2.95) | (2.51) |
| Year Ended 12/31/2017 | $20.88 | 0.35 | 3.27 | 3.62 |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Ratios include interfund lending expense which is less than 0.01%. |
| (d) | Ratios include line of credit interest expense which is less than 0.01%. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 16 | CTIVP® – MFS® Value Fund | Annual Report 2021 |
Financial Highlights (continued)
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets(a) | Total net expense ratio to average net assets(a),(b) | Net investment income ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Class 1 | |||||||
| Year Ended 12/31/2021 | $37.88 | 25.43% | 0.69%(c) | 0.69%(c) | 1.33% | 10% | $1,852,472 |
| Year Ended 12/31/2020 | $30.20 | 3.57% | 0.71%(c),(d) | 0.71%(c),(d) | 1.59% | 38% | $1,719,205 |
| Year Ended 12/31/2019 | $29.16 | 29.83% | 0.70%(c) | 0.70%(c) | 1.62% | 12% | $1,493,599 |
| Year Ended 12/31/2018 | $22.46 | (10.02%) | 0.69%(c) | 0.69%(c) | 2.00% | 8% | $1,588,214 |
| Year Ended 12/31/2017 | $24.96 | 17.62% | 0.71% | 0.71% | 1.84% | 13% | $2,203,985 |
| Class 2 | |||||||
| Year Ended 12/31/2021 | $36.82 | 25.11% | 0.94%(c) | 0.94%(c) | 1.08% | 10% | $86,264 |
| Year Ended 12/31/2020 | $29.43 | 3.33% | 0.96%(c),(d) | 0.96%(c),(d) | 1.36% | 38% | $67,733 |
| Year Ended 12/31/2019 | $28.48 | 29.51% | 0.95%(c) | 0.95%(c) | 1.36% | 12% | $63,976 |
| Year Ended 12/31/2018 | $21.99 | (10.25%) | 0.94%(c) | 0.94%(c) | 1.80% | 8% | $45,033 |
| Year Ended 12/31/2017 | $24.50 | 17.34% | 0.96% | 0.96% | 1.57% | 13% | $49,410 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| CTIVP® – MFS® Value Fund | Annual Report 2021 | 17 |
Notes to Financial Statements
December 31, 2021
December 31, 2021
Note 1. Organization
CTIVP® – MFS®
Value Fund (the Fund), a series of Columbia Funds Variable Series Trust II (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an
open-end management investment company organized as a Massachusetts business trust.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers Class 1 and Class 2 shares to separate accounts funding variable annuity contracts and variable life insurance policies (collectively, Contracts) issued by
affiliated and unaffiliated life insurance companies (Participating Insurance Companies) as well as qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors (Qualified
Investors) authorized by Columbia Management Investment Distributors, Inc. (the Distributor). You may not buy (nor will you own) shares of the Fund directly. You may invest by participating in a Qualified Plan or by
buying a Contract and making allocations to the Fund. Although all share classes generally have identical voting, dividend and liquidation rights, each share class votes separately when required by the Trust’s
organizational documents or by law. Different share classes pay different net investment income distribution amounts to the extent the expenses of such share classes differ, and distributions in liquidation will be
proportional to the net asset value of each share class. Each share class has its own cost structure and other features.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Equity securities listed on an
exchange are valued at the closing price or last trade price on their primary exchange at the close of business of the New York Stock Exchange. Securities with a closing price not readily available or not listed on
any exchange are valued at the mean between the closing bid and ask prices. Listed preferred stocks convertible into common stocks are valued using an evaluated price from a pricing service.
Foreign equity securities are
valued based on the closing price or last trade price on their primary exchange at the close of business of the New York Stock Exchange. If any foreign equity security closing prices are not readily available,
the securities are valued at the mean of the latest quoted bid and ask prices on such exchanges or markets. Foreign currency exchange rates are determined at the scheduled closing time of the New York Stock Exchange.
Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange; therefore, the closing prices for securities in such markets or on such exchanges may not fully reflect
events that occur after such close but before the close of the New York Stock Exchange. In those situations, foreign securities will be fair valued pursuant to a policy adopted by the Board of Trustees. Under the
policy, the Fund may utilize a third-party pricing service to determine these fair values. The third-party pricing service takes into account multiple factors, including, but not limited to, movements in the U.S.
securities markets, certain depositary receipts, futures contracts and foreign exchange rates that have occurred subsequent to the close of the foreign exchange or market, to determine a good faith estimate that
reasonably reflects the current market conditions as of the close of the New York Stock Exchange. The fair value of a security is likely to be different from the quoted or published price, if available.
Investments in open-end investment
companies (other than exchange-traded funds (ETFs)), are valued at the latest net asset value reported by those companies as of the valuation time.
| 18 | CTIVP® – MFS® Value Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Foreign currency transactions and
translations
The values of all assets and
liabilities denominated in foreign currencies are generally translated into U.S. dollars at exchange rates determined at the close of regular trading on the New York Stock Exchange. Net realized and unrealized gains
(losses) on foreign currency transactions and translations include gains (losses) arising from the fluctuation in exchange rates between trade and settlement dates on securities transactions, gains (losses) arising
from the disposition of foreign currency and currency gains (losses) between the accrual and payment dates on dividends, interest income and foreign withholding taxes.
For financial statement purposes,
the Fund does not distinguish that portion of gains (losses) on investments which is due to changes in foreign exchange rates from that which is due to changes in market prices of the investments. Such fluctuations
are included with the net realized and unrealized gains (losses) on investments in the Statement of Operations.
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
Income recognition
Corporate actions and dividend
income are generally recorded net of any non-reclaimable tax withholdings, on the ex-dividend date or upon receipt of an ex-dividend notification in the case of certain foreign securities.
The Fund may receive distributions
from holdings in equity securities, business development companies (BDCs), exchange-traded funds (ETFs), limited partnerships (LPs), other regulated investment companies (RICs), and real estate investment trusts
(REITs), which report information as to the tax character of their distributions annually. These distributions are allocated to dividend income, capital gain and return of capital based on actual information reported.
Return of capital is recorded as a reduction of the cost basis of securities held. If the Fund no longer owns the applicable securities, return of capital is recorded as a realized gain. With respect to REITs, to the
extent actual information has not yet been reported, estimates for return of capital are made by Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise
Financial, Inc. (Ameriprise Financial). The Investment Manager’s estimates are subsequently adjusted when the actual character of the distributions is disclosed by the REITs, which could result in a
proportionate change in return of capital to shareholders.
Awards from class action litigation
are recorded as a reduction of cost basis if the Fund still owns the applicable securities on the payment date. If the Fund no longer owns the applicable securities on the payment date, the proceeds are recorded as
realized gains.
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
| CTIVP® – MFS® Value Fund | Annual Report 2021 | 19 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
Federal income tax status
The Fund is treated as a
partnership for federal income tax purposes, and the Fund does not expect to make regular distributions. The Fund will not be subject to federal income tax, and therefore, there is no provision for federal income
taxes. The partners of the Fund are subject to tax on their distributive share of the Fund’s income and loss. The components of the Fund’s net assets are reported at the partner-level for federal income
tax purposes, and therefore, are not presented in the Statement of Assets and Liabilities.
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Foreign taxes
The Fund may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries, as applicable, based upon its current interpretation of tax rules
and regulations that exist in the markets in which it invests.
Realized gains in certain countries
may be subject to foreign taxes at the Fund level, based on statutory rates. The Fund accrues for such foreign taxes on realized and unrealized gains at the appropriate rate for each jurisdiction, as applicable. The
amount, if any, is disclosed as a liability on the Statement of Assets and Liabilities.
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Under the Management Agreement, the
Investment Manager provides the Fund with investment research and advice, as well as administrative and accounting services. The Investment Manager is responsible for the ultimate oversight of investments made by the
Fund. The Fund’s subadviser (see Subadvisory agreement below) has the primary responsibility for the day-to-day portfolio management of the Fund. The management services fee is an annual fee that is equal to a
percentage of the Fund’s daily net assets that declines from 0.71% to 0.53% as the Fund’s net assets increase. The effective management services fee rate for the year ended December 31, 2021 was 0.68% of
the Fund’s average daily net assets.
Subadvisory agreement
The Investment Manager has entered
into a Subadvisory Agreement with Massachusetts Financial Services Company to serve as the subadviser to the Fund. The Investment Manager compensates the subadviser to manage the investment of the Fund’s
assets.
| 20 | CTIVP® – MFS® Value Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. Under a Deferred Compensation Plan (the
Deferred Plan), these members of the Board of Trustees may elect to defer payment of up to 100% of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of
certain funds managed by the Investment Manager. The Fund’s liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Deferred Plan. All
amounts payable under the Deferred Plan constitute a general unsecured obligation of the Fund. The expense for the Deferred Plan, which includes Trustees’ fees deferred during the current period as well as any
gains or losses on the Trustees’ deferred compensation balances as a result of market fluctuations, is included in "Compensation of board members" on the Statement of Operations.
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
Service fees
The Fund has entered into a
Shareholder Services Agreement with Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial. Under this
agreement, the Fund pays a service fee equal to the payments made by the Transfer Agent to Participating Insurance Companies and other financial intermediaries (together, Participating Organizations) for services each
such Participating Organization provides to its clients, customers and participants that are invested directly or indirectly in the Fund, up to a cap approved by the Board of Trustees from time to time. The effective
service fee rate for the year ended December 31, 2021, was 0.00% of the Fund’s average daily net assets.
The Transfer Agent may retain as
compensation for its services revenues from fees for wire, telephone and redemption orders, account transcripts due the Transfer Agent from Fund shareholders and interest (net of bank charges) earned with respect to
balances in accounts the Transfer Agent maintains in connection with its services to the Fund.
Distribution and/or service fees
The Fund has an agreement with the
Distributor, an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution services. Under a Plan and Agreement of Distribution, the Fund pays a fee at an annual rate
of up to 0.25% of the Fund’s average daily net assets attributable to Class 2 shares. The Fund pays no distribution and service fees for Class 1 shares.
Expenses waived/reimbursed by the
Investment Manager and its affiliates
The Investment Manager and certain
of its affiliates have contractually agreed to waive fees and/or reimburse expenses (excluding certain fees and expenses described below) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, so that the Fund’s net operating expenses, after giving effect to fees waived/expenses reimbursed and any balance credits and/or overdraft charges from the Fund’s
custodian, do not exceed the following annual rate(s) as a percentage of the classes’ average daily net assets:
| CTIVP® – MFS® Value Fund | Annual Report 2021 | 21 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), expenses associated with investments in affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange-traded funds), transaction costs and
brokerage commissions, costs related to any securities lending program, dividend expenses associated with securities sold short, inverse floater program fees and expenses, transaction charges and interest on borrowed
money, interest, costs associated with certain shareholder meetings, infrequent and/or unusual expenses and any other expenses the exclusion of which is specifically approved by the Board of Trustees. This
agreement may be modified or amended only with approval from the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements
described above are not recoverable by the Investment Manager or its affiliates in future periods.
Note 4. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $182,081,722 and $421,823,592, respectively, for the year ended December 31, 2021. The amount of purchase and
sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 5. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes
referred to as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
Note 6. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund’s activity in the
Interfund Program during the year ended December 31, 2021 was as follows:
| Borrower or lender | Average loan balance ($) | Weighted average interest rate (%) | Number of days with outstanding loans |
| Borrower | 1,850,000 | 0.70 | 2 |
Interest expense incurred by the
Fund is recorded as Interfund lending in the Statement of Operations. The Fund had no outstanding interfund loans at December 31, 2021.
Note 7. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to an October 28, 2021 amendment and restatement, the credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment
Manager or an affiliated investment manager, severally and not jointly, permits collective borrowings up to $950 million. Interest is currently charged
| 22 | CTIVP® – MFS® Value Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
to each participating fund based on its borrowings
at a rate equal to the higher of (i) the federal funds effective rate, (ii) the secured overnight financing rate plus 0.11448% and (iii) the overnight bank funding rate, plus in each case, 1.00%. Each borrowing under
the credit facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum.
The commitment fee is included in other expenses in the Statement of Operations. This agreement expires annually in October unless extended or renewed. Prior to the October 28, 2021 amendment and restatement, the Fund
had access to a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. which permitted collective borrowings up to $950 million. Interest was
charged to each participating fund based on its borrowings at a rate equal to the higher of (i) the federal funds effective rate, (ii) the one-month London Interbank Offered Rate (LIBOR) rate and (iii) the overnight
bank funding rate, plus in each case, 1.25%.
The Fund had no borrowings during
the year ended December 31, 2021.
Note 8. Significant
risks
Financial sector risk
The Fund is more susceptible to the
particular risks that may affect companies in the financial services sector than if it were invested in a wider variety of companies in unrelated sectors. Companies in the financial services sector are subject to
certain risks, including the risk of regulatory change, decreased liquidity in credit markets and unstable interest rates. Such companies may have concentrated portfolios, such as a high level of loans to one or more
industries or sectors, which makes them vulnerable to economic conditions that affect such industries or sectors. Performance of such companies may be affected by competitive pressures and exposure to investments,
agreements and counterparties, including credit products that, under certain circumstances, may lead to losses (e.g., subprime loans). Companies in the financial services sector are subject to extensive governmental
regulation that may limit the amount and types of loans and other financial commitments they can make, and interest rates and fees that they may charge. In addition, profitability of such companies is largely
dependent upon the availability and the cost of capital.
Market risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
The coronavirus disease 2019 and
its variants (COVID-19) pandemic has resulted in, and may continue to result in, significant global economic and societal disruption and market volatility due to disruptions in market access, resource availability,
facilities operations, imposition of tariffs, export controls and supply chain disruption, among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement
and loss in human and other resources. The uncertainty surrounding the magnitude, duration, reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental
authorities or other third parties, present unknowns that are yet to unfold. The impacts, as well as the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and
pandemics that may arise in the future – could negatively affect global economies and markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in
emerging market countries may be greater due to generally less established healthcare systems, governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other
pre-existing
| CTIVP® – MFS® Value Fund | Annual Report 2021 | 23 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
political, social and economic risks in certain
countries or globally. The disruptions caused by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively impact the Fund’s ability to achieve its
investment objectives. Any such event(s) could have a significant adverse impact on the value and risk profile of the Fund.
Shareholder concentration risk
At December 31, 2021, affiliated
shareholders of record owned 100.0% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of
less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Note 9. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
Note 10. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in
connection with the conduct of their business activities. Ameriprise Financial believes that the Fund is not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject
of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with
the Fund. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (SEC) on legal and regulatory matters that relate to
Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that
these matters, or the adverse publicity associated with them, will not result in increased Fund redemptions, reduced sale of Fund shares or other adverse consequences to the Fund. Further, although we believe
proceedings are not likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines,
penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial or one or more of its affiliates that provides services to
the Fund.
| 24 | CTIVP® – MFS® Value Fund | Annual Report 2021 |
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees of Columbia
Funds Variable Series Trust II and Shareholders of CTIVP® – MFS® Value Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of CTIVP® – MFS® Value Fund (one of the funds constituting Columbia Funds Variable Series Trust II, referred to hereafter as
the "Fund") as of December 31, 2021, the related statement of operations for the year ended December 31, 2021, the statement of changes in net assets for each of the two years in the period ended December 31, 2021,
including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2021 (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, 2021, 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, 2021 and the financial highlights for each of the five years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in the United
States of America.
Basis for Opinion
These financial statements are the
responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these
financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2021 by correspondence with the custodian and transfer agent. We believe that our
audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Minneapolis, Minnesota
February 18, 2022
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| CTIVP® – MFS® Value Fund | Annual Report 2021 | 25 |
TRUSTEES AND
OFFICERS
The Board oversees the
Fund’s operations and appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following table provides basic biographical information about the
Fund’s Trustees as of the printing of this report, including their principal occupations during the past five years, although specific titles for individuals may have varied over the period. The year set forth
beneath Length of Service in the table below is the year in which the Trustee was first appointed or elected as Trustee to any Fund currently in the Columbia Funds Complex or a predecessor thereof. Under current Board
policy, each Trustee generally serves until December 31 of the year such Trustee turns seventy-five (75).
Independent trustees
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| George S. Batejan c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1953 | Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 176 | Former Chairman of the Board, NICSA (National Investment Company Services Association) (Executive Committee, Nominating Committee and Governance Committee), 2014-2016; former Director, Intech Investment Management, 2011-2016; former Board Member, Metro Denver Chamber of Commerce, 2015-2016; former Advisory Board Member, University of Colorado Business School, 2015-2018 |
| Kathleen Blatz c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2006 | Attorney, specializing in arbitration and mediation; Chief Justice, Minnesota Supreme Court, 1998-2006; Associate Justice, Minnesota Supreme Court, 1996-1998; Fourth Judicial District Court Judge, Hennepin County, 1994-1996; Attorney in private practice and public service, 1984-1993; State Representative, Minnesota House of Representatives, 1979-1993, which included service on the Tax and Financial Institutions and Insurance Committees; Member and Interim Chair, Minnesota Sports Facilities Authority, January 2017-July 2017; Interim President and Chief Executive Officer, Blue Cross Blue Shield of Minnesota (health care insurance), February-July 2018, April-October 2021 | 176 | Former Trustee, Blue Cross Blue Shield of Minnesota, 2009-2021 (Chair of the Business Development Committee, 2014-2017; Chair of the Governance Committee, 2017-2019); former Member and Chair of the Board, Minnesota Sports Facilities Authority, January 2017-July 2017; former Director, Robina Foundation, 2009-2020 (Chair, 2014-2020); Director, Schulze Family Foundation, since 2021 |
| Pamela G. Carlton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2007 | President, Springboard — Partners in Cross Cultural Leadership (consulting company) since 2003; Managing Director of US Equity Research, JP Morgan Chase, 1999-2003; Director of US Equity Research, Chase Asset Management, 1996-1999; Co-Director Latin America Research, 1993-1996, COO Global Research, 1992-1996, Co-Director of US Research, 1991-1992, Investment Banker, Morgan Stanley, 1982-1991, Morgan Stanley; Attorney, Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 176 | Trustee, New York Presbyterian Hospital Board (Executive Committee and Chair of People Committee) since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee); Director, Apollo Commercial Real Estate Finance, Inc. since 2021; the Governing Council of the Independent Directors Council (IDC), since 2021 |
| 26 | CTIVP® – MFS® Value Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Janet Langford Carrig c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1957 | Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 174 | Director, EQT Corporation (natural gas producer) since 2019; Director, Whiting Petroleum Corporation (independent oil and gas company) since 2020 |
| J. Kevin Connaughton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2020 | Member, FINRA National Adjudicatory Council since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Consultant to Independent Trustees of CFVIT and CFST I from March 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Managing Director and General Manager of Mutual Fund Products, Columbia Management Investment Advisers, LLC, May 2010-February 2015; President, Columbia Funds, 2008-2015; and senior officer of Columbia Funds and affiliated funds, 2003-2015 | 174 | Former Director, The Autism Project, March 2015-December 2021; former Member of the Investment Committee, St. Michael’s College, November 2015-February 2020; former Trustee, St. Michael’s College, June 2017-September 2019; former Trustee, New Century Portfolios, January 2015-December 2017 |
| Olive M. Darragh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since 2020 | Managing Director of Darragh Inc. (strategy and talent management consulting firm) since 2010; Founder and CEO, Zolio, Inc. (investment management talent identification platform) since 2004; Consultant to Independent Trustees of CFVIT and CFST I from June 2019 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 2001-2004 | 174 | Former Director, University of Edinburgh Business School (Member of US Board); former Director, Boston Public Library Foundation |
| Patricia M. Flynn c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1950 | Trustee since 2004 | Trustee Professor of Economics and Management, Bentley University since 1976 (also teaches and conducts research on corporate governance); Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 176 | Trustee, MA Taxpayers Foundation since 1997; Board of Governors, Innovation Institute, MA Technology Collaborative, 2010-2020; former Board of Directors, The MA Business Roundtable, 2003-2019 |
| Brian J. Gallagher c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 176 | Trustee, Catholic Schools Foundation since 2004 |
| CTIVP® – MFS® Value Fund | Annual Report 2021 | 27 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Douglas A. Hacker c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1955 | Co-Chair since 2021; Chair of CFST I and CFVIT since 2014; Trustee of CFST I and CFVIT since 1996 and CFST, CFST II, CFVST II, CET I and CET II since 2021 | Independent business executive since May 2006; Executive Vice President – Strategy of United Airlines, December 2002 - May 2006; President of UAL Loyalty Services (airline marketing company), September 2001-December 2002; Executive Vice President and Chief Financial Officer of United Airlines, July 1999-September 2001 | 176 | Director, Spartan Nash Company (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing); former Director, Nash Finch Company (food distributor), 2005-2013; former Director, SeaCube Container Leasing Ltd. (container leasing), 2010-2013; and former Director, Travelport Worldwide Limited (travel information technology), 2014-2019 |
| Nancy T. Lukitsh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1956 | Trustee since 2011 | Senior Vice President, Partner and Director of Marketing, Wellington Management Company, LLP (investment adviser), 1997-2010; Chair, Wellington Management Portfolios (commingled non-U.S. investment pools), 2007 -2010; Director, Wellington Trust Company, NA and other Wellington affiliates, 1997-2010 | 174 | None |
| David M. Moffett c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2011 | Retired; Consultant to Bridgewater and Associates | 174 | Director, CSX Corporation (transportation suppliers); Director, Genworth Financial, Inc. (financial and insurance products and services); Director, PayPal Holdings Inc. (payment and data processing services); Trustee, University of Oklahoma Foundation; former Director, eBay Inc. (online trading community), 2007-2015; and former Director, CIT Bank, CIT Group Inc. (commercial and consumer finance), 2010-2016 |
| Catherine James Paglia c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Co-Chair since 2021; Chair of CFST, CFST II, CFVST II, CET I and CET II since 2020; Trustee of CFST, CFST II and CFVST II since 2004 and CFST I and CFVIT since 2021 | Director, Enterprise Asset Management, Inc. (private real estate and asset management company) since September 1998; Managing Director and Partner, Interlaken Capital, Inc., 1989-1997; Vice President, 1982-1985, Principal, 1985-1987, Managing Director, 1987-1989, Morgan Stanley; Vice President, Investment Banking, 1980-1982, Associate, Investment Banking, 1976-1980, Dean Witter Reynolds, Inc. | 176 | Director, Valmont Industries, Inc. (irrigation systems manufacturer) since 2012; Trustee, Carleton College (on the Investment Committee); Trustee, Carnegie Endowment for International Peace (on the Investment Committee) |
| 28 | CTIVP® – MFS® Value Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Minor M. Shaw c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1947 | Trustee since 2003 | President, Micco LLC (private investments) since 2011; President, Micco Corp. (family investment business), 1998-2011 | 176 | Director, Blue Cross Blue Shield of South Carolina (Chair of Compensation Committee) since April 2008; Trustee, Hollingsworth Funds (on the Investment Committee) since 2016 (previously Board Chair from 2016-2019); Former Advisory Board member, Duke Energy Corp., 2016-2020; Chair of the Duke Endowment; Chair of Greenville – Spartanburg Airport Commission; former Trustee, BofA Funds Series Trust (11 funds), 2003-2011; former Director, Piedmont Natural Gas, 2004-2016; former Director, National Association of Corporate Directors, Carolinas Chapter, 2013-2018; Chair, Daniel-Mickel Foundation since 1998 |
| Natalie A. Trunow c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1967 | Trustee since 2020 | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services), January 2016-January 2021; Non-executive Member of the Investment Committee and Valuation Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services), August 2018-January 2021; Advisor, Paradigm Asset Management, November 2016-December 2021; Consultant to Independent Trustees of CFVIT and CFST I from September 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Director of Investments/Consultant, Casey Family Programs, April 2016-November 2016; Senior Vice President and Chief Investment Officer, Calvert Investments, August 2008-January 2016; Section Head and Portfolio Manager, General Motors Asset Management, June 1997-August 2008 | 174 | Former Director, Investment Committee, Health Services for Children with Special Needs, Inc., 2012-2019; Director, Chair of Audit Committee, Consumer Credit Counseling Services (formerly Guidewell Financial Solutions), since 2019; Independent Director, Investment Committee and Valuation Committee, Sarona Asset Management, since 2019 |
| Sandra Yeager c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2017 | Retired; President and founder, Hanoverian Capital, LLC (SEC registered investment advisor firm), 2008-2016; Managing Director, DuPont Capital, 2006-2008; Managing Director, Morgan Stanley Investment Management, 2004-2006; Senior Vice President, Alliance Bernstein, 1990-2004 | 176 | Former Director, NAPE Education Foundation, October 2016-October 2020 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Fund Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I (CET I), Columbia ETF Trust II (CET II), Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Beckman, Gallagher and Hacker and Mses. Blatz, Carlton, Flynn, Paglia, Shaw and Yeager serve as Directors of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
| CTIVP® – MFS® Value Fund | Annual Report 2021 | 29 |
TRUSTEES AND OFFICERS (continued)
Interested trustee affiliated with Investment Manager*
Interested trustee affiliated with Investment Manager*
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during the past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex overseen | Other directorships held by Trustee during the past five years |
| Daniel J. Beckman c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since November 2021(a) | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC (since April 2015); officer of Columbia Funds and affiliated funds since 2020. | 176 | Director, Ameriprise Trust Company, since October 2016; Director, Columbia Management Investment Distributors, Inc. since November 2018; Board of Governors, Columbia Wanger Asset Management, LLC since January 2022 |
| * | Interested person (as defined under the 1940 Act) by reason of being an officer, director, security holder and/or employee of the Investment Manager or Ameriprise Financial. |
| (a) | Mr. Beckman serves as the President and Principal Executive Officer of the Columbia Funds (since 2021). |
The Statement of Additional
Information has additional information about the Fund’s Board members and is available, without charge, upon request by calling 800.345.6611 or contacting your financial intermediary.
The Board has appointed officers
who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. The following table provides basic information about the Officers of the
Fund, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Beckman, who is President and Principal Executive Officer, the
Fund’s other officers are:
Fund officers
| 30 | CTIVP® – MFS® Value Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Fund officers (continued)
Fund officers (continued)
| CTIVP® – MFS® Value Fund | Annual Report 2021 | 31 |
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For Fund and other investment product prospectuses, which contain this and other important information, contact your
financial advisor or insurance representative. Please read the prospectus carefully before you invest. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved. Columbia Management Investment Distributors, Inc., 290 Congress Street, Boston, MA 02210
© 2022 Columbia Management Investment
Advisers, LLC.
C-2095 AW (2/22)
Variable Portfolio
– Partners International Growth Fund
Please remember that you may not
buy (nor will you own) shares of the Fund directly. The Fund is available through variable annuity contracts and variable life insurance policies offered by the separate accounts of participating insurance companies
as well as qualified pension and retirement plans. Please contact your financial advisor or insurance representative for more information.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
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Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which Variable Portfolio – Partners International Growth Fund (the Fund) holds investments consistent with the procedures as stated in the Statement of Additional
Information (SAI). You may obtain a copy of the SAI without charge by calling 800.345.6611; contacting your financial intermediary or searching the website of the Securities and Exchange Commission (SEC) at sec.gov.
Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge
by visiting columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. The Fund’s Form N-PORT is available on the SEC’s website at sec.gov. The Fund’s complete
schedule of portfolio holdings, as filed on Form N-PORT, can also be obtained without charge, upon request, by calling 800.345.6611.
Additional Fund information
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
290 Congress Street
Boston, MA 02210
Fund distributor
Columbia Management Investment Distributors,
Inc.
290 Congress Street
Boston, MA 02210
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
Variable Portfolio – Partners International
Growth Fund | Annual Report 2021
Fund at a Glance
Investment objective
The Fund
seeks to provide shareholders with long-term capital growth.
Portfolio management
Walter Scott & Partners Limited
Roy Leckie
Charlie Macquaker
Jane Henderson
William Blair Investment Management, LLC
Alaina Anderson, CFA
Simon Fennell
Kenneth McAtamney
| Variable Portfolio – Partners International Growth Fund | Annual Report 2021 | 3 |
Fund at a Glance (continued)
Performance of a hypothetical $10,000 investment (December 31, 2011 — December 31, 2021)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class 2 shares of Variable Portfolio – Partners International Growth Fund during the stated time period, and does not reflect the deduction of taxes, if any,
that a shareholder may pay on Fund distributions or on the redemption of Fund shares. The returns also do not reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance
policy or qualified pension or retirement plan, if any.
| 4 | Variable Portfolio – Partners International Growth Fund | Annual Report 2021 |
Manager Discussion of Fund Performance
At December 31, 2021,
approximately 96.32% of the Fund’s shares were owned in the aggregate by affiliated funds-of-funds managed by Columbia Management Investment Advisers, LLC (the Investment Manager). As a result of asset
allocation decisions by the Investment Manager, it is possible that the Fund may experience relatively large purchases or redemptions from affiliated funds-of-funds. The Investment Manager seeks to minimize the impact
of these transactions by structuring them over a reasonable period of time. The Fund may also experience increased expenses as it buys and sells securities as a result of purchases or redemptions by affiliated
funds-of-funds.
During the annual period ended
December 31, 2021, the Fund was managed by two subadvisers and each invested a portion of the Fund’s assets. As of December 31, 2021, Walter Scott & Partners Limited (Walter Scott) managed approximately
25.54% and William Blair Investment Management, LLC (William Blair) managed approximately 74.46% of the Fund’s assets.
For the 12-month period that ended
December 31, 2021, Class 2 shares of the Fund returned 10.33%. The Fund underperformed its benchmark, the MSCI EAFE Growth Index (Net), which returned 11.25% for the same time period.
Market overview
Equity markets continued their
robust recovery from the pandemic-induced lows of March 2020, although the year saw periodic bouts of volatility. At the start of the year, international stock markets posted gains as investors maintained a positive
outlook on recovery prospects despite the resurgence of COVID-19 infection rates in parts of the world. Although many countries remained in a fragile state of recovery, sentiment was bolstered by supportive monetary
and fiscal stimuli which showed little sign of being brought to an end.
Most international equities posted
further gains over the second quarter, against a backdrop of improving vaccine roll outs and expectations of a broadening economic recovery, although U.S. dollar returns in several markets were bolstered by the
weakness of the dollar. Several countries remained deeply affected by the pandemic, but as demonstrated by an encouraging results season, many leading, global-facing companies positioned themselves well for recovery,
and the robust earnings outlook underpinned the positive equity environment. Corporate confidence was on the mend in Europe, with companies benefiting from the gradual reopening of European economies and the buoyant
growth in the region’s trading partners. In Asia, the Chinese economy continued to grow strongly, with first-quarter GDP growth coming in at over 18% year on year. Pre-Olympic Japan continued to battle with
COVID-19 outbreaks, however, which did not help the moribund economy, nor investor sentiment, although Japanese companies were upbeat about the prospects for global growth, judging by the Tankan, a quarterly business
survey, which saw corporate confidence hit a two-year high.
However, emerging doubts regarding
the durability of a recovery amidst a pick-up in COVID-19 infection rates and renewed containment measures were evidenced by the September market pull-back in most countries. Also troubling investors was the onward
march of inflation. Central banks attributed this to pandemic-induced supply/demand mismatches, and were anxious to maintain their policies of monetary largesse and not risk impeding economic recovery. China’s
policy moves to rein in perceived excesses in the economy added to investor concerns.
The final quarter of the year was
marked by considerable volatility and performance disparity between regions and stock markets, with Europe showing solid returns while much of Asia was lackluster. Equities were periodically buffeted by concerns over
the emergence of the Omicron variant of COVID-19 and its impact on economic growth and supply chains. Investor nerves were also tested by the tilt towards monetary tightening by the U.S. Federal Reserve, with Chairman
Powell ditching the ‘transitory’ element of his view on inflation, accelerating the planned reduction in asset buying, and touting the likelihood of three interest rate increases in 2022. The eurozone,
Japan and subsequently China, (where domestic recovery slowed in the wake of the persistence of COVID-19 outbreaks), kept to the stimulus playbook given the uncertainty over the effects of the Omicron outbreak and the
belief that price pressures would eventually ease.
The Fund’s notable
detractors during the period
Walter Scott
| • | Overweight allocations to the materials and real estate sectors and an underweight to the financials sector were the strongest detractors from performance on a relative basis. |
| Variable Portfolio – Partners International Growth Fund | Annual Report 2021 | 5 |
Manager Discussion of Fund Performance (continued)
| ○ | Our materials allocation was positive although stock selection was negative. The sector delivered positive returns as it rebounded strongly from weakness in 2020. |
| ○ | Real estate allocation and stock selection were both negative. The sector delivered positive returns as it rebounded strongly from a very difficult 2020. |
| ○ | The allocation to financials had a small positive impact but stock selection was negative. The sector performed well in response to the prospect of rising interest rates. |
| • | At the individual stock level, Makita, Christian Hansen, and Hang Lung Properties were the top three detractors to relative performance in our portion of the Fund during the year. |
| ○ | Makita, a leading company in the global power tools industry, has been a COVID-19 beneficiary with the company’s average quarterly year-on-year organic growth profile trending at around 30% since Q1 FY21 versus 3% in the prior year period before COVID-19 struck. However, as stay-at-home demand fades, so has Makita’s organic growth profile. Currency neutral revenue growth was 10% in Q2 FY22 versus +35% in the previous quarter and +30% in the prior year period. Despite the deceleration in growth, we believe Makita’s business continues to execute well. |
| ○ | Despite delivering credible organic growth for the fiscal year, Christian Hansen’s share price was weak after a strong 2020. Some of this weakness can be attributed to tighter margins, and continued weakness in China as the company experiences growth issues with one of its newly acquired businesses. The company’s Food Cultures & Enzymes business was the star performer, with strong performance in Europe and North America offsetting another tough year in Asia. New product introductions were at an all-time high, although marketing was challenging in the current environment. |
| ○ | The shares of Hang Lung Properties underperformed in 2021 despite the company’s strong fundamental performance, especially in Mainland China. The share price weakness can be attributed to weak sentiment towards China-related stocks, particularly with concerns over real estate concerns and the Evergrande saga. Hang Lung has limited exposure to residential property and can boast a conservative balance sheet. Worries over the impact of regulatory interventions in China on luxury spending also weighed on the stock. |
| • | From a geographical perspective, detracting most were exposures to the United Kingdom, Hong Kong and Sweden. The United Kingdom continued to lag due to Brexit concerns, while Hong Kong was hit particularly hard by political uncertainty and COVID-19 concerns. |
William Blair
| • | Exposure to China was the largest source of detraction in our portion of the portfolio during the period. Our portion of the Fund also lost ground in its exposures to Finland and Israel. |
| • | Stock selection within the consumer discretionary, information technology and utilities sectors detracted most from performance within our portion of the portfolio during the period. A slight overweight in the utilities sector was a secondary detractor during the period. |
| • | At the individual stock level, TAL Education Group, Alibaba Group Holding Ltd. and TeamViewer AG were the top three detractors to performance in our portion of the Fund during the year. |
| • | TAL Education Group is a Chinese after-school tutoring services provider. It boasted a strong brand and significant growth opportunities before the Chinese government restructured the industry, significantly reducing profits for the company. The stock declined amid these regulatory changes as the government sought to reduce the tutoring burden for children as well as costs for parents. We sold the position in July as a result. |
| • | Alibaba Group Holding is an e-commerce giant in China and has long benefited from its dominant position as a comprehensive provider of goods and services, strengthened by increasing Chinese consumption trends. Increased scrutiny from Beijing during the year adversely impacted the company’s shares, as well as a deceleration in operating performance amid weaker demand and increased competition. |
| 6 | Variable Portfolio – Partners International Growth Fund | Annual Report 2021 |
Manager Discussion of Fund Performance (continued)
| • | TeamViewer AG is a cloud-based connectivity platform that delivers online remote control, remote access and online collaboration. The shift to work from home driven by the pandemic had a positive impact on TeamViewer’s results. More recently, however, competitive pressures have increased, affecting renewal rates and pricing. We exited the position in the fourth quarter. |
The Fund’s notable
contributors during the period
Walter Scott
Our portion of the Fund’s
portfolio outperformed the benchmark for the 12 months that ended December 31, 2021.
| • | From an allocation perspective, having no exposure to the underperforming communication services sector, an overweight to the health care sector and an underweight to the consumer staples sector contributed most to performance during the period. |
| ○ | A number of health care stocks performed strongly and both security selection and allocation were positive. The sector delivered positive return and continued to benefit from long-term structural growth tailwinds. |
| ○ | Consumer staples security selection and allocation were both positive. The sector delivered positive returns and benefited from many of its constituents’ defensive qualities during periods of uncertainty and volatility. |
| • | At the individual stock level, the top contributors to relative performance in our portion of the Fund were VAT Group, Kuehne & Nagel, and Dassault Systèmes. |
| ○ | VAT Group is one of the world’s leading supplier of high-end vacuum sealing technologies which are critical to manufacturing processes requiring ultra-clean process environments. The company has been a COVID-19 beneficiary, supported by strong investment in the semiconductor manufacturing industry thanks to the accelerating pace of digitalization. |
| ○ | Kuehne & Nagel (K&N) is one of the world’s leading transportation logistics operators, with an integrated offering in sea, air, rail/road freight forwarding and contract logistics. The company enjoyed a strong year, with growth driven by sea freight in particular against a market backdrop which remains disrupted due to the pandemic. We believe strong global demand for transport services continues and K&N is still seeing high service intensity levels as supply chains remain unpredictable and freight rates stay at elevated levels. |
| ○ | Dassault Systèmes is a world leader in the Product Lifecycle Management (PLM) software market. The company provides end-to-end software applications and services, designed to support innovation processes, from specification and design of a product, to its manufacture, supply and sale, through all stages of digital mock-up, simulation and realistic 3D virtual experiences. The COVID-19 pandemic has been positive for the advancement of virtual technology and the business enjoyed a strong year. The results for the third quarter of the current financial year were good, with operating profit rising 28% year on year. |
William Blair
Our portion of the Fund’s
portfolio performed in line with the benchmark during the 12 months that ended December 31, 2021.
| • | From a sector perspective, stock selection within the industrials and health care sectors was a significant source of outperformance for our portion of the portfolio during the period. Selections within the real estate sector also contributed, albeit modestly, to performance. |
| • | Individual stocks having the largest positive impact on performance during the period included Straumann Holding AG, Ashtead Group PLC and Kingspan Group PLC. |
| ○ | Straumann Holding is a global leader in esthetic dentistry, including implants, clear aligners and digital dentistry, all of which are growing well above global dental market rates. As a total solution provider, it also offers training, support and a wide range of services to the dental industry all over the world. |
| Variable Portfolio – Partners International Growth Fund | Annual Report 2021 | 7 |
Manager Discussion of Fund Performance (continued)
| ○ | Ashtead Group PLC is a rental company offering a broad range of construction and industrial equipment from general tools to specialty equipment. Ashtead has the key benefit of scale in a largely fragmented market, which enables Ashtead to buy equipment at a sizable discount to what its competitors pay support, a large and well invested fleet to meet customer needs and maintain a wide-reaching distribution network that ensures equipment is closer to the customer. These advantages have driven growth in cash flow which, in turn, has led to share gains and greater scale. |
| ○ | Kingspan Group, based in Ireland, has a differentiated technology within the building materials industry that we believe can continue to gain market share globally. Kingspan offers green products, such as insulation offering energy efficiency, improved durability and reduced maintenance costs, which we believe should benefit from nations looking to reduce their carbon footprint. Profits climbed higher during the period. |
| • | Exposure to Japan, Switzerland and Ireland were beneficial to performance in our portion of the portfolio during the period. |
The views expressed in this report
reflect the current views of the respective parties who have contributed to this report. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult
to predict, so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective parties
disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Columbia fund are based on numerous factors, may not be relied on as an
indication of trading intent on behalf of any particular Columbia fund. References to specific securities should not be construed as a recommendation or investment advice.
| 8 | Variable Portfolio – Partners International Growth Fund | Annual Report 2021 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur ongoing
costs, which generally include management fees, distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to help you compare these costs with the ongoing costs of investing in other mutual funds.
The information below does not
reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy (collectively, Contracts) or qualified pension and retirement plan (Qualified Plan), if any. The total fees
and expenses you bear may therefore be higher than those shown below.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount invested, to estimate the
expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as redemption or exchange fees, or expenses that apply to the subaccount or the Contract. Therefore, the
hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If the fees and expenses imposed under your Contract or
Qualified Plan, if any, were included, your costs would be higher.
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 365.
Expenses do not include fees and
expenses incurred indirectly by the Fund from its investment in underlying funds, including affiliated and non-affiliated pooled investment vehicles, such as mutual funds and exchange-traded funds.
Had Columbia Management Investment
Advisers, LLC and/or certain of its affiliates not waived/reimbursed certain fees and expenses, account value at the end of the period would have been reduced.
| Variable Portfolio – Partners International Growth Fund | Annual Report 2021 | 9 |
Portfolio of Investments
December 31, 2021
December 31, 2021
(Percentages represent value of
investments compared to net assets)
Investments in securities
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 10 | Variable Portfolio – Partners International Growth Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Variable Portfolio – Partners International Growth Fund | Annual Report 2021 | 11 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Notes to Portfolio of
Investments
| (a) | Non-income producing investment. |
| (b) | The rate shown is the seven-day current annualized yield at December 31, 2021. |
| (c) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended December 31, 2021 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Realized gain (loss)($) | Dividends($) | End of period shares |
| Columbia Short-Term Cash Fund, 0.085% | ||||||||
| 14,557,976 | 552,057,497 | (535,528,351) | (2,739) | 31,084,383 | (212) | 21,491 | 31,090,601 | |
Abbreviation Legend
| ADR | American Depositary Receipt |
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
Foreign equity securities actively
traded in markets where there is a significant delay in the local close relative to the New York Stock Exchange are classified as Level 2. The values of these securities may include an adjustment to reflect the impact
of market movements following the close of local trading, as described in Note 2 to the financial statements – Security valuation.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 12 | Variable Portfolio – Partners International Growth Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Fair value measurements (continued)
The following table is a summary of the inputs used to value the Fund’s investments at December 31, 2021:
The following table is a summary of the inputs used to value the Fund’s investments at December 31, 2021:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Investments in Securities | ||||
| Common Stocks | ||||
| Argentina | 11,317,121 | — | — | 11,317,121 |
| Australia | — | 32,760,627 | — | 32,760,627 |
| Canada | 42,729,740 | — | — | 42,729,740 |
| China | — | 49,903,744 | — | 49,903,744 |
| Denmark | — | 114,476,296 | — | 114,476,296 |
| Finland | — | 18,464,126 | — | 18,464,126 |
| France | — | 188,627,032 | — | 188,627,032 |
| Germany | — | 66,621,204 | — | 66,621,204 |
| Hong Kong | — | 44,950,612 | — | 44,950,612 |
| India | — | 48,106,554 | — | 48,106,554 |
| Ireland | 32,598,077 | 25,105,713 | — | 57,703,790 |
| Israel | 9,668,582 | — | — | 9,668,582 |
| Italy | — | 3,795,056 | — | 3,795,056 |
| Japan | — | 181,334,213 | — | 181,334,213 |
| Netherlands | — | 65,596,690 | — | 65,596,690 |
| New Zealand | — | 8,056,480 | — | 8,056,480 |
| Norway | — | 14,627,151 | — | 14,627,151 |
| Singapore | — | 6,934,522 | — | 6,934,522 |
| Spain | — | 27,657,289 | — | 27,657,289 |
| Sweden | — | 90,926,772 | — | 90,926,772 |
| Switzerland | — | 175,788,189 | — | 175,788,189 |
| Taiwan | 24,366,213 | 31,212,729 | — | 55,578,942 |
| United Kingdom | 14,785,282 | 186,337,878 | — | 201,123,160 |
| United States | 13,943,058 | — | — | 13,943,058 |
| Total Common Stocks | 149,408,073 | 1,381,282,877 | — | 1,530,690,950 |
| Money Market Funds | 31,084,383 | — | — | 31,084,383 |
| Total Investments in Securities | 180,492,456 | 1,381,282,877 | — | 1,561,775,333 |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The Fund’s assets assigned to
the Level 2 input category are generally valued using the market approach, in which a security’s value is determined through reference to prices and information from market transactions for similar or identical
assets. These assets include certain foreign securities for which a third party statistical pricing service may be employed for purposes of fair market valuation. The model utilized by such third party statistical
pricing service takes into account a security’s correlation to available market data including, but not limited to, intraday index, ADR, and exchange-traded fund movements.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Variable Portfolio – Partners International Growth Fund | Annual Report 2021 | 13 |
Statement of Assets and Liabilities
December 31, 2021
December 31, 2021
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $1,151,928,702) | $1,530,690,950 |
| Affiliated issuers (cost $31,087,122) | 31,084,383 |
| Cash | 394,841 |
| Receivable for: | |
| Capital shares sold | 10,713 |
| Dividends | 188,177 |
| Foreign tax reclaims | 3,248,169 |
| Expense reimbursement due from Investment Manager | 1,046 |
| Prepaid expenses | 14,462 |
| Total assets | 1,565,632,741 |
| Liabilities | |
| Foreign currency (cost $394,841) | 397,738 |
| Payable for: | |
| Capital shares purchased | 34,891 |
| Foreign capital gains taxes deferred | 883,447 |
| Management services fees | 37,069 |
| Distribution and/or service fees | 370 |
| Service fees | 2,819 |
| Compensation of board members | 144,420 |
| Compensation of chief compliance officer | 284 |
| Other expenses | 73,212 |
| Total liabilities | 1,574,250 |
| Net assets applicable to outstanding capital stock | $1,564,058,491 |
| Represented by | |
| Paid in capital | 1,118,921,194 |
| Total distributable earnings (loss) | 445,137,297 |
| Total - representing net assets applicable to outstanding capital stock | $1,564,058,491 |
| Class 1 | |
| Net assets | $1,510,036,241 |
| Shares outstanding | 103,128,813 |
| Net asset value per share | $14.64 |
| Class 2 | |
| Net assets | $54,022,250 |
| Shares outstanding | 3,722,740 |
| Net asset value per share | $14.51 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 14 | Variable Portfolio – Partners International Growth Fund | Annual Report 2021 |
Statement of Operations
Year Ended December 31, 2021
Year Ended December 31, 2021
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $15,409,591 |
| Dividends — affiliated issuers | 21,491 |
| Interfund lending | 308 |
| Foreign taxes withheld | (1,305,928) |
| Total income | 14,125,462 |
| Expenses: | |
| Management services fees | 13,029,898 |
| Distribution and/or service fees | |
| Class 2 | 127,547 |
| Service fees | 32,077 |
| Compensation of board members | 57,881 |
| Custodian fees | 180,398 |
| Printing and postage fees | 20,866 |
| Audit fees | 90,056 |
| Legal fees | 23,750 |
| Compensation of chief compliance officer | 275 |
| Other | 15,951 |
| Total expenses | 13,578,699 |
| Fees waived or expenses reimbursed by Investment Manager and its affiliates | (283,412) |
| Total net expenses | 13,295,287 |
| Net investment income | 830,175 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 73,103,975 |
| Investments — affiliated issuers | (212) |
| Foreign currency translations | (543,045) |
| Net realized gain | 72,560,718 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | 57,051,281 |
| Investments — affiliated issuers | (2,739) |
| Foreign currency translations | (192,500) |
| Foreign capital gains tax | (366,878) |
| Net change in unrealized appreciation (depreciation) | 56,489,164 |
| Net realized and unrealized gain | 129,049,882 |
| Net increase in net assets resulting from operations | $129,880,057 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| Variable Portfolio – Partners International Growth Fund | Annual Report 2021 | 15 |
Statement of Changes in Net Assets
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | |
| Operations | ||
| Net investment income | $830,175 | $1,516,628 |
| Net realized gain | 72,560,718 | 62,936,497 |
| Net change in unrealized appreciation (depreciation) | 56,489,164 | 157,133,009 |
| Net increase in net assets resulting from operations | 129,880,057 | 221,586,134 |
| Distributions to shareholders | ||
| Net investment income and net realized gains | ||
| Class 1 | (66,545,822) | (13,141,970) |
| Class 2 | (2,343,808) | (418,968) |
| Total distributions to shareholders | (68,889,630) | (13,560,938) |
| Increase (decrease) in net assets from capital stock activity | 324,521,353 | (122,700,752) |
| Total increase in net assets | 385,511,780 | 85,324,444 |
| Net assets at beginning of year | 1,178,546,711 | 1,093,222,267 |
| Net assets at end of year | $1,564,058,491 | $1,178,546,711 |
| Year Ended | Year Ended | |||
| December 31, 2021 | December 31, 2020 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class 1 | ||||
| Subscriptions | 30,014,523 | 435,939,035 | 12,580,730 | 138,479,225 |
| Distributions reinvested | 4,675,920 | 66,545,822 | 1,228,639 | 13,141,970 |
| Redemptions | (13,367,843) | (184,912,011) | (24,277,658) | (275,956,167) |
| Net increase (decrease) | 21,322,600 | 317,572,846 | (10,468,289) | (124,334,972) |
| Class 2 | ||||
| Subscriptions | 560,144 | 7,982,696 | 488,661 | 5,511,045 |
| Distributions reinvested | 165,874 | 2,343,808 | 38,819 | 418,968 |
| Redemptions | (236,179) | (3,377,997) | (391,493) | (4,295,793) |
| Net increase | 489,839 | 6,948,507 | 135,987 | 1,634,220 |
| Total net increase (decrease) | 21,812,439 | 324,521,353 | (10,332,302) | (122,700,752) |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 16 | Variable Portfolio – Partners International Growth Fund | Annual Report 2021 |
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| Variable Portfolio – Partners International Growth Fund | Annual Report 2021 | 17 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect any fees and expenses imposed under your
Contract and/or Qualified Plan, as applicable; such fees and expenses would reduce the total returns for all periods shown. Total return and portfolio turnover are not annualized for periods of less than one year. The
portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain derivatives, if any. If such transactions were included, the Fund’s portfolio
turnover rate may be higher.
| Net asset value, beginning of period | Net investment income (loss) | Net realized and unrealized gain (loss) | Total from investment operations | Distributions from net investment income | Distributions from net realized gains | Total distributions to shareholders | |
| Class 1 | |||||||
| Year Ended 12/31/2021 | $13.86 | 0.01 | 1.44 | 1.45 | (0.01) | (0.66) | (0.67) |
| Year Ended 12/31/2020 | $11.46 | 0.02 | 2.53 | 2.55 | (0.03) | (0.12) | (0.15) |
| Year Ended 12/31/2019 | $9.46 | 0.10 | 2.38 | 2.48 | (0.12) | (0.36) | (0.48) |
| Year Ended 12/31/2018 | $12.29 | 0.11 | (2.35) | (2.24) | (0.12) | (0.47) | (0.59) |
| Year Ended 12/31/2017 | $10.70 | 0.11 | 2.65 | 2.76 | (0.09) | (1.08) | (1.17) |
| Class 2 | |||||||
| Year Ended 12/31/2021 | $13.77 | (0.03) | 1.43 | 1.40 | — | (0.66) | (0.66) |
| Year Ended 12/31/2020 | $11.40 | (0.01) | 2.51 | 2.50 | (0.01) | (0.12) | (0.13) |
| Year Ended 12/31/2019 | $9.42 | 0.07 | 2.37 | 2.44 | (0.10) | (0.36) | (0.46) |
| Year Ended 12/31/2018 | $12.24 | 0.07 | (2.32) | (2.25) | (0.10) | (0.47) | (0.57) |
| Year Ended 12/31/2017 | $10.66 | 0.08 | 2.64 | 2.72 | (0.06) | (1.08) | (1.14) |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Ratios include interfund lending expense which is less than 0.01%. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 18 | Variable Portfolio – Partners International Growth Fund | Annual Report 2021 |
Financial Highlights (continued)
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets(a) | Total net expense ratio to average net assets(a),(b) | Net investment income (loss) ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Class 1 | |||||||
| Year Ended 12/31/2021 | $14.64 | 10.63% | 0.90% | 0.88% | 0.06% | 26% | $1,510,036 |
| Year Ended 12/31/2020 | $13.86 | 22.62% | 0.93%(c) | 0.92%(c) | 0.15% | 73% | $1,134,033 |
| Year Ended 12/31/2019 | $11.46 | 26.70% | 0.93% | 0.92% | 0.92% | 113% | $1,057,916 |
| Year Ended 12/31/2018 | $9.46 | (18.95%) | 0.91% | 0.91% | 0.92% | 19% | $793,614 |
| Year Ended 12/31/2017 | $12.29 | 26.87% | 0.95% | 0.95% | 0.93% | 22% | $1,682,196 |
| Class 2 | |||||||
| Year Ended 12/31/2021 | $14.51 | 10.33% | 1.15% | 1.13% | (0.21%) | 26% | $54,022 |
| Year Ended 12/31/2020 | $13.77 | 22.30% | 1.18%(c) | 1.17%(c) | (0.10%) | 73% | $44,514 |
| Year Ended 12/31/2019 | $11.40 | 26.36% | 1.18% | 1.17% | 0.67% | 113% | $35,306 |
| Year Ended 12/31/2018 | $9.42 | (19.10%) | 1.17% | 1.17% | 0.64% | 19% | $29,694 |
| Year Ended 12/31/2017 | $12.24 | 26.56% | 1.20% | 1.20% | 0.67% | 22% | $33,356 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Variable Portfolio – Partners International Growth Fund | Annual Report 2021 | 19 |
Notes to Financial Statements
December 31, 2021
December 31, 2021
Note 1. Organization
Variable Portfolio –
Partners International Growth Fund (the Fund), a series of Columbia Funds Variable Series Trust II (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended (the
1940 Act), as an open-end management investment company organized as a Massachusetts business trust.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers Class 1 and Class 2 shares to separate accounts funding variable annuity contracts and variable life insurance policies (collectively, Contracts) issued by
affiliated and unaffiliated life insurance companies (Participating Insurance Companies) as well as qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors (Qualified
Investors) authorized by Columbia Management Investment Distributors, Inc. (the Distributor). You may not buy (nor will you own) shares of the Fund directly. You may invest by participating in a Qualified Plan or by
buying a Contract and making allocations to the Fund. Although all share classes generally have identical voting, dividend and liquidation rights, each share class votes separately when required by the Trust’s
organizational documents or by law. Different share classes pay different net investment income distribution amounts to the extent the expenses of such share classes differ, and distributions in liquidation will be
proportional to the net asset value of each share class. Each share class has its own cost structure and other features.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Equity securities listed on an
exchange are valued at the closing price or last trade price on their primary exchange at the close of business of the New York Stock Exchange. Securities with a closing price not readily available or not listed on
any exchange are valued at the mean between the closing bid and ask prices. Listed preferred stocks convertible into common stocks are valued using an evaluated price from a pricing service.
Foreign equity securities are
valued based on the closing price or last trade price on their primary exchange at the close of business of the New York Stock Exchange. If any foreign equity security closing prices are not readily available,
the securities are valued at the mean of the latest quoted bid and ask prices on such exchanges or markets. Foreign currency exchange rates are determined at the scheduled closing time of the New York Stock Exchange.
Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange; therefore, the closing prices for securities in such markets or on such exchanges may not fully reflect
events that occur after such close but before the close of the New York Stock Exchange. In those situations, foreign securities will be fair valued pursuant to a policy adopted by the Board of Trustees. Under the
policy, the Fund may utilize a third-party pricing service to determine these fair values. The third-party pricing service takes into account multiple factors, including, but not limited to, movements in the U.S.
securities markets, certain depositary receipts, futures contracts and foreign exchange rates that have occurred subsequent to the close of the foreign exchange or market, to determine a good faith estimate that
reasonably reflects the current market conditions as of the close of the New York Stock Exchange. The fair value of a security is likely to be different from the quoted or published price, if available.
Investments in open-end investment
companies (other than exchange-traded funds (ETFs)), are valued at the latest net asset value reported by those companies as of the valuation time.
| 20 | Variable Portfolio – Partners International Growth Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Foreign currency transactions and
translations
The values of all assets and
liabilities denominated in foreign currencies are generally translated into U.S. dollars at exchange rates determined at the close of regular trading on the New York Stock Exchange. Net realized and unrealized gains
(losses) on foreign currency transactions and translations include gains (losses) arising from the fluctuation in exchange rates between trade and settlement dates on securities transactions, gains (losses) arising
from the disposition of foreign currency and currency gains (losses) between the accrual and payment dates on dividends, interest income and foreign withholding taxes.
For financial statement purposes,
the Fund does not distinguish that portion of gains (losses) on investments which is due to changes in foreign exchange rates from that which is due to changes in market prices of the investments. Such fluctuations
are included with the net realized and unrealized gains (losses) on investments in the Statement of Operations.
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
Income recognition
Corporate actions and dividend
income are generally recorded net of any non-reclaimable tax withholdings, on the ex-dividend date or upon receipt of an ex-dividend notification in the case of certain foreign securities.
The Fund may receive distributions
from holdings in equity securities, business development companies (BDCs), exchange-traded funds (ETFs), limited partnerships (LPs), other regulated investment companies (RICs), and real estate investment trusts
(REITs), which report information as to the tax character of their distributions annually. These distributions are allocated to dividend income, capital gain and return of capital based on actual information reported.
Return of capital is recorded as a reduction of the cost basis of securities held. If the Fund no longer owns the applicable securities, return of capital is recorded as a realized gain. With respect to REITs, to the
extent actual information has not yet been reported, estimates for return of capital are made by Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise
Financial, Inc. (Ameriprise Financial). The Investment Manager’s estimates are subsequently adjusted when the actual character of the distributions is disclosed by the REITs, which could result in a
proportionate change in return of capital to shareholders.
Awards from class action litigation
are recorded as a reduction of cost basis if the Fund still owns the applicable securities on the payment date. If the Fund no longer owns the applicable securities on the payment date, the proceeds are recorded as
realized gains.
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
| Variable Portfolio – Partners International Growth Fund | Annual Report 2021 | 21 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
Federal income tax status
The Fund intends to qualify each
year as a regulated investment company under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its investment company taxable income and net capital gain, if any, for its
tax year, and as such will not be subject to federal income taxes. In addition, because the Fund meets the exception under Internal Revenue Code Section 4982(f), the Fund expects not to be subject to federal excise
tax. Therefore, no federal income or excise tax provision is recorded.
Foreign taxes
The Fund may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries, as applicable, based upon its current interpretation of tax rules
and regulations that exist in the markets in which it invests.
Realized gains in certain countries
may be subject to foreign taxes at the Fund level, based on statutory rates. The Fund accrues for such foreign taxes on realized and unrealized gains at the appropriate rate for each jurisdiction, as applicable. The
amount, if any, is disclosed as a liability on the Statement of Assets and Liabilities.
Distributions to subaccounts
Distributions to the subaccounts of
Contracts, Qualified Plans and Qualified Investors are recorded at the close of business on the record date and are payable on the first business day following the record date. Dividends from net investment income, if
any, are declared and distributed quarterly. Capital gain distributions, when available, will be made annually. However, an additional capital gain distribution may be made during the fiscal year in order to comply
with the Internal Revenue Code, as applicable to registered investment companies. Income distributions and capital gain distributions are determined in accordance with federal income tax regulations, which may differ
from GAAP. All dividends and distributions are reinvested in additional shares of the applicable share class of the Fund at the net asset value as of the ex-dividend date of the distribution.
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Under the Management Agreement, the
Investment Manager provides the Fund with investment research and advice, as well as administrative and accounting services. The Investment Manager is responsible for the ultimate oversight of investments made by the
Fund. The Fund’s subadvisers (see Subadvisory agreements below) have the primary responsibility for the day-to-day portfolio management of the Fund. The management services fee is an annual fee that is equal to
a percentage of the Fund’s daily net assets that declines from 0.92% to 0.75% as the Fund’s net assets increase. The effective management services fee rate for the year ended December 31, 2021 was 0.87% of
the Fund’s average daily net assets.
| 22 | Variable Portfolio – Partners International Growth Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Subadvisory agreements
The Investment Manager has entered
into Subadvisory Agreements with Walter Scott & Partners Limited and William Blair Investment Management, LLC, each of which subadvises a portion of the assets of the Fund. New investments in the Fund, net of
redemptions, are allocated in accordance with the Investment Manager’s determination. Each subadviser’s proportionate share of investments in the Fund will vary due to market fluctuations. The Investment
Manager compensates each subadviser to manage the investment of the Fund’s assets.
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. Under a Deferred Compensation Plan (the
Deferred Plan), these members of the Board of Trustees may elect to defer payment of up to 100% of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of
certain funds managed by the Investment Manager. The Fund’s liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Deferred Plan. All
amounts payable under the Deferred Plan constitute a general unsecured obligation of the Fund. The expense for the Deferred Plan, which includes Trustees’ fees deferred during the current period as well as any
gains or losses on the Trustees’ deferred compensation balances as a result of market fluctuations, is included in "Compensation of board members" on the Statement of Operations.
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
Service fees
The Fund has entered into a
Shareholder Services Agreement with Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial. Under this
agreement, the Fund pays a service fee equal to the payments made by the Transfer Agent to Participating Insurance Companies and other financial intermediaries (together, Participating Organizations) for services each
such Participating Organization provides to its clients, customers and participants that are invested directly or indirectly in the Fund, up to a cap approved by the Board of Trustees from time to time. The effective
service fee rate for the year ended December 31, 2021, was 0.00% of the Fund’s average daily net assets.
The Transfer Agent may retain as
compensation for its services revenues from fees for wire, telephone and redemption orders, account transcripts due the Transfer Agent from Fund shareholders and interest (net of bank charges) earned with respect to
balances in accounts the Transfer Agent maintains in connection with its services to the Fund.
Distribution and/or service fees
The Fund has an agreement with the
Distributor, an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution services. Under a Plan and Agreement of Distribution, the Fund pays a fee at an annual rate
of up to 0.25% of the Fund’s average daily net assets attributable to Class 2 shares. The Fund pays no distribution and service fees for Class 1 shares.
| Variable Portfolio – Partners International Growth Fund | Annual Report 2021 | 23 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Expenses waived/reimbursed by the
Investment Manager and its affiliates
The Investment Manager and certain
of its affiliates have contractually agreed to waive fees and/or reimburse expenses (excluding certain fees and expenses described below) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, so that the Fund’s net operating expenses, after giving effect to fees waived/expenses reimbursed and any balance credits and/or overdraft charges from the Fund’s
custodian, do not exceed the following annual rate(s) as a percentage of the classes’ average daily net assets:
| May 1, 2021 through April 30, 2022 | Prior to May 1, 2021 | |
| Class 1 | 0.87% | 0.92% |
| Class 2 | 1.12 | 1.17 |
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), expenses associated with investments in affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange-traded funds), transaction costs and
brokerage commissions, costs related to any securities lending program, dividend expenses associated with securities sold short, inverse floater program fees and expenses, transaction charges and interest on borrowed
money, interest, costs associated with certain shareholder meetings, infrequent and/or unusual expenses and any other expenses the exclusion of which is specifically approved by the Board of Trustees. This
agreement may be modified or amended only with approval from the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements
described above are not recoverable by the Investment Manager or its affiliates in future periods.
Note 4. Federal tax
information
The timing and character of
income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP because of temporary or permanent book to tax differences.
At December 31, 2021, these
differences were primarily due to differing treatment for deferral/reversal of wash sale losses, trustees’ deferred compensation, distribution reclassifications, foreign currency transactions, passive foreign
investment company (PFIC) holdings and foreign tax reclaims refunded. To the extent these differences were permanent, reclassifications were made among the components of the Fund’s net assets. Temporary
differences do not require reclassifications.
The following reclassifications
were made:
| Excess of distributions over net investment income ($) | Accumulated net realized gain ($) | Paid in capital ($) |
| (631,101) | 192,391 | 438,710 |
Net investment income (loss) and
net realized gains (losses), as disclosed in the Statement of Operations, and net assets were not affected by this reclassification.
The tax character of distributions
paid during the years indicated was as follows:
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | ||||
| Ordinary income ($) | Long-term capital gains ($) | Total ($) | Ordinary income ($) | Long-term capital gains ($) | Total ($) |
| 1,016,046 | 67,873,584 | 68,889,630 | 2,132,949 | 11,427,989 | 13,560,938 |
Short-term capital gain
distributions, if any, are considered ordinary income distributions for tax purposes.
| 24 | Variable Portfolio – Partners International Growth Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
At December 31, 2021, the
components of distributable earnings on a tax basis were as follows:
| Undistributed ordinary income ($) | Undistributed long-term capital gains ($) | Capital loss carryforwards ($) | Net unrealized appreciation ($) |
| 3,977,842 | 68,103,363 | — | 374,167,472 |
At December 31, 2021, the cost of
all investments for federal income tax purposes along with the aggregate gross unrealized appreciation and depreciation based on that cost was:
| Federal tax cost ($) | Gross unrealized appreciation ($) | Gross unrealized (depreciation) ($) | Net unrealized appreciation ($) |
| 1,187,607,861 | 422,324,388 | (48,156,916) | 374,167,472 |
Tax cost of investments and
unrealized appreciation/(depreciation) may also include timing differences that do not constitute adjustments to tax basis.
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Note 5. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $605,604,725 and $368,847,704, respectively, for the year ended December 31, 2021. The amount of purchase and
sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 6. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes
referred to as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
Note 7. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund’s activity in the
Interfund Program during the year ended December 31, 2021 was as follows:
| Borrower or lender | Average loan balance ($) | Weighted average interest rate (%) | Number of days with outstanding loans |
| Lender | 4,000,000 | 0.69 | 4 |
| Variable Portfolio – Partners International Growth Fund | Annual Report 2021 | 25 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Interest income earned by the Fund
is recorded as Interfund lending in the Statement of Operations. The Fund had no outstanding interfund loans at December 31, 2021.
Note 8. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to an October 28, 2021 amendment and restatement, the credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment
Manager or an affiliated investment manager, severally and not jointly, permits collective borrowings up to $950 million. Interest is currently charged to each participating fund based on its borrowings at a rate
equal to the higher of (i) the federal funds effective rate, (ii) the secured overnight financing rate plus 0.11448% and (iii) the overnight bank funding rate, plus in each case, 1.00%. Each borrowing under the credit
facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The
commitment fee is included in other expenses in the Statement of Operations. This agreement expires annually in October unless extended or renewed. Prior to the October 28, 2021 amendment and restatement, the Fund had
access to a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. which permitted collective borrowings up to $950 million. Interest was
charged to each participating fund based on its borrowings at a rate equal to the higher of (i) the federal funds effective rate, (ii) the one-month London Interbank Offered Rate (LIBOR) rate and (iii) the overnight
bank funding rate, plus in each case, 1.25%.
The Fund had no borrowings during
the year ended December 31, 2021.
Note 9. Significant
risks
Foreign securities and emerging
market countries risk
Investing in foreign securities may
involve certain risks not typically associated with investing in U.S. securities, such as increased currency volatility and risks associated with political, regulatory, economic, social, diplomatic and other
conditions or events occurring in the country or region, which may result in significant market volatility. In addition, certain foreign securities may not be as liquid as U.S. securities. Investing in emerging
markets may increase these risks and expose the Fund to elevated risks associated with increased inflation, deflation or currency devaluation. To the extent that the Fund concentrates its investment exposure to any
one or a few specific countries, the Fund will be particularly susceptible to the risks associated with the conditions, events or other factors impacting those countries or regions and may, therefore, have a greater
risk than that of a fund that is more geographically diversified.
Geographic focus risk
The Fund may be particularly
susceptible to economic, political, regulatory or other events or conditions affecting issuers and countries within the specific geographic regions in which the Fund invests. The Fund’s NAV may be more volatile
than the NAV of a more geographically diversified fund.
Asia Pacific Region. The Fund is particularly susceptible to economic, political, regulatory or other events or conditions affecting issuers and countries in the Asia Pacific region. Many of the countries in
the region are considered underdeveloped or developing, including from a political, economic and/or social perspective, and may have relatively unstable governments and economies based on limited business, industries
and/or natural resources or commodities. Events in any one country within the region may impact other countries in the region or the region as a whole. As a result, events in the region will generally have a greater
effect on the Fund than if the Fund were more geographically diversified. This could result in increased volatility in the value of the Fund’s investments and losses for the Fund. Also, securities of some
companies in the region can be less liquid than U.S. or other foreign securities, potentially making it difficult for the Fund to sell such securities at a desirable time and price.
Europe. The Fund is particularly susceptible to economic, political, regulatory or other events or conditions affecting issuers and countries in Europe which are often closely connected and
interdependent, and events in one European country can have an adverse impact on other European countries. In addition, the private and public sectors’ debt problems of a single European Union (EU) country can
pose significant economic risks to the EU as a whole. As a result, the Fund’s NAV may be
| 26 | Variable Portfolio – Partners International Growth Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
more volatile than the NAV of a more
geographically diversified fund. If securities of issuers in Europe fall out of favor, it may cause the Fund to underperform other funds that do not focus their investments in this region of the world. The UK’s
departure from the EU single market became effective January 1, 2021 with the end of the Brexit transition period and the post-Brexit trade deal between the UK and EU taking effect on December 31, 2020. The impact of
Brexit on the UK and European economies and the broader global economy could be significant, resulting in negative impacts on currency and financial markets generally, such as increased volatility and illiquidity, and
potentially lower economic growth in markets in Europe, which may adversely affect the value of your investment in the Fund.
Industrials sector risk
The Fund is more susceptible to the
particular risks that may affect companies in the industrials sector than if it were invested in a wider variety of companies in unrelated sectors. Companies in the industrials sector are subject to certain risks,
including changes in supply and demand for their specific product or service and for industrial sector products in general, including decline in demand for such products due to rapid technological developments and
frequent new product introduction. Performance of such companies may be affected by factors including government regulation, world events and economic conditions and risks for environmental damage and product
liability claims.
Market risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
The coronavirus disease 2019 and
its variants (COVID-19) pandemic has resulted in, and may continue to result in, significant global economic and societal disruption and market volatility due to disruptions in market access, resource availability,
facilities operations, imposition of tariffs, export controls and supply chain disruption, among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement
and loss in human and other resources. The uncertainty surrounding the magnitude, duration, reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental
authorities or other third parties, present unknowns that are yet to unfold. The impacts, as well as the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and
pandemics that may arise in the future – could negatively affect global economies and markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in
emerging market countries may be greater due to generally less established healthcare systems, governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing
political, social and economic risks in certain countries or globally. The disruptions caused by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively
impact the Fund’s ability to achieve its investment objectives. Any such event(s) could have a significant adverse impact on the value and risk profile of the Fund.
Shareholder concentration risk
At December 31, 2021, affiliated
shareholders of record owned 100.0% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its
| Variable Portfolio – Partners International Growth Fund | Annual Report 2021 | 27 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
liquid positions, which may result in Fund losses
and the Fund holding a higher percentage of less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Note 10. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
Note 11. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in
connection with the conduct of their business activities. Ameriprise Financial believes that the Fund is not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject
of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with
the Fund. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (SEC) on legal and regulatory matters that relate to
Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that
these matters, or the adverse publicity associated with them, will not result in increased Fund redemptions, reduced sale of Fund shares or other adverse consequences to the Fund. Further, although we believe
proceedings are not likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines,
penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial or one or more of its affiliates that provides services to
the Fund.
| 28 | Variable Portfolio – Partners International Growth Fund | Annual Report 2021 |
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees of Columbia
Funds Variable Series Trust II and Shareholders of Variable Portfolio – Partners International Growth Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of Variable Portfolio – Partners International Growth Fund (one of the funds constituting Columbia Funds Variable Series Trust II,
referred to hereafter as the "Fund") as of December 31, 2021, the related statement of operations for the year ended December 31, 2021, the statement of changes in net assets for each of the two years in the period
ended December 31, 2021, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2021 (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, 2021, 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, 2021 and the financial highlights for each of the five years in the period ended December 31, 2021 in conformity with accounting principles generally
accepted in the United States of America.
Basis for Opinion
These financial statements are the
responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these
financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2021 by correspondence with the custodian and transfer agent. We believe that our
audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Minneapolis, Minnesota
February 22, 2022
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| Variable Portfolio – Partners International Growth Fund | Annual Report 2021 | 29 |
Federal Income Tax
Information
(Unaudited)
The Fund hereby designates the
following tax attributes for the fiscal year ended December 31, 2021.
| Capital gain dividend | Foreign taxes paid to foreign countries | Foreign taxes paid per share to foreign countries | Foreign source income | Foreign source income per share |
| $71,876,238 | $1,682,493 | $0.02 | $15,347,754 | $0.14 |
Capital gain dividend. The Fund
designates as a capital gain dividend the amount reflected above, or if subsequently determined to be different, the net capital gain of such fiscal period.
Foreign taxes. The Fund makes the
election to pass through to shareholders the foreign taxes paid. Eligible shareholders may claim a foreign tax credit. These taxes, and the corresponding foreign source income, are provided.
The Fund (or fund in which the fund
invests) has received a refund of foreign taxes previously reported and passed through in prior years (a “foreign tax redetermination”). Shareholders who claimed foreign tax credits with respect to such
foreign taxes previously reported in prior years may also have a foreign tax redetermination and may need to file amended tax returns to account for such taxes refunded to the Fund. The amount of tax refunded, and
years to which the tax relates, are available on the Tax Center page of ColumbiaThreadneedle.com, along with certain other information about the refunded tax. See your tax advisor. The amounts reported in the table
above have not been reduced for any foreign tax redeterminations.
Foreign taxes are deemed to be
passed through to shareholders with dividends paid after the close of the taxable year, on the next regularly scheduled distribution date of March 30, 2022.
TRUSTEES AND
OFFICERS
The Board oversees the Fund’s
operations and appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following table provides basic biographical information about the Fund’s Trustees as
of the printing of this report, including their principal occupations during the past five years, although specific titles for individuals may have varied over the period. The year set forth beneath Length of Service
in the table below is the year in which the Trustee was first appointed or elected as Trustee to any Fund currently in the Columbia Funds Complex or a predecessor thereof. Under current Board policy, each Trustee
generally serves until December 31 of the year such Trustee turns seventy-five (75).
| 30 | Variable Portfolio – Partners International Growth Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees
Independent trustees
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| George S. Batejan c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1953 | Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 176 | Former Chairman of the Board, NICSA (National Investment Company Services Association) (Executive Committee, Nominating Committee and Governance Committee), 2014-2016; former Director, Intech Investment Management, 2011-2016; former Board Member, Metro Denver Chamber of Commerce, 2015-2016; former Advisory Board Member, University of Colorado Business School, 2015-2018 |
| Kathleen Blatz c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2006 | Attorney, specializing in arbitration and mediation; Chief Justice, Minnesota Supreme Court, 1998-2006; Associate Justice, Minnesota Supreme Court, 1996-1998; Fourth Judicial District Court Judge, Hennepin County, 1994-1996; Attorney in private practice and public service, 1984-1993; State Representative, Minnesota House of Representatives, 1979-1993, which included service on the Tax and Financial Institutions and Insurance Committees; Member and Interim Chair, Minnesota Sports Facilities Authority, January 2017-July 2017; Interim President and Chief Executive Officer, Blue Cross Blue Shield of Minnesota (health care insurance), February-July 2018, April-October 2021 | 176 | Former Trustee, Blue Cross Blue Shield of Minnesota, 2009-2021 (Chair of the Business Development Committee, 2014-2017; Chair of the Governance Committee, 2017-2019); former Member and Chair of the Board, Minnesota Sports Facilities Authority, January 2017-July 2017; former Director, Robina Foundation, 2009-2020 (Chair, 2014-2020); Director, Schulze Family Foundation, since 2021 |
| Pamela G. Carlton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2007 | President, Springboard — Partners in Cross Cultural Leadership (consulting company) since 2003; Managing Director of US Equity Research, JP Morgan Chase, 1999-2003; Director of US Equity Research, Chase Asset Management, 1996-1999; Co-Director Latin America Research, 1993-1996, COO Global Research, 1992-1996, Co-Director of US Research, 1991-1992, Investment Banker, Morgan Stanley, 1982-1991, Morgan Stanley; Attorney, Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 176 | Trustee, New York Presbyterian Hospital Board (Executive Committee and Chair of People Committee) since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee); Director, Apollo Commercial Real Estate Finance, Inc. since 2021; the Governing Council of the Independent Directors Council (IDC), since 2021 |
| Janet Langford Carrig c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1957 | Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 174 | Director, EQT Corporation (natural gas producer) since 2019; Director, Whiting Petroleum Corporation (independent oil and gas company) since 2020 |
| Variable Portfolio – Partners International Growth Fund | Annual Report 2021 | 31 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| J. Kevin Connaughton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2020 | Member, FINRA National Adjudicatory Council since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Consultant to Independent Trustees of CFVIT and CFST I from March 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Managing Director and General Manager of Mutual Fund Products, Columbia Management Investment Advisers, LLC, May 2010-February 2015; President, Columbia Funds, 2008-2015; and senior officer of Columbia Funds and affiliated funds, 2003-2015 | 174 | Former Director, The Autism Project, March 2015-December 2021; former Member of the Investment Committee, St. Michael’s College, November 2015-February 2020; former Trustee, St. Michael’s College, June 2017-September 2019; former Trustee, New Century Portfolios, January 2015-December 2017 |
| Olive M. Darragh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since 2020 | Managing Director of Darragh Inc. (strategy and talent management consulting firm) since 2010; Founder and CEO, Zolio, Inc. (investment management talent identification platform) since 2004; Consultant to Independent Trustees of CFVIT and CFST I from June 2019 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 2001-2004 | 174 | Former Director, University of Edinburgh Business School (Member of US Board); former Director, Boston Public Library Foundation |
| Patricia M. Flynn c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1950 | Trustee since 2004 | Trustee Professor of Economics and Management, Bentley University since 1976 (also teaches and conducts research on corporate governance); Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 176 | Trustee, MA Taxpayers Foundation since 1997; Board of Governors, Innovation Institute, MA Technology Collaborative, 2010-2020; former Board of Directors, The MA Business Roundtable, 2003-2019 |
| Brian J. Gallagher c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 176 | Trustee, Catholic Schools Foundation since 2004 |
| Douglas A. Hacker c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1955 | Co-Chair since 2021; Chair of CFST I and CFVIT since 2014; Trustee of CFST I and CFVIT since 1996 and CFST, CFST II, CFVST II, CET I and CET II since 2021 | Independent business executive since May 2006; Executive Vice President – Strategy of United Airlines, December 2002 - May 2006; President of UAL Loyalty Services (airline marketing company), September 2001-December 2002; Executive Vice President and Chief Financial Officer of United Airlines, July 1999-September 2001 | 176 | Director, Spartan Nash Company (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing); former Director, Nash Finch Company (food distributor), 2005-2013; former Director, SeaCube Container Leasing Ltd. (container leasing), 2010-2013; and former Director, Travelport Worldwide Limited (travel information technology), 2014-2019 |
| 32 | Variable Portfolio – Partners International Growth Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Nancy T. Lukitsh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1956 | Trustee since 2011 | Senior Vice President, Partner and Director of Marketing, Wellington Management Company, LLP (investment adviser), 1997-2010; Chair, Wellington Management Portfolios (commingled non-U.S. investment pools), 2007 -2010; Director, Wellington Trust Company, NA and other Wellington affiliates, 1997-2010 | 174 | None |
| David M. Moffett c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2011 | Retired; Consultant to Bridgewater and Associates | 174 | Director, CSX Corporation (transportation suppliers); Director, Genworth Financial, Inc. (financial and insurance products and services); Director, PayPal Holdings Inc. (payment and data processing services); Trustee, University of Oklahoma Foundation; former Director, eBay Inc. (online trading community), 2007-2015; and former Director, CIT Bank, CIT Group Inc. (commercial and consumer finance), 2010-2016 |
| Catherine James Paglia c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Co-Chair since 2021; Chair of CFST, CFST II, CFVST II, CET I and CET II since 2020; Trustee of CFST, CFST II and CFVST II since 2004 and CFST I and CFVIT since 2021 | Director, Enterprise Asset Management, Inc. (private real estate and asset management company) since September 1998; Managing Director and Partner, Interlaken Capital, Inc., 1989-1997; Vice President, 1982-1985, Principal, 1985-1987, Managing Director, 1987-1989, Morgan Stanley; Vice President, Investment Banking, 1980-1982, Associate, Investment Banking, 1976-1980, Dean Witter Reynolds, Inc. | 176 | Director, Valmont Industries, Inc. (irrigation systems manufacturer) since 2012; Trustee, Carleton College (on the Investment Committee); Trustee, Carnegie Endowment for International Peace (on the Investment Committee) |
| Variable Portfolio – Partners International Growth Fund | Annual Report 2021 | 33 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Minor M. Shaw c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1947 | Trustee since 2003 | President, Micco LLC (private investments) since 2011; President, Micco Corp. (family investment business), 1998-2011 | 176 | Director, Blue Cross Blue Shield of South Carolina (Chair of Compensation Committee) since April 2008; Trustee, Hollingsworth Funds (on the Investment Committee) since 2016 (previously Board Chair from 2016-2019); Former Advisory Board member, Duke Energy Corp., 2016-2020; Chair of the Duke Endowment; Chair of Greenville – Spartanburg Airport Commission; former Trustee, BofA Funds Series Trust (11 funds), 2003-2011; former Director, Piedmont Natural Gas, 2004-2016; former Director, National Association of Corporate Directors, Carolinas Chapter, 2013-2018; Chair, Daniel-Mickel Foundation since 1998 |
| Natalie A. Trunow c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1967 | Trustee since 2020 | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services), January 2016-January 2021; Non-executive Member of the Investment Committee and Valuation Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services), August 2018-January 2021; Advisor, Paradigm Asset Management, November 2016-December 2021; Consultant to Independent Trustees of CFVIT and CFST I from September 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Director of Investments/Consultant, Casey Family Programs, April 2016-November 2016; Senior Vice President and Chief Investment Officer, Calvert Investments, August 2008-January 2016; Section Head and Portfolio Manager, General Motors Asset Management, June 1997-August 2008 | 174 | Former Director, Investment Committee, Health Services for Children with Special Needs, Inc., 2012-2019; Director, Chair of Audit Committee, Consumer Credit Counseling Services (formerly Guidewell Financial Solutions), since 2019; Independent Director, Investment Committee and Valuation Committee, Sarona Asset Management, since 2019 |
| Sandra Yeager c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2017 | Retired; President and founder, Hanoverian Capital, LLC (SEC registered investment advisor firm), 2008-2016; Managing Director, DuPont Capital, 2006-2008; Managing Director, Morgan Stanley Investment Management, 2004-2006; Senior Vice President, Alliance Bernstein, 1990-2004 | 176 | Former Director, NAPE Education Foundation, October 2016-October 2020 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Fund Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I (CET I), Columbia ETF Trust II (CET II), Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Beckman, Gallagher and Hacker and Mses. Blatz, Carlton, Flynn, Paglia, Shaw and Yeager serve as Directors of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
| 34 | Variable Portfolio – Partners International Growth Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Interested trustee affiliated with Investment Manager*
Interested trustee affiliated with Investment Manager*
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during the past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex overseen | Other directorships held by Trustee during the past five years |
| Daniel J. Beckman c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since November 2021(a) | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC (since April 2015); officer of Columbia Funds and affiliated funds since 2020. | 176 | Director, Ameriprise Trust Company, since October 2016; Director, Columbia Management Investment Distributors, Inc. since November 2018; Board of Governors, Columbia Wanger Asset Management, LLC since January 2022 |
| * | Interested person (as defined under the 1940 Act) by reason of being an officer, director, security holder and/or employee of the Investment Manager or Ameriprise Financial. |
| (a) | Mr. Beckman serves as the President and Principal Executive Officer of the Columbia Funds (since 2021). |
The Statement of Additional
Information has additional information about the Fund’s Board members and is available, without charge, upon request by calling 800.345.6611 or contacting your financial intermediary.
The Board has appointed officers
who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. The following table provides basic information about the Officers of the
Fund, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Beckman, who is President and Principal Executive Officer, the
Fund’s other officers are:
Fund officers
| Variable Portfolio – Partners International Growth Fund | Annual Report 2021 | 35 |
TRUSTEES AND OFFICERS (continued)
Fund officers (continued)
Fund officers (continued)
| 36 | Variable Portfolio – Partners International Growth Fund | Annual Report 2021 |
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For Fund and other investment product prospectuses, which contain this and other important information, contact your
financial advisor or insurance representative. Please read the prospectus carefully before you invest. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved. Columbia Management Investment Distributors, Inc., 290 Congress Street, Boston, MA 02210
© 2022 Columbia Management Investment
Advisers, LLC.
C-3035 AW (2/22)
CTIVP® –
T. Rowe Price Large Cap Value Fund
Please remember that you may not
buy (nor will you own) shares of the Fund directly. The Fund is available through variable annuity contracts and variable life insurance policies offered by the separate accounts of participating insurance companies
as well as qualified pension and retirement plans. Please contact your financial advisor or insurance representative for more information.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
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| 25 | |
| 26 |
Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which CTIVP® – T. Rowe Price Large Cap Value Fund (the Fund) holds investments consistent with the procedures as stated in the Statement of Additional Information
(SAI). You may obtain a copy of the SAI without charge by calling 800.345.6611; contacting your financial intermediary or searching the website of the Securities and Exchange Commission (SEC) at sec.gov. Information
regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge by visiting
columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. The Fund’s Form N-PORT is available on the SEC’s website at sec.gov. The Fund’s complete
schedule of portfolio holdings, as filed on Form N-PORT, can also be obtained without charge, upon request, by calling 800.345.6611.
Additional Fund information
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
290 Congress Street
Boston, MA 02210
Fund distributor
Columbia Management Investment Distributors,
Inc.
290 Congress Street
Boston, MA 02210
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
CTIVP® – T. Rowe Price Large Cap Value
Fund | Annual Report 2021
Fund at a Glance
Investment objective
The Fund
seeks to provide shareholders with long-term growth of capital and income.
Portfolio management
T. Rowe Price Associates, Inc.
Heather McPherson*
Mark Finn, CFA, CPA
John Linehan, CFA
Gabriel Solomon**
* Effective April 1, 2022, Ms. McPherson will no longer serve as Co-Portfolio Manager of the Fund.
**Effective October 1, 2021, Mr. Solomon was added as Co-Portfolio Manager of the Fund.
| CTIVP® – T. Rowe Price Large Cap Value Fund | Annual Report 2021 | 3 |
Fund at a Glance (continued)
Performance of a hypothetical $10,000 investment (December 31, 2011 — December 31, 2021)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class 2 shares of CTIVP® – T. Rowe Price Large Cap Value Fund during the stated time period, and does not reflect the deduction of taxes, if any, that a
shareholder may pay on Fund distributions or on the redemption of Fund shares. The returns also do not reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy or
qualified pension or retirement plan, if any.
| 4 | CTIVP® – T. Rowe Price Large Cap Value Fund | Annual Report 2021 |
Manager Discussion of Fund Performance
At December 31, 2021, approximately
98.01% of the Fund’s shares were owned in the aggregate by affiliated funds-of-funds managed by Columbia Management Investment Advisers, LLC (the Investment Manager). As a result of asset allocation decisions by
the Investment Manager, it is possible that the Fund may experience relatively large purchases or redemptions from affiliated funds-of-funds. The Investment Manager seeks to minimize the impact of these transactions
by structuring them over a reasonable period of time. The Fund may experience increased expenses as it buys and sells securities as a result of purchases or redemptions by affiliated funds-of-funds.
For the 12-month period that ended
December 31, 2021, the Fund’s Class 2 shares returned 24.93%. The Fund performed in line with its benchmark, the Russell 1000 Value Index, which returned 25.16% over the same period.
Market overview
U.S. equities recorded solid
gains in the first quarter of 2021. The market rotation that began late in 2020 continued, with mid- and small-cap stocks outperforming large-cap stocks, while value stocks easily outpaced growth stocks. The passage
of the $1.9 trillion American Rescue Plan Act fueled economic growth hopes but also worries about potential inflation, driving a sharp rise in bond yields that periodically weighed on sentiment. The accelerated
COVID-19 vaccine rollout seemed to provide a further boost to confidence, and as the third wave of the pandemic abated, many states began to reopen. As they did, hiring resumed, particularly in the hospitality and
leisure industry. Monthly payrolls registered gains, and weekly unemployment claims hit pandemic-era lows. Manufacturing and housing signals remained strong, although severe winter weather and the near collapse of the
Texas power grid in February slowed growth temporarily. It was reported that gross domestic product (GDP) had expanded at an annualized rate of 6.4% in the first quarter. However, inflation pressures also grew during
these months. In the second quarter, stocks recorded strong gains, as large-cap stocks and growth stocks reasserted their market leadership. The second quarter was also notable for considerable volatility in so-called
“meme” or chat-room stocks. (The meme stock phenomenon is where a stock gains a cult-like following online and through social media platforms.) Investor sentiment was boosted by a robust economic recovery,
driven by both fiscal stimulus and an accelerated COVID-19 vaccine rollout.
A sharp pullback from record highs
in September 2021 left the major U.S. equity indices mixed for the third calendar quarter. Growth stocks outperformed value stocks, except within the small-cap segment of the U.S. equity market, while large-cap stocks
outperformed smaller cap stocks. Both stock and bond prices fell in September after U.S. Federal Reserve (Fed) officials announced they would soon consider tapering the central bank’s purchases of U.S.
Treasuries and mortgage-backed securities in an effort to reduce some downward pressure on longer term interest rates. Inflation spiked to multi-year highs, as persistent supply chain problems, including soaring
shipping costs, raised prices for both inputs and finished goods. The release of pent-up demand for travel, recreation and other services also pushed prices higher, although the new wave of COVID-19 cases that began
early in June appeared to cool both growth and inflation pressures, even as cases began to decline again in mid-September. In the fourth quarter of 2021, stocks recorded solid gains after overcoming a late-November
sell-off in reaction to the global spread of the new COVID-19 Omicron variant. Growth stocks outpaced value stocks within the large-cap segment of the U.S. equity market, but value stocks generally performed better
within the mid- and small-cap segments. As the quarter came to an end, investors seemed reassured the Omicron variant appeared to cause milder illness. In addition, the approval of two new pill-based treatments for
those seriously ill with COVID-19 appeared to calm fears. However, the prospect of higher interest rates as the Fed took its first tightening steps periodically weighed on sentiment. Consumer prices rose 6.8% in the
12 months ended November 2021, the biggest increase since 1982. Nevertheless, investor sentiment, alongside corporate profits, seemed to remain resilient in the face of higher input and wage costs.
For the annual period overall, the
benchmark finished higher, with the energy sector in the lead, as energy demand rebounded amid a global economic recovery from the COVID-19 pandemic. Conversely, the communication services sector fared the worst, as
the market seemed uncertain that pandemic-powered growth trends within the sector would be sustainable.
The Fund’s notable
detractors during the period
| • | Stock selection in the health care, industrials and consumer discretionary sectors detracted from the Fund’s relative results during the annual period. |
| CTIVP® – T. Rowe Price Large Cap Value Fund | Annual Report 2021 | 5 |
Manager Discussion of Fund Performance (continued)
| • | Among the holdings that detracted most from the Fund’s relative results during the annual period was Google parent company Alphabet, Inc. because the Fund was underweight its strongly performing stock. Its shares benefited during the annual period, as advertising spending proved resilient and as the company showed significant revenue growth within its core search franchise, advertising business and cloud segment. It also reported strong margins. Later in the annual period, the company reported accelerated search advertising revenue growth, propelled by Alphabet’s retail vertical structure. |
| • | Las Vegas Sands Corp., an integrated casino and resorts owner and operator, was a notable detractor, recording negative returns amid continued uncertainty around a recovery timeline for its Singapore and Macau gaming businesses and more restrictive casino concession renewal terms in Macau. |
| • | Shares of Citrix Systems, Inc., a multinational cloud computing and virtualization technology company, fell during the annual period, as the company reported financials that missed revenue expectations and included lower than expected guidance as well. We remained cognizant of the potential headwinds that Citrix Systems may experience as it transitions to a subscription-based business. However, we remained encouraged by what we saw as the company’s competitive positioning and believed the market underappreciated the impact the transition may have. |
The Fund’s notable
contributors during the period
| • | During the annual period, the Fund performed in line with the benchmark, with stock selection overall contributing positively. |
| • | More specifically, stock selection in the financials, information technology and communication services sectors contributed positively. Having an underweighted allocation to communication services, which underperformed the benchmark during the annual period, also helped. |
| • | From an individual security perspective, among the Fund’s greatest positive contributors to relative results during the annual period was Applied Materials, Inc., which provides manufacturing equipment, services and software to the semiconductor, display and related industries. Applied Materials’ shares were lifted by strong underlying demand trends in its memory and foundry segment. Also, the company reported robust earnings and benefited from cyclical strength during the annual period. |
| • | A position in multinational financial services company Wells Fargo & Co. added significant value, recording strong positive returns on consumer credit resilience and the Fed greenlighting banks to resume returning capital to shareholders. The company also benefited from strong loan growth figures, despite its shares being impacted by headlines about a civil penalty assessment related to deficiencies in its lending loss mitigation program. |
| • | Software giant Microsoft Corp. contributed positively, performing well as the company continued to deliver impressive results, including strong revenue growth within its cloud computing and productivity and business processes segments. Midway through the annual period, its shares also benefited from accelerated corporate spending on enterprise technology services. |
The views expressed in this report
reflect the current views of the respective parties who have contributed to this report. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult
to predict, so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective parties
disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Columbia fund are based on numerous factors, may not be relied on as an
indication of trading intent on behalf of any particular Columbia fund. References to specific securities should not be construed as a recommendation or investment advice.
| 6 | CTIVP® – T. Rowe Price Large Cap Value Fund | Annual Report 2021 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur ongoing
costs, which generally include management fees, distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to help you compare these costs with the ongoing costs of investing in other mutual funds.
The information below does not
reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy (collectively, Contracts) or qualified pension and retirement plan (Qualified Plan), if any. The total fees
and expenses you bear may therefore be higher than those shown below.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount invested, to estimate the
expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as redemption or exchange fees, or expenses that apply to the subaccount or the Contract. Therefore, the
hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If the fees and expenses imposed under your Contract or
Qualified Plan, if any, were included, your costs would be higher.
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 365.
Expenses do not include fees and
expenses incurred indirectly by the Fund from its investment in underlying funds, including affiliated and non-affiliated pooled investment vehicles, such as mutual funds and exchange-traded funds.
| CTIVP® – T. Rowe Price Large Cap Value Fund | Annual Report 2021 | 7 |
Portfolio of Investments
December 31, 2021
December 31, 2021
(Percentages represent value of
investments compared to net assets)
Investments in securities
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 8 | CTIVP® – T. Rowe Price Large Cap Value Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| CTIVP® – T. Rowe Price Large Cap Value Fund | Annual Report 2021 | 9 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Notes to Portfolio of
Investments
| (a) | Non-income producing investment. |
| (b) | The rate shown is the seven-day current annualized yield at December 31, 2021. |
| (c) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended December 31, 2021 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Realized gain (loss)($) | Dividends($) | End of period shares |
| Columbia Short-Term Cash Fund, 0.085% | ||||||||
| 13,826,618 | 688,314,720 | (666,366,401) | (2,290) | 35,772,647 | (925) | 22,285 | 35,779,803 | |
Abbreviation Legend
| ADR | American Depositary Receipt |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 10 | CTIVP® – T. Rowe Price Large Cap Value Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
Foreign equity securities actively
traded in markets where there is a significant delay in the local close relative to the New York Stock Exchange are classified as Level 2. The values of these securities may include an adjustment to reflect the impact
of market movements following the close of local trading, as described in Note 2 to the financial statements – Security valuation.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at December 31, 2021:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Investments in Securities | ||||
| Common Stocks | ||||
| Communication Services | 105,335,851 | — | — | 105,335,851 |
| Consumer Discretionary | 78,250,064 | — | — | 78,250,064 |
| Consumer Staples | 162,041,434 | — | — | 162,041,434 |
| Energy | 125,755,231 | — | — | 125,755,231 |
| Financials | 510,437,695 | — | — | 510,437,695 |
| Health Care | 372,683,463 | — | — | 372,683,463 |
| Industrials | 244,341,993 | 21,864,577 | — | 266,206,570 |
| Information Technology | 273,656,747 | — | — | 273,656,747 |
| Materials | 97,577,653 | — | — | 97,577,653 |
| Real Estate | 85,536,120 | — | — | 85,536,120 |
| Utilities | 156,107,972 | — | — | 156,107,972 |
| Total Common Stocks | 2,211,724,223 | 21,864,577 | — | 2,233,588,800 |
| Convertible Preferred Stocks | ||||
| Health Care | — | 5,169,725 | — | 5,169,725 |
| Utilities | — | 8,358,030 | — | 8,358,030 |
| Total Convertible Preferred Stocks | — | 13,527,755 | — | 13,527,755 |
| Money Market Funds | 35,772,647 | — | — | 35,772,647 |
| Total Investments in Securities | 2,247,496,870 | 35,392,332 | — | 2,282,889,202 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| CTIVP® – T. Rowe Price Large Cap Value Fund | Annual Report 2021 | 11 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Fair value measurements (continued)
See the Portfolio of Investments for all investment classifications not indicated in the table.
See the Portfolio of Investments for all investment classifications not indicated in the table.
The Fund’s assets assigned to
the Level 2 input category are generally valued using the market approach, in which a security’s value is determined through reference to prices and information from market transactions for similar or identical
assets. These assets include certain foreign securities for which a third party statistical pricing service may be employed for purposes of fair market valuation. The model utilized by such third party statistical
pricing service takes into account a security’s correlation to available market data including, but not limited to, intraday index, ADR, and exchange-traded fund movements.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 12 | CTIVP® – T. Rowe Price Large Cap Value Fund | Annual Report 2021 |
Statement of Assets and Liabilities
December 31, 2021
December 31, 2021
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $1,749,236,538) | $2,247,116,555 |
| Affiliated issuers (cost $35,774,937) | 35,772,647 |
| Receivable for: | |
| Investments sold | 1,786,869 |
| Capital shares sold | 535 |
| Dividends | 3,461,537 |
| Foreign tax reclaims | 214,636 |
| Prepaid expenses | 17,741 |
| Total assets | 2,288,370,520 |
| Liabilities | |
| Payable for: | |
| Investments purchased | 1,090,319 |
| Capital shares purchased | 3,630,923 |
| Management services fees | 41,567 |
| Distribution and/or service fees | 290 |
| Service fees | 2,054 |
| Compensation of board members | 158,503 |
| Compensation of chief compliance officer | 418 |
| Other expenses | 26,341 |
| Total liabilities | 4,950,415 |
| Net assets applicable to outstanding capital stock | $2,283,420,105 |
| Represented by | |
| Trust capital | $2,283,420,105 |
| Total - representing net assets applicable to outstanding capital stock | $2,283,420,105 |
| Class 1 | |
| Net assets | $2,241,102,400 |
| Shares outstanding | 66,521,472 |
| Net asset value per share | $33.69 |
| Class 2 | |
| Net assets | $42,317,705 |
| Shares outstanding | 1,293,191 |
| Net asset value per share | $32.72 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| CTIVP® – T. Rowe Price Large Cap Value Fund | Annual Report 2021 | 13 |
Statement of Operations
Year Ended December 31, 2021
Year Ended December 31, 2021
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $46,674,746 |
| Dividends — affiliated issuers | 22,285 |
| Foreign taxes withheld | (1,145,702) |
| Total income | 45,551,329 |
| Expenses: | |
| Management services fees | 14,600,753 |
| Distribution and/or service fees | |
| Class 2 | 92,764 |
| Service fees | 23,038 |
| Compensation of board members | 68,154 |
| Custodian fees | 16,471 |
| Printing and postage fees | 14,414 |
| Audit fees | 29,500 |
| Legal fees | 30,341 |
| Compensation of chief compliance officer | 419 |
| Other | 65,241 |
| Total expenses | 14,941,095 |
| Net investment income | 30,610,234 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 201,738,948 |
| Investments — affiliated issuers | (925) |
| Foreign currency translations | 9,955 |
| Net realized gain | 201,747,978 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | 260,056,366 |
| Investments — affiliated issuers | (2,290) |
| Foreign currency translations | 143 |
| Net change in unrealized appreciation (depreciation) | 260,054,219 |
| Net realized and unrealized gain | 461,802,197 |
| Net increase in net assets resulting from operations | $492,412,431 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 14 | CTIVP® – T. Rowe Price Large Cap Value Fund | Annual Report 2021 |
Statement of Changes in Net Assets
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | |
| Operations | ||
| Net investment income | $30,610,234 | $31,846,426 |
| Net realized gain | 201,747,978 | 44,286,678 |
| Net change in unrealized appreciation (depreciation) | 260,054,219 | (63,349,592) |
| Net increase in net assets resulting from operations | 492,412,431 | 12,783,512 |
| Increase (decrease) in net assets from capital stock activity | 152,636,535 | (389,650,264) |
| Total increase (decrease) in net assets | 645,048,966 | (376,866,752) |
| Net assets at beginning of year | 1,638,371,139 | 2,015,237,891 |
| Net assets at end of year | $2,283,420,105 | $1,638,371,139 |
| Year Ended | Year Ended | |||
| December 31, 2021 | December 31, 2020 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class 1 | ||||
| Subscriptions | 20,279,983 | 566,807,255 | 12,676,758 | 301,147,662 |
| Redemptions | (13,563,239) | (418,510,276) | (28,780,853) | (692,566,430) |
| Net increase (decrease) | 6,716,744 | 148,296,979 | (16,104,095) | (391,418,768) |
| Class 2 | ||||
| Subscriptions | 254,177 | 7,705,657 | 230,354 | 5,173,842 |
| Redemptions | (112,525) | (3,366,101) | (152,578) | (3,405,338) |
| Net increase | 141,652 | 4,339,556 | 77,776 | 1,768,504 |
| Total net increase (decrease) | 6,858,396 | 152,636,535 | (16,026,319) | (389,650,264) |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| CTIVP® – T. Rowe Price Large Cap Value Fund | Annual Report 2021 | 15 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect any fees and expenses imposed under your
Contract and/or Qualified Plan, as applicable; such fees and expenses would reduce the total returns for all periods shown. Total return and portfolio turnover are not annualized for periods of less than one year. The
portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain derivatives, if any. If such transactions were included, the Fund’s portfolio
turnover rate may be higher.
| Net asset value, beginning of period | Net investment income | Net realized and unrealized gain (loss) | Total from investment operations | |
| Class 1 | ||||
| Year Ended 12/31/2021 | $26.89 | 0.44 | 6.36 | 6.80 |
| Year Ended 12/31/2020 | $26.19 | 0.50 | 0.20(c) | 0.70 |
| Year Ended 12/31/2019 | $20.69 | 0.52 | 4.98 | 5.50 |
| Year Ended 12/31/2018 | $22.81 | 0.44 | (2.56) | (2.12) |
| Year Ended 12/31/2017 | $19.62 | 0.37 | 2.82 | 3.19 |
| Class 2 | ||||
| Year Ended 12/31/2021 | $26.19 | 0.35 | 6.18 | 6.53 |
| Year Ended 12/31/2020 | $25.56 | 0.44 | 0.19(c) | 0.63 |
| Year Ended 12/31/2019 | $20.25 | 0.45 | 4.86 | 5.31 |
| Year Ended 12/31/2018 | $22.38 | 0.38 | (2.51) | (2.13) |
| Year Ended 12/31/2017 | $19.30 | 0.31 | 2.77 | 3.08 |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Calculation of the net gain (loss) per share (both realized and unrealized) does not correlate to the aggregate realized and unrealized gain (loss) presented in the Statement of Operations due to the timing of subscriptions and redemptions of Fund shares in relation to fluctuations in the market value of the portfolio. |
| (d) | Ratios include interfund lending expense which is less than 0.01%. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 16 | CTIVP® – T. Rowe Price Large Cap Value Fund | Annual Report 2021 |
Financial Highlights (continued)
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets(a) | Total net expense ratio to average net assets(a),(b) | Net investment income ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Class 1 | |||||||
| Year Ended 12/31/2021 | $33.69 | 25.29% | 0.68% | 0.68% | 1.40% | 32% | $2,241,102 |
| Year Ended 12/31/2020 | $26.89 | 2.67% | 0.70%(d) | 0.70%(d) | 2.20% | 37% | $1,608,218 |
| Year Ended 12/31/2019 | $26.19 | 26.58% | 0.69% | 0.69% | 2.17% | 28% | $1,987,789 |
| Year Ended 12/31/2018 | $20.69 | (9.30%) | 0.67% | 0.67% | 1.91% | 20% | $1,939,941 |
| Year Ended 12/31/2017 | $22.81 | 16.26% | 0.70% | 0.70% | 1.75% | 32% | $2,481,560 |
| Class 2 | |||||||
| Year Ended 12/31/2021 | $32.72 | 24.93% | 0.93% | 0.93% | 1.14% | 32% | $42,318 |
| Year Ended 12/31/2020 | $26.19 | 2.47% | 0.96%(d) | 0.96%(d) | 1.96% | 37% | $30,153 |
| Year Ended 12/31/2019 | $25.56 | 26.22% | 0.94% | 0.94% | 1.94% | 28% | $27,449 |
| Year Ended 12/31/2018 | $20.25 | (9.52%) | 0.92% | 0.92% | 1.70% | 20% | $20,084 |
| Year Ended 12/31/2017 | $22.38 | 15.96% | 0.94% | 0.94% | 1.52% | 32% | $17,050 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| CTIVP® – T. Rowe Price Large Cap Value Fund | Annual Report 2021 | 17 |
Notes to Financial Statements
December 31, 2021
December 31, 2021
Note 1. Organization
CTIVP® – T. Rowe Price
Large Cap Value Fund (the Fund), a series of Columbia Funds Variable Series Trust II (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as
an open-end management investment company organized as a Massachusetts business trust.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers Class 1 and Class 2 shares to separate accounts funding variable annuity contracts and variable life insurance policies (collectively, Contracts) issued by
affiliated and unaffiliated life insurance companies (Participating Insurance Companies) as well as qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors (Qualified
Investors) authorized by Columbia Management Investment Distributors, Inc. (the Distributor). You may not buy (nor will you own) shares of the Fund directly. You may invest by participating in a Qualified Plan or by
buying a Contract and making allocations to the Fund. Although all share classes generally have identical voting, dividend and liquidation rights, each share class votes separately when required by the Trust’s
organizational documents or by law. Different share classes pay different net investment income distribution amounts to the extent the expenses of such share classes differ, and distributions in liquidation will be
proportional to the net asset value of each share class. Each share class has its own cost structure and other features.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Equity securities listed on an
exchange are valued at the closing price or last trade price on their primary exchange at the close of business of the New York Stock Exchange. Securities with a closing price not readily available or not listed on
any exchange are valued at the mean between the closing bid and ask prices. Listed preferred stocks convertible into common stocks are valued using an evaluated price from a pricing service.
Foreign equity securities are
valued based on the closing price or last trade price on their primary exchange at the close of business of the New York Stock Exchange. If any foreign equity security closing prices are not readily available,
the securities are valued at the mean of the latest quoted bid and ask prices on such exchanges or markets. Foreign currency exchange rates are determined at the scheduled closing time of the New York Stock Exchange.
Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange; therefore, the closing prices for securities in such markets or on such exchanges may not fully reflect
events that occur after such close but before the close of the New York Stock Exchange. In those situations, foreign securities will be fair valued pursuant to a policy adopted by the Board of Trustees. Under the
policy, the Fund may utilize a third-party pricing service to determine these fair values. The third-party pricing service takes into account multiple factors, including, but not limited to, movements in the U.S.
securities markets, certain depositary receipts, futures contracts and foreign exchange rates that have occurred subsequent to the close of the foreign exchange or market, to determine a good faith estimate that
reasonably reflects the current market conditions as of the close of the New York Stock Exchange. The fair value of a security is likely to be different from the quoted or published price, if available.
Investments in open-end investment
companies (other than exchange-traded funds (ETFs)), are valued at the latest net asset value reported by those companies as of the valuation time.
| 18 | CTIVP® – T. Rowe Price Large Cap Value Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Foreign currency transactions and
translations
The values of all assets and
liabilities denominated in foreign currencies are generally translated into U.S. dollars at exchange rates determined at the close of regular trading on the New York Stock Exchange. Net realized and unrealized gains
(losses) on foreign currency transactions and translations include gains (losses) arising from the fluctuation in exchange rates between trade and settlement dates on securities transactions, gains (losses) arising
from the disposition of foreign currency and currency gains (losses) between the accrual and payment dates on dividends, interest income and foreign withholding taxes.
For financial statement purposes,
the Fund does not distinguish that portion of gains (losses) on investments which is due to changes in foreign exchange rates from that which is due to changes in market prices of the investments. Such fluctuations
are included with the net realized and unrealized gains (losses) on investments in the Statement of Operations.
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
Income recognition
Corporate actions and dividend
income are generally recorded net of any non-reclaimable tax withholdings, on the ex-dividend date or upon receipt of an ex-dividend notification in the case of certain foreign securities.
The Fund may receive distributions
from holdings in equity securities, business development companies (BDCs), exchange-traded funds (ETFs), limited partnerships (LPs), other regulated investment companies (RICs), and real estate investment trusts
(REITs), which report information as to the tax character of their distributions annually. These distributions are allocated to dividend income, capital gain and return of capital based on actual information reported.
Return of capital is recorded as a reduction of the cost basis of securities held. If the Fund no longer owns the applicable securities, return of capital is recorded as a realized gain. With respect to REITs, to the
extent actual information has not yet been reported, estimates for return of capital are made by Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise
Financial, Inc. (Ameriprise Financial). The Investment Manager’s estimates are subsequently adjusted when the actual character of the distributions is disclosed by the REITs, which could result in a
proportionate change in return of capital to shareholders.
Awards from class action litigation
are recorded as a reduction of cost basis if the Fund still owns the applicable securities on the payment date. If the Fund no longer owns the applicable securities on the payment date, the proceeds are recorded as
realized gains.
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
| CTIVP® – T. Rowe Price Large Cap Value Fund | Annual Report 2021 | 19 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
Federal income tax status
The Fund is treated as a
partnership for federal income tax purposes, and the Fund does not expect to make regular distributions. The Fund will not be subject to federal income tax, and therefore, there is no provision for federal income
taxes. The partners of the Fund are subject to tax on their distributive share of the Fund’s income and loss. The components of the Fund’s net assets are reported at the partner-level for federal income
tax purposes, and therefore, are not presented in the Statement of Assets and Liabilities.
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Foreign taxes
The Fund may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries, as applicable, based upon its current interpretation of tax rules
and regulations that exist in the markets in which it invests.
Realized gains in certain countries
may be subject to foreign taxes at the Fund level, based on statutory rates. The Fund accrues for such foreign taxes on realized and unrealized gains at the appropriate rate for each jurisdiction, as applicable. The
amount, if any, is disclosed as a liability on the Statement of Assets and Liabilities.
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Under the Management Agreement, the
Investment Manager provides the Fund with investment research and advice, as well as administrative and accounting services. The Investment Manager is responsible for the ultimate oversight of investments made by the
Fund. The Fund’s subadviser (see Subadvisory agreement below) has the primary responsibility for the day-to-day portfolio management of the Fund. The management services fee is an annual fee that is equal to a
percentage of the Fund’s daily net assets that declines from 0.71% to 0.53% as the Fund’s net assets increase. The effective management services fee rate for the year ended December 31, 2021 was 0.67% of
the Fund’s average daily net assets.
Subadvisory agreement
The Investment Manager has entered
into a Subadvisory Agreement with T. Rowe Price Associates, Inc. to serve as the subadviser to the Fund. The Investment Manager compensates the subadviser to manage the investment of the Fund’s assets.
| 20 | CTIVP® – T. Rowe Price Large Cap Value Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. Under a Deferred Compensation Plan (the
Deferred Plan), these members of the Board of Trustees may elect to defer payment of up to 100% of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of
certain funds managed by the Investment Manager. The Fund’s liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Deferred Plan. All
amounts payable under the Deferred Plan constitute a general unsecured obligation of the Fund. The expense for the Deferred Plan, which includes Trustees’ fees deferred during the current period as well as any
gains or losses on the Trustees’ deferred compensation balances as a result of market fluctuations, is included in "Compensation of board members" on the Statement of Operations.
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
Service fees
The Fund has entered into a
Shareholder Services Agreement with Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial. Under this
agreement, the Fund pays a service fee equal to the payments made by the Transfer Agent to Participating Insurance Companies and other financial intermediaries (together, Participating Organizations) for services each
such Participating Organization provides to its clients, customers and participants that are invested directly or indirectly in the Fund, up to a cap approved by the Board of Trustees from time to time. The effective
service fee rate for the year ended December 31, 2021, was 0.00% of the Fund’s average daily net assets.
The Transfer Agent may retain as
compensation for its services revenues from fees for wire, telephone and redemption orders, account transcripts due the Transfer Agent from Fund shareholders and interest (net of bank charges) earned with respect to
balances in accounts the Transfer Agent maintains in connection with its services to the Fund.
Distribution and/or service fees
The Fund has an agreement with the
Distributor, an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution services. Under a Plan and Agreement of Distribution, the Fund pays a fee at an annual rate
of up to 0.25% of the Fund’s average daily net assets attributable to Class 2 shares. The Fund pays no distribution and service fees for Class 1 shares.
Expenses waived/reimbursed by the
Investment Manager and its affiliates
The Investment Manager and certain
of its affiliates have contractually agreed to waive fees and/or reimburse expenses (excluding certain fees and expenses described below) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, so that the Fund’s net operating expenses, after giving effect to fees waived/expenses reimbursed and any balance credits and/or overdraft charges from the Fund’s
custodian, do not exceed the following annual rate(s) as a percentage of the classes’ average daily net assets:
| CTIVP® – T. Rowe Price Large Cap Value Fund | Annual Report 2021 | 21 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), expenses associated with investments in affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange-traded funds), transaction costs and
brokerage commissions, costs related to any securities lending program, dividend expenses associated with securities sold short, inverse floater program fees and expenses, transaction charges and interest on borrowed
money, interest, costs associated with certain shareholder meetings, infrequent and/or unusual expenses and any other expenses the exclusion of which is specifically approved by the Board of Trustees. This
agreement may be modified or amended only with approval from the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements
described above are not recoverable by the Investment Manager or its affiliates in future periods.
Note 4. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $849,485,652 and $688,038,753, respectively, for the year ended December 31, 2021. The amount of purchase and
sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 5. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes
referred to as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
Note 6. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund did not borrow or lend
money under the Interfund Program during the year ended December 31, 2021.
Note 7. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to an October 28, 2021 amendment and restatement, the credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment
Manager or an affiliated investment manager, severally and not jointly, permits collective borrowings up to $950 million. Interest is currently charged to each participating fund based on its borrowings at a rate
equal to the higher of (i) the federal funds effective rate, (ii) the secured overnight financing rate plus 0.11448% and (iii) the overnight bank funding rate, plus in each case, 1.00%. Each borrowing under the credit
facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The
commitment fee is included in other expenses in the Statement of Operations. This agreement expires annually in October unless extended or renewed. Prior to the October 28, 2021 amendment and restatement, the Fund had
access to a revolving
| 22 | CTIVP® – T. Rowe Price Large Cap Value Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
credit facility with a syndicate of banks led by
JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. which permitted collective borrowings up to $950 million. Interest was charged to each participating fund based on its borrowings at a rate equal to
the higher of (i) the federal funds effective rate, (ii) the one-month London Interbank Offered Rate (LIBOR) rate and (iii) the overnight bank funding rate, plus in each case, 1.25%.
The Fund had no borrowings during
the year ended December 31, 2021.
Note 8. Significant
risks
Financial sector risk
The Fund is more susceptible to the
particular risks that may affect companies in the financial services sector than if it were invested in a wider variety of companies in unrelated sectors. Companies in the financial services sector are subject to
certain risks, including the risk of regulatory change, decreased liquidity in credit markets and unstable interest rates. Such companies may have concentrated portfolios, such as a high level of loans to one or more
industries or sectors, which makes them vulnerable to economic conditions that affect such industries or sectors. Performance of such companies may be affected by competitive pressures and exposure to investments,
agreements and counterparties, including credit products that, under certain circumstances, may lead to losses (e.g., subprime loans). Companies in the financial services sector are subject to extensive governmental
regulation that may limit the amount and types of loans and other financial commitments they can make, and interest rates and fees that they may charge. In addition, profitability of such companies is largely
dependent upon the availability and the cost of capital.
Market risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
The coronavirus disease 2019 and
its variants (COVID-19) pandemic has resulted in, and may continue to result in, significant global economic and societal disruption and market volatility due to disruptions in market access, resource availability,
facilities operations, imposition of tariffs, export controls and supply chain disruption, among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement
and loss in human and other resources. The uncertainty surrounding the magnitude, duration, reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental
authorities or other third parties, present unknowns that are yet to unfold. The impacts, as well as the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and
pandemics that may arise in the future – could negatively affect global economies and markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in
emerging market countries may be greater due to generally less established healthcare systems, governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing
political, social and economic risks in certain countries or globally. The disruptions caused by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively
impact the Fund’s ability to achieve its investment objectives. Any such event(s) could have a significant adverse impact on the value and risk profile of the Fund.
| CTIVP® – T. Rowe Price Large Cap Value Fund | Annual Report 2021 | 23 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Shareholder concentration risk
At December 31, 2021, affiliated
shareholders of record owned 100.0% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of
less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Note 9. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
Note 10. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in
connection with the conduct of their business activities. Ameriprise Financial believes that the Fund is not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject
of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with
the Fund. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (SEC) on legal and regulatory matters that relate to
Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that
these matters, or the adverse publicity associated with them, will not result in increased Fund redemptions, reduced sale of Fund shares or other adverse consequences to the Fund. Further, although we believe
proceedings are not likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines,
penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial or one or more of its affiliates that provides services to
the Fund.
| 24 | CTIVP® – T. Rowe Price Large Cap Value Fund | Annual Report 2021 |
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees of Columbia
Funds Variable Series Trust II and Shareholders of CTIVP® – T. Rowe Price Large Cap Value Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of CTIVP® – T. Rowe Price Large Cap Value Fund (one of the funds constituting Columbia Funds Variable Series Trust II, referred
to hereafter as the "Fund") as of December 31, 2021, the related statement of operations for the year ended December 31, 2021, the statement of changes in net assets for each of the two years in the period ended
December 31, 2021, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2021 (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, 2021, 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, 2021 and the financial highlights for each of the five years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in
the United States of America.
Basis for Opinion
These financial statements are the
responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these
financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2021 by correspondence with the custodian, transfer agent and brokers. We believe that
our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Minneapolis, Minnesota
February 18, 2022
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| CTIVP® – T. Rowe Price Large Cap Value Fund | Annual Report 2021 | 25 |
TRUSTEES AND
OFFICERS
The Board oversees the
Fund’s operations and appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following table provides basic biographical information about the
Fund’s Trustees as of the printing of this report, including their principal occupations during the past five years, although specific titles for individuals may have varied over the period. The year set forth
beneath Length of Service in the table below is the year in which the Trustee was first appointed or elected as Trustee to any Fund currently in the Columbia Funds Complex or a predecessor thereof. Under current Board
policy, each Trustee generally serves until December 31 of the year such Trustee turns seventy-five (75).
Independent trustees
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| George S. Batejan c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1953 | Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 176 | Former Chairman of the Board, NICSA (National Investment Company Services Association) (Executive Committee, Nominating Committee and Governance Committee), 2014-2016; former Director, Intech Investment Management, 2011-2016; former Board Member, Metro Denver Chamber of Commerce, 2015-2016; former Advisory Board Member, University of Colorado Business School, 2015-2018 |
| Kathleen Blatz c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2006 | Attorney, specializing in arbitration and mediation; Chief Justice, Minnesota Supreme Court, 1998-2006; Associate Justice, Minnesota Supreme Court, 1996-1998; Fourth Judicial District Court Judge, Hennepin County, 1994-1996; Attorney in private practice and public service, 1984-1993; State Representative, Minnesota House of Representatives, 1979-1993, which included service on the Tax and Financial Institutions and Insurance Committees; Member and Interim Chair, Minnesota Sports Facilities Authority, January 2017-July 2017; Interim President and Chief Executive Officer, Blue Cross Blue Shield of Minnesota (health care insurance), February-July 2018, April-October 2021 | 176 | Former Trustee, Blue Cross Blue Shield of Minnesota, 2009-2021 (Chair of the Business Development Committee, 2014-2017; Chair of the Governance Committee, 2017-2019); former Member and Chair of the Board, Minnesota Sports Facilities Authority, January 2017-July 2017; former Director, Robina Foundation, 2009-2020 (Chair, 2014-2020); Director, Schulze Family Foundation, since 2021 |
| Pamela G. Carlton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2007 | President, Springboard — Partners in Cross Cultural Leadership (consulting company) since 2003; Managing Director of US Equity Research, JP Morgan Chase, 1999-2003; Director of US Equity Research, Chase Asset Management, 1996-1999; Co-Director Latin America Research, 1993-1996, COO Global Research, 1992-1996, Co-Director of US Research, 1991-1992, Investment Banker, Morgan Stanley, 1982-1991, Morgan Stanley; Attorney, Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 176 | Trustee, New York Presbyterian Hospital Board (Executive Committee and Chair of People Committee) since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee); Director, Apollo Commercial Real Estate Finance, Inc. since 2021; the Governing Council of the Independent Directors Council (IDC), since 2021 |
| 26 | CTIVP® – T. Rowe Price Large Cap Value Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Janet Langford Carrig c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1957 | Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 174 | Director, EQT Corporation (natural gas producer) since 2019; Director, Whiting Petroleum Corporation (independent oil and gas company) since 2020 |
| J. Kevin Connaughton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2020 | Member, FINRA National Adjudicatory Council since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Consultant to Independent Trustees of CFVIT and CFST I from March 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Managing Director and General Manager of Mutual Fund Products, Columbia Management Investment Advisers, LLC, May 2010-February 2015; President, Columbia Funds, 2008-2015; and senior officer of Columbia Funds and affiliated funds, 2003-2015 | 174 | Former Director, The Autism Project, March 2015-December 2021; former Member of the Investment Committee, St. Michael’s College, November 2015-February 2020; former Trustee, St. Michael’s College, June 2017-September 2019; former Trustee, New Century Portfolios, January 2015-December 2017 |
| Olive M. Darragh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since 2020 | Managing Director of Darragh Inc. (strategy and talent management consulting firm) since 2010; Founder and CEO, Zolio, Inc. (investment management talent identification platform) since 2004; Consultant to Independent Trustees of CFVIT and CFST I from June 2019 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 2001-2004 | 174 | Former Director, University of Edinburgh Business School (Member of US Board); former Director, Boston Public Library Foundation |
| Patricia M. Flynn c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1950 | Trustee since 2004 | Trustee Professor of Economics and Management, Bentley University since 1976 (also teaches and conducts research on corporate governance); Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 176 | Trustee, MA Taxpayers Foundation since 1997; Board of Governors, Innovation Institute, MA Technology Collaborative, 2010-2020; former Board of Directors, The MA Business Roundtable, 2003-2019 |
| Brian J. Gallagher c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 176 | Trustee, Catholic Schools Foundation since 2004 |
| CTIVP® – T. Rowe Price Large Cap Value Fund | Annual Report 2021 | 27 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Douglas A. Hacker c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1955 | Co-Chair since 2021; Chair of CFST I and CFVIT since 2014; Trustee of CFST I and CFVIT since 1996 and CFST, CFST II, CFVST II, CET I and CET II since 2021 | Independent business executive since May 2006; Executive Vice President – Strategy of United Airlines, December 2002 - May 2006; President of UAL Loyalty Services (airline marketing company), September 2001-December 2002; Executive Vice President and Chief Financial Officer of United Airlines, July 1999-September 2001 | 176 | Director, Spartan Nash Company (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing); former Director, Nash Finch Company (food distributor), 2005-2013; former Director, SeaCube Container Leasing Ltd. (container leasing), 2010-2013; and former Director, Travelport Worldwide Limited (travel information technology), 2014-2019 |
| Nancy T. Lukitsh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1956 | Trustee since 2011 | Senior Vice President, Partner and Director of Marketing, Wellington Management Company, LLP (investment adviser), 1997-2010; Chair, Wellington Management Portfolios (commingled non-U.S. investment pools), 2007 -2010; Director, Wellington Trust Company, NA and other Wellington affiliates, 1997-2010 | 174 | None |
| David M. Moffett c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2011 | Retired; Consultant to Bridgewater and Associates | 174 | Director, CSX Corporation (transportation suppliers); Director, Genworth Financial, Inc. (financial and insurance products and services); Director, PayPal Holdings Inc. (payment and data processing services); Trustee, University of Oklahoma Foundation; former Director, eBay Inc. (online trading community), 2007-2015; and former Director, CIT Bank, CIT Group Inc. (commercial and consumer finance), 2010-2016 |
| Catherine James Paglia c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Co-Chair since 2021; Chair of CFST, CFST II, CFVST II, CET I and CET II since 2020; Trustee of CFST, CFST II and CFVST II since 2004 and CFST I and CFVIT since 2021 | Director, Enterprise Asset Management, Inc. (private real estate and asset management company) since September 1998; Managing Director and Partner, Interlaken Capital, Inc., 1989-1997; Vice President, 1982-1985, Principal, 1985-1987, Managing Director, 1987-1989, Morgan Stanley; Vice President, Investment Banking, 1980-1982, Associate, Investment Banking, 1976-1980, Dean Witter Reynolds, Inc. | 176 | Director, Valmont Industries, Inc. (irrigation systems manufacturer) since 2012; Trustee, Carleton College (on the Investment Committee); Trustee, Carnegie Endowment for International Peace (on the Investment Committee) |
| 28 | CTIVP® – T. Rowe Price Large Cap Value Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Minor M. Shaw c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1947 | Trustee since 2003 | President, Micco LLC (private investments) since 2011; President, Micco Corp. (family investment business), 1998-2011 | 176 | Director, Blue Cross Blue Shield of South Carolina (Chair of Compensation Committee) since April 2008; Trustee, Hollingsworth Funds (on the Investment Committee) since 2016 (previously Board Chair from 2016-2019); Former Advisory Board member, Duke Energy Corp., 2016-2020; Chair of the Duke Endowment; Chair of Greenville – Spartanburg Airport Commission; former Trustee, BofA Funds Series Trust (11 funds), 2003-2011; former Director, Piedmont Natural Gas, 2004-2016; former Director, National Association of Corporate Directors, Carolinas Chapter, 2013-2018; Chair, Daniel-Mickel Foundation since 1998 |
| Natalie A. Trunow c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1967 | Trustee since 2020 | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services), January 2016-January 2021; Non-executive Member of the Investment Committee and Valuation Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services), August 2018-January 2021; Advisor, Paradigm Asset Management, November 2016-December 2021; Consultant to Independent Trustees of CFVIT and CFST I from September 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Director of Investments/Consultant, Casey Family Programs, April 2016-November 2016; Senior Vice President and Chief Investment Officer, Calvert Investments, August 2008-January 2016; Section Head and Portfolio Manager, General Motors Asset Management, June 1997-August 2008 | 174 | Former Director, Investment Committee, Health Services for Children with Special Needs, Inc., 2012-2019; Director, Chair of Audit Committee, Consumer Credit Counseling Services (formerly Guidewell Financial Solutions), since 2019; Independent Director, Investment Committee and Valuation Committee, Sarona Asset Management, since 2019 |
| Sandra Yeager c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2017 | Retired; President and founder, Hanoverian Capital, LLC (SEC registered investment advisor firm), 2008-2016; Managing Director, DuPont Capital, 2006-2008; Managing Director, Morgan Stanley Investment Management, 2004-2006; Senior Vice President, Alliance Bernstein, 1990-2004 | 176 | Former Director, NAPE Education Foundation, October 2016-October 2020 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Fund Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I (CET I), Columbia ETF Trust II (CET II), Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Beckman, Gallagher and Hacker and Mses. Blatz, Carlton, Flynn, Paglia, Shaw and Yeager serve as Directors of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
| CTIVP® – T. Rowe Price Large Cap Value Fund | Annual Report 2021 | 29 |
TRUSTEES AND OFFICERS (continued)
Interested trustee affiliated with Investment Manager*
Interested trustee affiliated with Investment Manager*
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during the past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex overseen | Other directorships held by Trustee during the past five years |
| Daniel J. Beckman c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since November 2021(a) | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC (since April 2015); officer of Columbia Funds and affiliated funds since 2020. | 176 | Director, Ameriprise Trust Company, since October 2016; Director, Columbia Management Investment Distributors, Inc. since November 2018; Board of Governors, Columbia Wanger Asset Management, LLC since January 2022 |
| * | Interested person (as defined under the 1940 Act) by reason of being an officer, director, security holder and/or employee of the Investment Manager or Ameriprise Financial. |
| (a) | Mr. Beckman serves as the President and Principal Executive Officer of the Columbia Funds (since 2021). |
The Statement of Additional
Information has additional information about the Fund’s Board members and is available, without charge, upon request by calling 800.345.6611 or contacting your financial intermediary.
The Board has appointed officers
who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. The following table provides basic information about the Officers of the
Fund, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Beckman, who is President and Principal Executive Officer, the
Fund’s other officers are:
Fund officers
| 30 | CTIVP® – T. Rowe Price Large Cap Value Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Fund officers (continued)
Fund officers (continued)
| CTIVP® – T. Rowe Price Large Cap Value Fund | Annual Report 2021 | 31 |
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For Fund and other investment product prospectuses, which contain this and other important information, contact your
financial advisor or insurance representative. Please read the prospectus carefully before you invest. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved. Columbia Management Investment Distributors, Inc., 290 Congress Street, Boston, MA 02210
© 2022 Columbia Management Investment
Advisers, LLC.
C-3005 AW (2/22)
CTIVP® –
CenterSquare Real Estate Fund
Please remember that you may not
buy (nor will you own) shares of the Fund directly. The Fund is available through variable annuity contracts and variable life insurance policies offered by the separate accounts of participating insurance companies
as well as qualified pension and retirement plans. Please contact your financial advisor or insurance representative for more information.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
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Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which CTIVP® – CenterSquare Real Estate Fund (the Fund) holds investments consistent with the procedures as stated in the Statement of Additional Information
(SAI). You may obtain a copy of the SAI without charge by calling 800.345.6611; contacting your financial intermediary or searching the website of the Securities and Exchange Commission (SEC) at sec.gov. Information
regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge by visiting
columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. The Fund’s Form N-PORT is available on the SEC’s website at sec.gov. The Fund’s complete
schedule of portfolio holdings, as filed on Form N-PORT, can also be obtained without charge, upon request, by calling 800.345.6611.
Additional Fund information
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
290 Congress Street
Boston, MA 02210
Fund distributor
Columbia Management Investment Distributors,
Inc.
290 Congress Street
Boston, MA 02210
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
CTIVP® – CenterSquare Real Estate
Fund | Annual Report 2021
Fund at a Glance
Investment objective
The Fund
seeks to provide shareholders with current income and capital appreciation.
| CTIVP® – CenterSquare Real Estate Fund | Annual Report 2021 | 3 |
Fund at a Glance (continued)
Performance of a hypothetical $10,000 investment (December 31, 2011 — December 31, 2021)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class 2 shares of CTIVP® - CenterSquare Real Estate Fund during the stated time period, and does not reflect the deduction of taxes, if any, that a shareholder
may pay on Fund distributions or on the redemption of Fund shares. The returns also do not reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy or qualified
pension or retirement plan, if any.
| 4 | CTIVP® – CenterSquare Real Estate Fund | Annual Report 2021 |
Manager Discussion of Fund Performance
At December 31, 2021,
approximately 86.04% of the Fund’s shares were owned in the aggregate by affiliated funds-of-funds managed by Columbia Management Investment Advisers, LLC (the Investment Manager). As a result of asset
allocation decisions by the Investment Manager, it is possible that the Fund may experience relatively large purchases or redemptions from affiliated funds-of-funds. The Investment Manager seeks to minimize the impact
of these transactions by structuring them over a reasonable period of time. The Fund may experience increased expenses as it buys and sells securities as a result of purchases or redemptions by affiliated
funds-of-funds.
For the 12-month period that ended
December 31, 2021, the Fund’s Class 2 shares returned 41.20%. While the Fund posted robust double-digit absolute gains, it underperformed its benchmark, the FTSE Nareit Equity REITs Index, which returned 43.24%
during the same period.
Market overview
The U.S. real estate investment
trust (REIT) market, as measured by the REITs Index, posted its highest absolute total return year ever in 2021 and outperformed the broad U.S. equities market in each quarter of the annual period ended December 31,
2021. The reopening of the economy early in the year, following the approval and distribution of multiple COVID-19 vaccines, led to a rapidly improving backdrop. Later in the year, as the Delta variant wave of the
pandemic ebbed and the early evidence from the Omicron variant began to suggest a far less virulent though far more contagious phase of COVID-19, investor focus returned to strong economic growth and recovery. The
correspondingly sharp rebound of commercial real estate operating trends, including rising occupancy and rental rates, proved highly beneficial for REIT stock prices during the annual period.
The Fund’s notable
detractors during the period
| • | Having an underweight to the strongly performing regional malls sub-sector detracted most from the Fund’s relative results during the annual period. |
| • | Both sub-sector positioning and stock selection in the specialty sub-sector also detracted the Fund’s relative results. Within the sub-sector, we favored casino REITs to capitalize on economic reopening, but these names lagged due both to COVID-19 and rising inflation impacting fundamental performance. Further, names classified in the specialty sub-sector in which the Fund held no position, such as those holding farmland real estate, rose significantly in the speculative wave of early 2021. |
| • | An out-of-benchmark exposure to towers dampened the Fund’s relative results. While we continued to like the long-term growth prospects for this sub-sector, the rise of inflation in the latter half of the year drove these REITs’ underperformance due to the length of their lease terms compared to other high-growth segments. |
| • | Americold Realty Trust, which focuses on the ownership and operation of temperature-controlled warehouses, was the biggest individual detractor from the Fund’s results during the annual period. It significantly lagged its peers due to operational challenges, including supply shortages, rising wages and labor shortages, which caused its fundamentals to deteriorate. A leadership change in the latter part of the year generated a degree of recovery, but Americold Realty Trust was the only industrial REIT to post a negative return in 2021. |
| • | Sabra Health Care REIT, along with other skilled nursing facility stocks, faced challenges, most notably the Delta and Omicron variants keeping COVID-19 in the news and causing pressures to occupancy. Further, rising labor costs and shortages affected its operating fundamentals, and a delay in Medicare reimbursement impacted revenues of facility operators broadly. |
| • | JBG Smith, an office developer primarily concentrated in the Washington, D.C. area, detracted from the Fund’s relative results, as the office sub-sector remained one of the most challenged during the annual period. The already-evolving nature of centralized office space was magnified by greater adoption of work-from-home trends during the pandemic, while sustained inflation threatened to impact its operating performance. |
The Fund’s notable
contributors during the period
| • | Both an underweight to and stock selection in the net lease sub-sector contributed most positively to the Fund’s relative results during the annual period. |
| CTIVP® – CenterSquare Real Estate Fund | Annual Report 2021 | 5 |
Manager Discussion of Fund Performance (continued)
| • | An overweight to and stock selection in the alternative housing sub-sector also added value. Residential REITs benefited from strong demand, rising rental rates and attractive valuations. |
| • | Effective stock selection in the self-storage sub-sector bolstered relative results as well. |
| • | Welltower, Inc., which invests in senior living and health care properties, primarily skilled nursing and assisted living facilities, was the biggest individual positive contributor to the Fund’s relative performance during the annual period. Welltower benefited from rising vaccination rates in the early part of 2021. After a strong first quarter, we trimmed the position, which proved prudent as the Delta variant of COVID-19 and labor issues caused virtually all residential health care names to lag in the late summer and autumn. |
| • | Diversified REIT VEREIT, Inc. was acquired during the annual period by peer Realty Income Corp. Its strong performance after the second quarter merger announcement boosted the valuation of its stock and added value through the Fund’s overweight position. |
| • | Self-storage REIT Life Storage, Inc. was a top contributor, producing stronger returns than its peers even as the sub-sector performed strongly. The Fund was overweight Life Storage due to what we saw as its best-in-sector regional distribution, technology and operating metrics. |
The views expressed in this report
reflect the current views of the respective parties who have contributed to this report. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult
to predict, so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective parties
disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Columbia fund are based on numerous factors, may not be relied on as an
indication of trading intent on behalf of any particular Columbia fund. References to specific securities should not be construed as a recommendation or investment advice.
| 6 | CTIVP® – CenterSquare Real Estate Fund | Annual Report 2021 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur ongoing
costs, which generally include management fees, distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to help you compare these costs with the ongoing costs of investing in other mutual funds.
The information below does not
reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy (collectively, Contracts) or qualified pension and retirement plan (Qualified Plan), if any. The total fees
and expenses you bear may therefore be higher than those shown below.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount invested, to estimate the
expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as redemption or exchange fees, or expenses that apply to the subaccount or the Contract. Therefore, the
hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If the fees and expenses imposed under your Contract or
Qualified Plan, if any, were included, your costs would be higher.
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 365.
Expenses do not include fees and
expenses incurred indirectly by the Fund from its investment in underlying funds, including affiliated and non-affiliated pooled investment vehicles, such as mutual funds and exchange-traded funds.
| CTIVP® – CenterSquare Real Estate Fund | Annual Report 2021 | 7 |
Portfolio of Investments
December 31, 2021
December 31, 2021
(Percentages represent value of
investments compared to net assets)
Investments in securities
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 8 | CTIVP® – CenterSquare Real Estate Fund | Annual Report 2021 |
| Common Stocks (continued) | ||
| Issuer | Shares | Value ($) |
| VICI Properties, Inc. | 136,230 | 4,101,885 |
| Total Specialized REITs | 68,289,850 | |
| Total Real Estate | 262,482,109 | |
| Total Common Stocks (Cost: $199,557,534) | 262,806,363 | |
| Money Market Funds 0.3% | ||
| Shares | Value ($) | |
| Columbia Short-Term Cash Fund, 0.085%(b),(c) | 839,827 | 839,660 |
| Total Money Market Funds (Cost: $839,660) | 839,660 | |
| Total Investments in Securities (Cost $200,397,194) | 263,646,023 | |
| Other Assets & Liabilities, Net | 615,915 | |
| Net Assets | $264,261,938 | |
Notes to Portfolio of
Investments
| (a) | Non-income producing investment. |
| (b) | The rate shown is the seven-day current annualized yield at December 31, 2021. |
| (c) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended December 31, 2021 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Realized gain (loss)($) | Dividends($) | End of period shares |
| Columbia Short-Term Cash Fund, 0.085% | ||||||||
| 790,933 | 38,516,190 | (38,467,463) | — | 839,660 | (96) | 663 | 839,827 | |
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| CTIVP® – CenterSquare Real Estate Fund | Annual Report 2021 | 9 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Fair value measurements (continued)
Investments falling into the Level 3 category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and estimated cash flows, and comparable company data.
Investments falling into the Level 3 category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at December 31, 2021:
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 10 | CTIVP® – CenterSquare Real Estate Fund | Annual Report 2021 |
Statement of Assets and Liabilities
December 31, 2021
December 31, 2021
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $199,557,534) | $262,806,363 |
| Affiliated issuers (cost $839,660) | 839,660 |
| Receivable for: | |
| Investments sold | 2,005,242 |
| Capital shares sold | 349 |
| Dividends | 791,624 |
| Prepaid expenses | 8,176 |
| Total assets | 266,451,414 |
| Liabilities | |
| Due to custodian | 71 |
| Payable for: | |
| Investments purchased | 828,190 |
| Capital shares purchased | 1,267,530 |
| Management services fees | 5,457 |
| Distribution and/or service fees | 240 |
| Service fees | 1,717 |
| Compensation of board members | 64,339 |
| Compensation of chief compliance officer | 48 |
| Other expenses | 21,884 |
| Total liabilities | 2,189,476 |
| Net assets applicable to outstanding capital stock | $264,261,938 |
| Represented by | |
| Paid in capital | 160,520,954 |
| Total distributable earnings (loss) | 103,740,984 |
| Total - representing net assets applicable to outstanding capital stock | $264,261,938 |
| Class 1 | |
| Net assets | $229,249,751 |
| Shares outstanding | 22,744,536 |
| Net asset value per share | $10.08 |
| Class 2 | |
| Net assets | $35,012,187 |
| Shares outstanding | 3,501,981 |
| Net asset value per share | $10.00 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| CTIVP® – CenterSquare Real Estate Fund | Annual Report 2021 | 11 |
Statement of Operations
Year Ended December 31, 2021
Year Ended December 31, 2021
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $5,352,327 |
| Dividends — affiliated issuers | 663 |
| Total income | 5,352,990 |
| Expenses: | |
| Management services fees | 1,960,756 |
| Distribution and/or service fees | |
| Class 2 | 75,584 |
| Service fees | 18,768 |
| Compensation of board members | 28,722 |
| Custodian fees | 13,052 |
| Printing and postage fees | 19,040 |
| Audit fees | 29,596 |
| Legal fees | 12,412 |
| Interest on interfund lending | 186 |
| Compensation of chief compliance officer | 46 |
| Other | 7,876 |
| Total expenses | 2,166,038 |
| Net investment income | 3,186,952 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 44,366,279 |
| Investments — affiliated issuers | (96) |
| Foreign currency translations | (138) |
| Net realized gain | 44,366,045 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | 43,627,828 |
| Foreign currency translations | 85 |
| Net change in unrealized appreciation (depreciation) | 43,627,913 |
| Net realized and unrealized gain | 87,993,958 |
| Net increase in net assets resulting from operations | $91,180,910 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 12 | CTIVP® – CenterSquare Real Estate Fund | Annual Report 2021 |
Statement of Changes in Net Assets
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | |
| Operations | ||
| Net investment income | $3,186,952 | $3,454,616 |
| Net realized gain | 44,366,045 | 18,348,588 |
| Net change in unrealized appreciation (depreciation) | 43,627,913 | (28,649,247) |
| Net increase (decrease) in net assets resulting from operations | 91,180,910 | (6,846,043) |
| Distributions to shareholders | ||
| Net investment income and net realized gains | ||
| Class 1 | (24,506,165) | (31,406,395) |
| Class 2 | (3,210,746) | (3,823,638) |
| Total distributions to shareholders | (27,716,911) | (35,230,033) |
| Decrease in net assets from capital stock activity | (48,319,714) | (247,971,223) |
| Total increase (decrease) in net assets | 15,144,285 | (290,047,299) |
| Net assets at beginning of year | 249,117,653 | 539,164,952 |
| Net assets at end of year | $264,261,938 | $249,117,653 |
| Year Ended | Year Ended | |||
| December 31, 2021 | December 31, 2020 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class 1 | ||||
| Subscriptions | 148,159 | 1,355,549 | 62,826 | 497,838 |
| Distributions reinvested | 2,692,985 | 24,506,165 | 4,290,491 | 31,406,395 |
| Redemptions | (8,235,957) | (76,302,493) | (27,890,328) | (280,976,193) |
| Net decrease | (5,394,813) | (50,440,779) | (23,537,011) | (249,071,960) |
| Class 2 | ||||
| Subscriptions | 464,483 | 4,196,638 | 206,887 | 1,623,654 |
| Distributions reinvested | 355,564 | 3,210,746 | 525,225 | 3,823,638 |
| Redemptions | (585,103) | (5,286,319) | (560,744) | (4,346,555) |
| Net increase | 234,944 | 2,121,065 | 171,368 | 1,100,737 |
| Total net decrease | (5,159,869) | (48,319,714) | (23,365,643) | (247,971,223) |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| CTIVP® – CenterSquare Real Estate Fund | Annual Report 2021 | 13 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect any fees and expenses imposed under your
Contract and/or Qualified Plan, as applicable; such fees and expenses would reduce the total returns for all periods shown. Total return and portfolio turnover are not annualized for periods of less than one year. The
portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain derivatives, if any. If such transactions were included, the Fund’s portfolio
turnover rate may be higher.
| Net asset value, beginning of period | Net investment income | Net realized and unrealized gain (loss) | Total from investment operations | Distributions from net investment income | Distributions from net realized gains | Total distributions to shareholders | |
| Class 1 | |||||||
| Year Ended 12/31/2021 | $7.94 | 0.11 | 3.07 | 3.18 | (0.13) | (0.91) | (1.04) |
| Year Ended 12/31/2020 | $9.85 | 0.11 | (0.70) | (0.59) | (0.39) | (0.93) | (1.32) |
| Year Ended 12/31/2019 | $7.94 | 0.19 | 1.89 | 2.08 | (0.17) | — | (0.17) |
| Year Ended 12/31/2018 | $8.64 | 0.17 | (0.64) | (0.47) | (0.16) | (0.07) | (0.23) |
| Year Ended 12/31/2017 | $8.59 | 0.17 | 0.33 | 0.50 | (0.19) | (0.26) | (0.45) |
| Class 2 | |||||||
| Year Ended 12/31/2021 | $7.88 | 0.09 | 3.05 | 3.14 | (0.11) | (0.91) | (1.02) |
| Year Ended 12/31/2020 | $9.79 | 0.11 | (0.72) | (0.61) | (0.37) | (0.93) | (1.30) |
| Year Ended 12/31/2019 | $7.89 | 0.17 | 1.88 | 2.05 | (0.15) | — | (0.15) |
| Year Ended 12/31/2018 | $8.59 | 0.15 | (0.64) | (0.49) | (0.14) | (0.07) | (0.21) |
| Year Ended 12/31/2017 | $8.54 | 0.15 | 0.32 | 0.47 | (0.16) | (0.26) | (0.42) |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Ratios include interfund lending expense which is less than 0.01%. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 14 | CTIVP® – CenterSquare Real Estate Fund | Annual Report 2021 |
Financial Highlights (continued)
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets(a) | Total net expense ratio to average net assets(a),(b) | Net investment income ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Class 1 | |||||||
| Year Ended 12/31/2021 | $10.08 | 41.44% | 0.80%(c) | 0.80%(c) | 1.24% | 57% | $229,250 |
| Year Ended 12/31/2020 | $7.94 | (4.87%) | 0.79% | 0.79% | 1.37% | 98% | $223,363 |
| Year Ended 12/31/2019 | $9.85 | 26.41% | 0.77% | 0.77% | 2.05% | 70% | $508,863 |
| Year Ended 12/31/2018 | $7.94 | (5.58%) | 0.77% | 0.77% | 2.03% | 51% | $402,354 |
| Year Ended 12/31/2017 | $8.64 | 6.01% | 0.81% | 0.81% | 2.00% | 72% | $426,287 |
| Class 2 | |||||||
| Year Ended 12/31/2021 | $10.00 | 41.20% | 1.05%(c) | 1.05%(c) | 1.03% | 57% | $35,012 |
| Year Ended 12/31/2020 | $7.88 | (5.18%) | 1.05% | 1.05% | 1.31% | 98% | $25,754 |
| Year Ended 12/31/2019 | $9.79 | 26.16% | 1.02% | 1.02% | 1.81% | 70% | $30,302 |
| Year Ended 12/31/2018 | $7.89 | (5.85%) | 1.02% | 1.02% | 1.76% | 51% | $24,164 |
| Year Ended 12/31/2017 | $8.59 | 5.74% | 1.06% | 1.06% | 1.76% | 72% | $27,353 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| CTIVP® – CenterSquare Real Estate Fund | Annual Report 2021 | 15 |
Notes to Financial Statements
December 31, 2021
December 31, 2021
Note 1. Organization
CTIVP® – CenterSquare
Real Estate Fund (the Fund), a series of Columbia Funds Variable Series Trust II (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an
open-end management investment company organized as a Massachusetts business trust.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers Class 1 and Class 2 shares to separate accounts funding variable annuity contracts and variable life insurance policies (collectively, Contracts) issued by
affiliated and unaffiliated life insurance companies (Participating Insurance Companies) as well as qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors (Qualified
Investors) authorized by Columbia Management Investment Distributors, Inc. (the Distributor). You may not buy (nor will you own) shares of the Fund directly. You may invest by participating in a Qualified Plan or by
buying a Contract and making allocations to the Fund. Although all share classes generally have identical voting, dividend and liquidation rights, each share class votes separately when required by the Trust’s
organizational documents or by law. Different share classes pay different net investment income distribution amounts to the extent the expenses of such share classes differ, and distributions in liquidation will be
proportional to the net asset value of each share class. Each share class has its own cost structure and other features.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Equity securities listed on an
exchange are valued at the closing price or last trade price on their primary exchange at the close of business of the New York Stock Exchange. Securities with a closing price not readily available or not listed on
any exchange are valued at the mean between the closing bid and ask prices. Listed preferred stocks convertible into common stocks are valued using an evaluated price from a pricing service.
Investments in open-end investment
companies (other than exchange-traded funds (ETFs)), are valued at the latest net asset value reported by those companies as of the valuation time.
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
| 16 | CTIVP® – CenterSquare Real Estate Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Foreign currency transactions and
translations
The values of all assets and
liabilities denominated in foreign currencies are generally translated into U.S. dollars at exchange rates determined at the close of regular trading on the New York Stock Exchange. Net realized and unrealized gains
(losses) on foreign currency transactions and translations include gains (losses) arising from the fluctuation in exchange rates between trade and settlement dates on securities transactions, gains (losses) arising
from the disposition of foreign currency and currency gains (losses) between the accrual and payment dates on dividends, interest income and foreign withholding taxes.
For financial statement purposes,
the Fund does not distinguish that portion of gains (losses) on investments which is due to changes in foreign exchange rates from that which is due to changes in market prices of the investments. Such fluctuations
are included with the net realized and unrealized gains (losses) on investments in the Statement of Operations.
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
Income recognition
Corporate actions and dividend
income are recorded on the ex-dividend date.
The Fund may receive distributions
from holdings in equity securities, business development companies (BDCs), exchange-traded funds (ETFs), limited partnerships (LPs), other regulated investment companies (RICs), and real estate investment trusts
(REITs), which report information as to the tax character of their distributions annually. These distributions are allocated to dividend income, capital gain and return of capital based on actual information reported.
Return of capital is recorded as a reduction of the cost basis of securities held. If the Fund no longer owns the applicable securities, return of capital is recorded as a realized gain. With respect to REITs, to the
extent actual information has not yet been reported, estimates for return of capital are made by Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise
Financial, Inc. (Ameriprise Financial). The Investment Manager’s estimates are subsequently adjusted when the actual character of the distributions is disclosed by the REITs, which could result in a
proportionate change in return of capital to shareholders.
Awards from class action litigation
are recorded as a reduction of cost basis if the Fund still owns the applicable securities on the payment date. If the Fund no longer owns the applicable securities on the payment date, the proceeds are recorded as
realized gains.
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
Federal income tax status
The Fund intends to qualify each
year as a regulated investment company under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its investment company taxable income and net capital gain, if any, for its
tax year, and as such will not be subject to federal income taxes. In addition, because the Fund meets the exception under Internal Revenue Code Section 4982(f), the Fund expects not to be subject to federal excise
tax. Therefore, no federal income or excise tax provision is recorded.
| CTIVP® – CenterSquare Real Estate Fund | Annual Report 2021 | 17 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Distributions to subaccounts
Distributions to the subaccounts of
Contracts, Qualified Plans and Qualified Investors are recorded at the close of business on the record date and are payable on the first business day following the record date. Dividends from net investment income, if
any, are declared and distributed annually. Capital gain distributions, when available, will be made annually. However, an additional capital gain distribution may be made during the fiscal year in order to comply
with the Internal Revenue Code, as applicable to registered investment companies. Income distributions and capital gain distributions are determined in accordance with federal income tax regulations, which may differ
from GAAP. All dividends and distributions are reinvested in additional shares of the applicable share class of the Fund at the net asset value as of the ex-dividend date of the distribution.
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Under the Management Agreement, the
Investment Manager provides the Fund with investment research and advice, as well as administrative and accounting services. The Investment Manager is responsible for the ultimate oversight of investments made by the
Fund. The Fund’s subadviser (see Subadvisory agreement below) has the primary responsibility for the day-to-day portfolio management of the Fund. The management services fee is an annual fee that is equal to a
percentage of the Fund’s daily net assets that declines from 0.75% to 0.66% as the Fund’s net assets increase. The effective management services fee rate for the year ended December 31, 2021 was 0.75% of
the Fund’s average daily net assets.
Subadvisory agreement
The Investment Manager has entered
into a Subadvisory Agreement with CenterSquare Investment Management LLC to serve as the subadviser to the Fund. The Investment Manager compensates the subadviser to manage the investment of the Fund’s
assets.
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. Under a Deferred Compensation Plan (the
Deferred Plan), these members of the Board of Trustees may elect to defer payment of up to 100% of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of
certain funds managed by the Investment Manager. The Fund’s liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Deferred Plan. All
amounts payable under the Deferred Plan constitute a general unsecured obligation of the Fund. The expense for the Deferred Plan, which includes Trustees’ fees deferred during the current period as well as any
gains or losses on the Trustees’ deferred compensation balances as a result of market fluctuations, is included in "Compensation of board members" on the Statement of Operations.
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
| 18 | CTIVP® – CenterSquare Real Estate Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Service fees
The Fund has entered into a
Shareholder Services Agreement with Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial. Under this
agreement, the Fund pays a service fee equal to the payments made by the Transfer Agent to Participating Insurance Companies and other financial intermediaries (together, Participating Organizations) for services each
such Participating Organization provides to its clients, customers and participants that are invested directly or indirectly in the Fund, up to a cap approved by the Board of Trustees from time to time. The effective
service fee rate for the year ended December 31, 2021, was 0.01% of the Fund’s average daily net assets.
The Transfer Agent may retain as
compensation for its services revenues from fees for wire, telephone and redemption orders, account transcripts due the Transfer Agent from Fund shareholders and interest (net of bank charges) earned with respect to
balances in accounts the Transfer Agent maintains in connection with its services to the Fund.
Distribution and/or service fees
The Fund has an agreement with the
Distributor, an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution services. Under a Plan and Agreement of Distribution, the Fund pays a fee at an annual rate
of up to 0.25% of the Fund’s average daily net assets attributable to Class 2 shares. The Fund pays no distribution and service fees for Class 1 shares.
Expenses waived/reimbursed by the
Investment Manager and its affiliates
The Investment Manager and certain
of its affiliates have contractually agreed to waive fees and/or reimburse expenses (excluding certain fees and expenses described below) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, so that the Fund’s net operating expenses, after giving effect to fees waived/expenses reimbursed and any balance credits and/or overdraft charges from the Fund’s
custodian, do not exceed the following annual rate(s) as a percentage of the classes’ average daily net assets:
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), expenses associated with investments in affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange-traded funds), transaction costs and
brokerage commissions, costs related to any securities lending program, dividend expenses associated with securities sold short, inverse floater program fees and expenses, transaction charges and interest on borrowed
money, interest, costs associated with certain shareholder meetings, infrequent and/or unusual expenses and any other expenses the exclusion of which is specifically approved by the Board of Trustees. This
agreement may be modified or amended only with approval from the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements
described above are not recoverable by the Investment Manager or its affiliates in future periods.
Note 4. Federal tax
information
The timing and character of
income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP because of temporary or permanent book to tax differences.
| CTIVP® – CenterSquare Real Estate Fund | Annual Report 2021 | 19 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
At December 31, 2021, these
differences were primarily due to differing treatment for deferral/reversal of wash sale losses, trustees’ deferred compensation and foreign currency transactions. To the extent these differences were permanent,
reclassifications were made among the components of the Fund’s net assets. Temporary differences do not require reclassifications.
The following reclassifications
were made:
| Undistributed net investment income ($) | Accumulated net realized gain ($) | Paid in capital ($) |
| (138) | 138 | — |
Net investment income (loss) and
net realized gains (losses), as disclosed in the Statement of Operations, and net assets were not affected by this reclassification.
The tax character of distributions
paid during the years indicated was as follows:
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | ||||
| Ordinary income ($) | Long-term capital gains ($) | Total ($) | Ordinary income ($) | Long-term capital gains ($) | Total ($) |
| 3,335,025 | 24,381,886 | 27,716,911 | 16,442,538 | 18,787,495 | 35,230,033 |
Short-term capital gain
distributions, if any, are considered ordinary income distributions for tax purposes.
At December 31, 2021, the
components of distributable earnings on a tax basis were as follows:
| Undistributed ordinary income ($) | Undistributed long-term capital gains ($) | Capital loss carryforwards ($) | Net unrealized appreciation ($) |
| 22,031,697 | 21,334,627 | — | 60,437,916 |
At December 31, 2021, the cost of
all investments for federal income tax purposes along with the aggregate gross unrealized appreciation and depreciation based on that cost was:
| Federal tax cost ($) | Gross unrealized appreciation ($) | Gross unrealized (depreciation) ($) | Net unrealized appreciation ($) |
| 203,208,107 | 63,707,145 | (3,269,229) | 60,437,916 |
Tax cost of investments and
unrealized appreciation/(depreciation) may also include timing differences that do not constitute adjustments to tax basis.
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Note 5. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $146,650,847 and $217,306,104, respectively, for the year ended December 31, 2021. The amount of purchase and
sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 6. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate
| 20 | CTIVP® – CenterSquare Real Estate Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
share of the expenses of the Affiliated MMF. The
Affiliated MMF prices its shares with a floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or
temporarily suspend redemptions (sometimes referred to as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
Note 7. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund’s activity in the
Interfund Program during the year ended December 31, 2021 was as follows:
| Borrower or lender | Average loan balance ($) | Weighted average interest rate (%) | Number of days with outstanding loans |
| Borrower | 421,739 | 0.69 | 23 |
Interest expense incurred by the
Fund is recorded as Interfund lending in the Statement of Operations. The Fund had no outstanding interfund loans at December 31, 2021.
Note 8. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to an October 28, 2021 amendment and restatement, the credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment
Manager or an affiliated investment manager, severally and not jointly, permits collective borrowings up to $950 million. Interest is currently charged to each participating fund based on its borrowings at a rate
equal to the higher of (i) the federal funds effective rate, (ii) the secured overnight financing rate plus 0.11448% and (iii) the overnight bank funding rate, plus in each case, 1.00%. Each borrowing under the credit
facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The
commitment fee is included in other expenses in the Statement of Operations. This agreement expires annually in October unless extended or renewed. Prior to the October 28, 2021 amendment and restatement, the Fund had
access to a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. which permitted collective borrowings up to $950 million. Interest was
charged to each participating fund based on its borrowings at a rate equal to the higher of (i) the federal funds effective rate, (ii) the one-month London Interbank Offered Rate (LIBOR) rate and (iii) the overnight
bank funding rate, plus in each case, 1.25%.
The Fund had no borrowings during
the year ended December 31, 2021.
Note 9. Significant
risks
Market risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and
| CTIVP® – CenterSquare Real Estate Fund | Annual Report 2021 | 21 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
conditions and events in one country, region or
financial market may adversely impact issuers in a different country, region or financial market. These risks may be magnified if certain events or developments adversely interrupt the global supply chain; in these
and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public
health issues, recessions, depressions or other events – or the potential for such events – could have a significant negative impact on global economic and market conditions.
The coronavirus disease 2019 and
its variants (COVID-19) pandemic has resulted in, and may continue to result in, significant global economic and societal disruption and market volatility due to disruptions in market access, resource availability,
facilities operations, imposition of tariffs, export controls and supply chain disruption, among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement
and loss in human and other resources. The uncertainty surrounding the magnitude, duration, reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental
authorities or other third parties, present unknowns that are yet to unfold. The impacts, as well as the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and
pandemics that may arise in the future – could negatively affect global economies and markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in
emerging market countries may be greater due to generally less established healthcare systems, governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing
political, social and economic risks in certain countries or globally. The disruptions caused by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively
impact the Fund’s ability to achieve its investment objectives. Any such event(s) could have a significant adverse impact on the value and risk profile of the Fund.
Real estate sector risk
The risks associated with
investments in real estate investment trusts (REITs) and other companies principally engaged in the real estate industry subject the Fund to risks similar to those of direct investments in real estate and the real
estate industry in general. These include risks related to general and local economic conditions, possible lack of availability of financing and changes in interest rates or property values. The value of such
investments may be affected by, among other factors, changes in the value of the underlying properties owned by the issuer, changes in the prospect for earnings and/or cash flow growth of the investment, defaults by
borrowers or tenants, market saturation, decreases in market rates for rents, and other economic, political, or regulatory occurrences affecting the real estate industry, including REITs.
REITs depend upon specialized
management skills, may have limited financial resources, may have less trading volume in their securities, and may be subject to more abrupt or erratic price movements than the overall securities markets. REITs are
also subject to the risk of failing to qualify for favorable tax treatment. Some REITs (especially mortgage REITs) are affected by risks similar to those associated with investments in debt securities including
changes in interest rates and the quality of credit extended.
Shareholder concentration risk
At December 31, 2021, affiliated
shareholders of record owned 100.0% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of
less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Small- and mid-cap company risk
Investments in small- and
mid-capitalization companies (small- and mid-cap companies) often involve greater risks than investments in larger, more established companies (larger companies) because small- and mid-cap companies tend to have less
predictable earnings and may lack the management experience, financial resources, product diversification and competitive strengths of larger companies. Securities of small- and mid-cap companies may be less liquid
and more volatile than the securities of larger companies.
| 22 | CTIVP® – CenterSquare Real Estate Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Note 10. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
Note 11. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in
connection with the conduct of their business activities. Ameriprise Financial believes that the Fund is not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject
of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with
the Fund. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (SEC) on legal and regulatory matters that relate to
Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that
these matters, or the adverse publicity associated with them, will not result in increased Fund redemptions, reduced sale of Fund shares or other adverse consequences to the Fund. Further, although we believe
proceedings are not likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines,
penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial or one or more of its affiliates that provides services to
the Fund.
| CTIVP® – CenterSquare Real Estate Fund | Annual Report 2021 | 23 |
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees of Columbia
Funds Variable Series Trust II and Shareholders of CTIVP® – CenterSquare Real Estate Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of CTIVP® – CenterSquare Real Estate Fund (one of the funds constituting Columbia Funds Variable Series Trust II, referred to
hereafter as the "Fund") as of December 31, 2021, the related statement of operations for the year ended December 31, 2021, the statement of changes in net assets for each of the two years in the period ended December
31, 2021, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2021 (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, 2021, 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, 2021 and the financial highlights for each of the five years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in the
United States of America.
Basis for Opinion
These financial statements are the
responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these
financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2021 by correspondence with the custodian, transfer agent and brokers. We believe that
our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Minneapolis, Minnesota
February 18, 2022
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| 24 | CTIVP® – CenterSquare Real Estate Fund | Annual Report 2021 |
Federal Income Tax
Information
(Unaudited)
The Fund hereby designates the
following tax attributes for the fiscal year ended December 31, 2021.
| Dividends received deduction | Capital gain dividend |
| 0.31% | $22,782,384 |
Dividends received deduction. The
percentage of ordinary income distributed during the fiscal year that qualifies for the corporate dividends received deduction.
Capital gain dividend. The Fund
designates as a capital gain dividend the amount reflected above, of which $22,398,393 was subject to a long term capital gains tax rate of not greater than 20% and $383,991 to a long term capital gains tax rate
of not greater than 25%.
TRUSTEES AND
OFFICERS
The Board oversees the Fund’s
operations and appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following table provides basic biographical information about the Fund’s Trustees as
of the printing of this report, including their principal occupations during the past five years, although specific titles for individuals may have varied over the period. The year set forth beneath Length of Service
in the table below is the year in which the Trustee was first appointed or elected as Trustee to any Fund currently in the Columbia Funds Complex or a predecessor thereof. Under current Board policy, each Trustee
generally serves until December 31 of the year such Trustee turns seventy-five (75).
Independent trustees
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| George S. Batejan c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1953 | Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 176 | Former Chairman of the Board, NICSA (National Investment Company Services Association) (Executive Committee, Nominating Committee and Governance Committee), 2014-2016; former Director, Intech Investment Management, 2011-2016; former Board Member, Metro Denver Chamber of Commerce, 2015-2016; former Advisory Board Member, University of Colorado Business School, 2015-2018 |
| CTIVP® – CenterSquare Real Estate Fund | Annual Report 2021 | 25 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Kathleen Blatz c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2006 | Attorney, specializing in arbitration and mediation; Chief Justice, Minnesota Supreme Court, 1998-2006; Associate Justice, Minnesota Supreme Court, 1996-1998; Fourth Judicial District Court Judge, Hennepin County, 1994-1996; Attorney in private practice and public service, 1984-1993; State Representative, Minnesota House of Representatives, 1979-1993, which included service on the Tax and Financial Institutions and Insurance Committees; Member and Interim Chair, Minnesota Sports Facilities Authority, January 2017-July 2017; Interim President and Chief Executive Officer, Blue Cross Blue Shield of Minnesota (health care insurance), February-July 2018, April-October 2021 | 176 | Former Trustee, Blue Cross Blue Shield of Minnesota, 2009-2021 (Chair of the Business Development Committee, 2014-2017; Chair of the Governance Committee, 2017-2019); former Member and Chair of the Board, Minnesota Sports Facilities Authority, January 2017-July 2017; former Director, Robina Foundation, 2009-2020 (Chair, 2014-2020); Director, Schulze Family Foundation, since 2021 |
| Pamela G. Carlton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2007 | President, Springboard — Partners in Cross Cultural Leadership (consulting company) since 2003; Managing Director of US Equity Research, JP Morgan Chase, 1999-2003; Director of US Equity Research, Chase Asset Management, 1996-1999; Co-Director Latin America Research, 1993-1996, COO Global Research, 1992-1996, Co-Director of US Research, 1991-1992, Investment Banker, Morgan Stanley, 1982-1991, Morgan Stanley; Attorney, Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 176 | Trustee, New York Presbyterian Hospital Board (Executive Committee and Chair of People Committee) since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee); Director, Apollo Commercial Real Estate Finance, Inc. since 2021; the Governing Council of the Independent Directors Council (IDC), since 2021 |
| Janet Langford Carrig c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1957 | Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 174 | Director, EQT Corporation (natural gas producer) since 2019; Director, Whiting Petroleum Corporation (independent oil and gas company) since 2020 |
| J. Kevin Connaughton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2020 | Member, FINRA National Adjudicatory Council since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Consultant to Independent Trustees of CFVIT and CFST I from March 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Managing Director and General Manager of Mutual Fund Products, Columbia Management Investment Advisers, LLC, May 2010-February 2015; President, Columbia Funds, 2008-2015; and senior officer of Columbia Funds and affiliated funds, 2003-2015 | 174 | Former Director, The Autism Project, March 2015-December 2021; former Member of the Investment Committee, St. Michael’s College, November 2015-February 2020; former Trustee, St. Michael’s College, June 2017-September 2019; former Trustee, New Century Portfolios, January 2015-December 2017 |
| 26 | CTIVP® – CenterSquare Real Estate Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Olive M. Darragh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since 2020 | Managing Director of Darragh Inc. (strategy and talent management consulting firm) since 2010; Founder and CEO, Zolio, Inc. (investment management talent identification platform) since 2004; Consultant to Independent Trustees of CFVIT and CFST I from June 2019 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 2001-2004 | 174 | Former Director, University of Edinburgh Business School (Member of US Board); former Director, Boston Public Library Foundation |
| Patricia M. Flynn c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1950 | Trustee since 2004 | Trustee Professor of Economics and Management, Bentley University since 1976 (also teaches and conducts research on corporate governance); Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 176 | Trustee, MA Taxpayers Foundation since 1997; Board of Governors, Innovation Institute, MA Technology Collaborative, 2010-2020; former Board of Directors, The MA Business Roundtable, 2003-2019 |
| Brian J. Gallagher c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 176 | Trustee, Catholic Schools Foundation since 2004 |
| Douglas A. Hacker c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1955 | Co-Chair since 2021; Chair of CFST I and CFVIT since 2014; Trustee of CFST I and CFVIT since 1996 and CFST, CFST II, CFVST II, CET I and CET II since 2021 | Independent business executive since May 2006; Executive Vice President – Strategy of United Airlines, December 2002 - May 2006; President of UAL Loyalty Services (airline marketing company), September 2001-December 2002; Executive Vice President and Chief Financial Officer of United Airlines, July 1999-September 2001 | 176 | Director, Spartan Nash Company (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing); former Director, Nash Finch Company (food distributor), 2005-2013; former Director, SeaCube Container Leasing Ltd. (container leasing), 2010-2013; and former Director, Travelport Worldwide Limited (travel information technology), 2014-2019 |
| Nancy T. Lukitsh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1956 | Trustee since 2011 | Senior Vice President, Partner and Director of Marketing, Wellington Management Company, LLP (investment adviser), 1997-2010; Chair, Wellington Management Portfolios (commingled non-U.S. investment pools), 2007 -2010; Director, Wellington Trust Company, NA and other Wellington affiliates, 1997-2010 | 174 | None |
| CTIVP® – CenterSquare Real Estate Fund | Annual Report 2021 | 27 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| David M. Moffett c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2011 | Retired; Consultant to Bridgewater and Associates | 174 | Director, CSX Corporation (transportation suppliers); Director, Genworth Financial, Inc. (financial and insurance products and services); Director, PayPal Holdings Inc. (payment and data processing services); Trustee, University of Oklahoma Foundation; former Director, eBay Inc. (online trading community), 2007-2015; and former Director, CIT Bank, CIT Group Inc. (commercial and consumer finance), 2010-2016 |
| Catherine James Paglia c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Co-Chair since 2021; Chair of CFST, CFST II, CFVST II, CET I and CET II since 2020; Trustee of CFST, CFST II and CFVST II since 2004 and CFST I and CFVIT since 2021 | Director, Enterprise Asset Management, Inc. (private real estate and asset management company) since September 1998; Managing Director and Partner, Interlaken Capital, Inc., 1989-1997; Vice President, 1982-1985, Principal, 1985-1987, Managing Director, 1987-1989, Morgan Stanley; Vice President, Investment Banking, 1980-1982, Associate, Investment Banking, 1976-1980, Dean Witter Reynolds, Inc. | 176 | Director, Valmont Industries, Inc. (irrigation systems manufacturer) since 2012; Trustee, Carleton College (on the Investment Committee); Trustee, Carnegie Endowment for International Peace (on the Investment Committee) |
| Minor M. Shaw c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1947 | Trustee since 2003 | President, Micco LLC (private investments) since 2011; President, Micco Corp. (family investment business), 1998-2011 | 176 | Director, Blue Cross Blue Shield of South Carolina (Chair of Compensation Committee) since April 2008; Trustee, Hollingsworth Funds (on the Investment Committee) since 2016 (previously Board Chair from 2016-2019); Former Advisory Board member, Duke Energy Corp., 2016-2020; Chair of the Duke Endowment; Chair of Greenville – Spartanburg Airport Commission; former Trustee, BofA Funds Series Trust (11 funds), 2003-2011; former Director, Piedmont Natural Gas, 2004-2016; former Director, National Association of Corporate Directors, Carolinas Chapter, 2013-2018; Chair, Daniel-Mickel Foundation since 1998 |
| 28 | CTIVP® – CenterSquare Real Estate Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Natalie A. Trunow c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1967 | Trustee since 2020 | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services), January 2016-January 2021; Non-executive Member of the Investment Committee and Valuation Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services), August 2018-January 2021; Advisor, Paradigm Asset Management, November 2016-December 2021; Consultant to Independent Trustees of CFVIT and CFST I from September 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Director of Investments/Consultant, Casey Family Programs, April 2016-November 2016; Senior Vice President and Chief Investment Officer, Calvert Investments, August 2008-January 2016; Section Head and Portfolio Manager, General Motors Asset Management, June 1997-August 2008 | 174 | Former Director, Investment Committee, Health Services for Children with Special Needs, Inc., 2012-2019; Director, Chair of Audit Committee, Consumer Credit Counseling Services (formerly Guidewell Financial Solutions), since 2019; Independent Director, Investment Committee and Valuation Committee, Sarona Asset Management, since 2019 |
| Sandra Yeager c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2017 | Retired; President and founder, Hanoverian Capital, LLC (SEC registered investment advisor firm), 2008-2016; Managing Director, DuPont Capital, 2006-2008; Managing Director, Morgan Stanley Investment Management, 2004-2006; Senior Vice President, Alliance Bernstein, 1990-2004 | 176 | Former Director, NAPE Education Foundation, October 2016-October 2020 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Fund Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I (CET I), Columbia ETF Trust II (CET II), Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Beckman, Gallagher and Hacker and Mses. Blatz, Carlton, Flynn, Paglia, Shaw and Yeager serve as Directors of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
Interested trustee affiliated with
Investment Manager*
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during the past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex overseen | Other directorships held by Trustee during the past five years |
| Daniel J. Beckman c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since November 2021(a) | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC (since April 2015); officer of Columbia Funds and affiliated funds since 2020. | 176 | Director, Ameriprise Trust Company, since October 2016; Director, Columbia Management Investment Distributors, Inc. since November 2018; Board of Governors, Columbia Wanger Asset Management, LLC since January 2022 |
| * | Interested person (as defined under the 1940 Act) by reason of being an officer, director, security holder and/or employee of the Investment Manager or Ameriprise Financial. |
| (a) | Mr. Beckman serves as the President and Principal Executive Officer of the Columbia Funds (since 2021). |
The Statement of Additional
Information has additional information about the Fund’s Board members and is available, without charge, upon request by calling 800.345.6611 or contacting your financial intermediary.
| CTIVP® – CenterSquare Real Estate Fund | Annual Report 2021 | 29 |
TRUSTEES AND OFFICERS (continued)
The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. The following table provides basic information about the Officers of the Fund, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Beckman, who is President and Principal Executive Officer, the Fund’s other officers are:
The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. The following table provides basic information about the Officers of the Fund, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Beckman, who is President and Principal Executive Officer, the Fund’s other officers are:
Fund officers
| 30 | CTIVP® – CenterSquare Real Estate Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Fund officers (continued)
Fund officers (continued)
| Name, address and year of birth | Position and year first appointed to position for any Fund in the Columbia Funds Complex or a predecessor thereof | Principal occupation(s) during past five years |
| Lyn Kephart-Strong 5228 Ameriprise Financial Center Minneapolis, MN 55474 1960 | Vice President (2015) | President, Columbia Management Investment Services Corp. since October 2014; Vice President & Resolution Officer, Ameriprise Trust Company since August 2009. |
| CTIVP® – CenterSquare Real Estate Fund | Annual Report 2021 | 31 |
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For Fund and other investment product prospectuses, which contain this and other important information, contact your
financial advisor or insurance representative. Please read the prospectus carefully before you invest. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved. Columbia Management Investment Distributors, Inc., 290 Congress Street, Boston, MA 02210
© 2022 Columbia Management Investment
Advisers, LLC.
C-2085 AW (2/22)
CTIVP® –
Westfield Mid Cap Growth Fund
Please remember that you may not
buy (nor will you own) shares of the Fund directly. The Fund is available through variable annuity contracts and variable life insurance policies offered by the separate accounts of participating insurance companies
as well as qualified pension and retirement plans. Please contact your financial advisor or insurance representative for more information.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
| 3 | |
| 5 | |
| 7 | |
| 8 | |
| 12 | |
| 13 | |
| 14 | |
| 16 | |
| 18 | |
| 25 | |
| 26 |
Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which CTIVP® – Westfield Mid Cap Growth Fund (the Fund) holds investments consistent with the procedures as stated in the Statement of Additional Information
(SAI). You may obtain a copy of the SAI without charge by calling 800.345.6611; contacting your financial intermediary or searching the website of the Securities and Exchange Commission (SEC) at sec.gov. Information
regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge by visiting
columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. The Fund’s Form N-PORT is available on the SEC’s website at sec.gov. The Fund’s complete
schedule of portfolio holdings, as filed on Form N-PORT, can also be obtained without charge, upon request, by calling 800.345.6611.
Additional Fund information
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
290 Congress Street
Boston, MA 02210
Fund distributor
Columbia Management Investment Distributors,
Inc.
290 Congress Street
Boston, MA 02210
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
CTIVP® – Westfield Mid Cap Growth
Fund | Annual Report 2021
Fund at a Glance
Investment objective
The Fund
seeks to provide shareholders with long-term capital growth.
Portfolio management
Westfield Capital Management Company, L.P.
William Muggia
Richard Lee, CFA
Ethan Meyers, CFA
| CTIVP® – Westfield Mid Cap Growth Fund | Annual Report 2021 | 3 |
Fund at a Glance (continued)
Performance of a hypothetical $10,000 investment (December 31, 2011 — December 31, 2021)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class 2 shares of CTIVP® – Westfield Mid Cap Growth Fund during the stated time period, and does not reflect the deduction of taxes, if any, that a
shareholder may pay on Fund distributions or on the redemption of Fund shares. The returns also do not reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy or
qualified pension or retirement plan, if any.
| 4 | CTIVP® – Westfield Mid Cap Growth Fund | Annual Report 2021 |
Manager Discussion of Fund Performance
At December 31, 2021,
approximately 91.31% of the Fund’s shares were owned in the aggregate by affiliated funds-of-funds managed by Columbia Management Investment Advisers, LLC (the Investment Manager). As a result of asset
allocation decisions by the Investment Manager, it is possible that the Fund may experience relatively large purchases or redemptions from affiliated funds-of-funds. The Investment Manager seeks to minimize the impact
of these transactions by structuring them over a reasonable period of time. The Fund may also experience increased expenses as it buys and sells securities as a result of purchases or redemptions by affiliated
funds-of-funds.
For the 12-month period that ended
December 31, 2021, the Fund’s Class 2 shares returned 16.41%. The Fund outperformed its benchmark, the Russell Midcap Growth Index, which returned 12.73% over the same time period.
Market overview
U.S. stocks faced a myriad of
issues during the period, many related to the ongoing COVID-19 pandemic, including the emergence of the Delta variant, persistent supply chain interruptions, and rising input costs. Complicating matters was a
consistent stream of news out of China impacting U.S. markets, ranging from increased regulation of gaming and leisure to banning trading in cryptocurrencies and the Evergrande liquidity scare, which roiled markets
for a period. On the policy front, the U.S. Federal Reserve began telegraphing plans for tapering of bond purchases, while additional stimulus measures and a bipartisan infrastructure bill (passed in November)
continued to be debated in Congress. The second half of the year saw the resumption of quality market leadership with earnings power driving stock performance more than speculative hype. U.S. stocks ended the year
near all-time highs, despite a tumultuous final month in which the Omicron variant swept across the globe with eye-popping speed. In addition to inflation hitting multi-decade highs, along with the Federal
Reserve’s pivot to tackle inflationary pressures, persistent labor shortages and supply chain disruptions were central to the 2021 storyline.
The Fund’s notable
contributors during the period:
| • | Communication services was the strongest relative performer during the period, with performance driven by strong stock selection. The Fund was underweight the sector during the period, but our holdings provided positive absolute returns. |
| • | Financials also contributed to relative and absolute performance during the year, primarily driven by strong stock selection, but our overweight positioning also provided a tailwind as the sector outperformed the benchmark. |
| • | Consumer discretionary was another source of relative and absolute strength. The Fund was modestly underweight the sector over the period and generated strong returns from security selection. |
| • | Fortinet, Inc., a software company that provides threat-management and network security solutions, was the top relative performer during the year. Fortinet outperformed over the period on strong third-quarter results and positive guidance. We continue to favor Fortinet based on a combination of sustainable revenue growth and free-cash-flow margins, in our view. |
| • | ICON Plc, a clinical research organization, also added to relative returns as shares were driven higher based on the continued strong performance following their merger with PRA Health Sciences. Management suggested that there is substantial room for additional synergies to be realized from the deal, which has been well received by investors. |
| • | Devon Energy Corporation, a quality hydrocarbon exploration operator, was a relative outperformer as the company stuck to its production discipline and delivered a strong third quarter with greater than expected capital return. |
The Fund’s notable
detractors during the period:
| • | Information technology was the biggest detractor from relative returns during the period. While the Fund’s holdings generated positive absolute returns, security selection was a relative detractor, particularly within IT Services. The Fund maintained an underweight positioning to the sector during the year. |
| • | Health care was also a source of relative weakness, an area where the Fund was modestly overweight. |
| • | Real estate also detracted from relative returns, primarily due to lack of exposure to several real estate investment trusts (REITs) that significantly outperformed the broader market. |
| CTIVP® – Westfield Mid Cap Growth Fund | Annual Report 2021 | 5 |
Manager Discussion of Fund Performance (continued)
| • | Global Payments Inc., a payment processing company, was the biggest relative detractor during the period, as investors rotated away from growth at a reasonable price for fintech and towards both high growth, high multiple payments stocks as well as value financials, including banks. We think the market is missing the magnitude of the cyclical recovery in the merchant segment. |
| • | Customer service enablement platform Zendesk, Inc. also detracted from relative returns after missing consensus expectations on second-quarter results and lowering its forward guidance. One explanation for the relative weakness was the moderation of one of its smaller business segments, which experienced a boost during the COVID-19 lockdowns. We continue to favor the stock. |
| • | Twilio, Inc. a communications software, cloud-based platform and services company, was also a source of relative weakness. The stock underperformed after organic revenue growth decelerated in the third quarter, followed by fourth-quarter guidance implying further deceleration. While the company faces near-term challenges, we continue to favor Twilio based on a combination of a large total addressable market, strong revenue growth, and a reasonable valuation. |
The views expressed in this report
reflect the current views of the respective parties who have contributed to this report. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult
to predict, so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective parties
disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Columbia fund are based on numerous factors, may not be relied on as an
indication of trading intent on behalf of any particular Columbia fund. References to specific securities should not be construed as a recommendation or investment advice.
| 6 | CTIVP® – Westfield Mid Cap Growth Fund | Annual Report 2021 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur ongoing
costs, which generally include management fees, distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to help you compare these costs with the ongoing costs of investing in other mutual funds.
The information below does not
reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy (collectively, Contracts) or qualified pension and retirement plan (Qualified Plan), if any. The total fees
and expenses you bear may therefore be higher than those shown below.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount invested, to estimate the
expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as redemption or exchange fees, or expenses that apply to the subaccount or the Contract. Therefore, the
hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If the fees and expenses imposed under your Contract or
Qualified Plan, if any, were included, your costs would be higher.
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 365.
Expenses do not include fees and
expenses incurred indirectly by the Fund from its investment in underlying funds, including affiliated and non-affiliated pooled investment vehicles, such as mutual funds and exchange-traded funds.
Had Columbia Management Investment
Advisers, LLC and/or certain of its affiliates not waived/reimbursed certain fees and expenses, account value at the end of the period would have been reduced.
| CTIVP® – Westfield Mid Cap Growth Fund | Annual Report 2021 | 7 |
Portfolio of Investments
December 31, 2021
December 31, 2021
(Percentages represent value of
investments compared to net assets)
Investments in securities
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 8 | CTIVP® – Westfield Mid Cap Growth Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| CTIVP® – Westfield Mid Cap Growth Fund | Annual Report 2021 | 9 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Notes to Portfolio of
Investments
| (a) | Non-income producing investment. |
| (b) | The rate shown is the seven-day current annualized yield at December 31, 2021. |
| (c) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended December 31, 2021 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Realized gain (loss)($) | Dividends($) | End of period shares |
| Columbia Short-Term Cash Fund, 0.085% | ||||||||
| 3,570,640 | 175,911,995 | (170,340,147) | — | 9,142,488 | (1,078) | 4,951 | 9,144,317 | |
Abbreviation Legend
| ADR | American Depositary Receipt |
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at December 31, 2021:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Investments in Securities | ||||
| Common Stocks | ||||
| Communication Services | 16,598,295 | — | — | 16,598,295 |
| Consumer Discretionary | 44,938,943 | — | — | 44,938,943 |
| Energy | 8,395,930 | — | — | 8,395,930 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 10 | CTIVP® – Westfield Mid Cap Growth Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Fair value measurements (continued)
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Financials | 34,685,422 | — | — | 34,685,422 |
| Health Care | 78,764,203 | — | — | 78,764,203 |
| Industrials | 70,146,872 | — | — | 70,146,872 |
| Information Technology | 145,403,037 | — | — | 145,403,037 |
| Materials | 6,283,763 | — | — | 6,283,763 |
| Real Estate | 12,465,958 | — | — | 12,465,958 |
| Total Common Stocks | 417,682,423 | — | — | 417,682,423 |
| Money Market Funds | 9,142,488 | — | — | 9,142,488 |
| Total Investments in Securities | 426,824,911 | — | — | 426,824,911 |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| CTIVP® – Westfield Mid Cap Growth Fund | Annual Report 2021 | 11 |
Statement of Assets and Liabilities
December 31, 2021
December 31, 2021
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $306,200,368) | $417,682,423 |
| Affiliated issuers (cost $9,142,488) | 9,142,488 |
| Receivable for: | |
| Capital shares sold | 933 |
| Dividends | 102,543 |
| Foreign tax reclaims | 4,065 |
| Prepaid expenses | 10,960 |
| Total assets | 426,943,412 |
| Liabilities | |
| Due to custodian | 4,065 |
| Payable for: | |
| Capital shares purchased | 388,125 |
| Management services fees | 9,496 |
| Distribution and/or service fees | 240 |
| Service fees | 1,741 |
| Compensation of board members | 84,671 |
| Compensation of chief compliance officer | 79 |
| Other expenses | 20,478 |
| Total liabilities | 508,895 |
| Net assets applicable to outstanding capital stock | $426,434,517 |
| Represented by | |
| Trust capital | $426,434,517 |
| Total - representing net assets applicable to outstanding capital stock | $426,434,517 |
| Class 1 | |
| Net assets | $391,573,154 |
| Shares outstanding | 8,176,940 |
| Net asset value per share | $47.89 |
| Class 2 | |
| Net assets | $34,861,363 |
| Shares outstanding | 750,397 |
| Net asset value per share | $46.46 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 12 | CTIVP® – Westfield Mid Cap Growth Fund | Annual Report 2021 |
Statement of Operations
Year Ended December 31, 2021
Year Ended December 31, 2021
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $2,398,897 |
| Dividends — affiliated issuers | 4,951 |
| Foreign taxes withheld | (6,538) |
| Total income | 2,397,310 |
| Expenses: | |
| Management services fees | 3,723,662 |
| Distribution and/or service fees | |
| Class 2 | 81,789 |
| Service fees | 20,140 |
| Compensation of board members | 35,425 |
| Custodian fees | 8,413 |
| Printing and postage fees | 12,928 |
| Audit fees | 29,500 |
| Legal fees | 14,202 |
| Interest on interfund lending | 179 |
| Compensation of chief compliance officer | 84 |
| Other | 14,120 |
| Total expenses | 3,940,442 |
| Fees waived or expenses reimbursed by Investment Manager and its affiliates | (5,014) |
| Total net expenses | 3,935,428 |
| Net investment loss | (1,538,118) |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 161,420,884 |
| Investments — affiliated issuers | (1,078) |
| Net realized gain | 161,419,806 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | (92,818,320) |
| Net change in unrealized appreciation (depreciation) | (92,818,320) |
| Net realized and unrealized gain | 68,601,486 |
| Net increase in net assets resulting from operations | $67,063,368 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| CTIVP® – Westfield Mid Cap Growth Fund | Annual Report 2021 | 13 |
Statement of Changes in Net Assets
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | |
| Operations | ||
| Net investment loss | $(1,538,118) | $(2,018,891) |
| Net realized gain | 161,419,806 | 67,691,319 |
| Net change in unrealized appreciation (depreciation) | (92,818,320) | 82,640,695 |
| Net increase in net assets resulting from operations | 67,063,368 | 148,313,123 |
| Decrease in net assets from capital stock activity | (309,829,368) | (60,979,151) |
| Total increase (decrease) in net assets | (242,766,000) | 87,333,972 |
| Net assets at beginning of year | 669,200,517 | 581,866,545 |
| Net assets at end of year | $426,434,517 | $669,200,517 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 14 | CTIVP® – Westfield Mid Cap Growth Fund | Annual Report 2021 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect any fees and expenses imposed under your
Contract and/or Qualified Plan, as applicable; such fees and expenses would reduce the total returns for all periods shown. Total return and portfolio turnover are not annualized for periods of less than one year. The
portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain derivatives, if any. If such transactions were included, the Fund’s portfolio
turnover rate may be higher.
| Net asset value, beginning of period | Net investment income (loss) | Net realized and unrealized gain (loss) | Total from investment operations | |
| Class 1 | ||||
| Year Ended 12/31/2021 | $41.03 | (0.14) | 7.00 | 6.86 |
| Year Ended 12/31/2020 | $32.18 | (0.11) | 8.96 | 8.85 |
| Year Ended 12/31/2019 | $22.64 | 0.07 | 9.47 | 9.54 |
| Year Ended 12/31/2018 | $23.43 | 0.01 | (0.80) | (0.79) |
| Year Ended 12/31/2017 | $19.06 | 0.01 | 4.36 | 4.37 |
| Class 2 | ||||
| Year Ended 12/31/2021 | $39.91 | (0.24) | 6.79 | 6.55 |
| Year Ended 12/31/2020 | $31.38 | (0.19) | 8.72 | 8.53 |
| Year Ended 12/31/2019 | $22.13 | 0.01 | 9.24 | 9.25 |
| Year Ended 12/31/2018 | $22.96 | (0.05) | (0.78) | (0.83) |
| Year Ended 12/31/2017 | $18.72 | (0.04) | 4.28 | 4.24 |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Ratios include interfund lending expense which is less than 0.01%. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 16 | CTIVP® – Westfield Mid Cap Growth Fund | Annual Report 2021 |
Financial Highlights (continued)
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets(a) | Total net expense ratio to average net assets(a),(b) | Net investment income (loss) ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Class 1 | |||||||
| Year Ended 12/31/2021 | $47.89 | 16.72% | 0.84%(c) | 0.84%(c) | (0.32%) | 58% | $391,573 |
| Year Ended 12/31/2020 | $41.03 | 27.50% | 0.83%(c) | 0.83%(c) | (0.35%) | 75% | $638,591 |
| Year Ended 12/31/2019 | $32.18 | 42.14% | 0.83% | 0.83% | 0.25% | 70% | $555,819 |
| Year Ended 12/31/2018 | $22.64 | (3.37%) | 0.84% | 0.84% | 0.05% | 72% | $491,881 |
| Year Ended 12/31/2017 | $23.43 | 22.93% | 0.87% | 0.87% | 0.04% | 121% | $515,408 |
| Class 2 | |||||||
| Year Ended 12/31/2021 | $46.46 | 16.41% | 1.09%(c) | 1.09%(c) | (0.56%) | 58% | $34,861 |
| Year Ended 12/31/2020 | $39.91 | 27.18% | 1.08%(c) | 1.08%(c) | (0.60%) | 75% | $30,610 |
| Year Ended 12/31/2019 | $31.38 | 41.80% | 1.08% | 1.08% | 0.02% | 70% | $26,048 |
| Year Ended 12/31/2018 | $22.13 | (3.61%) | 1.09% | 1.09% | (0.20%) | 72% | $18,181 |
| Year Ended 12/31/2017 | $22.96 | 22.65% | 1.12% | 1.12% | (0.21%) | 121% | $19,303 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| CTIVP® – Westfield Mid Cap Growth Fund | Annual Report 2021 | 17 |
Notes to Financial Statements
December 31, 2021
December 31, 2021
Note 1. Organization
CTIVP® – Westfield Mid
Cap Growth Fund (the Fund), a series of Columbia Funds Variable Series Trust II (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an
open-end management investment company organized as a Massachusetts business trust.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers Class 1 and Class 2 shares to separate accounts funding variable annuity contracts and variable life insurance policies (collectively, Contracts) issued by
affiliated and unaffiliated life insurance companies (Participating Insurance Companies) as well as qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors (Qualified
Investors) authorized by Columbia Management Investment Distributors, Inc. (the Distributor). You may not buy (nor will you own) shares of the Fund directly. You may invest by participating in a Qualified Plan or by
buying a Contract and making allocations to the Fund. Although all share classes generally have identical voting, dividend and liquidation rights, each share class votes separately when required by the Trust’s
organizational documents or by law. Different share classes pay different net investment income distribution amounts to the extent the expenses of such share classes differ, and distributions in liquidation will be
proportional to the net asset value of each share class. Each share class has its own cost structure and other features.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Equity securities listed on an
exchange are valued at the closing price or last trade price on their primary exchange at the close of business of the New York Stock Exchange. Securities with a closing price not readily available or not listed on
any exchange are valued at the mean between the closing bid and ask prices. Listed preferred stocks convertible into common stocks are valued using an evaluated price from a pricing service.
Foreign equity securities are
valued based on the closing price or last trade price on their primary exchange at the close of business of the New York Stock Exchange. If any foreign equity security closing prices are not readily available,
the securities are valued at the mean of the latest quoted bid and ask prices on such exchanges or markets. Foreign currency exchange rates are determined at the scheduled closing time of the New York Stock Exchange.
Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange; therefore, the closing prices for securities in such markets or on such exchanges may not fully reflect
events that occur after such close but before the close of the New York Stock Exchange. In those situations, foreign securities will be fair valued pursuant to a policy adopted by the Board of Trustees. Under the
policy, the Fund may utilize a third-party pricing service to determine these fair values. The third-party pricing service takes into account multiple factors, including, but not limited to, movements in the U.S.
securities markets, certain depositary receipts, futures contracts and foreign exchange rates that have occurred subsequent to the close of the foreign exchange or market, to determine a good faith estimate that
reasonably reflects the current market conditions as of the close of the New York Stock Exchange. The fair value of a security is likely to be different from the quoted or published price, if available.
Investments in open-end investment
companies (other than exchange-traded funds (ETFs)), are valued at the latest net asset value reported by those companies as of the valuation time.
| 18 | CTIVP® – Westfield Mid Cap Growth Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
Income recognition
Corporate actions and dividend
income are generally recorded net of any non-reclaimable tax withholdings, on the ex-dividend date or upon receipt of an ex-dividend notification in the case of certain foreign securities.
The Fund may receive distributions
from holdings in equity securities, business development companies (BDCs), exchange-traded funds (ETFs), limited partnerships (LPs), other regulated investment companies (RICs), and real estate investment trusts
(REITs), which report information as to the tax character of their distributions annually. These distributions are allocated to dividend income, capital gain and return of capital based on actual information reported.
Return of capital is recorded as a reduction of the cost basis of securities held. If the Fund no longer owns the applicable securities, return of capital is recorded as a realized gain. With respect to REITs, to the
extent actual information has not yet been reported, estimates for return of capital are made by Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise
Financial, Inc. (Ameriprise Financial). The Investment Manager’s estimates are subsequently adjusted when the actual character of the distributions is disclosed by the REITs, which could result in a
proportionate change in return of capital to shareholders.
Awards from class action litigation
are recorded as a reduction of cost basis if the Fund still owns the applicable securities on the payment date. If the Fund no longer owns the applicable securities on the payment date, the proceeds are recorded as
realized gains.
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
Federal income tax status
The Fund is treated as a
partnership for federal income tax purposes, and the Fund does not expect to make regular distributions. The Fund will not be subject to federal income tax, and therefore, there is no provision for federal income
taxes. The partners of the Fund are subject to tax on their distributive share of the Fund’s income and loss. The components of the Fund’s net assets are reported at the partner-level for federal income
tax purposes, and therefore, are not presented in the Statement of Assets and Liabilities.
| CTIVP® – Westfield Mid Cap Growth Fund | Annual Report 2021 | 19 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Foreign taxes
The Fund may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries, as applicable, based upon its current interpretation of tax rules
and regulations that exist in the markets in which it invests.
Realized gains in certain countries
may be subject to foreign taxes at the Fund level, based on statutory rates. The Fund accrues for such foreign taxes on realized and unrealized gains at the appropriate rate for each jurisdiction, as applicable. The
amount, if any, is disclosed as a liability on the Statement of Assets and Liabilities.
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Under the Management Agreement, the
Investment Manager provides the Fund with investment research and advice, as well as administrative and accounting services. The Investment Manager is responsible for the ultimate oversight of investments made by the
Fund. The Fund’s subadviser (see Subadvisory agreement below) has the primary responsibility for the day-to-day portfolio management of the Fund. The management services fee is an annual fee that is equal to a
percentage of the Fund’s daily net assets that declines from 0.81% to 0.68% as the Fund’s net assets increase. The effective management services fee rate for the year ended December 31, 2021 was 0.81% of
the Fund’s average daily net assets.
Subadvisory agreement
The Investment Manager has entered
into a Subadvisory Agreement with Westfield Capital Management Company, L.P. to serve as the subadviser to the Fund. The Investment Manager compensates the subadviser to manage the investment of the Fund’s
assets.
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. Under a Deferred Compensation Plan (the
Deferred Plan), these members of the Board of Trustees may elect to defer payment of up to 100% of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of
certain funds managed by the Investment Manager. The Fund’s liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Deferred Plan. All
amounts payable under the Deferred Plan constitute a general unsecured obligation of the Fund. The expense for the Deferred Plan, which includes Trustees’ fees deferred during the current period as well as any
gains or losses on the Trustees’ deferred compensation balances as a result of market fluctuations, is included in "Compensation of board members" on the Statement of Operations.
| 20 | CTIVP® – Westfield Mid Cap Growth Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
Service fees
The Fund has entered into a
Shareholder Services Agreement with Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial. Under this
agreement, the Fund pays a service fee equal to the payments made by the Transfer Agent to Participating Insurance Companies and other financial intermediaries (together, Participating Organizations) for services each
such Participating Organization provides to its clients, customers and participants that are invested directly or indirectly in the Fund, up to a cap approved by the Board of Trustees from time to time. The effective
service fee rate for the year ended December 31, 2021, was 0.00% of the Fund’s average daily net assets.
The Transfer Agent may retain as
compensation for its services revenues from fees for wire, telephone and redemption orders, account transcripts due the Transfer Agent from Fund shareholders and interest (net of bank charges) earned with respect to
balances in accounts the Transfer Agent maintains in connection with its services to the Fund.
Distribution and/or service fees
The Fund has an agreement with the
Distributor, an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution services. Under a Plan and Agreement of Distribution, the Fund pays a fee at an annual rate
of up to 0.25% of the Fund’s average daily net assets attributable to Class 2 shares. The Fund pays no distribution and service fees for Class 1 shares.
Expenses waived/reimbursed by the
Investment Manager and its affiliates
The Investment Manager and certain
of its affiliates have contractually agreed to waive fees and/or reimburse expenses (excluding certain fees and expenses described below) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, so that the Fund’s net operating expenses, after giving effect to fees waived/expenses reimbursed and any balance credits and/or overdraft charges from the Fund’s
custodian, do not exceed the following annual rate(s) as a percentage of the classes’ average daily net assets:
| May 1, 2021 through April 30, 2022 | Prior to May 1, 2021 | |
| Class 1 | 0.84% | 0.85% |
| Class 2 | 1.09 | 1.10 |
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), expenses associated with investments in affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange-traded funds), transaction costs and
brokerage commissions, costs related to any securities lending program, dividend expenses associated with securities sold short, inverse floater program fees and expenses, transaction charges and interest on borrowed
money, interest, costs associated with certain shareholder meetings, infrequent and/or unusual expenses and any other expenses the exclusion of which is specifically approved by the Board of Trustees. This
agreement may be modified or amended only with approval from the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements
described above are not recoverable by the Investment Manager or its affiliates in future periods.
| CTIVP® – Westfield Mid Cap Growth Fund | Annual Report 2021 | 21 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Note 4. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $267,068,537 and $584,467,863, respectively, for the year ended December 31, 2021. The amount of purchase and
sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 5. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes
referred to as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
Note 6. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund’s activity in the
Interfund Program during the year ended December 31, 2021 was as follows:
| Borrower or lender | Average loan balance ($) | Weighted average interest rate (%) | Number of days with outstanding loans |
| Borrower | 1,550,000 | 0.69 | 6 |
Interest expense incurred by the
Fund is recorded as Interfund lending in the Statement of Operations. The Fund had no outstanding interfund loans at December 31, 2021.
Note 7. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to an October 28, 2021 amendment and restatement, the credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment
Manager or an affiliated investment manager, severally and not jointly, permits collective borrowings up to $950 million. Interest is currently charged to each participating fund based on its borrowings at a rate
equal to the higher of (i) the federal funds effective rate, (ii) the secured overnight financing rate plus 0.11448% and (iii) the overnight bank funding rate, plus in each case, 1.00%. Each borrowing under the credit
facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The
commitment fee is included in other expenses in the Statement of Operations. This agreement expires annually in October unless extended or renewed. Prior to the October 28, 2021 amendment and restatement, the Fund had
access to a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. which permitted collective borrowings up to $950 million. Interest was
charged to each participating fund based on its borrowings at a rate equal to the higher of (i) the federal funds effective rate, (ii) the one-month London Interbank Offered Rate (LIBOR) rate and (iii) the overnight
bank funding rate, plus in each case, 1.25%.
The Fund had no borrowings during
the year ended December 31, 2021.
| 22 | CTIVP® – Westfield Mid Cap Growth Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Note 8. Significant
risks
Information technology sector
risk
The Fund is more susceptible to the
particular risks that may affect companies in the information technology sector than if it were invested in a wider variety of companies in unrelated sectors. Companies in the information technology sector are subject
to certain risks, including the risk that new services, equipment or technologies will not be accepted by consumers and businesses or will become rapidly obsolete. Performance of such companies may be affected by
factors including obtaining and protecting patents (or the failure to do so) and significant competitive pressures, including aggressive pricing of their products or services, new market entrants, competition for
market share and short product cycles due to an accelerated rate of technological developments. Such competitive pressures may lead to limited earnings and/or falling profit margins. As a result, the value of their
securities may fall or fail to rise. In addition, many information technology sector companies have limited operating histories and prices of these companies’ securities historically have been more volatile than
other securities, especially over the short term. Some companies in the information technology sector are facing increased government and regulatory scrutiny and may be subject to adverse government or regulatory
action, which could negatively impact the value of their securities.
Market risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
The coronavirus disease 2019 and
its variants (COVID-19) pandemic has resulted in, and may continue to result in, significant global economic and societal disruption and market volatility due to disruptions in market access, resource availability,
facilities operations, imposition of tariffs, export controls and supply chain disruption, among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement
and loss in human and other resources. The uncertainty surrounding the magnitude, duration, reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental
authorities or other third parties, present unknowns that are yet to unfold. The impacts, as well as the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and
pandemics that may arise in the future – could negatively affect global economies and markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in
emerging market countries may be greater due to generally less established healthcare systems, governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing
political, social and economic risks in certain countries or globally. The disruptions caused by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively
impact the Fund’s ability to achieve its investment objectives. Any such event(s) could have a significant adverse impact on the value and risk profile of the Fund.
Shareholder concentration risk
At December 31, 2021, affiliated
shareholders of record owned 100.0% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its
| CTIVP® – Westfield Mid Cap Growth Fund | Annual Report 2021 | 23 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
liquid positions, which may result in Fund losses
and the Fund holding a higher percentage of less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Small- and mid-cap company risk
Investments in small- and
mid-capitalization companies (small- and mid-cap companies) often involve greater risks than investments in larger, more established companies (larger companies) because small- and mid-cap companies tend to have less
predictable earnings and may lack the management experience, financial resources, product diversification and competitive strengths of larger companies. Securities of small- and mid-cap companies may be less liquid
and more volatile than the securities of larger companies.
Note 9. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
Note 10. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in
connection with the conduct of their business activities. Ameriprise Financial believes that the Fund is not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject
of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with
the Fund. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (SEC) on legal and regulatory matters that relate to
Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that
these matters, or the adverse publicity associated with them, will not result in increased Fund redemptions, reduced sale of Fund shares or other adverse consequences to the Fund. Further, although we believe
proceedings are not likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines,
penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial or one or more of its affiliates that provides services to
the Fund.
| 24 | CTIVP® – Westfield Mid Cap Growth Fund | Annual Report 2021 |
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees of Columbia
Funds Variable Series Trust II and Shareholders of CTIVP® – Westfield Mid Cap Growth Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of CTIVP® – Westfield Mid Cap Growth Fund (one of the funds constituting Columbia Funds Variable Series Trust II, referred to
hereafter as the "Fund") as of December 31, 2021, the related statement of operations for the year ended December 31, 2021, the statement of changes in net assets for each of the two years in the period ended December
31, 2021, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2021 (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, 2021, 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, 2021 and the financial highlights for each of the five years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in the
United States of America.
Basis for Opinion
These financial statements are the
responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these
financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2021 by correspondence with the custodian and transfer agent. We believe that our
audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Minneapolis, Minnesota
February 18, 2022
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| CTIVP® – Westfield Mid Cap Growth Fund | Annual Report 2021 | 25 |
TRUSTEES AND
OFFICERS
The Board oversees the
Fund’s operations and appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following table provides basic biographical information about the
Fund’s Trustees as of the printing of this report, including their principal occupations during the past five years, although specific titles for individuals may have varied over the period. The year set forth
beneath Length of Service in the table below is the year in which the Trustee was first appointed or elected as Trustee to any Fund currently in the Columbia Funds Complex or a predecessor thereof. Under current Board
policy, each Trustee generally serves until December 31 of the year such Trustee turns seventy-five (75).
Independent trustees
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| George S. Batejan c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1953 | Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 176 | Former Chairman of the Board, NICSA (National Investment Company Services Association) (Executive Committee, Nominating Committee and Governance Committee), 2014-2016; former Director, Intech Investment Management, 2011-2016; former Board Member, Metro Denver Chamber of Commerce, 2015-2016; former Advisory Board Member, University of Colorado Business School, 2015-2018 |
| Kathleen Blatz c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2006 | Attorney, specializing in arbitration and mediation; Chief Justice, Minnesota Supreme Court, 1998-2006; Associate Justice, Minnesota Supreme Court, 1996-1998; Fourth Judicial District Court Judge, Hennepin County, 1994-1996; Attorney in private practice and public service, 1984-1993; State Representative, Minnesota House of Representatives, 1979-1993, which included service on the Tax and Financial Institutions and Insurance Committees; Member and Interim Chair, Minnesota Sports Facilities Authority, January 2017-July 2017; Interim President and Chief Executive Officer, Blue Cross Blue Shield of Minnesota (health care insurance), February-July 2018, April-October 2021 | 176 | Former Trustee, Blue Cross Blue Shield of Minnesota, 2009-2021 (Chair of the Business Development Committee, 2014-2017; Chair of the Governance Committee, 2017-2019); former Member and Chair of the Board, Minnesota Sports Facilities Authority, January 2017-July 2017; former Director, Robina Foundation, 2009-2020 (Chair, 2014-2020); Director, Schulze Family Foundation, since 2021 |
| Pamela G. Carlton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2007 | President, Springboard — Partners in Cross Cultural Leadership (consulting company) since 2003; Managing Director of US Equity Research, JP Morgan Chase, 1999-2003; Director of US Equity Research, Chase Asset Management, 1996-1999; Co-Director Latin America Research, 1993-1996, COO Global Research, 1992-1996, Co-Director of US Research, 1991-1992, Investment Banker, Morgan Stanley, 1982-1991, Morgan Stanley; Attorney, Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 176 | Trustee, New York Presbyterian Hospital Board (Executive Committee and Chair of People Committee) since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee); Director, Apollo Commercial Real Estate Finance, Inc. since 2021; the Governing Council of the Independent Directors Council (IDC), since 2021 |
| 26 | CTIVP® – Westfield Mid Cap Growth Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Janet Langford Carrig c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1957 | Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 174 | Director, EQT Corporation (natural gas producer) since 2019; Director, Whiting Petroleum Corporation (independent oil and gas company) since 2020 |
| J. Kevin Connaughton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2020 | Member, FINRA National Adjudicatory Council since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Consultant to Independent Trustees of CFVIT and CFST I from March 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Managing Director and General Manager of Mutual Fund Products, Columbia Management Investment Advisers, LLC, May 2010-February 2015; President, Columbia Funds, 2008-2015; and senior officer of Columbia Funds and affiliated funds, 2003-2015 | 174 | Former Director, The Autism Project, March 2015-December 2021; former Member of the Investment Committee, St. Michael’s College, November 2015-February 2020; former Trustee, St. Michael’s College, June 2017-September 2019; former Trustee, New Century Portfolios, January 2015-December 2017 |
| Olive M. Darragh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since 2020 | Managing Director of Darragh Inc. (strategy and talent management consulting firm) since 2010; Founder and CEO, Zolio, Inc. (investment management talent identification platform) since 2004; Consultant to Independent Trustees of CFVIT and CFST I from June 2019 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 2001-2004 | 174 | Former Director, University of Edinburgh Business School (Member of US Board); former Director, Boston Public Library Foundation |
| Patricia M. Flynn c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1950 | Trustee since 2004 | Trustee Professor of Economics and Management, Bentley University since 1976 (also teaches and conducts research on corporate governance); Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 176 | Trustee, MA Taxpayers Foundation since 1997; Board of Governors, Innovation Institute, MA Technology Collaborative, 2010-2020; former Board of Directors, The MA Business Roundtable, 2003-2019 |
| Brian J. Gallagher c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 176 | Trustee, Catholic Schools Foundation since 2004 |
| CTIVP® – Westfield Mid Cap Growth Fund | Annual Report 2021 | 27 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Douglas A. Hacker c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1955 | Co-Chair since 2021; Chair of CFST I and CFVIT since 2014; Trustee of CFST I and CFVIT since 1996 and CFST, CFST II, CFVST II, CET I and CET II since 2021 | Independent business executive since May 2006; Executive Vice President – Strategy of United Airlines, December 2002 - May 2006; President of UAL Loyalty Services (airline marketing company), September 2001-December 2002; Executive Vice President and Chief Financial Officer of United Airlines, July 1999-September 2001 | 176 | Director, Spartan Nash Company (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing); former Director, Nash Finch Company (food distributor), 2005-2013; former Director, SeaCube Container Leasing Ltd. (container leasing), 2010-2013; and former Director, Travelport Worldwide Limited (travel information technology), 2014-2019 |
| Nancy T. Lukitsh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1956 | Trustee since 2011 | Senior Vice President, Partner and Director of Marketing, Wellington Management Company, LLP (investment adviser), 1997-2010; Chair, Wellington Management Portfolios (commingled non-U.S. investment pools), 2007 -2010; Director, Wellington Trust Company, NA and other Wellington affiliates, 1997-2010 | 174 | None |
| David M. Moffett c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2011 | Retired; Consultant to Bridgewater and Associates | 174 | Director, CSX Corporation (transportation suppliers); Director, Genworth Financial, Inc. (financial and insurance products and services); Director, PayPal Holdings Inc. (payment and data processing services); Trustee, University of Oklahoma Foundation; former Director, eBay Inc. (online trading community), 2007-2015; and former Director, CIT Bank, CIT Group Inc. (commercial and consumer finance), 2010-2016 |
| Catherine James Paglia c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Co-Chair since 2021; Chair of CFST, CFST II, CFVST II, CET I and CET II since 2020; Trustee of CFST, CFST II and CFVST II since 2004 and CFST I and CFVIT since 2021 | Director, Enterprise Asset Management, Inc. (private real estate and asset management company) since September 1998; Managing Director and Partner, Interlaken Capital, Inc., 1989-1997; Vice President, 1982-1985, Principal, 1985-1987, Managing Director, 1987-1989, Morgan Stanley; Vice President, Investment Banking, 1980-1982, Associate, Investment Banking, 1976-1980, Dean Witter Reynolds, Inc. | 176 | Director, Valmont Industries, Inc. (irrigation systems manufacturer) since 2012; Trustee, Carleton College (on the Investment Committee); Trustee, Carnegie Endowment for International Peace (on the Investment Committee) |
| 28 | CTIVP® – Westfield Mid Cap Growth Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Minor M. Shaw c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1947 | Trustee since 2003 | President, Micco LLC (private investments) since 2011; President, Micco Corp. (family investment business), 1998-2011 | 176 | Director, Blue Cross Blue Shield of South Carolina (Chair of Compensation Committee) since April 2008; Trustee, Hollingsworth Funds (on the Investment Committee) since 2016 (previously Board Chair from 2016-2019); Former Advisory Board member, Duke Energy Corp., 2016-2020; Chair of the Duke Endowment; Chair of Greenville – Spartanburg Airport Commission; former Trustee, BofA Funds Series Trust (11 funds), 2003-2011; former Director, Piedmont Natural Gas, 2004-2016; former Director, National Association of Corporate Directors, Carolinas Chapter, 2013-2018; Chair, Daniel-Mickel Foundation since 1998 |
| Natalie A. Trunow c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1967 | Trustee since 2020 | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services), January 2016-January 2021; Non-executive Member of the Investment Committee and Valuation Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services), August 2018-January 2021; Advisor, Paradigm Asset Management, November 2016-December 2021; Consultant to Independent Trustees of CFVIT and CFST I from September 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Director of Investments/Consultant, Casey Family Programs, April 2016-November 2016; Senior Vice President and Chief Investment Officer, Calvert Investments, August 2008-January 2016; Section Head and Portfolio Manager, General Motors Asset Management, June 1997-August 2008 | 174 | Former Director, Investment Committee, Health Services for Children with Special Needs, Inc., 2012-2019; Director, Chair of Audit Committee, Consumer Credit Counseling Services (formerly Guidewell Financial Solutions), since 2019; Independent Director, Investment Committee and Valuation Committee, Sarona Asset Management, since 2019 |
| Sandra Yeager c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2017 | Retired; President and founder, Hanoverian Capital, LLC (SEC registered investment advisor firm), 2008-2016; Managing Director, DuPont Capital, 2006-2008; Managing Director, Morgan Stanley Investment Management, 2004-2006; Senior Vice President, Alliance Bernstein, 1990-2004 | 176 | Former Director, NAPE Education Foundation, October 2016-October 2020 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Fund Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I (CET I), Columbia ETF Trust II (CET II), Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Beckman, Gallagher and Hacker and Mses. Blatz, Carlton, Flynn, Paglia, Shaw and Yeager serve as Directors of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
| CTIVP® – Westfield Mid Cap Growth Fund | Annual Report 2021 | 29 |
TRUSTEES AND OFFICERS (continued)
Interested trustee affiliated with Investment Manager*
Interested trustee affiliated with Investment Manager*
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during the past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex overseen | Other directorships held by Trustee during the past five years |
| Daniel J. Beckman c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since November 2021(a) | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC (since April 2015); officer of Columbia Funds and affiliated funds since 2020. | 176 | Director, Ameriprise Trust Company, since October 2016; Director, Columbia Management Investment Distributors, Inc. since November 2018; Board of Governors, Columbia Wanger Asset Management, LLC since January 2022 |
| * | Interested person (as defined under the 1940 Act) by reason of being an officer, director, security holder and/or employee of the Investment Manager or Ameriprise Financial. |
| (a) | Mr. Beckman serves as the President and Principal Executive Officer of the Columbia Funds (since 2021). |
The Statement of Additional
Information has additional information about the Fund’s Board members and is available, without charge, upon request by calling 800.345.6611 or contacting your financial intermediary.
The Board has appointed officers
who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. The following table provides basic information about the Officers of the
Fund, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Beckman, who is President and Principal Executive Officer, the
Fund’s other officers are:
Fund officers
| 30 | CTIVP® – Westfield Mid Cap Growth Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Fund officers (continued)
Fund officers (continued)
| CTIVP® – Westfield Mid Cap Growth Fund | Annual Report 2021 | 31 |
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For Fund and other investment product prospectuses, which contain this and other important information, contact your
financial advisor or insurance representative. Please read the prospectus carefully before you invest. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved. Columbia Management Investment Distributors, Inc., 290 Congress Street, Boston, MA 02210
© 2022 Columbia Management Investment
Advisers, LLC.
C-3020 AW (2/22)
Variable Portfolio
– Partners Small Cap Growth Fund
Please remember that you may not
buy (nor will you own) shares of the Fund directly. The Fund is available through variable annuity contracts and variable life insurance policies offered by the separate accounts of participating insurance companies
as well as qualified pension and retirement plans. Please contact your financial advisor or insurance representative for more information.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
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| 10 | |
| 16 | |
| 17 | |
| 18 | |
| 20 | |
| 22 | |
| 29 | |
| 30 |
Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which Variable Portfolio – Partners Small Cap Growth Fund (the Fund) holds investments consistent with the procedures as stated in the Statement of Additional
Information (SAI). You may obtain a copy of the SAI without charge by calling 800.345.6611; contacting your financial intermediary or searching the website of the Securities and Exchange Commission (SEC) at sec.gov.
Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge
by visiting columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. The Fund’s Form N-PORT is available on the SEC’s website at sec.gov. The Fund’s complete
schedule of portfolio holdings, as filed on Form N-PORT, can also be obtained without charge, upon request, by calling 800.345.6611.
Additional Fund information
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
290 Congress Street
Boston, MA 02210
Fund distributor
Columbia Management Investment Distributors,
Inc.
290 Congress Street
Boston, MA 02210
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
Variable Portfolio – Partners Small Cap
Growth Fund | Annual Report 2021
Fund at a Glance
Investment objective
The Fund
seeks to provide shareholders with long-term capital growth.
Portfolio management
Scout Investments, Inc.
James McBride, CFA
Timothy Miller, CFA
Allspring Global Investments, LLC
Thomas Ognar, CFA
Robert Gruendyke, CFA
David Nazaret, CFA
| Variable Portfolio – Partners Small Cap Growth Fund | Annual Report 2021 | 3 |
Fund at a Glance (continued)
Performance of a hypothetical $10,000 investment (December 31, 2011 — December 31, 2021)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class 2 shares of Variable Portfolio – Partners Small Cap Growth Fund during the stated time period, and does not reflect the deduction of taxes, if any, that a
shareholder may pay on Fund distributions or on the redemption of Fund shares. The returns also do not reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy or
qualified pension or retirement plan, if any.
| 4 | Variable Portfolio – Partners Small Cap Growth Fund | Annual Report 2021 |
Manager Discussion of Fund Performance
During the annual period ended
December 31, 2021, the Fund was managed by three independent money management firms and each invested a portion of the portfolio’s assets. Effective April 30, 2021, BMO Asset Management Corp. was terminated as a
subadviser and the assets of the sleeve managed by BMO Asset Management Corp. were divided among the two remaining portions of the Fund. As of December 31, 2021, Scout Investments, Inc. (Scout) and Allspring Global
Investments, LLC (Allspring) managed approximately 47.77% and 52.23% of the portfolio, respectively.
At December 31, 2021, approximately
97.21% of the Fund’s shares were owned in the aggregate by affiliated funds-of-funds managed by Columbia Management Investment Advisers, LLC (the Investment Manager). As a result of asset allocation decisions by
the Investment Manager, it is possible that the Fund may experience relatively large purchases or redemptions from affiliated funds-of-funds. The Investment Manager seeks to minimize the impact of these transactions
by structuring them over a reasonable period of time. The Fund may experience increased expenses as it buys and sells securities as a result of purchases or redemptions by affiliated funds-of-funds.
For the 12-month period that ended December 31, 2021, the Fund’s Class 2 shares returned 8.02%. The Fund outperformed its benchmark, the Russell 2000 Growth Index, which
returned 2.83% over the same period.
Market overview
The year 2021 was largely
characterized by a rotation away from growth stocks into value and economically-sensitive parts of the equity market. Strong economic growth and a rapid increase in earnings expectations for the broad-based equity
market, along with fears around rising interest rates and higher inflation, exacerbated the shift. Within the growth universe, large-cap and mega-cap growth stocks proved to be buoyant in the face of the cyclical
headwinds, as the Russell 1000 Growth Index generated strong, but heavily concentrated, returns, outpacing the Russell 1000 Value Index for the annual period. However, it was a very different picture down the market
capitalization spectrum, as growth stocks struggled mightily across the mid-cap and small-cap segments. For the annual period, the Russell Midcap Growth Index trailed the Russell 1000 Growth Index by nearly 1500 basis
points, and the Russell 2000 Growth Index trailed the Russell 1000 Growth Index by nearly 2500 basis points, each the highest differential in more than 20 years. (A basis point is 1/100th of a percentage point.) Not
only did mid-cap growth stocks and small-cap growth stocks lag large-cap growth stocks, they also significantly underperformed their mid-cap and small-cap value counterparts.
Fundamentally, growth stocks in the
mid-cap and small-cap segments of the U.S. equity market performed well but were not rewarded during the annual period. They were pressured by a deluge of special purpose acquisition companies and initial public
offerings, which created competition for capital in the lower market-cap segments. Additionally, the rapid shift into cyclicals, exacerbated by markedly higher inflation metrics, caused multiple compression (i.e., a
lower price/earnings ratio) in longer-duration assets, like small-cap and mid-cap growth stocks.
The Fund’s notable
contributors during the period
BMO
| • | From January 1, 2021 through April 30, 2021 when we managed a portion of the Fund (the initial reporting period), our portion of the Fund outperformed the benchmark due primarily to stock selection. Sector allocation contributed positively to relative results as well. |
| • | From a sector perspective, stock selection in health care, consumer discretionary and information technology contributed most positively to our portion of the Fund’s relative results. |
| • | Having overweighted allocations to the energy and industrials sectors added value. |
| • | Among the top positive individual contributors to our portion of the Fund’s results was Vericel Corp., a provider of tissue engineering and skin replacement therapy. Vericel’s shares appreciated during the initial reporting period based on strong fundamental results in the face of COVID-related headwinds that affected the medical market broadly, with its offerings gaining significant traction in their respective markets. |
| • | Sonos Inc., a provider of wireless smart home sound systems, experienced a share price gain during the initial reporting period. Investors reacted positively to the company’s new longer-term growth targets, which implied strong revenue growth. |
| Variable Portfolio – Partners Small Cap Growth Fund | Annual Report 2021 | 5 |
Manager Discussion of Fund Performance (continued)
| • | Shares of Golden Entertainment Inc. appreciated significantly during the initial reporting period, as investors recognized the steep recovery in Las Vegas and regional gaming strength. Both the company’s casino operations and distributed gaming segments performed well as occupancy improved across the gaming industry. |
Allspring
| • | Our portion of the Fund outperformed the benchmark during the annual period due primarily to stock selection decisions overall. |
| • | Stock selection within the consumer discretionary, health care and industrials sectors contributed most positively. |
| ○ | Within consumer discretionary, select retailers, restaurants and Internet-related holdings were rewarded for their strong execution. |
| ○ | Within health care, medical technology and diagnostics companies benefited from their durable business models, innovative therapeutics and solid fundamentals. The Fund’s underweight to biotechnology also added value, as the industry underperformed in 2021 due to lower merger and acquisition activity, a dearth of high-profile trials and a heavy supply of initial public offerings. |
| ○ | Stocks in the industrials sector were supported by a strong cyclical backdrop, with housing, employment, transportation and waste management names benefiting from favorable economic tailwinds. |
| • | Among the strongest relative contributors to our portion of the Fund’s results was Boot Barn Holdings, Inc. (Boot Barn), which operates specialty retail stores. During the annual period, its stock rallied sharply after delivering robust sales growth, citing high gross margins along with strong same-store sales comparisons guidance with promising commentary around e-commerce and the burgeoning ladies Western-wear business segment. The stock also rose in concert with many retailers, who benefited from a cyclical tailwind. Additionally, Boot Barn benefited from secular tailwinds, including limited competition and growing popularity of its specialty apparel market. |
| • | Zurn Water Solutions Corp. (formerly Rexnord Corp.) engages in the manufacturing of engineered power transmission, aerospace and other precision motion technology products. In July 2021, Rexnord Corp. spun off its process and motion control business segment to Regal Beloit, forming a new entity called Regal Rexnord Corp., while its water management platform remained as a stand-alone business and was renamed Zurn Water Solutions Corp. Investors looked favorably at the deal, as they believed the water business was undervalued relative to peers, while its process and motion business may benefit from attractive synergies with Regal Beloit. Since the spin-off, our portion of the Fund retained positions in both companies. |
| • | Crocs, Inc. designs, manufactures and distributes casual footwear. During the annual period, its shares enjoyed triple-digit percentage gain after reporting robust revenue and margin growth. The company was able to stave off higher input costs by raising prices on clogs and charms without adversely impacting demand. |
Scout
| • | During the annual period, our portion of the Fund outperformed the benchmark. Such outperformance was due to a number of factors, including effective stock selection, the outperformance of value stocks over growth stocks within the small-cap segment of the U.S. equity market, and the strong performance of profitable companies compared to unprofitable businesses. Sector allocation was a modest detractor during the period. |
| • | Favorable stock selection in the health care, information technology and communication services sectors contributed most positively to relative results. Having overweighted allocations to information technology and communication services, each of which outpaced the benchmark during the annual period, also helped. |
| ○ | Within health care, strong stock selection in biotechnology, life sciences tools and services, health care technology, and pharmaceuticals drove outperformance, while being underweight in biotechnology also helped. |
| ○ | Within information technology, stock selection and an underweight position in software added value, as did an overweight position in semiconductors. |
| 6 | Variable Portfolio – Partners Small Cap Growth Fund | Annual Report 2021 |
Manager Discussion of Fund Performance (continued)
| • | Among the top individual contributors to our portion of the Fund’s results during the annual period was Ambarella, Inc., a leading provider of video processing and computer vision semiconductors used in security cameras and automotive applications. Its stock outperformed in large part due to wins in the automotive market, leading to a significant increase in the size of the company’s automotive pipeline for its new computer vision chips. |
| • | AMN Healthcare Services, Inc., a temporary healthcare staffing company that provides traveling nurse staffing, was also a strong positive contributor. During the annual period, the company posted strong results, as hospital demand for nurses remained high due to the COVID-19 pandemic. The company raised guidance and indicated its belief that the pandemic has only pulled forward long-term structural issues in healthcare staffing. |
| • | Omnicell, Inc. (Omnicell), which produces medication management automation solutions and adherence tools for healthcare systems and pharmacies, contributed positively as well. The company showed positive trends in booking and revenue as hospitals moved past the most critical phase of the pandemic, allowing a more normal sales and installation process for Omnicell. At the end of the annual period, Omnicell had sole source agreements with 151 of the top 300 U.S. health systems. |
The Fund’s notable
detractors during the period
BMO
| • | During the initial reporting period, stock selection in the energy, utilities and financials sectors detracted most from our portion of the Fund’s relative results. |
| • | Having an overweighted allocation to information technology and an underweighted allocation to consumer discretionary further dampened relative results. |
| • | Among individual stocks, the biggest detractors from our portion of the Fund’s results included ACADIA Pharmaceuticals Inc., a developer of neurological therapeutics. Its shares fell during the initial reporting period based on a Food & Drug Administration setback related to the company’s supplemental new drug application for Nuplazid in the treatment of hallucinations and delusions associated with dementia-related psychosis. |
| • | Frequency Therapeutics Inc. is a clinical stage biotechnology company developing therapeutics for the treatment of various degenerative diseases, most notably hearing loss. The position detracted during the initial reporting period based on mixed Phase 2 data in the company’s lead asset, FX-322, which showed limited hearing benefit over a placebo. Such data drove a material share price sell-off. |
| • | Amicus Therapeutics Inc., a biotechnology company, experienced a share price decline during the initial reporting period based on a clinical trial setback. In February 2021, the company released Phase 3 data for a trial in the treatment of Pompe disease, which did not successfully reach the designated primary endpoint. Pompe disease is an inherited disorder caused by buildup of a complex sugar called glycogen in the body’s cells. |
Allspring
| • | Stock selection in the communication services and consumer staples sectors detracted most from our portion of the Fund’s relative results. |
| • | Having an underweighted allocation to the strongly performing real estate sector also dampened relative results. |
| • | Among the greatest individual detractors from our portion of the Fund’s performance during the annual period was iRhythm Technologies, Inc, a developer of cardiac monitoring solutions. During the annual period, its shares fell sharply after Novitas Solutions, a contracted entity of the Center for Medicare and Medicaid Services, lowered reimbursement rates for its Zio patch, used to detect atrial fibrillation. The lower rates dramatically reduced the company’s revenue expectations. |
| • | Q2 Holdings, Inc. is a software-as-a-service-based provider of secure, cloud-based virtual banking solutions. Its stock declined sharply during the annual period, despite generating strong revenue growth and registered user metrics, citing solid demand and a robust pipeline. Its share price weakness was in part tied to the broader software sell-off during the annual period, as many investors took profits in stocks perceived as “COVID winners” in 2020. |
| Variable Portfolio – Partners Small Cap Growth Fund | Annual Report 2021 | 7 |
Manager Discussion of Fund Performance (continued)
| • | BigCommerce Holdings, Inc. provides a software-as-a-service e-commerce platform that allows merchants of all sizes to build and grow their businesses online. During the annual period, its shares sold off in conjunction with other COVID-19 beneficiaries, as the company dealt with tough year-over-year comparisons. |
Scout
| • | Stock selection in the industrials, financials and consumer discretionary sectors detracted most from our portion of the Fund’s relative results during the annual period. Having an underweighted allocation to consumer discretionary, which outpaced the benchmark during the annual period, also hurt. |
| ○ | Within industrials, an industry overweight to aerospace and an industry underweight in road/rails hurt relative performance. |
| ○ | Within financials, an industry overweight to consumer finance and an industry underweight in banks dampened results. |
| • | Among the biggest individual detractors from our portion of the Fund’s relative performance during the annual period was TPI Composites, Inc., which designs and manufactures composite blades for the wind energy market. During the annual period, company management lowered guidance multiple times, as it dealt with demand issues early in the year and challenges from rising input costs that impacted margins as the year progressed. |
| • | Tactile Systems Technology, Inc. is a medical device company that develops and manufactures products for the treatment of lymphedema and chronic swelling. Several factors drove its weak stock performance during the annual period, including a new CEO, headwinds related to COVID-19 and turnover in the company’s sales force. |
| • | Upland Software, Inc. is a diversified software firm with a business model built around acquiring and integrating smaller software companies. Its primary products include customer engagement and sales management software. During the annual period, the company posted results at the low end of its management guidance, as the company lowered its forward looking expectations related to a sales force transition the company, which began in the year prior. |
The views expressed in this report
reflect the current views of the respective parties who have contributed to this report. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult
to predict, so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective parties
disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Columbia fund are based on numerous factors, may not be relied on as an
indication of trading intent on behalf of any particular Columbia fund. References to specific securities should not be construed as a recommendation or investment advice.
| 8 | Variable Portfolio – Partners Small Cap Growth Fund | Annual Report 2021 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur ongoing
costs, which generally include management fees, distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to help you compare these costs with the ongoing costs of investing in other mutual funds.
The information below does not
reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy (collectively, Contracts) or qualified pension and retirement plan (Qualified Plan), if any. The total fees
and expenses you bear may therefore be higher than those shown below.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount invested, to estimate the
expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as redemption or exchange fees, or expenses that apply to the subaccount or the Contract. Therefore, the
hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If the fees and expenses imposed under your Contract or
Qualified Plan, if any, were included, your costs would be higher.
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 365.
Expenses do not include fees and
expenses incurred indirectly by the Fund from its investment in underlying funds, including affiliated and non-affiliated pooled investment vehicles, such as mutual funds and exchange-traded funds.
Had Columbia Management Investment
Advisers, LLC and/or certain of its affiliates not waived/reimbursed certain fees and expenses, account value at the end of the period would have been reduced.
| Variable Portfolio – Partners Small Cap Growth Fund | Annual Report 2021 | 9 |
Portfolio of Investments
December 31, 2021
December 31, 2021
(Percentages represent value of
investments compared to net assets)
Investments in securities
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 10 | Variable Portfolio – Partners Small Cap Growth Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Variable Portfolio – Partners Small Cap Growth Fund | Annual Report 2021 | 11 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 12 | Variable Portfolio – Partners Small Cap Growth Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| Variable Portfolio – Partners Small Cap Growth Fund | Annual Report 2021 | 13 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Notes to Portfolio of
Investments
| (a) | Non-income producing investment. |
| (b) | The rate shown is the seven-day current annualized yield at December 31, 2021. |
| (c) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended December 31, 2021 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Realized gain (loss)($) | Dividends($) | End of period shares |
| Columbia Short-Term Cash Fund, 0.085% | ||||||||
| 6,117,413 | 197,288,525 | (198,801,800) | (84) | 4,604,054 | (215) | 5,348 | 4,604,975 | |
Abbreviation Legend
| ADR | American Depositary Receipt |
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at December 31, 2021:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Investments in Securities | ||||
| Common Stocks | ||||
| Bahamas | 3,620,406 | — | — | 3,620,406 |
| Belgium | 586,591 | — | — | 586,591 |
| Canada | 15,656,633 | — | — | 15,656,633 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 14 | Variable Portfolio – Partners Small Cap Growth Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Fair value measurements (continued)
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Israel | 10,379,313 | — | — | 10,379,313 |
| Jersey | 1,999,276 | — | — | 1,999,276 |
| Netherlands | 1,001,607 | — | — | 1,001,607 |
| Thailand | 5,826,118 | — | — | 5,826,118 |
| United Kingdom | 6,615,712 | — | — | 6,615,712 |
| United States | 679,169,927 | — | — | 679,169,927 |
| Virgin Islands | 2,143,635 | — | — | 2,143,635 |
| Total Common Stocks | 726,999,218 | — | — | 726,999,218 |
| Money Market Funds | 4,604,054 | — | — | 4,604,054 |
| Total Investments in Securities | 731,603,272 | — | — | 731,603,272 |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Variable Portfolio – Partners Small Cap Growth Fund | Annual Report 2021 | 15 |
Statement of Assets and Liabilities
December 31, 2021
December 31, 2021
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $563,063,529) | $726,999,218 |
| Affiliated issuers (cost $4,604,138) | 4,604,054 |
| Receivable for: | |
| Investments sold | 132,573 |
| Capital shares sold | 534 |
| Dividends | 116,889 |
| Prepaid expenses | 12,410 |
| Total assets | 731,865,678 |
| Liabilities | |
| Due to custodian | 200 |
| Payable for: | |
| Capital shares purchased | 4,317 |
| Management services fees | 17,183 |
| Distribution and/or service fees | 133 |
| Service fees | 906 |
| Compensation of board members | 78,052 |
| Compensation of chief compliance officer | 140 |
| Audit fees | 14,750 |
| Other expenses | 8,302 |
| Total liabilities | 123,983 |
| Net assets applicable to outstanding capital stock | $731,741,695 |
| Represented by | |
| Trust capital | $731,741,695 |
| Total - representing net assets applicable to outstanding capital stock | $731,741,695 |
| Class 1 | |
| Net assets | $712,474,622 |
| Shares outstanding | 18,680,478 |
| Net asset value per share | $38.14 |
| Class 2 | |
| Net assets | $19,267,073 |
| Shares outstanding | 520,163 |
| Net asset value per share | $37.04 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 16 | Variable Portfolio – Partners Small Cap Growth Fund | Annual Report 2021 |
Statement of Operations
Year Ended December 31, 2021
Year Ended December 31, 2021
| Net investment income | |
| Income: | |
| Dividends — unaffiliated issuers | $1,992,185 |
| Dividends — affiliated issuers | 5,348 |
| Foreign taxes withheld | (213) |
| Total income | 1,997,320 |
| Expenses: | |
| Management services fees | 6,637,273 |
| Distribution and/or service fees | |
| Class 2 | 43,687 |
| Service fees | 10,689 |
| Compensation of board members | 37,495 |
| Custodian fees | 24,537 |
| Printing and postage fees | 15,964 |
| Audit fees | 29,500 |
| Legal fees | 17,236 |
| Interest on interfund lending | 205 |
| Compensation of chief compliance officer | 144 |
| Other | 15,877 |
| Total expenses | 6,832,607 |
| Fees waived or expenses reimbursed by Investment Manager and its affiliates | (12,443) |
| Total net expenses | 6,820,164 |
| Net investment loss | (4,822,844) |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | 163,650,450 |
| Investments — affiliated issuers | (215) |
| Net realized gain | 163,650,235 |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | (84,365,982) |
| Investments — affiliated issuers | (84) |
| Net change in unrealized appreciation (depreciation) | (84,366,066) |
| Net realized and unrealized gain | 79,284,169 |
| Net increase in net assets resulting from operations | $74,461,325 |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| Variable Portfolio – Partners Small Cap Growth Fund | Annual Report 2021 | 17 |
Statement of Changes in Net Assets
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | |
| Operations | ||
| Net investment loss | $(4,822,844) | $(3,241,565) |
| Net realized gain | 163,650,235 | 65,476,949 |
| Net change in unrealized appreciation (depreciation) | (84,366,066) | 174,742,724 |
| Net increase in net assets resulting from operations | 74,461,325 | 236,978,108 |
| Increase (decrease) in net assets from capital stock activity | (166,372,322) | 890,467 |
| Total increase (decrease) in net assets | (91,910,997) | 237,868,575 |
| Net assets at beginning of year | 823,652,692 | 585,784,117 |
| Net assets at end of year | $731,741,695 | $823,652,692 |
| Year Ended | Year Ended | |||
| December 31, 2021 | December 31, 2020 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class 1 | ||||
| Subscriptions | 1,253,539 | 47,088,309 | 2,060,988 | 56,389,934 |
| Redemptions | (5,509,554) | (215,620,168) | (1,758,823) | (55,439,546) |
| Net increase (decrease) | (4,256,015) | (168,531,859) | 302,165 | 950,388 |
| Class 2 | ||||
| Subscriptions | 133,941 | 4,994,351 | 99,187 | 2,302,436 |
| Redemptions | (76,631) | (2,834,814) | (91,541) | (2,362,357) |
| Net increase (decrease) | 57,310 | 2,159,537 | 7,646 | (59,921) |
| Total net increase (decrease) | (4,198,705) | (166,372,322) | 309,811 | 890,467 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 18 | Variable Portfolio – Partners Small Cap Growth Fund | Annual Report 2021 |
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| Variable Portfolio – Partners Small Cap Growth Fund | Annual Report 2021 | 19 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect any fees and expenses imposed under your
Contract and/or Qualified Plan, as applicable; such fees and expenses would reduce the total returns for all periods shown. Total return and portfolio turnover are not annualized for periods of less than one year. The
portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain derivatives, if any. If such transactions were included, the Fund’s portfolio
turnover rate may be higher.
| Net asset value, beginning of period | Net investment income (loss) | Net realized and unrealized gain (loss) | Total from investment operations | |
| Class 1 | ||||
| Year Ended 12/31/2021 | $35.22 | (0.24) | 3.16 | 2.92 |
| Year Ended 12/31/2020 | $25.38 | (0.14) | 9.98 | 9.84 |
| Year Ended 12/31/2019 | $20.93 | (0.09) | 4.54 | 4.45 |
| Year Ended 12/31/2018 | $21.95 | (0.11) | (0.91) | (1.02) |
| Year Ended 12/31/2017 | $18.48 | (0.08) | 3.55 | 3.47 |
| Class 2 | ||||
| Year Ended 12/31/2021 | $34.29 | (0.32) | 3.07 | 2.75 |
| Year Ended 12/31/2020 | $24.77 | (0.20) | 9.72 | 9.52 |
| Year Ended 12/31/2019 | $20.48 | (0.14) | 4.43 | 4.29 |
| Year Ended 12/31/2018 | $21.53 | (0.17) | (0.88) | (1.05) |
| Year Ended 12/31/2017 | $18.17 | (0.13) | 3.49 | 3.36 |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Ratios include interfund lending expense which is less than 0.01%. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 20 | Variable Portfolio – Partners Small Cap Growth Fund | Annual Report 2021 |
Financial Highlights (continued)
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets(a) | Total net expense ratio to average net assets(a),(b) | Net investment income (loss) ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Class 1 | |||||||
| Year Ended 12/31/2021 | $38.14 | 8.29% | 0.87%(c) | 0.87%(c) | (0.61%) | 48% | $712,475 |
| Year Ended 12/31/2020 | $35.22 | 38.77% | 0.88% | 0.87% | (0.52%) | 63% | $807,783 |
| Year Ended 12/31/2019 | $25.38 | 21.26% | 0.88% | 0.87% | (0.38%) | 90% | $574,507 |
| Year Ended 12/31/2018 | $20.93 | (4.65%) | 0.87% | 0.86% | (0.46%) | 113% | $579,389 |
| Year Ended 12/31/2017 | $21.95 | 18.78% | 0.91% | 0.91% | (0.42%) | 114% | $644,746 |
| Class 2 | |||||||
| Year Ended 12/31/2021 | $37.04 | 8.02% | 1.12%(c) | 1.12%(c) | (0.85%) | 48% | $19,267 |
| Year Ended 12/31/2020 | $34.29 | 38.43% | 1.13% | 1.12% | (0.77%) | 63% | $15,870 |
| Year Ended 12/31/2019 | $24.77 | 20.95% | 1.13% | 1.12% | (0.62%) | 90% | $11,277 |
| Year Ended 12/31/2018 | $20.48 | (4.88%) | 1.12% | 1.11% | (0.70%) | 113% | $8,375 |
| Year Ended 12/31/2017 | $21.53 | 18.49% | 1.16% | 1.16% | (0.67%) | 114% | $7,101 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| Variable Portfolio – Partners Small Cap Growth Fund | Annual Report 2021 | 21 |
Notes to Financial Statements
December 31, 2021
December 31, 2021
Note 1. Organization
Variable Portfolio –
Partners Small Cap Growth Fund (the Fund), a series of Columbia Funds Variable Series Trust II (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940
Act), as an open-end management investment company organized as a Massachusetts business trust.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers Class 1 and Class 2 shares to separate accounts funding variable annuity contracts and variable life insurance policies (collectively, Contracts) issued by
affiliated and unaffiliated life insurance companies (Participating Insurance Companies) as well as qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors (Qualified
Investors) authorized by Columbia Management Investment Distributors, Inc. (the Distributor). You may not buy (nor will you own) shares of the Fund directly. You may invest by participating in a Qualified Plan or by
buying a Contract and making allocations to the Fund. Although all share classes generally have identical voting, dividend and liquidation rights, each share class votes separately when required by the Trust’s
organizational documents or by law. Different share classes pay different net investment income distribution amounts to the extent the expenses of such share classes differ, and distributions in liquidation will be
proportional to the net asset value of each share class. Each share class has its own cost structure and other features.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Equity securities listed on an
exchange are valued at the closing price or last trade price on their primary exchange at the close of business of the New York Stock Exchange. Securities with a closing price not readily available or not listed on
any exchange are valued at the mean between the closing bid and ask prices. Listed preferred stocks convertible into common stocks are valued using an evaluated price from a pricing service.
Foreign equity securities are
valued based on the closing price or last trade price on their primary exchange at the close of business of the New York Stock Exchange. If any foreign equity security closing prices are not readily available,
the securities are valued at the mean of the latest quoted bid and ask prices on such exchanges or markets. Foreign currency exchange rates are determined at the scheduled closing time of the New York Stock Exchange.
Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange; therefore, the closing prices for securities in such markets or on such exchanges may not fully reflect
events that occur after such close but before the close of the New York Stock Exchange. In those situations, foreign securities will be fair valued pursuant to a policy adopted by the Board of Trustees. Under the
policy, the Fund may utilize a third-party pricing service to determine these fair values. The third-party pricing service takes into account multiple factors, including, but not limited to, movements in the U.S.
securities markets, certain depositary receipts, futures contracts and foreign exchange rates that have occurred subsequent to the close of the foreign exchange or market, to determine a good faith estimate that
reasonably reflects the current market conditions as of the close of the New York Stock Exchange. The fair value of a security is likely to be different from the quoted or published price, if available.
Investments in open-end investment
companies (other than exchange-traded funds (ETFs)), are valued at the latest net asset value reported by those companies as of the valuation time.
| 22 | Variable Portfolio – Partners Small Cap Growth Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
Income recognition
Corporate actions and dividend
income are generally recorded net of any non-reclaimable tax withholdings, on the ex-dividend date or upon receipt of an ex-dividend notification in the case of certain foreign securities.
The Fund may receive distributions
from holdings in equity securities, business development companies (BDCs), exchange-traded funds (ETFs), limited partnerships (LPs), other regulated investment companies (RICs), and real estate investment trusts
(REITs), which report information as to the tax character of their distributions annually. These distributions are allocated to dividend income, capital gain and return of capital based on actual information reported.
Return of capital is recorded as a reduction of the cost basis of securities held. If the Fund no longer owns the applicable securities, return of capital is recorded as a realized gain. With respect to REITs, to the
extent actual information has not yet been reported, estimates for return of capital are made by Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise
Financial, Inc. (Ameriprise Financial). The Investment Manager’s estimates are subsequently adjusted when the actual character of the distributions is disclosed by the REITs, which could result in a
proportionate change in return of capital to shareholders.
Awards from class action litigation
are recorded as a reduction of cost basis if the Fund still owns the applicable securities on the payment date. If the Fund no longer owns the applicable securities on the payment date, the proceeds are recorded as
realized gains.
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
Federal income tax status
The Fund is treated as a
partnership for federal income tax purposes, and the Fund does not expect to make regular distributions. The Fund will not be subject to federal income tax, and therefore, there is no provision for federal income
taxes. The partners of the Fund are subject to tax on their distributive share of the Fund’s income and loss. The components of the Fund’s net assets are reported at the partner-level for federal income
tax purposes, and therefore, are not presented in the Statement of Assets and Liabilities.
| Variable Portfolio – Partners Small Cap Growth Fund | Annual Report 2021 | 23 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Foreign taxes
The Fund may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries, as applicable, based upon its current interpretation of tax rules
and regulations that exist in the markets in which it invests.
Realized gains in certain countries
may be subject to foreign taxes at the Fund level, based on statutory rates. The Fund accrues for such foreign taxes on realized and unrealized gains at the appropriate rate for each jurisdiction, as applicable. The
amount, if any, is disclosed as a liability on the Statement of Assets and Liabilities.
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Under the Management Agreement, the
Investment Manager provides the Fund with investment research and advice, as well as administrative and accounting services. The Investment Manager is responsible for the ultimate oversight of investments made by the
Fund. The Fund’s subadvisers (see Subadvisory agreements below) have the primary responsibility for the day-to-day portfolio management of the Fund. The management services fee is an annual fee that is equal to
a percentage of the Fund’s daily net assets that declines from 0.87% to 0.75% as the Fund’s net assets increase. The effective management services fee rate for the year ended December 31, 2021 was 0.85% of
the Fund’s average daily net assets.
Subadvisory agreements
The Investment Manager has entered
into Subadvisory Agreements with Allspring Global Investments, LLC and Scout Investments, Inc., each of which subadvises a portion of the assets of the Fund. Prior to November 1, 2021, Allspring Global Investments,
LLC was known as Wells Capital Management Incorporated. Prior to May 1, 2021, BMO Asset Management Corp. served as a subadviser to the Fund. New investments in the Fund, net of redemptions, are allocated in accordance
with the Investment Manager’s determination. Each subadviser’s proportionate share of investments in the Fund will vary due to market fluctuations. The Investment Manager compensates each subadviser to
manage the investment of the Fund’s assets.
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. Under a Deferred Compensation Plan (the
Deferred Plan), these members of the Board of Trustees may elect to defer payment of up to 100% of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of
certain funds managed by the Investment Manager. The Fund’s liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Deferred Plan. All
amounts payable under the Deferred Plan constitute a general unsecured obligation of the Fund. The expense for the Deferred Plan, which includes Trustees’ fees deferred during the current period as well as any
gains or losses on the Trustees’ deferred compensation balances as a result of market fluctuations, is included in "Compensation of board members" on the Statement of Operations.
| 24 | Variable Portfolio – Partners Small Cap Growth Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
Service fees
The Fund has entered into a
Shareholder Services Agreement with Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial. Under this
agreement, the Fund pays a service fee equal to the payments made by the Transfer Agent to Participating Insurance Companies and other financial intermediaries (together, Participating Organizations) for services each
such Participating Organization provides to its clients, customers and participants that are invested directly or indirectly in the Fund, up to a cap approved by the Board of Trustees from time to time. The effective
service fee rate for the year ended December 31, 2021, was 0.00% of the Fund’s average daily net assets.
The Transfer Agent may retain as
compensation for its services revenues from fees for wire, telephone and redemption orders, account transcripts due the Transfer Agent from Fund shareholders and interest (net of bank charges) earned with respect to
balances in accounts the Transfer Agent maintains in connection with its services to the Fund.
Distribution and/or service fees
The Fund has an agreement with the
Distributor, an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution services. Under a Plan and Agreement of Distribution, the Fund pays a fee at an annual rate
of up to 0.25% of the Fund’s average daily net assets attributable to Class 2 shares. The Fund pays no distribution and service fees for Class 1 shares.
Expenses waived/reimbursed by the
Investment Manager and its affiliates
The Investment Manager and certain
of its affiliates have contractually agreed to waive fees and/or reimburse expenses (excluding certain fees and expenses described below) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, so that the Fund’s net operating expenses, after giving effect to fees waived/expenses reimbursed and any balance credits and/or overdraft charges from the Fund’s
custodian, do not exceed the following annual rate(s) as a percentage of the classes’ average daily net assets:
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), expenses associated with investments in affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange-traded funds), transaction costs and
brokerage commissions, costs related to any securities lending program, dividend expenses associated with securities sold short, inverse floater program fees and expenses, transaction charges and interest on borrowed
money, interest, costs associated with certain shareholder meetings, infrequent and/or unusual expenses and any other expenses the exclusion of which is specifically approved by the Board of Trustees. This
agreement may be modified or amended only with approval from the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements
described above are not recoverable by the Investment Manager or its affiliates in future periods.
| Variable Portfolio – Partners Small Cap Growth Fund | Annual Report 2021 | 25 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Note 4. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $364,056,235 and $533,514,258, respectively, for the year ended December 31, 2021. The amount of purchase and
sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 5. Affiliated money
market fund
The Fund invests in Columbia
Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is included as
Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its shares with a
floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions (sometimes
referred to as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
Note 6. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund’s activity in the
Interfund Program during the year ended December 31, 2021 was as follows:
| Borrower or lender | Average loan balance ($) | Weighted average interest rate (%) | Number of days with outstanding loans |
| Borrower | 883,333 | 0.68 | 12 |
Interest expense incurred by the
Fund is recorded as Interfund lending in the Statement of Operations. The Fund had no outstanding interfund loans at December 31, 2021.
Note 7. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to an October 28, 2021 amendment and restatement, the credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment
Manager or an affiliated investment manager, severally and not jointly, permits collective borrowings up to $950 million. Interest is currently charged to each participating fund based on its borrowings at a rate
equal to the higher of (i) the federal funds effective rate, (ii) the secured overnight financing rate plus 0.11448% and (iii) the overnight bank funding rate, plus in each case, 1.00%. Each borrowing under the credit
facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The
commitment fee is included in other expenses in the Statement of Operations. This agreement expires annually in October unless extended or renewed. Prior to the October 28, 2021 amendment and restatement, the Fund had
access to a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. which permitted collective borrowings up to $950 million. Interest was
charged to each participating fund based on its borrowings at a rate equal to the higher of (i) the federal funds effective rate, (ii) the one-month London Interbank Offered Rate (LIBOR) rate and (iii) the overnight
bank funding rate, plus in each case, 1.25%.
The Fund had no borrowings during
the year ended December 31, 2021.
| 26 | Variable Portfolio – Partners Small Cap Growth Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Note 8. Significant
risks
Health care sector risk
The Fund is more susceptible to the
particular risks that may affect companies in the health care sector than if it were invested in a wider variety of companies in unrelated sectors. Companies in the health care sector are subject to certain risks,
including restrictions on government reimbursement for medical expenses, government approval of medical products and services, competitive pricing pressures, and the rising cost of medical products and services
(especially for companies dependent upon a relatively limited number of products or services). Performance of such companies may be affected by factors including, government regulation, obtaining and protecting
patents (or the failure to do so), product liability and other similar litigation as well as product obsolescence.
Information technology sector risk
The Fund is more susceptible to the
particular risks that may affect companies in the information technology sector than if it were invested in a wider variety of companies in unrelated sectors. Companies in the information technology sector are subject
to certain risks, including the risk that new services, equipment or technologies will not be accepted by consumers and businesses or will become rapidly obsolete. Performance of such companies may be affected by
factors including obtaining and protecting patents (or the failure to do so) and significant competitive pressures, including aggressive pricing of their products or services, new market entrants, competition for
market share and short product cycles due to an accelerated rate of technological developments. Such competitive pressures may lead to limited earnings and/or falling profit margins. As a result, the value of their
securities may fall or fail to rise. In addition, many information technology sector companies have limited operating histories and prices of these companies’ securities historically have been more volatile than
other securities, especially over the short term. Some companies in the information technology sector are facing increased government and regulatory scrutiny and may be subject to adverse government or regulatory
action, which could negatively impact the value of their securities.
Market risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
The coronavirus disease 2019 and
its variants (COVID-19) pandemic has resulted in, and may continue to result in, significant global economic and societal disruption and market volatility due to disruptions in market access, resource availability,
facilities operations, imposition of tariffs, export controls and supply chain disruption, among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement
and loss in human and other resources. The uncertainty surrounding the magnitude, duration, reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental
authorities or other third parties, present unknowns that are yet to unfold. The impacts, as well as the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and
pandemics that may arise in the future – could negatively affect global economies and markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in
emerging market countries may be greater due to generally less established healthcare systems, governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other
pre-existing
| Variable Portfolio – Partners Small Cap Growth Fund | Annual Report 2021 | 27 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
political, social and economic risks in certain
countries or globally. The disruptions caused by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively impact the Fund’s ability to achieve its
investment objectives. Any such event(s) could have a significant adverse impact on the value and risk profile of the Fund.
Shareholder concentration risk
At December 31, 2021, affiliated
shareholders of record owned 100.0% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of
less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Small- and mid-cap company risk
Investments in small- and
mid-capitalization companies (small- and mid-cap companies) often involve greater risks than investments in larger, more established companies (larger companies) because small- and mid-cap companies tend to have less
predictable earnings and may lack the management experience, financial resources, product diversification and competitive strengths of larger companies. Securities of small- and mid-cap companies may be less liquid
and more volatile than the securities of larger companies.
Note 9. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
Note 10. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in
connection with the conduct of their business activities. Ameriprise Financial believes that the Fund is not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject
of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with
the Fund. Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (SEC) on legal and regulatory matters that relate to
Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that
these matters, or the adverse publicity associated with them, will not result in increased Fund redemptions, reduced sale of Fund shares or other adverse consequences to the Fund. Further, although we believe
proceedings are not likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines,
penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial or one or more of its affiliates that provides services to
the Fund.
| 28 | Variable Portfolio – Partners Small Cap Growth Fund | Annual Report 2021 |
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees of Columbia
Funds Variable Series Trust II and Shareholders of Variable Portfolio – Partners Small Cap Growth Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of Variable Portfolio – Partners Small Cap Growth Fund (one of the funds constituting Columbia Funds Variable Series Trust II,
referred to hereafter as the "Fund") as of December 31, 2021, the related statement of operations for the year ended December 31, 2021, the statement of changes in net assets for each of the two years in the period
ended December 31, 2021, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2021 (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, 2021, 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, 2021 and the financial highlights for each of the five years in the period ended December 31, 2021 in conformity with accounting principles generally
accepted in the United States of America.
Basis for Opinion
These financial statements are the
responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these
financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2021 by correspondence with the custodian and transfer agent. We believe that our
audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Minneapolis, Minnesota
February 18, 2022
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| Variable Portfolio – Partners Small Cap Growth Fund | Annual Report 2021 | 29 |
TRUSTEES AND
OFFICERS
The Board oversees the
Fund’s operations and appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following table provides basic biographical information about the
Fund’s Trustees as of the printing of this report, including their principal occupations during the past five years, although specific titles for individuals may have varied over the period. The year set forth
beneath Length of Service in the table below is the year in which the Trustee was first appointed or elected as Trustee to any Fund currently in the Columbia Funds Complex or a predecessor thereof. Under current Board
policy, each Trustee generally serves until December 31 of the year such Trustee turns seventy-five (75).
Independent trustees
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| George S. Batejan c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1953 | Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 176 | Former Chairman of the Board, NICSA (National Investment Company Services Association) (Executive Committee, Nominating Committee and Governance Committee), 2014-2016; former Director, Intech Investment Management, 2011-2016; former Board Member, Metro Denver Chamber of Commerce, 2015-2016; former Advisory Board Member, University of Colorado Business School, 2015-2018 |
| Kathleen Blatz c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2006 | Attorney, specializing in arbitration and mediation; Chief Justice, Minnesota Supreme Court, 1998-2006; Associate Justice, Minnesota Supreme Court, 1996-1998; Fourth Judicial District Court Judge, Hennepin County, 1994-1996; Attorney in private practice and public service, 1984-1993; State Representative, Minnesota House of Representatives, 1979-1993, which included service on the Tax and Financial Institutions and Insurance Committees; Member and Interim Chair, Minnesota Sports Facilities Authority, January 2017-July 2017; Interim President and Chief Executive Officer, Blue Cross Blue Shield of Minnesota (health care insurance), February-July 2018, April-October 2021 | 176 | Former Trustee, Blue Cross Blue Shield of Minnesota, 2009-2021 (Chair of the Business Development Committee, 2014-2017; Chair of the Governance Committee, 2017-2019); former Member and Chair of the Board, Minnesota Sports Facilities Authority, January 2017-July 2017; former Director, Robina Foundation, 2009-2020 (Chair, 2014-2020); Director, Schulze Family Foundation, since 2021 |
| Pamela G. Carlton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2007 | President, Springboard — Partners in Cross Cultural Leadership (consulting company) since 2003; Managing Director of US Equity Research, JP Morgan Chase, 1999-2003; Director of US Equity Research, Chase Asset Management, 1996-1999; Co-Director Latin America Research, 1993-1996, COO Global Research, 1992-1996, Co-Director of US Research, 1991-1992, Investment Banker, Morgan Stanley, 1982-1991, Morgan Stanley; Attorney, Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 176 | Trustee, New York Presbyterian Hospital Board (Executive Committee and Chair of People Committee) since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee); Director, Apollo Commercial Real Estate Finance, Inc. since 2021; the Governing Council of the Independent Directors Council (IDC), since 2021 |
| 30 | Variable Portfolio – Partners Small Cap Growth Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Janet Langford Carrig c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1957 | Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 174 | Director, EQT Corporation (natural gas producer) since 2019; Director, Whiting Petroleum Corporation (independent oil and gas company) since 2020 |
| J. Kevin Connaughton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2020 | Member, FINRA National Adjudicatory Council since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Consultant to Independent Trustees of CFVIT and CFST I from March 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Managing Director and General Manager of Mutual Fund Products, Columbia Management Investment Advisers, LLC, May 2010-February 2015; President, Columbia Funds, 2008-2015; and senior officer of Columbia Funds and affiliated funds, 2003-2015 | 174 | Former Director, The Autism Project, March 2015-December 2021; former Member of the Investment Committee, St. Michael’s College, November 2015-February 2020; former Trustee, St. Michael’s College, June 2017-September 2019; former Trustee, New Century Portfolios, January 2015-December 2017 |
| Olive M. Darragh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since 2020 | Managing Director of Darragh Inc. (strategy and talent management consulting firm) since 2010; Founder and CEO, Zolio, Inc. (investment management talent identification platform) since 2004; Consultant to Independent Trustees of CFVIT and CFST I from June 2019 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 2001-2004 | 174 | Former Director, University of Edinburgh Business School (Member of US Board); former Director, Boston Public Library Foundation |
| Patricia M. Flynn c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1950 | Trustee since 2004 | Trustee Professor of Economics and Management, Bentley University since 1976 (also teaches and conducts research on corporate governance); Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 176 | Trustee, MA Taxpayers Foundation since 1997; Board of Governors, Innovation Institute, MA Technology Collaborative, 2010-2020; former Board of Directors, The MA Business Roundtable, 2003-2019 |
| Brian J. Gallagher c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 176 | Trustee, Catholic Schools Foundation since 2004 |
| Variable Portfolio – Partners Small Cap Growth Fund | Annual Report 2021 | 31 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Douglas A. Hacker c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1955 | Co-Chair since 2021; Chair of CFST I and CFVIT since 2014; Trustee of CFST I and CFVIT since 1996 and CFST, CFST II, CFVST II, CET I and CET II since 2021 | Independent business executive since May 2006; Executive Vice President – Strategy of United Airlines, December 2002 - May 2006; President of UAL Loyalty Services (airline marketing company), September 2001-December 2002; Executive Vice President and Chief Financial Officer of United Airlines, July 1999-September 2001 | 176 | Director, Spartan Nash Company (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing); former Director, Nash Finch Company (food distributor), 2005-2013; former Director, SeaCube Container Leasing Ltd. (container leasing), 2010-2013; and former Director, Travelport Worldwide Limited (travel information technology), 2014-2019 |
| Nancy T. Lukitsh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1956 | Trustee since 2011 | Senior Vice President, Partner and Director of Marketing, Wellington Management Company, LLP (investment adviser), 1997-2010; Chair, Wellington Management Portfolios (commingled non-U.S. investment pools), 2007 -2010; Director, Wellington Trust Company, NA and other Wellington affiliates, 1997-2010 | 174 | None |
| David M. Moffett c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2011 | Retired; Consultant to Bridgewater and Associates | 174 | Director, CSX Corporation (transportation suppliers); Director, Genworth Financial, Inc. (financial and insurance products and services); Director, PayPal Holdings Inc. (payment and data processing services); Trustee, University of Oklahoma Foundation; former Director, eBay Inc. (online trading community), 2007-2015; and former Director, CIT Bank, CIT Group Inc. (commercial and consumer finance), 2010-2016 |
| Catherine James Paglia c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Co-Chair since 2021; Chair of CFST, CFST II, CFVST II, CET I and CET II since 2020; Trustee of CFST, CFST II and CFVST II since 2004 and CFST I and CFVIT since 2021 | Director, Enterprise Asset Management, Inc. (private real estate and asset management company) since September 1998; Managing Director and Partner, Interlaken Capital, Inc., 1989-1997; Vice President, 1982-1985, Principal, 1985-1987, Managing Director, 1987-1989, Morgan Stanley; Vice President, Investment Banking, 1980-1982, Associate, Investment Banking, 1976-1980, Dean Witter Reynolds, Inc. | 176 | Director, Valmont Industries, Inc. (irrigation systems manufacturer) since 2012; Trustee, Carleton College (on the Investment Committee); Trustee, Carnegie Endowment for International Peace (on the Investment Committee) |
| 32 | Variable Portfolio – Partners Small Cap Growth Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Minor M. Shaw c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1947 | Trustee since 2003 | President, Micco LLC (private investments) since 2011; President, Micco Corp. (family investment business), 1998-2011 | 176 | Director, Blue Cross Blue Shield of South Carolina (Chair of Compensation Committee) since April 2008; Trustee, Hollingsworth Funds (on the Investment Committee) since 2016 (previously Board Chair from 2016-2019); Former Advisory Board member, Duke Energy Corp., 2016-2020; Chair of the Duke Endowment; Chair of Greenville – Spartanburg Airport Commission; former Trustee, BofA Funds Series Trust (11 funds), 2003-2011; former Director, Piedmont Natural Gas, 2004-2016; former Director, National Association of Corporate Directors, Carolinas Chapter, 2013-2018; Chair, Daniel-Mickel Foundation since 1998 |
| Natalie A. Trunow c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1967 | Trustee since 2020 | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services), January 2016-January 2021; Non-executive Member of the Investment Committee and Valuation Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services), August 2018-January 2021; Advisor, Paradigm Asset Management, November 2016-December 2021; Consultant to Independent Trustees of CFVIT and CFST I from September 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Director of Investments/Consultant, Casey Family Programs, April 2016-November 2016; Senior Vice President and Chief Investment Officer, Calvert Investments, August 2008-January 2016; Section Head and Portfolio Manager, General Motors Asset Management, June 1997-August 2008 | 174 | Former Director, Investment Committee, Health Services for Children with Special Needs, Inc., 2012-2019; Director, Chair of Audit Committee, Consumer Credit Counseling Services (formerly Guidewell Financial Solutions), since 2019; Independent Director, Investment Committee and Valuation Committee, Sarona Asset Management, since 2019 |
| Sandra Yeager c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2017 | Retired; President and founder, Hanoverian Capital, LLC (SEC registered investment advisor firm), 2008-2016; Managing Director, DuPont Capital, 2006-2008; Managing Director, Morgan Stanley Investment Management, 2004-2006; Senior Vice President, Alliance Bernstein, 1990-2004 | 176 | Former Director, NAPE Education Foundation, October 2016-October 2020 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Fund Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I (CET I), Columbia ETF Trust II (CET II), Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Beckman, Gallagher and Hacker and Mses. Blatz, Carlton, Flynn, Paglia, Shaw and Yeager serve as Directors of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
| Variable Portfolio – Partners Small Cap Growth Fund | Annual Report 2021 | 33 |
TRUSTEES AND OFFICERS (continued)
Interested trustee affiliated with Investment Manager*
Interested trustee affiliated with Investment Manager*
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during the past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex overseen | Other directorships held by Trustee during the past five years |
| Daniel J. Beckman c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since November 2021(a) | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC (since April 2015); officer of Columbia Funds and affiliated funds since 2020. | 176 | Director, Ameriprise Trust Company, since October 2016; Director, Columbia Management Investment Distributors, Inc. since November 2018; Board of Governors, Columbia Wanger Asset Management, LLC since January 2022 |
| * | Interested person (as defined under the 1940 Act) by reason of being an officer, director, security holder and/or employee of the Investment Manager or Ameriprise Financial. |
| (a) | Mr. Beckman serves as the President and Principal Executive Officer of the Columbia Funds (since 2021). |
The Statement of Additional
Information has additional information about the Fund’s Board members and is available, without charge, upon request by calling 800.345.6611 or contacting your financial intermediary.
The Board has appointed officers
who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. The following table provides basic information about the Officers of the
Fund, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Beckman, who is President and Principal Executive Officer, the
Fund’s other officers are:
Fund officers
| 34 | Variable Portfolio – Partners Small Cap Growth Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Fund officers (continued)
Fund officers (continued)
| Variable Portfolio – Partners Small Cap Growth Fund | Annual Report 2021 | 35 |
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For Fund and other investment product prospectuses, which contain this and other important information, contact your
financial advisor or insurance representative. Please read the prospectus carefully before you invest. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved. Columbia Management Investment Distributors, Inc., 290 Congress Street, Boston, MA 02210
© 2022 Columbia Management Investment
Advisers, LLC.
C-3045 AW (2/22)
CTIVP® –
TCW Core Plus Bond Fund
Please remember that you may not
buy (nor will you own) shares of the Fund directly. The Fund is available through variable annuity contracts and variable life insurance policies offered by the separate accounts of participating insurance companies
as well as qualified pension and retirement plans. Please contact your financial advisor or insurance representative for more information.
Not Federally Insured • No
Financial Institution Guarantee • May Lose Value
Table of Contents
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| 30 | |
| 32 | |
| 46 | |
| 47 |
Proxy voting policies and
procedures
The policy of the Board of Trustees
is to vote the proxies of the companies in which CTIVP® – TCW Core Plus Bond Fund (the Fund) holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You
may obtain a copy of the SAI without charge by calling 800.345.6611; contacting your financial intermediary or searching the website of the Securities and Exchange Commission (SEC) at sec.gov. Information regarding
how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31st for the most recent 12-month period ending June 30th of that year, and is available without charge by visiting
columbiathreadneedleus.com/investor/, or searching the website of the SEC at sec.gov.
Quarterly schedule of
investments
The Fund files a complete schedule
of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. The Fund’s Form N-PORT is available on the SEC’s website at sec.gov. The Fund’s complete
schedule of portfolio holdings, as filed on Form N-PORT, can also be obtained without charge, upon request, by calling 800.345.6611.
Additional Fund information
Fund investment manager
Columbia Management Investment Advisers, LLC (the
Investment Manager)
290 Congress Street
Boston, MA 02210
Fund distributor
Columbia Management Investment Distributors,
Inc.
290 Congress Street
Boston, MA 02210
Fund transfer agent
Columbia Management Investment Services Corp.
P.O. Box 219104
Kansas City, MO 64121-9104
CTIVP® – TCW Core Plus Bond
Fund | Annual Report 2021
Fund at a Glance
Investment objective
The Fund
seeks to provide shareholders with total return through current income and capital appreciation.
Portfolio management
TCW Investment Management Company LLC*
Laird Landmann
Stephen Kane, CFA
Bryan Whalen, CFA
* Effective December 31, 2021, Tad Rivelle retired from TCW Investment Management Company LLC.
| CTIVP® – TCW Core Plus Bond Fund | Annual Report 2021 | 3 |
Fund at a Glance (continued)
Performance of a hypothetical $10,000 investment (December 31, 2011 — December 31, 2021)
The chart above shows the change in
value of a hypothetical $10,000 investment in Class 2 shares of CTIVP® – TCW Core Plus Bond Fund during the stated time period, and does not reflect the deduction of taxes, if any, that a shareholder
may pay on Fund distributions or on the redemption of Fund shares. The returns also do not reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy or qualified
pension or retirement plan, if any.
| 4 | CTIVP® – TCW Core Plus Bond Fund | Annual Report 2021 |
MANAGER DISCUSSION OF FUND PERFORMANCE
At December 31, 2021, approximately
99.43% of the Fund’s shares were owned in the aggregate by affiliated funds-of-funds managed by Columbia Management Investment Advisers, LLC (the Investment Manager). As a result of asset allocation decisions by
the Investment Manager, it is possible that the Fund may experience relatively large purchases or redemptions from affiliated funds-of-funds. The Investment Manager seeks to minimize the impact of these transactions
by structuring them over a reasonable period of time. The Fund may also experience increased expenses as it buys and sells securities as a result of purchases or redemptions by affiliated funds-of-funds.
For the 12-month period that ended
December 31, 2021, the Fund’s Class 2 shares returned -1.41%. While the Fund posted negative absolute returns, it outperformed its benchmark, the Bloomberg U.S. Aggregate Bond Index, which returned -1.54% during
the same period.
Market overview
For everything that went on in
between, in many ways, 2021 finished much like it started — inflation as a headline risk and COVID-19 dominating investor sentiment. By the end of the annual period, the Federal Reserve (Fed) and elected
officials were in rare accord over an aim to curb inflation. For its part, the Fed responded in December 2021 with an accelerated pace to its tapering of U.S. Treasury and agency mortgage-backed securities purchases
and signaling it was likely to hike interest rates three times in 2022 from its current zero-range level.
Against this backdrop, equities
proved ebullient despite a lack of much consistently good news. Fixed-income markets, by contrast, were held back by rate volatility. During the annual period, a nearly 60 basis point move higher for the 10-year U.S.
Treasury yield challenged fixed-income total returns. (A basis point is 1/100th of a percentage point.) Indeed, U.S. Treasuries led the decline in the benchmark, with the Bloomberg Treasury Index falling 2.32%, its
first full-year loss since 2013. Credit and mortgage-backed securities, as measured by the Bloomberg U.S. Corporate Bond Index and Bloomberg U.S. Mortgage-Backed Securities Index, respectively, each fell 1.04% during
the annual period. Nevertheless, yield premiums actually declined during the annual period, and most sectors outperformed U.S. Treasuries on a duration-adjusted basis.
The risk factors that led to rate
volatility, such as the prospect of monetary policy tightening and increased inflation, did little to deter inflows and rattle corporate spreads, or yield differentials to duration-equivalent U.S. Treasuries, against
a relatively stable year of muted credit volatility, i.e., range-bound yield spreads in investment-grade and high-yield corporate bonds. Industries linked to economic re-opening outperformed during the annual period,
notably airlines, lodging and energy. Lower quality credits were also outperformers on seemingly little stress, with the more speculative universe of the Bloomberg U.S. Corporate High Yield Bond Index posting a return
of 5.28% for the annual period, with a default rate of less than 0.5%, the lowest calendar year reading since 2007. Among securitized issues, returns were mixed. Legacy non-agency mortgage-backed securities led on
strong housing price appreciation and ongoing borrower profile improvements, while also benefiting from their floating rate structures. Conversely, agency mortgage-backed securities were victim not only to higher
rates but also to concerns about accelerated Fed tapering, though TBAs still profited from the Fed’s ongoing purchases, especially lower coupon securities. (To be announced, or TBA, is a term describing
forward-settling mortgage-backed securities trades.) Meanwhile, commercial mortgage-backed securities struggled, though non-agency issues outran agency-backed issues during the annual period. Similarly, asset-backed
securities fell modestly during the annual period, though still outperformed U.S. Treasuries for the year.
The Fund’s notable
contributors during the period
| • | The Fund’s relative performance was boosted by favorable issue selection among corporate credit. Industrials led, with health care — an emphasis in the portfolio — among the best performing industries. Midstream energy, finance companies and life insurance holdings provided an additional boost to performance. |
| • | Residential mortgage-backed securities holdings were also notable positive contributors, despite challenges in the agency mortgage-backed securities space, as the Fund maintained exposure via TBA mortgage bonds, which benefited from a higher running yield than pools throughout the annual period, supported by the Fed’s sizable footprint in the sector. (Running yield is the annual income on an investment divided by its current market value.) |
| • | Seasoned, senior legacy non-agency mortgage-backed securities positions, not held in the benchmark, were maintained in the Fund throughout the annual period and benefited returns, as the sector was supported by a solid housing backdrop, with prices rising and loan-to-value ratios improving. |
| CTIVP® – TCW Core Plus Bond Fund | Annual Report 2021 | 5 |
MANAGER DISCUSSION OF FUND PERFORMANCE (continued)
| • | The Fund’s duration positioning, which was shorter than that of the benchmark for most of the annual period, contributed positively to relative performance, as U.S. Treasury yields reset higher across the yield curve, or spectrum of maturities. Duration is a measure of a fund’s sensitivity to interest rates. |
The Fund’s notable
detractors during the period
| • | The Fund’s overall underweight to corporate credit detracted, as the sector significantly outpaced U.S. Treasuries during the annual period. |
| • | A considerable allocation to agency mortgage-backed securities was a headwind to relative performance, as it was one of the only fixed-income sectors to lag U.S. Treasuries on a duration-adjusted basis during the annual period. The sector was weighed down by interest rate volatility and uncertainty of the Fed’s exit from accommodative policy. |
| • | Yield curve positioning modestly detracted, as the Fund remained generally underweight the long-term end of the curve, where rates rose less dramatically than at the shorter term and intermediate term segments of the curve. |
Derivatives usage
The Fund held futures during the
annual period as a method of managing duration and yield curve positioning. On a stand-alone basis, these derivative positions had a negative impact on the Fund’s results during the annual period.
The views expressed in this report
reflect the current views of the respective parties who have contributed to this report. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult
to predict, so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective parties
disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Columbia fund are based on numerous factors, may not be relied on as an
indication of trading intent on behalf of any particular Columbia fund. References to specific securities should not be construed as a recommendation or investment advice.
| 6 | CTIVP® – TCW Core Plus Bond Fund | Annual Report 2021 |
Understanding Your Fund’s
Expenses
(Unaudited)
(Unaudited)
As an investor, you incur ongoing
costs, which generally include management fees, distribution and/or service fees, and other fund expenses. The following information is intended to help you understand your ongoing costs (in dollars) of investing in
the Fund and to help you compare these costs with the ongoing costs of investing in other mutual funds.
The information below does not
reflect fees and expenses imposed under your variable annuity contract and/or variable life insurance policy (collectively, Contracts) or qualified pension and retirement plan (Qualified Plan), if any. The total fees
and expenses you bear may therefore be higher than those shown below.
Analyzing your Fund’s
expenses
To illustrate these ongoing
costs, we have provided examples and calculated the expenses paid by investors in each share class of the Fund during the period. The actual and hypothetical information in the table is based on an initial investment
of $1,000 at the beginning of the period indicated and held for the entire period. Expense information is calculated two ways and each method provides you with different information. The amount listed in the
“Actual” column is calculated using the Fund’s actual operating expenses and total return for the period. You may use the Actual information, together with the amount invested, to estimate the
expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the results by the expenses paid during the period under
the “Actual” column. The amount listed in the “Hypothetical” column assumes a 5% annual rate of return before expenses (which is not the Fund’s actual return) and then applies the
Fund’s actual expense ratio for the period to the hypothetical return. You should not use the hypothetical account values and expenses to estimate either your actual account balance at the end of the period or
the expenses you paid during the period. See “Compare with other funds” below for details on how to use the hypothetical data.
Compare with other funds
Since all mutual funds are
required to include the same hypothetical calculations about expenses in shareholder reports, you can use this information to compare the ongoing cost of investing in the Fund with other funds. To do so, compare the
hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. As you compare hypothetical examples of other funds, it is important to note that hypothetical examples are
meant to highlight the ongoing costs of investing in a fund only and do not reflect any transaction costs, such as redemption or exchange fees, or expenses that apply to the subaccount or the Contract. Therefore, the
hypothetical calculations are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. If the fees and expenses imposed under your Contract or
Qualified Plan, if any, were included, your costs would be higher.
Expenses paid during the period
are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period and then multiplied by the number of days in the Fund’s most recent fiscal
half year and divided by 365.
Expenses do not include fees and
expenses incurred indirectly by the Fund from its investment in underlying funds, including affiliated and non-affiliated pooled investment vehicles, such as mutual funds and exchange-traded funds.
| CTIVP® – TCW Core Plus Bond Fund | Annual Report 2021 | 7 |
Portfolio of Investments
December 31, 2021
December 31, 2021
(Percentages represent value of
investments compared to net assets)
Investments in securities
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 8 | CTIVP® – TCW Core Plus Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| CTIVP® – TCW Core Plus Bond Fund | Annual Report 2021 | 9 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 10 | CTIVP® – TCW Core Plus Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| CTIVP® – TCW Core Plus Bond Fund | Annual Report 2021 | 11 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 12 | CTIVP® – TCW Core Plus Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| CTIVP® – TCW Core Plus Bond Fund | Annual Report 2021 | 13 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 14 | CTIVP® – TCW Core Plus Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| CTIVP® – TCW Core Plus Bond Fund | Annual Report 2021 | 15 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 16 | CTIVP® – TCW Core Plus Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| CTIVP® – TCW Core Plus Bond Fund | Annual Report 2021 | 17 |
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 18 | CTIVP® – TCW Core Plus Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| CTIVP® – TCW Core Plus Bond Fund | Annual Report 2021 | 19 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 20 | CTIVP® – TCW Core Plus Bond Fund | Annual Report 2021 |
The accompanying Notes to Financial
Statements are an integral part of this statement.
| CTIVP® – TCW Core Plus Bond Fund | Annual Report 2021 | 21 |
The accompanying Notes to Financial
Statements are an integral part of this statement.
| 22 | CTIVP® – TCW Core Plus Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
At December 31, 2021,
securities and/or cash totaling $5,362,000 were pledged as collateral.
Investments in
derivatives
| Long futures contracts | ||||||
| Description | Number of contracts | Expiration date | Trading currency | Notional amount | Value/Unrealized appreciation ($) | Value/Unrealized depreciation ($) |
| U.S. Treasury 2-Year Note | 290 | 03/2022 | USD | 63,269,844 | — | (145,425) |
| U.S. Treasury 5-Year Note | 3,018 | 03/2022 | USD | 365,107,267 | 1,273,057 | — |
| U.S. Treasury Ultra 10-Year Note | 123 | 03/2022 | USD | 18,011,813 | 221,661 | — |
| U.S. Ultra Treasury Bond | 296 | 03/2022 | USD | 58,349,000 | 1,042,616 | — |
| Total | 2,537,334 | (145,425) | ||||
Notes to Portfolio of
Investments
| (a) | Represents privately placed and other securities and instruments exempt from Securities and Exchange Commission registration (collectively, private placements), such as Section 4(a)(2) and Rule 144A eligible securities, which are often sold only to qualified institutional buyers. At December 31, 2021, the total value of these securities amounted to $605,883,855, which represents 16.36% of total net assets. |
| (b) | Variable rate security. The interest rate shown was the current rate as of December 31, 2021. |
| (c) | Represents interest only securities which have the right to receive the monthly interest payments on an underlying pool of mortgage loans. |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| CTIVP® – TCW Core Plus Bond Fund | Annual Report 2021 | 23 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Notes to Portfolio of Investments (continued)
| (d) | Variable or floating rate security, the interest rate of which adjusts periodically based on changes in current interest rates and prepayments on the underlying pool of assets. The interest rate shown was the current rate as of December 31, 2021. |
| (e) | Non-income producing investment. |
| (f) | Valuation based on significant unobservable inputs. |
| (g) | Represents a variable rate security with a step coupon where the rate adjusts according to a schedule for a series of periods, typically lower for an initial period and then increasing to a higher coupon rate thereafter. The interest rate shown was the current rate as of December 31, 2021. |
| (h) | Represents securities that have defaulted on payment of interest. The Fund has stopped accruing interest on these securities. At December 31, 2021, the total value of these securities amounted to $5,512,189, which represents 0.15% of total net assets. |
| (i) | Zero coupon bond. |
| (j) | Principal and interest may not be guaranteed by a governmental entity. |
| (k) | Represents principal only securities which have the right to receive the principal portion only on an underlying pool of mortgage loans. |
| (l) | Represents a security purchased on a when-issued basis. |
| (m) | Represents fair value as determined in good faith under procedures approved by the Board of Trustees. At December 31, 2021, the total value of these securities amounted to $12,069,989, which represents 0.33% of total net assets. |
| (n) | The stated interest rate represents the weighted average interest rate at December 31, 2021 of contracts within the senior loan facility. Interest rates on contracts are primarily determined either weekly, monthly or quarterly by reference to the indicated base lending rate and spread and the reset period. These base lending rates are primarily the LIBOR and other short-term rates. Base lending rates may be subject to a floor or minimum rate. The interest rate for senior loans purchased on a when-issued or delayed delivery basis will be determined upon settlement, therefore no interest rate is disclosed. Senior loans often require prepayments from excess cash flows or permit the borrowers to repay at their election. The degree to which borrowers repay cannot be predicted with accuracy. As a result, remaining maturities of senior loans may be less than the stated maturities. Generally, the Fund is contractually obligated to receive approval from the agent bank and/or borrower prior to the disposition of a senior loan. |
| (o) | The borrower filed for protection under Chapter 11 of the U.S. Federal Bankruptcy Code. |
| (p) | Represents a security purchased on a forward commitment basis. |
| (q) | At December 31, 2021, the Fund had unfunded senior loan commitments pursuant to the terms of the loan agreement. The Fund receives a stated coupon rate until the borrower draws on the loan commitment, at which time the rate will become the stated rate in the loan agreement. |
| Borrower | Unfunded Commitment ($) |
| Intelsat Jackson Holdings SA Debtor in Possession Term Loan 07/13/2022 5.392% | 439,167 |
| (r) | Payment-in-kind security. Interest can be paid by issuing additional par of the security or in cash. |
| (s) | The rate shown is the seven-day current annualized yield at December 31, 2021. |
| (t) | As defined in the Investment Company Act of 1940, as amended, an affiliated company is one in which the Fund owns 5% or more of the company’s outstanding voting securities, or a company which is under common ownership or control with the Fund. The value of the holdings and transactions in these affiliated companies during the year ended December 31, 2021 are as follows: |
| Affiliated issuers | Beginning of period($) | Purchases($) | Sales($) | Net change in unrealized appreciation (depreciation)($) | End of period($) | Realized gain (loss)($) | Dividends($) | End of period shares |
| Columbia Short-Term Cash Fund, 0.085% | ||||||||
| 479,955,063 | 3,956,548,258 | (3,680,408,921) | (69,500) | 756,024,900 | (9,412) | 572,815 | 756,176,136 | |
Abbreviation Legend
| CMO | Collateralized Mortgage Obligation |
| CMT | Constant Maturity Treasury |
| LIBOR | London Interbank Offered Rate |
| MTA | Monthly Treasury Average |
| SOFR | Secured Overnight Financing Rate |
| TBA | To Be Announced |
Currency Legend
| USD | US Dollar |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 24 | CTIVP® – TCW Core Plus Bond Fund | Annual Report 2021 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Fair value measurements
The Fund categorizes its fair
value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available.
Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the
Fund’s assumptions about the information market participants would use in pricing an investment. An investment’s level within the fair value hierarchy is based on the lowest level of any input that is
deemed significant to the asset’s or liability’s fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example,
certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market.
Fair value inputs are summarized in
the three broad levels listed below:
| ■ | Level 1 — Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. |
| ■ | Level 2 — Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). |
| ■ | Level 3 — Valuations based on significant unobservable inputs (including the Fund’s own assumptions and judgment in determining the fair value of investments). |
Inputs that are used in determining
fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary
between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered
by the Investment Manager, along with any other relevant factors in the calculation of an investment’s fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include
periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels
within the hierarchy.
Investments falling into the Level 3
category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency
and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models may rely on one or more significant
unobservable inputs and/or significant assumptions by the Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and
estimated cash flows, and comparable company data.
Under the direction of the
Fund’s Board of Trustees (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for overseeing the valuation procedures approved by the Board. The Committee consists of
voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.
The Committee meets at least monthly
to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of
Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are or are not readily available, including recommendations of third
party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale
pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to
discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members
of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.
The following table is a summary of
the inputs used to value the Fund’s investments at December 31, 2021:
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Investments in Securities | ||||
| Asset-Backed Securities — Non-Agency | — | 167,993,351 | — | 167,993,351 |
| Commercial Mortgage-Backed Securities - Agency | — | 12,861,462 | — | 12,861,462 |
| Commercial Mortgage-Backed Securities - Non-Agency | — | 93,684,431 | — | 93,684,431 |
| Common Stocks | ||||
| Utilities | — | — | 1,763 | 1,763 |
| Total Common Stocks | — | — | 1,763 | 1,763 |
| Corporate Bonds & Notes | — | 910,854,735 | — | 910,854,735 |
| Foreign Government Obligations | — | 58,790,053 | — | 58,790,053 |
| Inflation-Indexed Bonds | — | 10,121,823 | — | 10,121,823 |
| Municipal Bonds | — | 24,043,362 | — | 24,043,362 |
| Residential Mortgage-Backed Securities - Agency | — | 1,076,084,982 | — | 1,076,084,982 |
| Residential Mortgage-Backed Securities - Non-Agency | — | 198,503,061 | 12,577,754 | 211,080,815 |
| Senior Loans | — | 50,145,309 | 180,320 | 50,325,629 |
| Treasury Bills | 78,929,977 | — | — | 78,929,977 |
| U.S. Treasury Obligations | 976,204,478 | — | — | 976,204,478 |
| Money Market Funds | 756,024,900 | — | — | 756,024,900 |
| Total Investments in Securities | 1,811,159,355 | 2,603,082,569 | 12,759,837 | 4,427,001,761 |
| Investments in Derivatives | ||||
| Asset | ||||
| Futures Contracts | 2,537,334 | — | — | 2,537,334 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| CTIVP® – TCW Core Plus Bond Fund | Annual Report 2021 | 25 |
Portfolio of Investments (continued)
December 31, 2021
December 31, 2021
Fair value measurements (continued)
| Level 1 ($) | Level 2 ($) | Level 3 ($) | Total ($) | |
| Liability | ||||
| Futures Contracts | (145,425) | — | — | (145,425) |
| Total | 1,813,551,264 | 2,603,082,569 | 12,759,837 | 4,429,393,670 |
See the Portfolio of Investments for
all investment classifications not indicated in the table.
The Fund’s assets assigned to
the Level 2 input category are generally valued using the market approach, in which a security’s value is determined through reference to prices and information from market transactions for similar or identical
assets.
Derivative instruments are valued at
unrealized appreciation (depreciation).
The Fund does not hold any
significant investments (greater than one percent of net assets) categorized as Level 3.
The accompanying Notes to Financial Statements are
an integral part of this statement.
| 26 | CTIVP® – TCW Core Plus Bond Fund | Annual Report 2021 |
Statement of Assets and Liabilities
December 31, 2021
December 31, 2021
| Assets | |
| Investments in securities, at value | |
| Unaffiliated issuers (cost $3,636,881,448) | $3,670,976,861 |
| Affiliated issuers (cost $756,094,400) | 756,024,900 |
| Cash | 159,500 |
| Margin deposits on: | |
| Futures contracts | 5,362,000 |
| Receivable for: | |
| Investments sold | 1,179 |
| Investments sold on a delayed delivery basis | 707,446,096 |
| Capital shares sold | 5,310 |
| Dividends | 57,332 |
| Interest | 10,455,894 |
| Foreign tax reclaims | 62,073 |
| Variation margin for futures contracts | 720,971 |
| Prepaid expenses | 28,920 |
| Total assets | 5,151,301,036 |
| Liabilities | |
| Payable for: | |
| Investments purchased | 266,800 |
| Investments purchased on a delayed delivery basis | 1,447,034,344 |
| Capital shares purchased | 139,358 |
| Management services fees | 48,008 |
| Distribution and/or service fees | 133 |
| Service fees | 1,070 |
| Compensation of board members | 180,638 |
| Compensation of chief compliance officer | 691 |
| Other expenses | 43,879 |
| Total liabilities | 1,447,714,921 |
| Net assets applicable to outstanding capital stock | $3,703,586,115 |
| Represented by | |
| Paid in capital | 3,644,143,967 |
| Total distributable earnings (loss) | 59,442,148 |
| Total - representing net assets applicable to outstanding capital stock | $3,703,586,115 |
| Class 1 | |
| Net assets | $3,684,151,250 |
| Shares outstanding | 343,138,339 |
| Net asset value per share | $10.74 |
| Class 2 | |
| Net assets | $19,434,865 |
| Shares outstanding | 1,818,296 |
| Net asset value per share | $10.69 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| CTIVP® – TCW Core Plus Bond Fund | Annual Report 2021 | 27 |
Statement of Operations
Year Ended December 31, 2021
Year Ended December 31, 2021
| Net investment income | |
| Income: | |
| Dividends — affiliated issuers | $572,815 |
| Interest | 54,143,452 |
| Total income | 54,716,267 |
| Expenses: | |
| Management services fees | 17,437,606 |
| Distribution and/or service fees | |
| Class 2 | 51,192 |
| Service fees | 13,045 |
| Compensation of board members | 89,955 |
| Custodian fees | 51,178 |
| Printing and postage fees | 14,281 |
| Audit fees | 41,326 |
| Legal fees | 43,375 |
| Interest on collateral | 182 |
| Compensation of chief compliance officer | 621 |
| Other | 19,602 |
| Total expenses | 17,762,363 |
| Net investment income | 36,953,904 |
| Realized and unrealized gain (loss) — net | |
| Net realized gain (loss) on: | |
| Investments — unaffiliated issuers | (4,256,211) |
| Investments — affiliated issuers | (9,412) |
| Futures contracts | (5,792,550) |
| Net realized loss | (10,058,173) |
| Net change in unrealized appreciation (depreciation) on: | |
| Investments — unaffiliated issuers | (67,387,217) |
| Investments — affiliated issuers | (69,500) |
| Futures contracts | 1,825,122 |
| Net change in unrealized appreciation (depreciation) | (65,631,595) |
| Net realized and unrealized loss | (75,689,768) |
| Net decrease in net assets resulting from operations | $(38,735,864) |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 28 | CTIVP® – TCW Core Plus Bond Fund | Annual Report 2021 |
Statement of Changes in Net Assets
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | |
| Operations | ||
| Net investment income | $36,953,904 | $51,269,692 |
| Net realized gain (loss) | (10,058,173) | 161,631,441 |
| Net change in unrealized appreciation (depreciation) | (65,631,595) | 53,898,438 |
| Net increase (decrease) in net assets resulting from operations | (38,735,864) | 266,799,571 |
| Distributions to shareholders | ||
| Net investment income and net realized gains | ||
| Class 1 | (214,899,768) | (124,872,481) |
| Class 2 | (1,119,084) | (661,778) |
| Total distributions to shareholders | (216,018,852) | (125,534,259) |
| Increase in net assets from capital stock activity | 782,010,680 | 214,175,897 |
| Total increase in net assets | 527,255,964 | 355,441,209 |
| Net assets at beginning of year | 3,176,330,151 | 2,820,888,942 |
| Net assets at end of year | $3,703,586,115 | $3,176,330,151 |
| Year Ended | Year Ended | |||
| December 31, 2021 | December 31, 2020 | |||
| Shares | Dollars ($) | Shares | Dollars ($) | |
| Capital stock activity | ||||
| Class 1 | ||||
| Subscriptions | 65,802,814 | 749,610,697 | 39,265,514 | 439,910,350 |
| Distributions reinvested | 19,843,007 | 214,899,768 | 10,934,543 | 124,872,481 |
| Redemptions | (16,239,665) | (180,551,973) | (31,638,480) | (360,672,751) |
| Net increase | 69,406,156 | 783,958,492 | 18,561,577 | 204,110,080 |
| Class 2 | ||||
| Subscriptions | 325,081 | 3,564,790 | 953,052 | 10,835,414 |
| Distributions reinvested | 103,619 | 1,119,084 | 58,153 | 661,778 |
| Redemptions | (601,349) | (6,631,686) | (126,173) | (1,431,375) |
| Net increase (decrease) | (172,649) | (1,947,812) | 885,032 | 10,065,817 |
| Total net increase | 69,233,507 | 782,010,680 | 19,446,609 | 214,175,897 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| CTIVP® – TCW Core Plus Bond Fund | Annual Report 2021 | 29 |
Financial Highlights
The following table is intended to
help you understand the Fund’s financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are
calculated based on average shares outstanding during the period. Total return assumes reinvestment of all dividends and distributions, if any. Total return does not reflect any fees and expenses imposed under your
Contract and/or Qualified Plan, as applicable; such fees and expenses would reduce the total returns for all periods shown. Total return and portfolio turnover are not annualized for periods of less than one year. The
portfolio turnover rate is calculated without regard to purchase and sales transactions of short-term instruments and certain derivatives, if any. If such transactions were included, the Fund’s portfolio
turnover rate may be higher.
| Net asset value, beginning of period | Net investment income | Net realized and unrealized gain (loss) | Total from investment operations | Distributions from net investment income | Distributions from net realized gains | Total distributions to shareholders | |
| Class 1 | |||||||
| Year Ended 12/31/2021 | $11.52 | 0.11 | (0.24) | (0.13) | (0.15) | (0.50) | (0.65) |
| Year Ended 12/31/2020 | $11.01 | 0.19 | 0.78 | 0.97 | (0.27) | (0.19) | (0.46) |
| Year Ended 12/31/2019 | $10.38 | 0.29 | 0.64 | 0.93 | (0.30) | — | (0.30) |
| Year Ended 12/31/2018 | $10.62 | 0.27 | (0.27) | 0.00 | (0.22) | (0.02) | (0.24) |
| Year Ended 12/31/2017 | $10.48 | 0.21 | 0.14 | 0.35 | (0.17) | (0.04) | (0.21) |
| Class 2 | |||||||
| Year Ended 12/31/2021 | $11.47 | 0.08 | (0.23) | (0.15) | (0.13) | (0.50) | (0.63) |
| Year Ended 12/31/2020 | $10.96 | 0.15 | 0.80 | 0.95 | (0.25) | (0.19) | (0.44) |
| Year Ended 12/31/2019 | $10.35 | 0.25 | 0.63 | 0.88 | (0.27) | — | (0.27) |
| Year Ended 12/31/2018 | $10.58 | 0.25 | (0.26) | (0.01) | (0.20) | (0.02) | (0.22) |
| Year Ended 12/31/2017 | $10.44 | 0.18 | 0.15 | 0.33 | (0.15) | (0.04) | (0.19) |
| Notes to Financial Highlights | |
| (a) | In addition to the fees and expenses that the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of any other funds in which it invests. Such indirect expenses are not included in the Fund’s reported expense ratios. |
| (b) | Total net expenses include the impact of certain fee waivers/expense reimbursements made by the Investment Manager and certain of its affiliates, if applicable. |
| (c) | Ratios include interest on collateral expense which is less than 0.01%. |
The accompanying Notes to
Financial Statements are an integral part of this statement.
| 30 | CTIVP® – TCW Core Plus Bond Fund | Annual Report 2021 |
Financial Highlights (continued)
| Net asset value, end of period | Total return | Total gross expense ratio to average net assets(a) | Total net expense ratio to average net assets(a),(b) | Net investment income ratio to average net assets | Portfolio turnover | Net assets, end of period (000’s) | |
| Class 1 | |||||||
| Year Ended 12/31/2021 | $10.74 | (1.14%) | 0.48%(c) | 0.48%(c) | 1.01% | 457% | $3,684,151 |
| Year Ended 12/31/2020 | $11.52 | 8.88% | 0.49% | 0.49% | 1.63% | 373% | $3,153,493 |
| Year Ended 12/31/2019 | $11.01 | 9.01% | 0.49% | 0.49% | 2.65% | 209% | $2,808,764 |
| Year Ended 12/31/2018 | $10.38 | 0.06% | 0.49% | 0.49% | 2.61% | 178% | $2,714,909 |
| Year Ended 12/31/2017 | $10.62 | 3.40% | 0.52% | 0.52% | 1.97% | 281% | $2,979,922 |
| Class 2 | |||||||
| Year Ended 12/31/2021 | $10.69 | (1.41%) | 0.73%(c) | 0.73%(c) | 0.76% | 457% | $19,435 |
| Year Ended 12/31/2020 | $11.47 | 8.67% | 0.74% | 0.74% | 1.32% | 373% | $22,838 |
| Year Ended 12/31/2019 | $10.96 | 8.58% | 0.74% | 0.74% | 2.37% | 209% | $12,125 |
| Year Ended 12/31/2018 | $10.35 | (0.10%) | 0.74% | 0.74% | 2.38% | 178% | $7,961 |
| Year Ended 12/31/2017 | $10.58 | 3.15% | 0.77% | 0.77% | 1.73% | 281% | $7,071 |
The accompanying Notes to Financial Statements are
an integral part of this statement.
| CTIVP® – TCW Core Plus Bond Fund | Annual Report 2021 | 31 |
Notes to Financial Statements
December 31, 2021
December 31, 2021
Note 1. Organization
CTIVP® – TCW Core Plus
Bond Fund (the Fund), a series of Columbia Funds Variable Series Trust II (the Trust), is a diversified fund. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end
management investment company organized as a Massachusetts business trust.
Fund shares
The Trust may issue an unlimited
number of shares (without par value). The Fund offers Class 1 and Class 2 shares to separate accounts funding variable annuity contracts and variable life insurance policies (collectively, Contracts) issued by
affiliated and unaffiliated life insurance companies (Participating Insurance Companies) as well as qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors (Qualified
Investors) authorized by Columbia Management Investment Distributors, Inc. (the Distributor). You may not buy (nor will you own) shares of the Fund directly. You may invest by participating in a Qualified Plan or by
buying a Contract and making allocations to the Fund. Although all share classes generally have identical voting, dividend and liquidation rights, each share class votes separately when required by the Trust’s
organizational documents or by law. Different share classes pay different net investment income distribution amounts to the extent the expenses of such share classes differ, and distributions in liquidation will be
proportional to the net asset value of each share class. Each share class has its own cost structure and other features.
Note 2. Summary of
significant accounting policies
Basis of preparation
The Fund is an investment company
that applies the accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services - Investment Companies (ASC 946). The financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The following is a summary of
significant accounting policies followed by the Fund in the preparation of its financial statements.
Security valuation
Equity securities listed on an
exchange are valued at the closing price or last trade price on their primary exchange at the close of business of the New York Stock Exchange. Securities with a closing price not readily available or not listed on
any exchange are valued at the mean between the closing bid and ask prices. Listed preferred stocks convertible into common stocks are valued using an evaluated price from a pricing service.
Debt securities generally are
valued by pricing services approved by the Board of Trustees based upon market transactions for normal, institutional-size trading units of similar securities. The services may use various pricing techniques that take
into account, as applicable, factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data, as well as approved independent broker-dealer quotes. Debt securities for
which quotations are not readily available or not believed to be reflective of market value may also be valued based upon a bid quote from an approved independent broker-dealer. Debt securities maturing in 60 days or
less are valued primarily at amortized market value, unless this method results in a valuation that management believes does not approximate fair value.
Asset- and mortgage-backed
securities are generally valued by pricing services, which utilize pricing models that incorporate the securities’ cash flow and loan performance data. These models also take into account available market data,
including trades, market quotations, and benchmark yield curves for identical or similar securities. Factors used to identify similar securities may include, but are not limited to, issuer, collateral type, vintage,
prepayment speeds, collateral performance, credit ratings, credit enhancement and expected life. Asset-backed securities for which quotations are readily available may also be valued based upon an over-the-counter or
exchange bid quote from an approved independent broker-dealer. Debt securities maturing in 60 days or less are valued primarily at amortized market value, unless this method results in a valuation that management
believes does not approximate fair value.
| 32 | CTIVP® – TCW Core Plus Bond Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Senior loan securities for which
reliable market quotations are readily available are generally valued by pricing services at the average of the bids received.
Investments in open-end investment
companies (other than exchange-traded funds (ETFs)), are valued at the latest net asset value reported by those companies as of the valuation time.
Futures and options on futures
contracts are valued based upon the settlement price at the close of regular trading on their principal exchanges or, in the absence of a settlement price, at the mean of the latest quoted bid and ask prices.
Investments for which market
quotations are not readily available, or that have quotations which management believes are not reflective of market value or reliable, are valued at fair value as determined in good faith under procedures approved by
and under the general supervision of the Board of Trustees. If a security or class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the quoted or published
price for the security, if available.
The determination of fair value
often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used
to determine fair value.
GAAP requires disclosure regarding
the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. This information is disclosed following
the Fund’s Portfolio of Investments.
Derivative instruments
The Fund invests in certain
derivative instruments, as detailed below, in seeking to meet its investment objectives. Derivatives are instruments whose values depend on, or are derived from, in whole or in part, the value of one or more
securities, currencies, commodities, indices, or other assets or instruments. Derivatives may be used to increase investment flexibility (including to maintain cash reserves while maintaining desired exposure to
certain assets), for risk management (hedging) purposes, to facilitate trading, to reduce transaction costs and to pursue higher investment returns. The Fund may also use derivative instruments to mitigate certain
investment risks, such as foreign currency exchange rate risk, interest rate risk and credit risk. Derivatives may involve various risks, including the potential inability of the counterparty to fulfill its
obligations under the terms of the contract, the potential for an illiquid secondary market (making it difficult for the Fund to sell or terminate, including at favorable prices) and the potential for market movements
which may expose the Fund to gains or losses in excess of the amount shown in the Statement of Assets and Liabilities. The notional amounts of derivative instruments, if applicable, are not recorded in the financial
statements.
A derivative instrument may suffer
a marked-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform its
obligations under the contract. The Fund’s risk of loss from counterparty credit risk on over-the-counter derivatives is generally limited to the aggregate unrealized gain netted against any collateral held by
the Fund and the amount of any variation margin held by the counterparty, plus any replacement costs or related amounts. With exchange-traded or centrally cleared derivatives, there is reduced counterparty credit risk
to the Fund since the clearinghouse or central counterparty (CCP) provides some protection in the case of clearing member default. The clearinghouse or CCP stands between the buyer and the seller of the contract;
therefore, additional counterparty credit risk is failure of the clearinghouse or CCP. However, credit risk still exists in exchange-traded or centrally cleared derivatives with respect to initial and variation margin
that is held in a broker’s customer account. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy
and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients and such shortfall is remedied by the CCP or otherwise, U.S. bankruptcy laws will typically
allocate that shortfall on a pro-rata basis across all the clearing broker’s customers (including the Fund), potentially resulting in losses to the Fund.
In order to better define its
contractual rights and to secure rights that will help the Fund mitigate its counterparty risk, the Fund may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (ISDA Master Agreement)
or similar agreement with its derivatives counterparties. An ISDA Master Agreement is an agreement between the Fund and a counterparty that governs over-the-counter derivatives and foreign exchange forward contracts
and contains, among other
| CTIVP® – TCW Core Plus Bond Fund | Annual Report 2021 | 33 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
things, collateral posting terms and netting
provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset with the counterparty certain derivative instruments’ payables
and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of default (close-out netting),
including the bankruptcy or insolvency of the counterparty. Note, however, that bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against the right of offset or
netting in bankruptcy, insolvency or other events.
Collateral (margin) requirements
differ by type of derivative. Margin requirements are established by the clearinghouse or CCP for exchange-traded and centrally cleared derivatives. Brokers can ask for margin in excess of the minimum in certain
circumstances. Collateral terms for most over-the-counter derivatives are subject to regulatory requirements to exchange variation margin with trading counterparties and may have contract specific margin terms as
well. For over-the-counter derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the marked-to-market amount for each transaction under such agreement and
comparing that amount to the value of any variation margin currently pledged by the Fund and/or the counterparty. Generally, the amount of collateral due from or to a party has to exceed a minimum transfer amount
threshold (e.g., $250,000) before a transfer has to be made. To the extent amounts due to the Fund from its counterparties are not fully collateralized, contractually or otherwise, the Fund bears the risk of loss from
counterparty nonperformance. The Fund may also pay interest expense on cash collateral received from the broker. Any interest expense paid by the Fund is shown on the Statement of Operations. The Fund attempts to
mitigate counterparty risk by only entering into agreements with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those
counterparties.
Certain ISDA Master Agreements
allow counterparties of over-the-counter derivatives transactions to terminate derivatives contracts prior to maturity in the event the Fund’s net asset value declines by a stated percentage over a specified
time period or if the Fund fails to meet certain terms of the ISDA Master Agreement, which would cause the Fund to accelerate payment of any net liability owed to the counterparty. The Fund also has termination
rights if the counterparty fails to meet certain terms of the ISDA Master Agreement. In determining whether to exercise such termination rights, the Fund would consider, in addition to counterparty credit risk,
whether termination would result in a net liability owed from the counterparty.
For financial reporting purposes,
the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statement of Assets and Liabilities.
Futures contracts
Futures contracts are
exchange-traded and represent commitments for the future purchase or sale of an asset at a specified price on a specified date. The Fund bought and sold futures contracts to produce incremental earnings, to manage the
duration and yield curve exposure of the Fund versus the benchmark and to manage exposure to movements in interest rates. These instruments may be used for other purposes in future periods. Upon entering into futures
contracts, the Fund bears risks that it may not achieve the anticipated benefits of the futures contracts and may realize a loss. Additional risks include counterparty credit risk, the possibility of an illiquid
market, and that a change in the value of the contract or option may not correlate with changes in the value of the underlying asset.
Upon entering into a futures
contract, the Fund deposits cash or securities with the broker, known as a futures commission merchant (FCM), in an amount sufficient to meet the initial margin requirement. The initial margin deposit must be
maintained at an established level over the life of the contract. Cash deposited as initial margin is recorded in the Statement of Assets and Liabilities as margin deposits. Securities deposited as initial margin are
designated in the Portfolio of Investments. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily change in the contract value and are
recorded as variation margin receivable or payable and are offset in unrealized gains or losses. The Fund generally expects to earn interest income on its margin deposits. The Fund recognizes a realized gain or loss
when the contract is closed or expires. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities.
| 34 | CTIVP® – TCW Core Plus Bond Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Effects of derivative transactions in
the financial statements
The following tables are intended
to provide additional information about the effect of derivatives on the financial statements of the Fund, including: the fair value of derivatives by risk category and the location of those fair values in the
Statement of Assets and Liabilities; and the impact of derivative transactions over the period in the Statement of Operations, including realized and unrealized gains (losses). The derivative instrument schedules
following the Portfolio of Investments present additional information regarding derivative instruments outstanding at the end of the period, if any.
The following table is a summary of
the fair value of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) at December 31, 2021:
| * | Includes cumulative appreciation (depreciation) as reported in the tables following the Portfolio of Investments. Only the current day’s variation margin is reported in receivables or payables in the Statement of Assets and Liabilities. |
The following table indicates the
effect of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) in the Statement of Operations for the year ended December 31, 2021:
The following table is a summary
of the average outstanding volume by derivative instrument for the year ended December 31, 2021:
| Derivative instrument | Average notional amounts ($) |
| Futures contracts — long | 454,407,753* |
| Futures contracts — short | 7,501,742** |
| * | Based on the ending quarterly outstanding amounts for the year ended December 31, 2021. |
| ** | Based on the ending daily outstanding amounts for the year ended December 31, 2021. |
Investments in senior loans
The Fund may invest in senior loan
assignments. When the Fund purchases an assignment of a senior loan, the Fund typically has direct rights against the borrower; provided, however, that the Fund’s rights may be more limited than the lender from
which it acquired the assignment and the Fund may be able to enforce its rights only through an administrative agent. Although certain senior loan assignments are secured by collateral, the Fund could experience
delays or limitations in realizing such collateral or have its interest subordinated to other indebtedness of the obligor. In the event that the
| CTIVP® – TCW Core Plus Bond Fund | Annual Report 2021 | 35 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
administrator or collateral agent of a loan
becomes insolvent or enters into receivership or bankruptcy, the Fund may incur costs and delays in realizing payment or may suffer a loss of principal and/or interest. The risk of loss is greater for unsecured or
subordinated loans. In addition, senior loan assignments are vulnerable to market, economic or other conditions or events that may reduce the demand for senior loan assignments and certain senior loan assignments
which were liquid when purchased, may become illiquid.
The Fund may enter into senior loan
assignments where all or a portion of the loan may be unfunded. The Fund is obligated to fund these commitments at the borrower’s discretion. These commitments, if any, are generally traded and priced in the
same manner as other senior loan securities and are disclosed as unfunded senior loan commitments in the Fund’s Portfolio of Investments with a corresponding payable for investments purchased. The Fund
designates cash or liquid securities to cover these commitments.
Asset- and mortgage-backed
securities
The Fund may invest in asset-backed
and mortgage-backed securities. The maturity dates shown represent the original maturity of the underlying obligation. Actual maturity may vary based upon prepayment activity on these obligations. All, or a portion,
of the obligation may be prepaid at any time because the underlying asset may be prepaid. As a result, decreasing market interest rates could result in an increased level of prepayment. An increased prepayment rate
will have the effect of shortening the maturity of the security. Unless otherwise noted, the coupon rates presented are fixed rates.
Delayed delivery securities
The Fund may trade securities on
other than normal settlement terms, including securities purchased or sold on a “when-issued” or "forward commitment" basis. This may increase risk to the Fund since the other party to the transaction may
fail to deliver, which could cause the Fund to subsequently invest at less advantageous prices. The Fund designates cash or liquid securities in an amount equal to the delayed delivery commitment.
To be announced securities
The Fund may trade securities on a
To Be Announced (TBA) basis. As with other delayed-delivery transactions, a seller agrees to issue a TBA security at a future date. However, the seller does not specify the particular securities to be delivered.
Instead, the Fund agrees to accept any security that meets specified terms.
In some cases, Master Securities
Forward Transaction Agreements (MSFTAs) may be used to govern transactions of certain forward-settling agency mortgage-backed securities, such as delayed-delivery and TBAs, between the Fund and counterparty. The MSFTA
maintains provisions for, among other things, initiation and confirmation, payment and transfer, events of default, termination, and maintenance of collateral relating to such transactions.
Mortgage dollar roll transactions
The Fund may enter into mortgage
“dollar rolls” in which the Fund sells securities for delivery in the current month and simultaneously contracts with the same counterparty to repurchase similar but not identical securities (same type,
coupon and maturity) on a specified future date. During the roll period, the Fund loses the right to receive principal and interest paid on the securities sold. However, the Fund may benefit because it receives
negotiated amounts in the form of reductions of the purchase price for the future purchase plus the interest earned on the cash proceeds of the securities sold until the settlement date of the forward purchase. The
Fund records the incremental difference between the forward purchase and sale of each forward roll as a realized gain or loss. Unless any realized gains exceed the income, capital appreciation, and gain or loss due to
mortgage prepayments that would have been realized on the securities sold as part of the mortgage dollar roll, the use of this technique may diminish the investment performance of the Fund compared to what the
performance would have been without the use of mortgage dollar rolls. All cash proceeds will be invested in instruments that are permissible investments for the Fund. The Fund identifies cash or liquid securities in
an amount equal to the forward purchase price.
For financial reporting and tax
purposes, the Fund treats “to be announced” mortgage dollar rolls as two separate transactions, one involving the purchase of a security and a separate transaction involving a sale. These transactions may
increase the Fund’s portfolio turnover rate. The Fund does not currently enter into mortgage dollar rolls that are accounted for as financing transactions.
| 36 | CTIVP® – TCW Core Plus Bond Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Mortgage dollar rolls involve the
risk that the market value of the securities the Fund is obligated to repurchase may decline below the repurchase price, or that the counterparty may default on its obligations.
Treasury inflation protected
securities
The Fund may invest in treasury
inflation protected securities (TIPS). The principal amount of TIPS is adjusted periodically and is increased for inflation or decreased for deflation based on a monthly published index. These adjustments are recorded
as interest income in the Statement of Operations. Coupon payments are based on the adjusted principal at the time the interest is paid.
Interest only and principal only
securities
The Fund may invest in Interest
Only (IO) or Principal Only (PO) securities. IOs are stripped securities entitled to receive all of the security’s interest, but none of its principal. IOs are particularly sensitive to changes in interest rates
and therefore subject to greater fluctuations in price than typical interest bearing debt securities. IOs are also subject to credit risk because the Fund may not receive all or part of the interest payments if the
issuer, obligor, guarantor or counterparty defaults on its obligation. Payments received for IOs are included in interest income on the Statement of Operations. Because no principal will be received at the maturity of
an IO, adjustments are made to the cost of the security on a monthly basis until maturity. These adjustments are included in interest income on the Statement of Operations. POs are stripped securities entitled to
receive the principal from the underlying obligation, but not the interest. POs are particularly sensitive to changes in interest rates and therefore are subject to fluctuations in price. POs are also subject to
credit risk because the Fund may not receive all or part of its principal if the issuer, obligor, guarantor or counterparty defaults on its obligation. The Fund may also invest in IO or PO stripped mortgage-backed
securities. Payments received for POs are treated as reductions to the cost and par value of the securities.
Security transactions
Security transactions are accounted
for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.
The trade date for senior loans
purchased in the primary market is the date on which the loan is allocated. The trade date for senior loans purchased in the secondary market is the date on which the transaction is entered into.
Income recognition
Interest income is recorded on an
accrual basis. Market premiums and discounts, including original issue discounts, are amortized and accreted, respectively, over the expected life of the security on all debt securities, unless otherwise noted. The
Fund classifies gains and losses realized on prepayments received on mortgage-backed securities as adjustments to interest income.
The Fund may place a debt security
on non-accrual status and reduce related interest income when it becomes probable that the interest will not be collected and the amount of uncollectible interest can be reasonably estimated. A defaulted debt security
is removed from non-accrual status when the issuer resumes interest payments or when collectability of interest is reasonably assured.
Corporate actions and dividend
income are recorded on the ex-dividend date.
The Fund may receive distributions
from holdings in equity securities, business development companies (BDCs), exchange-traded funds (ETFs), limited partnerships (LPs), other regulated investment companies (RICs), and real estate investment trusts
(REITs), which report information as to the tax character of their distributions annually. These distributions are allocated to dividend income, capital gain and return of capital based on actual information reported.
Return of capital is recorded as a reduction of the cost basis of securities held. If the Fund no longer owns the applicable securities, return of capital is recorded as a realized gain. With respect to REITs, to the
extent actual information has not yet been reported, estimates for return of capital are made by Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise
Financial, Inc. (Ameriprise Financial). The Investment Manager’s estimates are subsequently adjusted when the actual character of the distributions is disclosed by the REITs, which could result in a
proportionate change in return of capital to shareholders.
| CTIVP® – TCW Core Plus Bond Fund | Annual Report 2021 | 37 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Awards from class action litigation
are recorded as a reduction of cost basis if the Fund still owns the applicable securities on the payment date. If the Fund no longer owns the applicable securities on the payment date, the proceeds are recorded as
realized gains.
The value of additional securities
received as an income payment through a payment in kind, if any, is recorded as interest income and increases the cost basis of such securities.
The Fund may receive other income
from senior loans, including amendment fees, consent fees and commitment fees. These fees are recorded as income when received by the Fund. These amounts are included in Interest Income in the Statement of
Operations.
Expenses
General expenses of the Trust are
allocated to the Fund and other funds of the Trust based upon relative net assets or other expense allocation methodologies determined by the nature of the expense. Expenses directly attributable to the Fund are
charged to the Fund. Expenses directly attributable to a specific class of shares are charged to that share class.
Determination of class net asset
value
All income, expenses (other than
class-specific expenses, which are charged to that share class, as shown in the Statement of Operations) and realized and unrealized gains (losses) are allocated to each class of the Fund on a daily basis, based on
the relative net assets of each class, for purposes of determining the net asset value of each class.
Federal income tax status
The Fund intends to qualify each
year as a regulated investment company under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its investment company taxable income and net capital gain, if any, for its
tax year, and as such will not be subject to federal income taxes. In addition, because the Fund meets the exception under Internal Revenue Code Section 4982(f), the Fund expects not to be subject to federal excise
tax. Therefore, no federal income or excise tax provision is recorded.
Foreign taxes
The Fund may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries, as applicable, based upon its current interpretation of tax rules
and regulations that exist in the markets in which it invests.
Realized gains in certain countries
may be subject to foreign taxes at the Fund level, based on statutory rates. The Fund accrues for such foreign taxes on realized and unrealized gains at the appropriate rate for each jurisdiction, as applicable. The
amount, if any, is disclosed as a liability on the Statement of Assets and Liabilities.
Distributions to subaccounts
Distributions to the subaccounts of
Contracts, Qualified Plans and Qualified Investors are recorded at the close of business on the record date and are payable on the first business day following the record date. Dividends from net investment income, if
any, are declared and distributed annually. Capital gain distributions, when available, will be made annually. However, an additional capital gain distribution may be made during the fiscal year in order to comply
with the Internal Revenue Code, as applicable to registered investment companies. Income distributions and capital gain distributions are determined in accordance with federal income tax regulations, which may differ
from GAAP. All dividends and distributions are reinvested in additional shares of the applicable share class of the Fund at the net asset value as of the ex-dividend date of the distribution.
| 38 | CTIVP® – TCW Core Plus Bond Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Guarantees and indemnifications
Under the Trust’s
organizational documents and, in some cases, by contract, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust or its funds. In addition,
certain of the Fund’s contracts with its service providers contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims
that may be made against the Fund cannot be determined, and the Fund has no historical basis for predicting the likelihood of any such claims.
Note 3. Fees and other
transactions with affiliates
Management services fees
The Fund has entered into a
Management Agreement with Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Under the Management Agreement, the
Investment Manager provides the Fund with investment research and advice, as well as administrative and accounting services. The Investment Manager is responsible for the ultimate oversight of investments made by the
Fund. The Fund’s subadviser (see Subadvisory agreement below) has the primary responsibility for the day-to-day portfolio management of the Fund. The management services fee is an annual fee that is equal to a
percentage of the Fund’s daily net assets that declines from 0.50% to 0.34% as the Fund’s net assets increase. The effective management services fee rate for the year ended December 31, 2021 was 0.47% of
the Fund’s average daily net assets.
Subadvisory agreement
The Investment Manager has entered
into a Subadvisory Agreement with TCW Investment Management Company LLC to serve as the subadviser to the Fund. The Investment Manager compensates the subadviser to manage the investment of the Fund’s assets.
Compensation of board members
Members of the Board of Trustees
who are not officers or employees of the Investment Manager or Ameriprise Financial are compensated for their services to the Fund as disclosed in the Statement of Operations. Under a Deferred Compensation Plan (the
Deferred Plan), these members of the Board of Trustees may elect to defer payment of up to 100% of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of
certain funds managed by the Investment Manager. The Fund’s liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Deferred Plan. All
amounts payable under the Deferred Plan constitute a general unsecured obligation of the Fund. The expense for the Deferred Plan, which includes Trustees’ fees deferred during the current period as well as any
gains or losses on the Trustees’ deferred compensation balances as a result of market fluctuations, is included in "Compensation of board members" on the Statement of Operations.
Compensation of Chief Compliance
Officer
The Board of Trustees has appointed
a Chief Compliance Officer for the Fund in accordance with federal securities regulations. As disclosed in the Statement of Operations, a portion of the Chief Compliance Officer’s total compensation is allocated
to the Fund, along with other allocations to affiliated registered investment companies managed by the Investment Manager and its affiliates, based on relative net assets.
Service fees
The Fund has entered into a
Shareholder Services Agreement with Columbia Management Investment Services Corp. (the Transfer Agent), an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial. Under this
agreement, the Fund pays a service fee equal to the payments made by the Transfer Agent to Participating Insurance Companies and other financial intermediaries (together, Participating Organizations) for services each
such Participating Organization provides to its clients, customers and participants that are invested directly or indirectly in the Fund, up to a cap approved by the Board of Trustees from time to time. The effective
service fee rate for the year ended December 31, 2021, was 0.00% of the Fund’s average daily net assets.
| CTIVP® – TCW Core Plus Bond Fund | Annual Report 2021 | 39 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
The Transfer Agent may retain as
compensation for its services revenues from fees for wire, telephone and redemption orders, account transcripts due the Transfer Agent from Fund shareholders and interest (net of bank charges) earned with respect to
balances in accounts the Transfer Agent maintains in connection with its services to the Fund.
Distribution and/or service fees
The Fund has an agreement with the
Distributor, an affiliate of the Investment Manager and a wholly-owned subsidiary of Ameriprise Financial, for distribution services. Under a Plan and Agreement of Distribution, the Fund pays a fee at an annual rate
of up to 0.25% of the Fund’s average daily net assets attributable to Class 2 shares. The Fund pays no distribution and service fees for Class 1 shares.
Expenses waived/reimbursed by the
Investment Manager and its affiliates
The Investment Manager and certain
of its affiliates have contractually agreed to waive fees and/or reimburse expenses (excluding certain fees and expenses described below) for the period(s) disclosed below, unless sooner terminated at the sole
discretion of the Board of Trustees, so that the Fund’s net operating expenses, after giving effect to fees waived/expenses reimbursed and any balance credits and/or overdraft charges from the Fund’s
custodian, do not exceed the following annual rate(s) as a percentage of the classes’ average daily net assets:
Under the agreement governing
these fee waivers and/or expense reimbursement arrangements, the following fees and expenses are excluded from the waiver/reimbursement commitment, and therefore will be paid by the Fund, if applicable: taxes
(including foreign transaction taxes), expenses associated with investments in affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange-traded funds), transaction costs and
brokerage commissions, costs related to any securities lending program, dividend expenses associated with securities sold short, inverse floater program fees and expenses, transaction charges and interest on borrowed
money, interest, costs associated with certain shareholder meetings, infrequent and/or unusual expenses and any other expenses the exclusion of which is specifically approved by the Board of Trustees. This
agreement may be modified or amended only with approval from the Investment Manager, certain of its affiliates and the Fund. Any fees waived and/or expenses reimbursed under the expense reimbursement arrangements
described above are not recoverable by the Investment Manager or its affiliates in future periods.
Note 4. Federal tax
information
The timing and character of
income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP because of temporary or permanent book to tax differences.
At December 31, 2021, these
differences were primarily due to differing treatment for deferral/reversal of wash sale losses, trustees’ deferred compensation, derivative investments, tax straddles, capital loss carryforward, principal
and/or interest of fixed income securities and distribution reclassifications. To the extent these differences were permanent, reclassifications were made among the components of the Fund’s net assets. Temporary
differences do not require reclassifications.
The following reclassifications
were made:
| Undistributed net investment income ($) | Accumulated net realized (loss) ($) | Paid in capital ($) |
| 571,180 | (571,180) | — |
Net investment income (loss) and
net realized gains (losses), as disclosed in the Statement of Operations, and net assets were not affected by this reclassification.
| 40 | CTIVP® – TCW Core Plus Bond Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
The tax character of distributions
paid during the years indicated was as follows:
| Year Ended December 31, 2021 | Year Ended December 31, 2020 | ||||
| Ordinary income ($) | Long-term capital gains ($) | Total ($) | Ordinary income ($) | Long-term capital gains ($) | Total ($) |
| 176,788,290 | 39,230,562 | 216,018,852 | 112,426,756 | 13,107,503 | 125,534,259 |
Short-term capital gain
distributions, if any, are considered ordinary income distributions for tax purposes.
At December 31, 2021, the
components of distributable earnings on a tax basis were as follows:
| Undistributed ordinary income ($) | Undistributed long-term capital gains ($) | Capital loss carryforwards ($) | Net unrealized appreciation ($) |
| 36,496,045 | — | (8,873,827) | 31,999,293 |
At December 31, 2021, the cost of
all investments for federal income tax purposes along with the aggregate gross unrealized appreciation and depreciation based on that cost was:
| Federal tax cost ($) | Gross unrealized appreciation ($) | Gross unrealized (depreciation) ($) | Net unrealized appreciation ($) |
| 4,397,394,377 | 53,405,843 | (21,406,550) | 31,999,293 |
Tax cost of investments and
unrealized appreciation/(depreciation) may also include timing differences that do not constitute adjustments to tax basis.
The following capital loss
carryforwards, determined at December 31, 2021, may be available to reduce future net realized gains on investments, if any, to the extent permitted by the Internal Revenue Code. In addition, for the year ended
December 31, 2021, capital loss carryforwards utilized, if any, were as follows:
| No expiration short-term ($) | No expiration long-term ($) | Total ($) | Utilized ($) |
| (8,873,827) | — | (8,873,827) | — |
Management of the Fund has
concluded that there are no significant uncertain tax positions in the Fund that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at
a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the
prior three fiscal years remain subject to examination by the Internal Revenue Service.
Note 5. Portfolio
information
The cost of purchases and
proceeds from sales of securities, excluding short-term investments and derivatives, if any, aggregated to $16,761,254,284 and $16,244,212,055, respectively, for the year ended December 31, 2021, of which
$15,813,787,291 and $15,622,957,954, respectively, were U.S. government securities. The amount of purchase and sale activity impacts the portfolio turnover rate reported in the Financial Highlights.
Note 6. Affiliated money
market fund
The Fund invests significantly in
Columbia Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds (the Affiliated MMF). The income earned by the Fund from such investments is
included as Dividends - affiliated issuers in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of the Affiliated MMF. The Affiliated MMF prices its
shares with a floating net asset value. In addition, the Board of Trustees of the Affiliated MMF may impose a fee on redemptions (sometimes referred to as a liquidity fee) or temporarily suspend redemptions
(sometimes referred to as imposing a redemption gate) in the event its liquidity falls below regulatory limits.
| CTIVP® – TCW Core Plus Bond Fund | Annual Report 2021 | 41 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Note 7. Interfund
lending
Pursuant to an exemptive order
granted by the Securities and Exchange Commission, the Fund participates in a program (the Interfund Program) allowing each participating Columbia Fund (each, a Participating Fund) to lend money directly to and,
except for closed-end funds and money market funds, borrow money directly from other Participating Funds for temporary purposes. The amounts eligible for borrowing and lending under the Interfund Program are subject
to certain restrictions.
Interfund loans are subject to the
risk that the borrowing fund could be unable to repay the loan when due, and a delay in repayment to the lending fund could result in lost opportunities and/or additional lending costs. The exemptive order is subject
to conditions intended to mitigate conflicts of interest arising from the Investment Manager’s relationship with each Participating Fund.
The Fund did not borrow or lend
money under the Interfund Program during the year ended December 31, 2021.
Note 8. Line of credit
The Fund has access to a
revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. whereby the Fund may borrow for the temporary funding of shareholder redemptions or for
other temporary or emergency purposes. Pursuant to an October 28, 2021 amendment and restatement, the credit facility, which is a collective agreement between the Fund and certain other funds managed by the Investment
Manager or an affiliated investment manager, severally and not jointly, permits collective borrowings up to $950 million. Interest is currently charged to each participating fund based on its borrowings at a rate
equal to the higher of (i) the federal funds effective rate, (ii) the secured overnight financing rate plus 0.11448% and (iii) the overnight bank funding rate, plus in each case, 1.00%. Each borrowing under the credit
facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the unused amount of the credit facility at a rate of 0.15% per annum. The
commitment fee is included in other expenses in the Statement of Operations. This agreement expires annually in October unless extended or renewed. Prior to the October 28, 2021 amendment and restatement, the Fund had
access to a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A., Citibank, N.A. and Wells Fargo Bank, N.A. which permitted collective borrowings up to $950 million. Interest was
charged to each participating fund based on its borrowings at a rate equal to the higher of (i) the federal funds effective rate, (ii) the one-month London Interbank Offered Rate (LIBOR) rate and (iii) the overnight
bank funding rate, plus in each case, 1.25%.
The Fund had no borrowings during
the year ended December 31, 2021.
Note 9. Significant
risks
Credit risk
Credit risk is the risk that the
value of debt instruments in the Fund’s portfolio may decline because the issuer defaults or otherwise becomes unable or unwilling, or is perceived to be unable or unwilling, to honor its financial obligations,
such as making payments to the Fund when due. Credit rating agencies assign credit ratings to certain debt instruments to indicate their credit risk. Lower-rated or unrated debt instruments held by the Fund may
present increased credit risk as compared to higher-rated debt instruments.
Derivatives risk
Losses involving derivative
instruments may be substantial, because a relatively small movement in the underlying reference (which is generally the price, rate or other economic indicator associated with a security(ies), commodity, currency or
index or other instrument or asset) may result in a substantial loss for the Fund. In addition to the potential for increased losses, the use of derivative instruments may lead to increased volatility within the Fund.
Derivatives will typically increase the Fund’s exposure to principal risks to which it is otherwise exposed, and may expose the Fund to additional risks, including correlation risk, counterparty risk, hedging
risk, leverage risk, liquidity risk and pricing risk.
| 42 | CTIVP® – TCW Core Plus Bond Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
Interest rate risk
Interest rate risk is the risk of
losses attributable to changes in interest rates. In general, if prevailing interest rates rise, the values of debt instruments tend to fall, and if interest rates fall, the values of debt instruments tend to rise.
Actions by governments and central banking authorities can result in increases or decreases in interest rates. Higher periods of inflation could lead such authorities to raise interest rates. Increasing interest rates
may negatively affect the value of debt securities held by the Fund, resulting in a negative impact on the Fund’s performance and net asset value per share. In general, the longer the maturity or duration of a
debt security, the greater its sensitivity to changes in interest rates. The Fund is subject to the risk that the income generated by its investments may not keep pace with inflation.
Liquidity risk
Liquidity risk is the risk
associated with a lack of marketability of investments which may make it difficult to sell the investment at a desirable time or price. Changing regulatory, market or other conditions or environments (for example, the
interest rate or credit environments) may adversely affect the liquidity of the Fund’s investments. The Fund may have to accept a lower selling price for the holding, sell other investments, or forego another,
more appealing investment opportunity. Generally, the less liquid the market at the time the Fund sells a portfolio investment, the greater the risk of loss or decline of value to the Fund. A less liquid market can
lead to an increase in Fund redemptions, which may negatively impact Fund performance and net asset value per share, including, for example, if the Fund is forced to sell securities in a down market.
Market risk
The Fund may incur losses due to
declines in the value of one or more securities in which it invests. These declines may be due to factors affecting a particular issuer, or the result of, among other things, political, regulatory, market, economic or
social developments affecting the relevant market(s) more generally. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers,
which could adversely affect the Fund, including causing difficulty in assigning prices to hard-to-value assets in thinly traded and closed markets, significant redemptions and operational challenges. Global economies
and financial markets are increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks
may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. As a result, local, regional or global
events such as terrorism, war, natural disasters, disease/virus outbreaks and epidemics or other public health issues, recessions, depressions or other events – or the potential for such events – could
have a significant negative impact on global economic and market conditions.
The coronavirus disease 2019 and
its variants (COVID-19) pandemic has resulted in, and may continue to result in, significant global economic and societal disruption and market volatility due to disruptions in market access, resource availability,
facilities operations, imposition of tariffs, export controls and supply chain disruption, among others. Such disruptions may be caused, or exacerbated by, quarantines and travel restrictions, workforce displacement
and loss in human and other resources. The uncertainty surrounding the magnitude, duration, reach, costs and effects of the global pandemic, as well as actions that have been or could be taken by governmental
authorities or other third parties, present unknowns that are yet to unfold. The impacts, as well as the uncertainty over impacts to come, of COVID-19 – and any other infectious illness outbreaks, epidemics and
pandemics that may arise in the future – could negatively affect global economies and markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illness outbreaks and epidemics in
emerging market countries may be greater due to generally less established healthcare systems, governments and financial markets. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing
political, social and economic risks in certain countries or globally. The disruptions caused by COVID-19 could prevent the Fund from executing advantageous investment decisions in a timely manner and negatively
impact the Fund’s ability to achieve its investment objectives. Any such event(s) could have a significant adverse impact on the value and risk profile of the Fund.
Money market fund investment risk
An investment in a money market
fund is not a bank deposit and is not insured or guaranteed by any bank, the FDIC or any other government agency. Certain money market funds float their net asset value while others seek to preserve the value of
investments at a stable net asset value (typically, $1.00 per share). An investment in a money market fund, even an
| CTIVP® – TCW Core Plus Bond Fund | Annual Report 2021 | 43 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
investment in a fund seeking to maintain a stable
net asset value per share, is not guaranteed and it is possible for the Fund to lose money by investing in these and other types of money market funds. If the liquidity of a money market fund’s portfolio
deteriorates below certain levels, the money market fund may suspend redemptions (i.e., impose a redemption gate) and thereby prevent the Fund from selling its investment in the money market fund or impose a fee of up
to 2% on amounts the Fund redeems from the money market fund (i.e., impose a liquidity fee). These measures may result in an investment loss or prohibit the Fund from redeeming shares when the Investment Manager would
otherwise redeem shares. In addition to the fees and expenses that the Fund directly bears, the Fund indirectly bears the fees and expenses of any money market funds in which it invests, including affiliated money
market funds. By investing in a money market fund, the Fund will be exposed to the investment risks of the money market fund in direct proportion to such investment. To the extent the Fund invests in instruments
such as derivatives, the Fund may hold investments, which may be significant, in money market fund shares to cover its obligations resulting from the Fund’s investments in derivatives. Money market funds and the
securities they invest in are subject to comprehensive regulations. The enactment of new legislation or regulations, as well as changes in interpretation and enforcement of current laws, may affect the manner of
operation, performance and/or yield of money market funds.
Mortgage- and other asset-backed
securities risk
The value of any mortgage-backed
and other asset-backed securities including collateralized debt obligations, if any, held by the Fund may be affected by, among other things, changes or perceived changes in: interest rates; factors concerning the
interests in and structure of the issuer or the originator of the mortgages or other assets; the creditworthiness of the entities that provide any supporting letters of credit, surety bonds or other credit enhancements;
or the market’s assessment of the quality of underlying assets. Payment of principal and interest on some mortgage-backed securities (but not the market value of the securities themselves) may be guaranteed by
the full faith and credit of a particular U.S. Government agency, authority, enterprise or instrumentality, and some, but not all, are also insured or guaranteed by the U.S. Government. Mortgage-backed securities
issued by non-governmental issuers (such as commercial banks, savings and loan institutions, private mortgage insurance companies, mortgage bankers and other secondary market issuers) may entail greater risk than
obligations guaranteed by the U.S. Government. Mortgage- and other asset-backed securities are subject to liquidity risk and prepayment risk. A decline or flattening of housing values may cause delinquencies in
mortgages (especially sub-prime or non-prime mortgages) underlying mortgage-backed securities and thereby adversely affect the ability of the mortgage-backed securities issuer to make principal and/or interest
payments to mortgage-backed securities holders, including the Fund. Rising or high interest rates tend to extend the duration of mortgage- and other asset-backed securities, making their prices more volatile and more
sensitive to changes in interest rates.
Shareholder concentration risk
At December 31, 2021, affiliated
shareholders of record owned 100.0% of the outstanding shares of the Fund in one or more accounts. Subscription and redemption activity by concentrated accounts may have a significant effect on the operations of the
Fund. In the case of a large redemption, the Fund may be forced to sell investments at inopportune times, including its liquid positions, which may result in Fund losses and the Fund holding a higher percentage of
less liquid positions. Large redemptions could result in decreased economies of scale and increased operating expenses for non-redeeming Fund shareholders.
Note 10. Subsequent
events
Management has evaluated the
events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.
Note 11. Information
regarding pending and settled legal proceedings
Ameriprise Financial and certain
of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in
connection with the conduct of their business activities. Ameriprise Financial believes that the Fund is not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject
of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates
| 44 | CTIVP® – TCW Core Plus Bond Fund | Annual Report 2021 |
Notes to Financial Statements (continued)
December 31, 2021
December 31, 2021
to perform under their contracts with the Fund.
Ameriprise Financial is required to make quarterly (10-Q), annual (10-K) and, as necessary, 8-K filings with the Securities and Exchange Commission (SEC) on legal and regulatory matters that relate to Ameriprise
Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that
these matters, or the adverse publicity associated with them, will not result in increased Fund redemptions, reduced sale of Fund shares or other adverse consequences to the Fund. Further, although we believe
proceedings are not likely to have a material adverse effect on the Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines,
penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial or one or more of its affiliates that provides services to
the Fund.
| CTIVP® – TCW Core Plus Bond Fund | Annual Report 2021 | 45 |
Report of Independent Registered Public
Accounting Firm
To the Board of Trustees of Columbia
Funds Variable Series Trust II and Shareholders of CTIVP® – TCW Core Plus Bond Fund
Opinion on the Financial
Statements
We have audited the accompanying
statement of assets and liabilities, including the portfolio of investments, of CTIVP® – TCW Core Plus Bond Fund (one of the funds constituting Columbia Funds Variable Series Trust II, referred to hereafter
as the "Fund") as of December 31, 2021, the related statement of operations for the year ended December 31, 2021, the statement of changes in net assets for each of the two years in the period ended December 31, 2021,
including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2021 (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, 2021, 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, 2021 and the financial highlights for each of the five years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in the United
States of America.
Basis for Opinion
These financial statements are the
responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these
financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2021 by correspondence with the custodian, transfer agent, brokers and agent banks;
when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Minneapolis, Minnesota
February 22, 2022
We have served as the auditor of
one or more investment companies within the Columbia Funds Complex since 1977.
| 46 | CTIVP® – TCW Core Plus Bond Fund | Annual Report 2021 |
TRUSTEES AND
OFFICERS
The Board oversees the
Fund’s operations and appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following table provides basic biographical information about the
Fund’s Trustees as of the printing of this report, including their principal occupations during the past five years, although specific titles for individuals may have varied over the period. The year set forth
beneath Length of Service in the table below is the year in which the Trustee was first appointed or elected as Trustee to any Fund currently in the Columbia Funds Complex or a predecessor thereof. Under current Board
policy, each Trustee generally serves until December 31 of the year such Trustee turns seventy-five (75).
Independent trustees
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| George S. Batejan c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1953 | Trustee since 2017 | Executive Vice President, Global Head of Technology and Operations, Janus Capital Group, Inc., 2010-2016 | 176 | Former Chairman of the Board, NICSA (National Investment Company Services Association) (Executive Committee, Nominating Committee and Governance Committee), 2014-2016; former Director, Intech Investment Management, 2011-2016; former Board Member, Metro Denver Chamber of Commerce, 2015-2016; former Advisory Board Member, University of Colorado Business School, 2015-2018 |
| Kathleen Blatz c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2006 | Attorney, specializing in arbitration and mediation; Chief Justice, Minnesota Supreme Court, 1998-2006; Associate Justice, Minnesota Supreme Court, 1996-1998; Fourth Judicial District Court Judge, Hennepin County, 1994-1996; Attorney in private practice and public service, 1984-1993; State Representative, Minnesota House of Representatives, 1979-1993, which included service on the Tax and Financial Institutions and Insurance Committees; Member and Interim Chair, Minnesota Sports Facilities Authority, January 2017-July 2017; Interim President and Chief Executive Officer, Blue Cross Blue Shield of Minnesota (health care insurance), February-July 2018, April-October 2021 | 176 | Former Trustee, Blue Cross Blue Shield of Minnesota, 2009-2021 (Chair of the Business Development Committee, 2014-2017; Chair of the Governance Committee, 2017-2019); former Member and Chair of the Board, Minnesota Sports Facilities Authority, January 2017-July 2017; former Director, Robina Foundation, 2009-2020 (Chair, 2014-2020); Director, Schulze Family Foundation, since 2021 |
| Pamela G. Carlton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2007 | President, Springboard — Partners in Cross Cultural Leadership (consulting company) since 2003; Managing Director of US Equity Research, JP Morgan Chase, 1999-2003; Director of US Equity Research, Chase Asset Management, 1996-1999; Co-Director Latin America Research, 1993-1996, COO Global Research, 1992-1996, Co-Director of US Research, 1991-1992, Investment Banker, Morgan Stanley, 1982-1991, Morgan Stanley; Attorney, Cleary Gottlieb Steen & Hamilton LLP, 1980-1982 | 176 | Trustee, New York Presbyterian Hospital Board (Executive Committee and Chair of People Committee) since 1996; Director, DR Bank (Audit Committee) since 2017; Director, Evercore Inc. (Audit Committee); Director, Apollo Commercial Real Estate Finance, Inc. since 2021; the Governing Council of the Independent Directors Council (IDC), since 2021 |
| CTIVP® – TCW Core Plus Bond Fund | Annual Report 2021 | 47 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Janet Langford Carrig c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1957 | Trustee since 1996 | Senior Vice President, General Counsel and Corporate Secretary, ConocoPhillips (independent energy company), September 2007-October 2018 | 174 | Director, EQT Corporation (natural gas producer) since 2019; Director, Whiting Petroleum Corporation (independent oil and gas company) since 2020 |
| J. Kevin Connaughton c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2020 | Member, FINRA National Adjudicatory Council since January 2020; Adjunct Professor of Finance, Bentley University since January 2018; Consultant to Independent Trustees of CFVIT and CFST I from March 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Managing Director and General Manager of Mutual Fund Products, Columbia Management Investment Advisers, LLC, May 2010-February 2015; President, Columbia Funds, 2008-2015; and senior officer of Columbia Funds and affiliated funds, 2003-2015 | 174 | Former Director, The Autism Project, March 2015-December 2021; former Member of the Investment Committee, St. Michael’s College, November 2015-February 2020; former Trustee, St. Michael’s College, June 2017-September 2019; former Trustee, New Century Portfolios, January 2015-December 2017 |
| Olive M. Darragh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since 2020 | Managing Director of Darragh Inc. (strategy and talent management consulting firm) since 2010; Founder and CEO, Zolio, Inc. (investment management talent identification platform) since 2004; Consultant to Independent Trustees of CFVIT and CFST I from June 2019 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Partner, Tudor Investments, 2004-2010; Senior Partner, McKinsey & Company (consulting), 2001-2004 | 174 | Former Director, University of Edinburgh Business School (Member of US Board); former Director, Boston Public Library Foundation |
| Patricia M. Flynn c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1950 | Trustee since 2004 | Trustee Professor of Economics and Management, Bentley University since 1976 (also teaches and conducts research on corporate governance); Dean, McCallum Graduate School of Business, Bentley University, 1992-2002 | 176 | Trustee, MA Taxpayers Foundation since 1997; Board of Governors, Innovation Institute, MA Technology Collaborative, 2010-2020; former Board of Directors, The MA Business Roundtable, 2003-2019 |
| Brian J. Gallagher c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1954 | Trustee since 2017 | Retired; Partner with Deloitte & Touche LLP and its predecessors, 1977-2016 | 176 | Trustee, Catholic Schools Foundation since 2004 |
| 48 | CTIVP® – TCW Core Plus Bond Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Douglas A. Hacker c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1955 | Co-Chair since 2021; Chair of CFST I and CFVIT since 2014; Trustee of CFST I and CFVIT since 1996 and CFST, CFST II, CFVST II, CET I and CET II since 2021 | Independent business executive since May 2006; Executive Vice President – Strategy of United Airlines, December 2002 - May 2006; President of UAL Loyalty Services (airline marketing company), September 2001-December 2002; Executive Vice President and Chief Financial Officer of United Airlines, July 1999-September 2001 | 176 | Director, Spartan Nash Company (food distributor); Director, Aircastle Limited (Chair of Audit Committee) (aircraft leasing); former Director, Nash Finch Company (food distributor), 2005-2013; former Director, SeaCube Container Leasing Ltd. (container leasing), 2010-2013; and former Director, Travelport Worldwide Limited (travel information technology), 2014-2019 |
| Nancy T. Lukitsh c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1956 | Trustee since 2011 | Senior Vice President, Partner and Director of Marketing, Wellington Management Company, LLP (investment adviser), 1997-2010; Chair, Wellington Management Portfolios (commingled non-U.S. investment pools), 2007 -2010; Director, Wellington Trust Company, NA and other Wellington affiliates, 1997-2010 | 174 | None |
| David M. Moffett c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Trustee since 2011 | Retired; Consultant to Bridgewater and Associates | 174 | Director, CSX Corporation (transportation suppliers); Director, Genworth Financial, Inc. (financial and insurance products and services); Director, PayPal Holdings Inc. (payment and data processing services); Trustee, University of Oklahoma Foundation; former Director, eBay Inc. (online trading community), 2007-2015; and former Director, CIT Bank, CIT Group Inc. (commercial and consumer finance), 2010-2016 |
| Catherine James Paglia c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1952 | Co-Chair since 2021; Chair of CFST, CFST II, CFVST II, CET I and CET II since 2020; Trustee of CFST, CFST II and CFVST II since 2004 and CFST I and CFVIT since 2021 | Director, Enterprise Asset Management, Inc. (private real estate and asset management company) since September 1998; Managing Director and Partner, Interlaken Capital, Inc., 1989-1997; Vice President, 1982-1985, Principal, 1985-1987, Managing Director, 1987-1989, Morgan Stanley; Vice President, Investment Banking, 1980-1982, Associate, Investment Banking, 1976-1980, Dean Witter Reynolds, Inc. | 176 | Director, Valmont Industries, Inc. (irrigation systems manufacturer) since 2012; Trustee, Carleton College (on the Investment Committee); Trustee, Carnegie Endowment for International Peace (on the Investment Committee) |
| CTIVP® – TCW Core Plus Bond Fund | Annual Report 2021 | 49 |
TRUSTEES AND OFFICERS (continued)
Independent trustees (continued)
Independent trustees (continued)
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex* overseen | Other directorships held by Trustee during the past five years |
| Minor M. Shaw c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1947 | Trustee since 2003 | President, Micco LLC (private investments) since 2011; President, Micco Corp. (family investment business), 1998-2011 | 176 | Director, Blue Cross Blue Shield of South Carolina (Chair of Compensation Committee) since April 2008; Trustee, Hollingsworth Funds (on the Investment Committee) since 2016 (previously Board Chair from 2016-2019); Former Advisory Board member, Duke Energy Corp., 2016-2020; Chair of the Duke Endowment; Chair of Greenville – Spartanburg Airport Commission; former Trustee, BofA Funds Series Trust (11 funds), 2003-2011; former Director, Piedmont Natural Gas, 2004-2016; former Director, National Association of Corporate Directors, Carolinas Chapter, 2013-2018; Chair, Daniel-Mickel Foundation since 1998 |
| Natalie A. Trunow c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1967 | Trustee since 2020 | Chief Executive Officer, Millennial Portfolio Solutions LLC (asset management and consulting services), January 2016-January 2021; Non-executive Member of the Investment Committee and Valuation Committee, Sarona Asset Management Inc. (private equity firm) since September 2019; Advisor, Horizon Investments (asset management and consulting services), August 2018-January 2021; Advisor, Paradigm Asset Management, November 2016-December 2021; Consultant to Independent Trustees of CFVIT and CFST I from September 2016 to June 2020 with respect to CFVIT and December 2020 with respect to CFST I; Director of Investments/Consultant, Casey Family Programs, April 2016-November 2016; Senior Vice President and Chief Investment Officer, Calvert Investments, August 2008-January 2016; Section Head and Portfolio Manager, General Motors Asset Management, June 1997-August 2008 | 174 | Former Director, Investment Committee, Health Services for Children with Special Needs, Inc., 2012-2019; Director, Chair of Audit Committee, Consumer Credit Counseling Services (formerly Guidewell Financial Solutions), since 2019; Independent Director, Investment Committee and Valuation Committee, Sarona Asset Management, since 2019 |
| Sandra Yeager c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1964 | Trustee since 2017 | Retired; President and founder, Hanoverian Capital, LLC (SEC registered investment advisor firm), 2008-2016; Managing Director, DuPont Capital, 2006-2008; Managing Director, Morgan Stanley Investment Management, 2004-2006; Senior Vice President, Alliance Bernstein, 1990-2004 | 176 | Former Director, NAPE Education Foundation, October 2016-October 2020 |
| * | The term “Columbia Funds Complex” as used herein includes Columbia Seligman Premium Technology Growth Fund, Tri-Continental Corporation and each series of Columbia Fund Series Trust (CFST), Columbia Funds Series Trust I (CFST I), Columbia Funds Series Trust II (CFST II), Columbia ETF Trust I (CET I), Columbia ETF Trust II (CET II), Columbia Funds Variable Insurance Trust (CFVIT) and Columbia Funds Variable Series Trust II (CFVST II). Messrs. Batejan, Beckman, Gallagher and Hacker and Mses. Blatz, Carlton, Flynn, Paglia, Shaw and Yeager serve as Directors of Columbia Seligman Premium Technology Growth Fund and Tri-Continental Corporation. |
| 50 | CTIVP® – TCW Core Plus Bond Fund | Annual Report 2021 |
TRUSTEES AND OFFICERS (continued)
Interested trustee affiliated with Investment Manager*
Interested trustee affiliated with Investment Manager*
| Name, address, year of birth | Position held with the Columbia Funds and length of service | Principal occupation(s) during the past five years and other relevant professional experience | Number of Funds in the Columbia Funds Complex overseen | Other directorships held by Trustee during the past five years |
| Daniel J. Beckman c/o Columbia Management Investment Advisers, LLC 290 Congress Street Boston, MA 02210 1962 | Trustee since November 2021(a) | Vice President – Head of North America Product, Columbia Management Investment Advisers, LLC (since April 2015); officer of Columbia Funds and affiliated funds since 2020. | 176 | Director, Ameriprise Trust Company, since October 2016; Director, Columbia Management Investment Distributors, Inc. since November 2018; Board of Governors, Columbia Wanger Asset Management, LLC since January 2022 |
| * | Interested person (as defined under the 1940 Act) by reason of being an officer, director, security holder and/or employee of the Investment Manager or Ameriprise Financial. |
| (a) | Mr. Beckman serves as the President and Principal Executive Officer of the Columbia Funds (since 2021). |
The Statement of Additional
Information has additional information about the Fund’s Board members and is available, without charge, upon request by calling 800.345.6611 or contacting your financial intermediary.
The Board has appointed officers
who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. The following table provides basic information about the Officers of the
Fund, including principal occupations during the past five years, although their specific titles may have varied over the period. In addition to Mr. Beckman, who is President and Principal Executive Officer, the
Fund’s other officers are:
Fund officers
| CTIVP® – TCW Core Plus Bond Fund | Annual Report 2021 | 51 |
TRUSTEES AND OFFICERS (continued)
Fund officers (continued)
Fund officers (continued)
| 52 | CTIVP® – TCW Core Plus Bond Fund | Annual Report 2021 |
Please read and consider the
investment objectives, risks, charges and expenses for any fund carefully before investing. For Fund and other investment product prospectuses, which contain this and other important information, contact your
financial advisor or insurance representative. Please read the prospectus carefully before you invest. The Fund is distributed by Columbia Management Investment Distributors, Inc., member FINRA, and managed by Columbia Management Investment Advisers, LLC.
Columbia Threadneedle Investments
(Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. All rights reserved. Columbia Management Investment Distributors, Inc., 290 Congress Street, Boston, MA 02210
© 2022 Columbia Management Investment
Advisers, LLC.
C-3010 AW (2/22)
