UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-08361
Goldman Sachs Variable Insurance Trust
(Exact name of registrant as specified in charter)
71 South Wacker Drive, Chicago, Illinois 60606-6303
(Address of principal executive offices) (Zip code)
Caroline Kraus
Goldman, Sachs & Co.
200 West Street
New York, NY 10282
Copies to:
Geoffrey R.T. Kenyon, Esq.
Dechert LLP
One International Place, 40th Floor
100 Oliver Street
Boston, MA 02110-2605
(Name and address of agents for service)
Registrant’s telephone number, including area code: (312) 655-4400
Date of fiscal year end: December 31
Date of reporting period: December 31, 2016
ITEM 1. | REPORTS TO STOCKHOLDERS. |
The Annual Reports to Shareholders are filed herewith. |
Goldman
Sachs Variable Insurance Trust
Goldman Sachs
Global Trends
Allocation Fund
Annual Report
December 31, 2016
GOLDMAN SACHS VARIABLE INSURANCE TRUST GLOBAL TRENDS ALLOCATION FUND
INVESTMENT OBJECTIVE
The Fund seeks total return while seeking to provide volatility management.
Portfolio Management Discussion and Analysis
Below, the Goldman Sachs Quantitative Investment Strategies Team discusses the Goldman Sachs Variable Insurance Trust — Goldman Sachs Global Trends Allocation Fund’s (the “Fund”) performance and positioning for the 12-month period ended December 31, 2016 (the “Reporting Period”).
How did the Fund perform during the Reporting Period?
During the Reporting Period, the Fund’s Institutional and Service Shares generated average annual total returns of 4.49% and 4.33%, respectively. These returns compare to the 6.07% average annual total return of the Fund’s benchmark, the Global Trends Allocation Composite Index (the “Index”), during the same time period. The components of the Fund’s benchmark, the MSCI World Index (60%) and the Bloomberg Barclays U.S. Aggregate Bond Index (40%), generated average annual total returns of 8.13% and 2.64%, respectively, during the same time period.
Importantly, during the Reporting Period, the Fund’s overall annualized volatility (which is measured versus the S&P 500® Index) was 5.80%, less than the S&P 500® Index’s annualized volatility of 13.10% during the same time period.
What economic and market factors most influenced the Fund during the Reporting Period?
Global equities suffered a rout at the beginning of the Reporting Period, triggered by concerns about an intensifying economic slowdown in China and exacerbated by a plunge in crude oil prices. In March 2016, central bank dovishness, along with receding global economic concerns and oil price stabilization, helped to drive a global equity market recovery. (Dovish tends to suggest lower interest rates; opposite of hawkish.) In April 2016, market sentiment appeared to remain sanguine, as oil prices rose and China economic growth concerns abated with modestly improving economic data. Both the European Central Bank (“ECB”) and the Bank of Japan (“BoJ”) were on hold, or did not make any monetary policy changes, in April 2016. However, a lack of additional stimulus from the BoJ and a weaker than consensus expected first quarter U.S. Gross Domestic Product (“GDP”) growth rate of 0.5% caused global equities to sell off near the end of the month. Markets then rallied toward the end of May 2016 on anticipation of better economic data, rising oil prices and optimism that the U.S. economy could withstand possible Federal Reserve (“Fed”) rate hikes. In June 2016, global equity markets were dominated by anticipation around the U.K. referendum on membership in the European Union, popularly known as Brexit. Markets sold off in the global risk-off sentiment that dominated the days following the June 23, 2016 vote given the surprise “leave” result. They generally rebounded in the latter days of June 2016 and into July 2016, buoyed by expectations of easier monetary policy and a recovery in risk appetite, despite the increased uncertainty post Brexit. Investor concerns about a potential Fed interest rate hike intensified following a strong July 2016 U.S. jobs reports and Fed Chair Yellen’s hawkish Jackson Hole speech in late August 2016. In September 2016, global equity markets declined on the ECB’s lack of commitment to extend easing beyond March 2017. Meanwhile, the Fed left interest rates unchanged, while the BoJ introduced a 0% target for its 10-year government bond yield to exercise “yield curve control.” Global equities generally rebounded following the Fed and BoJ decisions, which markets viewed as generally benign. In November 2016, following the unexpected victory of Donald Trump in the U.S. elections, global equity markets rallied on anticipation of a pro-growth impact of Mr. Trump’s fiscal stimulus plan. Global equities saw another gain during an eventful December 2016, with the resignation of Prime Minister Renzi after Italian voters’ rejection of that nation’s constitutional reform referendum, the Fed’s first interest rate hike in a year and the ECB’s decision to slow its monthly pace of quantitative easing while extending the program to the end of 2017.
In terms of fixed income, when the Reporting Period began, spread (or non-government bond) sectors retreated, selling off significantly from January to mid-February 2016. The selloff was driven by an increase in a number of perceived risks, including slowing Chinese economic activity, the possibility of persistent oil oversupply and deteriorating corporate bond fundamentals, as the U.S. credit cycle entered its later stage. Some of these risks eased in the second half of the first calendar quarter, as economic news from China improved, U.S. oil production showed signs of slowing and commodity prices appeared to stabilize. As a result, spread sectors largely retraced their losses by the end of March 2016. During the second quarter of 2016, spread sectors rallied on stabilization of commodities prices as well as on declining fears about slowing Chinese economic growth and the potential for a U.S. economic recession. Spread sectors withstood the Brexit vote relatively well, selling off at first but then recovering most of their losses afterwards. During the third calendar quarter, spread sectors continued to advance. Overall, global interest rates
1
GOLDMAN SACHS VARIABLE INSURANCE TRUST GLOBAL TRENDS ALLOCATION FUND
remained low, as the world’s central banks remained broadly accommodative. In the fourth quarter of 2016, spread sectors generally outperformed U.S. Treasury securities in a reversal from the volatile start to the calendar year. Commodity prices stabilized, and crude oil prices rose following an agreement in November 2016 by the Organization of the Petroleum Exporting Countries (“OPEC”) and non-OPEC producers to cut production, which provided support for energy issuers within the corporate credit market as well as for oil-exporting emerging economies. Donald Trump’s victory in the November 2016 U.S. election marked an important regime change in monetary, fiscal and regulatory policy. Market expectations shifted toward a faster pace of Fed monetary policy tightening, increased fiscal stimulus and a potentially looser regulatory agenda. After the election, global interest rates rose. In December 2016, the Fed raised short-term interest rates, resulting in a further rise in U.S. Treasury yields, with a notable increase in shorter-term yields.
What key factors were responsible for the Fund’s performance during the Reporting Period?
The Fund primarily seeks to achieve its investment objective by investing in a global portfolio of equity and fixed income asset classes. Under normal market conditions, the Fund expects to invest at least 40% of its assets in equity investments and at least 20% of its assets in fixed income investments. The percentage of the Fund’s portfolio exposed to any asset class or geographic region will vary from time to time as the weightings of the Fund change, and the Fund may not be invested in each asset class at all times.
As part of the Fund’s investment strategy, the Investment Adviser seeks to manage volatility and limit losses by allocating the Fund’s assets away from risky investments in distressed or volatile market environments. Volatility is a statistical measurement of the magnitude of up and down fluctuations in the value of a financial instrument or index. In distressed or volatile market environments, the Fund may also hold significant amounts of U.S. Treasury, short-term or other fixed income investments, including money market funds and repurchase agreements or cash, and at times may invest up to 100% of its assets in such investments.
During the Reporting Period, the Fund continued dynamically allocating across global asset classes, using a momentum-based methodology, as it sought total return while also seeking to provide volatility management. Momentum investing seeks growth of capital by gaining exposure to asset classes that have exhibited trends in price performance over selected time periods. In managing the Fund, we use a methodology that evaluates historical three-, six- and nine-month returns, volatilities and correlations across a range of nine global asset classes. Represented by indices, these asset classes include, within the equities category, U.S. large-cap and small-cap, European, Asian, emerging markets and U.K. stocks. Within the fixed income category, the Fund may allocate assets to the U.S., Europe and Japan. The analysis of these asset classes drives the aggregate allocations of the Fund over time. We believe market price momentum — either positive or negative — has significant predictive power.
The Fund’s allocations to emerging market stocks and European equities detracted from its performance during the Reporting Period. Emerging market stocks and European equities, along with the broad global equity market, declined at the beginning of 2016 amid concerns of an intensifying economic slowdown in China and exacerbated by a plunge in oil prices. Although concerns about global economic growth receded toward the start of the second quarter, the U.K.’s Brexit vote shook global equity markets again. Within fixed income, the Fund’s allocation to German government bonds hurt returns, as global yields rose toward the end of the Reporting Period, offsetting gains from the first quarter of 2016 when yields fell.
On the positive side, the Fund’s overall allocations to equities and fixed income added to performance during the Reporting Period. Within equities, the largest positive contribution came from an allocation to U.S. large-cap stocks. Allocations to U.K. stocks and U.S. small-cap equities also bolstered returns. The Fund’s allocation to Japanese equities enhanced performance, albeit to a lesser extent. Within fixed income, an allocation to U.S. Treasury securities added most to the Fund’s results, followed by an allocation to Japanese government bonds. The Fund’s allocation to cash near the beginning of the Reporting Period provided downside protection as global equity markets declined.
What was the Fund’s volatility during the Reporting Period?
As part of our investment approach, we seek to mitigate the Fund’s volatility. As mentioned earlier, for the Reporting Period overall, the Fund’s actual volatility (annualized, using daily returns) was 5.80% versus the S&P 500® Index’s annualized volatility of 13.10%.
How was the Fund positioned during the Reporting Period?
During the Reporting Period, we tactically managed the Fund’s allocations across equity and fixed income markets based on the momentum and volatility of these asset classes. At the beginning of the Reporting Period, the Fund’s total assets were allocated 46% to equities, 27% to fixed income and 26% to cash. The Fund maintained a significant allocation to cash at the start of the Reporting Period amid heightened volatility in global equity markets and as rising bond yields dampened fixed income market
2
GOLDMAN SACHS VARIABLE INSURANCE TRUST GLOBAL TRENDS ALLOCATION FUND
momentum. The Fund also held small allocations to various fixed income market segments, including U.S. Treasury securities, German government bonds and Japanese government bonds. Within equities, the Fund had a significant allocation to U.S. large-cap equities and smaller allocations to Japanese, European and U.K. equities. The Fund did not have any exposure to emerging market stocks and U.S. small-cap equities at the start of the Reporting Period.
At the end of the second quarter 2016, the Fund had a small allocation to cash as global equity markets sold off following the Brexit vote. The Fund had a sizeable allocation to fixed income and a modest allocation to equities. Within fixed income, we increased the Fund’s allocations to U.S. Treasury securities and German government bonds. The Fund maintained a small allocation to Japanese government bonds. Within equities, the Fund continued to hold a significant allocation to U.S. large-cap equities and smaller allocations to U.K., European and Japanese equities. It continued to have no exposure to U.S. small-cap and emerging market equities at the end of the second quarter 2016.
Near the end of the Reporting Period, we increased the Fund’s overall equity allocations and decreased its overall fixed income allocations in response to the strong momentum of equity markets versus fixed income. Within equities, the Fund had a significant allocation to U.S. large-cap equities and small allocations to U.K., European, Japanese, U.S. small-cap and emerging market equities. Within fixed income, the Fund had small allocations to German and Japanese government bonds. It had no exposure to U.S. Treasury securities due their poor momentum, as yields rose near the end of the Reporting Period.
How did the Fund use derivatives and similar instruments during the Reporting Period?
During the Reporting Period, the Fund used exchange-traded index futures contracts to gain exposure to U.S. large-cap and small-cap stocks, the European, Japanese and U.K. equity markets, and Japanese and German government bonds. The use of exchange-traded index futures to gain exposure to U.S. large-cap and small-cap stocks, the U.K. and Japanese equity markets and Japanese government bonds had a positive impact on the Fund’s performance during the Reporting Period, as these allocations added to returns. The use of exchange-traded futures to gain exposure to European equities and German government bonds had a negative impact on performance, as these allocations hurt returns during the Reporting Period.
What is the Fund’s tactical asset allocation view and strategy for the months ahead?
At the end of the Reporting Period, we added to the Fund’s allocations to equities and fixed income and eliminated its allocation to cash. Within equities, we decreased the Fund’s allocation to U.S. large-cap stocks, while increasing its allocations to European, Japanese and U.K. equities as well as to U.S. small-cap stocks. We also removed the Fund’s allocation to emerging market equities. Within fixed income at the end of the Reporting Period, we increased the Fund’s allocation to German government bonds and trimmed its allocation to Japanese government bonds with the intention of eliminating the position in early 2017. The Fund did not have an allocation to U.S. Treasury securities. Overall, at the end of the Reporting Period, the Fund’s total assets were allocated 80% to equities, 20% to fixed income and 0% to cash.
Going forward, we intend to position the Fund to provide exposure to price momentum from among nine underlying asset classes, while dynamically managing the volatility, or risk, of the overall portfolio. In general, the Fund seeks to maintain a strategic allocation of at least 40% of its assets in equity investments and at least 20% of its assets in fixed income investments. The Fund may deviate from these strategic allocations in order to allocate a greater percentage to asset classes with strong momentum and to reduce its allocation to assets with weak momentum. When volatility increases, our goal is to preserve capital by proportionally increasing the Fund’s cash exposure and reducing its exposure to riskier asset classes. There is no guarantee the Fund’s dynamic management strategy will cause it to achieve its investment objective.
3
GOLDMAN SACHS VARIABLE INSURANCE TRUST GLOBAL TRENDS ALLOCATION FUND
Index Definitions
The Global Trends Allocation Composite Index is composed 60% of MSCI World Index and 40% of Bloomberg Barclays U.S. Aggregate Bond Index. It is a composite representation prepared by the Investment Adviser of the performance of the Fund’s asset classes, weighted according to their respective weightings in the Fund’s target range.
The MSCI World Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of 23 developed markets.
The Bloomberg Barclays U.S. Aggregate Bond Index represents an unmanaged diversified portfolio of fixed income securities, including U.S. Treasuries, investment grade corporate bonds, and mortgage-backed and asset-backed securities.
The S&P 500® Index is the Standard & Poor’s 500 composite index of 500 stocks, an unmanaged index of common stock prices.
4
FUND BASICS
Global Trends Allocation Fund
as of December 31, 2016
STANDARDIZED TOTAL RETURNS1
For the year ended 12/31/16 | One Year | Three Years | Since Inception | Inception Date | ||||||||||
Institutional | 4.49 | % | 0.96 | % | 1.88 | % | 10/16/13 | |||||||
Service | 4.33 | 0.71 | 4.01 | 4/16/12 |
1 | Standardized Total Returns are average annual total returns as of the most recent calendar quarter-end. They assume reinvestment of all distributions at net asset value (“NAV”). Because Institutional Shares and Service Shares do not involve a sales charge, such a charge is not applied to their Standardized Total Returns. |
Total return figures in the above chart represent past performance and do not indicate future results, which will vary. The investment return and principal value of an investment will fluctuate and, therefore, an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the total return figures in the above chart. Please visit www.GSAMFUNDS.com to obtain the most recent month-end returns. Performance reflects fee waivers and/or expense limitations in effect during the periods shown. In their absence, performance would be reduced.
EXPENSE RATIOS2
Net Expense Ratio (Current) | Gross Expense Ratio (Before Waivers) | |||||||
Institutional | 0.82 | % | 0.99 | % | ||||
Service | 1.07 | 1.24 |
2 | The expense ratios of the Fund, both current (net of any fee waivers and/or expense limitations) and before waivers (gross of any fee waivers and/or expense limitations) are as set forth above according to the most recent publicly available Prospectuses for the Fund and may differ from the expense ratios disclosed in the Financial Highlights in this report. Pursuant to a contractual arrangement, the Fund’s fee waivers and/or expense limitations will remain in place through at least April 29, 2017, and prior to such date, the Investment Adviser may not terminate the arrangements without the approval of the Fund’s Board of Trustees. If these arrangements are discontinued in the future, the expense ratios may change without shareholder approval. |
5
FUND BASICS
FUND COMPOSITION3
3 | The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets (excluding investments in the securities lending reinvestment vehicle if any). Investment in the securities lending reinvestment vehicle represents 2.5% of the Fund’s assets at December 31, 2016. Figures in the above graph may not sum to 100% due to the exclusion of other assets and liabilities. The underlying composition of exchange traded funds and investment companies held by the Fund are not reflected in the graph above. Consequently, the Fund’s overall composition may differ from the percentages contained in the graph above. The graph depicts the Fund’s investments but may not represent the Fund’s market exposure due to the exclusion of certain derivatives, if any, as listed in the Additional Investment Information section of the Schedule of Investments. |
4 | Short-Term Investments include investments in U.S. Government Agency Securities. U.S. Government Agency Securities include agency securities offered by companies such as Federal Home Loan Bank, Federal Home Loan Mortgage Corporation and Federal National Mortgage Association, which operate under a government charter. While they are required to report to a government regulator, their assets are not explicitly guaranteed by the government and they otherwise operate like any other publicly traded company. |
6
GOLDMAN SACHS VARIABLE INSURANCE TRUST GLOBAL TRENDS ALLOCATION FUND
Performance Summary
December 31, 2016
The following graph shows the value, as of December 31, 2016, of a $10,000 investment made on April 16, 2012 (commencement of the Fund’s operations) in Service Shares at NAV. For comparative purposes, the performance of the Fund’s benchmark, the Global Trends Allocation Composite Index, (comprised of the Morgan Stanley Capital International (MSCI) World Index (60%) and the Bloomberg Barclays U.S. Aggregate Bond Index (40%)) is shown. This performance data represents past performance and should not be considered indicative of future performance, which will fluctuate with changes in market conditions. These performance fluctuations may cause an investor’s shares, when redeemed, to be worth more or less than their original cost. Performance reflects Fund level expenses but does not reflect fees and expenses associated with any variable annuity contract or variable life insurance policy that uses the Fund as an investment option for any contract or policy. Had performance reflected all of those fees and expenses, performance would have been reduced. Performance reflects applicable fee waivers and/or expense limitations in effect during the periods shown, and in their absence, performance would be reduced. Performance of Institutional Shares will vary from Service Shares due to differences in class specific fees. In addition to the Investment Adviser’s decisions regarding issuer/industry investment selection and allocation, other factors may affect Fund performance. These factors include, but are not limited to, Fund operating fees and expenses, portfolio turnover, and subscription and redemption cash flows affecting the Fund.
Global Trends Allocation Fund’s Lifetime Performance
Performance of a $10,000 investment, with distributions reinvested, from April 16, 2012 through December 31, 2016.
Average Annual Total Return through December 31, 2016 | One Year | Three Years | Since Inception | |||
Institutional (Commenced October 16, 2013) | 4.49% | 0.96% | 1.88% | |||
Service (Commenced April 16, 2012) | 4.33% | 0.71% | 4.01% |
7
GOLDMAN SACHS VARIABLE INSURANCE TRUST GLOBAL TRENDS ALLOCATION FUND
Schedule of Investments
December 31, 2016
Shares | Description | Value | ||||||
Exchange Traded Funds – 45.0% | ||||||||
566,884 | iShares Core S&P 500 Fund | $ | 127,543,231 | |||||
153,562 | Vanguard S&P 500 Fund(a) | 31,527,815 | ||||||
|
| |||||||
TOTAL EXCHANGE TRADED FUNDS | ||||||||
(Cost $147,166,538) | $ | 159,071,046 | ||||||
|
|
Shares | Distribution Rate | Value | ||||||
Investment Company – 21.0% |
| |||||||
Goldman Sachs Financial Square Government Fund — Institutional Shares(b)(c) |
| |||||||
74,421,507 | 0.455 | % | $ | 74,421,507 | ||||
(Cost $74,421,507) | ||||||||
|
Principal Amount | Interest Rate | Maturity Date | Value | |||||||||||
Short-Term Investments(d) – 23.1% | ||||||||||||||
| FHLB Discounted Notes |
| ||||||||||||
$ | 17,752,000 | 0.000 | % | 03/22/17 | $ | 17,731,993 | ||||||||
| FHLMC Discounted Notes |
| ||||||||||||
28,544,000 | 0.000 | 04/06/17 | 28,503,439 | |||||||||||
| FNMA Discounted Notes |
| ||||||||||||
35,519,000 | 0.000 | 04/17/17 | 35,462,560 | |||||||||||
|
| |||||||||||||
TOTAL SHORT-TERM INVESTMENTS | ||||||||||||||
(Cost $81,707,970) | $ | 81,697,992 | ||||||||||||
|
| |||||||||||||
| TOTAL INVESTMENTS BEFORE SECURITIES LENDING REINVESTMENT VEHICLE | | ||||||||||||
(Cost $303,296,015) | $ | 315,190,545 | ||||||||||||
|
|
Shares | Distribution Rate | Value | ||||||
Securities Lending Reinvestment Vehicle(b)(c) – 2.5% | ||||||||
Goldman Sachs Financial Square Government Fund — Institutional Shares |
| |||||||
8,901,225 | 0.455 | % | $ | 8,901,225 | ||||
(Cost $8,901,225) | ||||||||
| ||||||||
TOTAL INVESTMENTS – 91.6% | ||||||||
(Cost $312,197,240) | $ | 324,091,770 | ||||||
| ||||||||
OTHER ASSETS IN EXCESS OF LIABILITIES – 8.4% |
| 29,549,802 | ||||||
| ||||||||
NET ASSETS – 100.0% | $ | 353,641,572 | ||||||
|
The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. | ||
(a) | All or a portion of security is on loan. | |
(b) | Represents an affiliated issuer. | |
(c) | Variable rate security. Interest rate or distribution rate disclosed is that which is in effect on December 31, 2016. | |
(d) | Issued with a zero coupon. Income is recognized through the accretion of discount. |
Investment Abbreviations: | ||
FHLB | —Federal Home Loan Bank | |
FHLMC | —Federal Home Loan Mortgage Corp. | |
FNMA | —Federal National Mortgage Association |
8 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST GLOBAL TRENDS ALLOCATION FUND
ADDITIONAL INVESTMENT INFORMATION
FUTURES CONTRACTS — At December 31, 2016, the Fund had the following futures contracts:
Type | Number of Contracts Long (Short) | Expiration Date | Current Value | Unrealized Gain (Loss) | ||||||||||||
EURO STOXX 50 Index | 1,382 | March 2017 | $ | 47,672,560 | $ | 691,520 | ||||||||||
Euro-Bund | 238 | March 2017 | 41,124,614 | 608,822 | ||||||||||||
FTSE 100 Index | 346 | March 2017 | 30,061,933 | 778,315 | ||||||||||||
Russell 2000 Mini Index | 260 | March 2017 | 17,639,700 | (297,043 | ) | |||||||||||
TSE TOPIX Index | 178 | March 2017 | 23,119,059 | 415,358 | ||||||||||||
10 Year Japanese Government Bonds | 20 | March 2017 | 25,709,519 | 15,197 | ||||||||||||
TOTAL | $ | 2,212,169 |
9
GOLDMAN SACHS VARIABLE INSURANCE TRUST GLOBAL TRENDS ALLOCATION FUND
Statement of Assets and Liabilities
December 31, 2016
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $228,874,508)(a) | $ | 240,769,038 | ||
Investments in affiliated issuers, at value (cost $74,421,507) | 74,421,507 | |||
Investments in affiliated securities lending reinvestment vehicle, at value which equals cost | 8,901,225 | |||
Cash | 5,119,842 | |||
Receivables: | ||||
Investments sold | 27,592,226 | |||
Collateral on certain derivative contracts | 7,829,830 | |||
Reimbursement from investment adviser | 40,671 | |||
Fund shares sold | 31,287 | |||
Dividends | 29,844 | |||
Securities lending income | 2,665 | |||
Other assets | 396 | |||
Total assets | 364,738,531 | |||
Liabilities: | ||||
Variation margin on certain derivative contracts | 1,661,314 | |||
Payables: | ||||
Payable upon return of securities loaned | 8,901,225 | |||
Management fees | 222,986 | |||
Distribution and Service fees and Transfer Agency fees | 80,370 | |||
Fund shares redeemed | 54,678 | |||
Investments purchased | 30,515 | |||
Accrued expenses | 145,871 | |||
Total liabilities | 11,096,959 | |||
Net Assets: | ||||
Paid-in capital | 355,866,791 | |||
Undistributed net investment income | 887,561 | |||
Accumulated net realized loss | (17,199,542 | ) | ||
Net unrealized gain | 14,086,762 | |||
NET ASSETS | $ | 353,641,572 | ||
Net Assets: | ||||
Institutional | $ | 26,561 | ||
Service | 353,615,011 | |||
Total Net Assets | $ | 353,641,572 | ||
Shares outstanding $0.001 par value (unlimited shares authorized): | ||||
Institutional | 2,343 | |||
Service | 31,235,328 | |||
Net asset value, offering and redemption price per share: | ||||
Institutional | $11.33 | |||
Service | 11.32 |
(a) Includes loaned securities having a market value of $ 8,657,199.
10 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST GLOBAL TRENDS ALLOCATION FUND
Statement of Operations
For the Fiscal Year Ended December 31, 2016
Investment income: | ||||
Dividends — unaffiliated issuers | $ | 2,800,880 | ||
Interest | 1,125,782 | |||
Dividends — affiliated issuers | 363,844 | |||
Securities lending income — affiliated issuer | 11,497 | |||
Total investment income | 4,302,003 | |||
Expenses: | ||||
Management fees | 2,837,291 | |||
Distribution and Service fees — Service Shares | 897,510 | |||
Professional fees | 115,389 | |||
Printing and mailing costs | 78,517 | |||
Transfer Agency fees(a) | 71,822 | |||
Custody, accounting and administrative services | 43,955 | |||
Trustee fees | 17,674 | |||
Other | 13,756 | |||
Total expenses | 4,075,914 | |||
Less — expense reductions | (475,620 | ) | ||
Net expenses | 3,600,294 | |||
NET INVESTMENT INCOME | 701,709 | |||
Realized and unrealized gain (loss): | ||||
Net realized gain (loss) from: | ||||
Investments | (3,391,698 | ) | ||
Futures contracts | 3,565,143 | |||
Foreign currency transactions | 52,392 | |||
Net change in unrealized gain (loss) on: | ||||
Investments | 12,395,555 | |||
Futures contracts | 1,959,832 | |||
Foreign currency translation | (35,547 | ) | ||
Net realized and unrealized gain | 14,545,677 | |||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 15,247,386 |
(a) Institutional and Service Shares incurred Transfer Agency fees of $28 and $71,794, respectively.
The accompanying notes are an integral part of these financial statements. | 11 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST GLOBAL TRENDS ALLOCATION FUND
Statements of Changes in Net Assets
For the Fiscal Year Ended December 31, 2016 | For the Fiscal Year Ended December 31, 2015 | |||||||
From operations: | ||||||||
Net investment income (loss) | $ | 701,709 | $ | (486,837 | ) | |||
Net realized gain (loss) | 225,837 | (14,388,102 | ) | |||||
Net change in unrealized gain (loss) | 14,319,840 | (5,187,236 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 15,247,386 | (20,062,175 | ) | |||||
Distributions to shareholders: | ||||||||
From net investment income | ||||||||
Institutional Shares | (119 | ) | (3,063 | ) | ||||
Service Shares | (992,542 | ) | (309,376 | ) | ||||
From net realized gains | ||||||||
Institutional Shares | — | (21,380 | ) | |||||
Service Shares | — | (7,668,103 | ) | |||||
Total distributions to shareholders | (992,661 | ) | (8,001,922 | ) | ||||
From share transactions: | ||||||||
Proceeds from sales of shares | 57,559,506 | 141,160,161 | ||||||
Reinvestment of distributions | 992,661 | 8,001,922 | ||||||
Cost of shares redeemed | (74,879,513 | ) | (33,842,796 | ) | ||||
Net increase (decrease) in net assets resulting from share transactions | (16,327,346 | ) | 115,319,287 | |||||
TOTAL INCREASE (DECREASE) | (2,072,621 | ) | 87,255,190 | |||||
Net assets: | ||||||||
Beginning of year | 355,714,193 | 268,459,003 | ||||||
End of year | $ | 353,641,572 | $ | 355,714,193 | ||||
Undistributed net investment income | $ | 887,561 | $ | — |
12 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST GLOBAL TRENDS ALLOCATION FUND
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
Income (loss) from investment operations | Distributions to shareholders | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year - Share Class | Net asset value, beginning of period | Net investment income (loss)(a) | Net realized and unrealized gain (loss) | Total from investment operations | From net investment Income | From net realized gains | Total distributions | Net asset value, end of year | Total return(b) | Net assets, end of period (in 000s) | Ratio of net expenses to average net assets | Ratio of total expenses to average net assets | Ratio of net investment income (loss) to average net assets | Portfolio turnover rate(c) | ||||||||||||||||||||||||||||||||||||||||||
FOR THE FISCAL YEARS ENDED DECEMBER 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2016 - Institutional | $ | 10.89 | $ | (0.03 | ) | $ | 0.52 | $ | 0.49 | $ | (0.05 | ) | $ | — | $ | (0.05 | ) | $ | 11.33 | 4.49 | % | $ | 27 | 0.74 | % | 0.89 | % | (0.25 | )% | 260 | % | |||||||||||||||||||||||||
2016 - Service | 10.88 | 0.02 | 0.45 | 0.47 | (0.03 | ) | — | (0.03 | ) | 11.32 | 4.33 | 353,615 | 1.00 | 1.13 | 0.20 | 260 | ||||||||||||||||||||||||||||||||||||||||
2015 - Institutional | 11.82 | 0.01 | (0.67 | ) | (0.66 | ) | (0.03 | ) | (0.24 | ) | (0.27 | ) | 10.89 | (5.52 | ) | 1,008 | 0.75 | 0.92 | 0.12 | 504 | ||||||||||||||||||||||||||||||||||||
2015 - Service | 11.82 | (0.02 | ) | (0.67 | ) | (0.69 | ) | (0.01 | ) | (0.24 | ) | (0.25 | ) | 10.88 | (5.82 | ) | 354,706 | 1.00 | 1.17 | (0.16 | ) | 504 | ||||||||||||||||||||||||||||||||||
2014 - Institutional | 11.46 | 0.08 | 0.41 | 0.49 | (0.03 | ) | (0.10 | ) | (0.13 | ) | 11.82 | 4.23 | 739 | 0.77 | 1.01 | 0.68 | 304 | |||||||||||||||||||||||||||||||||||||||
2014 - Service | 11.47 | — | (d) | 0.45 | 0.45 | — | (d) | (0.10 | ) | (0.10 | ) | 11.82 | 3.95 | 267,720 | 1.03 | 1.24 | 0.04 | 304 | ||||||||||||||||||||||||||||||||||||||
2013 - Institutional (Commenced October 16, 2013) | 11.41 | 0.01 | 0.34 | 0.35 | (0.02 | ) | (0.28 | ) | (0.30 | ) | 11.46 | 3.17 | 26 | 0.81 | (e) | 1.09 | (e) | 0.33 | (e) | 195 | ||||||||||||||||||||||||||||||||||||
2013 - Service | 10.36 | (0.02 | ) | 1.42 | 1.40 | (0.01 | ) | (0.28 | ) | (0.29 | ) | 11.47 | 13.57 | 136,116 | 1.04 | 1.51 | (0.21 | ) | 195 | |||||||||||||||||||||||||||||||||||||
FOR THE PERIOD ENDED DECEMBER 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 - Service (Commenced April 16, 2012) | 10.00 | 0.02 | 0.35 | 0.37 | — | (0.01 | ) | (0.01 | ) | 10.36 | 3.74 | 25,990 | 1.04 | (e) | 4.21 | (e) | 0.27 | (e) | 300 |
(a) | Calculated based on the average shares outstanding methodology. |
(b) | Assumes investment at the net asset value at the beginning of the period, reinvestment of all distributions, and a complete redemption of the investment at the net asset value at the end of the period. |
(c) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short term investments and certain derivatives. If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
(d) | Amount is less than $0.005 per share. |
(e) | Annualized. |
The accompanying notes are an integral part of these financial statements. | 13 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST GLOBAL TRENDS ALLOCATION FUND
Notes to Financial Statements
December 31, 2016
1. ORGANIZATION
Goldman Sachs Variable Insurance Trust (the “Trust” or “VIT”) is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company. The Trust includes the Goldman Sachs Global Trends Allocation Fund (the “Fund”). The Fund is a non-diversified portfolio under the Act offering two classes of shares — Institutional and Service Shares. Shares of the Trust are offered to separate accounts of participating life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies.
Goldman Sachs Asset Management, L.P. (“GSAM”), an affiliate of Goldman, Sachs & Co. (“Goldman Sachs”), serves as investment adviser to the Fund pursuant to a management agreement (the “Agreement”) with the Trust.
2. SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and require management to make estimates and assumptions that may affect the reported amounts and disclosures. Actual results may differ from those estimates and assumptions.
A. Investment Valuation — The Fund’s valuation policy is to value investments at fair value.
B. Investment Income and Investments — Investment income includes interest income, dividend income, net of any foreign withholding taxes, less any amounts reclaimable, and securities lending income. Interest income is accrued daily and adjusted for amortization of premiums and accretion of discounts. Dividend income is recognized on ex-dividend date or, for certain foreign securities, as soon as such information is obtained subsequent to the ex-dividend date. Investment transactions are reflected on trade date. Realized gains and losses are calculated using identified cost. Investment transactions are recorded on the following business day for daily net asset value (“NAV”) calculations. Any foreign capital gains tax is accrued daily based upon net unrealized gains, and is payable upon sale of such investments.
For derivative contracts, realized gains and losses are recorded upon settlement of the contract.
C. Class Allocations and Expenses — Investment income, realized and unrealized gain (loss), and non-class specific expenses of the Fund are allocated daily based upon the proportion of net assets of each class. Non-class specific expenses directly incurred by the Fund are charged to the Fund, while such expenses incurred by the Trust are allocated across the Fund on a straight-line and/or pro-rata basis depending upon the nature of the expenses. Class specific expenses, where applicable, are borne by the respective share classes and include Distribution and Service and Transfer Agency fees.
D. Federal Taxes and Distributions to Shareholders — It is the Fund’s policy to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Code”), applicable to regulated investment companies (mutual funds) and to distribute each year substantially all of its investment company taxable income and capital gains to its shareholders. Accordingly, the Fund is not required to make any provisions for the payment of federal income tax. Distributions to shareholders are recorded on the ex-dividend date. Income and capital gains distributions, if any, are declared and paid annually.
Net capital losses are carried forward to future fiscal years and may be used to the extent allowed by the Code to offset any future capital gains. Losses that are carried forward will retain their character as either short-term or long-term capital losses. Utilization of capital loss carryforwards will reduce the requirement of future capital gains distributions.
The characterization of distributions to shareholders for financial reporting purposes is determined in accordance with federal income tax rules, which may differ from GAAP. The source of the Fund’s distributions may be shown in the accompanying financial statements as either from net investment income, net realized gain or capital. Certain components of the Fund’s net assets on the Statement of Assets and Liabilities reflect permanent GAAP/tax differences based on the appropriate tax character.
14
GOLDMAN SACHS VARIABLE INSURANCE TRUST GLOBAL TRENDS ALLOCATION FUND
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
E. Foreign Currency Translation — The accounting records and reporting currency of the Fund are maintained in United States (“U.S.”) dollars. Assets and liabilities denominated in foreign currencies are translated into U.S. dollars using the current exchange rates at the close of each business day. The effect of changes in foreign currency exchange rates on investments is included within net realized and unrealized gain (loss) on investments. Changes in the value of other assets and liabilities as a result of fluctuations in foreign exchange rates are included in the Statement of Operations within net change in unrealized gain (loss) on foreign currency translations. Transactions denominated in foreign currencies are translated into U.S. dollars on the date the transaction occurred, the effects of which are included within net realized gain (loss) on foreign currency transactions.
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS
The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The levels used for classifying investments are not necessarily an indication of the risk associated with investing in these investments. The three levels of the fair value hierarchy are described below:
Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 — Quoted prices in markets that are not active or financial instruments for which significant inputs are observable (including, but not limited to, quoted prices for similar investments, interest rates, foreign exchange rates, volatility and credit spreads), either directly or indirectly;
Level 3 — Prices or valuations that require significant unobservable inputs (including GSAM’s assumptions in determining fair value measurement).
Changes in valuation techniques may result in transfers into or out of an assigned level within the hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value hierarchy resulting from such changes are deemed to have occurred as of the beginning of the reporting period.
The Board of Trustees (“Trustees”) has approved Valuation Procedures that govern the valuation of the portfolio investments held by the Fund, including investments for which market quotations are not readily available. The Trustees have delegated to GSAM day-to-day responsibility for implementing and maintaining internal controls and procedures related to the valuation of the Fund’s portfolio investments. To assess the continuing appropriateness of pricing sources and methodologies, GSAM regularly performs price verification procedures and issues challenges as necessary to third party pricing vendors or brokers, and any differences are reviewed in accordance with the Valuation Procedures.
A. Level 1 and Level 2 Fair Value Investments — The valuation techniques and significant inputs used in determining the fair values for investments classified as Level 1 and Level 2 are as follows:
Equity Securities — Equity securities traded on a U.S. securities exchange or the NASDAQ system, or those located on certain foreign exchanges, including but not limited to the Americas, are valued daily at their last sale price or official closing price on the principal exchange or system on which they are traded. If there is no sale or official closing price or such price is believed by GSAM to not represent fair value, equity securities are valued at the last bid price for long positions and at the last ask price for
15
GOLDMAN SACHS VARIABLE INSURANCE TRUST GLOBAL TRENDS ALLOCATION FUND
Notes to Financial Statements (continued)
December 31, 2016
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS (continued)
short positions. To the extent these investments are actively traded, they are classified as Level 1 of the fair value hierarchy, otherwise they are generally classified as Level 2.
Unlisted equity securities for which market quotations are available are valued at the last sale price on the valuation date, or if no sale occurs, at the last bid price. Securities traded on certain foreign securities exchanges are valued daily at fair value determined by an independent fair value service (if available) under Valuation Procedures approved by the Trustees and consistent with applicable regulatory guidance. The independent fair value service takes into account multiple factors including, but not limited to, movements in the securities markets, certain depositary receipts, futures contracts and foreign currency exchange rates that have occurred subsequent to the close of the foreign securities exchange. These investments are generally classified as Level 2 of the fair value hierarchy.
Underlying Funds (including Money Market Funds) — Underlying Funds (“Underlying Funds”) include other investment companies and exchange-traded funds (“ETFs”). Investments in the Underlying Funds (except ETFs) are valued at the NAV per share of the Institutional Share class on the day of valuation. ETFs are valued daily at the last sale price or official closing price on the principal exchange or system on which the investment is traded. Because the Fund invests in Underlying Funds that fluctuate in value, the Fund’s shares will correspondingly fluctuate in value. To the extent these investments are actively traded, they are classified as Level 1 of the fair value hierarchy, otherwise they are generally classified as Level 2. For information regarding an Underlying Fund’s accounting policies and investment holdings, please see the Underlying Fund’s shareholder report.
Debt Securities — Debt securities for which market quotations are readily available are valued daily on the basis of quotations supplied by dealers or an independent pricing service approved by the Trustees. The pricing services may use valuation models or matrix pricing, which consider: (i) yield or price with respect to bonds that are considered comparable in characteristics such as rating, interest rate and maturity date or (ii) quotations from securities dealers to determine current value. Short-term debt obligations that mature in sixty days or less and that do not exhibit signs of credit deterioration are valued using available market quotations as provided by a third party pricing vendor or broker. Prior to October 11, 2016, such securities were valued at amortized cost. With the exception of treasury securities of G8 countries (not held in money market funds that use amortized cost as a valuation methodology), which are generally classified as Level 1, these investments are generally classified as Level 2 of the fair value hierarchy.
Derivative Contracts — A derivative is an instrument whose value is derived from underlying assets, indices, reference rates or a combination of these factors. A Fund enters into derivative transactions to hedge against changes in interest rates, securities prices, and/or currency exchange rates, to increase total return, or to gain access to certain markets or attain exposure to other underliers.
Exchange-traded derivatives, including futures and options contracts, are valued at the last sale or settlement price and typically fall within Level 1 of the fair value hierarchy. Over-the-counter (“OTC”) and centrally cleared derivatives are valued using market transactions and other market evidence, including market-based inputs to models, calibration to market-clearing transactions, broker or dealer quotations, or other alternative pricing sources. Where models are used, the selection of a particular model to value OTC and centrally cleared derivatives depends upon the contractual terms of, and specific risks inherent in, the instrument, as well as the availability of pricing information in the market. Valuation models require a variety of inputs, including contractual terms, market prices, yield curves, credit curves, measures of volatility, voluntary and involuntary prepayment rates, loss severity rates and correlations of such inputs. For OTC and centrally cleared derivatives that trade in liquid markets, model inputs can generally be verified and model selection does not involve significant management judgment. OTC and centrally cleared derivatives are classified within Level 2 of the fair value hierarchy when significant inputs are corroborated by market evidence.
i. Futures Contracts — Futures contracts are contracts to buy or sell a standardized quantity of a specified commodity or security and are valued based on exchanged settlement prices or independent market quotes. Futures contracts are valued at the
16
GOLDMAN SACHS VARIABLE INSURANCE TRUST GLOBAL TRENDS ALLOCATION FUND
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS (continued)
last settlement price, or in the absence of a sale, the last bid price for long positions and at the last ask price for short positions, at the end of each day on the board of trade or exchange upon which they are traded. Upon entering into a futures contract, the Fund deposits cash or securities in an account on behalf of the broker in an amount sufficient to meet the initial margin requirement. Subsequent payments are made or received by the Fund equal to the daily change in the contract value and are recorded as variation margin receivable or payable with a corresponding offset to unrealized gains or losses.
Short Term Investments — Short-term investments having a maturity of 60 days or less are valued using available market quotations as provided by a third party pricing vendor or broker. Prior to October 11, 2016, such securities were valued at amortized cost. These investments are classified as Level 2 of the fair value hierarchy.
B. Level 3 Fair Value Investments — To the extent that significant inputs to valuation models and other alternative pricing sources are unobservable, or if quotations are not readily available, or if GSAM believes that such quotations do not accurately reflect fair value, the fair value of the Fund’s investments may be determined under Valuation Procedures approved by the Trustees. GSAM, consistent with its procedures and applicable regulatory guidance, may make an adjustment to the most recent valuation prices of either domestic or foreign securities in light of significant events to reflect what it believes to be the fair value of the securities at the time of determining the Fund’s NAV. Significant events which could affect a large number of securities in a particular market may include, but are not limited to: significant fluctuations in U.S. or foreign markets; market dislocations; market disruptions; or unscheduled market closings. Significant events which could also affect a single issuer may include, but are not limited to: corporate actions such as reorganizations, mergers and buy-outs; ratings downgrades; and bankruptcies.
C. Fair Value Hierarchy — The following is a summary of the Fund’s investments and derivatives classified in the fair value hierarchy as of December 31, 2016:
Investment Type | Level 1 | Level 2 | Level 3 | |||||||||
Assets | ||||||||||||
Exchange Traded Funds | $ | 159,071,046 | $ | — | $ | — | ||||||
Investment Company | 74,421,507 | — | — | |||||||||
Short-Term Investments | — | 81,697,992 | — | |||||||||
Securities Lending Reinvestment Vehicle | 8,901,225 | — | — | |||||||||
Total | $ | 242,393,778 | $ | 81,697,992 | $ | — | ||||||
Derivative Type | ||||||||||||
Assets(a) | ||||||||||||
Futures Contracts | $ | 2,509,212 | $ | — | $ | — | ||||||
Liabilities(a) | ||||||||||||
Futures Contracts | $ | (297,043 | ) | $ | — | $ | — |
(a) | Amount shown represents unrealized gain (loss) at fiscal year end. |
For further information regarding security characteristics, see the Schedule of Investments.
17
GOLDMAN SACHS VARIABLE INSURANCE TRUST GLOBAL TRENDS ALLOCATION FUND
Notes to Financial Statements (continued)
December 31, 2016
4. INVESTMENTS IN DERIVATIVES
The following table sets forth, by certain risk types, the gross value of derivative contracts as of December 31, 2016. These instruments were used as part the Fund’s investment strategies and to obtain and/or manage exposure related to the risks below. The values in the table below exclude the effects of cash collateral received or posted pursuant to these derivative contracts, and therefore are not representative of the Fund’s net exposure.
Risk | Statement of Assets and Liabilities | Assets(a) | Statement of Assets and Liabilities | Liabilities(a) | ||||||||||
Equity | Variation margin on certain derivative contracts | $ | 1,885,193 | Variation margin on certain derivative contracts | $ | (297,043 | ) | |||||||
Interest Rate | Variation margin on certain derivative contracts | 624,019 | — | — | ||||||||||
Total | $ | 2,509,212 | $ | (297,043 | ) |
(a) | Includes unrealized gain (loss) on futures contracts described in the Additional Investment Information section of the Schedule of Investments. Only the variation margin as of December 31, 2016 is reported within the Statement of Assets and Liabilities. |
The following table sets forth, by certain risk types, the Fund’s gains (losses) related to these derivatives and their indicative volumes for the fiscal year ended December 31, 2016. These gains (losses) should be considered in the context that these derivative contracts may have been executed to create investment opportunities and/or economically hedge certain investments, and accordingly, certain gains (losses) on such derivative contracts may offset certain (losses) gains attributable to investments. These gains (losses) are included in “Net realized gain (loss)” or “Net change in unrealized gain (loss)” on the Statement of Operations:
Risk | Statement of Operations | Net Realized Gain (Loss) | Net Change in Unrealized Gain (Loss) | Average Number of Contracts(a) | ||||||||||
Equity | Net realized gain (loss) from futures contracts/Net change in unrealized gain (loss) on futures contracts | $ | 3,147,600 | $ | 1,053,987 | 941 | ||||||||
Interest Rate | Net realized gain (loss) from futures contracts/Net change in unrealized gain (loss) on futures contracts | 417,543 | 905,845 | 287 | ||||||||||
Total | $ | 3,565,143 | $ | 1,959,832 | 1,228 |
(a) | Average number of contracts is based on the average of month end balances for the fiscal year ended December 31, 2016. |
5. AGREEMENTS AND AFFILIATED TRANSACTIONS
A. Management Agreement — Under the Agreement, GSAM manages the Fund, subject to the general supervision of the Trustees.
As compensation for the services rendered pursuant to the Agreement, the assumption of the expenses related thereto and administration of the Fund’s business affairs, including providing facilities, GSAM is entitled to a management fee, accrued daily and paid monthly, equal to an annual percentage rate of the Fund’s average daily net assets.
18
GOLDMAN SACHS VARIABLE INSURANCE TRUST GLOBAL TRENDS ALLOCATION FUND
5. AGREEMENTS AND AFFILIATED TRANSACTIONS (continued)
For the fiscal year ended December 31, 2016, contractual and effective net management fees with GSAM were at the following rates:
Contractual Management Rate | Effective Net Management Rate^ | |||||||||||||||||||||||||
First $1 billion | Next $1 billion | Next $3 billion | Next $3 billion | Over $8 billion | Effective Rate | |||||||||||||||||||||
0.79% | 0.71 | % | 0.68 | % | 0.66 | % | 0.65 | % | 0.79 | % | 0.73 | % |
^ | Effective Net Management Rate includes the impact of management fee waivers of affiliated Underlying Funds, if any. |
The Fund invests in Institutional Shares of the Goldman Sachs Financial Square Government Fund, which is an affiliated Underlying Fund. GSAM has agreed to waive a portion of its management fee payable by the Fund in an amount equal to the management fee it earns as an investment adviser to any of the affiliated Underlying Funds in which the Fund invests. For the fiscal year ended December 31, 2016, GSAM waived $206,970 of the Fund’s management fee.
B. Distribution and Service Plan — The Trust, on behalf of the Service Shares of the Fund, has adopted a Distribution and Service Plan (the “Plan”). Under the Plan, Goldman Sachs, which serves as distributor (the “Distributor”), is entitled to a fee accrued daily and paid monthly, for distribution services and personal and account maintenance services, which may then be paid by Goldman Sachs to authorized dealers, equal to, on an annual basis, 0.25% of the Fund’s average daily net assets attributable to Service Shares.
C. Transfer Agency Agreement — Goldman Sachs also serves as the transfer agent of the Fund for a fee pursuant to the Transfer Agency Agreement. The fees charged for such transfer agency services are accrued daily and paid monthly at an annual rate of 0.02% of the average daily net assets of Institutional and Service Shares.
D. Other Expense Agreements and Affiliated Transactions — GSAM has agreed to limit certain “Other Expenses” of the Fund (excluding acquired fund fees and expenses, transfer agency fees and expenses, taxes, interest, brokerage fees, shareholder meeting, litigation, indemnification, and extraordinary expenses) to the extent such expenses exceed, on an annual basis, a percentage rate of the average daily net assets of the Fund. Such Other Expense reimbursements, if any, are accrued daily and paid monthly. In addition, the Fund is not obligated to reimburse GSAM for prior fiscal year expense reimbursements, if any. The Other Expense limitation as an annual percentage rate of average daily net assets for the Fund is 0.004%. The Other Expense limitation will remain in place through at least April 29, 2017, and prior to such date GSAM may not terminate the arrangement without the approval of the Trustees. For the fiscal year ended December 31, 2016, GSAM reimbursed $254,924 to the Fund. In addition, the Fund has entered into certain offset arrangements with the custodian and the transfer agent, which may result in a reduction of the Fund’s expenses and are received irrespective of the application of the “Other Expense” limitation described above. For the fiscal year ended December 31, 2016, custody fee credits were $13,726.
E. Line of Credit Facility — As of December 31, 2016, the Fund participated in a $1,100,000,000 committed, unsecured revolving line of credit facility (the “facility”) together with other funds of the Trust and certain registered investment companies having management agreements with GSAM or its affiliates. This facility is to be used for temporary emergency purposes, or to allow for an orderly liquidation of securities to meet redemption requests. The interest rate on borrowings is based on the federal funds rate. The facility also requires a fee to be paid by the Fund based on the amount of the commitment that has not been utilized. For the fiscal year ended December 31, 2016, the Fund did not have any borrowings under the facility.
19
GOLDMAN SACHS VARIABLE INSURANCE TRUST GLOBAL TRENDS ALLOCATION FUND
Notes to Financial Statements (continued)
December 31, 2016
5. AGREEMENTS AND AFFILIATED TRANSACTIONS (continued)
F. Other Transactions with Affiliates — The following table provides information about the Fund’s investment in the Goldman Sachs Financial Square Government Fund as of and for the fiscal year ended December 31, 2016:
Market Value 12/31/2015 | Purchases at Cost | Proceeds from Sales | Market Value 12/31/2016 | Dividend Income | ||||||||||||||
$ | 160,199,048 | $ | 332,986,567 | $ | (418,764,108 | ) | $ | 74,421,507 | $ | 363,844 |
As of December 31, 2016, The Goldman Sachs Group, Inc. was the beneficial owner of approximately 100% of the Institutional Class Shares of the Fund.
6. PORTFOLIO SECURITIES TRANSACTIONS
The cost of purchases and proceeds from sales and maturities of long-term securities for the fiscal year ended December 31, 2016 were as follows:
Purchases of U.S. Government and Agency Obligations | Purchases (Excluding U.S. Government and Agency Obligations) | Sales and Maturities of U.S. Government and Agency Obligations | Sales and Maturities (Excluding U.S. Government and Agency Obligations) | |||||||||||
$ | 195,441,567 | $ | 260,994,737 | $ | 246,413,035 | $ | 189,695,691 |
7. SECURITIES LENDING
Pursuant to exemptive relief granted by the Securities and Exchange Commission (“SEC”) and the terms and conditions contained therein, the Fund may lend its securities through a securities lending agent, Goldman Sachs Agency Lending (“GSAL”), a wholly-owned subsidiary of Goldman Sachs, to certain qualified borrowers including Goldman Sachs and affiliates. In accordance with the Fund’s securities lending procedures, the Fund receives cash collateral at least equal to the market value of the securities on loan. The market value of the loaned securities is determined at the close of business of the Fund, at their last sale price or official closing price on the principal exchange or system on which they are traded, and any additional required collateral is delivered to the Fund on the next business day. As with other extensions of credit, the Fund may experience delay in the recovery of its securities or incur a loss should the borrower of the securities breach its agreement with the Fund or become insolvent at a time when the collateral is insufficient to cover the cost of repurchasing securities on loan. Dividend income received from securities on loan may not be subject to withholding taxes and therefore withholding taxes paid may differ from the amounts listed in the Statement of Operations. Loans of securities are terminable at any time and as such 1) the remaining contractual maturities of the outstanding securities lending transactions are considered to be overnight and continuous and 2) the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.
The Fund invests the cash collateral received in connection with securities lending transactions in the Goldman Sachs Financial Square Government Fund (the “Government Money Market Fund”), an affiliated series of the Trust. Prior to September 30, 2016, the cash collateral had been invested in the Goldman Sachs Financial Square Money Market Fund. The Government Money Market Fund is registered under the Act as an open end investment company, is subject to Rule 2a-7 under the
20
GOLDMAN SACHS VARIABLE INSURANCE TRUST GLOBAL TRENDS ALLOCATION FUND
7. SECURITIES LENDING (continued)
Act, and is managed by GSAM, for which GSAM may receive an investment advisory fee of up to 0.205% on an annualized basis of the average daily net assets of the Government Money Market Fund.
In the event of a default by a borrower with respect to any loan, GSAL will exercise any and all remedies provided under the applicable borrower agreement to make the Fund whole. These remedies include purchasing replacement securities by applying the collateral held from the defaulting broker against the purchase cost of the replacement securities. If GSAL is unable to purchase replacement securities, GSAL will indemnify the Fund by paying the Fund an amount equal to the market value of the securities loaned minus the value of cash collateral received from the borrower for the loan, subject to an exclusion for any shortfalls resulting from a loss of value in such cash collateral due to reinvestment risk. The Fund’s loaned securities were all subject to enforceable Securities Lending Agreements, and the value of the collateral is at least equal to the value of the cash received. The amounts of the Fund’s overnight and continuous agreements collateralized by common stocks which represent the gross amounts of recognized liabilities for securities lending transactions outstanding as of December 31, 2016 are disclosed as “Payable upon return of securities loaned” on the Statement of Assets and Liabilities.
Both the Fund and GSAL received compensation relating to the lending of the Fund’s securities. The amounts earned, if any, by the Fund for the fiscal year ended December 31, 2016 are reported under Investment Income on the Statement of Operations. The table below details securities lending activity with affiliates of Goldman Sachs:
For the Fiscal Year ended December 31, 2016 | ||||
Earnings of GSAL Relating to Securities Loaned | Amount Received by the Funds from Lending to Goldman Sachs | |||
$1,286 | $ | 3,747 |
The following table provides information about the Fund’s investment in the Goldman Sachs Financial Square Money Market Fund for the fiscal year ended December 31, 2016:
Market Value 12/31/2015 | Purchases | Proceeds | Market Value 12/31/2016 | |||||||||||
$— | $ | 10,425,000 | $ | (10,425,000 | ) | $ | — |
The following table provides information about the Fund’s investment in the Government Money Market Fund for the fiscal year ended December 31, 2016:
Market Value 12/31/15 | Purchases at Cost | Proceeds from Sales | Market Value 12/31/16 | |||||||||||
$— | $ | 53,176,400 | $ | (44,275,175 | ) | $ | 8,901,225 |
21
GOLDMAN SACHS VARIABLE INSURANCE TRUST GLOBAL TRENDS ALLOCATION FUND
Notes to Financial Statements (continued)
December 31, 2016
8. TAX INFORMATION
The tax character of distributions paid during the fiscal years ended December 31, 2015 and December 31, 2016 was as follows:
2015 | 2016 | |||||||
Distributions paid from: | ||||||||
Ordinary income | $ | 6,728,201 | $ | 992,661 | ||||
Net long-term capital gains | 1,273,993 | — | ||||||
Total taxable distributions | $ | 8,002,194 | $ | 992,661 |
As of December 31, 2016, the components of accumulated earnings (losses) on a tax-basis were as follows:
Undistributed ordinary income — net | $ | 1,182,751 | ||
Undistributed long-term capital gains | — | |||
Total undistributed earnings | $ | 1,182,751 | ||
Capital Loss Carryforward — Perpetual short-term | $ | (12,097,918 | ) | |
Timing differences (Qualified Late Year Loss Deferral/Post October Loss Deferral) | (295,190 | ) | ||
Unrealized gains — net | 8,985,138 | |||
Total accumulated earnings | $ | (2,225,219 | ) |
The Fund utilized $1,277,611 of capital loss carryforwards in the current fiscal year.
As of December 31, 2016, the Fund’s aggregate security unrealized gains and losses based on cost for U.S. federal income tax purposes were as follows:
Tax cost | $ | 315,517,250 | ||
Gross unrealized gain | 11,905,803 | |||
Gross unrealized loss | (3,331,283 | ) | ||
Net unrealized security gain | $ | 8,574,520 | ||
Net unrealized security gain in other investments | 410,618 | |||
Net unrealized gain (loss) | $ | 8,985,138 |
The difference between GAAP-basis and tax-basis unrealized gains (losses) is attributable primarily to wash sales and net mark to market gains (losses) on regulated futures contracts.
In order to present certain components of the Fund’s capital accounts on a tax-basis, the Fund has reclassified $1,178,513 of accumulated net realized gain to undistributed net investment income. These reclassifications have no impact on the NAV of the Fund and result primarily from differences in the tax treatment of foreign currency transactions.
GSAM has reviewed the Fund’s tax positions for all open tax years (the current and prior three years, as applicable) and has concluded that no provision for income tax is required in the Fund’s financial statements. Such open tax years remain subject to examination and adjustment by tax authorities.
22
GOLDMAN SACHS VARIABLE INSURANCE TRUST GLOBAL TRENDS ALLOCATION FUND
9. OTHER RISKS
The Fund’s risks include, but are not limited to, the following:
Derivatives Risk —The Fund’s use of derivatives may result in loss. Derivative instruments, which may pose risks in addition to and greater than those associated with investing directly in securities, currencies or other instruments, may be illiquid or less liquid, volatile, difficult to price and leveraged so that small changes in the value of the underlying instruments may produce disproportionate losses to the Fund. Derivatives are also subject to counterparty risk, which is the risk that the other party in the transaction will not fulfill its contractual obligation. The use of derivatives is a highly specialized activity that involves investment techniques and risks different from those associated with investments in more traditional securities and instruments. Losses from derivatives can also result from a lack of correlation between changes in the value of derivative instruments and the portfolio assets (if any) being hedged.
Foreign and Emerging Countries Risk — Investing in foreign markets may involve special risks and considerations not typically associated with investing in the U.S. Foreign securities may be subject to risk of loss because of more or less foreign government regulation, less public information and less economic, political and social stability in the countries in which the Fund invests. The imposition of exchange controls, confiscations, trade restrictions (including tariffs) and other government restrictions by the U.S. or other governments, or from problems in share registration, settlement or custody, may also result in losses. Foreign risk also involves the risk of negative foreign currency rate fluctuations, which may cause the value of securities denominated in such foreign currency (or other instruments through which the Fund has exposure to foreign currencies) to decline in value. Currency exchange rates may fluctuate significantly over short periods of time. To the extent that the Fund also invests in securities of issuers located in emerging markets, these risks may be more pronounced.
Foreign Custody Risk — If the Fund invests in foreign securities, the Fund may hold such securities and cash with foreign banks, agents, and securities depositories appointed by the Fund’s custodian (each a “Foreign Custodian”). Some foreign custodians may be recently organized or new to the foreign custody business. In some countries, Foreign Custodians may be subject to little or no regulatory oversight over, or independent evaluation of, their operations. Further, the laws of certain countries may place limitations on the Fund’s ability to recover its assets if a Foreign Custodian enters bankruptcy. Investments in emerging markets may be subject to even greater custody risks than investments in more developed markets. Custody services in emerging market countries are very often undeveloped and may be considerably less well regulated than in more developed countries, and thus may not afford the same level of investor protection as would apply in developed countries.
Interest Rate Risk — When interest rates increase, fixed income securities or instruments held by the Fund will generally decline in value. Long-term fixed income securities or instruments will normally have more price volatility because of this risk than short-term fixed income securities or instruments. The risks associated with increasing rates are heightened given that interest rates are near historic lows, but may be expected to increase in the future with unpredictable effects on the markets and the Fund‘s investments. Fluctuations in interest rates may also affect the liquidity of fixed income securities and instruments held by the Fund.
Investments in Other Investment Companies — As a shareholder of another investment company, including an exchange traded fund (“ETF”), the Fund will indirectly bear its proportionate share of any net management fees and other expenses paid by such other investment companies, in addition to the fees and expenses regularly borne by the Fund. ETFs are subject to risks that do not apply to conventional mutual funds, including but not limited to the following: (i) the market price of the ETF’s shares may trade at a premium or a discount to their NAV; and (ii) an active trading market for an ETF’s shares may not develop or be maintained.
23
GOLDMAN SACHS VARIABLE INSURANCE TRUST GLOBAL TRENDS ALLOCATION FUND
Notes to Financial Statements (continued)
December 31, 2016
9. OTHER RISKS (continued)
Large Shareholder Transactions Risk — The Fund may experience adverse effects when certain large shareholders, such as other funds, participating insurance companies, accounts and Goldman Sachs affiliates, purchase or redeem large amounts of shares of the Fund. Such large shareholder redemptions may cause the Fund to sell portfolio securities at times when it would not otherwise do so, which may negatively impact the Fund’s NAV and liquidity. These transactions may also accelerate the realization of taxable income to shareholders if such sales of investments resulted in gains, and may also increase transaction costs. In addition, a large redemption could result in the Fund’s current expenses being allocated over a smaller asset base, leading to an increase in the Fund’s expense ratio. Similarly, large Fund share purchases may adversely affect the Fund’s performance to the extent that the Fund is delayed in investing new cash and is required to maintain a larger cash position than it ordinarily would.
Liquidity Risk — The Fund may make investments that are illiquid or that may become less liquid in response to market developments or adverse investor perceptions. Illiquid investments may be more difficult to value. Liquidity risk may also refer to the risk that the Fund will not be able to pay redemption proceeds within the allowable time period because of unusual market conditions, an unusually high volume of redemption requests, or other reasons. To meet redemption requests, the Fund may be forced to sell investments at an unfavorable time and/or under unfavorable conditions. Liquidity risk may be the result of, among other things, the reduced number and capacity of traditional market participants to make a market in fixed income securities or the lack of an active market. The potential for liquidity risk may be magnified by a rising interest rate environment or other circumstances where investor redemptions from fixed income mutual funds may be higher than normal, potentially causing increased supply in the market due to selling activity.
Market and Credit Risks — In the normal course of business, the Fund trades financial instruments and enters into financial transactions where risk of potential loss exists due to changes in the market (market risk). Additionally, the Fund may also be exposed to credit risk in the event that an issuer or guarantor fails to perform or that an institution or entity with which the Fund has unsettled or open transactions defaults.
Non-Diversification Risk — The Fund is non-diversified, meaning that it is permitted to invest a larger percentage of its assets in fewer issuers than diversified mutual funds. Thus, the Fund may be more susceptible to adverse developments affecting any single issuer held in its portfolio, and may be more susceptible to greater losses because of these developments.
10. INDEMNIFICATIONS
Under the Trust’s organizational documents, its Trustees, officers, employees and agents are indemnified, to the extent permitted by the Act and state law, against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the course of business, the Fund enters into contracts that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, GSAM believes the risk of loss under these arrangements to be remote.
11. SUBSEQUENT EVENTS
Subsequent events after the Statement of Assets and Liabilities date have been evaluated and GSAM has concluded that there is no impact requiring adjustment or disclosure in the financial statements.
24
GOLDMAN SACHS VARIABLE INSURANCE TRUST GLOBAL TRENDS ALLOCATION FUND
12. SUMMARY OF SHARE TRANSACTIONS
Share activity is as follows:
For the Fiscal Year Ended December 31, 2016 | For the Fiscal Year Ended December 31, 2015 | |||||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||||
Institutional Shares | ||||||||||||||||
Shares sold | — | $ | — | 65,120 | $ | 767,595 | ||||||||||
Reinvestment of distributions | 10 | 119 | 2,244 | 24,443 | ||||||||||||
Shares redeemed | (90,223 | ) | (961,682 | ) | (37,336 | ) | (453,426 | ) | ||||||||
(90,213 | ) | (961,563 | ) | 30,028 | 338,612 | |||||||||||
Service Shares | ||||||||||||||||
Shares sold | 5,287,482 | 57,559,506 | 12,070,417 | 140,392,566 | ||||||||||||
Reinvestment of distributions | 87,603 | 992,542 | 732,551 | 7,977,479 | ||||||||||||
Shares redeemed | (6,728,313 | ) | (73,917,831 | ) | (2,872,736 | ) | (33,389,370 | ) | ||||||||
(1,353,228 | ) | (15,365,783 | ) | 9,930,232 | 114,980,675 | |||||||||||
NET INCREASE (DECREASE) | (1,443,441 | ) | $ | (16,327,346 | ) | 9,960,260 | $ | 115,319,287 |
25
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Goldman Sachs Variable Insurance Trust and Shareholders of the
Goldman Sachs Global Trends Allocation Fund:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Goldman Sachs Global Trends Allocation Fund (the “Fund”), a fund of the Goldman Sachs Variable Insurance Trust, as of December 31, 2016, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities as of December 31, 2016 by correspondence with the custodian, brokers, transfer agent of the underlying funds and the application of alternative auditing procedures where securities purchased confirmations had not been received, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 14, 2017
26
GOLDMAN SACHS VARIABLE INSURANCE TRUST GLOBAL TRENDS ALLOCATION FUND
Fund Expenses — Period Ended December 31, 2016 (Unaudited) |
As a shareholder of Institutional or Service Shares of the Fund, you incur ongoing costs, including management fees, distribution and/or service (12b-1) fees (with respect to Service Shares) and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Institutional Shares and Service Shares of the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from July 1, 2016 through December 31, 2016, which represents a period of 184 days of a 366 day year.
Actual Expenses — The first line under each share class in the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000=8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes — The second line under each share class in the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual net expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only. As a shareholder of the Fund, you do not incur any transaction costs, such as sales charges, redemption fees, or exchange fees, but shareholders of other funds may incur such costs. The second line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds whose shareholders may incur transaction costs.
Share Class | Beginning Account Value 07/01/16 | Ending Account Value 12/31/16 | Expenses Paid for the 6 Months Ended 12/31/16* | |||||||||
Institutional | ||||||||||||
Actual | $ | 1,000 | $ | 1,040.30 | $ | 3.85 | ||||||
Hypothetical 5% return | 1,000 | 1,021.37 | + | 3.81 | ||||||||
Service | ||||||||||||
Actual | 1,000 | 1,039.50 | 5.18 | |||||||||
Hypothetical 5% return | 1,000 | 1,020.06 | + | 5.13 |
* | Expenses are calculated using the Fund’s annualized net expense ratio for each class, which represents the ongoing expenses as a percentage of net assets for the six months ended December 31, 2016. Expenses are calculated by multiplying the annualized net expense ratio by the average account value for the period; then multiplying the result by the number of days in the most recent fiscal half year; and then dividing that result by the number of days in the fiscal year. The annualized net expense ratios for the period were 0.75% and 1.01% for Institutional and Service Shares, respectively. |
+ | Hypothetical expenses are based on the Fund’s annualized net expense ratios and an assumed rate of return of 5% per year before expenses. |
27
GOLDMAN SACHS VARIABLE INSURANCE TRUST GLOBAL TRENDS ALLOCATION FUND
Trustees and Officers (Unaudited)
Independent Trustees
Name, Address and Age1 | Position(s) Held with the Trust | Term of Office and | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee3 | Other Directorships Held by Trustee4 | |||||
Ashok N. Bakhru Age: 74 | Chairman of the Board of Trustees | Since 1996 (Trustee since 1991) | Mr. Bakhru is retired. He was formerly Director, Apollo Investment Corporation (a business development company) (2008-2013); President, ABN Associates (a management and financial consulting firm) (1994-1996 and 1998-2012); Trustee, Scholarship America (1998-2005); Trustee, Institute for Higher Education Policy (2003-2008); Director, Private Equity Investors — III and IV (1998-2007), and Equity-Linked Investors II (April 2002-2007).
Chairman of the Board of Trustees — Goldman Sachs Trust; Goldman Sachs Variable Insurance Trust; Goldman Sachs Trust II; Goldman Sachs BDC, Inc.; Goldman Sachs Private Middle Market Credit LLC; Goldman Sachs MLP Income Opportunities Fund; Goldman Sachs MLP and Energy Renaissance Fund; and Goldman Sachs ETF Trust. | 142 | None | |||||
Kathryn A. Cassidy Age: 62 | Trustee | Since 2015 | Ms. Cassidy is retired. Formerly, she was Advisor to the Chairman (May 2014-December 2014); and Senior Vice President and Treasurer (2008-2014), General Electric Company & General Electric Capital Corporation (technology and financial services companies).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||
Diana M. Daniels Age: 67 | Trustee | Since 2007 | Ms. Daniels is retired. Formerly, she was Vice President, General Counsel and Secretary, The Washington Post Company (1991-2006). Ms. Daniels is a Trustee Emeritus and serves as a Presidential Councillor of Cornell University (2013-Present); former Member of the Legal Advisory Board, New York Stock Exchange (2003-2006) and of the Corporate Advisory Board, Standish Mellon Management Advisors (2006-2007).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||
Herbert J. Markley Age: 66 | Trustee | Since 2013 | Mr. Markley is retired. Formerly, he was Executive Vice President, Deere & Company (an agricultural and construction equipment manufacturer) (2007-2009); and President, Agricultural Division, Deere & Company (2001-2007). Previously, Mr. Markley served as an Advisory Board Member of Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust (June 2013-October 2013).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||
Jessica Palmer Age: 67 | Trustee | Since 2007 | Ms. Palmer is retired. She is Director, Emerson Center for the Arts and Culture (2011-Present); and was formerly a Consultant, Citigroup Human Resources Department (2007-2008); Managing Director, Citigroup Corporate and Investment Banking (previously, Salomon Smith Barney/Salomon Brothers) (1984-2006). Ms. Palmer was a Member of the Board of Trustees of Indian Mountain School (private elementary and secondary school) (2004-2009).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||
28
GOLDMAN SACHS VARIABLE INSURANCE TRUST GLOBAL TRENDS ALLOCATION FUND
Trustees and Officers (Unaudited) (continued)
Independent Trustees
Name, Address and Age1 | Position(s) Held with the Trust | Term of Office and | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee3 | Other Directorships Held by Trustee4 | |||||
Roy W. Templin Age: 56 | Trustee | Since 2013 | Mr. Templin is retired. He recently served as Chairman of the Board of Directors, Con-Way Incorporated (a transportation, logistics and supply chain management service company) (2014-2015); and was formerly Executive Vice President and Chief Financial Officer, Whirlpool Corporation (an appliance manufacturer and marketer) (2004-2012). Previously, Mr. Templin served as an Advisory Board Member of Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust (June 2013-October 2013).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||
Gregory G. Weaver Age: 65 | Trustee | Since 2015 | Mr. Weaver is retired. He is Director, Verizon Communications Inc. (2015-Present); and was formerly Chairman and Chief Executive Officer, Deloitte & Touche LLP (a professional services firm) (2001-2005 and 2012-2014); and Member of the Board of Directors, Deloitte & Touche LLP (2006-2012).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | Verizon Communications Inc. | |||||
29
GOLDMAN SACHS VARIABLE INSURANCE TRUST GLOBAL TRENDS ALLOCATION FUND
Trustees and Officers (Unaudited) (continued)
Interested Trustees*
Name, Address and Age1 | Position(s) Held with the Trust | Term of Office and | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee3 | Other Directorships Held by Trustee4 | |||||
James A. McNamara Age: 54 | President and Trustee | Since 2007 | Managing Director, Goldman Sachs (December 1998-Present); Director of Institutional Fund Sales, GSAM (April 1998-December 2000); and Senior Vice President and Manager, Dreyfus Institutional Service Corporation (January 1993- April 1998).
President and Trustee — Goldman Sachs Trust; Goldman Sachs Variable Insurance Trust; Goldman Sachs Trust II; Goldman Sachs MLP Income Opportunities Fund; Goldman Sachs MLP and Energy Renaissance Fund; and Goldman Sachs ETF Trust. | 140 | None | |||||
Alan A. Shuch Age: 67 | Trustee | Since 1990 | Advisory Director — GSAM (May 1999-Present); Consultant to GSAM (December 1994-May 1999); and Limited Partner, Goldman Sachs (December 1994-May 1999).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||
* | These persons are considered to be “Interested Trustees” because they hold positions with Goldman Sachs and own securities issued by The Goldman Sachs Group, Inc. Each Interested Trustee holds comparable positions with certain other companies of which Goldman Sachs, GSAM or an affiliate thereof is the investment adviser, administrator and/or distributor. |
1 | Each Trustee may be contacted by writing to the Trustee, c/o Goldman Sachs, 200 West Street, New York, New York, 10282, Attn: Caroline Kraus. Information is provided as of December 31, 2016. Alan A. Shuch served as Trustee until his retirement from the Board on December 31, 2016. |
2 | Subject to such policies as may be adopted by the Board from time-to-time, each Trustee holds office for an indefinite term, until the earliest of: (a) the election of his or her successor; (b) the date the Trustee resigns or is removed by the Board or shareholders, in accordance with the Trust’s Declaration of Trust; or (c) the termination of the Trust. The Board has adopted policies which provide that (a) no Trustee shall hold office for more than 15 years and (b) a Trustee shall retire as of December 31st of the calendar year in which he or she reaches his or her 74th birthday, unless a waiver of such requirement shall have been adopted by a majority of the other Trustees. These policies may be changed by the Trustees without shareholder vote. One Trustee has been granted a waiver from the foregoing policies which permits him to serve until December 31, 2017. |
3 | The Goldman Sachs Fund Complex includes certain other companies listed above for each respective Trustee. As of December 31, 2016, Goldman Sachs Trust consisted of 92 portfolios (89 of which offered shares to the public); Goldman Sachs Variable Insurance Trust consisted of 14 portfolios; Goldman Sachs Trust II consisted of 17 portfolios (16 of which offered shares to the public); Goldman Sachs BDC, Inc., Goldman Sachs Private Middle Market Credit LLC, Goldman Sachs MLP Income Opportunities Fund, and Goldman Sachs MLP and Energy Renaissance Fund each consisted of one portfolio; and Goldman Sachs ETF Trust consisted of 15 portfolios (eight of which offered shares to the public). Goldman Sachs Private Middle Market Credit LLC does not offer shares to the public. |
4 | This column includes only directorships of companies required to report to the Securities and Exchange Commission under the Securities Exchange Act of 1934 (i.e., “public companies”) or other investment companies registered under the Act. |
Additional information about the Trustees is available in the Fund’s Statement of Additional Information, which can be obtained from Goldman Sachs free of charge by calling this toll-free number (in the United States of America): 1-800-526-7384.
30
GOLDMAN SACHS VARIABLE INSURANCE TRUST GLOBAL TRENDS ALLOCATION FUND
Trustees and Officers (Unaudited) (continued)
Officers of the Trust*
Name, Address and Age1 | Position(s) Held with the Trust | Term of Office and | Principal Occupation(s) During Past 5 Years | |||
James A. McNamara 200 West Street New York, NY 10282 Age: 54 | Trustee and President | Since 2007 | Managing Director, Goldman Sachs (December 1998-Present); Director of Institutional Fund Sales, GSAM (April 1998-December 2000); and Senior Vice President and Manager, Dreyfus Institutional Service Corporation (January 1993-April 1998).
President and Trustee — Goldman Sachs Trust; Goldman Sachs Variable Insurance Trust; Goldman Sachs Trust II; Goldman Sachs MLP Income Opportunities Fund; Goldman Sachs MLP and Energy Renaissance Fund; and Goldman Sachs ETF Trust. | |||
Caroline L. Kraus 200 West Street New York, NY 10282 Age: 39 | Secretary | Since 2012 | Managing Director, Goldman Sachs (January 2016-Present); Vice President, Goldman Sachs (August 2006-December 2015); Associate General Counsel, Goldman Sachs (2012-Present); Assistant General Counsel, Goldman Sachs (August 2006-December 2011); and Associate, Weil, Gotshal & Manges, LLP (2002-2006).
Secretary — Goldman Sachs Trust (previously Assistant Secretary (2012)); Goldman Sachs Variable Insurance Trust (previously Assistant Secretary (2012)); Goldman Sachs Trust II; Goldman Sachs BDC, Inc.; Goldman Sachs Private Middle Market Credit LLC; Goldman Sachs Middle Market Lending LLC; Goldman Sachs MLP Income Opportunities Fund; Goldman Sachs MLP and Energy Renaissance Fund; and Goldman Sachs ETF Trust. | |||
Scott M. McHugh 200 West Street New York, NY 10282 Age: 45 | Treasurer, Senior Vice President and Principal Financial Officer | Since 2009 (Principal Financial Officer since 2013) | Managing Director, Goldman Sachs (January 2016-Present); Vice President, Goldman Sachs (February 2007-December 2015); Assistant Treasurer of certain mutual funds administered by DWS Scudder (2005-2007); and Director (2005-2007), Vice President (2000-2005), and Assistant Vice President (1998-2000), Deutsche Asset Management or its predecessor (1998-2007).
Treasurer, Senior Vice President and Principal Financial Officer — Goldman Sachs Trust; Goldman Sachs Variable Insurance Trust; Goldman Sachs Trust II; Goldman Sachs MLP Income Opportunities Fund; Goldman Sachs MLP and Energy Renaissance Fund; and Goldman Sachs ETF Trust. | |||
* | Represents a partial list of officers of the Trust. Additional information about all the officers is available in the Fund’s Statement of Additional Information, which can be obtained from Goldman Sachs free of charge by calling this toll-free number (in the United States): 1-800-526-7384. |
1 | Information is provided as of December 31, 2016. |
2 | Officers hold office at the pleasure of the Board of Trustees or until their successors are duly elected and qualified. Each officer holds comparable positions with certain other companies of which Goldman Sachs, GSAM or an affiliate thereof is the investment adviser, administrator and/or distributor. |
31
GOLDMAN SACHS VARIABLE INSURANCE TRUST GLOBAL TRENDS ALLOCATION FUND
Goldman Sachs Variable Insurance Trust — Tax Information (Unaudited)
For the year ended December 31, 2016, 100% of the dividends paid from net investment company taxable income by the Global Trends Allocation Fund qualify for the dividends received deduction available to corporations.
32
TRUSTEES | OFFICERS | |
Ashok N. Bakhru, Chairman | James A. McNamara, President | |
Kathryn A. Cassidy | Scott M. McHugh, Treasurer, Senior Vice | |
Diana M. Daniels | President and Principal Financial Officer | |
Herbert J. Markley | Caroline L. Kraus, Secretary | |
James A. McNamara | ||
Jessica Palmer | ||
Roy W. Templin | ||
Gregory G. Weaver |
GOLDMAN, SACHS & CO.
Distributor and Transfer Agent
GOLDMAN SACHS ASSET MANAGEMENT, L.P.
Investment Adviser
200 West Street, New York
New York 10282
Visit our web site at www.GSAMFUNDS.com to obtain the most recent month-end returns.
The reports concerning the Fund included in this shareholder report may contain certain forward-looking statements about the factors that may affect the performance of the Fund in the future. These statements are based on Fund management’s predictions and expectations concerning certain future events and their expected impact on the Fund, such as performance of the economy as a whole and of specific industry sectors, changes in the levels of interest rates, the impact of developing world events, and other factors that may influence the future performance of the Fund. Management believes these forward-looking statements to be reasonable, although they are inherently uncertain and difficult to predict. Actual events may cause adjustments in portfolio management strategies from those currently expected to be employed.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the Fund voted proxies relating to portfolio securities for the 12-month period ended December 31 is available (i) without charge, upon request by calling 1-800-621-2550; and (ii) on the Securities and Exchange Commission (“SEC”) web site at http://www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the SEC’s web site at http://www.sec.gov within 60 days after the Fund’s first and third fiscal quarters. The Fund’s Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may also be obtained by calling 1-800-SEC-0330. Forms N-Q may be obtained upon request and without charge by calling 1-800-621-2550.
The website links provided are for your convenience only and are not an endorsement or recommendation by GSAM of any of these websites or the products or services offered. GSAM is not responsible for the accuracy and validity of the content of these websites.
Fund holdings and allocations shown are as of December 31, 2016 and may not be representative of future investments. Fund holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities. Current and future holdings are subject to risk.
References to indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only and do not imply that the portfolio will achieve similar results. The index composition may not reflect the manner in which a portfolio is constructed. While an adviser seeks to design a portfolio which reflects appropriate risk and return features, portfolio characteristics may deviate from those of the benchmark.
The portfolio risk management process includes an effort to monitor and manage risk, but does not imply low risk.
Shares of the Goldman Sachs VIT Funds are offered to separate accounts of participating life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Shares of the Fund are not offered directly to the general public. The variable annuity contracts and variable life insurance policies are described in the separate prospectuses issued by participating insurance companies. You should refer to those prospectuses for information about surrender charges, mortality and expense risk fees and other charges that may be assessed by participating insurance companies under the variable annuity contracts or variable life insurance policies. Such fees or charges, if any, may affect the return you may realize with respect to your investments. Ask your representative for more complete information. Please consider a fund’s objectives, risks and charges and expenses, and read the prospectus carefully before investing. The prospectus contains this and other information about the Fund.
This material is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus or summary prospectus, if applicable. Investors should consider the Fund’s objective, risks, and charges and expenses, and read the summary prospectus, if available, and/or the prospectus carefully before investing or sending money. The summary prospectus, if available, and the prospectus contain this and other information about the Fund and may be obtained from your authorized dealer or from Goldman, Sachs & Co. by calling 1-800-621-2550.
This report is prepared for the general information of contract owners and is not an offer of shares of the Goldman Sachs Variable Insurance Trust — Goldman Sachs Global Trends Allocation Fund.
© 2017 Goldman Sachs. All rights reserved.
VITNAVAR-17/80895-TMPL-02/2017-468850/12.7K
Goldman
Sachs Variable Insurance Trust
Goldman Sachs
Large Cap Value Fund
Annual Report
December 31, 2016
GOLDMAN SACHS VARIABLE INSURANCE TRUST LARGE CAP VALUE FUND
INVESTMENT OBJECTIVE
The Fund seeks long-term capital appreciation.
Portfolio Management Discussion and Analysis
Below, the Goldman Sachs Value Portfolio Management Team discusses the Goldman Sachs Variable Insurance Trust — Goldman Sachs Large Cap Value Fund’s (the “Fund”) performance and positioning for the 12-month period ended December 31, 2016 (the “Reporting Period”).
How did the Fund perform during the Reporting Period?
During the Reporting Period, the Fund’s Institutional and Service Shares generated average annual total returns of 11.55% and 11.25%, respectively. These returns compare to the 17.29% average annual total return of the Fund’s benchmark, the Russell 1000® Value Index (with dividends reinvested) (the “Russell Index”) during the same time period.
What economic and market factors most influenced the equity markets as a whole during the Reporting Period?
Representing the U.S. equity market, the S&P 500® Index gained 11.93% during the Reporting Period, despite a global rout at the start of the year, unexpected political events both domestically and abroad and a Federal Reserve (“Fed”) interest rate hike.
As the Reporting Period began in January 2016, U.S. equities were embroiled in a global rout, triggered by investor concerns about an intensifying economic slowdown in China and exacerbated by an oil price plunge. Following a December 2015 interest rate hike, the January 2016 Fed statement acknowledged these external risks and tightening financial conditions. U.S. equities stabilized in February 2016, as market sentiment improved on the more dovish tone set by global central banks. (Dovish language tends to suggest lower interest rates; opposite of hawkish.) U.S. equities were also supported by stronger economic data, rallying as fourth quarter 2015 U.S. Gross Domestic Product (“GDP”) came in above consensus expectations. In March 2016, the Fed kept interest rates on hold and surprised on the dovish side, reducing its forecast to two interest rate hikes in 2016, down from four. Along with receding global economic concerns, this helped to drive a recovery in U.S. equities. Released in March 2016, February 2016 unemployment data came in ahead of market consensus, with unemployment steady at 4.9% in spite of higher participation rates and declining underemployment.
Following the rebound in March 2016, market sentiment appeared to remain sanguine in April 2016, as oil prices rose and China economic growth concerns abated. U.S. equities fell near the end of the month as investors were disappointed by a lack of additional stimulus from the Bank of Japan and by a weaker than consensus expected first quarter U.S. GDP growth rate of 0.5%. Weaker than expected May 2016 payroll data drove expectations for a Fed interest rate hike in June 2016 temporarily lower, but subsequent hawkish Fed minutes revived market expectations. (Hawkish language tends to suggest higher interest rates; opposite of dovish.) The Fed ultimately held interest rates steady in June 2016 and signaled a slower pace of hikes, acknowledging the slowdown in the labor market. Markets were otherwise dominated in June 2016 by the U.K. referendum on membership in the European Union, popularly known as Brexit. U.S. equities sold off in the global risk-off in June 2016 following the surprise “leave” result. Markets rebounded in the latter days of the month owing to improving risk sentiment as markets digested the Brexit vote outcome and on dovish remarks from Bank of England Governor Carney.
In July 2016, U.S. equities were buoyed by strong economic data and corporate earnings, despite increased uncertainty post-Brexit. In her August 2016 Jackson Hole speech, Fed Chair Janet Yellen acknowledged the case for an interest rate hike had strengthened in the then-recent months. Along with strong labor market data and other hawkish comments from the Fed, this significantly increased the market-implied probability of an interest rate hike by year-end 2016, causing U.S. equities to sell off. In early September 2016, equities fell as the European Central Bank disappointed markets with its lack of commitment to extend quantitative easing. However, there was a subsequent rebound following the Fed’s decision in September 2016 to leave interest rates unchanged.
In October 2016, a combination of hawkish Fed commentary and mounting strong U.S. economic data led to increased market pricing for a December 2016 interest rate hike. U.S. GDP increased by 3.5% on an annualized basis for the third quarter of 2016, above consensus expectations and the strongest growth rate in two years. Following the unexpected victory of Donald Trump in the November 2016 U.S. elections, U.S. equities quickly reversed a short-lived sell-off and surged on anticipation of a pro-growth effect of Mr. Trump’s fiscal stimulus plan. The Fed raised rates 0.25% in December 2016, for the first time in a year, but as had
1
GOLDMAN SACHS VARIABLE INSURANCE TRUST LARGE CAP VALUE FUND
largely been anticipated, and set a more hawkish hike path for 2017, causing equities to decline, albeit modestly, following the announcement.
For the Reporting Period overall, energy, telecommunication services and financials were the best performing sectors in the S&P 500® Index by a wide margin. Industrials, materials, utilities and information technology also posted double-digit gains that outpaced the S&P 500® Index during the Reporting Period. The weakest performing sectors in the S&P 500® Index were real estate and health care, the only two to post negative absolute returns, followed by consumer staples and consumer discretionary, which were comparatively weak but generated positive returns during the Reporting Period.
Within the U.S. equity market, there was significant disparity in performance not only among sectors but also among the various capitalization and style segments. While all capitalization segments posted positive returns, small-cap stocks, as measured by the Russell 2000® Index, performed best, followed at some distance by mid-cap stocks, as measured by the Russell Midcap® Index, and then, large-cap stocks, as measured by the Russell 1000® Index. From a style perspective, value-oriented stocks significantly outpaced growth-oriented stocks across the capitalization spectrum. (All as measured by the Russell Investments indices.)
What key factors were responsible for the Fund’s performance during the Reporting Period?
While the Fund posted strong absolute gains, it underperformed the Russell Index on a relative basis. Stock selection had the greatest effect on the Fund’s performance relative to the Russell Index during the Reporting Period.
Which equity market sectors most significantly affected Fund performance?
Stock selection in the health care, industrials and financials sectors detracted most from the Fund’s relative results. Only partially offsetting these detractors was stock selection in the energy, real estate and consumer staples sectors, which contributed positively. Having underweighted allocations to real estate and consumer staples, which each lagged the Russell Index during the Reporting Period, also helped.
Which stocks detracted significantly from the Fund’s performance during the Reporting Period?
Detracting most from the Fund’s results relative to the Russell Index were positions in global pharmaceutical company Allergan, U.S.-based pharmaceutical company Vertex Pharmaceuticals and global insurance company Prudential Financial.
During the Reporting Period, Allergan’s shares were negatively affected when its announced merger with Pfizer fell through due to potential regulatory risk. Following the U.S. presidential election results, we took the opportunity to increase the Fund’s position in the company, as we continue to believe Allergan is a high quality business. At the end of the Reporting Period, the company continued to trade at an attractive valuation and had meaningful pipeline opportunities to support long-term returns. We also believed Allergan’s growth outlook remained superior to that of most large-cap pharmaceutical companies, and its proven management team should continue to engage in value accretive deals, in our view. Additionally, the company recently sold its generic business to Teva Pharmaceuticals at what we consider to be an attractive valuation, which should allow Allergan the flexibility to pay down debt, return capital to shareholders and continue to invest in its pipeline.
Vertex Pharmaceuticals is primarily focused on treatments for cystic fibrosis. The majority of its underperformance of the Russell Index came as investors began to raise concerns about a key pipeline drug that is widely expected to expand the company’s penetration into the cystic fibrosis market, causing downward pressure on the company’s stock. At the end of the Reporting Period, we believed these concerns were transitory and that Vertex Pharmaceuticals has the potential to expand its reach into the cystic fibrosis market through its two next-generation pipeline drugs. Additional concerns by the market regarding the company’s anticipated 2017 guidance also contributed to the stock’s decline. Despite the pullback during the Reporting Period, we believe the company’s cystic fibrosis products have significant upside potential and that the stock was trading at the end of the Reporting Period at a compelling valuation relative to its peer group.
Prudential Financial was also a top detractor from the Fund’s relative performance during the Reporting Period. While its fourth quarter 2015 earnings results were broadly in line with market expectations, the Fed’s more dovish comments and negative sentiment surrounding an impending Department of Labor fiduciary ruling pressured the stock’s share price during the first quarter of 2016. Strict to our sell discipline, as key points of our investment thesis became challenged, we sold the Fund’s position in the stock during the second quarter of 2016 in favor of higher conviction names.
What were some of the Fund’s best-performing individual stocks?
Relative to the Russell Index, the Fund benefited most from positions in global financial services company Bank of America, oil and natural gas exploration and production company Southwestern Energy and life insurance company Lincoln National.
2
GOLDMAN SACHS VARIABLE INSURANCE TRUST LARGE CAP VALUE FUND
Bank of America’s stock performance was driven in part by a positive fiscal second quarter earnings report. The company announced an additional $3.3 billion in cost reductions by 2018, bringing its total cost reduction program to $53.0 billion. Additionally, its shares rose sharply following the U.S. presidential election, as sentiment around the financials sector in general, and banks in particular, improved. Its stock price continued to strengthen after the company reported fiscal fourth quarter revenue and earnings that exceeded consensus expectations, largely due to improved trading and investment banking growth. At the end of the Reporting Period, we continued to believe shares of Bank of America were attractively valued, given rising U.S. interest rates and an improving U.S. economy. In our view, its management is committed to improving execution, growing margins and returning capital to shareholders. However, in light of its outperformance, we slightly moderated the Fund’s position in Bank of America to better reflect, in our view, its risk/return profile.
Southwestern Energy was also a top contributor to the Fund’s relative performance during the Reporting Period. Its stock performance was driven primarily by a rise in natural gas prices during the first half of the Reporting Period. Sentiment on natural gas and on natural gas-related companies improved due to a better supply and demand outlook for the natural gas market. Although its stock price faced pressure during the fourth quarter of 2016 due to weaker natural gas prices, we continued to see upside potential for Southwestern Energy given what we view as the company’s high quality assets, specifically in the Marcellus, Fayetteville and Utica Shales. At the end of the Reporting Period, we remained encouraged by its management team’s focus on cutting costs and divesting assets in an effort to maintain an appropriate level of debt and by its commitment to capital efficiency amidst a more challenging macro environment.
We opportunistically initiated a position in Lincoln National following downward pressure from Brexit. Its shares subsequently rose following the U.S. presidential election, as sentiment around the regulatory environment improved and interest rates rose. In addition, its share price strengthened after the company reported strong third quarter 2016 earnings that exceeded market expectations. At the end of the Reporting Period, we maintained a constructive view on Lincoln National’s strategy to shift sales to lower-risk products and on its strong risk management practices, which we believe could result in continued market confidence in its return on equity sustainability. Despite the recent rally, we remained positive at the end of the Reporting Period on the company’s risk/reward profile given its management’s execution and what we believe to be the likelihood of rising interest rates.
How did the Fund use derivatives and similar instruments during the Reporting Period?
During the Reporting Period, we did not use derivatives as part of an active management strategy.
Did the Fund make any significant purchases or sales during the Reporting Period?
During the second quarter of 2016, we initiated a number of positions in what we considered to be high quality, defensible businesses trading at attractive valuations. This included a position in Verizon Communications, a wireless communications provider. In our view, the company is a high quality franchise with solid new product revenues and an improving free cash flow profile. Additionally, we believe Verizon has some of the best assets in the industry, and we were positive, at the time of purchase, on its recent customer growth. We believe that going forward Verizon should have the potential to experience healthy growth should its management team continue to invest and focus on its strong wireless business.
We also initiated a position during the second quarter of 2016 in ConocoPhillips, an oil and natural gas exploration and production company. We believe ConocoPhillips is a high quality company that has the ability to maintain production despite capital expenditure reductions.
In addition to those sales already mentioned, we sold the Fund’s position in EMC. We believed EMC was one of the best positioned information technology hardware vendors in the industry. We felt the recovery in enterprise spending would benefit EMC, as companies increasingly focus on both storage spending and virtualization. Finally, we believed the company was attractively valued given its strong free cash flow generation and above-average growth prospects relative to its peers. Our thesis was validated when it was announced that EMC would be acquired by Dell for a healthy premium. Following substantial appreciation in the stock, we exited the position in favor of other opportunities with more upside potential.
We sold the Fund’s position in AT&T, a telecommunications company. We had initiated a position in the stock because we were attracted to its above-market-average dividend yield, potential synergies from its acquisition of DirecTV and the potential for free cash flow generation to improve as a result of lower capital expenditures. Strict to our sell discipline, we exited the position after the stock rallied and reached our price target.
3
GOLDMAN SACHS VARIABLE INSURANCE TRUST LARGE CAP VALUE FUND
Were there any notable changes in the Fund’s weightings during the Reporting Period?
In constructing the Fund’s portfolio, we focus on picking stocks rather than on making industry or sector bets. We seek to outpace the Russell Index by overweighting stocks that we expect to outperform and underweighting those that we think may lag. Consequently, changes in its sector weights are generally the direct result of individual stock selection or of stock appreciation or depreciation. That said, during the Reporting Period, the Fund’s exposure to industrials, materials and energy increased compared to the Russell Index. The Fund’s allocations compared to the Russell Index in information technology, consumer staples and utilities decreased.
How was the Fund positioned relative to its benchmark index at the end of the Reporting Period?
At the end of December 2016, the Fund had overweighted positions relative to the Russell Index in the consumer discretionary, health care and information technology sectors. On the same date, the Fund had underweighted positions compared to the Russell Index in utilities, real estate and consumer staples and was rather neutrally weighted to the Russell Index in financials, energy, industrials, telecommunication services and materials.
Were there any changes to the Fund’s portfolio management team during the Reporting Period?
Effective June 30, 2016, Andrew Braun, Managing Director and Portfolio Manager on the U.S. Value Equity Team for the Mid and Large Cap Value strategies, left the firm. For the Fund, John Arege, Managing Director and Portfolio Manager, has assumed Andy’s responsibilities in the financials (excluding REITs) industry. He will retain his existing coverage in the insurance and energy market segment and has transitioned his responsibilities in industrials to Kevin Martens, Vice President and Portfolio Manager. John will continue as Co-lead Portfolio Manager along with Sean Gallagher, Managing Director and Chief Investment Officer.
The U.S. Value Equity Team continues to be led by Sean Gallagher. Sean has 24 years of investing experience and has been the Head of the U.S. Value Equity Team and Chief Investment Officer since 2009. He joined Goldman Sachs in 2000. Sean continues to lead a well-resourced and talented team of investment professionals. The U.S. Value Equity Team consists of more than 25 investment professionals, including 15 portfolio managers averaging more than 19 years of investment experience.
What is the Fund’s tactical view and strategy for the months ahead?
As we enter 2017, we see an increasingly positive backdrop for the U.S. equity markets, as the U.S. transitions to what many believe will be a pro-growth environment. In our view, if realized, most companies could benefit from aggressive fiscal policy, including lower taxes and increased spending, and a less restrictive regulatory environment. In the near term, however, uncertainty around policy specifics and timing could increase volatility. While our aggregate return expectations are lower than in recent years given what we consider to be relatively full valuations, we believe U.S. equities still look more attractive than most other asset classes. Accordingly, we favor high quality, domestically-oriented companies with what we feel are strong management teams. Additionally, after several years of thematic-driven markets, we are excited about the prospect of increasing dispersion at the stock level. We believe an active approach is poised to benefit in this type of environment, as companies differentiate themselves on earnings growth and valuation.
Regardless of market direction, our fundamental, bottom-up stock selection continues to drive our process, rather than headlines or sentiment. We maintain high conviction in the companies the Fund owns and believe they have the potential to outperform relative to the broader market regardless of economic growth conditions. We continue to focus on undervalued companies that we believe have comparatively greater control of their own destiny, such as innovators with differentiated products, companies with low cost structures or companies that have been investing in their own businesses and may be poised to gain market share. We maintain our discipline in identifying companies with what we believe to be strong or improving balance sheets, led by quality management teams and trading at discounted valuations. We remain focused on the long-term performance of the Fund.
4
GOLDMAN SACHS VARIABLE INSURANCE TRUST LARGE CAP VALUE FUND
Index Definitions
The Russell 1000® Value Index (with dividends reinvested) is an unmanaged market capitalization weighted index of the 1000 largest U.S. companies with lower price-to-book ratios and lower forecasted growth values. The figures for the index do not include any deduction for fees, expenses or taxes. It is not possible to invest directly in an index.
The Russell 2000® Index (with dividends reinvested) is an unmanaged index of common stock prices that measures the performance of the 2000 smallest companies in the Russell 3000® Index. The figures for the index do not include any deduction for fees, expenses or taxes. It is not possible to invest directly in an index.
The S&P 500® Index (with dividends reinvested) is the Standard & Poor’s composite index of 500 stocks, an unmanaged index of common stock prices. The figures for the index do not include any deduction for fees, expenses or taxes. It is not possible to invest directly in an index.
The Russell Midcap® Index measures the performance of the 800 smallest companies in the Russell 1000® Index, which represents approximately 25% of the total market capitalization of the Russell 1000 Index. It is not possible to invest directly in an index.
The Russell 1000® Index measures the performance of the 1,000 largest companies in the Russell 3000® Index, which represents approximately 92% of the total market capitalization of the Russell 3000® Index. It is not possible to invest directly in an index.
5
FUND BASICS
Large Cap Value Fund
as of December 31, 2016
STANDARDIZED TOTAL RETURNS1
For the period ended 12/31/16 | One Year | Five Years | Ten Years | Since Inception | Inception Date | |||||||||||||
Institutional | 11.55 | % | 13.82 | % | 4.50 | % | 4.93 | % | 1/12/98 | |||||||||
Service | 11.25 | 13.54 | N/A | 3.94 | 7/24/07 |
1 | The Standardized Total Returns are average annual total returns as of the most recent calendar quarter-end. They assume reinvestment of all distributions at net asset value (“NAV”). Because Institutional Shares and Service Shares do not involve a sales charge, such a charge is not applied to their Standardized Total Returns. |
Total return figures in the above chart represent past performance and do not indicate future results, which will vary. The investment return and principal value of an investment will fluctuate and, therefore, an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the total return figures in the above chart. Please visit www.GSAMFUNDS.com to obtain the most recent month-end returns. Performance reflects fee waivers and/or expense limitations in effect during the periods shown. In their absence, performance would be reduced.
EXPENSE RATIOS2
Net Expense Ratio (Current) | Gross Expense Ratio (Before Waivers) | |||||||
Institutional | 0.74 | % | 0.81 | % | ||||
Service | 0.99 | 1.06 |
2 | The expense ratios of the Fund, both current (net of any fee waivers and/or expense limitations) and before waivers (gross of any fee waivers and/or expense limitations) are as set forth above according to the most recent publicly available Prospectuses for the Fund and may differ from the expense ratios disclosed in the Financial Highlights in this report. Pursuant to a contractual arrangement, the Fund’s fee waivers and/or expense limitations will remain in place through at least April 29, 2017, and prior to such date, the Investment Adviser may not terminate the arrangements without the approval of the Fund’s Board of Trustees. If these arrangements are discontinued in the future, the expense ratios may change without shareholder approval. |
TOP TEN HOLDINGS AS OF 12/31/163
Holding | % of Net Assets | Line of Business | ||||
Wells Fargo & Co. | 5.4% | Banks | ||||
Bank of America Corp. | 5.1 | Banks | ||||
General Electric Co. | 3.9 | Capital Goods | ||||
JPMorgan Chase & Co. | 3.7 | Banks | ||||
Verizon Communications, Inc. | 3.6 | Telecommunication Services | ||||
Exxon Mobil Corp. | 2.8 | Energy | ||||
ConocoPhillips | 2.8 | Energy | ||||
Pfizer, Inc. | 2.6 | Pharmaceuticals, Biotechnology & Life Sciences | ||||
American Express Co. | 2.3 | Diversified Financials | ||||
Allergan plc | 2.3 | Pharmaceuticals, Biotechnology & Life Sciences |
3 | The top 10 holdings may not be representative of the Fund’s future investments. |
6
FUND BASICS
FUND vs. BENCHMARK SECTOR ALLOCATIONS4
As of December 31, 2016
4 | The Fund is actively managed and, as such, its composition may differ over time. Consequently, the Fund’s overall sector allocations may differ from percentages contained in the graph above. The graph categorizes investments using Global Industry Classification Standard (“GICS”); however, the sector classifications used by the portfolio management team may differ from GICS. The percentage shown for each investment category reflects the value of investments in that category as a percentage of market value. Underlying sector allocations of exchange traded funds and investment companies held by the Fund are not reflected in the graph above. The graph depicts the Fund’s investments but may not represent the Fund’s market exposure due to the exclusion of certain derivatives, if any, as listed in the Additional Investment Information section of the Schedule of Investments. |
7
GOLDMAN SACHS VARIABLE INSURANCE TRUST LARGE CAP VALUE FUND
Performance Summary
December 31, 2016
The following graph shows the value, as of December 31, 2016, of a $10,000 investment made on January 1, 2007 in the Institutional Shares at NAV. For comparative purposes, the performance of the Fund’s benchmark, the Russell 1000® Value Index (with distributions reinvested), is shown. This performance data represents past performance and should not be considered indicative of future performance, which will fluctuate with changes in market conditions. These performance fluctuations may cause an investor’s shares, when redeemed, to be worth more or less than their original cost. Performance reflects Fund level expenses but does not reflect fees and expenses associated with any variable annuity contract or variable life insurance policy that uses the Fund as an investment option for any contract or policy. Had performance reflected all of those fees and expenses, performance would have been reduced. Performance reflects applicable fee waivers and/or expense limitations in effect during the periods shown, and in their absence, performance would be reduced. Performance of Service Shares will vary from Institutional Shares due to differences in class specific fees. In addition to the Investment Adviser’s decisions regarding issuer/industry investment selection and allocation, other factors may affect Fund performance. These factors include, but are not limited to, Fund operating fees and expenses, portfolio turnover, and subscription and redemption cash flows affecting the Fund.
Large Cap Value Fund’s 10 Year Performance
Performance of a $10,000 investment, with distributions reinvested, from January 1, 2007 through December 31, 2016.
Average Annual Total Return through December 31, 2016 | One Year | Five Years | Ten Years | Since Inception | ||||
Institutional (Commenced January 12, 1998) | 11.55% | 13.82% | 4.50% | 4.93% | ||||
Service (Commenced July 24, 2007) | 11.25% | 13.54% | N/A | 3.94% |
8
GOLDMAN SACHS VARIABLE INSURANCE TRUST LARGE CAP VALUE FUND
Schedule of Investments
December 31, 2016
Shares | Description | Value | ||||||
Common Stocks – 99.7% | ||||||||
| Automobiles & Components – 0.8% |
| ||||||
168,645 | General Motors Co. | $ | 5,875,592 | |||||
|
| |||||||
| Banks – 14.2% |
| ||||||
1,785,624 | Bank of America Corp. | 39,462,290 | ||||||
336,695 | JPMorgan Chase & Co. | 29,053,412 | ||||||
759,088 | Wells Fargo & Co. | 41,833,340 | ||||||
|
| |||||||
110,349,042 | ||||||||
|
| |||||||
| Capital Goods – 8.2% |
| ||||||
125,535 | Caterpillar, Inc. | 11,642,116 | ||||||
160,753 | Eaton Corp. plc | 10,784,919 | ||||||
117,945 | Fluor Corp. | 6,194,471 | ||||||
952,974 | General Electric Co. | 30,113,978 | ||||||
94,933 | Textron, Inc. | 4,609,947 | ||||||
|
| |||||||
63,345,431 | ||||||||
|
| |||||||
| Diversified Financials – 7.8% |
| ||||||
242,529 | American Express Co. | 17,966,548 | ||||||
111,686 | Capital One Financial Corp. | 9,743,487 | ||||||
422,143 | Deutsche Bank AG (Registered)* | 7,640,788 | ||||||
359,031 | Invesco Ltd. | 10,893,001 | ||||||
343,098 | Morgan Stanley | 14,495,890 | ||||||
|
| |||||||
60,739,714 | ||||||||
|
| |||||||
| Energy – 13.3% |
| ||||||
377,070 | BP plc ADR | 14,094,876 | ||||||
138,193 | Chevron Corp. | 16,265,316 | ||||||
426,713 | ConocoPhillips | 21,395,390 | ||||||
238,560 | Exxon Mobil Corp. | 21,532,426 | ||||||
279,437 | National Oilwell Varco, Inc. | 10,462,121 | ||||||
212,351 | Range Resources Corp. | 7,296,380 | ||||||
1,080,940 | Southwestern Energy Co.* | 11,695,771 | ||||||
|
| |||||||
102,742,280 | ||||||||
|
| |||||||
| Food & Staples Retailing – 1.2% |
| ||||||
140,128 | Kroger Co. (The) | 4,835,817 | ||||||
154,647 | Whole Foods Market, Inc. | 4,756,942 | ||||||
|
| |||||||
9,592,759 | ||||||||
|
| |||||||
| Food, Beverage & Tobacco – 3.5% |
| ||||||
117,568 | Campbell Soup Co. | 7,109,337 | ||||||
61,650 | General Mills, Inc. | 3,808,120 | ||||||
52,046 | Kellogg Co. | 3,836,311 | ||||||
137,969 | Mondelez International, Inc. Class A | 6,116,166 | ||||||
113,622 | Reynolds American, Inc. | 6,367,377 | ||||||
|
| |||||||
27,237,311 | ||||||||
|
| |||||||
| Health Care Equipment & Services – 4.0% |
| ||||||
411,151 | Abbott Laboratories | 15,792,310 | ||||||
54,652 | Aetna, Inc. | 6,777,394 | ||||||
21,967 | Humana, Inc. | 4,481,927 | ||||||
53,311 | Medtronic plc | 3,797,343 | ||||||
|
| |||||||
30,848,974 | ||||||||
|
| |||||||
Common Stocks – (continued) | ||||||||
| Household & Personal Products – 2.1% |
| ||||||
45,046 | Kimberly-Clark Corp. | $ | 5,140,649 | |||||
135,959 | Procter & Gamble Co. (The) | 11,431,433 | ||||||
|
| |||||||
16,572,082 | ||||||||
|
| |||||||
| Insurance – 4.2% |
| ||||||
163,774 | Hartford Financial Services Group, Inc. (The) | 7,803,831 | ||||||
163,433 | Lincoln National Corp. | 10,830,705 | ||||||
259,408 | MetLife, Inc. | 13,979,497 | ||||||
|
| |||||||
32,614,033 | ||||||||
|
| |||||||
| Materials – 3.2% |
| ||||||
94,263 | Ball Corp. | 7,076,323 | ||||||
189,418 | E.I. du Pont de Nemours & Co. | 13,903,281 | ||||||
308,178 | Freeport-McMoRan, Inc.* | 4,064,868 | ||||||
|
| |||||||
25,044,472 | ||||||||
|
| |||||||
| Media – 3.4% |
| ||||||
112,152 | Comcast Corp. Class A | 7,744,096 | ||||||
222,852 | DISH Network Corp. Class A* | 12,909,816 | ||||||
152,339 | Viacom, Inc. Class B | 5,347,099 | ||||||
|
| |||||||
26,001,011 | ||||||||
|
| |||||||
| Pharmaceuticals, Biotechnology & Life Sciences – 8.5% |
| ||||||
84,732 | Allergan plc* | 17,794,568 | ||||||
100,145 | Celgene Corp.* | 11,591,784 | ||||||
58,077 | Johnson & Johnson | 6,691,051 | ||||||
621,492 | Pfizer, Inc. | 20,186,060 | ||||||
129,481 | Vertex Pharmaceuticals, Inc.* | 9,538,865 | ||||||
|
| |||||||
65,802,328 | ||||||||
|
| |||||||
| Real Estate Investment Trusts – 2.4% |
| ||||||
51,599 | AvalonBay Communities, Inc. | 9,140,763 | ||||||
91,284 | Vornado Realty Trust | 9,527,311 | ||||||
|
| |||||||
18,668,074 | ||||||||
|
| |||||||
| Retailing – 2.9% |
| ||||||
102,294 | Dollar General Corp. | 7,576,916 | ||||||
28,871 | Home Depot, Inc. (The) | 3,871,024 | ||||||
107,070 | L Brands, Inc. | 7,049,489 | ||||||
50,686 | TJX Cos., Inc. (The) | 3,808,039 | ||||||
|
| |||||||
22,305,468 | ||||||||
|
| |||||||
| Semiconductors & Semiconductor Equipment – 1.5% |
| ||||||
318,517 | Intel Corp. | 11,552,611 | ||||||
|
| |||||||
| Software & Services – 5.8% |
| ||||||
16,917 | Alphabet, Inc. Class A* | 13,405,877 | ||||||
131,491 | eBay, Inc.* | 3,903,968 | ||||||
434,106 | Oracle Corp. | 16,691,376 | ||||||
242,432 | Symantec Corp. | 5,791,700 | ||||||
65,413 | Visa, Inc. Class A | 5,103,522 | ||||||
|
| |||||||
44,896,443 | ||||||||
|
|
The accompanying notes are an integral part of these financial statements. | 9 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST LARGE CAP VALUE FUND
Schedule of Investments (continued)
December 31, 2016
Shares | Description | Value | ||||||
Common Stocks – (continued) | ||||||||
| Technology Hardware & Equipment – 3.6% |
| ||||||
34,474 | Apple, Inc. | $ | 3,992,779 | |||||
474,142 | Cisco Systems, Inc. | 14,328,571 | ||||||
238,039 | Corning, Inc. | 5,777,207 | ||||||
59,269 | TE Connectivity Ltd. | 4,106,156 | ||||||
|
| |||||||
28,204,713 | ||||||||
|
| |||||||
| Telecommunication Services – 4.1% |
| ||||||
66,788 | Level 3 Communications, Inc.* | 3,764,172 | ||||||
529,612 | Verizon Communications, Inc. | 28,270,688 | ||||||
|
| |||||||
32,034,860 | ||||||||
|
| |||||||
| Transportation – 2.1% |
| ||||||
160,157 | Union Pacific Corp. | 16,605,078 | ||||||
|
| |||||||
| Utilities – 2.9% |
| ||||||
325,675 | FirstEnergy Corp. | 10,086,155 | ||||||
203,044 | PG&E Corp. | 12,338,984 | ||||||
|
| |||||||
22,425,139 | ||||||||
|
| |||||||
TOTAL COMMON STOCKS | ||||||||
(Cost $649,482,887) | $ | 773,457,415 | ||||||
|
|
Shares | Distribution Rate | Value | ||||||
Investment Company(a)(b) – 0.0% | ||||||||
Goldman Sachs Financial Square Government Fund — Institutional Shares |
| |||||||
944 | 0.455 | % | $ | 944 | ||||
(Cost $944) | ||||||||
| ||||||||
TOTAL INVESTMENTS – 99.7% | ||||||||
(Cost $649,483,831) | $ | 773,458,359 | ||||||
| ||||||||
OTHER ASSETS IN EXCESS OF LIABILITIES – 0.3% |
| 1,969,635 | ||||||
| ||||||||
NET ASSETS – 100.0% | $ | 775,427,994 | ||||||
|
The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. | ||
* | Non-income producing security. | |
(a) | Represents an affiliated issuer. | |
(b) | Variable rate security. Interest rate or distribution rate disclosed is that which is in effect on December 31, 2016. |
Investment Abbreviation: | ||
ADR | —American Depositary Receipt |
10 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST LARGE CAP VALUE FUND
Statement of Assets and Liabilities
December 31, 2016
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $649,482,887) | $ | 773,457,415 | ||
Investments in affiliated issuers, at value (cost $944) | 944 | |||
Cash | 2,352,382 | |||
Receivables: | ||||
Dividends | 662,635 | |||
Reimbursement from investment adviser | 49,715 | |||
Fund shares sold | 43,489 | |||
Other assets | 463 | |||
Total assets | 776,567,043 | |||
Liabilities: | ||||
Payables: | ||||
Management fees | 477,629 | |||
Fund shares redeemed | 387,837 | |||
Distribution and Service fees and Transfer Agency fees | 127,126 | |||
Investments purchased | 944 | |||
Accrued expenses | 145,513 | |||
Total liabilities | 1,139,049 | |||
Net Assets: | ||||
Paid-in capital | 659,311,789 | |||
Undistributed net investment income | 624,847 | |||
Accumulated net realized loss | (8,483,170 | ) | ||
Net unrealized gain | 123,974,528 | |||
NET ASSETS | $ | 775,427,994 | ||
Net Assets: | ||||
Institutional | $ | 243,875,139 | ||
Service | 531,552,855 | |||
Total Net Assets | $ | 775,427,994 | ||
Shares outstanding $0.001 par value (unlimited shares authorized): | ||||
Institutional | 23,992,308 | |||
Service | 52,305,487 | |||
Net asset value, offering and redemption price per share: | ||||
Institutional | $10.16 | |||
Service | 10.16 |
The accompanying notes are an integral part of these financial statements. | 11 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST LARGE CAP VALUE FUND
Statement of Operations
For the Fiscal Year Ended December 31, 2016
Investment income: | ||||
Dividends — unaffiliated issuers | $ | 22,199,381 | ||
Dividends — affiliated issuers | 7,335 | |||
Total investment income | 22,206,716 | |||
Expenses: | ||||
Management fees | 6,289,307 | |||
Distribution and Service fees — Service Shares | 1,450,099 | |||
Transfer Agency fees(a) | 167,700 | |||
Printing and mailing costs | 154,587 | |||
Professional fees | 89,914 | |||
Custody, accounting and administrative services | 70,583 | |||
Trustee fees | 17,458 | |||
Other | 28,549 | |||
Total expenses | 8,268,197 | |||
Less — expense reductions | (603,586 | ) | ||
Net expenses | 7,664,611 | |||
NET INVESTMENT INCOME | 14,542,105 | |||
Realized and unrealized gain (loss): | ||||
Net realized gain from investments (including commissions recaptured of $80,134) | 3,065,360 | |||
Net change in unrealized gain on investments | 69,964,908 | |||
Net realized and unrealized gain | 73,030,268 | |||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 87,572,373 |
(a) Institutional and Service Shares incurred Transfer Agency fees of $51,702 and $115,998, respectively.
12 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST LARGE CAP VALUE FUND
Statements of Changes in Net Assets
For the Fiscal Year Ended | For the Fiscal Year Ended December 31, 2015 | |||||||
From operations: | ||||||||
Net investment income | $ | 14,542,105 | $ | 11,690,140 | ||||
Net realized gain | 3,065,360 | 95,458,298 | ||||||
Net change in unrealized gain (loss) | 69,964,908 | (148,127,736 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 87,572,373 | (40,979,298 | ) | |||||
Distributions to shareholders: | ||||||||
From net investment income | ||||||||
Institutional Shares | (5,067,653 | ) | (4,277,987 | ) | ||||
Service Shares | (9,637,716 | ) | (7,701,841 | ) | ||||
From net realized gains | ||||||||
Institutional Shares | (2,433,036 | ) | (34,533,023 | ) | ||||
Service Shares | (5,324,082 | ) | (75,483,763 | ) | ||||
Total distributions to shareholders | (22,462,487 | ) | (121,996,614 | ) | ||||
From share transactions: | ||||||||
Proceeds from sales of shares | 46,845,142 | 81,069,087 | ||||||
Reinvestment of distributions | 22,462,487 | 121,996,614 | ||||||
Cost of shares redeemed | (249,588,098 | ) | (168,775,231 | ) | ||||
Net increase (decrease) in net assets resulting from share transactions | (180,280,469 | ) | 34,290,470 | |||||
TOTAL DECREASE | (115,170,583 | ) | (128,685,442 | ) | ||||
Net assets: | ||||||||
Beginning of year | 890,598,577 | 1,019,284,019 | ||||||
End of year | $ | 775,427,994 | $ | 890,598,577 | ||||
Undistributed net investment income | $ | 624,847 | $ | 1,299,901 |
The accompanying notes are an integral part of these financial statements. | 13 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST LARGE CAP VALUE FUND
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Year
Income (loss) from investment operations | Distributions to shareholders | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year - Share Class | Net asset value, beginning of year | Net investment income(a) | Net realized and unrealized gain (loss) | Total from investment operations | From net investment income | From net realized gains | Total distributions | Net asset value, end of year | Total return(b) | Net assets, (in 000s) | Ratio of net expenses to average net assets | Ratio of total expenses to average net assets | Ratio of net investment income to average net assets | Portfolio turnover rate(c) | ||||||||||||||||||||||||||||||||||||||||||
FOR THE FISCAL YEARS ENDED DECEMBER 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2016 - Institutional | $ | 9.39 | $ | 0.18 | $ | 0.91 | $ | 1.09 | $ | (0.22 | ) | $ | (0.10 | ) | $ | (0.32 | ) | $ | 10.16 | 11.55 | % | $ | 243,875 | 0.74 | % | 0.81 | % | 1.91 | % | 130 | % | |||||||||||||||||||||||||
2016 - Service | 9.39 | 0.16 | 0.90 | 1.06 | (0.19 | ) | (0.10 | ) | (0.29 | ) | 10.16 | 11.25 | 531,553 | 0.99 | 1.06 | 1.66 | 130 | |||||||||||||||||||||||||||||||||||||||
2015 - Institutional | 11.39 | 0.15 | (0.67 | ) | (0.52 | ) | (0.16 | ) | (1.32 | ) | (1.48 | ) | 9.39 | (4.41 | ) | 279,910 | 0.74 | 0.81 | 1.38 | 83 | ||||||||||||||||||||||||||||||||||||
2015 - Service | 11.38 | 0.13 | (0.67 | ) | (0.54 | ) | (0.13 | ) | (1.32 | ) | (1.45 | ) | 9.39 | (4.58 | ) | 610,689 | 0.99 | 1.06 | 1.13 | 83 | ||||||||||||||||||||||||||||||||||||
2014 - Institutional | 12.59 | 0.16 | 1.38 | 1.54 | (0.19 | ) | (2.55 | ) | (2.74 | ) | 11.39 | 12.94 | 326,543 | 0.75 | 0.80 | 1.21 | 72 | |||||||||||||||||||||||||||||||||||||||
2014 - Service | 12.58 | 0.13 | 1.37 | 1.50 | (0.15 | ) | (2.55 | ) | (2.70 | ) | 11.38 | 12.61 | 692,741 | 1.00 | 1.05 | 0.96 | 72 | |||||||||||||||||||||||||||||||||||||||
2013 - Institutional | 10.76 | 0.14 | 3.39 | 3.53 | (0.16 | ) | (1.54 | ) | (1.70 | ) | 12.59 | 33.23 | 370,241 | 0.75 | 0.79 | 1.15 | 86 | |||||||||||||||||||||||||||||||||||||||
2013 - Service | 10.75 | 0.11 | 3.39 | 3.50 | (0.13 | ) | (1.54 | ) | (1.67 | ) | 12.58 | 32.93 | 792,553 | 1.00 | 1.04 | 0.91 | 86 | |||||||||||||||||||||||||||||||||||||||
2012 - Institutional | 9.39 | 0.15 | 1.64 | 1.79 | (0.15 | ) | (0.27 | ) | (0.42 | ) | 10.76 | 19.07 | 351,677 | 0.77 | 0.78 | 1.40 | 120 | |||||||||||||||||||||||||||||||||||||||
2012 - Service | 9.38 | 0.12 | 1.64 | 1.76 | (0.12 | ) | (0.27 | ) | (0.39 | ) | 10.75 | 18.77 | 734,577 | 1.02 | 1.03 | 1.15 | 120 |
(a) | Calculated based on the average shares outstanding methodology. |
(b) | Assumes investment at the net asset value at the beginning of the year, reinvestment of all distributions, and a complete redemption of the investment at the net asset value at the end of the year. |
(c) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short term investments. If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
The accompanying notes are an integral part of these financial statements. | 14 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST LARGE CAP VALUE FUND
Notes to Financial Statements
December 31, 2016
1. ORGANIZATION
Goldman Sachs Variable Insurance Trust (the “Trust” or “VIT”) is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company. The Trust includes the Goldman Sachs Large Cap Value Fund (the “Fund”). The Fund is a diversified portfolio under the Act offering two classes of shares — Institutional and Service Shares. Shares of the Trust are offered to separate accounts of participating life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies.
Goldman Sachs Asset Management, L.P. (“GSAM”), an affiliate of Goldman, Sachs & Co. (“Goldman Sachs”), serves as investment adviser to the Fund pursuant to a management agreement (the “Agreement”) with the Trust.
2. SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and require management to make estimates and assumptions that may affect the reported amounts and disclosures. Actual results may differ from those estimates and assumptions.
A. Investment Valuation — The Fund’s valuation policy is to value investments at fair value.
B. Investment Income and Investments — Investment income includes interest income, dividend income, net of any foreign withholding taxes, less any amounts reclaimable, and securities lending income. Interest income is accrued daily and adjusted for amortization of premiums and accretion of discounts. Dividend income is recognized on ex-dividend date or, for certain foreign securities, as soon as such information is obtained subsequent to the ex-dividend date. Investment transactions are reflected on trade date. Realized gains and losses are calculated using identified cost. Investment transactions are recorded on the following business day for daily net asset value (“NAV”) calculations. Any foreign capital gains tax is accrued daily based upon net unrealized gains, and is payable upon sale of such investments. Distributions received from the Fund’s investments in United States (“U.S.”) real estate investment trusts (“REITs”) may be characterized as ordinary income, net capital gain or a return of capital. A return of capital is recorded by the Fund as a reduction to the cost basis of the REIT.
C. Class Allocations and Expenses — Investment income, realized and unrealized gain (loss), and non-class specific expenses of the Fund are allocated daily based upon the proportion of net assets of each class. Non-class specific expenses directly incurred by the Fund are charged to the Fund, while such expenses incurred by the Trust are allocated across the Fund on a straight-line and/or pro-rata basis depending upon the nature of the expenses. Class specific expenses, where applicable, are borne by the respective share classes and include Distribution and Service and Transfer Agency fees.
D. Federal Taxes and Distributions to Shareholders — It is the Fund’s policy to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Code”), applicable to regulated investment companies (mutual funds) and to distribute each year substantially all of its investment company taxable income and capital gains to its shareholders. Accordingly, the Fund is not required to make any provisions for the payment of federal income tax. Distributions to shareholders are recorded on the ex-dividend date. Income and capital gains distributions, if any, are declared and paid annually.
Net capital losses are carried forward to future fiscal years and may be used to the extent allowed by the Code to offset any future capital gains. Losses that are carried forward will retain their character as either short-term or long-term capital losses. Utilization of capital loss carryforwards will reduce the requirement of future capital gains distributions.
The characterization of distributions to shareholders for financial reporting purposes is determined in accordance with federal income tax rules, which may differ from GAAP. The source of the Fund’s distributions may be shown in the accompanying financial statements as either from net investment income, net realized gain or capital. Certain components of the Fund’s net assets on the Statement of Assets and Liabilities reflect permanent GAAP/tax differences based on the appropriate tax character.
E. Commission Recapture — GSAM, on behalf of certain Funds, may direct portfolio trades, subject to seeking best execution, to various brokers who have agreed to rebate a portion of the commissions generated. Such rebates are made directly to the Fund as cash payments and are included in net realized gain (loss) from investments on the Statement of Operations.
15
GOLDMAN SACHS VARIABLE INSURANCE TRUST LARGE CAP VALUE FUND
Notes to Financial Statements (continued)
December 31, 2016
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS
The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The levels used for classifying investments are not necessarily an indication of the risk associated with investing in these investments. The three levels of the fair value hierarchy are described below:
Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 — Quoted prices in markets that are not active or financial instruments for which significant inputs are observable (including, but not limited to, quoted prices for similar investments, interest rates, foreign exchange rates, volatility and credit spreads), either directly or indirectly;
Level 3 — Prices or valuations that require significant unobservable inputs (including GSAM’s assumptions in determining fair value measurement).
Changes in valuation techniques may result in transfers into or out of an assigned level within the hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value hierarchy resulting from such changes are deemed to have occurred as of the beginning of the reporting period.
The Board of Trustees (“Trustees”) has approved Valuation Procedures that govern the valuation of the portfolio investments held by the Fund, including investments for which market quotations are not readily available. The Trustees have delegated to GSAM day-to-day responsibility for implementing and maintaining internal controls and procedures related to the valuation of the Fund’s portfolio investments. To assess the continuing appropriateness of pricing sources and methodologies, GSAM regularly performs price verification procedures and issues challenges as necessary to third party pricing vendors or brokers, and any differences are reviewed in accordance with the Valuation Procedures.
A. Level 1 and Level 2 Fair Value Investments — The valuation techniques and significant inputs used in determining the fair values for investments classified as Level 1 and Level 2 are as follows:
Equity Securities — Equity securities traded on a U.S. securities exchange or the NASDAQ system, or those located on certain foreign exchanges, including but not limited to the Americas, are valued daily at their last sale price or official closing price on the principal exchange or system on which they are traded. If there is no sale or official closing price or such price is believed by GSAM to not represent fair value, equity securities are valued at the last bid price for long positions and at the last ask price for short positions. To the extent these investments are actively traded, they are classified as Level 1 of the fair value hierarchy, otherwise they are generally classified as Level 2.
Unlisted equity securities for which market quotations are available are valued at the last sale price on the valuation date, or if no sale occurs, at the last bid price. Securities traded on certain foreign securities exchanges are valued daily at fair value determined by an independent fair value service (if available) under Valuation Procedures approved by the Trustees and consistent with applicable regulatory guidance. The independent fair value service takes into account multiple factors including, but not limited to, movements in the securities markets, certain depositary receipts, futures contracts and foreign currency exchange rates that have occurred subsequent to the close of the foreign securities exchange. These investments are generally classified as Level 2 of the fair value hierarchy.
Money Market Funds — Investments in the Goldman Sachs Financial Square Government Fund (“Underlying Fund”) are valued at the NAV of the Institutional Share class on the day of valuation. These investments are generally classified as Level 1 of the fair value hierarchy. For information regarding an Underlying Fund’s accounting policies and investment holdings, please see the Underlying Fund’s shareholder report.
B. Level 3 Fair Value Investments — To the extent that significant inputs to valuation models and other alternative pricing sources are unobservable, or if quotations are not readily available, or if GSAM believes that such quotations do not accurately
16
GOLDMAN SACHS VARIABLE INSURANCE TRUST LARGE CAP VALUE FUND
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS (continued)
reflect fair value, the fair value of the Fund’s investments may be determined under Valuation Procedures approved by the Trustees. GSAM, consistent with its procedures and applicable regulatory guidance, may make an adjustment to the most recent valuation prices of either domestic or foreign securities in light of significant events to reflect what it believes to be the fair value of the securities at the time of determining the Fund’s NAV. Significant events which could affect a large number of securities in a particular market may include, but are not limited to: significant fluctuations in U.S. or foreign markets; market dislocations; market disruptions; or unscheduled market closings. Significant events which could also affect a single issuer may include, but are not limited to: corporate actions such as reorganizations, mergers and buy-outs; ratings downgrades; and bankruptcies.
C. Fair Value Hierarchy — The following is a summary of the Fund’s investments classified in the fair value hierarchy as of December 31, 2016:
Investment Type | Level 1 | Level 2 | Level 3 | |||||||||
Assets | ||||||||||||
Common Stock and/or Other Equity Investments(a) | ||||||||||||
North America | $ | 773,457,415 | $ | — | $ | — | ||||||
Investment Company | 944 | — | — | |||||||||
Total | $ | 773,458,359 | $ | — | $ | — |
(a) | Amounts are disclosed by continent to highlight the impact of time zone differences between local market close and the calculation of NAV. Security valuations are based on the principal exchange or system on which they are traded, which may differ from country of domicile noted in the table. |
For further information regarding security characteristics, see the Schedule of Investments.
4. AGREEMENTS AND AFFILIATED TRANSACTIONS
A. Management Agreement — Under the Agreement, GSAM manages the Fund, subject to the general supervision of the Trustees.
As compensation for the services rendered pursuant to the Agreement, the assumption of the expenses related thereto and administration of the Fund’s business affairs, including providing facilities, GSAM is entitled to a management fee, accrued daily and paid monthly, equal to an annual percentage rate of the Fund’s average daily net assets.
For the fiscal year ended December 31, 2016, contractual and effective net management fees with GSAM were at the following rates:
Contractual Management Rate | Effective Net | |||||||||||||||||||||||||
First $1 billion | Next $1 billion | Next $3 billion | Next $3 billion | Over $8 billion | Effective Rate | |||||||||||||||||||||
0.75% | 0.68 | % | 0.65 | % | 0.64 | % | 0.63 | % | 0.75 | % | 0.72 | %* |
^ | Effective Net Management Rate includes the impact of management fee waivers of affiliated Underlying Funds, if any. |
* | GSAM agreed to waive a portion of its management fee in order to achieve a net management rate, as defined in the Fund’s most recent prospectus. This waiver will be effective through at least April 29, 2017, and prior to such date GSAM may not terminate the arrangement without approval of the Trustees. For the fiscal year ended December 31, 2016, GSAM waived $251,581 of its management fee. |
The Fund invests in Institutional Shares of the Goldman Sachs Financial Square Government Fund, which is an affiliated Underlying Fund. GSAM has agreed to waive a portion of its management fee payable by the Fund in an amount equal to the management fee it earns as an investment adviser to any of the affiliated Underlying Funds in which the Fund invests. For the fiscal year ended December 31, 2016, GSAM waived $3,819 of the Fund’s management fee.
17
GOLDMAN SACHS VARIABLE INSURANCE TRUST LARGE CAP VALUE FUND
Notes to Financial Statements (continued)
December 31, 2016
4. AGREEMENTS AND AFFILIATED TRANSACTIONS (continued)
B. Distribution and Service Plan — The Trust, on behalf of the Service Shares of the Fund, has adopted a Distribution and Service Plan (the “Plan”). Under the Plan, Goldman Sachs, which serves as distributor (the “Distributor”), is entitled to a fee accrued daily and paid monthly, for distribution services and personal and account maintenance services, which may then be paid by Goldman Sachs to authorized dealers, equal to, on an annual basis, 0.25% of the Fund’s average daily net assets attributable to Service Shares.
C. Transfer Agency Agreement — Goldman Sachs also serves as the transfer agent of the Fund for a fee pursuant to the Transfer Agency Agreement. The fees charged for such transfer agency services are accrued daily and paid monthly at an annual rate of 0.02% of the average daily net assets of Institutional and Service Shares.
D. Other Expense Agreements and Affiliated Transactions — GSAM has agreed to limit certain “Other Expenses” of the Fund (excluding acquired fund fees and expenses, transfer agency fees and expenses, taxes, interest, brokerage fees, shareholder meeting, litigation, indemnification and extraordinary expenses) to the extent such expenses exceed, on an annual basis, a percentage rate of the average daily net assets of the Fund. Such Other Expense reimbursements, if any, are accrued daily and paid monthly. In addition, the Fund is not obligated to reimburse GSAM for prior fiscal year expense reimbursements, if any. The Other Expense limitation as an annual percentage rate of average daily net assets for the Fund is 0.004%. The Other Expense limitation will remain in place through at least April 29, 2017, and prior to such date GSAM may not terminate the arrangement without the approval of the Trustees. For the fiscal year ended December 31, 2016, GSAM reimbursed $327,540 to the Fund. In addition, the Fund has entered into certain offset arrangements with the custodian and the transfer agent, which may result in a reduction of the Fund’s expenses and are received irrespective of the application of the “Other Expense” limitation described above. For the fiscal year ended December 31, 2016, custody fee credits were $20,646.
E. Line of Credit Facility — As of December 31, 2016, the Fund participated in a $1,100,000,000 committed, unsecured revolving line of credit facility (the “facility”) together with other funds of the Trust and certain registered investment companies having management agreements with GSAM or its affiliates. This facility is to be used for temporary emergency purposes, or to allow for an orderly liquidation of securities to meet redemption requests. The interest rate on borrowings is based on the federal funds rate. The facility also requires a fee to be paid by the Fund based on the amount of the commitment that has not been utilized. For the fiscal year ended December 31, 2016, the Fund did not have any borrowings under the facility.
F. Other Transactions with Affiliates —The following table provides information about the Fund’s investment in the Goldman Sachs Financial Square Government Fund as of and for the fiscal year ended December 31, 2016:
Market Value 12/31/15 | Purchases at Cost | Proceeds from Sales | Market Value 12/31/16 | Dividend Income | ||||||||||||||
$ | — | $ | 78,389,752 | $ | (78,388,808 | ) | $ | 944 | $ | 7,335 |
5. PORTFOLIO SECURITIES TRANSACTIONS
The cost of purchases and proceeds from sales and maturities of long-term securities for the fiscal year ended December 31, 2016 were $1,057,308,791 and $1,245,440,557, respectively.
18
GOLDMAN SACHS VARIABLE INSURANCE TRUST LARGE CAP VALUE FUND
6. SECURITIES LENDING
The Fund may lend its securities through a securities lending agent, the Bank of New York Mellon (“BNYM”), to certain qualified borrowers. In accordance with the Fund’s securities lending procedures, the Fund receives cash as collateral at least equal to the market value of the securities on loan. The market value of the loaned securities is determined at the close of business of the Fund, at their last sale price or official closing price on the principal exchange or system on which they are traded, and any additional required collateral is delivered to the Fund on the next business day. As with other extensions of credit, the Fund may experience delay in the recovery of its securities or incur a loss should the borrower of the securities breach its agreement with the Fund or become insolvent at a time when the collateral is insufficient to cover the cost of repurchasing securities on loan. Dividend income received from securities on loan may not be subject to withholding taxes and therefore withholding taxes paid may differ from the amounts listed in the Statement of Operations. Loans of securities are terminable at any time and as such 1) the remaining contractual maturities of the outstanding securities lending transactions are considered to be overnight and continuous and 2) the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.
The Fund invests the cash collateral received in connection with securities lending transactions in the Goldman Sachs Financial Square Government Fund (“Government Money Market Fund”), an affiliated series of the Trust. The Government Money Market Fund is registered under the Act as an open end investment company, is subject to Rule 2a-7 under the Act, and is managed by GSAM, for which GSAM may receive an investment advisory fee of up to 0.205% on an annualized basis of the average daily net assets of the Government Money Market Fund.
In the event of a default by a borrower with respect to any loan, BNYM may exercise any and all remedies provided under the applicable borrower agreement to make the Fund whole. These remedies include purchasing replacement securities by applying the collateral held from the defaulting broker against the purchase cost of the replacement securities. If BNYM is unable to purchase replacement securities, BNYM will indemnify the Fund by paying the Fund an amount equal to the market value of the securities loaned minus the value of cash collateral received from the borrower for the loan, subject to an exclusion for any shortfalls resulting from a loss of value in such cash collateral due to reinvestment risk. The amounts of the Fund’s overnight and continuous agreements collateralized by common stocks which represent the gross amounts of recognized liabilities for securities lending transactions outstanding as of December 31, 2016 are disclosed as “Payable upon return of securities loaned” on the Statement of Assets and Liabilities.
For the fiscal year ended December 31, 2016, the Fund did not lend any securities.
7. TAX INFORMATION
The tax character of distributions paid during the fiscal years ended December 31, 2015 and December 31, 2016 was as follows:
2015 | 2016 | |||||||
Distributions paid from: | ||||||||
Ordinary income | $ | 33,603,562 | $ | 14,929,563 | ||||
Net long-term capital gains | 88,393,052 | 7,532,924 | ||||||
Total taxable distributions | $ | 121,996,614 | $ | 22,462,487 |
19
GOLDMAN SACHS VARIABLE INSURANCE TRUST LARGE CAP VALUE FUND
Notes to Financial Statements (continued)
December 31, 2016
7. TAX INFORMATION (continued)
As of December 31, 2016, the components of accumulated earnings (losses) on a tax-basis were as follows:
Undistributed ordinary income — net | $ | 3,246,299 | ||
Undistributed long-term capital gains | 563,677 | |||
Total undistributed earnings | $ | 3,809,976 | ||
Unrealized gains — net | 112,306,229 | |||
Total accumulated gains — net | $ | 116,116,205 |
As of December 31, 2016, the Fund’s aggregate security unrealized gains and losses based on cost for U.S. federal income tax purposes were as follows:
Tax cost | $ | 661,152,130 | ||
Gross unrealized gain | 135,590,078 | |||
Gross unrealized loss | (23,283,849 | ) | ||
Net unrealized security gain | $ | 112,306,229 |
The difference between GAAP-basis and tax-basis unrealized gains (losses) is attributable primarily to wash sales.
In order to present certain components of the Fund’s capital accounts on a tax-basis, the Fund has reclassified $511,790 from undistributed net investment income into accumulated net realized gain. This reclassification has no impact on the NAV of the Fund and results primarily from differences in the tax treatment of underlying fund investments.
GSAM has reviewed the Fund’s tax positions for all open tax years (the current and prior three years, as applicable) and has concluded that no provision for income tax is required in the Fund’s financial statements. Such open tax years remain subject to examination and adjustment by tax authorities.
8. OTHER RISKS
The Fund’s risks include, but are not limited to, the following:
Investments in Other Investment Companies — As a shareholder of another investment company, including an exchange-traded fund (“ETF”), the Fund will indirectly bear its proportionate share of any net management fees and other expenses paid by such other investment companies, in addition to the fees and expenses regularly borne by the Fund. ETFs are subject to risks that do not apply to conventional mutual funds, including but not limited to the following: (i) the market price of the ETF’s shares may trade at a premium or a discount to their NAV; and (ii) an active trading market for an ETF’s shares may not develop or be maintained.
Large Shareholder Transactions Risk — The Fund may experience adverse effects when certain large shareholders, such as other funds, participating insurance companies, accounts and Goldman Sachs affiliates, purchase or redeem large amounts of shares of the Fund. Such large shareholder redemptions may cause the Fund to sell portfolio securities at times when it would not otherwise do so, which may negatively impact the Fund’s NAV and liquidity. These transactions may also accelerate the realization of taxable income to shareholders if such sales of investments resulted in gains, and may also increase transaction costs. In addition, a large redemption could result in the Fund’s current expenses being allocated over a smaller asset base, leading to an increase in the Fund’s expense ratio. Similarly, large Fund share purchases may adversely affect the Fund’s performance to the extent that the Fund is delayed in investing new cash and is required to maintain a larger cash position than it ordinarily would.
Market and Credit Risks — In the normal course of business, the Fund trades financial instruments and enters into financial transactions where risk of potential loss exists due to changes in the market (market risk). Additionally, the Fund may also be
20
GOLDMAN SACHS VARIABLE INSURANCE TRUST LARGE CAP VALUE FUND
8. OTHER RISKS (continued)
exposed to credit risk in the event that an issuer or guarantor fails to perform or that an institution or entity with which the Fund has unsettled or open transactions defaults.
9. INDEMNIFICATIONS
Under the Trust’s organizational documents, its Trustees, officers, employees and agents are indemnified, to the extent permitted by the Act and state law, against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the course of business, the Fund enters into contracts that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, GSAM believes the risk of loss under these arrangements to be remote.
10. SUBSEQUENT EVENTS
Subsequent events after the Statement of Assets and Liabilities date have been evaluated and GSAM has concluded that there is no impact requiring adjustment or disclosure in the financial statements.
11. SUMMARY OF SHARE TRANSACTIONS
Share activity is as follows:
For the Fiscal Year Ended December 31, 2016 | For the Fiscal Year Ended December 31, 2015 | |||||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||||
Institutional Shares | ||||||||||||||||
Shares sold | 1,208,095 | $ | 11,301,985 | 2,160,929 | $ | 23,733,358 | ||||||||||
Reinvestment of distributions | 732,489 | 7,500,689 | 4,177,719 | 38,811,010 | ||||||||||||
Shares redeemed | (7,742,346 | ) | (74,469,762 | ) | (5,222,161 | ) | (57,804,985 | ) | ||||||||
(5,801,762 | ) | (55,667,088 | ) | 1,116,487 | 4,739,383 | |||||||||||
Service Shares | ||||||||||||||||
Shares sold | 3,825,318 | 35,543,157 | 5,254,815 | 57,335,729 | ||||||||||||
Reinvestment of distributions | 1,461,113 | 14,961,798 | 8,954,317 | 83,185,604 | ||||||||||||
Shares redeemed | (18,016,464 | ) | (175,118,336 | ) | (10,053,254 | ) | (110,970,246 | ) | ||||||||
(12,730,033 | ) | (124,613,381 | ) | 4,155,878 | 29,551,087 | |||||||||||
NET (DECREASE) INCREASE | (18,531,795 | ) | $ | (180,280,469 | ) | 5,272,365 | $ | 34,290,470 |
21
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Goldman Sachs Variable Insurance Trust and Shareholders of the
Goldman Sachs Large Cap Value Fund:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Goldman Sachs Large Cap Value Fund (the “Fund”), a fund of the Goldman Sachs Variable Insurance Trust, as of December 31, 2016, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities as of December 31, 2016 by correspondence with the custodian, brokers, transfer agent of the underlying funds and the application of alternative auditing procedures where securities purchased confirmations had not been received, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 14, 2017
22
GOLDMAN SACHS VARIABLE INSURANCE TRUST LARGE CAP VALUE FUND
Fund Expenses — Six Month Period Ended December 31, 2016 (Unaudited) |
As a shareholder of Institutional or Service Shares of the Fund, you incur ongoing costs, including management fees, distribution and/or service (12b-1) fees (with respect to Service Shares) and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Institutional Shares and Service Shares of the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from July 1, 2016 through December 31, 2016, which represents a period of 184 days of a 366 day year.
Actual Expenses — The first line under each share class in the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000=8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes — The second line under each share class in the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual net expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only. As a shareholder of the Fund, you do not incur any transaction costs, such as sales charges, redemption fees, or exchange fees, but shareholders of other funds may incur such costs. The second line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds whose shareholders may incur transaction costs.
Share Class | Beginning Account Value 7/01/16 | Ending Account Value | Expenses Paid for the 6 Months Ended 12/31/16* | |||||||||
Institutional | ||||||||||||
Actual | $ | 1,000 | $ | 1,102.90 | $ | 3.91 | ||||||
Hypothetical 5% return | 1,000 | 1,021.42 | + | 3.76 | ||||||||
Service | ||||||||||||
Actual | 1,000 | 1,102.30 | 5.23 | |||||||||
Hypothetical 5% return | 1,000 | 1,020.16 | + | 5.03 |
* | Expenses are calculated using the Fund’s annualized net expense ratio for each class, which represents the ongoing expenses as a percentage of net assets for the six months ended December 31, 2016. Expenses are calculated by multiplying the annualized net expense ratio by the average account value for the period; then multiplying the result by the number of days in the most recent fiscal half year; and then dividing that result by the number of days in the fiscal year. The annualized net expense ratios for the period were 0.74% and 0.99% for the Institutional and Service Shares, respectively. |
+ | Hypothetical expenses are based on the Fund’s actual annualized net expense ratios and an assumed rate of return of 5% per year before expenses. |
23
GOLDMAN SACHS VARIABLE INSURANCE TRUST LARGE CAP VALUE FUND
Trustees and Officers (Unaudited)
Independent Trustees
Name, Address and Age1 | Position(s) Held with the Trust | Term of Office and | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee3 | Other Directorships Held by Trustee4 | |||||||
Ashok N. Bakhru Age: 74 | Chairman of the Board of Trustees | Since 1996 (Trustee since 1991) | Mr. Bakhru is retired. He was formerly Director, Apollo Investment Corporation (a business development company) (2008-2013); President, ABN Associates (a management and financial consulting firm) (1994-1996 and 1998-2012); Trustee, Scholarship America (1998-2005); Trustee, Institute for Higher Education Policy (2003-2008); Director, Private Equity Investors — III and IV (1998-2007), and Equity-Linked Investors II (April 2002-2007).
Chairman of the Board of Trustees — Goldman Sachs Trust; Goldman Sachs Variable Insurance Trust; Goldman Sachs Trust II; Goldman Sachs BDC, Inc.; Goldman Sachs Private Middle Market Credit LLC; Goldman Sachs MLP Income Opportunities Fund; Goldman Sachs MLP and Energy Renaissance Fund; and Goldman Sachs ETF Trust. | 142 | None | |||||||
Kathryn A. Cassidy Age: 62 | Trustee | Since 2015 | Ms. Cassidy is retired. Formerly, she was Advisor to the Chairman (May 2014-December 2014); and Senior Vice President and Treasurer (2008-2014), General Electric Company & General Electric Capital Corporation (technology and financial services companies).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||||
Diana M. Daniels Age: 67 | Trustee | Since 2007 | Ms. Daniels is retired. Formerly, she was Vice President, General Counsel and Secretary, The Washington Post Company (1991-2006). Ms. Daniels is a Trustee Emeritus and serves as a Presidential Councillor of Cornell University (2013-Present); former Member of the Legal Advisory Board, New York Stock Exchange (2003-2006) and of the Corporate Advisory Board, Standish Mellon Management Advisors (2006-2007).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||||
Herbert J. Markley Age: 66 | Trustee | Since 2013 | Mr. Markley is retired. Formerly, he was Executive Vice President, Deere & Company (an agricultural and construction equipment manufacturer) (2007-2009); and President, Agricultural Division, Deere & Company (2001-2007). Previously, Mr. Markley served as an Advisory Board Member of Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust (June 2013-October 2013).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||||
Jessica Palmer Age: 67 | Trustee | Since 2007 | Ms. Palmer is retired. She is Director, Emerson Center for the Arts and Culture (2011-Present); and was formerly a Consultant, Citigroup Human Resources Department (2007-2008); Managing Director, Citigroup Corporate and Investment Banking (previously, Salomon Smith Barney/Salomon Brothers) (1984-2006). Ms. Palmer was a Member of the Board of Trustees of Indian Mountain School (private elementary and secondary school) (2004-2009).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||||
24
GOLDMAN SACHS VARIABLE INSURANCE TRUST LARGE CAP VALUE FUND
Trustees and Officers (Unaudited) (continued)
Independent Trustees
Name, Address and Age1 | Position(s) Held with the Trust | Term of Office and | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee3 | Other Directorships Held by Trustee4 | |||||||
Roy W. Templin Age: 56 | Trustee | Since 2013 | Mr. Templin is retired. He recently served as Chairman of the Board of Directors, Con-Way Incorporated (a transportation, logistics and supply chain management service company) (2014-2015); and was formerly Executive Vice President and Chief Financial Officer, Whirlpool Corporation (an appliance manufacturer and marketer) (2004-2012). Previously, Mr. Templin served as an Advisory Board Member of Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust (June 2013-October 2013).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||||
Gregory G. Weaver Age: 65 | Trustee | Since 2015 | Mr. Weaver is retired. He is Director, Verizon Communications Inc. (2015-Present); and was formerly Chairman and Chief Executive Officer, Deloitte & Touche LLP (a professional services firm) (2001-2005 and 2012-2014); and Member of the Board of Directors, Deloitte & Touche LLP (2006-2012).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | Verizon Communications Inc. | |||||||
25
GOLDMAN SACHS VARIABLE INSURANCE TRUST LARGE CAP VALUE FUND
Trustees and Officers (Unaudited) (continued)
Interested Trustees*
Name, Address and Age1 | Position(s) Held with the Trust | Term of Office and | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee3 | Other Directorships Held by Trustee4 | |||||||
James A. McNamara Age: 54 | President and Trustee | Since 2007 | Managing Director, Goldman Sachs (December 1998-Present); Director of Institutional Fund Sales, GSAM (April 1998-December 2000); and Senior Vice President and Manager, Dreyfus Institutional Service Corporation (January 1993- April 1998).
President and Trustee — Goldman Sachs Trust; Goldman Sachs Variable Insurance Trust; Goldman Sachs Trust II; Goldman Sachs MLP Income Opportunities Fund; Goldman Sachs MLP and Energy Renaissance Fund; and Goldman Sachs ETF Trust. | 140 | None | |||||||
Alan A. Shuch Age: 67 | Trustee | Since 1990 | Advisory Director — GSAM (May 1999-Present); Consultant to GSAM (December 1994-May 1999); and Limited Partner, Goldman Sachs (December 1994-May 1999).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||||
* | These persons are considered to be “Interested Trustees” because they hold positions with Goldman Sachs and own securities issued by The Goldman Sachs Group, Inc. Each Interested Trustee holds comparable positions with certain other companies of which Goldman Sachs, GSAM or an affiliate thereof is the investment adviser, administrator and/or distributor. |
1 | Each Trustee may be contacted by writing to the Trustee, c/o Goldman Sachs, 200 West Street, New York, New York, 10282, Attn: Caroline Kraus. Information is provided as of December 31, 2016. Alan A. Shuch served as Trustee until his retirement from the Board on December 31, 2016. |
2 | Subject to such policies as may be adopted by the Board from time-to-time, each Trustee holds office for an indefinite term, until the earliest of: (a) the election of his or her successor; (b) the date the Trustee resigns or is removed by the Board or shareholders, in accordance with the Trust’s Declaration of Trust; or (c) the termination of the Trust. The Board has adopted policies which provide that (a) no Trustee shall hold office for more than 15 years and (b) a Trustee shall retire as of December 31st of the calendar year in which he or she reaches his or her 74th birthday, unless a waiver of such requirement shall have been adopted by a majority of the other Trustees. These policies may be changed by the Trustees without shareholder vote. One Trustee has been granted a waiver from the foregoing policies which permits him to serve until December 31, 2017. |
3 | The Goldman Sachs Fund Complex includes certain other companies listed above for each respective Trustee. As of December 31, 2016, Goldman Sachs Trust consisted of 92 portfolios (89 of which offered shares to the public); Goldman Sachs Variable Insurance Trust consisted of 14 portfolios; Goldman Sachs Trust II consisted of 17 portfolios (16 of which offered shares to the public); Goldman Sachs BDC, Inc., Goldman Sachs Private Middle Market Credit LLC, Goldman Sachs MLP Income Opportunities Fund, and Goldman Sachs MLP and Energy Renaissance Fund each consisted of one portfolio; and Goldman Sachs ETF Trust consisted of 15 portfolios (eight of which offered shares to the public). Goldman Sachs Private Middle Market Credit LLC does not offer shares to the public. |
4 | This column includes only directorships of companies required to report to the Securities and Exchange Commission under the Securities Exchange Act of 1934 (i.e., “public companies”) or other investment companies registered under the Act. |
Additional information about the Trustees is available in the Fund’s Statement of Additional Information, which can be obtained from Goldman Sachs free of charge by calling this toll-free number (in the United States of America): 1-800-526-7384.
26
GOLDMAN SACHS VARIABLE INSURANCE TRUST LARGE CAP VALUE FUND
Trustees and Officers (Unaudited) (continued)
Officers of the Trust*
Name, Address and Age1 | Position(s) Held with the Trust | Term of Office and | Principal Occupation(s) During Past 5 Years | |||
James A. McNamara 200 West Street New York, NY 10282 Age: 54 | Trustee and President | Since 2007 | Managing Director, Goldman Sachs (December 1998-Present); Director of Institutional Fund Sales, GSAM (April 1998-December 2000); and Senior Vice President and Manager, Dreyfus Institutional Service Corporation (January 1993-April 1998).
President and Trustee — Goldman Sachs Trust; Goldman Sachs Variable Insurance Trust; Goldman Sachs Trust II; Goldman Sachs MLP Income Opportunities Fund; Goldman Sachs MLP and Energy Renaissance Fund; and Goldman Sachs ETF Trust. | |||
Caroline L. Kraus 200 West Street New York, NY 10282 Age: 39 | Secretary | Since 2012 | Managing Director, Goldman Sachs (January 2016-Present); Vice President, Goldman Sachs (August 2006-December 2015); Associate General Counsel, Goldman Sachs (2012-Present); Assistant General Counsel, Goldman Sachs (August 2006-December 2011); and Associate, Weil, Gotshal & Manges, LLP (2002-2006).
Secretary — Goldman Sachs Trust (previously Assistant Secretary (2012)); Goldman Sachs Variable Insurance Trust (previously Assistant Secretary (2012)); Goldman Sachs Trust II; Goldman Sachs BDC, Inc.; Goldman Sachs Private Middle Market Credit LLC; Goldman Sachs Middle Market Lending LLC; Goldman Sachs MLP Income Opportunities Fund; Goldman Sachs MLP and Energy Renaissance Fund; and Goldman Sachs ETF Trust. | |||
Scott M. McHugh 200 West Street New York, NY 10282 Age: 45 | Treasurer, Senior Vice President and Principal Financial Officer | Since 2009 (Principal | Managing Director, Goldman Sachs (January 2016-Present); Vice President, Goldman Sachs (February 2007-December 2015); Assistant Treasurer of certain mutual funds administered by DWS Scudder (2005-2007); and Director (2005-2007), Vice President (2000-2005), and Assistant Vice President (1998-2000), Deutsche Asset Management or its predecessor (1998-2007).
Treasurer, Senior Vice President and Principal Financial Officer — Goldman Sachs Trust; Goldman Sachs Variable Insurance Trust; Goldman Sachs Trust II; Goldman Sachs MLP Income Opportunities Fund; Goldman Sachs MLP and Energy Renaissance Fund; and Goldman Sachs ETF Trust. | |||
* | Represents a partial list of officers of the Trust. Additional information about all the officers is available in the Fund’s Statement of Additional Information, which can be obtained from Goldman Sachs free of charge by calling this toll-free number (in the United States): 1-800-526-7384. |
1 | Information is provided as of December 31, 2016. |
2 | Officers hold office at the pleasure of the Board of Trustees or until their successors are duly elected and qualified. Each officer holds comparable positions with certain other companies of which Goldman Sachs, GSAM or an affiliate thereof is the investment adviser, administrator and/or distributor. |
27
GOLDMAN SACHS VARIABLE INSURANCE TRUST LARGE CAP VALUE FUND
Goldman Sachs Variable Insurance Trust — Tax Information (Unaudited)
For the year ended December 31, 2016, 98.26% of the dividends paid from net investment company taxable income by the Large Cap Value Fund qualify for the dividends received deduction available to corporations.
Pursuant to Section 852 of the Internal Revenue Code, the Large Cap Value Fund designates $7,532,924 or, if different, the maximum amount allowable, as capital gain dividends paid during the fiscal year ended December 31, 2016.
28
TRUSTEES | OFFICERS | |
Ashok N. Bakhru, Chairman | James A. McNamara, President | |
Kathryn A. Cassidy | Scott M. McHugh, Treasurer, Senior Vice | |
Diana M. Daniels | President and Principal Financial Officer | |
Herbert J. Markley | Caroline L. Kraus, Secretary | |
James A. McNamara | ||
Jessica Palmer | ||
Roy W. Templin | ||
Gregory G. Weaver |
GOLDMAN, SACHS & CO.
Distributor and Transfer Agent
GOLDMAN SACHS ASSET MANAGEMENT, L.P.
Investment Adviser
200 West Street, New York
New York 10282
Visit our web site at www.GSAMFUNDS.com to obtain the most recent month-end returns.
The reports concerning the Fund included in this shareholder report may contain certain forward-looking statements about the factors that may affect the performance of the Fund in the future. These statements are based on Fund management’s predictions and expectations concerning certain future events and their expected impact on the Fund, such as performance of the economy as a whole and of specific industry sectors, changes in the levels of interest rates, the impact of developing world events, and other factors that may influence the future performance of the Fund. Management believes these forward-looking statements to be reasonable, although they are inherently uncertain and difficult to predict. Actual events may cause adjustments in portfolio management strategies from those currently expected to be employed.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the Fund voted proxies relating to portfolio securities for the 12-month period ended December 31 is available (i) without charge, upon request by calling 1-800-621-2550; and (ii) on the Securities and Exchange Commission (“SEC”) web site at http://www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Form N-Qs are available on the SEC’s web site at http://www.sec.gov within 60 days after the Fund’s first and third fiscal quarters. The Fund’s Form N-Qs may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may also be obtained by calling 1-800-SEC-0330. Form N-Qs may be obtained upon request and without charge by calling 1-800-621-2550.
The website links provided are for your convenience only and are not an endorsement or recommendation by GSAM of any of these websites or the products or services offered. GSAM is not responsible for the accuracy and validity of the content of these websites.
Fund holdings and allocations shown are as of December 31, 2016 and may not be representative of future investments. Fund holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities. Current and future holdings are subject to risk.
References to indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only and do not imply that the portfolio will achieve similar results. The index composition may not reflect the manner in which a portfolio is constructed. While an adviser seeks to design a portfolio which reflects appropriate risk and return features, portfolio characteristics may deviate from those of the benchmark.
The Global Industry Classification Standard (“GICS”) was developed by and is the exclusive property and a service mark of Morgan Stanley Capital International Inc. (“MSCI”) and Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. (“S&P”) and is licensed for use by Goldman Sachs. Neither MSCI, S&P nor any other party involved in making or compiling the GICS or any GICS classifications makes any express or implied warranties or representations with respect to such standard or classification (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of such standard or classification. Without limiting any of the foregoing, in no event shall MSCI, S&P, any of their affiliates or any third party involved in making or compiling the GICS or any GICS classifications have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.
The portfolio risk management process includes an effort to monitor and manage risk, but does not imply low risk.
Shares of the Goldman Sachs VIT Funds are offered to separate accounts of participating life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Shares of the Fund are not offered directly to the general public. The variable annuity contracts and variable life insurance policies are described in the separate prospectuses issued by participating insurance companies. You should refer to those prospectuses for information about surrender charges, mortality and expense risk fees and other charges that may be assessed by participating insurance companies under the variable annuity contracts or variable life insurance policies. Such fees or charges, if any, may affect the return you may realize with respect to your investments. Ask your representative for more complete information. Please consider a fund’s objectives, risks and charges and expenses, and read the prospectus carefully before investing. The prospectus contains this and other information about the Fund.
This material is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus or summary prospectus, if applicable. Investors should consider the Fund’s objective, risks, and charges and expenses, and read the summary prospectus, if available, and/or the prospectus carefully before investing or sending money. The summary prospectus, if available, and the prospectus contain this and other information about the Fund and may be obtained from your authorized dealer or from Goldman, Sachs & Co. by calling 1-800-621-2550.
This report is prepared for the general information of contract owners and is not an offer of shares of the Goldman Sachs Variable Insurance Trust — Goldman Sachs Large Cap Value Fund.
© 2017 Goldman Sachs. All rights reserved.
VITLCVAR-17/80638-TMPL-02/2017-468825
Goldman
Sachs Variable Insurance Trust
Goldman Sachs
Mid Cap Value Fund
Annual Report
December 31, 2016
GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND
INVESTMENT OBJECTIVE
The Fund seeks long-term capital appreciation.
Portfolio Management Discussion and Analysis
Below, the Goldman Sachs Value Portfolio Management Team discusses the Goldman Sachs Variable Insurance Trust — Goldman Sachs Mid Cap Value Fund’s (the “Fund”) performance and positioning for the 12-month period ended December 31, 2016 (the “Reporting Period”).
How did the Fund perform during the Reporting Period?
During the Reporting Period, the Fund’s Institutional and Service Shares generated average annual total returns of 13.49% and 13.24%, respectively. These returns compare to the 19.94% average annual total return of the Fund’s benchmark, the Russell Midcap® Value Index (with dividends reinvested) (the “Russell Index”), during the same time period.
What economic and market factors most influenced the equity markets as a whole during the Reporting Period?
Representing the U.S. equity market, the S&P 500® Index gained 11.93% during the Reporting Period, despite a global rout at the start of the year, unexpected political events both domestically and abroad and a Federal Reserve (“Fed”) interest rate hike.
As the Reporting Period began in January 2016, U.S. equities were embroiled in a global rout, triggered by investor concerns about an intensifying economic slowdown in China and exacerbated by an oil price plunge. Following a December 2015 interest rate hike, the January 2016 Fed statement acknowledged these external risks and tightening financial conditions. U.S. equities stabilized in February 2016, as market sentiment improved on the more dovish tone set by global central banks. (Dovish language tends to suggest lower interest rates; opposite of hawkish.) U.S. equities were also supported by stronger economic data, rallying as fourth quarter 2015 U.S. Gross Domestic Product (“GDP”) came in above consensus expectations. In March 2016, the Fed kept interest rates on hold and surprised on the dovish side, reducing its forecast to two interest rate hikes in 2016, down from four. Along with receding global economic concerns, this helped to drive a recovery in U.S. equities. Released in March 2016, February 2016 unemployment data came in ahead of market consensus, with unemployment steady at 4.9% in spite of higher participation rates and declining underemployment.
Following the rebound in March 2016, market sentiment appeared to remain sanguine in April 2016, as oil prices rose and China economic growth concerns abated. U.S. equities fell near the end of the month as investors were disappointed by a lack of additional stimulus from the Bank of Japan and by a weaker than consensus expected first quarter U.S. GDP growth rate of 0.5%. Weaker than expected May 2016 payroll data drove expectations for a Fed interest rate hike in June 2016 temporarily lower, but subsequent hawkish Fed minutes revived market expectations. (Hawkish language tends to suggest higher interest rates; opposite of dovish.) The Fed ultimately held interest rates steady in June 2016 and signaled a slower pace of hikes, acknowledging the slowdown in the labor market. Markets were otherwise dominated in June 2016 by the U.K. referendum on membership in the European Union, popularly known as Brexit. U.S. equities sold off in the global risk-off in June 2016 following the surprise “leave” result. Markets rebounded in the latter days of the month owing to improving risk sentiment as markets digested the Brexit vote outcome and on dovish remarks from Bank of England Governor Carney.
In July 2016, U.S. equities were buoyed by strong economic data and corporate earnings, despite increased uncertainty post-Brexit. In her August 2016 Jackson Hole speech, Fed Chair Janet Yellen acknowledged the case for an interest rate hike had strengthened in the then-recent months. Along with strong labor market data and other hawkish comments from the Fed, this significantly increased the market-implied probability of an interest rate hike by year-end 2016, causing U.S. equities to sell off. In early September 2016, equities fell as the European Central Bank disappointed markets with its lack of commitment to extend quantitative easing. However, there was a subsequent rebound following the Fed’s decision in September 2016 to leave interest rates unchanged.
In October 2016, a combination of hawkish Fed commentary and mounting strong U.S. economic data led to increased market pricing for a December 2016 interest rate hike. U.S. GDP increased by 3.5% on an annualized basis for the third quarter of 2016, above consensus expectations and the strongest growth rate in two years. Following the unexpected victory of Donald Trump in the November 2016 U.S. elections, U.S. equities quickly reversed a short-lived sell-off and surged on anticipation of a pro-growth effect of Mr. Trump’s fiscal stimulus plan. The Fed raised rates 0.25% in December 2016, for the first time in a year, but as had
1
GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND
largely been anticipated, and set a more hawkish hike path for 2017, causing equities to decline, albeit modestly, following the announcement.
For the Reporting Period overall, energy, telecommunication services and financials were the best performing sectors in the S&P 500® Index by a wide margin. Industrials, materials, utilities and information technology also posted double-digit gains that outpaced the S&P 500® Index during the Reporting Period. The weakest performing sectors in the S&P 500® Index were real estate and health care, the only two to post negative absolute returns, followed by consumer staples and consumer discretionary, which were comparatively weak but generated positive returns during the Reporting Period.
Within the U.S. equity market, there was significant disparity in performance not only among sectors but also among the various capitalization and style segments. While all capitalization segments posted positive returns, small-cap stocks, as measured by the Russell 2000® Index, performed best, followed at some distance by mid-cap stocks, as measured by the Russell Midcap® Index, and then, large-cap stocks, as measured by the Russell 1000® Index. From a style perspective, value-oriented stocks significantly outpaced growth-oriented stocks across the capitalization spectrum. (All as measured by the Russell Investments indices.)
What key factors were responsible for the Fund’s performance during the Reporting Period?
While the Fund posted strong positive absolute returns, it underperformed the Russell Index on a relative basis. Stock selection had the greatest effect on the Fund’s performance relative to the Russell Index during the Reporting Period.
Which equity market sectors most significantly affected Fund performance?
Detracting from the Fund’s relative results most was stock selection in the industrials, health care and consumer discretionary sectors. Such detractors were only partially offset by effective stock selection in the energy and telecommunication services sectors, which contributed positively to the Fund’s performance relative to the Russell Index during the Reporting Period. Having an underweighted allocation to real estate, which lagged the Russell Index during the Reporting Period, also boosted the Fund’s relative results.
Which stocks detracted significantly from the Fund’s performance during the Reporting Period?
Detracting from the Fund’s results relative to the Russell Index were positions in over-the-counter pharmaceuticals manufacturer Perrigo, global car and equipment rental company Hertz Global Holdings and grocery-anchored community shopping centers owner Brixmor Property Group.
Shares of Perrigo, a new position for the Fund during the Reporting Period, fell after the company reported first quarter 2016 earnings below consensus expectations and lowered its future guidance. We were attracted to the exposure Perrigo had to multiple secular growth tailwinds, including aging demographics and increasing store-brand over-the counter penetration. We also believed the company had the potential to expand its operating margins through cost-cutting efforts. We became concerned, however, following a change in its management and an increasingly challenging pricing environment. In light of these headwinds and limited near-to medium-term catalysts, we decided to exit the position and transition the capital to higher conviction names.
Our original investment thesis on Hertz Global Holdings was predicated on a new operational improvement strategy, available capital deployment options and a stable industry backdrop. Its shares were hurt, however, after several quarters of disappointing earnings, driven by weaker than consensus expected pricing trends in the U.S. caused by increased airport competition. Strict to our sell discipline, as key points of our investment thesis became invalidated, we sold the Fund’s position in the stock in favor of other names with what we believed to have greater upside potential.
We believe the underperformance of Brixmor Property Group was largely due to investor concern around disappointing retail industry sales and the potential impact to the company’s tenants. We further believe these fears were overblown, especially given Brixmor Property Group’s base in high quality grocery-anchored shopping centers. Overall, at the end of the Reporting Period, we remained positive on Brixmor Property Group’s long-term growth potential as well as on the company’s portfolio of assets, since fundamentals in the industry remain healthy, in our view, as supply, relative to historical levels, is low and demand continues to be strong. Finally, we were encouraged at the end of the Reporting Period by its management’s focus on high return redevelopment projects and on improving the company’s balance sheet.
What were some of the Fund’s best-performing individual stocks?
The Fund benefited most relative to the Russell Index from positions in Encana, SLM and Martin Marietta Materials.
Encana, a new position for the Fund during the Reporting Period, was the top contributor to its relative performance during the Reporting Period. We first initiated a Fund position in Encana, an oil and gas company, because we were positive on the company’s
2
GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND
plan to divest lower-return assets and invest capital in higher-return acreage, predominantly in the Permian and Montney shale basins. During the third quarter of 2016, its share price appreciated after it was announced that Encana had completed a large sale of lower quality acreage and would be using the proceeds to strengthen its balance sheet, thus validating a major part of our investment thesis. We believe the stock was also supported by the valuation of several transactions near to Encana’s Permian acreage, reinforcing the value of these assets.
SLM is a company that provides funding and servicing for student loans and is commonly known as Sallie Mae. We first invested in Sallie Mae because we felt the company had strong and highly visible growth, a dominant position in a market with high barriers to entry and a new Chief Executive Officer with a track record of success at other companies. Despite solid performance at Sallie Mae, perceived political risk weighed heavily on the stock ahead of the U.S. presidential election. Its shares subsequently spiked following the election results, and sentiment continued to improve as investors anticipated a more attractive regulatory environment for the company. Despite its recent outperformance, at the end of the Reporting Period, we continued to see upside potential for the company and opportunities for future growth.
Martin Marietta Materials, a supplier of construction aggregates and heavy building materials, performed well. The company benefited from a positive backdrop in which construction trends in Texas, where the company has significant exposure, have been strong. Pricing has been a key contributor to its positive earnings trajectory and margin expansion. Further, in our view, its shares spiked after the U.S. election on speculation that the company would be a beneficiary of future infrastructure spending. Additionally, despite weather-related headwinds, the company reported better than market expected pricing and operating performance. At the end of the Reporting Period, we continued to believe Martin Marietta Materials was a high quality company with the ability to expand margins, both in its core business and as the company integrates recent acquisitions.
How did the Fund use derivatives and similar instruments during the Reporting Period?
During the Reporting Period, we did not use derivatives as part of an active management strategy.
Did the Fund make any significant purchases or sales during the Reporting Period?
In addition to those purchases already mentioned, we initiated a Fund position in SunTrust Banks, a bank holding company based in Atlanta, Georgia. We are positive on SunTrust Banks’ attractive relative valuation and its broad footprint in the fast-growing southeastern U.S. Additionally, we are encouraged by its management’s execution on plans to improve capital efficiency.
We started a position in CIT Group, a provider of financing and leasing capital. We are constructive on the company’s new management team and its strategy to improve profitability. Additionally, we are positive on the recent sale of its aircraft leasing business, which simplifies CIT Group’s business model and allows the company, in our view, to strengthen its balance sheet and return capital to shareholders. Finally, we believe the stock’s sizable valuation discount relative to its peers is attractive from a risk-adjusted return perspective.
In addition to those sales already mentioned, we exited the Fund’s position in Gulfport Energy, an exploration and production company. We believed the company was an efficient, low cost operator compared to its peers, but we decided to sell the position after consecutive quarters of what we viewed as challenged execution, giving us less confidence in its management’s ability to meet its production plans. We used the proceeds to fund other natural gas-exposed investments that we felt had less execution risk and more attractive valuations.
We sold the Fund’s position in M&T Bank, a regional bank. We originally initiated a position in M&T Bank due to our view that the company has a best-in-class management team with a consistent focus on driving strong risk-adjusted shareholder returns. Although we still believe M&T Bank is a high quality company with good long-term growth prospects, at the time of exit, we believed there was short-term earnings risk that no longer justified the stock’s valuation.
Were there any notable changes in the Fund’s weightings during the Reporting Period?
In constructing the Fund’s portfolio, we focus on picking stocks rather than on making industry or sector bets. We seek to outpace the Russell Index by overweighting stocks that we expect to outperform and underweighting those that we think may lag. Consequently, changes in its sector weights are generally the direct result of individual stock selection or of stock appreciation or depreciation. That said, during the Reporting Period, the Fund’s exposure to financials, industrials and utilities increased compared to the Russell Index. The Fund’s allocations compared to the Russell Index in consumer discretionary and consumer staples decreased.
3
GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND
How was the Fund positioned relative to its benchmark index at the end of the Reporting Period?
At the end of December 2016, the Fund had overweighted positions relative to the Russell Index in the financials and health care sectors. On the same date, the Fund had underweighted positions compared to the Russell Index in utilities, real estate and telecommunication services and was rather neutrally weighted to the Russell Index in consumer discretionary, industrials, energy, health care, consumer staples and materials.
Were there any changes to the Fund’s portfolio management team during the Reporting Period?
Effective June 30, 2016, Andrew Braun, Managing Director and Portfolio Manager on the U.S. Value Equity Team for the Mid and Large Cap Value strategies, left the firm. For the Fund, Samyak Jasani, Vice President, was promoted to Portfolio Manager and assumed Andy’s research coverage in the insurance industry.
The U.S. Value Equity Team continues to be led by Sean Gallagher. Sean has 24 years of investing experience and has been the Head of the U.S. Value Equity Team and Chief Investment Officer since 2009. He joined Goldman Sachs in 2000. Sean continues to lead a well-resourced and talented team of investment professionals. The U.S. Value Equity Team consists of more than 25 investment professionals, including 15 portfolio managers averaging more than 19 years of investment experience.
What is the Fund’s tactical view and strategy for the months ahead?
As we enter 2017, we see an increasingly positive backdrop for the U.S. equity markets, as the U.S. transitions to what many believe will be a pro-growth environment. If realized, in our view, most companies could benefit from aggressive fiscal policy, including lower taxes and increased spending, and a less restrictive regulatory environment. In the near term, however, uncertainty around policy specifics and timing could increase volatility. While our aggregate return expectations are lower than in recent years given what we consider to be relatively full valuations, we believe U.S. equities still look more attractive than most other asset classes. Accordingly, we favor high quality, domestically-oriented companies with what we feel are strong management teams. Additionally, after several years of thematic-driven markets, we are excited about the prospect of increasing dispersion at the stock level. We believe an active approach is poised to benefit in this type of environment, as companies differentiate themselves on earnings growth and valuation.
Regardless of market direction, our fundamental, bottom-up stock selection continues to drive our process, rather than headlines or sentiment. We maintain high conviction in the companies the Fund owns and believe they have the potential to outperform relative to the broader market regardless of economic growth conditions. We continue to focus on undervalued companies that we believe have comparatively greater control of their own destiny, such as innovators with differentiated products, companies with low cost structures or companies that have been investing in their own businesses and may be poised to gain market share. We maintain our discipline in identifying companies with what we believe to be strong or improving balance sheets, led by quality management teams and trading at discounted valuations. We remain focused on the long-term performance of the Fund.
4
GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND
Index Definitions
The Russell Midcap Value® Index is an unmanaged index of common stock prices that measures the performance of those Russell Midcap companies with lower price-to-book ratios and lower forecasted growth values. The Index figures do not reflect any deduction for fees, expenses or taxes. It is not possible to invest directly in an index.
The Russell 2000® Index (with dividends reinvested) is an unmanaged index of common stock prices that measures the performance of the 2000 smallest companies in the Russell 3000® Index. The figures for the index do not include any deduction for fees, expenses or taxes. It is not possible to invest directly in an index.
The S&P 500® Index (with dividends reinvested) is the Standard & Poor’s composite index of 500 stocks, an unmanaged index of common stock prices. The figures for the index do not include any deduction for fees, expenses or taxes. It is not possible to invest directly in an index.
The Russell Midcap® Index measures the performance of the 800 smallest companies in the Russell 1000® Index, which represents approximately 25% of the total market capitalization of the Russell 1000® Index. It is not possible to invest directly in an index.
The Russell 1000® Index measures the performance of the 1,000 largest companies in the Russell 3000® Index, which represents approximately 92% of the total market capitalization of the Russell 3000® Index. It is not possible to invest directly in an index.
5
FUND BASICS
Mid Cap Value Fund
as of December 31, 2016
STANDARDIZED TOTAL RETURNS1
For the period ended 12/31/16 | One Year | Five Years | Ten Years | Since Inception | Inception Date | |||||||||||||
Institutional | 13.49 | % | 12.98 | % | 6.43 | % | 8.68 | % | 5/01/98 | |||||||||
Service | 13.24 | 12.70 | 6.18 | 6.79 | 1/09/06 |
1 | The Standardized Total Returns are average annual total returns as of the most recent calendar quarter-end. They assume reinvestment of all distributions at net asset value (“NAV”). Because Institutional Shares and Service Shares do not involve a sales charge, such a charge is not applied to their Standardized Total Returns. |
Total return figures in the above chart represent past performance and do not indicate future results, which will vary. The investment return and principal value of an investment will fluctuate and, therefore, an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the total return figures in the above chart. Please visit www.GSAMFUNDS.com to obtain the most recent month-end returns. Performance reflects fee waivers and/or expense limitations in effect during the periods shown. In their absence, performance would be reduced.
EXPENSE RATIOS2
Net Expense Ratio (Current) | Gross Expense Ratio (Before Waivers) | |||||||
Institutional | 0.84 | % | 0.87 | % | ||||
Service | 1.09 | 1.12 |
2 | The expense ratios of the Fund, both current (net of any fee waivers and/or expense limitations) and before waivers (gross of any fee waivers and/or expense limitations) are as set forth above according to the most recent publicly available Prospectuses for the Fund and may differ from the expense ratios disclosed in the Financial Highlights in this report. Pursuant to a contractual arrangement, the Fund’s fee waivers and/or expense limitations will remain in place through at least April 29, 2017, and prior to such date, the Investment Adviser may not terminate the arrangements without the approval of the Fund’s Board of Trustees. If these arrangements are discontinued in the future, the expense ratios may change without shareholder approval. |
TOP TEN HOLDINGS AS OF 12/31/163
Holding | % of Net Assets | Line of Business | ||||
Synchrony Financial | 2.4% | Diversified Financials | ||||
SunTrust Banks, Inc. | 2.1 | Banks | ||||
Huntington Bancshares, Inc. | 1.8 | Banks | ||||
SLM Corp. | 1.8 | Diversified Financials | ||||
Mid-America Apartment Communities, Inc. | 1.7 | Real Estate Investment Trusts | ||||
Vornado Realty Trust | 1.7 | Real Estate Investment Trusts | ||||
Stanley Black & Decker, Inc. | 1.6 | Capital Goods | ||||
JetBlue Airways Corp. | 1.6 | Transportation | ||||
Brixmor Property Group, Inc. | 1.6 | Real Estate Investment Trusts | ||||
Citizens Financial Group, Inc. | 1.6 | Banks |
3 | The top 10 holdings may not be representative of the Fund’s future investments. |
6
GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND
FUND vs. BENCHMARK SECTOR ALLOCATIONS4
As of December 31, 2016
4 | The Fund is actively managed and, as such, its composition may differ over time. Consequently, the Fund’s overall sector allocations may differ from percentages contained in the graph above. The graph categorizes investments using Global Industry Classification Standard (“GICS”); however, the sector classifications used by the portfolio management team may differ from GICS. The percentage shown for each investment category reflects the value of investments in that category as a percentage of market value (excluding investments in the securities lending reinvestment vehicle). Underlying sector allocations of exchange traded funds and investment companies held by the Fund are not reflected in the graph above. Investments in the securities lending reinvestment vehicle represented 0.4% of the Fund’s net assets at December 31, 2016. The graph depicts the Fund’s investments but may not represent the Fund’s market exposure due to the exclusion of certain derivatives, if any, as listed in the Additional Investment Information section of the Schedule of Investments. |
7
GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND
Performance Summary
December 31, 2016
The following graph shows the value, as of December 31, 2016, of a $10,000 investment made on January 1, 2007 in the Institutional Shares at NAV. For comparative purposes, the performance of the Fund’s benchmark, the Russell Midcap Value* Index (with distributions reinvested), is shown. This performance data represents past performance and should not be considered indicative of future performance, which will fluctuate with changes in market conditions. These performance fluctuations may cause an investor’s shares, when redeemed, to be worth more or less than their original cost. Performance reflects Fund level expenses but does not reflect fees and expenses associated with any variable annuity contract or variable life insurance policy that uses the Fund as an investment option for any contract or policy. Had performance reflected all of those fees and expenses, performance would have been reduced. Performance reflects applicable fee waivers and/or expense limitations in effect during the periods shown, and in their absence, performance would be reduced. Performance of Service Shares will vary from Institutional Shares due to differences in class specific fees. In addition to the Investment Adviser’s decisions regarding issuer/industry investment selection and allocation, other factors may affect Fund performance. These factors include, but are not limited to, Fund operating fees and expenses, portfolio turnover, and subscription and redemption cash flows affecting the Fund.
Mid Cap Value Fund’s 10 Year Performance
Performance of a $10,000 investment, with distributions reinvested, from January 1, 2007 through December 31, 2016.
Average Annual Total Return through December 31, 2016 | One Year | Five Years | Ten Years | Since Inception | ||||
Institutional (Commenced May 1, 1998) | 13.49% | 12.98% | 6.43% | 8.68% | ||||
Service (Commenced January 9, 2006) | 13.24% | 12.70% | 6.18% | 6.79% |
8
GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND
Schedule of Investments
December 31, 2016
Shares | Description | Value | ||||||
Common Stocks – 97.8% | ||||||||
| Banks – 8.1% |
| ||||||
253,983 | CIT Group, Inc. | $ | 10,839,994 | |||||
354,027 | Citizens Financial Group, Inc. | 12,613,982 | ||||||
1,105,277 | Huntington Bancshares, Inc. | 14,611,762 | ||||||
69,218 | Signature Bank* | 10,396,544 | ||||||
311,419 | SunTrust Banks, Inc. | 17,081,333 | ||||||
|
| |||||||
65,543,615 | ||||||||
|
| |||||||
| Capital Goods – 9.4% |
| ||||||
249,150 | AMETEK, Inc. | 12,108,690 | ||||||
146,214 | Jacobs Engineering Group, Inc.* | 8,334,198 | ||||||
52,546 | L-3 Communications Holdings, Inc. | 7,992,772 | ||||||
75,933 | MSC Industrial Direct Co., Inc. Class A | 7,015,450 | ||||||
113,658 | Stanley Black & Decker, Inc. | 13,035,436 | ||||||
211,865 | Textron, Inc. | 10,288,164 | ||||||
215,680 | Trinity Industries, Inc. | 5,987,277 | ||||||
130,898 | Wabtec Corp. | 10,867,152 | ||||||
|
| |||||||
75,629,139 | ||||||||
|
| |||||||
| Commercial & Professional Services – 1.0% |
| ||||||
102,797 | Waste Connections, Inc. | 8,078,816 | ||||||
|
| |||||||
| Consumer Durables & Apparel – 1.9% |
| ||||||
294,621 | Kate Spade & Co.* | 5,500,574 | ||||||
137,156 | Toll Brothers, Inc.* | 4,251,836 | ||||||
105,803 | VF Corp. | 5,644,590 | ||||||
|
| |||||||
15,397,000 | ||||||||
|
| |||||||
| Consumer Services – 0.5% |
| ||||||
136,451 | MGM Resorts International* | 3,933,882 | ||||||
|
| |||||||
| Diversified Financials – 6.6% |
| ||||||
75,024 | Ameriprise Financial, Inc. | 8,323,163 | ||||||
80,449 | Raymond James Financial, Inc. | 5,572,702 | ||||||
1,296,331 | SLM Corp.* | 14,285,568 | ||||||
537,139 | Synchrony Financial | 19,482,031 | ||||||
143,749 | Voya Financial, Inc. | 5,637,836 | ||||||
|
| |||||||
53,301,300 | ||||||||
|
| |||||||
| Energy – 10.9% |
| ||||||
69,385 | Anadarko Petroleum Corp. | 4,838,216 | ||||||
291,808 | Antero Resources Corp.* | 6,901,259 | ||||||
137,088 | Baker Hughes, Inc. | 8,906,607 | ||||||
39,094 | Cimarex Energy Co. | 5,312,875 | ||||||
15,507 | Devon Energy Corp. | 708,205 | ||||||
529,954 | Encana Corp. | 6,221,660 | ||||||
232,119 | FMC Technologies, Inc.* | 8,247,188 | ||||||
164,274 | Marathon Petroleum Corp. | 8,271,196 | ||||||
196,993 | Newfield Exploration Co.* | 7,978,217 | ||||||
39,446 | Pioneer Natural Resources Co. | 7,103,041 | ||||||
247,344 | Rice Energy, Inc.* | 5,280,795 | ||||||
152,957 | RSP Permian, Inc.* | 6,824,941 | ||||||
10,913 | US Silica Holdings, Inc. | 618,549 | ||||||
197,294 | Williams Cos., Inc. (The) | 6,143,735 | ||||||
331,327 | WPX Energy, Inc.* | 4,827,434 | ||||||
|
| |||||||
88,183,918 | ||||||||
|
| |||||||
Common Stocks – (continued) | ||||||||
| Food & Staples Retailing – 0.6% |
| ||||||
163,493 | Whole Foods Market, Inc. | $ | 5,029,045 | |||||
|
| |||||||
| Food, Beverage & Tobacco – 2.3% |
| ||||||
178,000 | Conagra Brands, Inc. | 7,039,900 | ||||||
119,287 | Molson Coors Brewing Co. Class B | 11,607,818 | ||||||
|
| |||||||
18,647,718 | ||||||||
|
| |||||||
| Health Care Equipment & Services – 3.7% |
| ||||||
126,014 | Centene Corp.* | 7,121,051 | ||||||
87,539 | Laboratory Corp. of America Holdings* | 11,238,257 | ||||||
110,502 | Zimmer Biomet Holdings, Inc. | 11,403,806 | ||||||
|
| |||||||
29,763,114 | ||||||||
|
| |||||||
| Insurance – 5.4% |
| ||||||
80,052 | Arch Capital Group Ltd.* | 6,907,687 | ||||||
83,904 | Arthur J. Gallagher & Co. | 4,359,652 | ||||||
244,590 | Hartford Financial Services Group, Inc. (The) | 11,654,713 | ||||||
142,502 | Lincoln National Corp. | 9,443,608 | ||||||
81,177 | W.R. Berkley Corp. | 5,399,082 | ||||||
165,833 | XL Group Ltd. | 6,178,938 | ||||||
|
| |||||||
43,943,680 | ||||||||
|
| |||||||
| Materials – 6.6% |
| ||||||
121,525 | Ball Corp. | 9,122,882 | ||||||
26,547 | Bemis Co., Inc. | 1,269,477 | ||||||
131,255 | Celanese Corp. Series A | 10,335,019 | ||||||
111,964 | FMC Corp. | 6,332,684 | ||||||
592,334 | Freeport-McMoRan, Inc.* | 7,812,885 | ||||||
50,234 | Martin Marietta Materials, Inc. | 11,128,338 | ||||||
198,770 | Steel Dynamics, Inc. | 7,072,237 | ||||||
|
| |||||||
53,073,522 | ||||||||
|
| |||||||
| Media – 2.9% |
| ||||||
202,556 | Discovery Communications, Inc. Class A* | 5,552,060 | ||||||
210,717 | DISH Network Corp. Class A* | 12,206,836 | ||||||
151,608 | Viacom, Inc. Class B | 5,321,440 | ||||||
|
| |||||||
23,080,336 | ||||||||
|
| |||||||
| Pharmaceuticals, Biotechnology & Life Sciences – 1.4% |
| ||||||
54,453 | BioMarin Pharmaceutical, Inc.* | 4,510,887 | ||||||
89,118 | Vertex Pharmaceuticals, Inc.* | 6,565,323 | ||||||
|
| |||||||
11,076,210 | ||||||||
|
| |||||||
| Real Estate Investment Trusts – 12.7% |
| ||||||
518,319 | Brixmor Property Group, Inc. | 12,657,350 | ||||||
93,625 | CyrusOne, Inc. | 4,187,846 | ||||||
594,269 | DDR Corp. | 9,074,488 | ||||||
159,652 | Equity Residential | 10,275,203 | ||||||
81,768 | Federal Realty Investment Trust | 11,620,050 | ||||||
141,351 | Mid-America Apartment Communities, Inc. | 13,841,090 | ||||||
400,662 | RLJ Lodging Trust | 9,812,212 | ||||||
220,329 | Starwood Property Trust, Inc. | 4,836,222 | ||||||
|
|
The accompanying notes are an integral part of these financial statements. | 9 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND
Schedule of Investments (continued)
December 31, 2016
Shares | Description | Value | ||||||
Common Stocks – (continued) | ||||||||
| Real Estate Investment Trusts – (continued) |
| ||||||
103,850 | Taubman Centers, Inc. | $ | 7,677,631 | |||||
554,381 | Two Harbors Investment Corp. | 4,834,202 | ||||||
132,170 | Vornado Realty Trust | 13,794,583 | ||||||
|
| |||||||
102,610,877 | ||||||||
|
| |||||||
| Retailing – 3.9% |
| ||||||
8,577 | AutoZone, Inc.* | 6,774,029 | ||||||
88,846 | Expedia, Inc. | 10,064,475 | ||||||
162,432 | L Brands, Inc. | 10,694,523 | ||||||
164,384 | Sally Beauty Holdings, Inc.* | 4,343,025 | ||||||
|
| |||||||
31,876,052 | ||||||||
|
| |||||||
| Semiconductors & Semiconductor Equipment – 1.8% |
| ||||||
635,917 | Marvell Technology Group Ltd. | 8,820,169 | ||||||
151,920 | Maxim Integrated Products, Inc. | 5,859,554 | ||||||
|
| |||||||
14,679,723 | ||||||||
|
| |||||||
| Software & Services – 5.6% |
| ||||||
72,605 | Check Point Software Technologies Ltd.* | 6,132,218 | ||||||
100,848 | Computer Sciences Corp. | 5,992,388 | ||||||
119,704 | Fidelity National Information Services, Inc. | 9,054,411 | ||||||
105,604 | IAC/InterActiveCorp.* | 6,842,083 | ||||||
286,409 | Pandora Media, Inc.*(a) | 3,734,773 | ||||||
421,803 | Symantec Corp. | 10,076,874 | ||||||
85,275 | Verint Systems, Inc.* | 3,005,944 | ||||||
|
| |||||||
44,838,691 | ||||||||
|
| |||||||
| Technology Hardware & Equipment – 2.4% |
| ||||||
162,440 | Corning, Inc. | 3,942,419 | ||||||
230,109 | Juniper Networks, Inc. | 6,502,880 | ||||||
167,460 | VeriFone Systems, Inc.* | 2,969,066 | ||||||
765,297 | Viavi Solutions, Inc.* | 6,260,129 | ||||||
|
| |||||||
19,674,494 | ||||||||
|
| |||||||
| Telecommunication Services – 0.4% |
| ||||||
57,211 | Level 3 Communications, Inc.* | 3,224,412 | ||||||
|
| |||||||
| Transportation – 2.3% |
| ||||||
576,738 | JetBlue Airways Corp.* | 12,930,466 | ||||||
65,247 | Old Dominion Freight Line, Inc.* | 5,597,540 | ||||||
|
| |||||||
18,528,006 | ||||||||
|
| |||||||
| Utilities – 7.4% |
| ||||||
114,874 | American Water Works Co., Inc. | 8,312,283 | ||||||
98,236 | Atmos Energy Corp. | 7,284,199 | ||||||
361,049 | FirstEnergy Corp. | 11,181,687 | ||||||
199,279 | PG&E Corp. | 12,110,185 | ||||||
120,744 | Pinnacle West Capital Corp. | 9,421,654 | ||||||
79,835 | SCANA Corp. | 5,850,309 | ||||||
58,275 | Sempra Energy | 5,864,796 | ||||||
|
| |||||||
60,025,113 | ||||||||
|
| |||||||
TOTAL COMMON STOCKS | ||||||||
(Cost $692,273,492) | $ | 790,138,663 | ||||||
|
| |||||||
Shares | Distribution Rate | Value | ||||||
Investment Company(b)(c) – 1.0% | ||||||||
Goldman Sachs Financial Square Government Fund — Institutional Shares |
| |||||||
8,285,364 | 0.455 | % | $ | 8,285,364 | ||||
(Cost $8,285,364) | ||||||||
| ||||||||
TOTAL INVESTMENTS BEFORE SECURITIES LENDING REINVESTMENT VEHICLE | ||||||||
(Cost $700,558,856) | $ | 798,424,027 | ||||||
| ||||||||
Securities Lending Reinvestment Vehicle(b)(c) – 0.4% | ||||||||
Goldman Sachs Financial Square Government Fund — Institutional Shares |
| |||||||
3,827,250 | 0.455 | % | $ | 3,827,250 | ||||
(Cost $3,827,250) | ||||||||
| ||||||||
TOTAL INVESTMENTS – 99.2% | ||||||||
(Cost $704,386,106) | $ | 802,251,277 | ||||||
| ||||||||
OTHER ASSETS IN EXCESS OF LIABILITIES – 0.8% |
| 6,199,310 | ||||||
| ||||||||
NET ASSETS – 100.0% | $ | 808,450,587 | ||||||
|
The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. | ||
* | Non-income producing security. | |
(a) | All or a portion of security is on loan. | |
(b) | Variable rate security. Interest rate or distribution rate disclosed is that which is in effect on December 31, 2016. | |
(c) | Represents an affiliated issuer. |
10 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND
Statement of Assets and Liabilities
December 31, 2016
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $692,273,492)(a) | $ | 790,138,663 | ||
Investments in affiliated issuers, at value (cost $8,285,364) | 8,285,364 | |||
Investments in affiliated securities lending reinvestment vehicle, at value which equals cost | 3,827,250 | |||
Cash | 12,259,724 | |||
Receivables: | ||||
Dividends | 1,192,220 | |||
Investments sold | 107,347 | |||
Fund shares sold | 42,447 | |||
Reimbursement from investment adviser | 534 | |||
Other assets | 465 | |||
Total assets | 815,854,014 | |||
Liabilities: | ||||
Payables: | ||||
Payable upon return of securities loaned | 3,827,250 | |||
Investments purchased | 1,808,909 | |||
Fund shares redeemed | 1,059,542 | |||
Management fees | 530,011 | |||
Distribution and Service fees and Transfer Agency fees | 93,072 | |||
Accrued expenses | 84,643 | |||
Total liabilities | 7,403,427 | |||
Net Assets: | ||||
Paid-in capital | 744,440,019 | |||
Undistributed net investment income | 1,572,110 | |||
Accumulated net realized loss | (35,426,713 | ) | ||
Net unrealized gain | 97,865,171 | |||
NET ASSETS | $ | 808,450,587 | ||
Net Assets: | ||||
Institutional | $ | 437,084,704 | ||
Service | 371,365,883 | |||
Total Net Assets | $ | 808,450,587 | ||
Shares outstanding $0.001 par value (unlimited shares authorized): | ||||
Institutional | 26,930,725 | |||
Service | 22,850,117 | |||
Net asset value, offering and redemption price per share: | ||||
Institutional | $16.23 | |||
Service | 16.25 |
(a) | Includes loaned securities having a market value of $3,694,005. |
The accompanying notes are an integral part of these financial statements. | 11 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND
Statement of Operations
For the Fiscal Year Ended December 31, 2016
Investment income: | ||||
Dividends — unaffiliated issuers (net of foreign taxes withheld of $17,133) | $ | 14,847,503 | ||
Dividends — affiliated issuers | 16,431 | |||
Total investment income | 14,863,934 | |||
Expenses: | ||||
Management fees | 6,258,697 | |||
Distribution and Service fees — Service Shares | 788,155 | |||
Printing and mailing costs | 210,257 | |||
Transfer Agency fees(a) | 156,454 | |||
Custody, accounting and administrative services | 80,672 | |||
Professional fees | 78,433 | |||
Trustee fees | 19,149 | |||
Other | 27,526 | |||
Total expenses | 7,619,343 | |||
Less — expense reductions | (269,445 | ) | ||
Net expenses | 7,349,898 | |||
NET INVESTMENT INCOME | 7,514,036 | |||
Realized and unrealized gain (loss): | ||||
Net realized loss from investments (including commissions recaptured of $49,087) | (12,111,930 | ) | ||
Net change in unrealized gain on investments | 101,468,808 | |||
Net realized and unrealized gain | 89,356,878 | |||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 96,870,914 |
(a) Institutional and Service Shares incurred Transfer Agency fees of $93,407 and $63,047, respectively.
12 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND
Statements of Changes in Net Assets
For the Fiscal Year Ended December 31, 2016 | For the Fiscal Year Ended December 31, 2015 | |||||||
From operations: | ||||||||
Net investment income | $ | 7,514,036 | $ | 6,217,364 | ||||
Net realized gain (loss) | (12,111,930 | ) | 24,622,227 | |||||
Net change in unrealized gain (loss) | 101,468,808 | (116,718,047 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 96,870,914 | (85,878,456 | ) | |||||
Distributions to shareholders: | ||||||||
From net investment income | ||||||||
Institutional Shares | (5,637,619 | ) | (2,359,711 | ) | ||||
Service Shares | (4,045,785 | ) | (329,903 | ) | ||||
From net realized gains | ||||||||
Institutional Shares | (227,729 | ) | (42,488,374 | ) | ||||
Service Shares | (194,596 | ) | (21,063,319 | ) | ||||
Total distributions to shareholders | (10,105,729 | ) | (66,241,307 | ) | ||||
From share transactions: | ||||||||
Proceeds from sales of shares | 139,251,803 | 71,780,808 | ||||||
Reinvestment of distributions | 10,105,729 | 66,241,307 | ||||||
Cost of shares redeemed | (228,675,673 | ) | (239,467,354 | ) | ||||
Net decrease in net assets resulting from share transactions | (79,318,141 | ) | (101,445,239 | ) | ||||
TOTAL INCREASE (DECREASE) | 7,447,044 | (253,565,002 | ) | |||||
Net assets: | ||||||||
Beginning of year | 801,003,543 | 1,054,568,545 | ||||||
End of year | $ | 808,450,587 | $ | 801,003,543 | ||||
Undistributed net investment income | $ | 1,572,110 | $ | 3,981,811 |
The accompanying notes are an integral part of these financial statements. | 13 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Year
Income (loss) from investment operations | Distributions to shareholders | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year - Share Class | Net asset value, beginning of year | Net investment income(a) | Net realized and unrealized gain (loss) | Total from investment operations | From net investment income | From net realized gain | Total distributions | Net asset value, end of year | Total return(b) | Net assets, end of year (in 000s) | Ratio of net expenses to average net assets | Ratio of total expenses to average net assets | Ratio of net investment income to average net assets | Portfolio turnover rate(c) | ||||||||||||||||||||||||||||||||||||||||||
FOR THE FISCAL YEARS ENDED DECEMBER 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2016 - Institutional | $ | 14.49 | $ | 0.16 | $ | 1.80 | $ | 1.96 | $ | (0.21 | ) | $ | (0.01 | ) | $ | (0.22 | ) | $ | 16.23 | 13.49 | % | $ | 437,085 | 0.84 | % | 0.87 | % | 1.08 | % | 149 | % | |||||||||||||||||||||||||
2016 - Service | 14.51 | 0.12 | 1.81 | 1.93 | (0.18 | ) | (0.01 | ) | (0.19 | ) | 16.25 | 13.24 | 371,366 | 1.09 | 1.12 | 0.78 | 149 | |||||||||||||||||||||||||||||||||||||||
2015 - Institutional | 17.43 | 0.13 | (1.75 | ) | (1.62 | ) | (0.07 | ) | (1.25 | ) | (1.32 | ) | 14.49 | (9.24 | ) | 535,459 | 0.84 | 0.87 | 0.74 | 94 | ||||||||||||||||||||||||||||||||||||
2015 - Service | 17.45 | 0.08 | (1.75 | ) | (1.67 | ) | (0.02 | ) | (1.25 | ) | (1.27 | ) | 14.51 | (9.52 | ) | 265,545 | 1.09 | 1.12 | 0.48 | 94 | ||||||||||||||||||||||||||||||||||||
2014 - Institutional | 18.64 | 0.12 | 2.31 | 2.43 | (0.21 | ) | (3.43 | ) | (3.64 | ) | 17.43 | 13.57 | 692,068 | 0.83 | 0.87 | 0.62 | 88 | |||||||||||||||||||||||||||||||||||||||
2014 - Service | 18.66 | 0.07 | 2.31 | 2.38 | (0.16 | ) | (3.43 | ) | (3.59 | ) | 17.45 | 13.29 | 362,501 | 1.08 | 1.12 | 0.38 | 88 | |||||||||||||||||||||||||||||||||||||||
2013 - Institutional | 15.33 | 0.13 | 4.88 | 5.01 | (0.16 | ) | (1.54 | ) | (1.70 | ) | 18.64 | 32.89 | 695,832 | 0.83 | 0.86 | 0.74 | 108 | |||||||||||||||||||||||||||||||||||||||
2013 - Service | 15.35 | 0.09 | 4.88 | 4.97 | (0.12 | ) | (1.54 | ) | (1.66 | ) | 18.66 | 32.56 | 319,524 | 1.08 | 1.11 | 0.51 | 108 | |||||||||||||||||||||||||||||||||||||||
2012 - Institutional | 13.09 | 0.18 | (d) | 2.24 | 2.42 | (0.18 | ) | — | (0.18 | ) | 15.33 | 18.41 | 601,620 | 0.84 | 0.87 | 1.24 | (d) | 79 | ||||||||||||||||||||||||||||||||||||||
2012 - Service | 13.11 | 0.15 | (d) | 2.23 | 2.38 | (0.14 | ) | — | (0.14 | ) | 15.35 | 18.13 | 221,917 | 1.09 | 1.12 | 1.05 | (d) | 79 |
(a) | Calculated based on the average shares outstanding methodology. |
(b) | Assumes investment at the net asset value at the beginning of the year, reinvestment of all distributions, and a complete redemption of the investment at the net asset value at the end of the year. |
(c) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short term investments. If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
(d) | Reflects income recognized from special dividends which amounted to $0.04 per share and 0.31% of average net assets. |
The accompanying notes are an integral part of these financial statements. | 14 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND
Notes to Financial Statements
December 31, 2016
1. ORGANIZATION
Goldman Sachs Variable Insurance Trust (the “Trust” or “VIT”) is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company. The Trust includes the Goldman Sachs Mid Cap Value Fund (the “Fund”). The Fund is a diversified portfolio under the Act offering two classes of shares — Institutional and Service Shares. Shares of the Trust are offered to separate accounts of participating life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies.
Goldman Sachs Asset Management, L.P. (“GSAM”), an affiliate of Goldman, Sachs & Co. (“Goldman Sachs”), serves as investment adviser to the Fund pursuant to a management agreement (the “Agreement”) with the Trust.
2. SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and require management to make estimates and assumptions that may affect the reported amounts and disclosures. Actual results may differ from those estimates and assumptions.
A. Investment Valuation — The Fund’s valuation policy is to value investments at fair value.
B. Investment Income and Investments — Investment income includes interest income, dividend income, net of any foreign withholding taxes, less any amounts reclaimable, and securities lending income. Interest income is accrued daily and adjusted for amortization of premiums and accretion of discounts. Dividend income is recognized on ex-dividend date or, for certain foreign securities, as soon as such information is obtained subsequent to the ex-dividend date. Investment transactions are reflected on trade date. Realized gains and losses are calculated using identified cost. Investment transactions are recorded on the following business day for daily net asset value (“NAV”) calculations. Any foreign capital gains tax is accrued daily based upon net unrealized gains, and is payable upon sale of such investments. Distributions received from the Fund’s investments in United States (“U.S.”) real estate investment trusts (“REITs”) may be characterized as ordinary income, net capital gain or a return of capital. A return of capital is recorded by the Fund as a reduction to the cost basis of the REIT.
C. Class Allocations and Expenses — Investment income, realized and unrealized gain (loss), and non-class specific expenses of the Fund are allocated daily based upon the proportion of net assets of each class. Non-class specific expenses directly incurred by the Fund are charged to the Fund, while such expenses incurred by the Trust are allocated across the Fund on a straight-line and/or pro-rata basis depending upon the nature of the expenses. Class specific expenses, where applicable, are borne by the respective share classes and include Distribution and Service and Transfer Agency fees.
D. Federal Taxes and Distributions to Shareholders — It is the Fund’s policy to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Code”), applicable to regulated investment companies (mutual funds) and to distribute each year substantially all of its investment company taxable income and capital gains to its shareholders. Accordingly, the Fund is not required to make any provisions for the payment of federal income tax. Distributions to shareholders are recorded on the ex-dividend date. Income and capital gains distributions, if any, are declared and paid annually.
Net capital losses are carried forward to future fiscal years and may be used to the extent allowed by the Code to offset any future capital gains. Losses that are carried forward will retain their character as either short-term or long-term capital losses. Utilization of capital loss carryforwards will reduce the requirement of future capital gains distributions.
The characterization of distributions to shareholders for financial reporting purposes is determined in accordance with federal income tax rules, which may differ from GAAP. The source of the Fund’s distributions may be shown in the accompanying financial statements as either from net investment income, net realized gain or capital. Certain components of the Fund’s net assets on the Statement of Assets and Liabilities reflect permanent GAAP/tax differences based on the appropriate tax character.
E. Commission Recapture — GSAM, on behalf of certain Funds, may direct portfolio trades, subject to seeking best execution, to various brokers who have agreed to rebate a portion of the commissions generated. Such rebates are made directly to the Fund as cash payments and are included in net realized gain (loss) from investments on the Statement of Operations.
15
GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND
Notes to Financial Statements (continued)
December 31, 2016
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS
The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The levels used for classifying investments are not necessarily an indication of the risk associated with investing in these investments. The three levels of the fair value hierarchy are described below:
Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 — Quoted prices in markets that are not active or financial instruments for which significant inputs are observable (including, but not limited to, quoted prices for similar investments, interest rates, foreign exchange rates, volatility and credit spreads), either directly or indirectly;
Level 3 — Prices or valuations that require significant unobservable inputs (including GSAM’s assumptions in determining fair value measurement).
Changes in valuation techniques may result in transfers into or out of an assigned level within the hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value hierarchy resulting from such changes are deemed to have occurred as of the beginning of the reporting period.
The Board of Trustees (“Trustees”) has approved Valuation Procedures that govern the valuation of the portfolio investments held by the Fund, including investments for which market quotations are not readily available. The Trustees have delegated to GSAM day-to-day responsibility for implementing and maintaining internal controls and procedures related to the valuation of the Fund’s portfolio investments. To assess the continuing appropriateness of pricing sources and methodologies, GSAM regularly performs price verification procedures and issues challenges as necessary to third party pricing vendors or brokers, and any differences are reviewed in accordance with the Valuation Procedures.
A. Level 1 and Level 2 Fair Value Investments — The valuation techniques and significant inputs used in determining the fair values for investments classified as Level 1 and Level 2 are as follows:
Equity Securities — Equity securities traded on a U.S. securities exchange or the NASDAQ system, or those located on certain foreign exchanges, including but not limited to the Americas, are valued daily at their last sale price or official closing price on the principal exchange or system on which they are traded. If there is no sale or official closing price or such price is believed by GSAM to not represent fair value, equity securities are valued at the last bid price for long positions and at the last ask price for short positions. To the extent these investments are actively traded, they are classified as Level 1 of the fair value hierarchy, otherwise they are generally classified as Level 2.
Unlisted equity securities for which market quotations are available are valued at the last sale price on the valuation date, or if no sale occurs, at the last bid price. Securities traded on certain foreign securities exchanges are valued daily at fair value determined by an independent fair value service (if available) under Valuation Procedures approved by the Trustees and consistent with applicable regulatory guidance. The independent fair value service takes into account multiple factors including, but not limited to, movements in the securities markets, certain depositary receipts, futures contracts and foreign currency exchange rates that have occurred subsequent to the close of the foreign securities exchange. These investments are generally classified as Level 2 of the fair value hierarchy.
Money Market Funds — Investments in the Goldman Sachs Financial Square Government Fund (“Underlying Fund”) are valued at the NAV of the Institutional Share class on the day of valuation. These investments are generally classified as Level 1 of the fair value hierarchy. For information regarding an Underlying Fund’s accounting policies and investment holdings, please see the Underlying Fund’s shareholder report.
B. Level 3 Fair Value Investments — To the extent that significant inputs to valuation models and other alternative pricing sources are unobservable, or if quotations are not readily available, or if GSAM believes that such quotations do not accurately
16
GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS (continued)
reflect fair value, the fair value of the Fund’s investments may be determined under Valuation Procedures approved by the Trustees. GSAM, consistent with its procedures and applicable regulatory guidance, may make an adjustment to the most recent valuation prices of either domestic or foreign securities in light of significant events to reflect what it believes to be the fair value of the securities at the time of determining the Fund’s NAV. Significant events which could affect a large number of securities in a particular market may include, but are not limited to: significant fluctuations in U.S. or foreign markets; market dislocations; market disruptions; or unscheduled market closings. Significant events which could also affect a single issuer may include, but are not limited to: corporate actions such as reorganizations, mergers and buy-outs; ratings downgrades; and bankruptcies.
C. Fair Value Hierarchy — The following is a summary of the Fund’s investments classified in the fair value hierarchy as of December 31, 2016:
Investment Type | Level 1 | Level 2 | Level 3 | |||||||||
Assets | ||||||||||||
Common Stock and/or Other Equity Investments(a) | ||||||||||||
Asia | $ | 6,132,218 | $ | — | $ | — | ||||||
North America | 784,006,445 | — | — | |||||||||
Investment Company | 8,285,364 | — | — | |||||||||
Securities Lending Reinvestment Vehicle | 3,827,250 | — | — | |||||||||
Total | $ | 802,251,277 | $ | — | $ | — |
(a) | Amounts are disclosed by continent to highlight the impact of time zone differences between local market close and the calculation of NAV. Security valuations are based on the principal exchange or system on which they are traded, which may differ from country of domicile noted in the table. |
For further information regarding security characteristics, see the Schedule of Investments.
4. AGREEMENTS AND AFFILIATED TRANSACTIONS
A. Management Agreement — Under the Agreement, GSAM manages the Fund, subject to the general supervision of the Trustees.
As compensation for the services rendered pursuant to the Agreement, the assumption of the expenses related thereto and administration of the Fund’s business affairs, including providing facilities, GSAM is entitled to a management fee, accrued daily and paid monthly, equal to an annual percentage rate of the Fund’s average daily net assets.
For the fiscal year ended December 31, 2016, contractual and effective net management fees with GSAM were at the following rates:
Contractual Management Rate | ||||||||||||||||||||||
First $2 billion | Next $3 billion | Next $3 billion | Over $8 billion | Effective Rate | Effective Net Management | |||||||||||||||||
0.80 | % | 0.72 | % | 0.68 | % | 0.67 | % | 0.80 | % | 0.77 | %* |
^ | Effective Net Management Rate includes the impact of management fee waivers of affiliated Underlying Funds, if any. |
* | GSAM agreed to waive a portion of its management fee in order to achieve a net management rate, as defined in the Fund’s most recent prospectus. This waiver will be effective through at least April 29, 2017, and prior to such date GSAM may not terminate the arrangement without approval of the Trustees. For the fiscal year ended December 31, 2016, GSAM waived $234,709 of its management fee. |
The Fund invests in Institutional Shares of the Goldman Sachs Financial Square Government Fund, which is an affiliated Underlying Fund. GSAM has agreed to waive a portion of its management fee payable by the Fund in an amount equal to the management fee it earns as an investment adviser to any of the affiliated Underlying Funds in which the Fund invests. For the fiscal year ended December 31, 2016, GSAM waived $8,489 of the Fund’s management fee.
17
GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND
Notes to Financial Statements (continued)
December 31, 2016
4. AGREEMENTS AND AFFILIATED TRANSACTIONS (continued)
B. Distribution and Service Plan — The Trust, on behalf of the Service Shares of the Fund, has adopted a Distribution and Service Plan (the “Plan”). Under the Plan, Goldman Sachs, which serves as distributor (the “Distributor”), is entitled to a fee accrued daily and paid monthly, for distribution services and personal and account maintenance services, which may then be paid by Goldman Sachs to authorized dealers, equal to, on an annual basis, 0.25% of the Fund’s average daily net assets attributable to Service Shares.
C. Transfer Agency Agreement — Goldman Sachs also serves as the transfer agent of the Fund for a fee pursuant to the Transfer Agency Agreement. The fees charged for such transfer agency services are accrued daily and paid monthly at an annual rate of 0.02% of the average daily net assets of Institutional and Service Shares.
D. Other Expense Agreements and Affiliated Transactions — GSAM has agreed to limit certain “Other Expenses” of the Fund (excluding acquired fund fees and expenses, transfer agency fees and expenses, taxes, interest, brokerage fees, shareholder meeting, litigation, indemnification and extraordinary expenses) to the extent such expenses exceed, on an annual basis, a percentage rate of the average daily net assets of the Fund. Such Other Expense reimbursements, if any, are accrued daily and paid monthly. In addition, the Fund is not obligated to reimburse GSAM for prior fiscal year expense reimbursements, if any. The Other Expense limitation as an annual percentage rate of average daily net assets for the Fund is 0.054%. The Other Expense limitation will remain in place through at least April 29, 2017, and prior to such date GSAM may not terminate the arrangement without the approval of the Trustees. For the fiscal year ended December 31, 2016, GSAM reimbursed $534 to the Fund. In addition, the Fund has entered into certain offset arrangements with the custodian and the transfer agent, which may result in a reduction of the Fund’s expenses and are received irrespective of the application of the “Other Expense” limitation described above. For the fiscal year ended December 31, 2016, custody fee credits were $25,713.
E. Line of Credit Facility — As of December 31, 2016, the Fund participated in a $1,100,000,000 committed, unsecured revolving line of credit facility (the “facility”) together with other funds of the Trust and certain registered investment companies having management agreements with GSAM or its affiliates. This facility is to be used for temporary emergency purposes, or to allow for an orderly liquidation of securities to meet redemption requests. The interest rate on borrowings is based on the federal funds rate. The facility also requires a fee to be paid by the Fund based on the amount of the commitment that has not been utilized. For the fiscal year ended December 31, 2016, the Fund did not have any borrowings under the facility.
F. Other Transactions with Affiliates — For the fiscal year ended December 31, 2016, Goldman Sachs earned $66,204 in brokerage commissions from portfolio transactions.
The following table provides information about the Fund’s investment in the Goldman Sachs Financial Square Government Fund as of and for the fiscal year ended December 31, 2016:
Market Value 12/31/15 | Purchases at Cost | Proceeds from Sales | Market Value 12/31/16 | Dividend Income | ||||||||||||||
$ | — | $ | 149,234,660 | $ | (140,949,296 | ) | $ | 8,285,364 | $ | 16,431 |
5. PORTFOLIO SECURITIES TRANSACTIONS
The cost of purchases and proceeds from sales and maturities of long-term securities for the fiscal year ended December 31, 2016 were $1,126,794,668 and $1,199,768,367, respectively.
18
GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND
6. SECURITIES LENDING
The Fund may lend its securities through a securities lending agent, the Bank of New York Mellon (“BNYM”), to certain qualified borrowers. In accordance with the Fund’s securities lending procedures, the Fund receives cash collateral at least equal to the market value of the securities on loan. The market value of the loaned securities is determined at the close of business of the Fund, at their last sale price or official closing price on the principal exchange or system on which they are traded, and any additional required collateral is delivered to the Fund on the next business day. As with other extensions of credit, the Fund may experience delay in the recovery of its securities or incur a loss should the borrower of the securities breach its agreement with the Fund or become insolvent at a time when the collateral is insufficient to cover the cost of repurchasing securities on loan. Dividend income received from securities on loan may not be subject to withholding taxes and therefore withholding taxes paid may differ from the amounts listed in the Statement of Operations. Loans of securities are terminable at any time and as such 1) the remaining contractual maturities of the outstanding securities lending transactions are considered to be overnight and continuous and 2) the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.
The Fund invests the cash collateral received in connection with securities lending transactions in the Goldman Sachs Financial Square Government Fund (“Government Money Market Fund”), an affiliated series of the Trust. The Government Money Market Fund is registered under the Act as an open end investment company, is subject to Rule 2a-7 under the Act, and is managed by GSAM, for which GSAM may receive an investment advisory fee of up to 0.205% on an annualized basis of the average daily net assets of the Government Money Market Fund.
In the event of a default by a borrower with respect to any loan, BNYM may exercise any and all remedies provided under the applicable borrower agreement to make the Fund whole. These remedies include purchasing replacement securities by applying the collateral held from the defaulting broker against the purchase cost of the replacement securities. If BNYM is unable to purchase replacement securities, BNYM will indemnify the Fund by paying the Fund an amount equal to the market value of the securities loaned minus the value of cash collateral received from the borrower for the loan, subject to an exclusion for any shortfalls resulting from a loss of value in such cash collateral due to reinvestment risk. The amounts of the Fund’s overnight and continuous agreements collateralized by common stocks which represent the gross amounts of recognized liabilities for securities lending transactions outstanding as of December 31, 2016 are disclosed as “Payable upon return of securities loaned” on the Statement of Assets and Liabilities.
Both the Fund and BNYM received compensation relating to the lending of the Fund’s securities. The amounts earned, if any, by the Fund for the fiscal year ended December 31, 2016 are reported under Investment Income on the Statement of Operations.
The following table provides information about the Fund’s investment in the Government Money Market Fund for the fiscal year ended December 31, 2016:
Market Value | Purchases | Proceeds | Market Value | |||||||||||
$— | $ | 18,441,579 | $ | (14,614,329 | ) | $ | 3,827,250 |
7. TAX INFORMATION
The tax character of distributions paid during the fiscal years ended December 31, 2015 and December 31, 2016 was as follows:
2015 | 2016 | |||||||
Distributions paid from: | ||||||||
Ordinary income | $ | 19,814,139 | $ | 9,870,345 | ||||
Net long-term capital gains | 46,427,168 | 235,384 | ||||||
Total taxable distributions | $ | 66,241,307 | $ | 10,105,729 |
19
GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND
Notes to Financial Statements (continued)
December 31, 2016
7. TAX INFORMATION (continued)
As of December 31, 2016, the components of accumulated earnings (losses) on a tax-basis were as follows:
Undistributed ordinary income — net | $ | 1,251,287 | ||
Capital loss carryforwards: | ||||
Perpetual short-term | (17,207,278 | ) | ||
Perpetual long-term | (12,844,650 | ) | ||
Total capital loss carryforwards | $ | (30,051,928 | ) | |
Timing differences (Certain REIT Adjustments) | 233,580 | |||
Unrealized gains — net | 92,577,629 | |||
Total accumulated gains — net | $ | 64,010,568 |
As of December 31, 2016, the Fund’s aggregate security unrealized gains and losses based on cost for U.S. federal income tax purposes were as follows:
Tax cost | $ | 709,673,648 | ||
Gross unrealized gain | 106,248,856 | |||
Gross unrealized loss | (13,671,227 | ) | ||
Net unrealized security gain | $ | 92,577,629 |
The difference between GAAP-basis and tax-basis unrealized gains (losses) is attributable primarily to wash sales and differences in the tax treatment of underlying fund investments.
In order to present certain components of the Fund’s capital accounts on a tax-basis, the Fund has reclassified $240,333 from undistributed net investment income to accumulated net realized gain (loss). This reclassification has no impact on the NAV of the Fund and results primarily from dividend resignations and differences in the tax treatment of underlying fund investments.
GSAM has reviewed the Fund’s tax positions for all open tax years (the current and prior three years, as applicable) and has concluded that no provision for income tax is required in the Fund’s financial statements. Such open tax years remain subject to examination and adjustment by tax authorities.
8. OTHER RISKS
The Fund’s risks include, but are not limited to, the following:
Investments in Other Investment Companies — As a shareholder of another investment company, including an exchange-traded fund (“ETF”), the Fund will indirectly bear its proportionate share of any net management fees and other expenses paid by such other investment companies, in addition to the fees and expenses regularly borne by the Fund. ETFs are subject to risks that do not apply to conventional mutual funds, including but not limited to the following: (i) the market price of the ETF’s shares may trade at a premium or a discount to their NAV; and (ii) an active trading market for an ETF’s shares may not develop or be maintained.
Large Shareholder Transactions Risk — The Fund may experience adverse effects when certain large shareholders, such as other funds, participating insurance companies, accounts and Goldman Sachs affiliates, purchase or redeem large amounts of shares of the Fund. Such large shareholder redemptions may cause the Fund to sell portfolio securities at times when it would not otherwise do so, which may negatively impact the Fund’s NAV and liquidity. These transactions may also accelerate the realization of taxable income to shareholders if such sales of investments resulted in gains, and may also increase transaction costs. In addition,
20
GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND
8. OTHER RISKS (continued)
a large redemption could result in the Fund’s current expenses being allocated over a smaller asset base, leading to an increase in the Fund’s expense ratio. Similarly, large Fund share purchases may adversely affect the Fund’s performance to the extent that the Fund is delayed in investing new cash and is required to maintain a larger cash position than it ordinarily would.
Liquidity Risk — The Fund may make investments that are illiquid or that may become less liquid in response to market developments or adverse investor perceptions. Illiquid investments may be more difficult to value. Liquidity risk may also refer to the risk that the Fund will not be able to pay redemption proceeds within the allowable time period because of unusual market conditions, an unusually high volume of redemption requests, or other reasons. To meet redemption requests, the Fund may be forced to sell investments at an unfavorable time and/or under unfavorable conditions.
Market and Credit Risks — In the normal course of business, the Fund trades financial instruments and enters into financial transactions where risk of potential loss exists due to changes in the market (market risk). Additionally, the Fund may also be exposed to credit risk in the event that an issuer or guarantor fails to perform or that an institution or entity with which the Fund has unsettled or open transactions defaults.
9. INDEMNIFICATIONS
Under the Trust’s organizational documents, its Trustees, officers, employees and agents are indemnified, to the extent permitted by the Act and state law, against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the course of business, the Fund enters into contracts that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, GSAM believes the risk of loss under these arrangements to be remote.
10. SUBSEQUENT EVENTS
Subsequent events after the Statement of Assets and Liabilities date have been evaluated and GSAM has concluded that there is no impact requiring adjustment or disclosure in the financial statements.
21
GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND
Notes to Financial Statements (continued)
December 31, 2016
11. SUMMARY OF SHARE TRANSACTIONS
Share activity is as follows:
For the Fiscal Year Ended December 31, 2016 | For the Fiscal Year Ended December 31, 2015 | |||||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||||
Institutional Shares | ||||||||||||||||
Shares sold | 1,446,124 | $ | 22,058,515 | 1,719,609 | $ | 28,721,424 | ||||||||||
Reinvestment of distributions | 359,837 | 5,865,348 | 3,114,450 | 44,848,085 | ||||||||||||
Shares redeemed | (11,837,314 | ) | (176,540,514 | ) | (7,566,438 | ) | (128,872,863 | ) | ||||||||
(10,031,353 | ) | (148,616,651 | ) | (2,732,379 | ) | (55,303,354 | ) | |||||||||
Service Shares | ||||||||||||||||
Shares sold | 7,792,442 | 117,193,288 | 2,499,549 | 43,059,384 | ||||||||||||
Reinvestment of distributions | 259,668 | 4,240,381 | 1,482,552 | 21,393,222 | ||||||||||||
Shares redeemed | (3,499,961 | ) | (52,135,159 | ) | (6,456,250 | ) | (110,594,491 | ) | ||||||||
4,552,149 | 69,298,510 | (2,474,149 | ) | (46,141,885 | ) | |||||||||||
NET DECREASE | (5,479,204 | ) | $ | (79,318,141 | ) | (5,206,528 | ) | $ | (101,445,239 | ) |
22
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Goldman Sachs Variable Insurance Trust and Shareholders of the
Goldman Sachs Mid Cap Value Fund:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Goldman Sachs Mid Cap Value Fund (the “Fund”), a fund of the Goldman Sachs Variable Insurance Trust, as of December 31, 2016, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities as of December 31, 2016 by correspondence with the custodian, brokers, transfer agent of the underlying funds and the application of alternative auditing procedures where securities purchased confirmations had not been received, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 14, 2017
23
GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND
Fund Expenses — Six Month Period Ended December 31, 2016 (Unaudited) |
As a shareholder of Institutional or Service Shares of the Fund, you incur ongoing costs, including management fees, distribution and/or service (12b-1) fees (with respect to Service Shares) and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Institutional Shares and Service Shares of the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from July 1, 2016 through December 31, 2016, which represents a period of 184 days of a 366 day year.
Actual Expenses — The first line under each share class in the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000=8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes — The second line under each share class in the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual net expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only. As a shareholder of the Fund you do not incur any transaction costs, such as sales charges, redemption fees, or exchange fees, but shareholders of other funds may incur such costs. The second line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds whose shareholders may incur transaction costs.
Share Class | Beginning Account Value 7/01/16 | Ending Account Value | Expenses Paid for the 6 Months Ended 12/31/16* | |||||||||
Institutional | ||||||||||||
Actual | $ | 1,000 | $ | 1,093.80 | $ | 4.42 | ||||||
Hypothetical 5% return | 1,000 | 1,020.91 | + | 4.27 | ||||||||
Service | ||||||||||||
Actual | 1,000 | 1,092.10 | 5.73 | |||||||||
Hypothetical 5% return | 1,000 | 1,019.66 | + | 5.53 |
* | Expenses are calculated using the Fund’s annualized net expense ratio for each class, which represents the ongoing expenses as a percentage of net assets for the six months ended December 31, 2016. Expenses are calculated by multiplying the annualized net expense ratio by the average account value for the period; then multiplying the result by the number of days in the most recent fiscal half year; and then dividing that result by the number of days in the fiscal year. The annualized net expense ratios for the period were 0.84% and 1.09% for Institutional and Service Shares, respectively. |
+ | Hypothetical expenses are based on the Fund’s actual annualized net expense ratios and an assumed rate of return of 5% per year before expenses. |
24
GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND
Trustees and Officers (Unaudited)
Independent Trustees
Name, Address and Age1 | Position(s) Held with the Trust | Term of Office and | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee3 | Other Directorships Held by Trustee4 | |||||||
Ashok N. Bakhru Age: 74 | Chairman of the Board of Trustees | Since 1996 (Trustee since 1991) | Mr. Bakhru is retired. He was formerly Director, Apollo Investment Corporation (a business development company) (2008-2013); President, ABN Associates (a management and financial consulting firm) (1994-1996 and 1998-2012); Trustee, Scholarship America (1998-2005); Trustee, Institute for Higher Education Policy (2003-2008); Director, Private Equity Investors — III and IV (1998-2007), and Equity-Linked Investors II (April 2002-2007).
Chairman of the Board of Trustees — Goldman Sachs Trust; Goldman Sachs Variable Insurance Trust; Goldman Sachs Trust II; Goldman Sachs BDC, Inc.; Goldman Sachs Private Middle Market Credit LLC; Goldman Sachs MLP Income Opportunities Fund; Goldman Sachs MLP and Energy Renaissance Fund; and Goldman Sachs ETF Trust. | 142 | None | |||||||
Kathryn A. Cassidy Age: 62 | Trustee | Since 2015 | Ms. Cassidy is retired. Formerly, she was Advisor to the Chairman (May 2014-December 2014); and Senior Vice President and Treasurer (2008-2014), General Electric Company & General Electric Capital Corporation (technology and financial services companies).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||||
Diana M. Daniels Age: 67 | Trustee | Since 2007 | Ms. Daniels is retired. Formerly, she was Vice President, General Counsel and Secretary, The Washington Post Company (1991-2006). Ms. Daniels is a Trustee Emeritus and serves as a Presidential Councillor of Cornell University (2013-Present); former Member of the Legal Advisory Board, New York Stock Exchange (2003-2006) and of the Corporate Advisory Board, Standish Mellon Management Advisors (2006-2007).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||||
Herbert J. Markley Age: 66 | Trustee | Since 2013 | Mr. Markley is retired. Formerly, he was Executive Vice President, Deere & Company (an agricultural and construction equipment manufacturer) (2007-2009); and President, Agricultural Division, Deere & Company (2001-2007). Previously, Mr. Markley served as an Advisory Board Member of Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust (June 2013-October 2013).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||||
Jessica Palmer Age: 67 | Trustee | Since 2007 | Ms. Palmer is retired. She is Director, Emerson Center for the Arts and Culture (2011-Present); and was formerly a Consultant, Citigroup Human Resources Department (2007-2008); Managing Director, Citigroup Corporate and Investment Banking (previously, Salomon Smith Barney/Salomon Brothers) (1984-2006). Ms. Palmer was a Member of the Board of Trustees of Indian Mountain School (private elementary and secondary school) (2004-2009).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||||
25
GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND
Trustees and Officers (Unaudited) (continued)
Independent Trustees
Name, Address and Age1 | Position(s) Held with the Trust | Term of Office and | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee3 | Other Directorships Held by Trustee4 | |||||||
Roy W. Templin Age: 56 | Trustee | Since 2013 | Mr. Templin is retired. He recently served as Chairman of the Board of Directors, Con-Way Incorporated (a transportation, logistics and supply chain management service company) (2014-2015); and was formerly Executive Vice President and Chief Financial Officer, Whirlpool Corporation (an appliance manufacturer and marketer) (2004-2012). Previously, Mr. Templin served as an Advisory Board Member of Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust (June 2013-October 2013).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||||
Gregory G. Weaver Age: 65 | Trustee | Since 2015 | Mr. Weaver is retired. He is Director, Verizon Communications Inc. (2015-Present); and was formerly Chairman and Chief Executive Officer, Deloitte & Touche LLP (a professional services firm) (2001-2005 and 2012-2014); and Member of the Board of Directors, Deloitte & Touche LLP (2006-2012).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | Verizon Communications Inc. | |||||||
26
GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND
Trustees and Officers (Unaudited) (continued)
Interested Trustees*
Name, Address and Age1 | Position(s) Held with the Trust | Term of Office and | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee3 | Other Directorships Held by Trustee4 | |||||||
James A. McNamara Age: 54 | President and Trustee | Since 2007 | Managing Director, Goldman Sachs (December 1998-Present); Director of Institutional Fund Sales, GSAM (April 1998-December 2000); and Senior Vice President and Manager, Dreyfus Institutional Service Corporation (January 1993- April 1998).
President and Trustee — Goldman Sachs Trust; Goldman Sachs Variable Insurance Trust; Goldman Sachs Trust II; Goldman Sachs MLP Income Opportunities Fund; Goldman Sachs MLP and Energy Renaissance Fund; and Goldman Sachs ETF Trust. | 140 | None | |||||||
Alan A. Shuch Age: 67 | Trustee | Since 1990 | Advisory Director — GSAM (May 1999-Present); Consultant to GSAM (December 1994-May 1999); and Limited Partner, Goldman Sachs (December 1994-May 1999).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||||
* | These persons are considered to be “Interested Trustees” because they hold positions with Goldman Sachs and own securities issued by The Goldman Sachs Group, Inc. Each Interested Trustee holds comparable positions with certain other companies of which Goldman Sachs, GSAM or an affiliate thereof is the investment adviser, administrator and/or distributor. |
1 | Each Trustee may be contacted by writing to the Trustee, c/o Goldman Sachs, 200 West Street, New York, New York, 10282, Attn: Caroline Kraus. Information is provided as of December 31, 2016. Alan A. Shuch served as Trustee until his retirement from the Board on December 31, 2016. |
2 | Subject to such policies as may be adopted by the Board from time-to-time, each Trustee holds office for an indefinite term, until the earliest of: (a) the election of his or her successor; (b) the date the Trustee resigns or is removed by the Board or shareholders, in accordance with the Trust’s Declaration of Trust; or (c) the termination of the Trust. The Board has adopted policies which provide that (a) no Trustee shall hold office for more than 15 years and (b) a Trustee shall retire as of December 31st of the calendar year in which he or she reaches his or her 74th birthday, unless a waiver of such requirement shall have been adopted by a majority of the other Trustees. These policies may be changed by the Trustees without shareholder vote. One Trustee has been granted a waiver from the foregoing policies which permits him to serve until December 31, 2017. |
3 | The Goldman Sachs Fund Complex includes certain other companies listed above for each respective Trustee. As of December 31, 2016, Goldman Sachs Trust consisted of 92 portfolios (89 of which offered shares to the public); Goldman Sachs Variable Insurance Trust consisted of 14 portfolios; Goldman Sachs Trust II consisted of 17 portfolios (16 of which offered shares to the public); Goldman Sachs BDC, Inc., Goldman Sachs Private Middle Market Credit LLC, Goldman Sachs MLP Income Opportunities Fund, and Goldman Sachs MLP and Energy Renaissance Fund each consisted of one portfolio; and Goldman Sachs ETF Trust consisted of 15 portfolios (eight of which offered shares to the public). Goldman Sachs Private Middle Market Credit LLC does not offer shares to the public. |
4 | This column includes only directorships of companies required to report to the Securities and Exchange Commission under the Securities Exchange Act of 1934 (i.e., “public companies”) or other investment companies registered under the Act. |
Additional information about the Trustees is available in the Fund’s Statement of Additional Information, which can be obtained from Goldman Sachs free of charge by calling this toll-free number (in the United States of America): 1-800-526-7384.
27
GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND
Trustees and Officers (Unaudited) (continued)
Officers of the Trust*
Name, Address and Age1 | Position(s) Held with the Trust | Term of Office and | Principal Occupation(s) During Past 5 Years | |||
James A. McNamara 200 West Street New York, NY 10282 Age: 54 | Trustee and President | Since 2007 | Managing Director, Goldman Sachs (December 1998-Present); Director of Institutional Fund Sales, GSAM (April 1998-December 2000); and Senior Vice President and Manager, Dreyfus Institutional Service Corporation (January 1993-April 1998).
President and Trustee — Goldman Sachs Trust; Goldman Sachs Variable Insurance Trust; Goldman Sachs Trust II; Goldman Sachs MLP Income Opportunities Fund; Goldman Sachs MLP and Energy Renaissance Fund; and Goldman Sachs ETF Trust. | |||
Caroline L. Kraus 200 West Street New York, NY 10282 Age: 39 | Secretary | Since 2012 | Managing Director, Goldman Sachs (January 2016-Present); Vice President, Goldman Sachs (August 2006-December 2015); Associate General Counsel, Goldman Sachs (2012-Present); Assistant General Counsel, Goldman Sachs (August 2006-December 2011); and Associate, Weil, Gotshal & Manges, LLP (2002-2006).
Secretary — Goldman Sachs Trust (previously Assistant Secretary (2012)); Goldman Sachs Variable Insurance Trust (previously Assistant Secretary (2012)); Goldman Sachs Trust II; Goldman Sachs BDC, Inc.; Goldman Sachs Private Middle Market Credit LLC; Goldman Sachs Middle Market Lending LLC; Goldman Sachs MLP Income Opportunities Fund; Goldman Sachs MLP and Energy Renaissance Fund; and Goldman Sachs ETF Trust. | |||
Scott M. McHugh 200 West Street New York, NY 10282 Age: 45 | Treasurer, Senior Vice President and Principal Financial Officer | Since 2009 (Principal | Managing Director, Goldman Sachs (January 2016-Present); Vice President, Goldman Sachs (February 2007-December 2015); Assistant Treasurer of certain mutual funds administered by DWS Scudder (2005-2007); and Director (2005-2007), Vice President (2000-2005), and Assistant Vice President (1998-2000), Deutsche Asset Management or its predecessor (1998-2007).
Treasurer, Senior Vice President and Principal Financial Officer — Goldman Sachs Trust; Goldman Sachs Variable Insurance Trust; Goldman Sachs Trust II; Goldman Sachs MLP Income Opportunities Fund; Goldman Sachs MLP and Energy Renaissance Fund; and Goldman Sachs ETF Trust. | |||
* | Represents a partial list of officers of the Trust. Additional information about all the officers is available in the Fund’s Statement of Additional Information, which can be obtained from Goldman Sachs free of charge by calling this toll-free number (in the United States): 1-800-526-7384. |
1 | Information is provided as of December 31, 2016. |
2 | Officers hold office at the pleasure of the Board of Trustees or until their successors are duly elected and qualified. Each officer holds comparable positions with certain other companies of which Goldman Sachs, GSAM or an affiliate thereof is the investment adviser, administrator and/or distributor. |
Goldman Sachs Variable Insurance Trust — Tax Information (Unaudited)
For the year ended December 31, 2016, 81.99% of the dividends paid from net investment company taxable income by the Mid Cap Value Fund qualify for the dividends received deduction available to corporations.
Pursuant to Section 852 of the Internal Revenue Code, the Mid Cap Value Fund designates $235,384 or, if different, the maximum amount allowable, as capital gain dividends paid during the fiscal year ended December 31, 2016.
28
TRUSTEES | OFFICERS | |
Ashok N. Bakhru, Chairman Kathryn A. Cassidy Diana M. Daniels Herbert J. Markley James A. McNamara Jessica Palmer Roy W. Templin Gregory G. Weaver | James A. McNamara, President Scott M. McHugh, Treasurer, Senior Vice President and Principal Financial Officer Caroline L. Kraus, Secretary |
GOLDMAN, SACHS & CO.
Distributor and Transfer Agent
GOLDMAN SACHS ASSET MANAGEMENT, L.P.
Investment Adviser
200 West Street, New York
New York 10282
Visit our web site at www.GSAMFUNDS.com to obtain the most recent month-end returns.
The reports concerning the Fund included in this shareholder report may contain certain forward-looking statements about the factors that may affect the performance of the Fund in the future. These statements are based on Fund management’s predictions and expectations concerning certain future events and their expected impact on the Fund, such as performance of the economy as a whole and of specific industry sectors, changes in the levels of interest rates, the impact of developing world events, and other factors that may influence the future performance of the Fund. Management believes these forward-looking statements to be reasonable, although they are inherently uncertain and difficult to predict. Actual events may cause adjustments in portfolio management strategies from those currently expected to be employed.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the Fund voted proxies relating to portfolio securities for the 12-month period ended December 31 is available (i) without charge, upon request by calling 1-800-621-2550; and (ii) on the Securities and Exchange Commission (“SEC”) web site at http://www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Form N-Qs are available on the SEC’s web site at http://www.sec.gov within 60 days after the Fund’s first and third fiscal quarters. The Fund’s Form N-Qs may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may also be obtained by calling 1-800-SEC-0330. Form N-Qs may be obtained upon request and without charge by calling 1-800-621-2550.
The website links provided are for your convenience only and are not an endorsement or recommendation by GSAM of any of these websites or the products or services offered. GSAM is not responsible for the accuracy and validity of the content of these websites.
Fund holdings and allocations shown are as of December 31, 2016 and may not be representative of future investments. Fund holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities. Current and future holdings are subject to risk.
References to indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only and do not imply that the portfolio will achieve similar results. The index composition may not reflect the manner in which a portfolio is constructed. While an adviser seeks to design a portfolio which reflects appropriate risk and return features, portfolio characteristics may deviate from those of the benchmark.
The Global Industry Classification Standard (“GICS”) was developed by and is the exclusive property and a service mark of Morgan Stanley Capital International Inc. (“MSCI”) and Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. (“S&P”) and is licensed for use by Goldman Sachs. Neither MSCI, S&P nor any other party involved in making or compiling the GICS or any GICS classifications makes any express or implied warranties or representations with respect to such standard or classification (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of such standard or classification. Without limiting any of the foregoing, in no event shall MSCI, S&P, any of their affiliates or any third party involved in making or compiling the GICS or any GICS classifications have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.
The portfolio risk management process includes an effort to monitor and manage risk, but does not imply low risk.
Shares of the Goldman Sachs VIT Funds are offered to separate accounts of participating life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Shares of the Fund are not offered directly to the general public. The variable annuity contracts and variable life insurance policies are described in the separate prospectuses issued by participating insurance companies. You should refer to those prospectuses for information about surrender charges, mortality and expense risk fees and other charges that may be assessed by participating insurance companies under the variable annuity contracts or variable life insurance policies. Such fees or charges, if any, may affect the return you may realize with respect to your investments. Ask your representative for more complete information. Please consider a fund’s objectives, risks and charges and expenses, and read the prospectus carefully before investing. The prospectus contains this and other information about the Fund.
This material is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus or summary prospectus, if applicable. Investors should consider the Fund’s objective, risks, and charges and expenses, and read the summary prospectus, if available, and/or the prospectus carefully before investing or sending money. The summary prospectus, if available, and the prospectus contain this and other information about the Fund and may be obtained from your authorized dealer or from Goldman, Sachs & Co. by calling 1-800-621-2550.
This report is prepared for the general information of contract owners and is not an offer of shares of the Goldman Sachs Variable Insurance Trust — Goldman Sachs Mid Cap Value Fund.
© 2017 Goldman Sachs. All rights reserved.
VITMCVAR-17/80643-TMPL-02/2017-468843
Goldman
Sachs Variable Insurance Trust
Goldman Sachs Government
Money Market Fund
(formerly Goldman Sachs Money Market Fund)
Annual Report
December 31, 2016
You could lose money by investing in the Fund. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. An investment in the Fund is not a deposit of the bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund’s sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.
GOLDMAN SACHS VARIABLE INSURANCE TRUST GOVERNMENT MONEY MARKET FUND
INVESTMENT OBJECTIVE
The Fund seeks to maximize current income to the extent consistent with the preservation of capital and the maintenance of liquidity by investing exclusively in high quality money market instruments.
Portfolio Management Discussion and Analysis
Effective April 15, 2016, the Goldman Sachs VIT Money Market Fund was repositioned and renamed the Goldman Sachs VIT Government Money Market Fund. The repositioned and renamed fund pursues its investment objective by investing only in government securities and repurchase agreements collateralized by government securities.
Below, the Goldman Sachs Money Market Portfolio Management Team discusses the Goldman Sachs Variable Insurance Trust — Goldman Sachs Government Money Market Fund’s (the “Fund) performance and positioning for the 12-month period ended December 31, 2016 (the “Reporting Period”).
How did the Fund perform during the Reporting Period?
The Fund’s Institutional Shares’ standardized 7-day current yield was 0.45% and their standardized 7-day effective yield was also 0.45% as of December 31, 2016. The Institutional Shares’ one-month simple average yield was 0.38% as of December 31, 2016. The Institutional Shares’ 7-day distribution yield as of December 31, 2016 was 0.45%.
The Fund’s Service Shares’ standardized 7-day current yield was 0.20% and their standardized 7-day effective yield was also 0.20% as of December 31, 2016. The Service Shares’ one-month simple average yield was 0.13% as of December 31, 2016. The Service Shares’ 7-day distribution yield as of December 31, 2016 was 0.20%.
The yields represent past performance. Past performance does not guarantee future results. Current performance may be lower or higher than the performance quoted above.
Yields will fluctuate as market conditions change. The yield quotations more closely reflect the current earnings of the Fund than total return quotations.
What economic and market factors most influenced the money markets as a whole during the Reporting Period?
The Reporting Period was one wherein money market yields remained low throughout, as the Federal Reserve (the “Fed”), after making its initial rate hike since 2006 in December 2015, kept interest rates steady until December 2016, when it raised the targeted federal funds rate by 0.25%.
All eyes were on the Fed, with the release of its policy statement, updated economic projections and a press conference following a two-day meeting in March 2016 of particular attention. The statement leaned dovish, as it twice mentioned global economic conditions as a key concern. The projections were also dovish, as the path of interest rates came down, with the median projection then calling for two hikes in 2016, down from four in December 2015. (Dovish language tends to suggest lower interest rates.) Near-term core inflation was unchanged. The press conference was fairly balanced, focusing on global concerns and inflation expectations, which remained lower than the Fed would like, among other topics. However, the Fed was also careful to note that it does not view an overshoot of its inflation target as an acceptable outcome.
Markets reacted accordingly, with rates rallying, the U.S. dollar falling, equities rising and the derivative market reducing the probability of a June 2016 interest rate hike. The Fed clearly signaled more sensitivity to the global economic environment than expected from many market participants.
On the domestic economic front, the labor market performed well, and developments at the end of the first quarter of 2016 maintained the dichotomy between further improvement in the labor market and concerns about global conditions on the part of the Fed leadership. Non-farm payrolls were above consensus expectations. The unemployment rate rose 0.1% to 5.0%, however, this was largely due to an uptick in the participation rate, also by 0.1%, to 63.0%. Average hourly earnings rose more than expected, increasing at a 2.3% year over year pace.
We began 2016 talking of gradually improving economic growth prospects and firming inflation, with a pro-risk stance. This view evolved to become more bearish on risk assets based on the events of the second calendar quarter. More specifically, risk assets
1
GOLDMAN SACHS VARIABLE INSURANCE TRUST GOVERNMENT MONEY MARKET FUND
rallied on stabilization in commodities prices and a decline in perceived risks around slowing Chinese economic growth and U.S. recession. Sovereign bond yields declined during the second quarter of 2016 on easy monetary policy from central banks globally and diminished chances of a Fed interest rate hike in 2016. U.S. non-farm payrolls indicated 287,000 new jobs in June 2016, significantly above market expectations of approximately 180,000. The unemployment rate ticked back down to 4.9%. Still, it remained unclear what the jobs report means for the Fed given limited wage/inflation pressure. The Fed remained focused on downside risk and lack of inflation pressure.
The Fed met in June 2016. While its statement was marginally dovish, and the economic data estimates for Gross Domestic Product (“GDP”), inflation and unemployment, were largely unchanged, the fed funds forecasts shifted in a materially dovish way. Median projections for 2017-2018 as well as the long-run federal funds rate estimate all came down. In addition, the tone of the press conference leaned dovish, with worries about slowing labor market momentum as the key takeaway. Given the small changes to the economic forecasts followed by the larger changes to the fed funds projections, it seems as though this dichotomy can be explained by one of two — or possibly both — ways. One, a dovish shift in the Fed reaction function, or how it interprets and reacts to economic data and market developments. And two, a belief that the U.S. economy’s long-term potential is diminished and therefore may require a lower rate of interest going forward, a theory the Fed had previously been reluctant to embrace.
On June 23, 2016 U.K. voters elected to leave the European Union, popularly known as “Brexit”. As a result, market volatility increased sharply, risk assets weakened and developed market government bonds rallied. Following Brexit, the short-term end of the U.S. Treasury yield curve flattened materially, meaning differentials between yields on various maturities narrowed, as consensus expectations for Fed rate hikes were sharply reduced. Indeed, market probabilities for a rate hike in 2016 declined from approximately 40% to 8% immediately after the Brexit vote. The credit curve widened versus U.S. Treasuries, as increased uncertainty added to already weak investor demand in the run-up to U.S. money market reform, with final implementation to take effect in October 2016.
During the summer of 2016, the agency floater curve steepened, as LIBOR widened and interest in shorter floaters amongst market participants increased. (LIBOR, or the London Inter-Bank Offered Rate, is the interest rate that banks charge each other for short-term loans.) In 2016, the Bank of America Merrill Lynch U.S. Dollar Three-Month LIBOR Constant Maturity Index spiked to its highest level since the 2008 financial crisis. However, unlike in 2008, funding costs for banks did not increase due to market stress. Instead, spread widening, or greater yield differentials, was a result of declining demand, as prime money market funds had been a key source of short-term bank funding. Most of the flows went into government money market funds that can invest in agencies — and may offer higher yields benchmarked to LIBOR — benefiting government yields and reducing pressure on U.S. Treasury yields.
The U.S. Treasury money market yield curve steepened substantially late in 2016 on the heels of the post-U.S. election sell-off, as the market began pricing in higher inflation as a result of greater anticipated fiscal spending. Trump’s election victory was widely seen as potentially marking a regime change in monetary and fiscal policy. The short-term end of the yield curve reacted by rallying and then selling off sharply, unlike the rest of the yield curve, which sold off right away. Toward the very end of the Reporting Period, we saw a flattening of the yield curve, with prices on securities with maturities of 10 to 12 months a bit higher than it had been in the weeks just after the November 2016 election.
Were there any changes to the Fund’s investment strategy during the Reporting Period?
During the Reporting Period, the Fund officially transitioned from a prime money market fund to a government money market fund, effective April 15, 2016. In the months prior to April 15, 2016, we gradually increased the Fund’s holdings of U.S. government securities. To qualify as a government money market fund, the Fund must invest at least 99.5% of its total assets in government securities, cash or repurchase agreements collateralized by government securities or cash. As a government money market fund, the Fund seeks to maintain a stable $1.00 net asset value per share and is not currently permitted to impose liquidity fees and/or redemption gates.
What key factors were responsible for the Fund’s performance during the Reporting Period?
The Fund’s yields remained low during the Reporting Period due primarily to the market factors discussed above. The targeted federal funds rate was maintained within a range of 0.25% and 0.50% through most of the Reporting Period, and, as such, money market yields remained anchored near the same level with little difference between maturities during that time. That said, money market yields as a whole did move modestly higher toward the end of 2016, mainly driven by the interest rate hike by the Fed in December 2016 and expectations for further rate hikes in 2017 on the back of improvement in the labor market, rising wages and potential fiscal policy initiatives following Trump’s victory in the U.S. presidential election in November 2016. Despite movement otherwise in the last months of the calendar year, the money market yield curve, or spectrum of maturities, did flatten during the Reporting Period overall, as shorter-term rates rose more than longer-term rates did. The Fund remained highly liquid throughout.
2
GOLDMAN SACHS VARIABLE INSURANCE TRUST GOVERNMENT MONEY MARKET FUND
During the first quarter of 2016, we had a bias to keep the Fund’s weighted average maturity long and targeted to a 41 to 45 range. We preferred floating rate securities, as, in our view, the market was pricing attractively versus a more aggressive Fed rate hike scenario.
In the second quarter of 2016, we shortened the Fund’s weighted average maturity target range to 30 to 40 days, as we felt yield levels did not offer enough compensation to extend on the money market yield curve. We continued to focus on floating rate securities where we saw what we considered to be attractive opportunities. We also looked to extend duration opportunistically later in the second quarter given dovish messaging from the Fed.
During the late summer of 2016, we were skeptical of a September 2016 rate hike and positioned the fund accordingly. We extended the weighted average maturity of the fund. Our focus during the summer remained on LIBOR floaters. As already mentioned, LIBOR widened out heading into U.S. money market reform, and interest in shorter floaters amongst market participants increased. During the period when the floater curve was steep, we focused on longer, i.e. 12- to 18-month final, three-month LIBOR floaters. As that curve began to flatten in the late summer, we adjusted and expressed this view via shorter, i.e. six-month final, three-month LIBOR floaters.
As LIBOR’s move slowed, the U.S. Treasury money market curve began to offer compelling value, in our view. When the U.S. Treasury money market curve steepened late in 2016 on the heels of the post-election sell-off, we focused more on the longer-term end of the money market U.S. Treasury coupon curve.
We added positions to the Fund late in 2016 that we think may carry relatively well even under a more aggressive Fed hike scenario, which is not afforded by the curve as it stood at the end of the calendar year. The Fund retained, as of December 31, 2016, a sizable allocation to agency LIBOR floaters and repurchase agreements.
We felt comfortable that the Fund was appropriately positioned given the interest rate environment during the Reporting Period. While conditions throughout the Reporting Period did not provide bountiful opportunities to pick up yield, as the interest rate yield curve flattened through most of the Reporting Period, it should be noted that regardless of interest rate conditions, we manage the Fund consistently. Our investment approach has always been tri-fold — to seek preservation of capital, daily liquidity and maximization of yield potential. We manage interest and credit risk daily. Whether interest rates are historically low, high or in-between, we intend to continue to use our actively managed approach to provide the best possible return within the framework of the Fund’s guidelines and objectives.
How did you manage the Fund’s weighted average maturity during the Reporting Period?
On December 31, 2015, the Fund’s weighted average maturity was 52 days. During the first quarter of 2016, we maintained the Fund’s weighted average maturity in a 45 to 55 day range. During the second quarter of 2016, we targeted a weighted average maturity for the Fund in a 30 to 40 day range. During the third quarter, we targeted a weighted average maturity in the 29 to 42 day range. We were slightly short at the beginning of the quarter, but we gradually extended the Fund’s weighted average maturity heading into the Fed’s September 2016 meeting, as we were skeptical of a rate hike being made at that meeting. During the fourth quarter of 2016, we targeted a weighted average maturity for the Fund in the 40 to 60 day range. We had a longer bias toward the end of the year and focused on longer maturity U.S. Treasury securities, as we felt the long-term end of the U.S. Treasury money market curve began to offer compelling value. Throughout, we made adjustments in line with our outlook on interest rates, Fed policy and the shape of the yield curve over the near term. The Fund’s weighted average maturity on December 31, 2016 was 55 days. The weighted average maturity of a money market fund is a measure of its price sensitivity to changes in interest rates. Also known as effective maturity, weighted average maturity measures the weighted average of the maturity date of bonds held by the Fund taking into consideration any available maturity shortening features.
How did you manage the Fund’s weighted average life during the Reporting Period?
The weighted average life of the Fund was 100 days as of December 31, 2016. The weighted average life of a money market fund is a measure of a money market fund’s price sensitivity to changes in liquidity and/or credit risk.
Under amendments to SEC Rule 2a-7 that became effective in May 2010, the maximum allowable weighted average life of a money market fund is 120 days. While one of the goals of the SEC’s money market fund rule is to reinforce conservative investment practices across the money market fund industry, our security selection process has long emphasized conservative investment choices.
3
GOLDMAN SACHS VARIABLE INSURANCE TRUST GOVERNMENT MONEY MARKET FUND
How was the Fund invested during the Reporting Period?
Prior to the repositioning, the Fund had investments in commercial paper, asset-backed commercial paper, U.S. Treasury securities, government agency securities, repurchase agreements, government guaranteed paper, variable rate demand notes, municipal debt, LIBOR floaters and certificates of deposit during the Reporting Period. We focused on securities across the maturity spectrum, from overnight repurchase agreements to securities with one-year maturities. We preferred secured positions to unsecured positions.
During the first half of the Reporting Period, the Fund officially transitioned from a prime money market fund to a government money market fund. The Fund ended the Reporting Period with investments in government agency and U.S. Treasury securities as well as government agency repurchase agreements.
With yields bound in a low range, there was not a lot of dispersion in performance among securities available for purchase. Throughout, though, we stayed true to our investment discipline, favoring liquidity and high quality credits over added yield. The primary focal points for our team are consistently managing interest rate risk and credit risk. We were able to navigate interest rate risk by adjusting the Fund’s weighted average maturity longer or shorter as market conditions shifted and to manage potential credit risk by buying high quality, creditworthy names, strategies which added to the Fund’s performance during the Reporting Period.
Did you make any changes in the Fund’s portfolio during the Reporting Period?
As mentioned earlier, the Fund transitioned from a prime money market fund to a government money market fund during the Reporting Period. As such, the Fund ended the Reporting Period with investments in government agency securities, U.S. Treasury securities and government agency repurchase agreements. Also, as indicated earlier, we made adjustments to the Fund’s weighted average maturity and to specific security type composition allocations based on then-current market conditions, our near-term view, and anticipated and actual Fed monetary policy statements.
What is the Fund’s tactical view and strategy for the months ahead?
At the end of the Reporting Period, we believed a gradual pace of interest rate hikes by the Fed, totaling two or three per year, was the most likely scenario. However, the risks of an earlier move by the Fed have increased, in our view, particularly due to an increased probability of a fiscal package and a continuation of improvement in the labor market, inclusive of rising wages.
Given this view, we did not see much value on the U.S. Treasury coupon curve at the end of the Reporting Period, and so our focus was on shorter agency floaters — both as a hedge against an earlier hike and as an optimal way to use the Fund’s spread duration. (Spread duration is a bond’s or bond portfolio’s price sensitivity to spread changes, wherein spread is the yield differential to U.S. Treasuries.)
We expect to keep the Fund conservatively positioned as we continue to focus on preservation and daily liquidity. We do not believe there is value in sacrificing liquidity in exchange for opportunities that only modestly increase yield potential. We will continue to use our actively managed approach to seek the best possible return within the framework of the Fund’s investment guidelines and objectives. In addition, we will continue to manage interest, liquidity and credit risk daily.
We will, of course, continue to closely monitor economic data, Fed policy, and any shifts in the money market yield curve, as we strive to strategically navigate the interest rate environment.
4
FUND BASICS
FUND COMPOSITION†
Security Type
(Percentage of Net Assets)
† | The Fund is actively managed and, as such, its portfolio composition may differ over time. The percentage shown for each investment category reflects the value (based on amortized cost) of investments in that category as a percentage of net assets. Figures in the above chart may not sum to 100% due to the exclusion of other assets and liabilities. |
5
GOLDMAN SACHS VARIABLE INSURANCE TRUST GOVERNMENT MONEY MARKET FUND
Schedule of Investments
December 31, 2016
Principal Amount | Interest Rate | Maturity Date | Amortized Cost | |||||||||||
U.S. Government Agency Obligations – 33.6% | ||||||||||||||
| Federal Farm Credit Bank |
| ||||||||||||
$ | 2,500,000 | 0.824 | %(a) | 01/20/17 | $ | 2,500,000 | ||||||||
500,000 | 0.732 | (a) | 04/07/17 | 499,995 | ||||||||||
1,200,000 | 0.856 | (a) | 04/25/17 | 1,200,000 | ||||||||||
10,000,000 | 0.815 | (a) | 05/23/17 | 10,000,000 | ||||||||||
300,000 | 0.927 | (a) | 06/13/17 | 300,163 | ||||||||||
350,000 | 0.823 | (a) | 06/15/17 | 350,000 | ||||||||||
2,000,000 | 0.795 | (a) | 06/30/17 | 1,999,960 | ||||||||||
1,000,000 | 0.886 | (a) | 08/01/17 | 999,715 | ||||||||||
300,000 | 0.744 | (a) | 09/15/17 | 299,989 | ||||||||||
| Federal Home Loan Bank |
| ||||||||||||
3,000,000 | 0.678 | (a) | 01/13/17 | 2,999,997 | ||||||||||
2,500,000 | 0.790 | (a) | 01/17/17 | 2,499,898 | ||||||||||
3,500,000 | 0.732 | (a) | 01/25/17 | 3,500,000 | ||||||||||
5,000,000 | 0.711 | (a) | 02/06/17 | 5,000,000 | ||||||||||
500,000 | 0.821 | (a) | 02/07/17 | 499,994 | ||||||||||
5,000,000 | 0.846 | (a) | 02/17/17 | 5,000,000 | ||||||||||
2,700,000 | 0.428 | 02/21/17 | 2,698,394 | |||||||||||
10,000,000 | 0.817 | (a) | 03/03/17 | 10,000,000 | ||||||||||
2,000,000 | 0.872 | (a) | 03/03/17 | 2,000,000 | ||||||||||
1,500,000 | 0.897 | (a) | 03/13/17 | 1,500,000 | ||||||||||
1,500,000 | 0.910 | (a) | 03/16/17 | 1,500,000 | ||||||||||
3,400,000 | 0.919 | (a) | 03/21/17 | 3,400,000 | ||||||||||
3,500,000 | 0.887 | (a) | 03/29/17 | 3,500,000 | ||||||||||
3,000,000 | 0.438 | (a) | 04/03/17 | 3,000,000 | ||||||||||
3,150,000 | 0.743 | (a) | 04/05/17 | 3,150,000 | ||||||||||
3,500,000 | 0.424 | (a) | 04/06/17 | 3,500,000 | ||||||||||
3,500,000 | 0.428 | (a) | 04/07/17 | 3,500,000 | ||||||||||
7,000,000 | 0.448 | (a) | 04/07/17 | 6,999,919 | ||||||||||
1,500,000 | 0.432 | (a) | 04/11/17 | 1,500,000 | ||||||||||
2,450,000 | 0.778 | (a) | 04/13/17 | 2,450,000 | ||||||||||
1,500,000 | 0.782 | (a) | 04/18/17 | 1,500,000 | ||||||||||
3,300,000 | 0.493 | 04/19/17 | 3,295,208 | |||||||||||
7,500,000 | 0.711 | (a) | 04/21/17 | 7,500,000 | ||||||||||
3,800,000 | 0.702 | (a) | 04/25/17 | 3,800,000 | ||||||||||
7,000,000 | 0.841 | (a) | 06/09/17 | 7,000,000 | ||||||||||
1,400,000 | 0.525 | (a) | 06/13/17 | 1,399,950 | ||||||||||
1,350,000 | 0.530 | (a) | 06/13/17 | 1,350,000 | ||||||||||
1,350,000 | 0.535 | (a) | 06/13/17 | 1,350,000 | ||||||||||
2,700,000 | 0.554 | (a) | 06/15/17 | 2,700,000 | ||||||||||
1,500,000 | 0.828 | (a) | 06/15/17 | 1,500,000 | ||||||||||
3,000,000 | 0.642 | (a) | 06/27/17 | 3,000,000 | ||||||||||
1,100,000 | 0.560 | (a) | 07/14/17 | 1,100,000 | ||||||||||
500,000 | 0.694 | (a) | 08/21/17 | 500,000 | ||||||||||
1,000,000 | 0.689 | (a) | 08/22/17 | 1,000,000 | ||||||||||
2,500,000 | 0.900 | (a) | 08/28/17 | 2,499,835 | ||||||||||
3,500,000 | 0.691 | (a) | 09/01/17 | 3,500,000 | ||||||||||
2,000,000 | 0.706 | (a) | 09/06/17 | 2,000,000 | ||||||||||
1,350,000 | 0.554 | (a) | 09/12/17 | 1,350,000 | ||||||||||
2,500,000 | 0.576 | (a) | 10/02/17 | 2,500,000 | ||||||||||
3,000,000 | 0.586 | (a) | 10/02/17 | 3,000,000 | ||||||||||
1,500,000 | 0.708 | (a) | 11/08/17 | 1,500,000 | ||||||||||
1,500,000 | 0.783 | (a) | 12/19/17 | 1,500,000 | ||||||||||
3,000,000 | 0.741 | (a) | 12/26/17 | 3,000,000 | ||||||||||
1,400,000 | 0.782 | (a) | 12/27/17 | 1,400,000 | ||||||||||
|
| |||||||||||||
U.S. Government Agency Obligations – (continued) | ||||||||||||||
| Federal Home Loan Bank (continued) |
| ||||||||||||
$ | 2,000,000 | 0.776 | %(a) | 02/05/18 | $ | 2,000,000 | ||||||||
2,000,000 | 0.752 | (a) | 02/15/18 | 2,000,000 | ||||||||||
3,000,000 | 0.766 | (a) | 02/22/18 | 3,000,000 | ||||||||||
1,430,000 | 0.793 | (a) | 03/15/18 | 1,430,000 | ||||||||||
1,430,000 | 0.800 | (a) | 03/16/18 | 1,429,914 | ||||||||||
4,000,000 | 0.778 | (a) | 03/23/18 | 4,000,000 | ||||||||||
4,000,000 | 0.746 | (a) | 06/19/18 | 4,000,000 | ||||||||||
2,710,000 | 0.766 | (a) | 06/28/18 | 2,710,000 | ||||||||||
| Federal Home Loan Mortgage Corporation |
| ||||||||||||
10,000,000 | 0.744 | (a) | 04/20/17 | 9,999,543 | ||||||||||
6,099,000 | 1.056 | (a) | 04/26/17 | 6,098,808 | ||||||||||
1,434,000 | 1.250 | 05/12/17 | 1,436,939 | |||||||||||
139,000 | 1.000 | 06/29/17 | 139,280 | |||||||||||
3,500,000 | 0.917 | (a) | 12/20/17 | 3,500,000 | ||||||||||
3,000,000 | 0.842 | (a) | 01/08/18 | 3,000,000 | ||||||||||
1,000,000 | 0.844 | (a) | 01/12/18 | 1,000,000 | ||||||||||
| Federal National Mortgage Association |
| ||||||||||||
200,000 | 0.750 | 04/20/17 | 200,058 | |||||||||||
1,994,000 | 5.000 | 05/11/17 | 2,024,022 | |||||||||||
100,000 | 0.609 | 06/01/17 | 99,750 | |||||||||||
735,000 | 5.375 | 06/12/17 | 750,341 | |||||||||||
1,225,000 | 0.759 | (a) | 07/20/17 | 1,224,594 | ||||||||||
|
| |||||||||||||
| TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS | | $ | 195,636,266 | ||||||||||
|
| |||||||||||||
U.S. Treasury Obligations – 18.9% | ||||||||||||||
| United States Treasury Bills |
| ||||||||||||
$ | 1,200,000 | 0.550 | % | 03/16/17 | $ | 1,198,668 | ||||||||
350,000 | 0.519 | 03/23/17 | 349,598 | |||||||||||
50,000 | 0.524 | 03/23/17 | �� | 49,942 | ||||||||||
300,000 | 0.509 | 05/04/17 | 299,488 | |||||||||||
500,000 | 0.514 | 05/04/17 | 499,137 | |||||||||||
40,000 | 0.596 | 05/04/17 | 39,920 | |||||||||||
3,300,000 | 0.514 | 05/11/17 | 3,293,982 | |||||||||||
5,000,000 | 0.545 | 05/11/17 | 4,990,340 | |||||||||||
1,000,000 | 0.560 | 05/11/17 | 998,014 | |||||||||||
100,000 | 0.616 | 05/18/17 | 99,770 | |||||||||||
10,400,000 | 0.637 | 05/18/17 | 10,375,264 | |||||||||||
300,000 | 0.611 | 05/25/17 | 299,280 | |||||||||||
1,200,000 | 0.621 | 05/25/17 | 1,197,072 | |||||||||||
800,000 | 0.626 | 05/25/17 | 798,032 | |||||||||||
2,500,000 | 0.621 | 06/01/17 | 2,493,603 | |||||||||||
10,000 | 0.631 | 06/01/17 | 9,974 | |||||||||||
1,200,000 | 0.619 | 06/08/17 | 1,196,801 | |||||||||||
900,000 | 0.621 | 06/08/17 | 897,591 | |||||||||||
440,000 | 0.652 | 06/22/17 | 438,655 | |||||||||||
| United States Treasury Notes |
| ||||||||||||
100,000 | 0.875 | 02/28/17 | 100,059 | |||||||||||
400,000 | 3.000 | 02/28/17 | 401,600 | |||||||||||
300,000 | 3.250 | 03/31/17 | 301,958 | |||||||||||
3,190,000 | 4.500 | 05/15/17 | 3,235,778 | |||||||||||
690,000 | 0.625 | 05/31/17 | 689,982 | |||||||||||
|
|
6 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST GOVERNMENT MONEY MARKET FUND
Principal Amount | Interest Rate | Maturity Date | Amortized Cost | |||||||||||
U.S. Treasury Obligations – (continued) | ||||||||||||||
| United States Treasury Notes (continued) |
| ||||||||||||
$ | 4,600,000 | 2.750 | % | 05/31/17 | $ | 4,640,725 | ||||||||
10,700,000 | 0.875 | 06/15/17 | 10,711,847 | |||||||||||
1,090,000 | 0.625 | 06/30/17 | 1,090,178 | |||||||||||
4,500,000 | 0.750 | 06/30/17 | 4,502,667 | |||||||||||
4,000,000 | 2.500 | 06/30/17 | 4,036,710 | |||||||||||
1,600,000 | 0.875 | 07/15/17 | 1,601,548 | |||||||||||
200,000 | 0.500 | 07/31/17 | 199,747 | |||||||||||
2,550,000 | 0.875 | 08/15/17 | 2,553,100 | |||||||||||
8,410,000 | 4.750 | 08/15/17 | 8,621,196 | |||||||||||
5,200,000 | 0.625 | 08/31/17 | 5,196,442 | |||||||||||
10,500,000 | 1.875 | 08/31/17 | 10,581,475 | |||||||||||
4,100,000 | 1.000 | 09/15/17 | 4,105,821 | |||||||||||
4,300,000 | 0.625 | 09/30/17 | 4,293,776 | |||||||||||
3,000,000 | 1.875 | (b) | 09/30/17 | 3,024,183 | ||||||||||
2,150,000 | 0.875 | 10/15/17 | 2,150,626 | |||||||||||
1,700,000 | 0.750 | 10/31/17 | 1,698,154 | |||||||||||
2,560,000 | 1.875 | 10/31/17 | 2,581,445 | |||||||||||
2,500,000 | 4.250 | 11/15/17 | 2,572,813 | |||||||||||
500,000 | 0.625 | 11/30/17 | 498,706 | |||||||||||
1,400,000 | 0.875 | 11/30/17 | 1,399,481 | |||||||||||
|
| |||||||||||||
| TOTAL U.S. TREASURY OBLIGATIONS | | $ | 110,315,148 | ||||||||||
|
| |||||||||||||
| TOTAL INVESTMENTS BEFORE REPURCHASE AGREEMENTS | | $ | 305,951,414 | ||||||||||
|
| |||||||||||||
Repurchase Agreements(c) – 44.2% | ||||||||||||||
| Joint Repurchase Agreement Account III |
| ||||||||||||
$ | 257,400,000 | 0.504 | % | 01/03/17 | $ | 257,400,000 | ||||||||
| Maturity Value: $257,414,412 |
| ||||||||||||
|
| |||||||||||||
TOTAL INVESTMENTS – 96.7% | $ | 563,351,414 | ||||||||||||
|
| |||||||||||||
| OTHER ASSETS IN EXCESS OF | | 19,215,172 | |||||||||||
|
| |||||||||||||
NET ASSETS – 100.0% | $ | 582,566,586 | ||||||||||||
|
|
The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. | ||
(a) | Variable or floating rate security. Interest rate disclosed is that which is in effect at December 31, 2016. | |
(b) | All or a portion represents a forward commitment. | |
(c) | Repurchase agreement was entered into on December 30, 2016. Additional information on Joint Repurchase Agreement Account III appears on page 8. | |
Interest rates represent either the stated coupon rate, annualized yield on date of purchase for discounted securities, or, for floating rate securities, the current reset rate, which is based upon current interest rate indices.
Maturity dates represent either the final legal maturity date on the security, the demand date for puttable securities, or the prerefunded date for those types of securities. |
The accompanying notes are an integral part of these financial statements. | 7 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST GOVERNMENT MONEY MARKET FUND
Schedule of Investments (continued)
December 31, 2016
ADDITIONAL INVESTMENT INFORMATION
JOINT REPURCHASE AGREEMENT ACCOUNT III — At December 31, 2016, the Fund had undivided interests in the Joint Repurchase Agreement Account III, with a maturity date of January 3, 2017, as follows:
Principal Amount | Maturity Value | Collateral Value | |||||||||||
$257,400,000 | $ | 257,414,412 | $ | 264,681,458 |
REPURCHASE AGREEMENTS — At December 31, 2016, the Principal Amounts of the Fund’s interest in the Joint Repurchase Agreement Account III were as follows:
Counterparty | Interest Rate | Principal Amount | ||||||
ABN Amro Bank N.V. | 0.510 | % | $ | 12,318,652 | ||||
Bank of America, N.A. | 0.500 | 17,598,075 | ||||||
Bank of Nova Scotia (The) | 0.500 | 59,833,454 | ||||||
BNP Paribas | 0.500 | 17,598,075 | ||||||
Citigroup Global Markets, Inc. | 0.530 | 15,426,472 | ||||||
TD Securities USA, LLC | 0.530 | 14,078,460 | ||||||
Wells Fargo Securities, LLC | 0.500 | 120,546,812 | ||||||
TOTAL | $ | 257,400,000 |
At December 31, 2016, the Joint Repurchase Agreement Account III was fully collateralized by:
Issuer | Interest Rates | Maturity Dates | ||||||
Federal Home Loan Mortgage Corp. | 3.000 to 7.500 | % | 08/01/26 to 01/01/47 | |||||
Federal National Mortgage Association | 1.050 to 7.500 | 05/25/18 to 08/01/53 | ||||||
Government National Mortgage Association | 3.000 to 4.500 | 08/15/39 to 11/20/46 | ||||||
U.S. Treasury Bonds | 2.750 to 3.625 | 11/15/42 to 11/15/46 | ||||||
U.S. Treasury Inflation-Indexed Bonds | 0.750 to 2.000 | 01/15/26 to 02/15/46 | ||||||
U.S. Treasury Interest-Only Stripped Securities | 0.000 | 08/15/22 to 05/15/42 | ||||||
U.S. Treasury Notes | 0.500 to 4.000 | 03/31/17 to 05/15/26 | ||||||
U.S. Treasury Principal-Only Stripped Securities | 0.000 | 05/15/20 to 11/15/45 |
8 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST GOVERNMENT MONEY MARKET FUND
Statement of Assets and Liabilities
December 31, 2016
Assets: | ||||
Investments based on amortized cost | $ | 305,951,414 | ||
Repurchase agreements based on amortized cost | 257,400,000 | |||
Cash | 91,762 | |||
Receivables: | ||||
Fund shares sold | 19,133,771 | |||
Investment securities sold | 901,404 | |||
Interest | 590,767 | |||
Reimbursement from investment adviser | 43,297 | |||
Other assets | 370 | |||
Total assets | 584,112,785 | |||
Liabilities: | ||||
Payables: | ||||
Investment securities purchased | 911,611 | |||
Fund shares redeemed | 393,442 | |||
Distribution and Service fees and Transfer Agency fees | 89,500 | |||
Management fees | 76,348 | |||
Accrued expenses | 75,298 | |||
Total liabilities | 1,546,199 | |||
Net Assets: | ||||
Paid-in capital | 582,567,875 | |||
Accumulated net realized loss | (1,289 | ) | ||
NET ASSETS | $ | 582,566,586 | ||
Net asset value, offering and redemption price per share | $ | 1.00 | ||
Net Assets: | ||||
Institutional Shares | $ | 206,986,655 | ||
Service Shares | 375,579,931 | |||
Total Net Assets | $ | 582,566,586 | ||
Shares of beneficial interest outstanding $0.001 par value (unlimited shares authorized): | ||||
Institutional Shares | 206,987,081 | |||
Service Shares | 375,580,775 |
The accompanying notes are an integral part of these financial statements. | 9 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST GOVERNMENT MONEY MARKET FUND
Statement of Operations
For the Fiscal Year Ended December 31, 2016
Investment income: | ||||
Interest | $ | 1,960,672 | ||
Expenses: | ||||
Distribution and Service fees — Service Shares | 872,084 | |||
Management fees | 842,174 | |||
Professional fees | 139,030 | |||
Transfer Agency fees(a) | 82,164 | |||
Printing and mailing costs | 69,378 | |||
Custody, accounting and administrative services | 54,343 | |||
Trustee fees | 20,885 | |||
Other | 5,654 | |||
Total expenses | 2,085,712 | |||
Less — expense reductions | (422,382 | ) | ||
Net expenses | 1,663,330 | |||
NET INVESTMENT INCOME | 297,342 | |||
NET REALIZED GAIN FROM INVESTMENT TRANSACTIONS | 45,052 | |||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 342,394 |
(a) Institutional and Service Shares incurred Transfer Agency fees of $12,397 and $69,767, respectively.
10 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST GOVERNMENT MONEY MARKET FUND
Statements of Changes in Net Assets
For the Fiscal Year Ended | For the Fiscal Year Ended | |||||||
From operations: | ||||||||
Net investment income | $ | 297,342 | $ | 17,323 | ||||
Net realized gain from investment transactions | 45,052 | 1,557 | ||||||
Net increase in net assets resulting from operations | 342,394 | 18,880 | ||||||
Distributions to shareholders: | ||||||||
From net investment income: | ||||||||
Institutional Shares | (193,798 | ) | (179 | ) | ||||
Service Shares | (103,544 | ) | (17,144 | ) | ||||
From net realized gains: | ||||||||
Institutional Shares | (5,258 | ) | (3 | ) | ||||
Service Shares | (42,567 | ) | (1,874 | ) | ||||
Total distributions to shareholders | (345,167 | ) | (19,200 | ) | ||||
From share transactions (at $1.00 per share): | ||||||||
Proceeds from sales of shares | 542,052,079 | 206,637,372 | ||||||
Reinvestment of distributions | 345,167 | 19,200 | ||||||
Cost of shares redeemed | (289,172,490 | ) | (184,078,571 | ) | ||||
Net increase in net assets resulting from share transactions | 253,224,756 | 22,578,001 | ||||||
TOTAL INCREASE | 253,221,983 | 22,577,681 | ||||||
Net assets: | ||||||||
Beginning of year | 329,344,603 | 306,766,922 | ||||||
End of year | $ | 582,566,586 | $ | 329,344,603 |
The accompanying notes are an integral part of these financial statements. | 11 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST GOVERNMENT MONEY MARKET FUND
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
Year - Share Class | Net asset value, beginning of period | Net investment income(a) | Distributions from net investment income(b) | Net asset value, end of period | Total return(c) | Net assets, end of period (in 000's) | Ratio of net expenses to average net assets | Ratio of total expenses to average net assets | Ratio of to average net assets | |||||||||||||||||||||||||||
FOR THE FISCAL YEARS ENDED DECEMBER 31, | ||||||||||||||||||||||||||||||||||||
2016 - Institutional | $ | 1.00 | $ | 0.003 | $ | (0.003 | ) | $ | 1.00 | 0.29 | % | $ | 206,987 | 0.19 | % | 0.30 | % | 0.31 | % | |||||||||||||||||
2016 - Service | 1.00 | — | (d) | — | (d) | 1.00 | 0.04 | 375,580 | 0.44 | 0.55 | 0.03 | |||||||||||||||||||||||||
2015 - Institutional | 1.00 | — | (d) | — | (d) | 1.00 | 0.02 | 1,143 | 0.23 | 0.31 | 0.03 | |||||||||||||||||||||||||
2015 - Service | 1.00 | — | (d) | — | (d) | 1.00 | 0.01 | 328,202 | 0.26 | 0.56 | 0.01 | |||||||||||||||||||||||||
2014 - Institutional | 1.00 | — | (d) | — | (d) | 1.00 | 0.01 | 773 | 0.23 | 0.31 | 0.03 | |||||||||||||||||||||||||
2014 - Service | 1.00 | — | (d) | — | (d) | 1.00 | 0.01 | 305,994 | 0.24 | 0.56 | — | (e) | ||||||||||||||||||||||||
2013 - Institutional(f) | 1.00 | — | (d) | — | (d) | 1.00 | 0.01 | 25 | 0.24 | (g) | 0.36 | (g) | 0.04 | (g) | ||||||||||||||||||||||
2013 - Service | 1.00 | — | (d) | — | (d) | 1.00 | 0.01 | 316,404 | 0.28 | 0.55 | — | (e) | ||||||||||||||||||||||||
2012 - Service | 1.00 | — | (d) | — | (d) | 1.00 | 0.01 | 357,545 | 0.35 | 0.53 | — | (e) |
(a) | Calculated based on the average shares outstanding methodology. |
(b) | Distributions may not coincide with the current year net investment income or net realized gains as distributions may be paid from current or prior year earnings. |
(c) | Assumes reinvestment of all distributions. |
(d) | Amount is less than $0.0005 per share. |
(e) | Amount is less than 0.005% of average net assets. |
(f) | Commenced operations on October 16, 2013. |
(g) | Annualized. |
The accompanying notes are an integral part of these financial statements. | 12 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST GOVERNMENT MONEY MARKET FUND
Notes to Financial Statements
December 31, 2016
1. ORGANIZATION
Goldman Sachs Variable Insurance Trust (the “Trust” or “VIT”) is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company. The Trust includes the Goldman Sachs Government Money Market Fund (formerly, Goldman Sachs Money Market Fund) (the “Fund”). The Fund is a diversified portfolio under the Act offering two classes of shares — Institutional and Service Shares. Shares of the Trust are offered to separate accounts of participating life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies.
Goldman Sachs Asset Management, L.P. (“GSAM”), an affiliate of Goldman, Sachs & Co. (“Goldman Sachs”), serves as investment adviser to the Fund pursuant to a management agreement (the “Agreement”) with the Trust.
2. SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and require management to make estimates and assumptions that may affect the reported amounts and disclosures. Actual results may differ from those estimates and assumptions.
A. Investment Valuation — The investment valuation policy of the Fund is to use the amortized-cost method permitted by Rule 2a-7 under the Act, which approximates market value, for valuing portfolio securities. Under this method, all investments purchased at a discount or premium are valued by accreting or amortizing the difference between the original purchase price and maturity value of the issue, as an adjustment to interest income. Under procedures and tolerances approved by the Board of Trustees (“Trustees”), GSAM evaluates the difference between the Fund’s net asset value per share (“NAV”) based upon the amortized cost of the Fund’s securities and the NAV based upon available market quotations (or permitted substitutes) on a daily basis.
B. Investment Income and Investments — Interest income is accrued daily and adjusted for amortization of premiums and accretion of discounts. Investment transactions are reflected on trade date. Realized gains and losses are calculated using identified cost.
C. Class Allocations and Expenses — Investment income, realized and unrealized gain (loss), and non-class specific expenses of the Fund are allocated daily based upon the proportion of net assets of each class. Class specific expenses, where applicable, are borne by the respective share classes and include Distribution and Service and Transfer Agency fees. Non-class specific expenses directly incurred by the Fund are charged to the Fund, while such expenses incurred by the Trust are allocated across the applicable Funds on a straight-line and/or pro-rata basis depending upon the nature of the expenses.
D. Federal Taxes and Distributions to Shareholders — It is the Fund’s policy to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Code”), applicable to regulated investment companies (mutual funds) and to distribute each year substantially all of its investment company taxable and tax-exempt income and capital gains to its shareholders. Accordingly, the Fund is not required to make any provisions for the payment of federal income tax. Distributions to shareholders are declared and recorded daily and paid monthly by the Fund and may include short-term capital gains. Long-term capital gain distributions, if any, are declared and paid annually.
The characterization of distributions to shareholders for financial reporting purposes is determined in accordance with federal income tax rules, which may differ from GAAP. The source of the Fund’s distributions may be shown in the accompanying financial statements as either from net investment income, net realized gain or capital. Certain components of the Fund’s net assets on the Statement of Assets and Liabilities reflect permanent GAAP/tax differences based on the appropriate tax character.
13
GOLDMAN SACHS VARIABLE INSURANCE TRUST GOVERNMENT MONEY MARKET FUND
Notes to Financial Statements (continued)
December 31, 2016
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
The tax character of distributions paid during the fiscal years ended December 31, 2016 and December 31, 2015, were as follows:
2016 | 2015 | |||||||
Distributions paid from: | ||||||||
Ordinary income | $ | 341,931 | $ | 17,396 | ||||
Net long-term capital gains | 3,236 | 1,804 | ||||||
Total taxable distributions | $ | 345,167 | $ | 19,200 |
As of December 31, 2016, the components of accumulated earnings on a tax basis were as follows:
Undistributed (Distributions in excess of) ordinary income — net | $ | 2,504 | ||
Timing differences (Post October Loss Deferral/Distributions Payable) | (103 | ) | ||
Unrealized gains (losses) — net | (3,690 | ) | ||
Total accumulated earnings (losses) — net | $ | (1,289 | ) |
The amortized cost for the Fund stated in the accompanying Statement of Assets and Liabilities also represents aggregate cost for U.S. federal income tax purposes.
GSAM has reviewed the Fund’s tax positions for all open tax years (the current and prior three years, as applicable) and has concluded that no provision for income tax is required in the Fund’s financial statements. Such open tax years remain subject to examination and adjustment by tax authorities.
E. Forward Commitments — A forward commitment involves entering into a contract to purchase or sell securities, typically on an extended settlement basis, for a fixed price at a future date. The purchase of securities on a forward commitment basis involves a risk of loss if the value of the security to be purchased declines before the settlement date. Conversely, the sale of securities on a forward commitment basis involves the risk that the value of the securities sold may increase before the settlement date. Although the Fund will generally purchase securities on a forward commitment basis with the intention of acquiring the securities for its portfolio, the Fund may dispose of forward commitments prior to settlement which may result in a realized gain or loss.
F. Repurchase Agreements — Repurchase agreements involve the purchase of securities subject to the seller’s agreement to repurchase the securities at a mutually agreed upon date and price, under the terms of a Master Repurchase Agreement (“MRA”). During the term of a repurchase agreement, the value of the underlying securities held as collateral on behalf of the Fund, including accrued interest, is required to exceed the value of the repurchase agreement, including accrued interest. The gross value of repurchase agreements is included in the Statement of Assets and Liabilities for financial reporting purposes. The underlying securities for all repurchase agreements are held at the Fund’s custodian or designated sub-custodians under tri-party repurchase agreements.
An MRA governs transactions between the Fund and select counterparties. An MRA contains provisions for, among other things, initiation of the transaction, income payments, events of default and maintenance of securities for repurchase agreements. An MRA also permits offsetting with collateral to create one single net payment in the event of default or similar events, including the bankruptcy or insolvency of a counterparty.
If the seller defaults, the Fund could suffer a loss to the extent that the proceeds from the sale of the underlying securities and other collateral held by the Fund are less than the repurchase price and the Fund’s costs associated with delay and enforcement of the repurchase agreement. In addition, in the event of default or insolvency of the seller, a court could determine that the Fund’s interest in the collateral is not enforceable, resulting in additional losses to the Fund.
Pursuant to exemptive relief granted by the Securities and Exchange Commission (“SEC”) and terms and conditions contained therein, the Fund, together with other funds of the Trust and registered investment companies having management agreements with
14
GOLDMAN SACHS VARIABLE INSURANCE TRUST GOVERNMENT MONEY MARKET FUND
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
GSAM or its affiliates, may transfer uninvested cash into joint accounts, the daily aggregate balance of which is invested in one or more repurchase agreements. Under these joint accounts, the Fund maintains pro-rata credit exposure to the underlying repurchase agreements’ counterparties. With the exception of certain transaction fees, the Fund is not subject to any expenses in relation to these investments.
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS
The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The levels used for classifying investments are not necessarily an indication of the risk associated with investing in these investments. The three levels of the fair value hierarchy are described below:
Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 — Quoted prices in markets that are not active or financial instruments for which significant inputs are observable (including, but not limited to, quoted prices for similar investments, interest rates, foreign exchange rates, volatility and credit spreads), either directly or indirectly;
Level 3 — Prices or valuations that require significant unobservable inputs (including GSAM’s assumptions in determining fair value measurement).
The Trustees have approved Valuation Procedures that govern the valuation of the portfolio investments held by the Fund, including investments for which market quotations are not readily available. The Trustees have delegated to GSAM day-to-day responsibility for implementing and maintaining internal controls and procedures related to the valuation (including both the amortized cost and market-based methods of valuation) of the Fund’s portfolio investments. To assess the continuing appropriateness of pricing sources and methodologies related to the market-based method of valuation, GSAM regularly performs price verification procedures and issues challenges as necessary to third party pricing vendors or brokers, and any differences are reviewed in accordance with the Valuation Procedures.
As of December 31, 2016, all investments are classified as Level 2. Please refer to the Schedule of Investments for further detail.
4. AGREEMENTS AND AFFILIATED TRANSACTIONS
A. Management Agreement — Under the Agreement, GSAM manages the Fund, subject to the general supervision of the Trustees.
As compensation for the services rendered pursuant to the Agreement, the assumption of the expenses related thereto and administration of the Fund’s business affairs, including providing facilities, GSAM is entitled to a management fee, accrued daily and paid monthly, equal to an annual percentage rate of the Fund’s average daily net assets. Effective April 29, 2016 GSAM has agreed to waive a portion of the management fee equal to 0.045% of the annual contractual rate applicable to the Fund’s average daily net assets. Prior to April 29, 2016, there was no contractual management fee waiver. The management fee waiver will remain in effect through at least April 29, 2017, and prior to such date GSAM may not terminate the arrangement without the approval of the Board of Trustees. For the fiscal year ended December 31, 2016, GSAM waived $134,947 of its management fee pursuant to the contractual management fee waiver.
B. Distribution and Service Plan — The Trust, on behalf of the Service Shares of the Fund, has adopted a Distribution and Service Plan (the “Plan”). Under the Plan, Goldman Sachs, which serves as distributor, is entitled to a fee, accrued daily and paid
15
GOLDMAN SACHS VARIABLE INSURANCE TRUST GOVERNMENT MONEY MARKET FUND
Notes to Financial Statements (continued)
December 31, 2016
4. AGREEMENTS AND AFFILIATED TRANSACTIONS (continued)
monthly for distribution services, which may then be paid by Goldman Sachs to authorized dealers. This fee is equal to an annual percentage rate of the average daily net assets.
C. Transfer Agency Agreement — Goldman Sachs also serves as the transfer agent of the Fund for a fee pursuant to a Transfer Agency Agreement. The fee charged for such transfer agency services is accrued daily and paid monthly at an annual rate of 0.02% of the average daily net assets of Institutional and Service Shares.
D. Other Expense Agreements — GSAM has agreed to limit certain “Other Expenses” of the Fund (excluding transfer agency fees and expenses, taxes, interest, brokerage fees, shareholder meetings, litigation, indemnification and extraordinary expenses) to the extent that such expenses exceed, on an annual basis, 0.004% of the average daily net assets of the Fund. Such Other Expense reimbursements, if any, are accrued daily and paid monthly. In addition, the Fund is not obligated to reimburse GSAM for prior fiscal year expense reimbursements, if any. This Other Expense limitation will remain in place through at least April 29, 2017, and prior to such date GSAM may not terminate the arrangement without the approval of the Trustees. For the fiscal year ended December 31, 2016, GSAM reimbursed $272,858 to the Fund. In addition, the Fund has entered into certain offset arrangements with the custodian and the transfer agent, which may result in a reduction of the Fund’s expenses and are received irrespective of the application of the “Other Expense” limitation described above.
E. Contractual and Net Fund Expenses — During the fiscal year ended December 31, 2016, GSAM as the investment adviser, and Goldman Sachs, as distributor and transfer agent, voluntarily agreed to waive a portion of management fees, distribution and service plan fees and transfer agency fees attributable to the Fund. These waivers may be modified or terminated at any time at the option of GSAM or Goldman Sachs (as applicable). The following table outlines such fees (net of waivers) and Other Expenses (net of reimbursements and custodian and transfer agency fee credit reductions) in order to determine the Fund’s net annualized expenses for the fiscal period. The Fund is not obligated to reimburse Goldman Sachs for prior fiscal year fee waivers, if any.
Institutional Shares | Service Shares | |||||||||||||||
Fee/Expense Type | Contractual rate, if any | Ratio of net expenses to average net assets for the fiscal year ended December 31, 2016 | Contractual rate, if any | Ratio of net expenses to average net assets for the fiscal year ended December 31, 2016 | ||||||||||||
Management Fee | 0.205 | % | 0.172 | % | 0.205 | % | 0.172 | % | ||||||||
Distribution and Service Fees | N/A | N/A | 0.25 | 0.25 | ||||||||||||
Transfer Agency Fees | 0.02 | 0.02 | 0.02 | 0.02 | ||||||||||||
Other Expenses | — | 0.00 | (a) | — | 0.00 | (a) | ||||||||||
Net Expenses | 0.19 | % | 0.44 | % |
(a) | Amount is less than 0.005% of average net assets. |
N/A — Fees not applicable to respective share class.
For the fiscal year ended December 31, 2016, Goldman Sachs waived $134,947, $14,570 and $7 in management, distribution and service fees, and transfer agency fees, respectively.
F. Other Transactions with Affiliates — The Fund may purchase securities from, or sell securities to, an affiliated fund provided the affiliation is solely due to having a common investment adviser, common officers, or common Trustees. For the fiscal year ended December 31, 2016, the purchase and sale transactions for the Fund with affiliated funds in compliance with Rule 17a-7 under the Act were as follows:
Fund | Purchases | Sales | Net Realized Gain (Loss) | |||||||||||
Government Money Market | $ | — | $ | 250,029 | $ | — |
16
GOLDMAN SACHS VARIABLE INSURANCE TRUST GOVERNMENT MONEY MARKET FUND
4. AGREEMENTS AND AFFILIATED TRANSACTIONS (continued)
G. Line of Credit Facility — As of December 31, 2016, the Fund participated in a $1,100,000,000 committed, unsecured revolving line of credit facility (the “facility”) together with other funds of the Trust and registered investment companies having management agreements with GSAM or its affiliates. This facility is to be used for temporary emergency purposes, or to allow for an orderly liquidation of securities to meet redemption requests. The interest rate on borrowings is based on the federal funds rate. The facility also requires a fee to be paid by the Fund based on the amount of the commitment that has not been utilized. For the fiscal year ended December 31, 2016, the Fund did not have any borrowings under the facility.
5. OTHER RISKS
The Fund’s risks include, but are not limited to, the following:
Large Shareholder Transactions Risk — The Fund may experience adverse effects when certain large shareholders, such as other funds, participating insurance companies, accounts and Goldman Sachs affiliates, purchase or redeem large amounts of shares of the Fund. Such large shareholder redemptions may cause the Fund to sell portfolio securities at times when it would not otherwise do so, which may negatively impact the Fund’s NAV and liquidity. These transactions may also increase transaction costs. In addition, a large redemption could result in the Fund’s current expenses being allocated over a smaller asset base, leading to an increase in the Fund’s expense ratio. Similarly, large Fund share purchases may adversely affect the Fund’s performance to the extent that the Fund is delayed in investing new cash and is required to maintain a larger cash position than it ordinarily would.
Interest Rate Risk — When interest rates increase, the Fund’s yield will tend to be lower than prevailing market rates, and the market value of its securities or instruments may also be adversely affected. A low interest rate environment poses additional risks to the Fund, because low yields on the Fund’s portfolio holdings may have an adverse impact on the Fund’s ability to provide a positive yield to its shareholders, pay expenses out of Fund assets, or, at times, maintain a stable $1.00 share price. The risks associated with increasing interest rates are heightened given that interest rates are near historic lows, but may be expected to increase in the future with unpredictable effects on the markets and the Fund’s investments. Fluctuations in interest rates may also affect the yield and liquidity of fixed income securities and instruments held by the Fund.
Market and Credit Risks — In the normal course of business, the Fund trades financial instruments and enters into financial transactions where risk of potential loss exists due to changes in the market (market risk). Additionally, the Fund may also be exposed to credit risk in the event that an issuer or guarantor fails to perform or that an institution or entity with which the Fund has unsettled or open transactions defaults.
6. INDEMNIFICATIONS
Under the Trust’s organizational documents, its Trustees, officers, employees and agents are indemnified, to the extent permitted by the Act and state law, against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the course of business, the Fund enters into contracts that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, GSAM believes the risk of loss under these arrangements to be remote.
7. SUBSEQUENT EVENTS
Subsequent events after the Statement of Assets and Liabilities date have been evaluated through the date the financial statements were issued. GSAM has concluded that there is no impact requiring adjustment or disclosure in the financial statements.
17
GOLDMAN SACHS VARIABLE INSURANCE TRUST GOVERNMENT MONEY MARKET FUND
Notes to Financial Statements (continued)
December 31, 2016
8. SUMMARY OF SHARE TRANSACTIONS
Share activity is as follows:
For the Fiscal Year Ended December 31, 2016 | For the Fiscal Year Ended December 31, 2015 | |||||||
Institutional Shares | ||||||||
Shares sold | 273,054,154 | 2,610,668 | ||||||
Reinvestment of distributions | 199,056 | 182 | ||||||
Shares redeemed | (67,408,741 | ) | (2,241,115 | ) | ||||
205,844,469 | 369,735 | |||||||
Service Shares | ||||||||
Shares sold | 268,997,925 | 204,026,704 | ||||||
Reinvestment of distributions | 146,111 | 19,018 | ||||||
Shares redeemed | (221,763,749 | ) | (181,837,456 | ) | ||||
47,380,287 | 22,208,266 | |||||||
NET INCREASE IN SHARES | 253,224,756 | 22,578,001 |
18
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Goldman Sachs Variable Insurance Trust and Shareholders of the
Goldman Sachs Government Money Market Fund (formerly Goldman Sachs Money Market Fund):
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Goldman Sachs Government Money Market Fund (formerly Goldman Sachs Money Market Fund) (the “Fund”), a fund of the Goldman Sachs Variable Insurance Trust, as of December 31, 2016, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities as of December 31, 2016 by correspondence with the custodian, brokers, transfer agent of the underlying funds and the application of alternative auditing procedures where securities purchased confirmations had not been received, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 14, 2017
19
GOLDMAN SACHS VARIABLE INSURANCE TRUST GOVERNMENT MONEY MARKET FUND
Fund Expenses — Six Month Period Ended December 31, 2016 (Unaudited) |
As a shareholder of the Institutional Shares and Service Shares of the Fund, you incur ongoing costs, including management fees; distribution and service (12b-1) fees (with respect to Service Shares); and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from July 1, 2016 through December 31, 2016, which represents a period of 184 days of a 366 day year.
Actual Expenses — The first line in the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000=8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes — The second line in the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual net expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges, redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Share Class | Beginning Account Value 07/01/16 | Ending Account Value 12/31/16 | Expense Paid for the 6 Months Ended 12/31/16* | |||||||||
Institutional Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,001.57 | $ | 0.93 | ||||||
Hypothetical 5% return | $ | 1,000.00 | $ | 1,024.21 | + | $ | 0.94 | |||||
Service Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,000.31 | $ | 2.18 | ||||||
Hypothetical 5% return | $ | 1,000.00 | $ | 1,022.95 | + | $ | 2.21 |
* | Expenses are calculated using the Fund’s annualized net expense ratio for each class, which represents the ongoing expenses as a percentage of net assets for the six months ended December 31, 2016. Expenses are calculated by multiplying the annualized net expense ratio by the average account value for the period; then multiplying the result by the number of days in the most recent fiscal half year (or, since inception, if shorter); and then dividing that result by the number of days in the period. The annualized net expense ratios for the period were 0.18% and 0.43% for the Institutional Shares and Service Shares, respectively. |
+ | Hypothetical expenses are based on the Fund’s actual annualized net expense ratio and an assumed rate of return of 5% per year before expenses. |
20
GOLDMAN SACHS VARIABLE INSURANCE TRUST GOVERNMENT MONEY MARKET FUND
Trustees and Officers (Unaudited)
Independent Trustees
Name, Address and Age1 | Position(s) Held with the Trust | Term of Office and | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee3 | Other Directorships Held by Trustee4 | |||||||
Ashok N. Bakhru Age: 74 | Chairman of the Board of Trustees | Since 1996 (Trustee since 1991) | Mr. Bakhru is retired. He was formerly Director, Apollo Investment Corporation (a business development company) (2008-2013); President, ABN Associates (a management and financial consulting firm) (1994-1996 and 1998-2012); Trustee, Scholarship America (1998-2005); Trustee, Institute for Higher Education Policy (2003-2008); Director, Private Equity Investors — III and IV (1998-2007), and Equity-Linked Investors II (April 2002-2007).
Chairman of the Board of Trustees — Goldman Sachs Trust; Goldman Sachs Variable Insurance Trust; Goldman Sachs Trust II; Goldman Sachs BDC, Inc.; Goldman Sachs Private Middle Market Credit LLC; Goldman Sachs MLP Income Opportunities Fund; Goldman Sachs MLP and Energy Renaissance Fund; and Goldman Sachs ETF Trust. | 142 | None | |||||||
Kathryn A. Cassidy Age: 62 | Trustee | Since 2015 | Ms. Cassidy is retired. Formerly, she was Advisor to the Chairman (May 2014-December 2014); and Senior Vice President and Treasurer (2008-2014), General Electric Company & General Electric Capital Corporation (technology and financial services companies).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||||
Diana M. Daniels Age: 67 | Trustee | Since 2007 | Ms. Daniels is retired. Formerly, she was Vice President, General Counsel and Secretary, The Washington Post Company (1991-2006). Ms. Daniels is a Trustee Emeritus and serves as a Presidential Councillor of Cornell University (2013-Present); former Member of the Legal Advisory Board, New York Stock Exchange (2003-2006) and of the Corporate Advisory Board, Standish Mellon Management Advisors (2006-2007).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||||
Herbert J. Markley Age: 66 | Trustee | Since 2013 | Mr. Markley is retired. Formerly, he was Executive Vice President, Deere & Company (an agricultural and construction equipment manufacturer) (2007-2009); and President, Agricultural Division, Deere & Company (2001-2007). Previously, Mr. Markley served as an Advisory Board Member of Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust (June 2013-October 2013).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||||
Jessica Palmer Age: 67 | Trustee | Since 2007 | Ms. Palmer is retired. She is Director, Emerson Center for the Arts and Culture (2011-Present); and was formerly a Consultant, Citigroup Human Resources Department (2007-2008); Managing Director, Citigroup Corporate and Investment Banking (previously, Salomon Smith Barney/Salomon Brothers) (1984-2006). Ms. Palmer was a Member of the Board of Trustees of Indian Mountain School (private elementary and secondary school) (2004-2009).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||||
21
GOLDMAN SACHS VARIABLE INSURANCE TRUST GOVERNMENT MONEY MARKET FUND
Trustees and Officers (Unaudited) (continued)
Independent Trustees
Name, Address and Age1 | Position(s) Held with the Trust | Term of Office and | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee3 | Other Directorships Held by Trustee4 | |||||||
Roy W. Templin Age: 56 | Trustee | Since 2013 | Mr. Templin is retired. He recently served as Chairman of the Board of Directors, Con-Way Incorporated (a transportation, logistics and supply chain management service company) (2014-2015); and was formerly Executive Vice President and Chief Financial Officer, Whirlpool Corporation (an appliance manufacturer and marketer) (2004-2012). Previously, Mr. Templin served as an Advisory Board Member of Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust (June 2013-October 2013).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||||
Gregory G. Weaver Age: 65 | Trustee | Since 2015 | Mr. Weaver is retired. He is Director, Verizon Communications Inc. (2015-Present); and was formerly Chairman and Chief Executive Officer, Deloitte & Touche LLP (a professional services firm) (2001-2005 and 2012-2014); and Member of the Board of Directors, Deloitte & Touche LLP (2006-2012).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | Verizon Communications Inc. | |||||||
22
GOLDMAN SACHS VARIABLE INSURANCE TRUST GOVERNMENT MONEY MARKET FUND
Trustees and Officers (Unaudited) (continued)
Interested Trustees*
Name, Address and Age1 | Position(s) Held with the Trust | Term of Office and | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee3 | Other Directorships Held by Trustee4 | |||||||
James A. McNamara Age: 54 | President and Trustee | Since 2007 | Managing Director, Goldman Sachs (December 1998-Present); Director of Institutional Fund Sales, GSAM (April 1998-December 2000); and Senior Vice President and Manager, Dreyfus Institutional Service Corporation (January 1993- April 1998).
President and Trustee — Goldman Sachs Trust; Goldman Sachs Variable Insurance Trust; Goldman Sachs Trust II; Goldman Sachs MLP Income Opportunities Fund; Goldman Sachs MLP and Energy Renaissance Fund; and Goldman Sachs ETF Trust. | 140 | None | |||||||
Alan A. Shuch Age: 67 | Trustee | Since 1990 | Advisory Director — GSAM (May 1999-Present); Consultant to GSAM (December 1994-May 1999); and Limited Partner, Goldman Sachs (December 1994-May 1999).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||||
* | These persons are considered to be “Interested Trustees” because they hold positions with Goldman Sachs and own securities issued by The Goldman Sachs Group, Inc. Each Interested Trustee holds comparable positions with certain other companies of which Goldman Sachs, GSAM or an affiliate thereof is the investment adviser, administrator and/or distributor. |
1 | Each Trustee may be contacted by writing to the Trustee, c/o Goldman Sachs, 200 West Street, New York, New York, 10282, Attn: Caroline Kraus. Information is provided as of December 31, 2016. Alan A. Shuch served as Trustee until his retirement from the Board on December 31, 2016. |
2 | Subject to such policies as may be adopted by the Board from time-to-time, each Trustee holds office for an indefinite term, until the earliest of: (a) the election of his or her successor; (b) the date the Trustee resigns or is removed by the Board or shareholders, in accordance with the Trust’s Declaration of Trust; or (c) the termination of the Trust. The Board has adopted policies which provide that (a) no Trustee shall hold office for more than 15 years and (b) a Trustee shall retire as of December 31st of the calendar year in which he or she reaches his or her 74th birthday, unless a waiver of such requirement shall have been adopted by a majority of the other Trustees. These policies may be changed by the Trustees without shareholder vote. One Trustee has been granted a waiver from the foregoing policies which permits him to serve until December 31, 2017. |
3 | The Goldman Sachs Fund Complex includes certain other companies listed above for each respective Trustee. As of December 31, 2016, Goldman Sachs Trust consisted of 92 portfolios (89 of which offered shares to the public); Goldman Sachs Variable Insurance Trust consisted of 14 portfolios; Goldman Sachs Trust II consisted of 17 portfolios (16 of which offered shares to the public); Goldman Sachs BDC, Inc., Goldman Sachs Private Middle Market Credit LLC, Goldman Sachs MLP Income Opportunities Fund, and Goldman Sachs MLP and Energy Renaissance Fund each consisted of one portfolio; and Goldman Sachs ETF Trust consisted of 15 portfolios (eight of which offered shares to the public). Goldman Sachs Private Middle Market Credit LLC does not offer shares to the public. |
4 | This column includes only directorships of companies required to report to the Securities and Exchange Commission under the Securities Exchange Act of 1934 (i.e., “public companies”) or other investment companies registered under the Act. |
Additional information about the Trustees is available in the Fund’s Statement of Additional Information, which can be obtained from Goldman Sachs free of charge by calling this toll-free number (in the United States of America): 1-800-526-7384.
23
GOLDMAN SACHS VARIABLE INSURANCE TRUST GOVERNMENT MONEY MARKET FUND
Trustees and Officers (Unaudited) (continued)
Officers of the Trust*
Name, Address and Age1 | Position(s) Held with the Trust | Term of Office and | Principal Occupation(s) During Past 5 Years | |||
James A. McNamara 200 West Street New York, NY 10282 Age: 54 | President and Trustee | Since 2007 | Managing Director, Goldman Sachs (December 1998-Present); Director of Institutional Fund Sales, GSAM (April 1998-December 2000); and Senior Vice President and Manager, Dreyfus Institutional Service Corporation (January 1993-April 1998).
President and Trustee — Goldman Sachs Trust; Goldman Sachs Variable Insurance Trust; Goldman Sachs Trust II; Goldman Sachs MLP Income Opportunities Fund; Goldman Sachs MLP and Energy Renaissance Fund; and Goldman Sachs ETF Trust. | |||
Caroline L. Kraus 200 West Street New York, NY 10282 Age: 39 | Secretary | Since 2012 | Managing Director, Goldman Sachs (January 2016 – Present); Vice President, Goldman Sachs (August 2006-December 2015); Associate General Counsel, Goldman Sachs (2012-Present); Assistant General Counsel, Goldman Sachs (August 2006-December 2011); and Associate, Weil, Gotshal & Manges, LLP (2002-2006).
Secretary — Goldman Sachs Trust (previously Assistant Secretary (2012)); Goldman Sachs Variable Insurance Trust (previously Assistant Secretary (2012)); Goldman Sachs Trust II; Goldman Sachs BDC, Inc.; Goldman Sachs Private Middle Market Credit LLC; Goldman Sachs Middle Market Lending LLC; Goldman Sachs MLP Income Opportunities Fund; Goldman Sachs MLP and Energy Renaissance Fund; and Goldman Sachs ETF Trust. | |||
Scott M. McHugh 200 West Street New York, NY 10282 Age: 45 | Treasurer, Senior Vice President and Principal Financial Officer | Since 2009 (Principal | Managing Director, Goldman Sachs (January 2016-Present); Vice President, Goldman Sachs (February 2007-December 2015); Assistant Treasurer of certain mutual funds administered by DWS Scudder (2005-2007); and Director (2005-2007), Vice President (2000-2005), and Assistant Vice President (1998-2000); Deutsche Asset Management or its predecessor (1998-2007).
Treasurer, Senior Vice President and Principal Financial Officer — Goldman Sachs Trust; Goldman Sachs Variable Insurance Trust; Goldman Sachs Trust II; Goldman Sachs MLP Income Opportunities Fund; Goldman Sachs MLP and Energy Renaissance Fund; and Goldman Sachs ETF Trust. | |||
* | Represents a partial list of officers of the Trust. Additional information about all the officers is available in the Fund’s Statement of Additional Information, which can be obtained from Goldman Sachs free of charge by calling this toll-free number (in the United States): 1-800-526-7384. |
1 | Information is provided as of December 31, 2016. |
2 | Officers hold office at the pleasure of the Board of Trustees or until their successors are duly elected and qualified. Each officer holds comparable positions with certain other companies of which Goldman Sachs, GSAM or an affiliate thereof is the investment adviser, administrator and/or distributor. |
24
GOLDMAN SACHS VARIABLE INSURANCE TRUST GOVERNMENT MONEY MARKET FUND
Goldman Sachs Variable Insurance Trust — Tax Information (Unaudited)
Pursuant to Section 852 of the Internal Revenue Code, the Government Money Market Fund designates $3,236, or, if different, the maximum amount allowable, as capital gain dividends paid during the fiscal year ended December 31, 2016.
25
TRUSTEES Ashok N. Bakhru, Chairman Kathryn A. Cassidy Diana M. Daniels Herbert J. Markley James A. McNamara Jessica Palmer Roy W. Templin Gregory G. Weaver | OFFICERS James A. McNamara, President Scott M. McHugh, Treasurer, Senior Vice President and Principal Financial Officer Caroline L. Kraus, Secretary |
GOLDMAN, SACHS & CO.
Distributor and Transfer Agent
GOLDMAN SACHS ASSET MANAGEMENT, L.P.
Investment Adviser
200 West Street, New York
New York 10282
Visit our Web site at www.GSAMFUNDS.com to obtain the most recent month-end returns.
The reports concerning the Fund included in this shareholder report may contain certain forward-looking statements about the factors that may affect the performance of the Fund in the future. These statements are based on Fund management’s predictions and expectations concerning certain future events and their expected impact on the Fund, such as performance of the economy as a whole and of specific industry sectors, changes in the levels of interest rates, the impact of developing world events, and other factors that may influence the future performance of the Fund. Management believes these forward-looking statements to be reasonable, although they are inherently uncertain and difficult to predict. Actual events may cause adjustments in portfolio management strategies from those currently expected to be employed.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available (i) without charge, upon request by calling 1-800-621-2550; and (ii) on the Securities and Exchange Commission (“SEC”) Web site at http://www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the SEC’s web site at http://www.sec.gov within 60 days after the Fund’s first and third fiscal quarters. The Fund’s Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may also be obtained by calling 1-800-SEC-0330. Forms N-Q may be obtained upon request and without charge by calling 1-800-621-2550.
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Fund holdings and allocations shown are as of December 31, 2016 and may not be representative of future investments. Fund holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities. Current and future holdings are subject to risk.
The portfolio risk management process includes an effort to monitor and manage risk, but does not imply low risk.
Shares of the Goldman Sachs VIT Funds are offered to separate accounts of participating life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Shares of the Fund are not offered directly to the general public. The variable annuity contracts and variable life insurance policies are described in the separate prospectuses issued by participating insurance companies. You should refer to those prospectuses for information about surrender charges, mortality and expense risk fees and other charges that may be assessed by participating insurance companies under the variable annuity contracts or variable life insurance policies. Such fees or charges, if any, may affect the return you may realize with respect to your investments. Ask your representative for more complete information. Please consider a fund’s objectives, risks and charges and expenses, and read the prospectus carefully before investing. The prospectus contains this and other information about the Fund.
This material is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus or summary prospectus, if applicable. Investors should consider the Fund’s objective, risks, and charges and expenses, and read the summary prospectus, if available, and/or the prospectus carefully before investing or sending money. The summary prospectus, if available, and the prospectus contain this and other information about the Fund and may be obtained from your authorized dealer or from Goldman, Sachs & Co. by calling 1-800-621-2550.
This report is prepared for the general information of contract owners and is not an offer of shares of the Goldman Sachs Variable Insurance Trust — Goldman Sachs Government Money Market Fund.
© 2017 Goldman Sachs. All rights reserved.
VITMMAR-17/80636-TMPL-02/2017-468833
Goldman
Sachs Variable Insurance Trust
Goldman Sachs
Multi-Strategy
Alternatives Portfolio
Annual Report
December 31, 2016
GOLDMAN SACHS VARIABLE INSURANCE TRUST MULTI-STRATEGY ALTERNATIVES PORTFOLIO
INVESTMENT OBJECTIVE
The Portfolio seeks long-term growth of capital.
Portfolio Management Discussion and Analysis
Below, the Goldman Sachs Global Portfolio Solutions Team discusses the Goldman Sachs Variable Insurance Trust – Goldman Sachs Multi-Strategy Alternatives Portfolio’s (the “Portfolio”) performance and positioning for the 12-month period ended December 31, 2016 (the “Reporting Period”).
How did the Portfolio perform during the Reporting Period?
During the Reporting Period, the Portfolio’s Institutional, Service and Advisor Shares generated average annual total returns of 0.52%, 0.28% and 0.27%, respectively. These returns compare to the 0.66% average annual total return of the Portfolio’s benchmark, the Bank of America Merrill Lynch U.S. Dollar Three-Month LIBOR Constant Maturity Index (the “LIBOR Index”), during the same period.
Please note that the Portfolio’s benchmark being the LIBOR Index is a means of emphasizing that the Portfolio has an unconstrained strategy. That said, this Portfolio employs a benchmark agnostic strategy and thus comparisons to a benchmark index are not particularly relevant.
What economic and market factors most influenced the Portfolio during the Reporting Period?
Investor sentiment was dominated during the Reporting Period by global central bank monetary policy, commodity price movements and geopolitical events, such as the U.K.’s June 2016 vote to exit the European Union, popularly known as Brexit, and the November 2016 U.S. presidential election.
Generally supportive but diverging central bank monetary policy across countries and global regions continued to unfold during the Reporting Period. In the U.S., the Federal Reserve’s (the “Fed”) dovish tone, adopted early in the Reporting Period due to global growth concerns and market volatility, gave way to more hawkish rhetoric by the end of the Reporting Period. (A dovish tone tends to indicate lower interest rates; opposite of hawkish.) Improving U.S. economic data supported the Fed’s decision in December 2016 to raise short-term interest rates, the only increase of the 2016 calendar year. Policymakers lifted the targeted federal funds by 0.25% to a range of between 0.50% and 0.75%. In other developed markets, dovish central bank policy prevailed, with the Bank of Japan (“BoJ”), European Central Bank and Bank of England either maintaining or only slightly reducing their asset purchase programs in the latter part of the Reporting Period.
During the first half of the Reporting Period, the performance of financial markets was driven by “lower for longer” interest rates, downward revisions to global economic growth and corporate earnings expectations, a stronger U.S. dollar, and lower commodity prices. (“Lower for longer” is a term used to characterize the Fed’s policy on short-term interest rates wherein policymakers are expected to keep rates lower for longer than the markets previously expected.) In this environment, investors generally sought yield in high dividend-paying instruments and shifted investments away from cyclical sectors. Momentum, growth versus value, high dividend-yielding and low volatility strategies performed best. In the second half of the Reporting Period, the “lower for longer” theme was challenged, mainly by economic growth data that surprised to the upside, as well as by indications that global policymakers might shift their stimulus efforts from monetary policy to fiscal policy. Such a shift, many observers suggested, could result in higher inflation, higher yields and a stronger U.S. dollar. Perhaps as a result, higher yielding names generally sold off during the second half of the Reporting Period, and cyclical names started to assume leadership. Donald Trump’s victory in the November 2016 U.S. presidential election reinforced this trend, with investors appearing, in our view, to expect more government spending and market-friendly tax policies from the incoming administration.
Global equities, as represented by the MSCI World Index, posted positive returns during the Reporting Period, rebounding from sharp losses suffered at the beginning of 2016. Emerging market stocks were among the better performing equity asset classes during the Reporting Period overall, with the MSCI Emerging Markets Index recording a gain of more than 11%. Meanwhile, global fixed income generated positive returns, as yields remained low and investors sought perceived safe haven assets in an uncertain market environment. Government bond prices increased in a number of developed economies, as yields, including those on 10-year Japanese and Eurozone government bonds, fell. In contrast, the 10-year U.S Treasury yield, which was 2.27% on December 31, 2015, ended the Reporting Period higher, at 2.43%, after reaching a low of 1.36% in July 2016. With the exception
1
GOLDMAN SACHS VARIABLE INSURANCE TRUST MULTI-STRATEGY ALTERNATIVES PORTFOLIO
of the Japanese yen, the U.S. dollar strengthened against most developed market currencies, including the euro and the British pound. The British pound fell to a 30-year low versus the U.S. dollar on the heels of the U.K.’s Brexit vote. Emerging market currencies also appreciated during the Reporting Period. In this environment, momentum or trend-following1 strategies underperformed traditional equity and fixed income classes, largely as a by-product of the heightened market volatility. Commodity-related investment returns remained below their historic average but were still positive during the Reporting Period, primarily because of a rebound in crude oil prices from earlier weakness amid oversupply. The price of West Texas Intermediate crude oil, for example, which fell to a 12-year low in mid-January 2016, nearly doubled to more than $52 a barrel at the end of the Reporting Period. Crude oil prices rallied after members of the Organization of the Petroleum Exporting Countries (“OPEC”) agreed to limit output for the first time in eight years.
What key factors were responsible for the Portfolio’s performance during the Reporting Period?
The Portfolio’s performance is driven by three sources of return: strategic asset allocation to market exposures, short-term tactical allocation and excess returns from investments in underlying funds. Strategic asset allocation is the process by which the Portfolio’s assets are allocated across underlying asset classes and strategies in a way that considers the risks of each underlying asset class and strategy. The short-term tactical allocation is the implementation of tactical market views with the goal of improving the Portfolio’s risk-adjusted return. (The risk-adjusted return on an investment takes into account the risk associated with that investment relative to other potential investments.)
During the Reporting Period, the Portfolio underperformed relative to its benchmark primarily because of weak security selection within its underlying funds. Tactical asset allocation also detracted. These results were partially offset by the Portfolio’s strategic asset allocation, which added value.
Strategic asset allocation contributed positively to performance during the Reporting Period. In particular, the Portfolio was helped by its strategic allocations to corporate credit and equities as well as by its duration strategy. (Duration is a measure of the Portfolio’s sensitivity to changes in interest rates.) Strategic allocations to U.S. real estate securities, international real estate securities, emerging market equities and emerging market debt also added to results. This was partially offset by strategic allocations to certain liquid alternative strategies, including momentum and trend-following strategies in managed futures, although the Portfolio’s short volatility strategy bolstered returns.
Overall, investments in the underlying funds detracted from the Portfolio’s performance. More specifically, three of the Portfolio’s underlying fixed income funds—the Goldman Sachs Strategic Income Fund, the Goldman Sachs Fixed Income Macro Strategies Fund and the Goldman Sachs Long Short Credit Strategies Fund—underperformed their respective benchmark indices. In addition, the Goldman Sachs Long Short Fund and the Goldman Sachs Managed Futures Fund underperformed their respective benchmark indices. On the positive side, two of the underlying funds—the Goldman Sachs Absolute Return Tracker Fund and the Goldman Sachs Dynamic Emerging Markets Debt Fund—outperformed their respective benchmark indices.
Tactical asset allocation detracted overall from the Portfolio’s returns. This was led by the Portfolio’s short-term tactical allocations to European and Japanese equities, which lagged the broader global developed equity market during the Reporting Period. Both positions were managed throughout the Reporting Period to increase the Portfolio’s risk exposure opportunistically and in an effort to secure gains based on the Goldman Sachs Global Portfolio Solutions Team’s (the “Team”) fundamental views. Offsetting this somewhat was the Portfolio’s short-term tactical long position in gold, which contributed positively as investors fled to perceived safe havens in January 2016 through mid-February 2016. The Portfolio also benefited from its tactical positions in U.S. large-cap bank stocks and select long/short positions in developed and emerging markets currencies.
How was the Portfolio positioned at the beginning of the Reporting Period?
At the beginning of the Reporting Period, the Portfolio was positioned, in terms of its total net assets, with 75.8% in liquid alternative strategies, 13.7% in real assets and 2.6% in cash. (Liquid alternatives strategies generally include, but are not limited to, momentum or trend trading strategies (investment decisions based on trends in asset prices over time), hedge fund beta (long term total returns consistent with investment results that approximate the return and risk patterns of a diversified universe of hedge funds), managed risk investment strategies (which seek to manage extreme risk scenarios by implementing daily and monthly risk targets across a diversified mix of asset classes), emerging markets debt and unconstrained fixed income strategies (which have the ability to move across various fixed income sectors). Real assets generally include, but are not limited to, commodities, global real estate securities, infrastructure and master limited partnerships (“MLPs”).) The strategic asset allocation of the Portfolio reflects a
1 | In trend-following strategies, investment decisions are based on trends in asset classes over time. |
2
GOLDMAN SACHS VARIABLE INSURANCE TRUST MULTI-STRATEGY ALTERNATIVES PORTFOLIO
risk-based allocation approach to increase diversification across the Portfolio. The Portfolio had 7.9% of its total net assets invested in tactical exposures at the beginning of the Reporting Period.
How did you tactically manage the Portfolio’s allocations during the Reporting Period?
During the Reporting Period, the Team established a tactical long position in Japanese equities versus other developed market stocks based on a decision by the BoJ to ease monetary policy. In addition, we initiated a tactical long position in U.S. large-cap bank stocks because of what we considered to be supportive fundamentals and the potential for outperformance; a tactical long position in Spanish equities versus the broader European equity market; and a relative value position in U.K. equities that favored large-cap stocks over more domestically focused equities.
Emerging market equities also played a role in the Portfolio during the Reporting Period. In June 2016, we established a tactical long position in Indian equity futures in response to that country’s broadening economic recovery, what we considered fair valuations, and recent legislative victories and limited near-term political risks posed by Prime Minister Narendra Modi. We trimmed this position in August 2016 to capture profits. Also, the Portfolio held a tactical long position in offshore-listed Chinese stocks versus their onshore-listed counterparts during September 2016 based on our belief that foreign investors would favor offshore-listed stocks. We reinforced our positive view on the emerging markets late in the Reporting Period, adopting a tactical long position in emerging market equities versus developed market equities.
Within fixed income, we initiated a tactical long position in emerging market debt during July 2016, which was halved later in the Reporting Period. We also expressed our view on U.S. interest rates by positioning the Portfolio on the front, or short-term, end of the yield curve, which tends to be more sensitive than the longer-term end to changes in interest rates. (Yield curve is a spectrum of maturities).
Within currencies, we added a tactical allocation to a basket of international currencies during the Reporting Period. We used this basket as we sought to take advantage of the monetary and inflationary environment across developed and emerging market countries. It was also used to express our views on issues such as slowing economic growth in China, economic developments in other emerging market countries and commodity prices.
Within commodities, during March 2016, we exited the Portfolio’s tactical long position in gold to realize profits.
In addition, during the Reporting Period overall, we adjusted the Portfolio’s strategic asset allocation to more evenly balance the different sources of active risk in the Portfolio. These changes translated into the elimination of the Goldman Sachs VIT Global Trends Allocation Fund and the Goldman Sachs Dynamic Commodity Strategy Fund from the Portfolio. The proceeds were invested in the Goldman Sachs Managed Futures Strategy Fund, which allows the Portfolio, in our view, to more effectively access momentum and cross-asset trend strategies.
Also, as part of its risk management efforts, we reduced the Portfolio’s equity long/short allocation during the Reporting Period. The decision was driven by our concerns about negative momentum and overcrowding in the hedge fund universe.
How was the Portfolio positioned at the end of the Reporting Period?
At the end of the Reporting Period, the Portfolio was positioned, in terms of its total net assets, with 76.1% in liquid alternative strategies, 11.4% in real assets and 1.4% in cash. The Portfolio had 11.1% of its total net assets invested in tactical exposures.
How did the Portfolio use derivatives and similar instruments during the Reporting Period?
During the Reporting Period, the Portfolio used derivatives primarily to express views across developed and emerging market equities. The Portfolio employed equity index futures to replicate exposures to U.S. large-cap equities (positive impact), U.K. large-cap equities versus U.K. domestically-focused equities (negative impact), and European equities (negative impact, though Spanish equity exposure contributed positively). Additionally, the Portfolio used equity index futures to gain tactical exposure to Indian equities (positive impact), Japanese equities (negative impact) and Chinese offshore-listed versus onshore-listed equities (negative impact). The Portfolio also used emerging market equity index futures to partially hedge the beta associated with investing in emerging market stocks, thus isolating active security selection. These futures detracted from the Portfolio’s performance during the Reporting Period. (Beta is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole.) Within fixed income, the Portfolio used interest rate futures (negative impact) to take views on the U.S. Treasury yield curve. In addition, during the Reporting Period, the Portfolio employed foreign exchange forwards to go long and short select developed and emerging market currencies within a tactical basket of currencies. The use of these forwards had a positive impact on performance overall.
3
GOLDMAN SACHS VARIABLE INSURANCE TRUST MULTI-STRATEGY ALTERNATIVES PORTFOLIO
Additionally, some of the underlying funds used derivatives during the Reporting Period to apply their active investment views with greater versatility and potentially to afford greater risk management precision. As market conditions warranted during the Reporting Period, some of these underlying funds engaged in forward foreign currency exchange contracts, financial futures contracts, options, swap contracts and structured securities to attempt to enhance portfolio return and for hedging purposes. The use of derivatives had a negative impact on performance overall.
What is the Portfolio’s tactical view and strategy for the months ahead?
For most of the Reporting Period, the Team’s asset allocation views were underpinned by developed market economic growth in an environment of relatively easy liquidity but marked by bouts of heightened volatility due to geopolitical events. Broadly speaking, the Portfolio was overweight riskier asset classes and underweight U.S. government bonds. Going into the end of the Reporting Period, the Portfolio was significantly overweight riskier asset classes, with meaningful allocations to equities, breakeven inflation positions and high-yielding currencies. (The breakeven inflation rate is the difference between the nominal yield on a fixed-rate investment and the real yield on an inflation-linked investment of similar maturity and credit quality. If inflation averages more than the breakeven, the inflation-linked investment will outperform the fixed-rate. Conversely, if inflation averages below the breakeven, the fixed-rate will outperform the inflation-linked.)
Overall, we think 2017 is likely to be a year of moderately positive returns for riskier asset classes, driven by three macro themes. First, we expect a widening economic expansion, should growth in emerging market countries pick up and growth in the U.S. and Europe continue, as we expect. Indeed, improving U.S. macroeconomic data at the end of the Reporting Period supported our view of an ongoing U.S. economic expansion. Second, we believe an improvement in economic growth, together with increasing U.S. inflationary pressures, is likely to reduce investor conviction in the secular stagnation thesis, with higher bond yields a likely consequence. (Secular stagnation is a condition of negligible or no economic growth in a market-based economy.) At the end of the Reporting Period, we believed the financial markets were underestimating the number of potential Fed interest rate hikes. Third, we expect positive, but moderate, equity returns in 2017, as we believe there is limited room for earnings growth, and there are likely to be headwinds from rising bond yields. We also expect credit spreads (yield differentials between corporate bonds and U.S. Treasury securities of comparable maturity) and crude oil prices to remain relatively range bound. Given what we consider to be a wide range of macro risks, we think a dynamic approach to asset allocation may well add value during 2017.
Regarding equities, we believe continued economic expansion should be supportive of the asset class. At the end of the Reporting Period, we favored emerging market stocks over developed market stocks. We believe progress has been made in terms of valuations, macro imbalances, growth challenges and investors’ sentiment toward the emerging markets, which should set the scene for outperformance of emerging market stocks over the medium term, in our view. Nevertheless, we see risks in the near term due to the moderation of policy support in China and uncertainty around a Trump Administration’s policies on trade as well as potential pressure from a further rise in bond yields.
Within fixed income, though we expect spreads to remain largely range bound, we think they have the potential to drift slightly wider as the U.S. economic expansion matures. We have a bearish view on government bonds. In our view, the markets are underpricing the pace of future Fed rate hikes, especially at the front, or short-term, end of the U.S. Treasury yield curve. We think the tightening U.S. labor market and building inflationary pressures are supportive of this view. At the longer-term end of the U.S. Treasury yield curve, we believe yields could rise further if investors reassess the future path of Fed rate hikes or if they place a higher risk premium on longer-term U.S. Treasuries due to increased fiscal stimulus and/or the Fed shifting its inflation target higher.
4
GOLDMAN SACHS VARIABLE INSURANCE TRUST MULTI-STRATEGY ALTERNATIVES PORTFOLIO
Index Definitions
∎ | The Bank of America Merrill Lynch U.S. Dollar Three-Month LIBOR Constant Maturity Index is based on the assumed purchase of a synthetic instrument having three months to maturity and with a coupon equal to the closing quote for three-month LIBOR. That issue is sold the following day (priced at a yield equal to the current day closing three-month LIBOR rate) and is rolled into a new three-month instrument. The index, therefore, will always have a constant maturity equal to exactly three months. |
∎ | The MSCI World Index represents large- and mid-cap equity performance across 23 developed markets countries, covering approximately 85% of the free float-adjusted market capitalization in each. This index offers a broad global equity benchmark, without emerging markets exposure. |
∎ | The MSCI Emerging Markets Index captures large-cap and mid-cap representation across 23 emerging markets countries. The index covers approximately 85% of the free float-adjusted market capitalization in each country. |
5
FUND BASICS
Multi-Strategy Alternatives Portfolio
as of December 31, 2016
STANDARDIZED TOTAL RETURNS1
For the period ended 12/31/16 | One Year | Since Inception | Inception Date | |||||||
Institutional | 0.52 | % | -1.75 | % | 4/25/14 | |||||
Service | 0.28 | -2.00 | 4/25/14 | |||||||
Advisor | 0.27 | -2.10 | 4/25/14 |
1 | The Standardized Total Returns are average annual total returns as of the most recent calendar quarter-end. They assume reinvestment of all distributions at net asset value (“NAV”). Because Institutional, Service and Advisor Shares do not involve a sales charge, such a charge is not applied to their Standardized Total Returns. |
Total return figures in the above chart represent past performance and do not indicate future results, which will vary. The investment return and principal value of an investment will fluctuate and, therefore, an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the total return figures in the above chart. Please visit www.GSAMFUNDS.com to obtain the most recent month-end returns. Performance reflects fee waivers and/or expense limitations in effect during the periods shown. In their absence, performance would be reduced.
EXPENSE RATIOS2
Net Expense Ratio (Current) | Gross Expense Ratio (Before Waivers) | |||||||
Institutional | 1.05 | % | 4.28 | % | ||||
Service | 1.30 | 3.21 | ||||||
Advisor | 1.45 | 3.39 |
2 | The expense ratios of the Portfolio, both current (net of any fee waivers and/or expense limitations) and before waivers (gross of any fee waivers and/or expense limitations) are as set forth above according to the most recent publicly available Prospectuses for the Portfolio and may differ from the expense ratios disclosed in the Financial Highlights of this report. Pursuant to a contractual arrangement, the Portfolio’s fee waivers and/or expense limitations will remain in place through at least April 29, 2017, and prior to such date, the Investment Adviser may not terminate the arrangements without the approval of the Portfolio’s Board of Trustees. If these arrangements are discontinued in the future, the expense ratios may change without shareholder approval. |
6
FUND BASICS
OVERALL UNDERLYING FUND AND ETF WEIGHTINGS3
Percentage of Net Assets
3 | The Portfolio is actively managed and, as such, its composition may differ over time. The percentage shown for each Underlying Fund and exchange traded fund (“ETF”) reflects the value of that Underlying Fund or ETF as a percentage of net assets of the Portfolio. Figures in the graph above may not sum to 100% due to rounding and/or exclusion of other assets and liabilities. Underlying sector allocations of exchange traded funds and investment companies held by the Portfolio are not reflected in the graph above. The above graph depicts the Portfolio’s investments but may not represent the Portfolio’s market exposure due to the exclusion of certain derivatives, if any, as listed in the Additional Investment Information section of the Schedule of Investments. |
7
GOLDMAN SACHS VARIABLE INSURANCE TRUST MULTI-STRATEGY ALTERNATIVES PORTFOLIO
Performance Summary
December 31, 2016
The following graph shows the value, as of December 31, 2016, of a $10,000 investment made on April 25, 2014 (commencement of the Portfolio’s operations) in Advisor Shares at NAV. For comparative purposes, the performance of the Portfolio’s benchmark, the Bank of America Merrill Lynch U.S. Dollar Three-Month LIBOR Constant Maturity Index, is shown. This performance data represents past performance and should not be considered indicative of future performance, which will fluctuate with changes in market conditions. These performance fluctuations may cause an investor’s shares, when redeemed, to be worth more or less than their original cost. Performance reflects Portfolio level expenses but does not reflect fees and expenses associated with any variable annuity contract or variable life insurance policy that uses the Portfolio as an investment option for any contract or policy. Had performance reflected all of those fees and expenses, performance would have been reduced. Performance reflects applicable fee waivers and/or expense limitations in effect during the periods shown, and in their absence, performance would be reduced. Performance of Institutional and Service Shares will vary from Advisor Shares due to differences in class specific fees. In addition to the Investment Adviser’s decisions regarding issuer/industry investment selection and allocation, other factors may affect Portfolio performance. These factors include, but are not limited to, Portfolio operating fees and expenses, portfolio turnover, and subscription and redemption cash flows affecting the Portfolio.
Multi-Strategy Alternatives Portfolio’s Lifetime Performance
Performance of a $10,000 investment, with distributions reinvested, from April 25, 2014 through December 31, 2016.
Average Annual Total Return through December 31, 2016 | One Year | Since Inception | ||
Institutional (Commenced April 25, 2014) | 0.52% | -1.75% | ||
Service (Commenced April 25, 2014) | 0.28% | -2.00% | ||
Advisor (Commenced April 25, 2014) | 0.27% | -2.10% |
8
GOLDMAN SACHS VARIABLE INSURANCE TRUST MULTI-STRATEGY ALTERNATIVES PORTFOLIO
Schedule of Investments
December 31, 2016
Shares | Description | Value | ||||||
Underlying Funds(a) – 87.2% | ||||||||
| Equity – 26.5% |
| ||||||
160,637 | Goldman Sachs Absolute Return Tracker Fund | $ | 1,482,676 | |||||
79,208 | Goldman Sachs Long Short Fund | 685,145 | ||||||
34,179 | Goldman Sachs Emerging Markets Equity Fund | 547,542 | ||||||
6,090 | Goldman Sachs Real Estate Securities Fund | 114,560 | ||||||
20,648 | Goldman Sachs International Real Estate Securities Fund | 114,391 | ||||||
|
| |||||||
2,944,314 | ||||||||
|
| |||||||
| Fixed Income – 60.7% |
| ||||||
187,901 | Goldman Sachs Long Short Credit Strategies Fund | 1,768,151 | ||||||
162,807 | Goldman Sachs Strategic Income Fund | 1,569,457 | ||||||
144,832 | Goldman Sachs Fixed Income Macro Strategies Fund | 1,265,829 | ||||||
105,974 | Goldman Sachs Managed Futures Strategy Fund | 1,090,475 | ||||||
130,751 | Goldman Sachs Dynamic Emerging Markets Debt Fund | 1,059,082 | ||||||
|
| |||||||
6,752,994 | ||||||||
|
| |||||||
| TOTAL UNDERLYING FUNDS (INSTITUTIONAL SHARES) | | ||||||
(Cost $9,948,470) | $ | 9,697,308 | ||||||
|
| |||||||
Exchange Traded Funds(b) – 2.0% | ||||||||
706 | iShares JP Morgan USD Emerging Markets Bond Fund | $ | 77,815 | |||||
1,515 | ProShares Short VIX Short-Term Futures Fund | 137,835 | ||||||
|
| |||||||
TOTAL EXCHANGE TRADED FUNDS | ||||||||
(Cost $164,987) | $ | 215,650 | ||||||
|
|
Shares | Distribution Rate | Value | ||||||
Investment Company(a)(c) – 9.7% | ||||||||
Goldman Sachs Financial Square Government Fund — Institutional Shares |
| |||||||
1,079,735 | 0.455 | % | $ | 1,079,735 | ||||
(Cost $1,079,735) | ||||||||
| ||||||||
TOTAL INVESTMENTS BEFORE SECURITIES LENDING REINVESTMENT VEHICLE – 98.9% | ||||||||
(Cost $11,193,192) | $ | 10,992,693 | ||||||
| ||||||||
Securities Lending Reinvestment Vehicle(a)(c) – 1.4% | ||||||||
Goldman Sachs Financial Square Government Fund — Institutional Shares |
| |||||||
162,650 | 0.455 | % | $ | 162,650 | ||||
(Cost $162,650) | ||||||||
| ||||||||
TOTAL INVESTMENTS – 100.3% | ||||||||
(Cost $11,355,842) | $ | 11,155,343 | ||||||
| ||||||||
LIABILITIES IN EXCESS OF |
| (34,822 | ) | |||||
| ||||||||
NET ASSETS – 100.0% | $ | 11,120,521 | ||||||
|
The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. | ||
(a) | Represents affiliated funds. | |
(b) | All or a portion of security is on loan. | |
(c) | Variable rate security. Interest rate or distribution rate disclosed is that which is in effect on December 31, 2016. |
Currency Abbreviations: | ||
BRL | —Brazilian Real | |
CHF | —Swiss Franc | |
CLP | —Chilean Peso | |
CNY | —Chinese Yuan | |
CZK | —Czech Koruna | |
EUR | —Euro | |
HUF | —Hungarian Forint | |
IDR | —Indonesian Rupiah | |
INR | —Indian Rupee | |
JPY | —Japanese Yen | |
KRW | —South Korean Won | |
NOK | —Norwegian Krone | |
RUB | —Russian Ruble | |
SEK | —Swedish Krona | |
TRY | —Turkish Lira | |
TWD | —Taiwan Dollar | |
USD | —United States Dollar | |
ZAR | —South African Rand |
The accompanying notes are an integral part of these financial statements. | 9 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST MULTI-STRATEGY ALTERNATIVES PORTFOLIO
Schedule of Investments (continued)
December 31, 2016
ADDITIONAL INVESTMENT INFORMATION
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS — At December 31, 2016, the Portfolio had the following forward foreign currency exchange contracts:
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS WITH UNREALIZED GAIN
Counterparty | Currency Purchased | Currency Sold | Settlement Date | Current Value | Unrealized Gain | |||||||||||||||
Morgan Stanley Co., Inc. | BRL | 160,000 | USD | 46,421 | 01/04/17 | $ | 49,160 | $ | 2,739 | |||||||||||
BRL | 160,000 | USD | 48,394 | 02/02/17 | 48,719 | 325 | ||||||||||||||
IDR | 1,350,000,000 | USD | 98,648 | 03/15/17 | 98,952 | 304 | ||||||||||||||
INR | 6,500,000 | USD | 94,449 | 03/15/17 | 94,938 | 489 | ||||||||||||||
RUB | 4,250,000 | USD | 65,346 | 03/15/17 | 68,101 | 2,755 | ||||||||||||||
USD | 49,936 | CHF | 50,000 | 03/15/17 | 49,320 | 616 | ||||||||||||||
USD | 67,116 | CLP | 45,000,000 | 03/15/17 | 66,853 | 263 | ||||||||||||||
USD | 64,618 | CNY | 450,000 | 03/15/17 | 63,398 | 1,220 | ||||||||||||||
USD | 107,906 | EUR | 100,000 | 03/15/17 | 105,635 | 2,271 | ||||||||||||||
USD | 68,571 | HUF | 20,000,000 | 03/16/17 | 68,203 | 368 | ||||||||||||||
USD | 105,888 | JPY | 12,000,000 | 03/15/17 | 103,033 | 2,855 | ||||||||||||||
USD | 102,712 | KRW | 120,000,000 | 03/15/17 | 99,377 | 3,335 | ||||||||||||||
USD | 68,581 | RUB | 4,250,000 | 03/15/17 | 68,101 | 480 | ||||||||||||||
USD | 65,478 | TWD | 2,100,000 | 03/15/17 | 64,822 | 656 | ||||||||||||||
TOTAL | $ | 18,676 |
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS WITH UNREALIZED LOSS
Counterparty | Currency Purchased | Currency Sold | Settlement Date | Current Value | Unrealized Gain | |||||||||||||||
Morgan Stanley Co., Inc. | CZK | 2,600,000 | USD | 104,289 | 03/15/17 | $ | 101,647 | $ | (2,642 | ) | ||||||||||
INR | 500,000 | USD | 7,313 | 03/15/17 | 7,303 | (10 | ) | |||||||||||||
NOK | 450,000 | USD | 53,700 | 03/15/17 | 52,136 | (1,564 | ) | |||||||||||||
SEK | 450,000 | USD | 49,911 | 03/15/17 | 49,599 | (312 | ) | |||||||||||||
TRY | 180,000 | USD | 51,798 | 03/15/17 | 50,276 | (1,522 | ) | |||||||||||||
USD | 48,825 | BRL | 160,000 | 01/04/17 | 49,160 | (335 | ) | |||||||||||||
USD | 2,817 | CNY | 20,000 | 03/15/17 | 2,818 | (1 | ) | |||||||||||||
ZAR | 910,000 | USD | 65,658 | 03/15/17 | 65,390 | (268 | ) | |||||||||||||
TOTAL | $ | (6,654 | ) |
10 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST MULTI-STRATEGY ALTERNATIVES PORTFOLIO
ADDITIONAL INVESTMENT INFORMATION (continued)
FUTURES CONTRACTS — At December 31, 2016, the Portfolio had the following futures contracts:
Type | Number of Contracts Long (Short) | Expiration Date | Current Value | Unrealized Gain (Loss) | ||||||||||||
90 Day Eurodollar | 20 | December 2017 | $ | 4,924,000 | $ | 3,704 | ||||||||||
90 Day Eurodollar | (20 | ) | March 2020 | (4,881,250 | ) | (9,046 | ) | |||||||||
EURO STOXX 50 Index | (2 | ) | March 2017 | (68,991 | ) | (1,884 | ) | |||||||||
FTSE 100 Index | 2 | March 2017 | 173,768 | 4,537 | ||||||||||||
FTSE 250 Index | (4 | ) | March 2017 | (177,530 | ) | (3,905 | ) | |||||||||
H-Shares Index | 1 | January 2017 | 60,533 | 874 | ||||||||||||
IBEX 35 Index | 1 | January 2017 | 98,038 | 1,747 | ||||||||||||
mini MSCI EAFE Index Futures | (1 | ) | March 2017 | (83,780 | ) | 168 | ||||||||||
mini MSCI Emerging Markets Index Futures | 3 | March 2017 | 128,835 | (2,684 | ) | |||||||||||
SGX FTSE China A50 Index | (8 | ) | January 2017 | (79,700 | ) | 122 | ||||||||||
SGX Nifty 50 Equity Index | 4 | January 2017 | 65,476 | 1,192 | ||||||||||||
10 Year U.S. Treasury Note | (1 | ) | March 2017 | (124,281 | ) | 748 | ||||||||||
TOTAL | $ | (4,427 | ) |
The accompanying notes are an integral part of these financial statements. | 11 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST MULTI-STRATEGY ALTERNATIVES PORTFOLIO
Statement of Assets and Liabilities
December 31, 2016
Assets: | ||||
Investments in affiliated Underlying Funds, at value (cost $11,028,205)(a) | $ | 10,777,043 | ||
Investments in unaffiliated Funds, at value (cost $164,987) | 215,650 | |||
Investments in affiliated securities lending reinvestment vehicle, at value which equals cost | 162,650 | |||
Cash | 189,706 | |||
Receivables: | ||||
Collateral on certain derivative contracts | 46,747 | |||
Portfolio shares sold | 10,524 | |||
Reimbursement from investment adviser | 9,583 | |||
Dividends | 338 | |||
Unrealized gain on forward foreign currency exchange contracts | 18,676 | |||
Other assets | 371 | |||
Total assets | 11,431,288 | |||
Liabilities: | ||||
Unrealized loss on forward foreign currency exchange contracts | 6,654 | |||
Variation margin on certain derivative contracts | 2,866 | |||
Payables: | ||||
Payable upon return of securities loaned | 162,650 | |||
Portfolio shares redeemed | 20,969 | |||
Distribution and Service fees and Transfer Agency fees | 3,841 | |||
Investments purchased | 344 | |||
Accrued expenses | 113,443 | |||
Total liabilities | 310,767 | |||
Net Assets: | ||||
Paid-in capital | 12,047,315 | |||
Undistributed net investment income | 36,841 | |||
Accumulated net realized loss | (771,956 | ) | ||
Net unrealized loss | (191,679 | ) | ||
NET ASSETS | $ | 11,120,521 | ||
Net Assets: | ||||
Institutional | $ | 308,804 | ||
Service | 33,515 | |||
Advisor | 10,778,202 | |||
Total Net Assets | $ | 11,120,521 | ||
Shares outstanding $0.001 par value (unlimited shares authorized): | ||||
Institutional | 33,920 | |||
Service | 3,669 | |||
Advisor | 1,187,187 | |||
Net asset value, offering and redemption price per share: | ||||
Institutional | $9.10 | |||
Service | 9.13 | |||
Advisor | 9.08 |
(a) Includes loaned securities having a market value of $159,150.
12 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST MULTI-STRATEGY ALTERNATIVES PORTFOLIO
Statement of Operations
For the Fiscal Year Ended December 31, 2016
Investment income: | ||||
Dividends from affiliated Underlying Funds | $ | 170,954 | ||
Dividends from unaffiliated Funds | 2,720 | |||
Total investment income | 173,674 | |||
Expenses: | ||||
Printing and mailing costs | 79,189 | |||
Custody, accounting and administrative services | 71,286 | |||
Professional fees | 44,507 | |||
Distribution and Service fees(a) | 39,907 | |||
Trustee fees | 15,789 | |||
Management fees | 15,714 | |||
Transfer Agency fees(a) | 2,095 | |||
Other | 317 | |||
Total expenses | 268,804 | |||
Less — expense reductions | (206,972 | ) | ||
Net expenses | 61,832 | |||
NET INVESTMENT INCOME | 111,842 | |||
Realized and unrealized gain (loss): | ||||
Net realized gain (loss) from: | ||||
Investments affiliated Underlying Funds | (528,283 | ) | ||
Investments in unaffiliated Underlying Funds | 28,053 | |||
Futures contracts | (82,158 | ) | ||
Forward foreign currency exchange contracts | (5,628 | ) | ||
Foreign currency transactions | 391 | |||
Capital gain distributions from affiliated Underlying Funds | 16,178 | |||
Net change in unrealized gain (loss) on: | ||||
Investments affiliated Underlying Funds | 422,586 | |||
Investments in unaffiliated Underlying Funds | 67,123 | |||
Futures contracts | (18,089 | ) | ||
Forward foreign currency exchange contracts | 12,022 | |||
Foreign currency translation | 1,187 | |||
Net realized and unrealized loss | (86,618 | ) | ||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 25,224 |
(a) Class specific Distribution and Service, and Transfer Agency fees were as follows:
Distribution and Service Fees | Transfer Agent Fees | |||||||||||||||||
Advisor | Service | Advisor | Institutional | Service | ||||||||||||||
$ | 39,688 | $ | 219 | $ | 1,985 | $ | 93 | $ | 17 |
The accompanying notes are an integral part of these financial statements. | 13 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST MULTI-STRATEGY ALTERNATIVES PORTFOLIO
Statements of Changes in Net Assets
For the Fiscal Year Ended December 31, 2016 | For the Fiscal Year Ended December 31, 2015 | |||||||
From operations: | ||||||||
Net investment income | $ | 111,842 | $ | 170,751 | ||||
Net realized loss | (571,447 | ) | (155,810 | ) | ||||
Net change in unrealized gain (loss) | 484,829 | (565,645 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 25,224 | (550,704 | ) | |||||
Distributions to shareholders: | ||||||||
From net investment income | ||||||||
Institutional Shares | (3,280 | ) | (20,864 | ) | ||||
Service Shares | (131 | ) | (439 | ) | ||||
Advisor Shares | (76,669 | ) | (183,729 | ) | ||||
From net realized gains | ||||||||
Institutional Shares | — | (1,452 | ) | |||||
Service Shares | — | (33 | ) | |||||
Advisor Shares | — | (14,588 | ) | |||||
Total distributions to shareholders | (80,080 | ) | (221,105 | ) | ||||
From share transactions: | ||||||||
Proceeds from sales of shares | 4,005,564 | 9,018,089 | ||||||
Reinvestment of distributions | 80,080 | 221,105 | ||||||
Cost of shares redeemed | (3,556,068 | ) | (2,079,723 | ) | ||||
Net increase in net assets resulting from share transactions | 529,576 | 7,159,471 | ||||||
TOTAL INCREASE | 474,720 | 6,387,662 | ||||||
Net assets: | ||||||||
Beginning of year | 10,645,801 | 4,258,139 | ||||||
End of year | $ | 11,120,521 | $ | 10,645,801 | ||||
Undistributed net investment income | $ | 36,841 | $ | 2,719 |
14 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST MULTI-STRATEGY ALTERNATIVES PORTFOLIO
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
Income (loss) from investment operations | Distributions to shareholders | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year - Share Class | Net asset value, beginning of period | Net investment income(a)(b) | Net and loss | Total from investment operations | From net investment income | From realized gains | Total distributions | Net asset value, end of period | Total return(c) | Net assets, end of period (in 000s) | Ratio of net expenses to average net assets(d) | Ratio of total expenses to average net assets(d) | Ratio of net investment income | Portfolio turnover rate(e) | ||||||||||||||||||||||||||||||||||||||||||
FOR THE FISCAL YEARS ENDED DECEMBER 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2016 - Institutional | $ | 9.15 | $ | 0.11 | $ | (0.06 | ) | $ | 0.05 | $ | (0.10 | ) | $ | — | $ | (0.10 | ) | $ | 9.10 | 0.52 | % | $ | 309 | 0.24 | % | 2.37 | % | 1.17 | % | 44 | % | |||||||||||||||||||||||||
2016 - Service | 9.14 | 0.08 | (0.05 | ) | 0.03 | (0.04 | ) | — | (0.04 | ) | 9.13 | 0.28 | 34 | 0.46 | 1.97 | 0.92 | 44 | |||||||||||||||||||||||||||||||||||||||
2016 - Advisor | 9.12 | 0.10 | (0.07 | ) | 0.03 | (0.07 | ) | — | (0.07 | ) | 9.08 | 0.27 | 10,778 | 0.61 | 2.58 | 1.06 | 44 | |||||||||||||||||||||||||||||||||||||||
2015 - Institutional | 9.81 | 0.20 | (0.65 | ) | (0.45 | ) | (0.20 | ) | (0.01 | ) | (0.21 | ) | 9.15 | (4.51 | ) | 958 | 0.22 | 4.40 | 2.02 | 53 | ||||||||||||||||||||||||||||||||||||
2015 - Service | 9.81 | 0.24 | (0.71 | ) | (0.47 | ) | (0.19 | ) | (0.01 | ) | (0.20 | ) | 9.14 | (4.76 | ) | 22 | 0.48 | 3.33 | 2.54 | 53 | ||||||||||||||||||||||||||||||||||||
2015 - Advisor | 9.79 | 0.21 | (0.69 | ) | (0.48 | ) | (0.18 | ) | (0.01 | ) | (0.19 | ) | 9.12 | (4.89 | ) | 9,666 | 0.62 | 3.51 | 2.16 | 53 | ||||||||||||||||||||||||||||||||||||
FOR THE PERIOD ENDED DECEMBER 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2014 - Institutional (Commenced | 10.00 | 0.09 | (0.16 | ) | (0.07 | ) | (0.12 | ) | — | (f) | (0.12 | ) | 9.81 | (0.67 | ) | 1,003 | 0.22 | (g) | 24.63 | (g) | 1.30 | (g) | 25 | |||||||||||||||||||||||||||||||||
2014 - Service (Commenced | 10.00 | 0.07 | (0.16 | ) | (0.09 | ) | (0.10 | ) | — | (f) | (0.10 | ) | 9.81 | (0.85 | ) | 10 | 0.49 | (g) | 25.05 | (g) | 1.02 | (g) | 25 | |||||||||||||||||||||||||||||||||
2014 - Advisor (Commenced | 10.00 | 0.11 | (0.21 | ) | (0.10 | ) | (0.11 | ) | — | (f) | (0.11 | ) | 9.79 | (0.97 | ) | 3,246 | 0.62 | (g) | 16.16 | (g) | 1.66 | (g) | 25 |
(a) | Calculated based on the average shares outstanding methodology. |
(b) | Recognition of net investment income by the Portfolio is affected by the timing of declaration of dividends by the Underlying Funds in which the Portfolio invests. |
(c) | Assumes investment at the net asset value at the beginning of the year, reinvestment of all distributions, and a complete redemption of the investment at the net asset value at the end of the period. Total returns for periods less than one full year are not annualized. |
(d) | Expense ratios exclude the expenses of the Underlying Funds in which the Portfolio invests. |
(e) | The portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short term investments and certain derivatives. If such transactions were included, the portfolio turnover rate may be higher. |
(f) | Amount is less than $0.005 per share. |
(g) | Annualized. |
The accompanying notes are an integral part of these financial statements. | 15 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST MULTI-STRATEGY ALTERNATIVES PORTFOLIO
Notes to Financial Statements
December 31, 2016 (Unaudited)
1. ORGANIZATION
Goldman Sachs Variable Insurance Trust (the “Trust” or “VIT”) is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company. The Trust includes the Goldman Sachs Multi-Strategy Alternatives Portfolio (the “Portfolio”). The Portfolio is a diversified portfolio under the Act offering three classes of shares — Institutional, Service and Advisor Shares. Shares of the Trust are offered to separate accounts of participating life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies.
Goldman Sachs Asset Management, L.P. (“GSAM”), an affiliate of Goldman, Sachs & Co. (“Goldman Sachs”), serves as investment adviser to the Portfolio pursuant to a management agreement (the “Agreement”) with the Trust.
The Portfolio invests primarily in a combination of domestic and international equity and fixed income underlying funds (“Underlying Funds”) which are registered under the Act, for which GSAM or Goldman Sachs Asset Management International (“GSAMI”), also an affiliate of Goldman Sachs, act as investment advisers. Additionally, this Portfolio may invest a portion of its assets directly in other securities and instruments, including unaffiliated exchange traded funds (“Unaffiliated Funds”).
2. SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and require management to make estimates and assumptions that may affect the reported amounts and disclosures. Actual results may differ from those estimates and assumptions.
A. Investment Valuation — The Portfolio’s valuation policy, as well as the Underlying Funds’ is to value investments at fair value.
B. Investment Income and Investments — Investment income includes interest income, dividend income, net of any foreign withholding taxes, less any amounts reclaimable, and securities lending income. Interest income is accrued daily and adjusted for amortization of premiums and accretion of discounts. Dividend income is recognized on ex-dividend date or, for certain foreign securities, as soon as such information is obtained subsequent to the ex-dividend date. Capital gain distributions received from Underlying Funds are recognized on ex-dividend date. Investment transactions are reflected on trade date. Realized gains and losses are calculated using identified cost. Investment transactions are recorded on the following business day for daily net asset value (“NAV”) calculations. Any foreign capital gains tax is accrued daily based upon net unrealized gains, and is payable upon sale of such investments. Income distributions are recognized as capital gains or income in the financial statements in accordance with the character that is distributed.
For derivative contracts, realized gains and losses are recorded upon settlement of the contract.
C. Class Allocations and Expenses — Investment income, realized and unrealized gain (loss), and non-class specific expenses of the Portfolio are allocated daily based upon the proportion of net assets of each class. Non-class specific expenses directly incurred by the Portfolio are charged to that Portfolio, while such expenses incurred by the Trust are allocated across the applicable Portfolios on a straight-line and/or pro-rata basis depending upon the nature of the expenses. Class specific expenses, where applicable, are borne by the respective share classes and include Distribution and Service and Transfer Agency fees.
Expenses included in the accompanying financial statements reflect the expenses of the Portfolio and do not include any expenses associated with the Underlying Funds (“Underlying Funds”). Because the Underlying Funds have varied expense and fee levels and the Portfolio may own different proportions of the Underlying Funds at different times, the amount of fees and expenses incurred indirectly by the Portfolio will vary.
D. Federal Taxes and Distributions to Shareholders — It is the Portfolio’s policy to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Code”), applicable to regulated investment companies (mutual funds) and to distribute each year substantially all of its investment company taxable income and capital gains to its shareholders. Accordingly, the Portfolio is not required to make any provisions for the payment of federal income tax. Distributions to shareholders are recorded on the ex-dividend date. Income and capital gains distributions, if any, are declared and paid annually.
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GOLDMAN SACHS VARIABLE INSURANCE TRUST MULTI-STRATEGY ALTERNATIVES PORTFOLIO
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Net capital losses are carried forward to future fiscal years and may be used to the extent allowed by the Code to offset any future capital gains. Losses that are carried forward will retain their character as either short-term or long-term capital losses. Utilization of capital loss carryforwards will reduce the requirement of future capital gains distributions.
The characterization of distributions to shareholders for financial reporting purposes is determined in accordance with federal income tax rules, which may differ from GAAP. The source of the Portfolio’s distributions may be shown in the accompanying financial statements as either from net investment income, net realized gain or capital. Certain components of the Portfolio’s net assets on the Statement of Assets and Liabilities reflect permanent GAAP/tax differences based on the appropriate tax character.
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS
The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The levels used for classifying investments are not necessarily an indication of the risk associated with investing in these investments. The three levels of the fair value hierarchy are described below:
Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 — Quoted prices in markets that are not active or financial instruments for which significant inputs are observable (including, but not limited to, quoted prices for similar investments, interest rates, foreign exchange rates, volatility and credit spreads), either directly or indirectly;
Level 3 — Prices or valuations that require significant unobservable inputs (including GSAM’s assumptions in determining fair value measurement).
Changes in valuation techniques may result in transfers into or out of an assigned level within the hierarchy. In accordance with the Portfolio’s policy, transfers between different levels of the fair value hierarchy resulting from such changes are deemed to have occurred as of the beginning of the reporting period.
The Board of Trustees (“Trustees”) has approved Valuation Procedures that govern the valuation of the portfolio investments held by the Portfolio, including investments for which market quotations are not readily available. The Trustees have delegated to GSAM day-to-day responsibility for implementing and maintaining internal controls and procedures related to the valuation of the Portfolio’s investments. To assess the continuing appropriateness of pricing sources and methodologies, GSAM regularly performs price verification procedures and issues challenges as necessary to third party pricing vendors or brokers, and any differences are reviewed in accordance with the Valuation Procedures.
A. Level 1 and Level 2 Fair Value Investments — The valuation techniques and significant inputs used in determining the fair values for investments classified as Level 1 and Level 2 are as follows:
Underlying Funds (Including Money Market Funds) — Investments in the Underlying Funds are valued at the NAV per share of the Institutional Share class of each Underlying Fund on the day of valuation. Because the Portfolio invests primarily in other mutual funds that fluctuate in value, the Portfolio’s shares will correspondingly fluctuate in value. These investments are generally classified as Level 1 of the fair value hierarchy. For information regarding an Underlying Fund’s accounting policies and investment holdings, please see the Underlying Fund’s shareholder report.
Derivative Contracts — A derivative is an instrument whose value is derived from underlying assets, indices, reference rates or a combination of these factors. The Portfolio enters into derivative transactions to hedge against changes in interest rates, securities prices, and/or currency exchange rates, to increase total return, or to gain access to certain markets or attain exposure to other underliers.
17
GOLDMAN SACHS VARIABLE INSURANCE TRUST MULTI-STRATEGY ALTERNATIVES PORTFOLIO
Notes to Financial Statements (continued)
December 31, 2016 (Unaudited)
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS (continued)
Exchange-traded derivatives, including futures and options contracts, are valued at the last sale or settlement price and typically fall within Level 1 of the fair value hierarchy. Over-the-counter (“OTC”) and centrally cleared derivatives are valued using market transactions and other market evidence, including market-based inputs to models, calibration to market-clearing transactions, broker or dealer quotations, or other alternative pricing sources. Where models are used, the selection of a particular model to value OTC and centrally cleared derivatives depends upon the contractual terms of, and specific risks inherent in, the instrument, as well as the availability of pricing information in the market. Valuation models require a variety of inputs, including contractual terms, market prices, yield curves, credit curves, measures of volatility, voluntary and involuntary prepayment rates, loss severity rates and correlations of such inputs. For OTC and centrally cleared derivatives that trade in liquid markets, model inputs can generally be verified and model selection does not involve significant management judgment. OTC and centrally cleared derivatives are classified within Level 2 of the fair value hierarchy when significant inputs are corroborated by market evidence.
i. Forward Contracts — A forward contract is a contract between two parties to buy or sell an asset at a specified price on a future date. A forward contract settlement can occur on a cash or delivery basis. Forward contracts are marked-to-market daily using independent vendor prices, and the change in value, if any, is recorded as an unrealized gain or loss. Cash and certain investments may be used to collateralize forward contracts.
A forward foreign currency contract is a forward contract in which the Portfolio agrees to receive or deliver a fixed quantity of one currency for another, at a pre-determined price at a future date. All forward foreign currency exchange contracts are marked-to-market daily at the applicable forward rate. Non-deliverable forward foreign currency exchange contracts are settled with the counterparty in cash without the delivery of foreign currency.
ii. Futures Contracts — Futures contracts are contracts to buy or sell a standardized quantity of a specified commodity or security and are valued based on exchanged settlement prices or independent market quotes. Futures contracts are valued at the last settlement price, or in the absence of a sale, the last bid price for long positions and at the last ask price for short positions, at the end of each day on the board of trade or exchange upon which they are traded. Upon entering into a futures contract, the Portfolio deposits cash or securities in an account on behalf of the broker in an amount sufficient to meet the initial margin requirement. Subsequent payments are made or received by the Portfolio equal to the daily change in the contract value and are recorded as variation margin receivable or payable with a corresponding offset to unrealized gains or losses.
B. Level 3 Fair Value Investments — To the extent that significant inputs to valuation models and other alternative pricing sources are unobservable, or if quotations are not readily available, or if GSAM believes that such quotations do not accurately reflect fair value, the fair value of the Portfolio’s investments may be determined under Valuation Procedures approved by the Trustees. GSAM, consistent with its procedures and applicable regulatory guidance, may make an adjustment to the most recent valuation prices of either domestic or foreign securities in light of significant events to reflect what it believes to be the fair value of the securities at the time of determining the Portfolio’s NAV. Significant events which could affect a large number of securities in a particular market may include, but are not limited to: significant fluctuations in U.S. or foreign markets; market dislocations; market disruptions; or unscheduled market closings. Significant events which could also affect a single issuer may include, but are not limited to: corporate actions such as reorganizations, mergers and buy-outs; ratings downgrades; and bankruptcies.
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GOLDMAN SACHS VARIABLE INSURANCE TRUST MULTI-STRATEGY ALTERNATIVES PORTFOLIO
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS (continued)
C. Fair Value Hierarchy — The following is a summary of the Portfolio’s investments and derivatives classified in the fair value hierarchy as of December 31, 2016:
Investment Type | Level 1 | Level 2 | Level 3 | |||||||||
Assets | ||||||||||||
Equity Underlying Funds | $ | 1,461,638 | $ | — | $ | — | ||||||
Fixed Income Underlying Funds | 8,235,670 | — | — | |||||||||
Exchange Traded Funds | 215,650 | — | — | |||||||||
Investment Company | 1,079,735 | — | — | |||||||||
Securities Lending Reinvestment Vehicle | 162,650 | — | — | |||||||||
Total | $ | 11,155,343 | $ | — | $ | — | ||||||
Derivative Type | ||||||||||||
Assets(a) | ||||||||||||
Forward Foreign Currency Exchange Contracts | $ | — | $ | 18,676 | $ | — | ||||||
Futures Contracts | 13,092 | — | — | |||||||||
Total | $ | 13,092 | $ | 18,676 | $ | — | ||||||
Liabilities(a) | ||||||||||||
Forward Foreign Currency Exchange Contracts | $ | — | $ | (6,654 | ) | $ | — | |||||
Futures Contracts | (17,519 | ) | — | — | ||||||||
Total | $ | (17,519 | ) | $ | (6,654 | ) | $ | — |
(a) | Amount shown represents unrealized gain (loss) at fiscal year end. |
For further information regarding security characteristics, see the Schedule of Investments.
4. INVESTMENTS IN DERIVATIVES
The following table sets forth, by certain risk types, the gross value of derivative contracts as of December 31, 2016. These instruments were used as part of the Portfolio’s investment strategies and to obtain and/or manage exposure related to the risks below. The values in the table below exclude the effects of cash collateral received or posted pursuant to these derivative contracts, and therefore are not representative of the Portfolio’s net exposure.
Risk | Statement of Assets and Liabilities | Assets | Statement of Assets and Liabilities | Liabilities | ||||||||||
Equity | Variation margin on certain derivative contracts | $ | 8,640 | (a) | Variation margin on certain derivative contracts | $ | (8,473 | )(a) | ||||||
Currency | Receivables for unrealized gain on forward foreign currency exchange contracts | 18,676 | Payable for unrealized loss on forward foreign currency exchange contracts | (6,654 | ) | |||||||||
Interest Rate | Variation margin on certain derivative contracts | 4,452 | (a) | Variation margin on certain derivative contracts | (9,046 | )(a) | ||||||||
Total | $ | 31,768 | $ | (24,173 | ) |
(a) | Includes unrealized gain (loss) on futures contracts described in the Additional Investment Information section of the Schedule of Investments. Only the variation margin as of December 31, 2016 is reported within the Statement of Assets and Liabilities. |
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GOLDMAN SACHS VARIABLE INSURANCE TRUST MULTI-STRATEGY ALTERNATIVES PORTFOLIO
Notes to Financial Statements (continued)
December 31, 2016 (Unaudited)
4. INVESTMENTS IN DERIVATIVES (continued)
The following table sets forth, by certain risk types, the Portfolio’s gains (losses) related to these derivatives and their indicative volumes for the fiscal year ended December 31, 2016. These gains (losses) should be considered in the context that these derivative contracts may have been executed to create investment opportunities and/or economically hedge certain investments, and accordingly, certain gains (losses) on such derivative contracts may offset certain (losses) gains attributable to investments. These gains (losses) are included in “Net realized gain (loss)” or “Net change in unrealized gain (loss)” on the Statement of Operations.
Risk | Statement of Operations | Net Realized Gain (Loss) | Net Change in Unrealized Gain (Loss) | Average Number of Contracts(a) | ||||||||||
Equity | Net realized gain (loss) from futures contracts/Net change in unrealized gain (loss) on futures contracts | $ | (81,969 | ) | $ | (13,495 | ) | 24 | ||||||
Currency | Net realized gain (loss) from forward foreign currency exchange contracts/Net change in unrealized gain (loss) on forward foreign currency exchange contracts | (5,628 | ) | $ | 12,022 | 42 | ||||||||
Interest Rate | Net realized gain (loss) from futures contracts/Net change in unrealized gain (loss) on futures contracts | (189 | ) | (4,594 | ) | 4 | ||||||||
Total | $ | (87,786 | ) | $ | (6,067 | ) | 70 |
(a) | Average number of contracts is based on the average of month end balances for the fiscal year ended December 31, 2016. |
5. AGREEMENTS AND AFFILIATED TRANSACTIONS
A. Management Agreement — Under the Agreement, GSAM manages the Portfolio, subject to the general supervision of the Trustees.
As compensation for the services rendered pursuant to the Agreement, the assumption of the expenses related thereto and administration of the Portfolio’s business affairs, including providing facilities, GSAM is entitled to a management fee, accrued daily and paid monthly, equal to an annual percentage rate of 0.15% of the Portfolio’s average daily net assets. GSAM has agreed to waive all of its management fee. The management fee waiver will remain in effect through at least April 29, 2017, and prior to such date, GSAM may not terminate the arrangement without the approval of the Board of Trustees. For the fiscal year ended December 31, 2016, GSAM waived $15,714 of its management fee.
The Portfolio invests in Institutional Shares of the Goldman Sachs Financial Square Government Fund, which is an affiliated Underlying Fund. GSAM has agreed to waive a portion of its management fee payable by the Portfolio in an amount equal to the management fee it earns as an investment adviser to any of the affiliated Underlying Funds in which the Portfolio invests. For the fiscal year ended December 31, 2016, GSAM waived $1,571 of the Portfolio’s management fee.
B. Distribution and Service Plans — The Trust, on behalf of the Portfolio, has adopted Distribution and Service Plans (the “Plans”). Under each Plan, Goldman Sachs, which serves as distributor (the “Distributor”), is entitled to a fee accrued daily and paid monthly, for distribution services and personal and account maintenance services, which may then be paid by Goldman Sachs to authorized dealers, equal to, on an annual basis, 0.25% and 0.40% of the Portfolio’s average daily net assets attributable to Service and Advisor Shares, respectively.
C. Transfer Agency Agreement — Goldman Sachs also serves as the transfer agent of the Portfolio for a fee pursuant to the Transfer Agency Agreement. The fees charged for such transfer agency services are accrued daily and paid monthly at an annual rate of 0.02% of the average daily net assets of Institutional, Service and Advisor Shares.
D. Other Expense Agreements and Affiliated Transactions — GSAM has agreed to limit certain “Other Expenses” of the Portfolio (excluding acquired fund fees and expenses, transfer agency fees and expenses, taxes, interest, brokerage fees, shareholder meeting, litigation, indemnification and extraordinary expenses) to the extent such expenses exceed, on an annual basis, a percentage rate of the average daily net assets of the Portfolio. Such Other Expense reimbursements, if any, are accrued daily and
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GOLDMAN SACHS VARIABLE INSURANCE TRUST MULTI-STRATEGY ALTERNATIVES PORTFOLIO
5. AGREEMENTS AND AFFILIATED TRANSACTIONS (continued)
paid monthly. In addition, the Portfolio is not obligated to reimburse GSAM for prior fiscal year expense reimbursements, if any. The Other Expense limitation as an annual percentage rate of average daily net assets for the Portfolio is 0.204%. The Other Expense limitation will remain in place through at least April 29, 2017, and prior to such date GSAM may not terminate the arrangement without the approval of the Trustees. For the fiscal year ended December 31, 2016, GSAM reimbursed $189,575 to the Portfolio. In addition, the Portfolio has entered into certain offset arrangements with the custodian and the transfer agent, which may result in a reduction of the Portfolio’s expenses and are received irrespective of the application of the “Other Expense” limitation described above. For the fiscal year ended December 31, 2016, custody fee credits were $112.
E. Line of Credit Facility — As of December 31, 2016, the Portfolio participated in a $1,100,000,000 committed, unsecured revolving line of credit facility (the “facility”) together with other funds of the Trust and certain registered investment companies having management agreements with GSAM or its affiliates. This facility is to be used for temporary emergency purposes, or to allow for an orderly liquidation of securities to meet redemption requests. The interest rate on borrowings is based on the federal funds rate. The facility also requires a fee to be paid by the Portfolio based on the amount of the commitment that has not been utilized. For the fiscal year ended December 31, 2016, the Portfolio did not have any borrowings under the facility.
F. Other Transactions with Affiliates — The Portfolio invests primarily in the Institutional Shares of the Underlying Funds. These Underlying Funds are considered to be affiliated with the Portfolio. The table below shows the transactions in and earnings from investments in these Underlying Funds for the fiscal year ended December 31, 2016:
Underlying Funds | Market Value | Purchases at Cost | Proceeds Sales | Net (Loss) | Change in Unrealized Appreciation (Depreciation) | Market Value | Dividend Income | Capital Gain | ||||||||||||||||||||||||
Goldman Sachs Absolute Return Tracker Fund | $ | 1,464,549 | $ | 259,562 | $ | (298,000 | ) | $ | (15,031 | ) | $ | 71,596 | $ | 1,482,676 | $ | 3,494 | $ | 6,068 | ||||||||||||||
Goldman Sachs Dynamic Commodity Strategy Fund | 502,270 | — | (488,156 | ) | (123,211 | ) | 109,097 | — | — | — | ||||||||||||||||||||||
Goldman Sachs Dynamic Emerging Markets Debt Fund | 789,146 | 411,924 | (165,000 | ) | (16,586 | ) | 39,598 | 1,059,082 | 37,362 | — | ||||||||||||||||||||||
Goldman Sachs Emerging Markets Equity Fund | 510,845 | 115,885 | (106,000 | ) | 3,814 | 22,998 | 547,542 | 5,885 | — | |||||||||||||||||||||||
Goldman Sachs Financial Square Government Fund | 812,720 | 3,776,673 | (3,509,658 | ) | — | — | 1,079,735 | 2,825 | — | |||||||||||||||||||||||
Goldman Sachs Fixed Income Macro Strategies Fund | 1,235,596 | 283,707 | (240,000 | ) | (23,460 | ) | 9,986 | 1,265,829 | 18,318 | — | ||||||||||||||||||||||
Goldman Sachs International Real Estate Securities Fund | 90,303 | 30,103 | — | — | (6,015 | ) | 114,391 | 5,093 | — | |||||||||||||||||||||||
Goldman Sachs Long Short Credit Strategies Fund | 1,092,205 | 989,950 | (305,000 | ) | (19,521 | ) | 10,517 | 1,768,151 | 60,241 | — | ||||||||||||||||||||||
Goldman Sachs Long Short Fund | 1,343,748 | 235,000 | (782,000 | ) | (207,703 | ) | 96,100 | 685,145 | — | — |
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GOLDMAN SACHS VARIABLE INSURANCE TRUST MULTI-STRATEGY ALTERNATIVES PORTFOLIO
Notes to Financial Statements (continued)
December 31, 2016 (Unaudited)
5. AGREEMENTS AND AFFILIATED TRANSACTIONS (continued)
Underlying Funds | Market Value | Purchases at Cost | Proceeds Sales | Net (Loss) | Change in Unrealized Appreciation (Depreciation) | Market Value | Dividend Income | Capital Gain | ||||||||||||||||||||||||
Goldman Sachs Managed Futures Strategy Fund | $ | — | $ | 1,256,186 | $ | (120,000 | ) | $ | (6,981 | ) | $ | (38,730 | ) | $ | 1,090,475 | $ | 1,186 | $ | — | |||||||||||||
Goldman Sachs Real Estate Securities Fund | 108,252 | 12,790 | — | — | (6,482 | ) | 114,560 | 2,680 | 10,110 | |||||||||||||||||||||||
Goldman Sachs Strategic Income Fund | 1,499,095 | 340,395 | (275,000 | ) | (30,123 | ) | 35,090 | 1,569,457 | 33,870 | — | ||||||||||||||||||||||
Goldman Sachs VIT Global Trends Allocation Fund | 982,531 | — | (961,542 | ) | (91,146 | ) | 70,157 | — | — | — | ||||||||||||||||||||||
Total | $ | 10,431,260 | $ | 7,712,175 | $ | (7,250,357 | ) | $ | (529,947 | ) | $ | 413,912 | $ | 10,777,043 | $ | 170,954 | $ | 16,178 |
As of December 31, 2016, The Goldman Sachs Group, Inc. was the beneficial owner of approximately 28% of the Service Shares of the Portfolio.
6. PORTFOLIO SECURITIES TRANSACTIONS
The cost of purchases and proceeds from sales and maturities of long-term securities for the fiscal year ended December 31, 2016 were $4,264,091 and $4,194,936, respectively.
7. SECURITIES LENDING
The Portfolio may lend its securities through a securities lending agent, the Bank of New York Mellon (“BNYM”), to certain qualified borrowers. In accordance with the Portfolio’s securities lending procedures, the Portfolio receives cash collateral at least equal to the market value of the securities on loan. The market value of the loaned securities is determined at the close of business of the Portfolio, at their last sale price or official closing price on the principal exchange or system on which they are traded, and any additional required collateral is delivered to the Portfolio on the next business day. As with other extensions of credit, the Portfolio may experience delay in the recovery of its securities or incur a loss should the borrower of the securities breach its agreement with the Portfolio or become insolvent at a time when the collateral is insufficient to cover the cost of repurchasing securities on loan. Dividend income received from securities on loan may not be subject to withholding taxes and therefore withholding taxes paid may differ from the amounts listed in the Statement of Operations. Loans of securities are terminable at any time and as such 1) the remaining contractual maturities of the outstanding securities lending transactions are considered to be overnight and continuous and 2) the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.
The Portfolio invests the cash collateral received in connection with securities lending transactions in the Goldman Sachs Financial Square Government Fund (the “Government Money Market Fund”), an affiliated series of the Trust. The Government Money Market Fund is registered under the Act as an open end investment company, is subject to Rule 2a-7 under the Act, and is managed by GSAM, for which GSAM may receive an investment advisory fee of up to 0.205% on an annualized basis of the average daily net assets of the Government Money Market Fund.
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GOLDMAN SACHS VARIABLE INSURANCE TRUST MULTI-STRATEGY ALTERNATIVES PORTFOLIO
7. SECURITIES LENDING (continued)
In the event of a default by a borrower with respect to any loan, BNYM may exercise any and all remedies provided under the applicable borrower agreement to make the Portfolio whole. These remedies include purchasing replacement securities by applying the collateral held from the defaulting broker against the purchase cost of the replacement securities. If BNYM is unable to purchase replacement securities, BNYM will indemnify the Fund by paying the Fund an amount equal to the market value of the securities loaned minus the value of cash collateral received from the borrower for the loan, subject to an exclusion for any shortfalls resulting from a loss of value in such cash collateral due to reinvestment risk. The Portfolio’s loaned securities were all subject to enforceable Securities Lending Agreements, and the value of the collateral is at least equal to the value of the cash received. The amounts of the Portfolio’s overnight and continuous agreements collateralized by common stocks which represent the gross amounts of recognized liabilities for securities lending transactions outstanding as of December 31, 2016 are disclosed as “Payable upon return of securities loaned” on the Statement of Assets and Liabilities.
Both the Portfolio and BNYM received compensation relating to the lending of the Portfolio’s securities. The amounts earned, if any, by the Portfolio for the fiscal year ended December 31, 2016 are reported under Investment Income on the Statement of Operations.
The following table provides information about the Portfolio’s investment in the Government Money Market Fund for the fiscal year ended December 31, 2016:
Market Value | Purchases | Proceeds | Market Value | |||||||||||
$— | $ | 189,500 | $ | (26,850 | ) | $ | 162,650 |
8. TAX INFORMATION
The tax character of distributions paid during the fiscal years ended December 31, 2015 and December 31, 2016 was as follows:
2015 | 2016 | |||||||
Distributions paid from: | ||||||||
Ordinary income | $ | 205,079 | $ | 80,080 | ||||
Net long-term capital gains | 16,026 | — | ||||||
Total taxable distributions | $ | 221,105 | $ | 80,080 |
As of December 31, 2016, the components of accumulated earnings (losses) on a tax-basis were as follows:
Undistributed ordinary income — net | $ | 47,639 | ||
Capital loss carryforwards: | ||||
Perpetual Short-term | (398,586 | ) | ||
Perpetual Long-term | (183,884 | ) | ||
Total capital loss carryforwards | $ | (582,470 | ) | |
Timing differences (Qualified Late Year Loss Deferral/Post October Loss Deferral) | (3,378 | ) | ||
Unrealized losses — net | (388,585 | ) | ||
Total accumulated losses — net | $ | (926,794 | ) |
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GOLDMAN SACHS VARIABLE INSURANCE TRUST MULTI-STRATEGY ALTERNATIVES PORTFOLIO
Notes to Financial Statements (continued)
December 31, 2016 (Unaudited)
8. TAX INFORMATION (continued)
As of December 31, 2016, the Portfolio’s aggregate security unrealized gains and losses based on cost for U.S. federal income tax purposes were as follows:
Tax cost | $ | 11,550,479 | ||
Gross unrealized gain | 79,543 | |||
Gross unrealized loss | (474,679 | ) | ||
Net unrealized security loss | (395,136 | ) | ||
Net unrealized security gain on other investments | 6,551 | |||
Net unrealized loss | $ | (388,585 | ) |
The difference between GAAP-basis and tax-basis unrealized gains (losses) is attributable primarily to wash sales, net mark to market gains (losses) on regulated futures and foreign exchange contracts and differences in the tax treatment of underlying fund investments.
In order to present certain components of the Portfolio’s capital accounts on a tax-basis, the Portfolio has reclassified $2,360 of accumulated net realized gain to undistributed net investment income. These reclassifications have no impact on the NAV of the Portfolio and result primarily from differences in the tax treatment of foreign currency transactions and underlying fund investments.
GSAM has reviewed the Portfolio’s tax position for all open tax years (the current and prior three years, as applicable) and has concluded that no provision for income tax is required in the Portfolio’s financial statements. Such open tax years remain subject to examination and adjustment by tax authorities.
9. OTHER RISKS
The Portfolio’s risks include, but are not limited to, the following:
Derivatives Risk — The Portfolio’s use of derivatives may result in loss. Derivative instruments, which may pose risks in addition to and greater than those associated with investing directly in securities, currencies or other instruments, may be illiquid or less liquid, volatile, difficult to price and leveraged so that small changes in the value of the underlying instruments may produce disproportionate losses to the Portfolio. Derivatives are also subject to counterparty risk, which is the risk that the other party in the transaction will not fulfill its contractual obligation. The use of derivatives is a highly specialized activity that involves investment techniques and risks different from those associated with investments in more traditional securities and instruments. Losses from derivatives can also result from a lack of correlation between changes in the value of derivative instruments and the portfolio assets (if any) being hedged.
Investments in the Underlying Funds — The investments of the Portfolio are concentrated in the Underlying Funds, and the Portfolio’s investment performance is directly related to the investment performance of the Underlying Funds it holds. The Portfolio is subject to the risk factors associated with the investments of the Underlying Funds in direct proportion to the amount of assets allocated to each. To the extent that the Portfolio has a relative concentration of its portfolio in a single Underlying Fund, the Portfolio may be more susceptible to adverse developments affecting that Underlying Fund, and may be more susceptible to losses because of these developments.
Investments in Other Investment Companies — As a shareholder of another investment company, including an exchange-traded fund (“ETF”), the Portfolio will indirectly bear its proportionate share of any net management fees and other expenses paid by such other investment companies, in addition to the fees and expenses regularly borne by the Portfolio. ETFs are subject to risks that do not apply to conventional mutual funds, including but not limited to the following: (i) the market price of the ETF’s shares
24
GOLDMAN SACHS VARIABLE INSURANCE TRUST MULTI-STRATEGY ALTERNATIVES PORTFOLIO
9. OTHER RISKS (continued)
may trade at a premium or a discount to their NAV; and (ii) an active trading market for an ETF’s shares may not develop or be maintained.
Large Shareholder Transactions Risk — The Portfolio or an Underlying Fund may experience adverse effects when certain large shareholders, such as other funds, participating insurance companies, accounts and Goldman Sachs affiliates, purchase or redeem large amounts of shares of the Portfolio or an Underlying Fund. Such large shareholder redemptions may cause the Portfolio or an Underlying Fund to sell portfolio securities at times when it would not otherwise do so, which may negatively impact the Portfolio’s or an Underlying Fund’s NAV and liquidity. These transactions may also accelerate the realization of taxable income to shareholders if such sales of investments resulted in gains, and may also increase transaction costs. In addition, a large redemption could result in the Portfolio’s or an Underlying Fund’s current expenses being allocated over a smaller asset base, leading to an increase in the Portfolio’s or an Underlying Fund’s expense ratio. Similarly, large Portfolio or Underlying Fund share purchases may adversely affect the Portfolio’s or an Underlying Fund’s performance to the extent that the Portfolio or an Underlying Fund is delayed in investing new cash and is required to maintain a larger cash position than it ordinarily would.
Liquidity Risk — The Underlying Funds may make investments that are illiquid or that may become less liquid in response to market developments or adverse investor perceptions. Illiquid investments may be more difficult to value. Liquidity risk may also refer to the risk that the Portfolio will not be able to pay redemption proceeds within the allowable time period because of unusual market conditions, an unusually high volume of redemption requests, or other reasons. To meet redemption requests, the Portfolio may be forced to sell investments at an unfavorable time and/or under unfavorable conditions. Liquidity risk may be the result of, among other things, the reduced number and capacity of traditional market participants to make a market in fixed income securities or the lack of an active market. The potential for liquidity risk may be magnified by a rising interest rate environment or other circumstances where investor redemptions from fixed income mutual funds may be higher than normal, potentially causing increased supply in the market due to selling activity.
Market and Credit Risks — In the normal course of business, the Portfolio and the Underlying Funds trade financial instruments and enter into financial transactions where risk of potential loss exists due to changes in the market (market risk). Additionally, the Portfolio and the Underlying Funds may also be exposed to credit risk in the event that an issuer or guarantor fails to perform or that an institution or entity with which the Portfolio and the Underlying Funds have unsettled or open transactions defaults.
Short Position Risk — The Portfolio or an Underlying Fund may enter into a short position through a futures contract, an option or swap agreement or through short sales of any instrument that the Portfolio or an Underlying Fund may purchase for investment. Taking short positions involves leverage of the Portfolio’s assets and presents various risks. If the value of the underlying instrument or market in which the Portfolio or an Underlying Fund has taken a short position increases, then the Portfolio or an Underlying Fund will incur a loss equal to the increase in value from the time that the short position was entered into plus any related interest payments or other fees. Taking short positions involves the risk that losses may be disproportionate, may exceed the amount invested, and may be unlimited.
10. INDEMNIFICATIONS
Under the Trust’s organizational documents, its Trustees, officers, employees and agents are indemnified, to the extent permitted by the Act and state law, against certain liabilities that may arise out of performance of their duties to the Portfolio. Additionally, in the course of business, the Portfolio enters into contracts that contain a variety of indemnification clauses. The Portfolio’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Portfolio that have not yet occurred. However, GSAM believes the risk of loss under these arrangements to be remote.
25
GOLDMAN SACHS VARIABLE INSURANCE TRUST MULTI-STRATEGY ALTERNATIVES PORTFOLIO
Notes to Financial Statements (continued)
December 31, 2016 (Unaudited)
11. SUBSEQUENT EVENTS
Subsequent events after the Statement of Assets and Liabilities date have been evaluated and GSAM has concluded that there is no impact requiring adjustment or disclosure in the financial statements.
12. SUMMARY OF SHARE TRANSACTIONS
Share activity is as follows:
For the Fiscal Year Ended December 31, 2016 | For the Fiscal Year Ended December 31, 2015 | |||||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||||
Institutional Shares | ||||||||||||||||
Shares sold | 30,367 | $ | 278,375 | 167 | $ | 1,635 | ||||||||||
Reinvestment of distributions | 360 | 3,280 | 2,436 | 22,316 | ||||||||||||
Shares redeemed | (101,512 | ) | (911,862 | ) | (90 | ) | (866 | ) | ||||||||
(70,785 | ) | (630,207 | ) | 2,513 | 23,085 | |||||||||||
Service Shares | ||||||||||||||||
Shares sold | 2,700 | 24,286 | 1,310 | 12,500 | ||||||||||||
Reinvestment of distributions | 14 | 131 | 51 | 472 | ||||||||||||
Shares redeemed | (1,411 | ) | (17,774 | ) | (5 | ) | (51 | ) | ||||||||
1,303 | 6,643 | 1,356 | 12,921 | |||||||||||||
Advisor Shares | ||||||||||||||||
Shares sold | 410,465 | 3,702,903 | 924,410 | 9,003,954 | ||||||||||||
Reinvestment of distributions | 8,435 | 76,669 | 21,718 | 198,317 | ||||||||||||
Shares redeemed | (291,572 | ) | (2,626,432 | ) | (217,661 | ) | (2,078,806 | ) | ||||||||
127,328 | 1,153,140 | 728,467 | 7,123,465 | |||||||||||||
NET INCREASE | 57,846 | $ | 529,576 | 732,336 | $ | 7,159,471 |
26
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Goldman Sachs Variable Insurance Trust and Shareholders of the
Goldman Sachs Multi-Strategy Alternatives Portfolio:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Goldman Sachs Multi-Strategy Alternatives Portfolio (the “Portfolio”), a fund of the Goldman Sachs Variable Insurance Trust, as of December 31, 2016, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Portfolio’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities as of December 31, 2016 by correspondence with the custodian, brokers, transfer agent of the underlying funds and the application of alternative auditing procedures where securities purchased confirmations had not been received, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 14, 2017
27
GOLDMAN SACHS VARIABLE INSURANCE TRUST MULTI-STRATEGY ALTERNATIVES PORTFOLIO
Portfolio Expenses — Six Month Period Ended December 31, 2016 (Unaudited) |
As a shareholder of Institutional, Service or Advisor Shares of the Portfolio, you incur ongoing costs, including management fees, distribution and/or service (12b-1) fees (with respect to Service and Advisor Shares) and other Portfolio expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Institutional Shares, Service Shares and Advisor Shares of the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from July 1, 2016 through December 31, 2016, which represents a period of 184 days of a 366 day year.
Actual Expenses — The first line under each share class in the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000=8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes — The second line under each share class in the table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio’s actual net expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only. As a shareholder of the Portfolio you do not incur any transaction costs, such as sales charges, redemption fees, or exchange fees, but shareholders of other funds may incur such costs. The second line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds whose shareholders may incur transaction costs.
Share Class | Beginning Account Value 07/01/16 | Ending Account Value 12/31/16 | Expenses Paid for the 6 Months Ended 12/31/16* | |||||||||
Institutional | ||||||||||||
Actual | $ | 1,000 | $ | 1,020.80 | $ | 1.07 | ||||||
Hypothetical 5% return | 1,000 | 1,024.08 | + | 1.07 | ||||||||
Service | ||||||||||||
Actual | 1,000 | 1,019.50 | 2.34 | |||||||||
Hypothetical 5% return | 1,000 | 1,022.82 | + | 2.34 | ||||||||
Advisor | ||||||||||||
Actual | 1,000 | 1,019.50 | 3.10 | |||||||||
Hypothetical 5% return | 1,000 | 1,022.07 | + | 3.10 |
* | Expenses are calculated using the Portfolio’s annualized net expense ratio for each class, which represents the ongoing expenses as a percentage of net assets for the six months ended December 31, 2016. Expenses are calculated by multiplying the annualized net expense ratio by the average account value for the period; then multiplying the result by the number of days in the most recent fiscal half year; and then dividing that result by the number of days in the fiscal year. The annualized net expense ratios for the period were 0.21%, 0.46% and 0.61% for Institutional, Service and Advisor Shares, respectively. |
+ | Hypothetical expenses are based on the Portfolio’s actual annualized net expense ratios and an assumed rate of return of 5% per year before expenses. |
28
GOLDMAN SACHS VARIABLE INSURANCE TRUST MULTI-STRATEGY ALTERNATIVES PORTFOLIO
Trustees and Officers (Unaudited)
Independent Trustees
Name, Address and Age1 | Position(s) Held with the Trust | Term of Office and | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee3 | Other Directorships Held by Trustee4 | |||||||
Ashok N. Bakhru Age: 74 | Chairman of the Board of Trustees | Since 1996 (Trustee since 1991) | Mr. Bakhru is retired. He was formerly Director, Apollo Investment Corporation (a business development company) (2008-2013); President, ABN Associates (a management and financial consulting firm) (1994-1996 and 1998-2012); Trustee, Scholarship America (1998-2005); Trustee, Institute for Higher Education Policy (2003-2008); Director, Private Equity Investors — III and IV (1998-2007), and Equity-Linked Investors II (April 2002-2007).
Chairman of the Board of Trustees — Goldman Sachs Trust; Goldman Sachs Variable Insurance Trust; Goldman Sachs Trust II; Goldman Sachs BDC, Inc.; Goldman Sachs Private Middle Market Credit LLC; Goldman Sachs MLP Income Opportunities Fund; Goldman Sachs MLP and Energy Renaissance Fund; and Goldman Sachs ETF Trust. | 142 | None | |||||||
Kathryn A. Cassidy Age: 62 | Trustee | Since 2015 | Ms. Cassidy is retired. Formerly, she was Advisor to the Chairman (May 2014-December 2014); and Senior Vice President and Treasurer (2008-2014), General Electric Company & General Electric Capital Corporation (technology and financial services companies).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||||
Diana M. Daniels Age: 67 | Trustee | Since 2007 | Ms. Daniels is retired. Formerly, she was Vice President, General Counsel and Secretary, The Washington Post Company (1991-2006). Ms. Daniels is a Trustee Emeritus and serves as a Presidential Councillor of Cornell University (2013-Present); former Member of the Legal Advisory Board, New York Stock Exchange (2003-2006) and of the Corporate Advisory Board, Standish Mellon Management Advisors (2006-2007).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||||
Herbert J. Markley Age: 66 | Trustee | Since 2013 | Mr. Markley is retired. Formerly, he was Executive Vice President, Deere & Company (an agricultural and construction equipment manufacturer) (2007-2009); and President, Agricultural Division, Deere & Company (2001-2007). Previously, Mr. Markley served as an Advisory Board Member of Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust (June 2013-October 2013).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||||
Jessica Palmer Age: 67 | Trustee | Since 2007 | Ms. Palmer is retired. She is Director, Emerson Center for the Arts and Culture (2011-Present); and was formerly a Consultant, Citigroup Human Resources Department (2007-2008); Managing Director, Citigroup Corporate and Investment Banking (previously, Salomon Smith Barney/Salomon Brothers) (1984-2006). Ms. Palmer was a Member of the Board of Trustees of Indian Mountain School (private elementary and secondary school) (2004-2009).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||||
29
GOLDMAN SACHS VARIABLE INSURANCE TRUST MULTI-STRATEGY ALTERNATIVES PORTFOLIO
Trustees and Officers (Unaudited) (continued)
Independent Trustees
Name, Address and Age1 | Position(s) Held with the Trust | Term of Office and | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee3 | Other Directorships Held by Trustee4 | |||||||
Roy W. Templin Age: 56 | Trustee | Since 2013 | Mr. Templin is retired. He recently served as Chairman of the Board of Directors, Con-Way Incorporated (a transportation, logistics and supply chain management service company) (2014-2015); and was formerly Executive Vice President and Chief Financial Officer, Whirlpool Corporation (an appliance manufacturer and marketer) (2004-2012). Previously, Mr. Templin served as an Advisory Board Member of Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust (June 2013-October 2013).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||||
Gregory G. Weaver Age: 65 | Trustee | Since 2015 | Mr. Weaver is retired. He is Director, Verizon Communications Inc. (2015-Present); and was formerly Chairman and Chief Executive Officer, Deloitte & Touche LLP (a professional services firm) (2001-2005 and 2012-2014); and Member of the Board of Directors, Deloitte & Touche LLP (2006-2012).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | Verizon Communications Inc. | |||||||
30
GOLDMAN SACHS VARIABLE INSURANCE TRUST MULTI-STRATEGY ALTERNATIVES PORTFOLIO
Trustees and Officers (Unaudited) (continued)
Interested Trustees*
Name, Address and Age1 | Position(s) Held with the Trust | Term of Office and | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee3 | Other Directorships Held by Trustee4 | |||||||
James A. McNamara Age: 54 | President and Trustee | Since 2007 | Managing Director, Goldman Sachs (December 1998-Present); Director of Institutional Fund Sales, GSAM (April 1998-December 2000); and Senior Vice President and Manager, Dreyfus Institutional Service Corporation (January 1993- April 1998).
President and Trustee — Goldman Sachs Trust; Goldman Sachs Variable Insurance Trust; Goldman Sachs Trust II; Goldman Sachs MLP Income Opportunities Fund; Goldman Sachs MLP and Energy Renaissance Fund; and Goldman Sachs ETF Trust. | 140 | None | |||||||
Alan A. Shuch Age: 67 | Trustee | Since 1990 | Advisory Director — GSAM (May 1999-Present); Consultant to GSAM (December 1994-May 1999); and Limited Partner, Goldman Sachs (December 1994-May 1999).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||||
* | These persons are considered to be “Interested Trustees” because they hold positions with Goldman Sachs and own securities issued by The Goldman Sachs Group, Inc. Each Interested Trustee holds comparable positions with certain other companies of which Goldman Sachs, GSAM or an affiliate thereof is the investment adviser, administrator and/or distributor. |
1 | Each Trustee may be contacted by writing to the Trustee, c/o Goldman Sachs, 200 West Street, New York, New York, 10282, Attn: Caroline Kraus. Information is provided as of December 31, 2016. Alan A. Shuch served as Trustee until his retirement from the Board on December 31, 2016. |
2 | Subject to such policies as may be adopted by the Board from time-to-time, each Trustee holds office for an indefinite term, until the earliest of: (a) the election of his or her successor; (b) the date the Trustee resigns or is removed by the Board or shareholders, in accordance with the Trust’s Declaration of Trust; or (c) the termination of the Trust. The Board has adopted policies which provide that (a) no Trustee shall hold office for more than 15 years and (b) a Trustee shall retire as of December 31st of the calendar year in which he or she reaches his or her 74th birthday, unless a waiver of such requirement shall have been adopted by a majority of the other Trustees. These policies may be changed by the Trustees without shareholder vote. One Trustee has been granted a waiver from the foregoing policies which permits him to serve until December 31, 2017. |
3 | The Goldman Sachs Fund Complex includes certain other companies listed above for each respective Trustee. As of December 31, 2016, Goldman Sachs Trust consisted of 92 portfolios (89 of which offered shares to the public); Goldman Sachs Variable Insurance Trust consisted of 14 portfolios; Goldman Sachs Trust II consisted of 17 portfolios (16 of which offered shares to the public); Goldman Sachs BDC, Inc., Goldman Sachs Private Middle Market Credit LLC, Goldman Sachs MLP Income Opportunities Fund, and Goldman Sachs MLP and Energy Renaissance Fund each consisted of one portfolio; and Goldman Sachs ETF Trust consisted of 15 portfolios (eight of which offered shares to the public). Goldman Sachs Private Middle Market Credit LLC does not offer shares to the public. |
4 | This column includes only directorships of companies required to report to the Securities and Exchange Commission under the Securities Exchange Act of 1934 (i.e., “public companies”) or other investment companies registered under the Act. |
Additional information about the Trustees is available in the Portfolio’s Statement of Additional Information, which can be obtained from Goldman Sachs free of charge by calling this toll-free number (in the United States of America): 1-800-526-7384.
31
GOLDMAN SACHS VARIABLE INSURANCE TRUST MULTI-STRATEGY ALTERNATIVES PORTFOLIO
Trustees and Officers (Unaudited) (continued)
Officers of the Trust*
Name, Address and Age1 | Position(s) Held with the Trust | Term of Office and | Principal Occupation(s) During Past 5 Years | |||
James A. McNamara 200 West Street New York, NY 10282 Age: 54 | Trustee and President | Since 2007 | Managing Director, Goldman Sachs (December 1998-Present); Director of Institutional Fund Sales, GSAM (April 1998-December 2000); and Senior Vice President and Manager, Dreyfus Institutional Service Corporation (January 1993-April 1998).
President and Trustee — Goldman Sachs Trust; Goldman Sachs Variable Insurance Trust; Goldman Sachs Trust II; Goldman Sachs MLP Income Opportunities Fund; Goldman Sachs MLP and Energy Renaissance Fund; and Goldman Sachs ETF Trust. | |||
Caroline L. Kraus 200 West Street New York, NY 10282 Age: 39 | Secretary | Since 2012 | Managing Director, Goldman Sachs (January 2016-Present); Vice President, Goldman Sachs (August 2006-December 2015); Associate General Counsel, Goldman Sachs (2012-Present); Assistant General Counsel, Goldman Sachs (August 2006-December 2011); and Associate, Weil, Gotshal & Manges, LLP (2002-2006).
Secretary — Goldman Sachs Trust (previously Assistant Secretary (2012)); Goldman Sachs Variable Insurance Trust (previously Assistant Secretary (2012)); Goldman Sachs Trust II; Goldman Sachs BDC, Inc.; Goldman Sachs Private Middle Market Credit LLC; Goldman Sachs Middle Market Lending LLC; Goldman Sachs MLP Income Opportunities Fund; Goldman Sachs MLP and Energy Renaissance Fund; and Goldman Sachs ETF Trust. | |||
Scott M. McHugh 200 West Street New York, NY 10282 Age: 45 | Treasurer, Senior Vice President and Principal Financial Officer | Since 2009 (Principal | Managing Director, Goldman Sachs (January 2016-Present); Vice President, Goldman Sachs (February 2007-December 2015); Assistant Treasurer of certain mutual funds administered by DWS Scudder (2005-2007); and Director (2005-2007), Vice President (2000-2005), and Assistant Vice President (1998-2000), Deutsche Asset Management or its predecessor (1998-2007).
Treasurer, Senior Vice President and Principal Financial Officer — Goldman Sachs Trust; Goldman Sachs Variable Insurance Trust; Goldman Sachs Trust II; Goldman Sachs MLP Income Opportunities Fund; Goldman Sachs MLP and Energy Renaissance Fund; and Goldman Sachs ETF Trust. | |||
* | Represents a partial list of officers of the Trust. Additional information about all the officers is available in the Portfolio’s Statement of Additional Information, which can be obtained from Goldman Sachs free of charge by calling this toll-free number (in the United States): 1-800-526-7384. |
1 | Information is provided as of December 31, 2016. |
2 | Officers hold office at the pleasure of the Board of Trustees or until their successors are duly elected and qualified. Each officer holds comparable positions with certain other companies of which Goldman Sachs, GSAM or an affiliate thereof is the investment adviser, administrator and/or distributor. |
Goldman Sachs Variable Insurance Trust — Tax Information (Unaudited)
For the year ended December 31, 2016, 1.95% of the dividends paid from net investment company taxable income by the Multi-Strategy Alternatives Portfolio qualify for the dividends received deduction available to corporations.
32
TRUSTEES | OFFICERS | |
Ashok N. Bakhru, Chairman | James A. McNamara, President | |
Kathryn A. Cassidy | Scott M. McHugh, Treasurer, Senior Vice | |
Diana M. Daniels | President and Principal Financial Officer | |
Herbert J. Markley | Caroline L. Kraus, Secretary | |
James A. McNamara | ||
Jessica Palmer | ||
Roy W. Templin | ||
Gregory G. Weaver |
GOLDMAN, SACHS & CO.
Distributor and Transfer Agent
GOLDMAN SACHS ASSET MANAGEMENT, L.P.
Investment Adviser
200 West Street, New York
New York 10282
Visit our web site at www.GSAMFUNDS.com to obtain the most recent month-end returns.
The reports concerning the Portfolio included in this shareholder report may contain certain forward-looking statements about the factors that may affect the performance of the Portfolio in the future. These statements are based on Portfolio management’s predictions and expectations concerning certain future events and their expected impact on the Portfolio, such as performance of the economy as a whole and of specific industry sectors, changes in the levels of interest rates, the impact of developing world events, and other factors that may influence the future performance of the Portfolio. Management believes these forward-looking statements to be reasonable, although they are inherently uncertain and difficult to predict. Actual events may cause adjustments in portfolio management strategies from those currently expected to be employed.
A description of the policies and procedures that the Portfolio uses to determine how to vote proxies relating to portfolio securities and information regarding how the Portfolio voted proxies relating to portfolio securities for the 12-month period ended December 31 is available (i) without charge, upon request by calling 1-800-621-2550; and (ii) on the Securities and Exchange Commission (“SEC”) web site at http://www.sec.gov.
The Portfolio files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Portfolio’s Form N-Qs are available on the SEC’s web site at http://www.sec.gov within 60 days after the Portfolio’s first and third fiscal quarters. The Portfolio’s Form N-Qs may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may also be obtained by calling 1-800-SEC-0330. Form N-Qs may be obtained upon request and without charge by calling 1-800-621-2550.
The website links provided are for your convenience only and are not an endorsement or recommendation by GSAM of any of these websites or the products or services offered. GSAM is not responsible for the accuracy and validity of the content of these websites.
Portfolio holdings and allocations shown are as of December 31, 2016 and may not be representative of future investments. Portfolio holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities. Current and future holdings are subject to risk.
References to indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only and do not imply that the portfolio will achieve similar results. The index composition may not reflect the manner in which a portfolio is constructed. While an adviser seeks to design a portfolio which reflects appropriate risk and return features, portfolio characteristics may deviate from those of the benchmark.
The Global Industry Classification Standard (“GICS”) was developed by and is the exclusive property and a service mark of Morgan Stanley Capital International Inc. (“MSCI”) and Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. (“S&P”) and is licensed for use by Goldman Sachs. Neither MSCI, S&P nor any other party involved in making or compiling the GICS or any GICS classifications makes any express or implied warranties or representations with respect to such standard or classification (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of such standard or classification. Without limiting any of the foregoing, in no event shall MSCI, S&P, any of their affiliates or any third party involved in making or compiling the GICS or any GICS classifications have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.
The portfolio risk management process includes an effort to monitor and manage risk, but does not imply low risk.
Diversification does not protect an investor from market risk and does not ensure a profit.
Shares of the Goldman Sachs VIT Funds are offered to separate accounts of participating life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Shares of the Portfolio are not offered directly to the general public. The variable annuity contracts and variable life insurance policies are described in the separate prospectuses issued by participating insurance companies. You should refer to those prospectuses for information about surrender charges, mortality and expense risk fees and other charges that may be assessed by participating insurance companies under the variable annuity contracts or variable life insurance policies. Such fees or charges, if any, may affect the return you may realize with respect to your investments. Ask your representative for more complete information. Please consider a fund’s objectives, risks and charges and expenses, and read the prospectus carefully before investing. The prospectus contains this and other information about the Portfolio.
This material is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus or summary prospectus, if applicable. Investors should consider the Portfolio’s objective, risks, and charges and expenses, and read the summary prospectus, if available, and/or the prospectus carefully before investing or sending money. The summary prospectus, if available, and the prospectus contain this and other information about the Portfolio and may be obtained from your authorized dealer or from Goldman, Sachs & Co. by calling 1-800-621-2550.
This report is prepared for the general information of contract owners and is not an offer of shares of the Goldman Sachs Variable Insurance Trust — Goldman Sachs Multi-Strategy Alternatives Portfolio.
© 2017 Goldman Sachs. All rights reserved.
VITMSAAR-17/80652-TMPL-02/2017-468827/377
Goldman
Sachs Variable Insurance Trust
Goldman Sachs Core Fixed Income Fund
Goldman Sachs Equity Index Fund
Goldman Sachs Growth Opportunities Fund
Goldman Sachs High Quality Floating Rate Fund
Annual Report
December 31, 2016
MARKET REVIEW
Goldman Sachs Variable Insurance Trust Funds
Market Review
During the 12 months ended December 31, 2016 (the “Reporting Period”), the U.S. equity market recorded a strong gain, while the broad fixed income market generated more modest, but positive, returns.
Equity Markets
As the Reporting Period began in January 2016, U.S. equities were embroiled in a global rout, triggered by investor concerns about an intensifying economic slowdown in China and exacerbated by an oil price plunge. Following a December 2015 interest rate hike, the January 2016 Federal Reserve (“Fed”) statement acknowledged these external risks and tightening financial conditions. U.S. equities stabilized in February 2016, as market sentiment improved on the more dovish tone set by global central banks. (Dovish language tends to suggest lower interest rates; opposite of hawkish.) U.S. equities were also supported by stronger economic data, rallying as fourth quarter 2015 U.S. Gross Domestic Product (“GDP”) came in above consensus expectations. In March 2016, the Fed kept interest rates on hold and surprised on the dovish side, reducing its forecast to two interest rate hikes in 2016, down from four. Along with receding global economic concerns, this helped to drive a recovery in U.S. equities. Released in March 2016, February 2016 unemployment data came in ahead of market consensus, with unemployment steady at 4.9% in spite of higher participation rates and declining underemployment.
Following the rebound in March 2016, market sentiment appeared to remain sanguine in April 2016, as oil prices rose and China economic growth concerns abated. U.S. equities fell near the end of the month as investors were disappointed by a lack of additional stimulus from the Bank of Japan (“BoJ”) and by a weaker than consensus expected first quarter U.S. GDP growth rate of 0.5%. Weaker than expected May 2016 payroll data drove expectations for a Fed interest rate hike in June 2016 temporarily lower, but subsequent hawkish Fed minutes revived market expectations. (Hawkish language tends to suggest higher interest rates; opposite of dovish.) The Fed ultimately held interest rates steady in June 2016 and signaled a slower pace of hikes, acknowledging the slowdown in the labor market. Markets were otherwise dominated in June 2016 by the U.K. referendum on membership in the European Union, popularly known as Brexit. U.S. equities sold off in the global risk-off, or heightened risk averse sentiment, in June 2016 following the surprise “leave” result. Markets rebounded in the latter days of the month owing to improving risk sentiment as markets digested the Brexit vote outcome and on dovish remarks from Bank of England (“BoE”) Governor Carney.
In July 2016, U.S. equities were buoyed by strong economic data and corporate earnings, despite increased uncertainty post-Brexit. In her Jackson Hole speech toward the end of August 2016, Fed Chair Janet Yellen acknowledged the case for an interest rate hike had strengthened in the then-recent months. Along with strong labor market data and other hawkish comments from the Fed, this significantly increased the market-implied probability of an interest rate hike by year-end 2016, causing U.S. equities to sell off. In early September 2016, equities fell as the European Central Bank (“ECB”) disappointed markets with its lack of commitment to extend quantitative easing. However, there was a subsequent rebound following the Fed’s decision in September 2016 to leave interest rates unchanged.
In October 2016, a combination of hawkish Fed commentary and mounting strong U.S. economic data led to increased market pricing for a December 2016 interest rate hike. U.S. GDP increased by 3.5% on an annualized basis for the third quarter of 2016, above consensus expectations and the strongest growth rate in two years. Following the unexpected victory of Donald Trump in the November 2016 U.S. elections, U.S. equities quickly reversed a short-lived sell-off and surged on anticipation of a pro-growth effect of Mr. Trump’s fiscal stimulus plan. The Fed raised rates 0.25% in December 2016, for the first time in 2016 but as had largely been anticipated, set a more hawkish hike path for 2017, causing equities to decline, albeit modestly, following the announcement.
U.S. equities, as represented by the S&P 500® Index, gained 11.93% during the Reporting Period. Energy, telecommunication services and financials were the best performing sectors in the S&P 500® Index by a wide margin. Industrials, materials, utilities and information technology also posted double-digit gains that outpaced the S&P 500® Index during the Reporting Period. The weakest performing sectors in the S&P 500® Index were real estate and health care, the only two to post negative absolute returns, followed by consumer staples and consumer discretionary, which were comparatively weak but generated positive returns during the Reporting Period.
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MARKET REVIEW
Within the U.S. equity market, there was significant disparity in performance not only among sectors but also among the various capitalization and style segments. While all capitalization segments posted positive returns, small-cap stocks, as measured by the Russell 2000® Index, performed best, followed at some distance by mid-cap stocks, as measured by the Russell Midcap® Index, and then, large-cap stocks, as measured by the Russell 1000® Index. From a style perspective, value-oriented stocks significantly outpaced growth-oriented stocks across the capitalization spectrum. (All as measured by the Russell Investments indices.)
Fixed Income Markets
When the Reporting Period started, spread (or non-government bond) sectors retreated, selling off significantly from January to mid-February 2016. The selloff was driven by an increase in a number of perceived risks, including slowing Chinese economic activity, the possibility of persistent oil oversupply and deteriorating corporate bond fundamentals, as the U.S. credit cycle entered its later stage. Some of these risks eased in the second half of the first calendar quarter, as economic news from China improved, U.S. oil production showed signs of slowing, and commodity prices appeared to stabilize. As a result, spread sectors largely retraced their losses by the end of March 2016. Global central banks remained accommodative. The BoJ, in a surprise move at its January 2016 policy meeting, introduced a -0.1% interest rate, reaffirming its commitment to achieving a 2% inflation target. The ECB shifted its focus from currency depreciation to credit creation by leaving the deposit rate unchanged, expanding its asset purchase program to include purchases of non-financial corporate credit and announcing a new series of easing measures in the form of targeted long-term refinancing operations. In the U.S., the Fed left interest rates unchanged and reduced its previous forecast of four rate hikes in 2016 to two. After a sustained period of appreciation, the U.S. dollar weakened during the first quarter of 2016 due to generally tighter financial conditions, mixed U.S. economic data and the Fed’s more dovish commentary.
During the second quarter of 2016, spread sectors rallied on stabilization of commodities prices as well as on declining fears about slowing Chinese economic growth and the potential for a U.S. economic recession. Global interest rates broadly declined amid continued accommodative monetary policy from the world’s central banks. In the U.S., minutes from the Fed’s April 2016 policy meeting, released in mid-May 2016, suggested Fed policymakers might raise interest rates in June 2016 if U.S. economic growth strengthened, employment data firmed and inflation rose toward the Fed’s 2% target. In early June 2016, however, the release of weak May 2016 employment data raised concerns about the health of the U.S. economy, pushing down expectations of a Fed rate hike. Indeed, the Fed did not raise interest rates at its June 2016 policy meeting. In the last week of June 2016, Brexit renewed investor uncertainty about the path of global economic growth. Spread sectors withstood the Brexit vote relatively well, selling off at first but then recovering most of their losses afterwards. The U.S. dollar strengthened versus most global currencies during the second calendar quarter, though it weakened against the Japanese yen.
During the third calendar quarter, spread sectors continued to advance. Overall, global interest rates remained low, as the world’s central banks remained broadly accommodative. In July 2016, however, the Fed’s policy statement was more hawkish than most observers expected, reflecting cautious optimism amid the market’s relatively muted reaction to the Brexit outcome and strengthening U.S. economic data. The July 2016 U.S. non-farm payrolls report showed 255,000 new jobs added, exceeding market expectations and countering a disappointing second quarter 2016 GDP report that showed growth of 1.2%. The ECB kept interest rates unchanged during July 2016. The BoJ, meanwhile, fell short of market expectations with the announcement of an equity purchase program and the absence of changes to key policy tools, such as an interest rate cut and increased government bond purchases. In August 2016, the BoE unveiled a “timely, coherent and comprehensive package,” as described by Governor Mark Carney, which included a number of measures intended to help the U.K. economy navigate a post-Brexit environment. Although the ECB kept monetary policy unchanged during the month, the European and U.K. credit markets received technical, or supply/demand, support from the ongoing corporate bond purchases of central banks. In the U.S., non-farm payroll gains moderated in August 2016 and manufacturing and services data weakened, but continued hawkish comments from the Fed boosted market expectations of a rate hike by the end of 2016. However, at its September 2016 policy meeting, the Fed kept short-term interest rates unchanged. In Japan, during September 2016, the BoJ announced a new “yield curve control” framework designed to steepen Japan’s government bond yield curve and alleviate the impact on financial institutions of low longer-term rates. During the third quarter of 2016, the U.S. dollar depreciated versus many world currencies.
In the fourth quarter of 2016, spread sectors generally outperformed U.S. Treasury securities in a reversal from the volatile start to the calendar year. Commodity prices stabilized and crude oil prices rose following an agreement in November 2016 by the
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MARKET REVIEW
Organization of the Petroleum Exporting Countries (“OPEC”) and non-OPEC producers to cut production, which provided support for energy issuers within the corporate credit market as well as for oil-exporting emerging economies. Donald Trump’s victory in the November 2016 U.S. election marked an important regime change in monetary, fiscal and regulatory policy. Market expectations shifted toward a faster pace of Fed monetary policy tightening, increased fiscal stimulus and a potentially looser regulatory agenda. After the U.S. election, global interest rates rose and the U.S. dollar strengthened versus most developed market and emerging market currencies. The U.S. economy strengthened, with strong job growth and increased consumer spending reported. In December 2016, the Fed raised the targeted federal funds rate 0.25% to a range of between 0.50% and 0.75%. The rate hike resulted in a further rise in U.S. Treasury yields, with a notable increase in shorter-term yields, and additional appreciation in the U.S. dollar. In the Eurozone, the ECB announced it would reduce its monthly pace of asset purchases starting in April 2017 but said it would maintain its monetary easing policies throughout 2017. Meanwhile, Italy voted to reject constitutional reforms, while the outcome of Austria’s election defied the populist tide that had claimed victories in the U.K. and U.S. during 2016.
For the Reporting Period overall, high yield corporate bonds outperformed U.S. Treasuries, posting a double-digit gain. Sovereign emerging market debt and investment grade corporate bonds also outpaced U.S. Treasuries, followed by commercial mortgage-backed securities, agency securities and asset-backed securities. Mortgage-backed securities slightly underperformed U.S. Treasuries. The U.S. Treasury yield curve, or spectrum of maturities, flattened during the Reporting Period and shifted upwards, though it steepened during the final three months of the calendar year. The yield on the bellwether 10-year U.S. Treasury rose approximately 16 basis points to end the Reporting Period at 2.43%. (A basis point is 1/100th of a percentage point. A flattening yield curve is one wherein the differential in yields between longer-term and shorter-term maturities narrows.)
Looking Ahead
Equity Markets
At the end of the Reporting Period, we believed the macroeconomic environment may be shifting from low growth to pro-growth. Following Donald Trump’s victory in the U.S. presidential election, we expect to see more aggressive fiscal and pro-business policy leading to stronger U.S. and global economic growth. Chief Executive Officer confidence is already increasing, according to end-of-2016 polls, and could reignite corporate “animal spirits,” economist John Maynard Keynes’ term for the confidence and willingness to invest that are essential for economic growth. We believe the U.S. equity bull market could extend through 2017. Stronger economic growth and revenue-driven earnings growth in the U.S. should be a positive backdrop for equities, in our view. Moreover, we believe U.S. equities can do well in an environment of modestly rising interest rates and inflation, provided the underlying reason is healthy economic growth.
Even with this positive view for U.S. economic and revenue-driven earnings growth, we do believe the U.S. equity market remained expensive at the end of the Reporting Period. The median S&P 500® Index stock was trading in the 98th percentile relative to history and the 12-month forward price-to-earnings ratio was the highest of the major regions. That said, we believe the U.S. equity market still offers significant opportunities at the stock level, as more policy details become available and investors begin to focus on company-specific impacts. In our view, policy changes from a more populist, protectionist and unconventional U.S. president will likely increase volatility and the dispersion of returns as investors consider the effects of those policies on individual stocks, creating a potentially beneficial environment for active managers.
Fixed Income Markets
At the end of the Reporting Period, we expected the long economic recovery, which followed the 2008-2009 financial crisis, to continue during 2017. In our view, growth is poised to broaden to more countries, with the world economy drawing on more sources of strength than at any time since 2010.
In some respects, our outlook is an extension of our views at the start of the Reporting Period. However, we note the emergence of four transitional factors. First, populism is challenging globalism and creating new downside risks. Second, concerns about low economic growth are giving way to concerns about inflation. Third, the focus on monetary policy is shifting toward fiscal policy. Fourth, concerns about new regulation are moving toward hopes for deregulation.
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MARKET REVIEW
Our three strongest convictions for the 2017 calendar year are continued strength in the U.S. economy; monetary policy divergence reaching new extremes, which could potentially drive repricing across the interest rate markets; and higher volatility, largely fueled by political anxieties. We believe these developments point to more opportunity for relative value trades in the near term and indicate that risks from directional exposure to rising interest rates have increased. (Directional is defined as a strategy based on an assessment of a market’s, asset class’ or specific security’s anticipated direction.)
From an investment perspective, then, we considered relative value positions in interest rates and currencies more attractive than directional positions at the end of the Reporting Period. We also preferred securitized credit for its yield potential, while we were cautiously optimistic about corporate credit.
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GOLDMAN SACHS VARIABLE INSURANCE TRUST CORE FIXED INCOME FUND
INVESTMENT OBJECTIVE
The Fund seeks a total return consisting of capital appreciation and income that exceeds the total return of the Bloomberg Barclays U.S. Aggregate Bond Index.
Portfolio Management Discussion and Analysis
Below, the Goldman Sachs Fixed Income Portfolio Management Team discusses the Goldman Sachs Variable Insurance Trust — Goldman Sachs Core Fixed Income Fund’s (the “Fund”) performance and positioning for the 12-month period ended December 31, 2016 (the “Reporting Period”).
How did the Fund perform during the Reporting Period?
During the Reporting Period, the Fund’s Institutional and Service Shares generated average annual total returns of 2.98% and 2.70%, respectively. These returns compare to the 2.64% average annual total return of the Fund’s benchmark, the Bloomberg Barclays U.S. Aggregate Bond Index (the “Bloomberg Barclays Index”), during the same time period.
What key factors were responsible for the Fund’s performance during the Reporting Period?
During the Reporting Period, the Fund’s top-down country strategy contributed positively to relative returns. The outperformance was driven by the Fund’s long positions in Europe versus its short positions in the U.S. and Japan. A long position in Canada versus a short position in the U.S. further added to results. The Fund benefited from its short position in the euro within our top-down currency strategy. In addition, our top-down cross-sector strategy bolstered relative performance. In our cross-sector strategy, we invested Fund assets across a variety of fixed income sectors, including some that may not be included in the Bloomberg Barclays Index. Also, our bottom-up individual issue selection, especially within the securitized and corporate bond sectors, contributed positively during the Reporting Period.
Conversely, the Fund’s tactical duration and yield curve positioning detracted from its relative performance. Duration is a measure of the Fund’s sensitivity to changes in interest rates. Yield curve indicates a spectrum of maturities. Our top-down currency strategy overall, especially the Fund’s long position in the Swedish krona, also hurt relative returns. Sweden’s central bank remained accommodative throughout 2016, which was a headwind for the appreciation of the Swedish krona in spite of the country’s relatively robust economic growth.
Which fixed income market sectors most affected Fund performance during the Reporting Period?
During the Reporting Period, the Fund benefited most from its overweight position relative to the Bloomberg Barclays Index in collateralized loan obligations. Its overweight position in emerging market sovereign debt and asset-backed securities (“ABS”) further enhanced relative returns. These positive contributions were offset somewhat by the Fund’s overweight position in U.S. corporate bonds during the first half of the Reporting Period and its underweight position during the second half. In the first half of the Reporting Period, U.S. corporate bonds underperformed as credit spreads (yield differentials versus U.S. Treasuries of comparable maturity) widened in response to weak commodity prices and concerns about economic growth in China. They outperformed in the second half of the Reporting Period as credit spreads tightened, supported by monetary stimulus from the world’s central banks and investors’ global search for yield. In addition, the Fund was hampered during the Reporting Period overall by its underweight positions in agency mortgage-backed securities and emerging market corporate bonds. Although we considered fundamentals unattractive for agency mortgage-backed securities, their prices were buoyed by the purchases of non-U.S. investors and U.S. commercial banks.
Regarding individual issue selection, the Fund’s performance was helped by its holdings of mortgage backed-securities within the securitized sector. In the corporate bond sector, the Fund benefited from its investments in intermediate-term bonds and its underweight positions in longer-term bonds. In the government/swaps sector, issue selection of U.S. Treasury inflation protected securities (“TIPS”) added to relative returns. Conversely, within emerging market debt, selection of U.S. dollar-denominated Mexican external debt detracted from the Fund’s performance during the Reporting Period.
Did the Fund’s duration and yield curve positioning strategy help or hurt its results during the Reporting Period?
Tactical management of the Fund’s duration and yield curve positioning detracted overall from relative returns during the Reporting Period. Most of the underperformance occurred during March and June 2016, when the Fund was hurt by its short
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GOLDMAN SACHS VARIABLE INSURANCE TRUST CORE FIXED INCOME FUND
duration positioning versus the Bloomberg Barclays Index as U.S. interest rates fell. In March 2016, the Federal Reserve (“Fed”) surprised markets by taking a dovish stance on monetary policy, which led U.S. Treasury yields to decline. (A dovish stance implies lower interest rates; opposite of hawkish.) In June 2016, the U.K. voted to exit the European Union, also known as Brexit, resulting in heightened market volatility and another drop in U.S. Treasury yields. Somewhat offsetting this negative performance was the benefit of the Fund’s short duration positioning in August 2016 when market expectations for a Fed rate hike edged up in response to the hawkish comments of some policymakers ahead of the Fed’s September 2016 policy meeting.
How did the Fund use derivatives and similar instruments during the Reporting Period?
As market conditions warranted during the Reporting Period, currency transactions were carried out using primarily over-the-counter (“OTC”) forward foreign exchange contracts. Currency transactions were used as we sought both to enhance returns and to hedge the Fund’s portfolio against currency exchange rate fluctuations. OTC forward foreign exchange contracts detracted from Fund performance during the Reporting Period. In addition, Treasury futures were employed as warranted to facilitate specific duration, yield curve and country strategies. During the Reporting Period, Treasury futures contributed positively to Fund results. Swaptions (options on interest rate swap contracts), which were used to express our interest rate views and to hedge volatility and yield curve risks in the Fund, did not have a meaningful impact on the Fund’s performance during the Reporting Period. Interest rate swaps were used to manage exposure to fluctuations in interest rates and added to Fund performance during the Reporting Period. Additionally, the Fund employed credit default swaps to implement specific credit-related investment strategies, including management of the Fund’s exposure to credit spreads. Credit default swaps had a negative impact on the Fund’s results during the Reporting Period. Overall, we employ derivatives and similar instruments for the efficient management of the Fund’s portfolio. Derivatives and similar instruments allow us to manage interest rate, credit and currency risks more effectively by allowing us both to hedge and to apply active investment views with greater versatility and to afford greater risk management precision than we would otherwise be able to implement.
Were there any notable changes in the Fund’s weightings during the Reporting Period?
The Fund began the Reporting Period with a long duration position relative to that of the Bloomberg Barclays Index, which we shifted to a neutral position in February 2016 and then to a short position in March 2016. We maintained this short duration positioning through September 2016. In October 2016, we shifted the Fund to a neutral duration position as U.S. Treasury yields had risen and U.S. inflation data remained surprisingly weak. In December 2016, we reestablished the Fund’s short duration position relative to the Bloomberg Barclays Index because we believed U.S. Treasury yields had room to rise, given the potential for more fiscal stimulus and less regulation under a Republican-led administration, the market’s increased inflation expectations and signs of tightness in the labor market.
Also, at the start of the Reporting Period, we maintained the Fund’s overweight position compared to the Bloomberg Barclays Index in corporate credit. We moved to an underweight position within the sector in June 2016 in anticipation of summer seasonal pressures and due to our view that Brexit volatility would cause credit spreads to drift wider. We also believed the U.S. economy was in the later stages of the credit cycle. Additionally, at the beginning of the Reporting Period, the Fund had an underweight position relative to the Bloomberg Barclays Index in agency mortgage-backed securities, most of which were mortgage-backed pass-through securities. We shifted the Fund to a neutral position during the third quarter 2016 and then reestablished the underweight position in November 2016. (Pass-through mortgages consist of a pool of residential mortgage loans, where homeowners’ monthly payments of principal, interest and prepayments pass from the original bank through a government agency or investment bank to investors.) Consistent with our decision to underweight agency mortgage-backed securities, we reduced the Fund’s exposure to agency collateralized mortgage obligations because of what we considered unfavorable valuations. We also reduced the Fund’s exposure to commercial mortgage-backed securities (“CMBS”) because they tend to be sensitive to credit spreads and because of our belief that the U.S. economy is in the later stage of the corporate credit cycle. In addition, we reduced the Fund’s exposure to emerging markets debt because of valuations and given a possible shift toward protectionism in the U.S. as well as uncertainty regarding trade policy under the Trump administration.
Were there any changes to the Fund’s portfolio management team during the Reporting Period?
There were no changes to the Fund’s portfolio management team during the Reporting Period.
How was the Fund positioned relative to the Bloomberg Barclays Index at the end of the Reporting Period?
At the end of the Reporting Period, the Fund was underweight U.S. government securities compared to the Bloomberg Barclays Index on a market-value weighted basis. It was also underweight agency mortgage-backed securities. The Fund was overweight ABS and investment grade corporate bonds. In terms of contribution to duration, the Fund was underweight corporate credit. It was
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GOLDMAN SACHS VARIABLE INSURANCE TRUST CORE FIXED INCOME FUND
marginally overweight on a market-value weighted basis in CMBS and non-agency mortgage-backed securities. The Fund was neutral relative to the Bloomberg Barclays Index in quasi-government bonds, emerging market debt and covered bonds at the end of the Reporting Period. (Covered bonds are securities created from either mortgage loans or public sector loans.)
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FUND BASICS
Core Fixed Income Fund
As of December 31, 2016
STANDARDIZED TOTAL RETURNS1
For the period ended 12/31/16 | One Year | Five Years | Ten Years | Since Inception | Inception Date | |||||||||||||
Institutional | 2.98 | % | N/A | N/A | 1.90 | % | 4/30/13 | |||||||||||
Service | 2.70 | 2.74 | % | 3.92 | % | 3.94 | 1/09/06 |
1 | The Standardized Total Returns are average annual total returns as of the most recent calendar quarter-end. They assume reinvestment of all distributions at net asset value (“NAV”). Because Institutional and Service Shares do not involve a sales charge, such a charge is not applied to their Standardized Total Returns. |
Total return figures in the above chart represent past performance and do not indicate future results, which will vary. The investment return and principal value of an investment will fluctuate and, therefore, an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the total return figures in the above chart. Please visit www.GSAMFUNDS.com to obtain the most recent month-end returns. Performance reflects fee waivers and/or expense limitations in effect during the periods shown. In their absence, performance would be reduced.
EXPENSE RATIOS2
Net Expense Ratio (Current) | Gross Expense Ratio (Before Waivers) | |||||||
Institutional | 0.42 | % | 0.74 | % | ||||
Service | 0.67 | 0.99 |
2 | The expense ratios of the Fund, both current (net of any fee waivers and/or expense limitations) and before waivers (gross of any fee waivers and/or expense limitations) are as set forth above according to the most recent publicly available Prospectus for the Fund and may differ from the expense ratios disclosed in the Financial Highlights in this report. Pursuant to a contractual arrangement, the Fund’s fee waivers and/or expense limitations will remain in place through at least April 29, 2017, and prior to such date, the Investment Adviser may not terminate the arrangements without the approval of the Fund’s Board of Trustees. If these arrangements are discontinued in the future, the expense ratios may change without shareholder approval. |
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FUND BASICS
FUND COMPOSITION3
3 | The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. Figures in the graph may not sum to 100% due to the exclusion of other assets and liabilities. The graph depicts the Fund’s investments but may not represent the Fund’s market exposure due to the exclusion of certain derivatives, if any, as listed in the Additional Investment Information section of the Schedule of Investments. |
4 | “Mortgage-Backed Securities” are guaranteed by the Government National Mortgage Association (“GNMA”), the Federal National Mortgage Association (“FNMA”) or the Federal Home Loan Mortgage Corp. (“FHLMC”). GNMA instruments are backed by the full faith and credit of the United States Government. |
5 | “U.S. Government Agency Securities” include agency securities offered by companies such as FNMA and the Federal Home Loan Bank (“FHLB”), which operate under a government charter. While they are required to report to a government regulator, their assets are not explicitly guaranteed by the government and they otherwise operate like any other publicly traded company. |
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GOLDMAN SACHS VARIABLE INSURANCE TRUST CORE FIXED INCOME FUND
Performance Summary
December 31, 2016
The following graph shows the value, as of December 31, 2016, of a $10,000 investment made on January 1, 2007 in the Service Class Shares. For comparative purposes, the performance of the Fund’s benchmark, the Bloomberg Barclays U.S. Aggregate Bond Index, is shown. This performance data represents past performance and should not be considered indicative of future performance, which will fluctuate with changes in market conditions. These performance fluctuations may cause an investor’s shares, when redeemed, to be worth more or less than their original cost. Performance reflects Fund level expenses, but does not reflect fees and expenses associated with any variable annuity contract or variable life insurance policy that uses the Fund as an investment option for any contract or policy. Had performance reflected all of those fees and expenses, performance would have been reduced. Performance reflects applicable fee waivers and/or expense limitations in effect during the periods shown, and in their absence, performance would be reduced. Performance of Institutional Shares will vary from Service Shares due to differences in class specific fees. In addition to the Investment Adviser’s decisions regarding issuer/industry/country investment selection and allocation, other factors may affect Fund performance. These factors include, but are not limited to, Fund operating fees and expenses, portfolio turnover, and subscription and redemption cash flows affecting the Fund.
Core Fixed Income Fund’s 10 Year Performance
Performance of a $10,000 investment, with distributions reinvested, from January 1, 2007 through December 31, 2016.
Average Annual Total Return through December 31, 2016 | One Year | Five Years | Ten Years | Since Inception | ||||
Institutional (Commenced April 30, 2013) | 2.98% | N/A | N/A | 1.90% | ||||
Service (Commenced January 9, 2006) | 2.70% | 2.74% | 3.92% | 3.94% |
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GOLDMAN SACHS VARIABLE INSURANCE TRUST EQUITY INDEX FUND
INVESTMENT OBJECTIVE
The Fund seeks to achieve investment results that correspond to the aggregate price and yield performance of a benchmark index that measures the investment returns of large capitalization stocks.
Portfolio Management Discussion and Analysis
Below, SSgA Funds Management, Inc. (“SSgA”), the Fund’s Subadvisor, discusses the Goldman Sachs Variable Insurance Trust — Goldman Sachs Equity Index Fund’s (the “Fund”) performance and positioning for the 12-month period ended December 31, 2016 (the “Reporting Period”).
How did the Fund perform during the Reporting Period?
During the Reporting Period, the Fund’s Service Shares generated an average annual total return of 11.41%*. This return compares to the 11.93% average annual total return of the Fund’s benchmark, the Standard & Poor’s 500® Index (with dividends reinvested) (the “S&P 500® Index”), during the same time period.
During the Reporting Period, which sectors and which industries in the S&P 500® Index were the strongest contributors to the Fund’s performance?
Nine of the 11 sectors in the S&P 500® Index advanced during the Reporting Period. (Effective after the market close on August 31, 2016, real estate was reclassified as an eleventh sector within the Global Industry Classification Standard (“GICS”).) In terms of total return, the sectors that made the strongest positive contributions to the S&P 500® Index and to the Fund were energy, telecommunication services and financials. The largest sector by weighting in the S&P 500® Index at the end of the Reporting Period was information technology at a weighting of 20.77%. The industries with the strongest performance in terms of total return were precious metals; oil and gas pipelines; steel; electronic production equipment; and electronics/appliance stores.
On the basis of impact (which takes both total returns and weightings into account), the sectors that made the strongest positive contributions to the S&P 500® Index and to the Fund were information technology, financials and industrials. The industries with the strongest performance on the basis of impact were financial conglomerates, integrated oil, semiconductors, major telecommunications and major banks.
Which sectors and industries in the S&P 500® Index were the weakest contributors to the Fund’s performance?
In terms of total return, during the Reporting Period, the weakest performing sectors were health care, real estate and consumer staples. The weakest performing industries in terms of total return were other pharmaceuticals, generic pharmaceuticals, forest products, office equipment/supplies and medical distributors.
On the basis of impact, the weakest performing sectors were health care, real estate and materials. The weakest performing industries on the basis of impact were biotechnology, generic pharmaceuticals, medical distributors, other pharmaceuticals and apparel/footwear.
Which individual stocks were the top performers, and which were the greatest detractors?
On the basis of impact, the stocks that made the strongest positive contribution during the Reporting Period were Exxon Mobil, JPMorgan Chase, AT&T, Apple and Chevron. The weakest performers were Allergan, Gilead Sciences, Alexion Pharmaceuticals, CVS Health and Regeneron Pharmaceuticals.
How did the Fund use derivatives and similar instruments during the Reporting Period?
During the Reporting Period, the Fund did not use derivatives as part of an active management strategy to add value to the Fund’s results. However, equity index futures were used to equitize the Fund’s cash holdings. In other words, we put the Fund’s cash holdings to work by using them as collateral for the purchase of equity index futures. We also used these equity index futures to
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* | Effective on or about December 1, 2016, the Fund was permitted to engage in securities lending. Securities lending involves the lending of securities owned by the Fund to financial institutions. Borrowers are required to secure their loans continuously with cash, cash equivalents, U.S. government securities or letters of credit in an amount at least equal to the market value of the securities loaned. Cash collateral may be invested by the Fund in short-term investments. The Fund may lend its securities to seek to increase its income. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST EQUITY INDEX FUND
provide liquidity for daily cash flow requirements. Equity index futures had a neutral impact on the Fund’s performance during the Reporting Period.
Were there any changes to the Fund’s portfolio management team during the Reporting Period?
There were no changes to the Fund’s portfolio management team during the Reporting Period.
What changes were made to the makeup of the S&P 500® Index during the Reporting Period?
Thirty-eight stocks were removed from the S&P 500® Index during the Reporting Period. They were ADT, AGL Resources, Adient, AdvanSix, Airgas, Alcoa, Baxalta, Broadcom, Cablevision Systems, Cameron International, Chubb, Coca-Cola Enterprises, Columbia Pipeline Group, Consol Energy, Dell Technologies, Diamond Offshore Drilling, EMC, Ensco, Fossil Group, GameStop, Ingevity, Johnson Controls, Keurig Green Mountain, Lamb Weston Holdings, Legg Mason, Owen-Illinois, Pepco Holdings, Plum Creek Timber, Precision Castparts, Quality Care Properties, SanDisk, Starwood Hotels and Resorts Worldwide, TECO Energy, Tenet Healthcare, Time Warner Cable, Versum Materials, Vistana Signature Experiences and Yum China Holdings. There were 39 stocks added to the S&P 500® Index during the Reporting Period. They were Acuity Brands, Adient, AdvanSix, Alaska Air Group, Albemarle, Alcoa Upstream, Alliant Energy, American Water Works, Amsurg, Centene, Charter Communications, Citizens Financial Group, Concho Resources, Cooper Companies, Coty, Dell Technologies, Digital Realty Trust, Extra Space Storage, Federal Realty Investment Trust, Foot Locker, Fortive, Fortune Brands Home & Security, Arthur J. Gallagher & Co., Global Payments, Hologic, Ingevity, LKQ, Lamb Weston Holdings, Mettler-Toledo International, Mid-America Apartment Communities, Quality Care Properties, TransDigm Group, UDR, Ulta Salon Cosmetics & Fragrance, Under Armour Class C, Versum Materials, Vistana Signature Experiences, Willis Group Holdings and Yum China Holdings.
The source of the data included in the above Portfolio Management Discussion and Analysis with respect to the Goldman Sachs Equity Index Fund is FactSet as of 12/30/16.
Characteristics presented are calculated using the month end market value of holdings, except for beta and standard deviation, if shown, which use month end return values. Averages reflect the market weight of securities in the portfolio. Market data, prices, and dividend estimates for characteristics calculations provided by FactSet Research Systems, Inc. All other portfolio data provided by SSGA. Characteristics are as of the date indicated, are subject to change, and should not be relied upon as current thereafter.
Past performance is not a guarantee of future results.
Index returns are unmanaged and do not reflect the deduction of any fees or expenses. Index returns reflect all items of income, gain and loss and the reinvestment of dividends and other income.
SSgA may have or may seek investment management or other business relationships with companies discussed in this material or affiliates of those companies, such as their officers, directors and pension plans.
The views expressed in this material are the views of SSGA’s Global Equity Beta Solutions Team through the period ended December 31, 2016 and are subject to change based on market and other conditions. All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.
Changes to the Fund’s Portfolio Management Team after the Reporting Period
On January 3, 2017, after the Reporting Period ended, co-portfolio manager John Tucker no longer served as a Portfolio Manager for the Fund. By design, all investment decisions for the Fund are performed within a co-lead or team structure. Effective January 3, 2017, Daniel TenPas, Principal and Portfolio Manager, replaced Mr. Tucker as Portfolio Manager for the Fund. Mr. TenPas joins Michael Feehily, Senior Managing Director and the Head of Global Equity Beta Solutions in the Americas of SSgA and Melissa Kapitulik, Vice President and Senior Portfolio Manager of SSgA, both of whom have managed the Fund since 2014.
12
FUND BASICS
Equity Index Fund
as of December 31, 2016
STANDARDIZED TOTAL RETURNS1
For the period ended 12/31/16 | One Year | Five Years | Ten Years | Since Inception | Inception Date | |||||||||||||
Service | 11.41 | % | 14.16 | % | 6.58 | % | 7.09 | % | 1/09/06 |
1 | The Standardized Total Returns are average annual total returns as of the most recent calendar quarter-end. They assume reinvestment of all distributions at net asset value (“NAV”). Because Service Shares do not involve a sales charge, such a charge is not applied to their Standardized Total Returns. |
Total return figures in the above chart represent past performance and do not indicate future results, which will vary. The investment return and principal value of an investment will fluctuate and, therefore, an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the total return figures in the above chart. Please visit www.GSAMFUNDS.com to obtain the most recent month-end returns. Performance reflects fee waivers and/or expense limitations in effect during the periods shown. In their absence, performance would be reduced.
EXPENSE RATIOS2
Net Expense Ratio (Current) | Gross Expense Ratio (Before Waivers) | |||||||
Service | 0.48 | % | 0.70 | % |
2 | The expense ratios of the Fund, both current (net of any fee waivers and/or expense limitations) and before waivers (gross of any fee waivers and/or expense limitations) are as set forth above according to the most recent publicly available Prospectus for the Fund and may differ from the expense ratios disclosed in the Financial Highlights in this report. Pursuant to a contractual arrangement, the Fund’s fee waivers and/or expense limitations will remain in place through at least April 29, 2017, and prior to such date, the Investment Adviser may not terminate the arrangements without the approval of the Fund’s Board of Trustees. If these arrangements are discontinued in the future, the expense ratios may change without shareholder approval. |
TOP TEN HOLDINGS AS OF 12/31/163
Holding | % of Net Assets | Line of Business | ||||
Apple, Inc. | 3.2 | % | Technology Hardware & Equipment | |||
Microsoft Corp. | 2.5 | Software & Services | ||||
Exxon Mobil Corp. | 1.9 | Energy | ||||
Johnson & Johnson | 1.6 | Pharmaceuticals, Biotechnology & Life Sciences | ||||
Berkshire Hathaway, Inc. Class B | 1.6 | Diversified Financials | ||||
JPMorgan Chase & Co. | 1.6 | Banks | ||||
Amazon.com, Inc. | 1.5 | Retailing | ||||
General Electric Co. | 1.4 | Capital Goods | ||||
Facebook, Inc. Class A | 1.4 | Software & Services | ||||
AT&T, Inc. | 1.3 | Telecommunication Services |
3 | The top 10 holdings may not be representative of the Fund’s future investments. |
13
FUND BASICS
FUND VS. BENCHMARK SECTOR ALLOCATIONS4
As of December 31, 2016
4 | The Fund is actively managed and, as such, its composition may differ over time. Consequently, the Fund’s overall sector allocations may differ from percentages contained in the graph above. The graph categorizes investments using Global Industry Classification Standard (“GICS”); however, the sector classifications used by the portfolio management team may differ from GICS. The percentage shown for each investment category reflects the value of investments in that category as a percentage of total market value (excluding investments in the securities lending reinvestment vehicle, if any). Underlying sector allocations of exchange traded funds and investment companies held by the Fund are not reflected in the graph above. Investments in the securities lending reinvestment vehicle represented 0.1% of the Fund’s net assets at December 31, 2016. The graph depicts the Fund’s investments but may not represent the Fund’s market exposure due to the exclusion of certain derivatives, if any, as listed in the Additional Investment Information section of the Schedule of Investments. |
14
GOLDMAN SACHS VARIABLE INSURANCE TRUST EQUITY INDEX FUND
Performance Summary
December 31, 2016
The following graph shows the value, as of December 31, 2016, of a $10,000 investment made in the Fund on January 1, 2007. For comparative purposes, the performance of the Fund’s benchmark, the S&P 500 Index (with distributions reinvested), is shown. This performance data represents past performance and should not be considered indicative of future performance, which will fluctuate with changes in market conditions. These performance fluctuations may cause an investor’s shares, when redeemed, to be worth more or less than their original cost. Performance reflects Fund level expenses, but does not reflect fees and expenses associated with any variable annuity contract or variable life insurance policy that uses the Fund as an investment option for any contract or policy. Had performance reflected all of those fees and expenses, performance would have been reduced. Performance reflects applicable fee waivers and/or expense limitations in effect during the periods shown, and in their absence, performance would be reduced. In addition to the Investment Adviser’s decisions regarding issuer/industry investment selection and allocation, other factors may affect Fund performance. These factors include, but are not limited to, Fund operating fees and expenses, portfolio turnover, and subscription and redemption cash flows affecting the Fund.
Equity Index Fund’s 10 Year Performance
Performance of a $10,000 investment, with distributions reinvested, from January 1, 2007 through December 31, 2016.
Average Annual Total Return through December 31, 2016 | One Year | Five Years | Ten Years | Since Inception | ||||
Equity Index Fund (Commenced January 9, 2006) | 11.41% | 14.16% | 6.58% | 7.09% |
15
GOLDMAN SACHS VARIABLE INSURANCE TRUST GROWTH OPPORTUNITIES FUND
INVESTMENT OBJECTIVE
The Fund seeks long-term growth of capital.
Portfolio Management Discussion and Analysis
Below, the Goldman Sachs Growth Investment Team discusses the Goldman Sachs Variable Insurance Trust — Goldman Sachs Growth Opportunities Fund’s (the “Fund”) performance and positioning for the 12-month period ended December 31, 2016 (the “Reporting Period”).
How did the Fund perform during the Reporting Period?
During the Reporting Period, the Fund’s Institutional and Service Shares generated average annual total returns of 1.71% and 1.42%, respectively. These returns compare to the 7.31% average annual total return of the Fund’s benchmark, the Russell Midcap® Growth Index (with dividends reinvested) (the “Russell Index”), during the same time period.
What key factors were responsible for the Fund’s performance during the Reporting Period?
The Fund underperformed the Russell Index during the Reporting Period primarily due to stock selection.
Which equity market sectors helped and hurt Fund performance?
Our bottom-up approach focuses on security selection, and as a result, we do not make active sector-level investment decisions. That said, on a sector level, stock selection in the information technology, consumer discretionary and consumer staples sectors detracted from Fund returns. Stock selection in two sectors — financials and real estate — added to the Fund’s relative performance. (Effective after the market close on August 31, 2016, real estate was reclassified as an eleventh sector within the Global Industry Classification Standard (“GICS”).)
Which individual stocks detracted from the Fund’s performance during the Reporting Period?
The top detractors from the Fund’s relative performance were LinkedIn, an online professional networking service; RH (formerly Restoration Hardware), a home furnishings retailer; and Edwards Lifesciences, a medical equipment company.
The Fund’s top relative detractor during the Reporting Period was LinkedIn. The company reported solid fourth quarter 2015 results, but its outlook was well below market expectations. Given that LinkedIn is a high multiple growth stock in a challenging market environment, its share price fell sharply. Later in the Reporting Period, after the company announced it would be acquired by technology company Microsoft, the stock rose significantly. Following the announcement, the Fund exited its position in LinkedIn.
RH was a key detractor from the Fund’s relative performance during the Reporting Period. The company experienced headwinds in an increasingly challenging retail environment, especially relative to the high-end consumer. Notably, during the first quarter 2016, its shares declined steeply as the company pre-announced negative fiscal fourth quarter results, with sales and earnings below market expectations. We believed these results represented a significant reset to our previous expectations about the company’s growth, and we eliminated the Fund’s position in RH during the Reporting Period.
Another top detractor from the Fund’s relative returns was Edwards Lifesciences. Its shares declined considerably after the company reported third quarter 2016 revenues and earnings that were below market expectations. Additionally, the pace of market penetration and the durability of growth related to the company’s total aortic valve replacement (“TAVR”) procedure, a key business area, was a concern. Despite the weakness, at the end of the Reporting Period, we believed Edwards Lifesciences’ market share and growth opportunity remained compelling. We believe TAVR is in the early innings in terms of penetration and adoption. In our view, the company has substantial upside opportunities as it takes market share away from open heart surgery and potentially expands its market in the coming years. The Fund continued to hold a position in Edwards Lifesciences at the end of the Reporting Period.
Which individual stocks added to the Fund’s relative performance during the Reporting Period?
The Fund benefited most relative to the Russell Index from its positions in Ulta Salon, Cosmetics & Fragrances, a beauty products retailer; Amphenol, a producer of electrical, electronic and fiber optic connectors; and Xylem, a water technology company.
16
GOLDMAN SACHS VARIABLE INSURANCE TRUST GROWTH OPPORTUNITIES FUND
Ulta Salon, Cosmetics & Fragrance was the top positive contributor to Fund performance during the Reporting Period. After a challenging start to 2016, its share price picked up momentum in early April 2016 after the company issued strong first calendar quarter earnings, and the stock was added to the S&P 500® Index. Its first quarter 2016 results were driven by better than expected margins, revenues and e-commerce growth. In our view, Ulta Salon, Cosmetics & Fragrance is a strong brand that continues to gain recognition. At the end of the Reporting Period, we believed the company had an opportunity to grow market share through higher brand awareness, increasing loyalty to existing stores, expansion of new stores, and e-commerce. Thus, the Fund continued to hold Ulta Salon, Cosmetics & Fragrance at the end of the Reporting Period.
Notable contributor Amphenol also had a challenging start to 2016 but then rebounded to end the Reporting Period up significantly. The company reported strong quarterly results throughout 2016, causing its shares to steadily gain. At the end of the Reporting Period, we remained positive on the company’s fundamentals and management team, which continued to be focused, in our view, on creating shareholder value and sustaining financial strength. The Fund maintained a position in Amphenol at the end of the Reporting Period.
During the Reporting Period, Xylem reported solid quarterly results, beating market expectations for earnings, and also raised guidance. In addition, during August 2016, Xylem’s share price appreciated as the company announced the purchase of Sensus, a leader in smart meters, network technologies and advanced data analytics solutions. In our opinion, investors had a positive view of the acquisition because it would bolster Xylem’s product offering and technological advantage. At the end of the Reporting Period, we were optimistic about Xylem’s prospects for margin expansion and believed its management team had positioned the company for sustainable long-term growth. At the end of the Reporting Period, the Fund continued to hold a position in the stock.
Did the Fund make any significant purchases or sales during the Reporting Period?
Among the purchases initiated during the Reporting Period was a position in Roper Technologies, a diversified technology company providing engineered products and solutions for global niche markets. Roper Technologies focuses on cash return on investment (“CROI”) metrics, which have historically served the company well. (CROI is a method of valuation that compares a company’s cash return to its equity.) In our view, Roper Technologies has a significant runway for its differentiated merger and acquisitions strategy to help grow its business. We think the company’s margins and CROI could continue to expand as it transitions from an industrial company to a more software-aligned company. We are optimistic about what we consider to be Roper Technologies’ innovative measures, disciplined capital deployment and management’s solid execution ability.
The Fund also established a position in off-price retailer Ross Stores. Off-price retailers seek to take advantage of excess inventory from full-price retailers by purchasing goods at a significant discount to their original price. We believe Ross Stores is well positioned within its industry and is attractively valued given what we consider to be its high quality. The company has, in our view, delivered consistent sales, earnings growth and strong free cash flows over time and has a demonstrated track record of returning capital to shareholders.
In addition to the sales already mentioned, among notable sales during the Reporting Period was that of McCormick & Company, a manufacturer of spices, seasoning mixes and condiments. The stock performed strongly in the first half of the Reporting Period, but the company’s premium valuation and more conventional consumer staples characteristics left it more vulnerable, in our view, to a rotation in market sentiment. As a result, we decided to eliminate the Fund’s position in the name during the Reporting Period.
Were there any notable changes in the Fund’s weightings during the Reporting Period?
During the Reporting Period, we shifted the Fund from an underweight position relative to the Russell Index in the financials sector to an overweight position. We moved the Fund from an overweight position in health care to an underweight position. In addition, we changed the Fund’s neutral positions in information technology and consumer discretionary to underweight positions. We also shifted the Fund from underweight positions compared to the Russell Index in the materials and industrials sectors to neutral positions during the Reporting Period.
How did the Fund use derivatives and similar instruments during the Reporting Period?
The Fund did not use derivatives or similar instruments within its investment process during the Reporting Period.
Were there any changes to the Fund’s portfolio management team during the Reporting Period?
There were no changes to the Fund’s portfolio management team during the Reporting Period.
17
GOLDMAN SACHS VARIABLE INSURANCE TRUST GROWTH OPPORTUNITIES FUND
How was the Fund positioned relative to the Russell Index at the end of the Reporting Period?
As mentioned, the Fund’s sector positioning relative to the Russell Index is the result of our stock selection, as we take a pure bottom-up, research-intensive approach to investing. From that perspective, then, at the end of the Reporting Period, the Fund’s portfolio was broadly diversified with overweight positions compared to the Russell Index in the financials and telecommunication services sectors. The Fund had smaller weightings than the Russell Index in the health care, information technology, real estate and consumer discretionary sectors at the end of the Reporting Period. It was relatively neutral compared to the Russell Index at the end of the Reporting Period in the industrials, materials, energy, utilities and consumer staples sectors.
18
FUND BASICS
Growth Opportunities Fund
as of December 31, 2016
STANDARDIZED TOTAL RETURNS1
For the period ended 12/31/16 | One Year | Five Years | Ten Years | Since Inception | Inception Date | |||||||||||||
Institutional | 1.71 | % | N/A | N/A | 7.06 | % | 4/30/13 | |||||||||||
Service | 1.42 | 11.00 | % | 8.03 | % | 7.52 | 1/09/06 |
1 | The Standardized Total Returns are average annual total returns as of the most recent calendar quarter-end. They assume reinvestment of all distributions at net asset value (“NAV”). Because Institutional and Service Shares do not involve a sales charge, such a charge is not applied to their Standardized Total Returns. |
Total return figures in the above chart represent past performance and do not indicate future results, which will vary. The investment return and principal value of an investment will fluctuate and, therefore, an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the total return figures in the above chart. Please visit www.GSAMFUNDS.com to obtain the most recent month-end returns. Performance reflects fee waivers and/or expense limitations in effect during the periods shown. In their absence, performance would be reduced.
EXPENSE RATIOS2
Net Expense Ratio (Current) | Gross Expense Ratio (Before Waivers) | |||||||
Institutional | 0.89 | % | 1.14 | % | ||||
Service | 1.05 | 1.40 |
2 | The expense ratios of the Fund, both current (net of any fee waivers and/or expense limitations) and before waivers (gross of any fee waivers and/or expense limitations) are as set forth above according to the most recent publicly available Prospectus for the Fund and may differ from the expense ratios disclosed in the Financial Highlights in this report. Pursuant to a contractual arrangement, the Fund’s fee waivers and/or expense limitations will remain in place through at least April 29, 2017, and prior to such date, the Investment Adviser may not terminate the arrangements without the approval of the Fund’s Board of Trustees. If these arrangements are discontinued in the future, the expense ratios may change without shareholder approval. |
TOP TEN HOLDINGS AS OF 12/31/163
Holding | % of Net Assets | Line of Business | ||||
Amphenol Corp. Class A | 3.1 | % | Technology Hardware & Equipment | |||
Roper Technologies, Inc. | 2.9 | Capital Goods | ||||
Panera Bread Co. Class A | 2.6 | Consumer Services | ||||
Xylem, Inc. | 2.5 | Capital Goods | ||||
Ulta Salon, Cosmetics & Fragrance, Inc. | 2.5 | Retailing | ||||
Middleby Corp. (The) | 2.5 | Capital Goods | ||||
Intuit, Inc. | 2.3 | Software & Services | ||||
Intercontinental Exchange, Inc. | 2.1 | Diversified Financials | ||||
Ross Stores, Inc. | 2.1 | Retailing | ||||
First Republic Bank | 2.1 | Banks |
3 | The top 10 holdings may not be representative of the Fund’s future investments. |
19
FUND BASICS
FUND vs. BENCHMARK SECTOR ALLOCATIONS4
As of December 31, 2016
4 | The Fund is actively managed and, as such, its composition may differ over time. Consequently, the Fund’s overall sector allocations may differ from percentages contained in the graph above. The graph categorizes investments using Global Industry Classification Standard (“GICS”); however, the sector classifications used by the portfolio management team may differ from GICS. The percentage shown for each investment category reflects the value of investments in that category as a percentage of market value. Underlying sector allocations of exchange traded funds and investment companies held by the Fund are not reflected in the graph above. Investments in the securities lending reinvestment vehicle represented 2.1% of the Fund’s net assets at December 31, 2016. The graph depicts the Fund’s investments but may not represent the Fund’s market exposure due to the exclusion of certain derivatives, if any, as listed in the Additional Investment Information section of the Schedule of Investments. |
20
GOLDMAN SACHS VARIABLE INSURANCE TRUST GROWTH OPPORTUNITIES FUND
Performance Summary
December 31, 2016
The following graph shows the value, as of December 31, 2016, of a $10,000 investment made on January 1, 2007 in the Service Class Shares. For comparative purposes, the performance of the Fund’s benchmark, the Russell Midcap Growth Index (with distributions reinvested), is shown. This performance data represents past performance and should not be considered indicative of future performance which will fluctuate with changes in market conditions. These performance fluctuations may cause an investor’s shares, when redeemed, to be worth more or less than their original cost. Performance reflects Fund level expenses, but does not reflect fees and expenses associated with any variable annuity contract or variable life insurance policy that uses the Fund as an investment option for any contract or policy. Had performance reflected all of those fees and expenses, performance would have been reduced. Performance reflects applicable fee waivers and/or expense limitations in effect during the periods shown, and in their absence, performance would be reduced. Performance of Institutional Shares will vary from Service Shares due to differences in class specific fees. In addition to the Investment Adviser’s decisions regarding issuer/industry investment selection and allocation, other factors may affect Fund performance. These factors include, but are not limited to, Fund operating fees and expenses, portfolio turnover, and subscription and redemption cash flows affecting the Fund.
Growth Opportunities Fund’s 10 Year Performance
Performance of a $10,000 investment, with distributions reinvested, from January 1, 2007 through December 31, 2016.
Average Annual Total Return through December 31, 2016 | One Year | Five Years | Ten Years | Since Inception | ||||
Institutional (Commenced April 30, 2013) | 1.71% | N/A | N/A | 7.06% | ||||
Service (Commenced January 9, 2006) | 1.42% | 11.00% | 8.03% | 7.52% |
21
GOLDMAN SACHS VARIABLE INSURANCE TRUST HIGH QUALITY FLOATING RATE FUND
INVESTMENT OBJECTIVE
The Fund seeks to provide a high level of current income, consistent with low volatility of principal.
Portfolio Management Discussion and Analysis
Below, the Goldman Sachs Fixed Income Portfolio Management Team discusses the Goldman Sachs High Quality Floating Rate Fund’s (the “Fund”) performance and positioning for the 12-month period ended December 31, 2016 (the “Reporting Period”).
How did the Fund perform during the Reporting Period?
During the Reporting Period, the Fund’s Institutional, Service and Advisor Shares generated average annual total returns of 1.35%, 1.00% and 0.96%, respectively. These returns compare to the 0.33% average annual total return of the Fund’s benchmark, the Bank of America Merrill Lynch Three-Month U.S. Treasury Bill Index (the “BofA Index”), during the Reporting Period.
We note that the Fund’s benchmark being the BofA Index is a means of emphasizing that the Fund has an unconstrained strategy. That said, this Fund employs a benchmark agnostic strategy and thus comparisons to a benchmark index are not particularly relevant.
What key factors had the greatest impact on the Fund’s performance during the Reporting Period?
During the Reporting Period, our top-down cross-sector strategy added to relative performance. In our cross-sector strategy, we invested Fund assets based on a discipline of valuing each fixed income sector in the context of all investment opportunities within the Fund’s universe. Our individual issue selection also bolstered Fund returns.
Conversely, the Fund’s tactical duration and U.S. yield curve positioning detracted from results during the Reporting Period. Duration is a measure of the Fund’s sensitivity to changes in interest rates. Yield curve indicates a spectrum of maturities.
Which fixed income market sectors helped or hurt Fund performance during the Reporting Period?
Within our cross-sector strategy, the Fund benefited from its overweight position versus the BofA Index in agency mortgage-backed securities and asset backed securities (“ABS”). Agency mortgage-backed securities were supported overall by its purchases by overseas investors and U.S. commercial banks. In addition, the Fund’s overweight position in collateralized loan obligations added to results.
Individual issue selection overall contributed positively to relative returns during the Reporting Period. Within the government/swaps sector, our selection of U.S. Treasury bills and U.S. Treasury inflation protected securities (“TIPS”) added to performance. Selection among collateralized loan obligations also enhanced performance. These gains were slightly offset by selection within the securitized sector, specifically collateralized mortgage obligations (“CMOs”) and agency adjustable-rate mortgage-backed securities, which detracted.
Did the Fund’s duration and yield curve positioning strategy help or hurt its results during the Reporting Period?
Tactical management of the Fund’s duration and yield curve positioning detracted overall from relative returns during the Reporting Period. The Fund’s limited exposure to the three-month segment of the U.S. Treasury yield curve hurt performance during the Reporting Period overall.
Were there any notable changes in the Fund’s weightings during the Reporting Period?
The Fund began the Reporting Period with a long duration position relative to that of the BofA Index, which we shifted to a neutral position in February 2016 and then to a short position in March 2016. We maintained this short duration positioning through September 2016. In October 2016, we shifted the Fund to a neutral duration position, as U.S. Treasury yields had risen and U.S. inflation data remained surprisingly weak. In December 2016, we reestablished the Fund’s short duration position relative to that of the BofA Index because U.S. Treasury yields had risen considerably since the November 2016 U.S. election, driven by expectations for more fiscal stimulus and less regulation. In addition, we reduced the Fund’s exposure to the three-month and five-year segments of the U.S. Treasury yield curve and increased its exposure to the 20-year segment. Also, during the Reporting Period, we increased the Fund’s exposure to government securities, residential mortgage-backed securities and ABS. We decreased its exposure to commercial mortgage-backed securities and its cash position during the Reporting Period.
22
GOLDMAN SACHS VARIABLE INSURANCE TRUST HIGH QUALITY FLOATING RATE FUND
How did the Fund use derivatives and similar instruments during the Reporting Period?
As market conditions warranted, the Fund used Treasury futures to manage the duration and term structure of the Fund. (Term structure, most often depicted as a yield curve, refers to the term structure of interest rates, which is the relationship between the yield to maturity and the time to maturity for pure discount bonds.) The use of Treasury futures detracted from Fund performance during the Reporting Period.
Were there any changes to the Fund’s portfolio management team during the Reporting Period?
On February 11, 2016, co-portfolio manager James McCarthy announced his intention to retire from the firm and, as of that date, he no longer had portfolio management responsibilities for the Fund. Effective February 11, 2016, joining Dave Fishman, portfolio manager and head of the Fund’s global liquidity management strategy, were John Olivo, head of the Fund’s short duration strategy, and Matthew Kaiser. By design, the portfolio management team is organized into a series of specialist teams which focus on generating and implementing investment ideas within their area of expertise. Both top-down and bottom-up decisions are made by these small strategy teams, rather than by one portfolio manager or committee. Ultimate accountability for the portfolio resides with the portfolio managers, who set the long-term risk budget and oversee the portfolio construction process.
How was the Fund positioned relative to the BofA Index at the end of the Reporting Period?
At the end of the Reporting Period, the Fund had little exposure to U.S. government securities, which represent 100% of the BofA Index. The Fund had positions in ABS, agency CMOs, residential mortgage-backed securities, agency adjustable-rate mortgage-backed securities and mortgage pass-through securities, none of which are represented in the BofA Index. Pass-through mortgages consist of a pool of residential mortgage loans, where homeowners’ monthly payments of principal, interest and prepayments pass from the original bank through a government agency or investment bank to investors.
23
FUND BASICS
High Quality Floating Rate Fund
as of December 31, 2016
STANDARDIZED TOTAL RETURNS1
For the period ended 12/31/16 | One Year | Five Years | Ten Years | Since Inception | Inception Date | |||||||||||||
Institutional | 1.35 | % | N/A | N/A | 0.50 | % | 4/30/13 | |||||||||||
Service | 1.00 | 0.73 | % | 3.18 | % | 3.24 | 1/09/06 | |||||||||||
Advisor | 0.96 | N/A | N/A | 0.13 | 10/15/14 |
1 | The Standardized Total Returns are average annual total returns as of the most recent calendar quarter-end. They assume reinvestment of all distributions at net asset value (“NAV”). Because Institutional and Service Shares do not involve a sales charge, such a charge is not applied to their Standardized Total Returns. |
Total return figures in the above chart represent past performance and do not indicate future results, which will vary. The investment return and principal value of an investment will fluctuate and, therefore, an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the total return figures in the above chart. Please visit www.GSAMFUNDS.com to obtain the most recent month-end returns. Performance reflects fee waivers and/or expense limitations in effect during the periods shown. In their absence, performance would be reduced.
EXPENSE RATIOS2
Net Expense Ratio (Current) | Gross Expense Ratio (Before Waivers) | |||||||
Institutional | 0.39 | % | 0.82 | % | ||||
Service | 0.65 | 1.06 | ||||||
Advisor | 0.79 | 1.26 |
2 | The expense ratios of the Fund, both current (net of any fee waivers and/or expense limitations) and before waivers (gross of any fee waivers and/or expense limitations) are as set forth above according to the most recent publicly available Prospectus for the Fund and may differ from the expense ratios disclosed in the Financial Highlights in this report. Pursuant to a contractual arrangement, the Fund’s fee waivers and/or expense limitations will remain in place through at least April 29, 2017, and prior to such date, the Investment Adviser may not terminate the arrangements without the approval of the Fund’s Board of Trustees. If these arrangements are discontinued in the future, the expense ratios may change without shareholder approval. |
24
FUND BASICS
FUND COMPOSITION3
3 | The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. Figures in the above graph may not sum to 100% due to the exclusion of other assets and liabilities. Underlying sector allocations of investment companies held by the Fund are not reflected in the graph above. The graph depicts the Fund’s investments but may not represent the Fund’s market exposure due to the exclusion of certain derivatives, if any, as listed in the Additional Investment Information section of the Schedule of Investments. |
4 | Mortgage-backed securities guaranteed by the Government National Mortgage Association (“GNMA”), the Federal National Mortgage Association (“FNMA”) or the Federal Home Loan Mortgage Corp. (“FHLMC”). GNMA instruments are backed by the full faith and credit of the United States Government. |
25
GOLDMAN SACHS VARIABLE INSURANCE TRUST HIGH QUALITY FLOATING RATE FUND
Performance Summary
December 31, 2016
The following graph shows the value, as of December 31, 2016, of a $10,000 investment made on January 1, 2007 in the Service Class Shares. For comparative purposes, the performance of the Fund’s benchmark, the BofA Index, is shown. This performance data represents past performance and should not be considered indicative of future performance, which will fluctuate with changes in market conditions. These performance fluctuations may cause an investor’s shares, when redeemed, to be worth more or less than their original cost. Performance reflects Fund level expenses, but does not reflect fees and expenses associated with any variable annuity contract or variable life insurance policy that uses the Fund as an investment option for any contract or policy. Had performance reflected all of those fees and expenses, performance would have been reduced. Performance reflects applicable fee waivers and/or expense limitations in effect during the periods shown, and in their absence, performance would be reduced. Performance of Institutional and Advisor Shares will vary from Service Shares due to differences in class specific fees. In addition to the Investment Adviser’s decisions regarding issuer/industry investment selection and allocation, other factors may affect Fund performance. These factors include, but are not limited to, Fund operating fees and expenses, portfolio turnover, and subscription and redemption cash flows affecting the Fund.
High Quality Floating Rate Fund’s 10 Year Performance
Performance of a $10,000 investment, with distributions reinvested, from January 1, 2007 through December 31, 2016.
Average Annual Total Return through December 31, 2016 | One Year | Five Years | Ten Years | Since Inception | ||||
Institutional (Commenced April 30, 2013) | 1.35% | N/A | N/A | 0.50% | ||||
Service (Commenced January 9, 2006) | 1.00% | 0.73% | 3.18% | 3.24% | ||||
Advisor (Commenced October 15, 2014) | 0.96% | N/A | N/A | 0.13% |
26
GOLDMAN SACHS VARIABLE INSURANCE TRUST FUNDS
Index Definitions
Bloomberg Barclays U.S. Aggregate Bond Index is a broad based index that follows the U.S. dollar denominated investment grade fixed rate taxable bond market. It includes U.S. Treasuries, agency and corporate securities, mortgage-backed securities, asset-backed securities and commercial mortgage-backed securities.
The S&P 500® Index is a U.S. stock market index based on the market capitalizations of 500 large companies having common stock listed on the New York Stock Exchange or NASDAQ. The S&P 500® Index components and their weightings are determined by S&P Dow Jones Indices.
Russell Midcap® Index measures the performance of the mid-cap segment of the U.S. equity universe. The Russell Midcap® Index is a subset of the Russell 1000® Index. The Russell Midcap® Index includes approximately 800 of the smallest securities based on a combination of their market cap and current index membership. The Russell Midcap® Index represents approximately 31% of the total market capitalization of the Russell 1000® Index companies. The Russell Midcap® Index is constructed to provide a comprehensive and unbiased barometer for the mid-cap segment. The Russell Midcap® Index is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true mid-cap opportunity set.
Russell Midcap® Growth Index is an unmanaged index that measures the performance of those companies in the Russell Midcap® Index with higher price-to-book ratios and higher forecasted growth values. Its figures do not reflect any deduction for fees, expenses or taxes.
Russell 1000® Index measures the performance of the large-cap segment of the U.S. equity universe. The Russell 1000® Index is a subset of the Russell 3000® Index and includes approximately 1000 of the largest securities based on a combination of their market cap and current index membership. The Russell 1000® Index represents approximately 92% of the U.S. market. The Russell 1000® Index is constructed to provide a comprehensive and unbiased barometer for the large-cap segment and is completely reconstituted annually to ensure new and growing equities are reflected.
Russell 2000® Index measures the performance of the small-cap segment of the U.S. equity universe. The Russell 2000® Index is a subset of the Russell 3000® Index representing approximately 10% of the total market capitalization of that index. The Russell 2000® Index includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership. The Russell 2000® Index is constructed to provide a comprehensive and unbiased small-cap barometer and is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true small-cap opportunity set.
Bank of America Merrill Lynch Three-Month U.S. Treasury Bill Index is an unmanaged market index of U.S. Treasury securities maturing in 90 days that assumes reinvestment of all income. It is composed of a single issue purchased at the beginning of the month and held for a full month. At the end of the month that issue is sold and rolled into a newly selected issue. The issue selected at each month-end rebalancing is the outstanding U.S. Treasury Bill that matures closest to, but not beyond, three months from the rebalancing date. To qualify for selection, an issue must have settled on or before the month-end rebalancing date. While the index will often hold the U.S. Treasury Bill issued at the most recent three-month auction, it is also possible for a seasoned six-month U.S. Treasury Bill to be selected.
27
GOLDMAN SACHS VARIABLE INSURANCE TRUST CORE FIXED INCOME FUND
Schedule of Investments
December 31, 2016
Principal Amount | Interest Rate | Maturity Date | Value | |||||||||||
Corporate Bonds – 34.4% | ||||||||||||||
| Automobiles & Components – 0.5% |
| ||||||||||||
| Ford Motor Credit Co. LLC |
| ||||||||||||
$ | 475,000 | 5.875 | % | 08/02/21 | $ | 524,575 | ||||||||
|
| |||||||||||||
| Banks – 9.6% |
| ||||||||||||
| American Express Co.(a) |
| ||||||||||||
75,000 | 3.625 | 12/05/24 | 75,311 | |||||||||||
| Bank of America Corp. |
| ||||||||||||
100,000 | 5.700 | 01/24/22 | 112,324 | |||||||||||
225,000 | 4.125 | 01/22/24 | 233,831 | |||||||||||
275,000 | 4.000 | 04/01/24 | 283,618 | |||||||||||
275,000 | 3.248 | (a) | 10/21/27 | 262,543 | ||||||||||
| Bank of Tokyo-Mitsubishi UFJ Ltd. (The)(b) |
| ||||||||||||
300,000 | 2.150 | 09/14/18 | 300,248 | |||||||||||
| BNP Paribas SA |
| ||||||||||||
275,000 | 2.375 | 05/21/20 | 273,641 | |||||||||||
| Citigroup, Inc. |
| ||||||||||||
200,000 | 3.400 | 05/01/26 | 194,332 | |||||||||||
75,000 | 4.125 | 07/25/28 | 74,087 | |||||||||||
| Compass Bank(a) |
| ||||||||||||
375,000 | 2.750 | 09/29/19 | 372,959 | |||||||||||
| Credit Suisse AG |
| ||||||||||||
325,000 | 2.300 | 05/28/19 | 325,795 | |||||||||||
| Credit Suisse Group Funding Guernsey Ltd. |
| ||||||||||||
400,000 | 3.125 | 12/10/20 | 398,750 | |||||||||||
| Deutsche Bank AG |
| ||||||||||||
50,000 | 2.500 | 02/13/19 | 49,599 | |||||||||||
150,000 | 4.250 | (b) | 10/14/21 | 150,579 | ||||||||||
| Discover Financial Services(a) |
| ||||||||||||
225,000 | 3.750 | 03/04/25 | 219,974 | |||||||||||
| HSBC Holdings plc |
| ||||||||||||
225,000 | 3.400 | 03/08/21 | 228,798 | |||||||||||
| ING Bank NV(a)(c) |
| ||||||||||||
325,000 | 4.125 | 11/21/23 | 328,513 | |||||||||||
| Intesa Sanpaolo SpA |
| ||||||||||||
350,000 | 2.375 | 01/13/17 | 350,049 | |||||||||||
350,000 | 3.875 | 01/16/18 | 354,652 | |||||||||||
| JPMorgan Chase & Co. |
| ||||||||||||
450,000 | 4.400 | 07/22/20 | 477,996 | |||||||||||
225,000 | 2.972 | (a) | 01/15/23 | 224,246 | ||||||||||
275,000 | 2.700 | (a) | 05/18/23 | 269,057 | ||||||||||
| JPMorgan Chase & Co. Series Z(a)(c) |
| ||||||||||||
250,000 | 5.300 | 12/31/49 | 255,140 | |||||||||||
| KBC Bank NV(a)(c) |
| ||||||||||||
200,000 | 8.000 | 01/25/23 | 210,900 | |||||||||||
| KeyCorp |
| ||||||||||||
400,000 | 2.900 | 09/15/20 | 404,741 | |||||||||||
| Lloyds Bank plc |
| ||||||||||||
175,000 | 2.300 | 11/27/18 | 176,095 | |||||||||||
| Macquarie Bank Ltd.(b)(d) |
| ||||||||||||
150,000 | 6.625 | 04/07/21 | 168,626 | |||||||||||
| Mizuho Bank Ltd.(b) |
| ||||||||||||
200,000 | 2.550 | 03/17/17 | 200,540 | |||||||||||
| Morgan Stanley(a)(c) |
| ||||||||||||
150,000 | 2.282 | 10/24/23 | 151,666 | |||||||||||
650,000 | 3.700 | 10/23/24 | 657,743 | |||||||||||
|
| |||||||||||||
Corporate Bonds – (continued) | ||||||||||||||
| Banks – (continued) |
| ||||||||||||
| Morgan Stanley Series F |
| ||||||||||||
$ | 100,000 | 3.875 | % | 04/29/24 | $ | 102,557 | ||||||||
| PNC Preferred Funding Trust I(a)(b)(c) |
| ||||||||||||
100,000 | 2.613 | 12/31/49 | 96,875 | |||||||||||
| PNC Preferred Funding Trust II(a)(b)(c) |
| ||||||||||||
200,000 | 2.186 | 12/31/49 | 193,000 | |||||||||||
| Regions Bank |
| ||||||||||||
250,000 | 7.500 | 05/15/18 | 267,832 | |||||||||||
| Royal Bank of Scotland plc (The)(a)(c) |
| ||||||||||||
100,000 | 9.500 | 03/16/22 | 101,625 | |||||||||||
| Santander Bank NA(a) |
| ||||||||||||
250,000 | 2.000 | 01/12/18 | 249,896 | |||||||||||
| Synchrony Financial(a) |
| ||||||||||||
350,000 | 2.600 | 01/15/19 | 351,770 | |||||||||||
| Toronto-Dominion Bank (The)(a)(c) |
| ||||||||||||
125,000 | 3.625 | 09/15/31 | 122,104 | |||||||||||
| UBS Group Funding Jersey Ltd.(b) |
| ||||||||||||
350,000 | 3.000 | 04/15/21 | 350,184 | |||||||||||
| Wells Fargo & Co. |
| ||||||||||||
850,000 | 3.000 | 10/23/26 | 809,537 | |||||||||||
| Westpac Banking Corp.(a)(c) |
| ||||||||||||
150,000 | 4.322 | 11/23/31 | 150,478 | |||||||||||
|
| |||||||||||||
10,582,211 | ||||||||||||||
|
| |||||||||||||
| Commercial Services – 0.5% |
| ||||||||||||
| Rensselaer Polytechnic Institute |
| ||||||||||||
475,000 | 5.600 | 09/01/20 | 519,170 | |||||||||||
|
| |||||||||||||
| Consumer Services(a) – 0.3% |
| ||||||||||||
| Marriott International, Inc. |
| ||||||||||||
125,000 | 2.875 | 03/01/21 | 125,563 | |||||||||||
250,000 | 2.300 | 01/15/22 | 242,512 | |||||||||||
|
| |||||||||||||
368,075 | ||||||||||||||
|
| |||||||||||||
| Diversified Financials – 0.3% |
| ||||||||||||
| General Motors Financial Co., Inc. |
| ||||||||||||
125,000 | 3.250 | 05/15/18 | 126,638 | |||||||||||
175,000 | 3.500 | 07/10/19 | 178,194 | |||||||||||
|
| |||||||||||||
304,832 | ||||||||||||||
|
| |||||||||||||
| Diversified Manufacturing(a) – 0.2% |
| ||||||||||||
| Roper Technologies, Inc. |
| ||||||||||||
125,000 | 3.000 | 12/15/20 | 126,626 | |||||||||||
100,000 | 2.800 | 12/15/21 | 99,952 | |||||||||||
|
| |||||||||||||
226,578 | ||||||||||||||
|
| |||||||||||||
| Electric – 1.6% |
| ||||||||||||
| Berkshire Hathaway Energy Co. |
| ||||||||||||
200,000 | 6.125 | 04/01/36 | 249,776 | |||||||||||
| Emera US Finance LP(a)(b) |
| ||||||||||||
125,000 | 2.700 | 06/15/21 | 123,730 | |||||||||||
| Entergy Corp.(a) |
| ||||||||||||
125,000 | 2.950 | 09/01/26 | 116,930 | |||||||||||
| Florida Power & Light Co.(a) |
| ||||||||||||
193,000 | 4.125 | 02/01/42 | 197,962 | |||||||||||
|
|
28 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST CORE FIXED INCOME FUND
Principal Amount | Interest Rate | Maturity Date | Value | |||||||||||
Corporate Bonds – (continued) | ||||||||||||||
| Electric – (continued) |
| ||||||||||||
| Pacific Gas & Electric Co.(a) |
| ||||||||||||
$ | 100,000 | 3.500 | % | 06/15/25 | $ | 102,755 | ||||||||
| Progress Energy, Inc. |
| ||||||||||||
350,000 | 7.000 | 10/30/31 | 453,771 | |||||||||||
| Puget Sound Energy, Inc. Series A(a)(c) |
| ||||||||||||
150,000 | 6.974 | 06/01/67 | 128,250 | |||||||||||
| Southern California Edison Co.(a) |
| ||||||||||||
175,000 | 4.050 | 03/15/42 | 176,391 | |||||||||||
| Southern Co. (The)(a) |
| ||||||||||||
225,000 | 2.350 | 07/01/21 | 221,178 | |||||||||||
|
| |||||||||||||
1,770,743 | ||||||||||||||
|
| |||||||||||||
| Energy – 2.1% |
| ||||||||||||
| Anadarko Petroleum Corp. |
| ||||||||||||
35,000 | 3.450 | (a) | 07/15/24 | 34,357 | ||||||||||
100,000 | 6.450 | 09/15/36 | 119,017 | |||||||||||
| Apache Corp.(a) |
| ||||||||||||
50,000 | 2.625 | 01/15/23 | 48,079 | |||||||||||
150,000 | 4.250 | 01/15/44 | 147,873 | |||||||||||
| ConocoPhillips Co.(a) |
| ||||||||||||
150,000 | 3.350 | 11/15/24 | 149,136 | |||||||||||
50,000 | 4.950 | 03/15/26 | 55,200 | |||||||||||
100,000 | 4.150 | 11/15/34 | 97,745 | |||||||||||
| Devon Energy Corp.(a) |
| ||||||||||||
25,000 | 4.000 | 07/15/21 | 25,835 | |||||||||||
75,000 | 5.600 | 07/15/41 | 77,250 | |||||||||||
80,000 | 4.750 | 05/15/42 | 75,575 | |||||||||||
| Dolphin Energy Ltd.(b) |
| ||||||||||||
50,880 | 5.888 | 06/15/19 | 53,106 | |||||||||||
| Energy Transfer Partners LP(a) |
| ||||||||||||
75,000 | 4.650 | 06/01/21 | 77,870 | |||||||||||
75,000 | 4.750 | 01/15/26 | 77,538 | |||||||||||
| Kinder Morgan Energy Partners LP(a) |
| ||||||||||||
150,000 | 5.400 | 09/01/44 | 149,511 | |||||||||||
| Kinder Morgan, Inc.(a) |
| ||||||||||||
425,000 | 3.050 | 12/01/19 | 431,101 | |||||||||||
| Occidental Petroleum Corp.(a) |
| ||||||||||||
200,000 | 3.400 | 04/15/26 | 201,509 | |||||||||||
| Petroleos Mexicanos |
| ||||||||||||
30,000 | 5.500 | (b) | 02/04/19 | 31,163 | ||||||||||
60,000 | 6.375 | (b) | 02/04/21 | 63,750 | ||||||||||
20,000 | 4.500 | 01/23/26 | 18,175 | |||||||||||
13,000 | 5.500 | 06/27/44 | 10,819 | |||||||||||
70,000 | 5.625 | 01/23/46 | 58,187 | |||||||||||
| Pioneer Natural Resources Co.(a) |
| ||||||||||||
125,000 | 3.450 | 01/15/21 | 127,736 | |||||||||||
70,000 | 3.950 | 07/15/22 | 72,627 | |||||||||||
| Plains All American Pipeline LP(a) |
| ||||||||||||
50,000 | 3.650 | 06/01/22 | 50,276 | |||||||||||
| Valero Energy Corp. |
| ||||||||||||
100,000 | 3.650 | 03/15/25 | 99,181 | |||||||||||
|
| |||||||||||||
2,352,616 | ||||||||||||||
|
| |||||||||||||
Corporate Bonds – (continued) | ||||||||||||||
| Food & Beverage – 2.2% |
| ||||||||||||
| Anheuser-Busch InBev Finance, Inc.(a) |
| ||||||||||||
675,000 | 2.650 | 02/01/21 | 678,878 | |||||||||||
425,000 | 3.650 | 02/01/26 | 431,456 | |||||||||||
75,000 | 4.900 | 02/01/46 | 81,065 | |||||||||||
| Kraft Heinz Foods Co.(a) |
| ||||||||||||
100,000 | 2.800 | 07/02/20 | 100,950 | |||||||||||
175,000 | 3.950 | 07/15/25 | 177,281 | |||||||||||
225,000 | 4.375 | 06/01/46 | 211,721 | |||||||||||
| Molson Coors Brewing Co.(a) |
| ||||||||||||
50,000 | 2.100 | 07/15/21 | 48,696 | |||||||||||
75,000 | 3.000 | 07/15/26 | 70,898 | |||||||||||
| Pernod Ricard SA(b) |
| ||||||||||||
375,000 | 4.450 | 01/15/22 | 397,866 | |||||||||||
| Suntory Holdings Ltd.(b) |
| ||||||||||||
275,000 | 2.550 | 09/29/19 | 276,618 | |||||||||||
|
| |||||||||||||
2,475,429 | ||||||||||||||
|
| |||||||||||||
| Food & Staples Retailing(a) – 1.0% |
| ||||||||||||
| CVS Health Corp. |
| ||||||||||||
125,000 | 2.800 | 07/20/20 | 126,826 | |||||||||||
125,000 | 4.125 | 05/15/21 | 132,264 | |||||||||||
225,000 | 3.500 | 07/20/22 | 231,186 | |||||||||||
89,000 | 3.875 | 07/20/25 | 91,813 | |||||||||||
275,000 | 2.875 | 06/01/26 | 262,121 | |||||||||||
| Walgreens Boots Alliance, Inc. |
| ||||||||||||
125,000 | 2.600 | 06/01/21 | 124,215 | |||||||||||
125,000 | 3.450 | 06/01/26 | 122,700 | |||||||||||
|
| |||||||||||||
1,091,125 | ||||||||||||||
|
| |||||||||||||
| Health Care Equipment & Services – 0.9% |
| ||||||||||||
| Aetna, Inc.(a) |
| ||||||||||||
100,000 | 2.400 | 06/15/21 | 99,547 | |||||||||||
75,000 | 2.800 | 06/15/23 | 73,876 | |||||||||||
| Becton Dickinson and Co. |
| ||||||||||||
175,000 | 2.675 | 12/15/19 | 177,557 | |||||||||||
| Cigna Corp.(a) |
| ||||||||||||
150,000 | 3.250 | 04/15/25 | 146,092 | |||||||||||
| Medtronic, Inc. |
| ||||||||||||
75,000 | 2.500 | 03/15/20 | 75,839 | |||||||||||
150,000 | 3.150 | 03/15/22 | 153,633 | |||||||||||
| Stryker Corp.(a) |
| ||||||||||||
50,000 | 2.625 | 03/15/21 | 50,193 | |||||||||||
125,000 | 3.375 | 11/01/25 | 124,206 | |||||||||||
| UnitedHealth Group, Inc. |
| ||||||||||||
100,000 | 4.625 | 07/15/35 | 109,004 | |||||||||||
|
| |||||||||||||
1,009,947 | ||||||||||||||
|
| |||||||||||||
| Life Insurance – 0.7% |
| ||||||||||||
| American International Group, Inc.(a) |
| ||||||||||||
50,000 | 3.750 | 07/10/25 | 50,323 | |||||||||||
25,000 | 4.500 | 07/16/44 | 24,652 | |||||||||||
100,000 | 4.800 | 07/10/45 | 103,792 | |||||||||||
| Northwestern Mutual Life Insurance Co. (The)(b) |
| ||||||||||||
200,000 | 6.063 | 03/30/40 | 246,277 | |||||||||||
|
|
The accompanying notes are an integral part of these financial statements. | 29 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST CORE FIXED INCOME FUND
Schedule of Investments (continued)
December 31, 2016
Principal Amount | Interest Rate | Maturity Date | Value | |||||||||||
Corporate Bonds – (continued) | ||||||||||||||
| Life Insurance – (continued) |
| ||||||||||||
| Principal Financial Group, Inc.(a) |
| ||||||||||||
$ | 150,000 | 3.100 | % | 11/15/26 | $ | 144,982 | ||||||||
| Reliance Standard Life Global Funding II(b) |
| ||||||||||||
225,000 | 2.500 | 01/15/20 | 223,635 | |||||||||||
|
| |||||||||||||
793,661 | ||||||||||||||
|
| |||||||||||||
| Materials – 0.2% |
| ||||||||||||
| Ecolab, Inc. |
| ||||||||||||
100,000 | 5.500 | 12/08/41 | 117,599 | |||||||||||
| Westlake Chemical Corp.(a)(b) |
| ||||||||||||
100,000 | 3.600 | 08/15/26 | 96,183 | |||||||||||
|
| |||||||||||||
213,782 | ||||||||||||||
|
| |||||||||||||
| Media – 0.7% |
| ||||||||||||
| 21st Century Fox America, Inc.(a) |
| ||||||||||||
75,000 | 3.700 | 09/15/24 | 75,941 | |||||||||||
| CCO Safari II LLC(a) |
| ||||||||||||
25,000 | 3.579 | 07/23/20 | 25,506 | |||||||||||
200,000 | 4.908 | 07/23/25 | 210,786 | |||||||||||
25,000 | 6.484 | 10/23/45 | 28,902 | |||||||||||
| Comcast Corp.(a) |
| ||||||||||||
400,000 | 3.375 | 08/15/25 | 402,415 | |||||||||||
| Time Warner Cable LLC |
| ||||||||||||
50,000 | 5.000 | 02/01/20 | 53,067 | |||||||||||
25,000 | 5.875 | (a) | 11/15/40 | 26,661 | ||||||||||
|
| |||||||||||||
823,278 | ||||||||||||||
|
| |||||||||||||
| Metals and Mining(b) – 0.3% |
| ||||||||||||
| Glencore Finance Canada Ltd. |
| ||||||||||||
350,000 | 2.700 | 10/25/17 | 352,678 | |||||||||||
|
| |||||||||||||
| Noncaptive-Financial – 0.3% |
| ||||||||||||
| Capital One Financial Corp.(a) |
| ||||||||||||
200,000 | 4.200 | 10/29/25 | 200,665 | |||||||||||
| International Lease Finance Corp.(b) |
| ||||||||||||
150,000 | 7.125 | 09/01/18 | 161,625 | |||||||||||
|
| |||||||||||||
362,290 | ||||||||||||||
|
| |||||||||||||
| Pharmaceuticals, Biotechnology & Life Sciences – 2.6% |
| ||||||||||||
| AbbVie, Inc.(a) |
| ||||||||||||
125,000 | 2.500 | 05/14/20 | 125,033 | |||||||||||
75,000 | 2.300 | 05/14/21 | 73,484 | |||||||||||
| Actavis Funding SCS |
| ||||||||||||
225,000 | 2.350 | 03/12/18 | 226,301 | |||||||||||
50,000 | 3.450 | (a) | 03/15/22 | 50,750 | ||||||||||
85,000 | 3.800 | (a) | 03/15/25 | 85,100 | ||||||||||
125,000 | 4.850 | (a) | 06/15/44 | 123,937 | ||||||||||
| Amgen, Inc.(a) |
| ||||||||||||
200,000 | 3.125 | 05/01/25 | 194,636 | |||||||||||
| Bayer US Finance LLC(b) |
| ||||||||||||
400,000 | 3.000 | 10/08/21 | 402,196 | |||||||||||
| EMD Finance LLC(a)(b) |
| ||||||||||||
375,000 | 2.950 | 03/19/22 | 373,410 | |||||||||||
| Forest Laboratories LLC(a)(b) |
| ||||||||||||
325,000 | 4.375 | 02/01/19 | 337,720 | |||||||||||
100,000 | 5.000 | 12/15/21 | 108,118 | |||||||||||
|
| |||||||||||||
Corporate Bonds – (continued) | ||||||||||||||
| Pharmaceuticals, Biotechnology & Life Sciences – (continued) |
| ||||||||||||
| Mylan NV(a)(b) |
| ||||||||||||
100,000 | 3.950 | 06/15/26 | 93,585 | |||||||||||
| Shire Acquisitions Investments Ireland DAC |
| ||||||||||||
225,000 | 1.900 | 09/23/19 | 222,147 | |||||||||||
200,000 | 3.200 | (a) | 09/23/26 | 186,867 | ||||||||||
| Thermo Fisher Scientific, Inc.(a) |
| ||||||||||||
175,000 | 3.000 | 04/15/23 | 172,002 | |||||||||||
100,000 | 3.650 | 12/15/25 | 100,324 | |||||||||||
|
| |||||||||||||
2,875,610 | ||||||||||||||
|
| |||||||||||||
| Pipelines(a) – 1.2% |
| ||||||||||||
| Columbia Pipeline Group, Inc. |
| ||||||||||||
100,000 | 3.300 | 06/01/20 | 101,869 | |||||||||||
| Enbridge, Inc.(a) |
| ||||||||||||
50,000 | 3.500 | 06/10/24 | 48,696 | |||||||||||
| EnLink Midstream Partners LP |
| ||||||||||||
175,000 | 4.150 | 06/01/25 | 169,866 | |||||||||||
75,000 | 4.850 | 07/15/26 | 75,655 | |||||||||||
| Enterprise Products Operating LLC |
| ||||||||||||
25,000 | 3.350 | 03/15/23 | 25,309 | |||||||||||
| Enterprise Products Operating LLC Series A(c) |
| ||||||||||||
350,000 | 4.593 | 08/01/66 | 329,186 | |||||||||||
| Sunoco Logistics Partners Operations LP |
| ||||||||||||
50,000 | 4.250 | 04/01/24 | 50,386 | |||||||||||
| Western Gas Partners LP |
| ||||||||||||
100,000 | 3.950 | 06/01/25 | 98,605 | |||||||||||
| Williams Partners LP |
| ||||||||||||
80,000 | 3.600 | 03/15/22 | 80,423 | |||||||||||
175,000 | 3.900 | 01/15/25 | 171,632 | |||||||||||
125,000 | 4.000 | 09/15/25 | 123,598 | |||||||||||
|
| |||||||||||||
1,275,225 | ||||||||||||||
|
| |||||||||||||
| Property/Casualty Insurance(a)(c) – 0.1% |
| ||||||||||||
| Chubb Corp. (The) |
| ||||||||||||
125,000 | 6.375 | 04/15/37 | 117,500 | |||||||||||
|
| |||||||||||||
| Real Estate Investment Trusts – 2.3% |
| ||||||||||||
| American Campus Communities Operating Partnership LP(a) |
| ||||||||||||
275,000 | 4.125 | 07/01/24 | 281,954 | |||||||||||
| Brixmor Operating Partnership LP(a) |
| ||||||||||||
75,000 | 3.850 | 02/01/25 | 73,853 | |||||||||||
| Camden Property Trust |
| ||||||||||||
325,000 | 5.700 | 05/15/17 | 329,841 | |||||||||||
| Crown Castle International Corp.(a) |
| ||||||||||||
75,000 | 2.250 | 09/01/21 | 72,559 | |||||||||||
| CubeSmart LP(a) |
| ||||||||||||
125,000 | 4.000 | 11/15/25 | 126,878 | |||||||||||
| DDR Corp. |
| ||||||||||||
375,000 | 7.500 | 04/01/17 | 380,167 | |||||||||||
| HCP, Inc.(a) |
| ||||||||||||
25,000 | 2.625 | 02/01/20 | 25,033 | |||||||||||
| Healthcare Realty Trust, Inc. |
| ||||||||||||
350,000 | 5.750 | 01/15/21 | 384,669 | |||||||||||
| Healthcare Trust of America Holdings LP(a) |
| ||||||||||||
100,000 | 3.375 | 07/15/21 | 100,709 | |||||||||||
|
|
30 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST CORE FIXED INCOME FUND
Principal Amount | Interest Rate | Maturity Date | Value | |||||||||||
Corporate Bonds – (continued) | ||||||||||||||
| Real Estate Investment Trusts – (continued) |
| ||||||||||||
| National Retail Properties, Inc.(a) |
| ||||||||||||
$ | 125,000 | 4.000 | % | 11/15/25 | $ | 127,431 | ||||||||
| Select Income REIT(a) |
| ||||||||||||
50,000 | 2.850 | 02/01/18 | 50,214 | |||||||||||
75,000 | 3.600 | 02/01/20 | 75,143 | |||||||||||
| Ventas Realty LP(a) |
| ||||||||||||
125,000 | 3.500 | 02/01/25 | 123,066 | |||||||||||
| Welltower, Inc. |
| ||||||||||||
375,000 | 2.250 | 03/15/18 | 376,603 | |||||||||||
|
| |||||||||||||
2,528,120 | ||||||||||||||
|
| |||||||||||||
| Retailing(a) – 0.3% |
| ||||||||||||
| Home Depot, Inc. (The) |
| ||||||||||||
175,000 | 4.250 | 04/01/46 | 183,726 | |||||||||||
| Priceline Group, Inc. (The) |
| ||||||||||||
200,000 | 3.600 | 06/01/26 | 197,801 | |||||||||||
|
| |||||||||||||
381,527 | ||||||||||||||
|
| |||||||||||||
| Semiconductors & Semiconductor Equipment(a) – 0.1% |
| ||||||||||||
| NVIDIA Corp. |
| ||||||||||||
100,000 | 2.200 | 09/16/21 | 97,610 | |||||||||||
|
| |||||||||||||
| Software & Services(a) – 0.5% |
| ||||||||||||
| Fidelity National Information Services, Inc. |
| ||||||||||||
250,000 | 3.625 | 10/15/20 | 258,817 | |||||||||||
125,000 | 3.000 | 08/15/26 | 117,367 | |||||||||||
| Fiserv, Inc. |
| ||||||||||||
150,000 | 2.700 | 06/01/20 | 150,724 | |||||||||||
|
| |||||||||||||
526,908 | ||||||||||||||
|
| |||||||||||||
| Technology – 0.7% |
| ||||||||||||
| Amphenol Corp.(a) |
| ||||||||||||
125,000 | 3.125 | 09/15/21 | 126,934 | |||||||||||
| Cisco Systems, Inc. |
| ||||||||||||
100,000 | 2.200 | 02/28/21 | 99,784 | |||||||||||
| Hewlett Packard Enterprise Co.(a) |
| ||||||||||||
125,000 | 4.900 | 10/15/25 | 128,602 | |||||||||||
| Intel Corp.(a) |
| ||||||||||||
200,000 | 3.700 | 07/29/25 | 210,951 | |||||||||||
| Oracle Corp.(a) |
| ||||||||||||
200,000 | 2.500 | 05/15/22 | 198,611 | |||||||||||
|
| |||||||||||||
764,882 | ||||||||||||||
|
| |||||||||||||
| Tobacco – 1.1% |
| ||||||||||||
| Imperial Brands Finance plc(b) |
| ||||||||||||
400,000 | 2.050 | 02/11/18 | 400,371 | |||||||||||
| Reynolds American, Inc.(a) |
| ||||||||||||
775,000 | 4.450 | 06/12/25 | 818,254 | |||||||||||
|
| |||||||||||||
1,218,625 | ||||||||||||||
|
| |||||||||||||
| Transportation(b) – 0.5% |
| ||||||||||||
| ERAC USA Finance LLC |
| ||||||||||||
350,000 | 2.350 | 10/15/19 | 349,689 | |||||||||||
| Penske Truck Leasing Co. LP(a) |
| ||||||||||||
200,000 | 3.375 | 02/01/22 | 201,692 | |||||||||||
|
| |||||||||||||
551,381 | ||||||||||||||
|
| |||||||||||||
Corporate Bonds – (continued) | ||||||||||||||
| Wireless Telecommunications – 3.2% |
| ||||||||||||
| American Tower Corp. |
| ||||||||||||
75,000 | 3.300 | (a) | 02/15/21 | 75,854 | ||||||||||
125,000 | 4.700 | 03/15/22 | 133,484 | |||||||||||
| AT&T, Inc. |
| ||||||||||||
225,000 | 2.300 | 03/11/19 | 225,863 | |||||||||||
250,000 | 3.800 | 03/15/22 | 256,285 | |||||||||||
250,000 | 3.400 | (a) | 05/15/25 | 240,956 | ||||||||||
100,000 | 4.125 | (a) | 02/17/26 | 101,256 | ||||||||||
50,000 | 4.750 | (a) | 05/15/46 | 47,371 | ||||||||||
| Verizon Communications, Inc. |
| ||||||||||||
607,000 | 2.625 | 02/21/20 | 612,824 | |||||||||||
850,000 | 4.500 | 09/15/20 | 909,596 | |||||||||||
675,000 | 5.150 | 09/15/23 | 746,376 | |||||||||||
200,000 | 2.625 | 08/15/26 | 184,110 | |||||||||||
|
| |||||||||||||
3,533,975 | ||||||||||||||
|
| |||||||||||||
| Wirelines Telecommunications – 0.4% |
| ||||||||||||
| Telefonica Emisiones SAU |
| ||||||||||||
175,000 | 3.192 | 04/27/18 | 177,517 | |||||||||||
225,000 | 5.462 | 02/16/21 | 245,266 | |||||||||||
|
| |||||||||||||
422,783 | ||||||||||||||
|
| |||||||||||||
TOTAL CORPORATE BONDS | ||||||||||||||
(Cost $37,776,506) | $ | 38,065,136 | ||||||||||||
|
| |||||||||||||
Mortgage-Backed Securities – 26.6% | ||||||||||||||
| Adjustable Rate FHLMC(c) – 0.5% |
| ||||||||||||
$ | 473,357 | 2.821 | % | 09/01/35 | $ | 499,444 | ||||||||
|
| |||||||||||||
| Adjustable Rate FNMA(c) – 0.9% |
| ||||||||||||
217,526 | 2.625 | 05/01/33 | 225,209 | |||||||||||
401,022 | 2.833 | 05/01/35 | 423,142 | |||||||||||
272,763 | 3.032 | 09/01/35 | 285,548 | |||||||||||
|
| |||||||||||||
933,899 | ||||||||||||||
|
| |||||||||||||
| FHLMC – 1.9% |
| ||||||||||||
25,925 | 5.500 | 02/01/18 | 26,455 | |||||||||||
2,532 | 5.500 | 04/01/18 | 2,582 | |||||||||||
1,304 | 4.500 | 09/01/18 | 1,333 | |||||||||||
4,223 | 5.500 | 09/01/18 | 4,348 | |||||||||||
17 | 9.500 | 08/01/20 | 18 | |||||||||||
29,290 | 6.500 | 10/01/20 | 33,074 | |||||||||||
7,253 | 4.500 | 07/01/24 | 7,696 | |||||||||||
39,825 | 4.500 | 11/01/24 | 42,369 | |||||||||||
9,662 | 4.500 | 12/01/24 | 10,261 | |||||||||||
9,445 | 6.000 | 03/01/29 | 10,671 | |||||||||||
155 | 6.000 | 04/01/29 | 175 | |||||||||||
11,108 | 7.500 | 12/01/29 | 13,231 | |||||||||||
116,517 | 7.000 | 05/01/32 | 136,183 | |||||||||||
194 | 6.000 | 08/01/32 | 221 | |||||||||||
64,068 | 7.000 | 12/01/32 | 74,964 | |||||||||||
3,789 | 5.000 | 10/01/33 | 4,141 | |||||||||||
5,702 | 5.000 | 07/01/35 | 6,228 | |||||||||||
7,689 | 5.000 | 12/01/35 | 8,541 | |||||||||||
|
|
The accompanying notes are an integral part of these financial statements. | 31 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST CORE FIXED INCOME FUND
Principal Amount | Interest Rate | Maturity Date | Value | |||||||||||
Mortgage-Backed Securities – (continued) | ||||||||||||||
| FHLMC – (continued) |
| ||||||||||||
$ | 63,880 | 5.500 | % | 01/01/37 | $ | 71,025 | ||||||||
1,757 | 5.000 | 03/01/38 | 1,918 | |||||||||||
110,894 | 7.000 | 02/01/39 | 128,446 | |||||||||||
3,785 | 5.000 | 06/01/41 | 4,141 | |||||||||||
1,553,231 | 3.500 | 04/01/43 | 1,601,224 | |||||||||||
|
| |||||||||||||
2,189,245 | ||||||||||||||
|
| |||||||||||||
| FNMA – 5.3% |
| ||||||||||||
10 | 7.500 | 04/01/17 | 10 | |||||||||||
32,675 | 5.500 | 02/01/18 | 33,330 | |||||||||||
31,292 | 5.000 | 05/01/18 | 31,949 | |||||||||||
3,459 | 6.500 | 08/01/18 | 3,571 | |||||||||||
18,857 | 7.000 | 08/01/18 | 19,291 | |||||||||||
855 | 5.000 | 06/01/23 | 910 | |||||||||||
81,071 | 5.500 | 09/01/23 | 87,155 | |||||||||||
21,801 | 5.500 | 10/01/23 | 23,530 | |||||||||||
398 | 6.000 | 12/01/23 | 450 | |||||||||||
4,555 | 4.500 | 07/01/24 | 4,842 | |||||||||||
106,237 | 4.500 | 11/01/24 | 113,198 | |||||||||||
42,806 | 4.500 | 12/01/24 | 45,639 | |||||||||||
63 | 7.000 | 07/01/25 | 72 | |||||||||||
12,726 | 9.000 | 11/01/25 | 14,788 | |||||||||||
38,109 | 7.000 | 08/01/26 | 43,227 | |||||||||||
649 | 7.000 | 08/01/27 | 749 | |||||||||||
5,022 | 7.000 | 09/01/27 | 5,470 | |||||||||||
126 | 7.000 | 01/01/28 | 145 | |||||||||||
68,589 | 6.000 | 02/01/29 | 78,392 | |||||||||||
61,946 | 6.000 | 06/01/29 | 70,713 | |||||||||||
22,582 | 8.000 | 10/01/29 | 26,710 | |||||||||||
5,820 | 7.000 | 12/01/29 | 6,718 | |||||||||||
1,301 | 8.500 | 04/01/30 | 1,585 | |||||||||||
2,422 | 8.000 | 05/01/30 | 2,769 | |||||||||||
242 | 8.500 | 06/01/30 | 268 | |||||||||||
6,796 | 7.000 | 05/01/32 | 8,021 | |||||||||||
52,715 | 7.000 | 06/01/32 | 61,599 | |||||||||||
70,622 | 7.000 | 08/01/32 | 82,680 | |||||||||||
11,471 | 8.000 | 08/01/32 | 13,285 | |||||||||||
2,849 | 5.000 | 08/01/33 | 3,128 | |||||||||||
781 | 5.500 | 09/01/33 | 882 | |||||||||||
905 | 5.500 | 02/01/34 | 1,022 | |||||||||||
180 | 5.500 | 04/01/34 | 205 | |||||||||||
6,657 | 5.500 | 12/01/34 | 7,520 | |||||||||||
27,112 | 5.000 | 04/01/35 | 30,135 | |||||||||||
52,908 | 6.000 | 04/01/35 | 60,025 | |||||||||||
1,206 | 5.500 | 09/01/35 | 1,371 | |||||||||||
116,183 | 6.000 | 10/01/35 | 131,415 | |||||||||||
268,032 | 6.000 | 09/01/36 | 303,170 | |||||||||||
82 | 5.500 | 02/01/37 | 93 | |||||||||||
198 | 5.500 | 04/01/37 | 224 | |||||||||||
24 | 5.500 | 05/01/37 | 27 | |||||||||||
170,389 | 5.500 | 08/01/37 | 189,988 | |||||||||||
233 | 5.500 | 03/01/38 | 263 | |||||||||||
220 | 5.500 | 06/01/38 | 248 | |||||||||||
185 | 5.500 | 07/01/38 | 209 | |||||||||||
|
| |||||||||||||
Mortgage-Backed Securities – (continued) | ||||||||||||||
| FNMA – (continued) |
| ||||||||||||
170 | 5.500 | 08/01/38 | 192 | |||||||||||
121 | 5.500 | 09/01/38 | 137 | |||||||||||
2,312 | 5.500 | 10/01/38 | 2,608 | |||||||||||
56 | 5.500 | 12/01/38 | 63 | |||||||||||
130,430 | 5.000 | 01/01/39 | 144,989 | |||||||||||
71,276 | 7.000 | 03/01/39 | 82,189 | |||||||||||
272,128 | 6.000 | 05/01/39 | 307,466 | |||||||||||
17,574 | 4.500 | 08/01/39 | 19,105 | |||||||||||
57,820 | 3.000 | 01/01/43 | 57,930 | |||||||||||
229,207 | 3.000 | 03/01/43 | 229,646 | |||||||||||
321,027 | 3.000 | 04/01/43 | 321,642 | |||||||||||
241,156 | 3.000 | 05/01/43 | 241,618 | |||||||||||
821,960 | 3.500 | 07/01/43 | 846,510 | |||||||||||
868,763 | 4.500 | 04/01/45 | 935,592 | |||||||||||
104,634 | 4.500 | 05/01/45 | 112,881 | |||||||||||
871,305 | 3.500 | 05/01/46 | 897,070 | |||||||||||
|
| |||||||||||||
5,710,629 | ||||||||||||||
|
| |||||||||||||
| GNMA – 18.0% |
| ||||||||||||
2,151 | 7.000 | 10/15/25 | 2,198 | |||||||||||
7,562 | 7.000 | 11/15/25 | 8,196 | |||||||||||
1,261 | 7.000 | 02/15/26 | 1,300 | |||||||||||
5,815 | 7.000 | 04/15/26 | 6,454 | |||||||||||
3,286 | 7.000 | 03/15/27 | 3,807 | |||||||||||
54,363 | 7.000 | 11/15/27 | 61,957 | |||||||||||
450 | 7.000 | 01/15/28 | 500 | |||||||||||
18,561 | 7.000 | 02/15/28 | 20,277 | |||||||||||
2,629 | 7.000 | 03/15/28 | 3,000 | |||||||||||
1,043 | 7.000 | 04/15/28 | 1,216 | |||||||||||
323 | 7.000 | 05/15/28 | 370 | |||||||||||
4,607 | 7.000 | 06/15/28 | 5,351 | |||||||||||
8,129 | 7.000 | 07/15/28 | 9,475 | |||||||||||
13,809 | 7.000 | 09/15/28 | 16,127 | |||||||||||
2,324 | 7.000 | 11/15/28 | 2,710 | |||||||||||
2,846 | 7.500 | 11/15/30 | 2,856 | |||||||||||
166,372 | 6.000 | 08/20/34 | 192,195 | |||||||||||
176,675 | 5.000 | 06/15/40 | 193,831 | |||||||||||
863,252 | 4.000 | 08/20/43 | 920,206 | |||||||||||
2,211,065 | 4.000 | 08/20/45 | 2,352,107 | |||||||||||
1,595,085 | 4.000 | 10/20/45 | 1,696,336 | |||||||||||
999,900 | 3.000 | 11/20/45 | 1,014,235 | |||||||||||
962,438 | 4.000 | 01/20/46 | 1,023,530 | |||||||||||
944,374 | 4.000 | 03/20/46 | 1,004,320 | |||||||||||
4,000,001 | 4.000 | 04/20/46 | 4,251,407 | |||||||||||
1,945,494 | 4.000 | 08/20/46 | 2,067,164 | |||||||||||
999,900 | 3.000 | 09/20/46 | 1,014,391 | |||||||||||
2,000,000 | 3.000 | 11/20/46 | 2,028,984 | |||||||||||
2,099,900 | 3.000 | 12/20/46 | 2,130,332 | |||||||||||
|
| |||||||||||||
20,034,832 | ||||||||||||||
|
| |||||||||||||
TOTAL MORTGAGE-BACKED SECURITIES | ||||||||||||||
(Cost $29,049,007) | $ | 29,368,049 | ||||||||||||
|
| |||||||||||||
32 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST CORE FIXED INCOME FUND
Principal Amount | Interest Rate | Maturity Date | Value | |||||||||||
Collateralized Mortgage Obligations – 2.3% | ||||||||||||||
| Adjustable Rate Non-Agency(a)(c) – 0.4% |
| ||||||||||||
| Alternative Loan Trust Series 2005-38, Class A1 |
| ||||||||||||
$ | 122,500 | 2.067 | % | 09/25/35 | $ | 115,493 | ||||||||
| Lehman XS Trust Series 2005-7N, Class 1A1A |
| ||||||||||||
215,427 | 1.026 | 12/25/35 | 194,370 | |||||||||||
| MASTR Adjustable Rate Mortgages Trust Series 2006-OA2, | | ||||||||||||
274,203 | 1.417 | 12/25/46 | 230,604 | |||||||||||
|
| |||||||||||||
540,467 | ||||||||||||||
|
| |||||||||||||
| Regular Floater(c) – 1.4% |
| ||||||||||||
| Connecticut Avenue Securities Series 2014-C03, Class 1M1(a) |
| ||||||||||||
15,788 | 1.956 | 07/25/24 | 15,809 | |||||||||||
| Mortgage Repurchase Agreement Financing Trust Series 2016-1, | | ||||||||||||
500,000 | 1.637 | 09/10/18 | 500,000 | |||||||||||
| Mortgage Repurchase Agreement Financing Trust Series 2016-2, | | ||||||||||||
500,000 | 1.837 | 03/10/19 | 500,000 | |||||||||||
| Mortgage Repurchase Agreement Financing Trust Series 2016-3, | | ||||||||||||
150,000 | 1.664 | 11/10/18 | 150,000 | |||||||||||
| Station Place Securitization Trust Series 2015-2, Class A(b) |
| ||||||||||||
300,000 | 1.754 | 05/15/18 | 300,000 | |||||||||||
|
| |||||||||||||
1,465,809 | ||||||||||||||
|
| |||||||||||||
| Sequential Fixed Rate – 0.5% |
| ||||||||||||
| FNMA REMIC Series 2012-111, Class B |
| ||||||||||||
22,313 | 7.000 | 10/25/42 | 26,139 | |||||||||||
| FNMA REMIC Series 2012-153, Class B |
| ||||||||||||
59,047 | 7.000 | 07/25/42 | 68,225 | |||||||||||
| FREMF Mortgage Trust Series 2014-K40, Class C(a)(b)(c)(e) |
| ||||||||||||
100,000 | 4.072 | 11/25/47 | 93,261 | |||||||||||
| FREMF Mortgage Trust Series 2014-K41, Class B(a)(b)(c) |
| ||||||||||||
100,000 | 3.831 | 11/25/47 | 99,190 | |||||||||||
| NCUA Guaranteed Notes Series A4 |
| ||||||||||||
300,000 | 3.000 | 06/12/19 | 310,346 | |||||||||||
|
| |||||||||||||
597,161 | ||||||||||||||
|
| |||||||||||||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS | ||||||||||||||
(Cost $2,588,603) | $ | 2,603,437 | ||||||||||||
|
| |||||||||||||
Commercial Mortgage-Backed Securities – 1.6% | ||||||||||||||
| Sequential Fixed Rate(c) – 1.6% |
| ||||||||||||
| Banc of America Commercial Mortgage Trust Series 2007-4, | | ||||||||||||
$ | 255,121 | 5.774 | % | 02/10/51 | $ | 258,410 | ||||||||
| GS Mortgage Securities Trust Series 2007-GG10, Class A1A(e) |
| ||||||||||||
558,115 | 5.793 | 08/10/45 | 563,812 | |||||||||||
| GS Mortgage Securities Trust Series 2007-GG10, Class A4(e) |
| ||||||||||||
248,872 | 5.793 | 08/10/45 | 250,422 | |||||||||||
| JP Morgan Chase Commercial Mortgage Securities Trust | | ||||||||||||
189,305 | 5.713 | 02/12/49 | 190,598 | |||||||||||
|
| |||||||||||||
Commercial Mortgage-Backed Securities – (continued) | ||||||||||||||
| Sequential Fixed Rate(c) – (continued) |
| ||||||||||||
| Wachovia Bank Commercial Mortgage Trust Series 2007-C34, | | ||||||||||||
451,509 | 5.608 | 05/15/46 | 458,515 | |||||||||||
|
| |||||||||||||
TOTAL COMMERCIAL MORTGAGE-BACKED SECURITIES | ||||||||||||||
(Cost $1,904,060) | $ | 1,721,757 | ||||||||||||
|
| |||||||||||||
U.S. Government Agency Securities – 2.5% | ||||||||||||||
| FHLB |
| ||||||||||||
$ | 600,000 | 2.125 | % | 06/09/23 | $ | 590,704 | ||||||||
100,000 | 3.375 | 12/08/23 | 105,750 | |||||||||||
| FNMA |
| ||||||||||||
400,000 | 1.875 | 09/24/26 | 367,490 | |||||||||||
400,000 | 6.250 | 05/15/29 | 531,044 | |||||||||||
| Tennessee Valley Authority |
| ||||||||||||
500,000 | 3.875 | 02/15/21 | 537,235 | |||||||||||
500,000 | 5.375 | 04/01/56 | 616,260 | |||||||||||
|
| |||||||||||||
TOTAL U.S. GOVERNMENT AGENCY SECURITIES | ||||||||||||||
(Cost $2,658,814) | $ | 2,748,483 | ||||||||||||
|
| |||||||||||||
Asset-Backed Securities(c) – 9.2% | ||||||||||||||
| Collateralized Loan Obligations – 2.8% |
| ||||||||||||
| Acis CLO Ltd. Series 2013-1A, Class ACOM(a)(b) |
| ||||||||||||
$ | 1,500,000 | 2.109 | % | 04/18/24 | $ | 1,484,250 | ||||||||
| Acis CLO Ltd. Series 2013-2A, Class A(a)(b) |
| ||||||||||||
54,517 | 1.381 | 10/14/22 | 54,404 | |||||||||||
| Acis CLO Ltd. Series 2013-2A, Class ACOM(a)(b) |
| ||||||||||||
489,936 | 1.579 | 10/14/22 | 488,565 | |||||||||||
| Black Diamond CLO Ltd. Series 2006-1A, Class AD(a)(b) |
| ||||||||||||
26,058 | 1.137 | 04/29/19 | 26,048 | |||||||||||
| Ocean Trails CLO I Series 2006-1X, Class A1(a)(d) |
| ||||||||||||
137,970 | 1.124 | 10/12/20 | 137,954 | |||||||||||
| OFSI Fund V Ltd. Series 2013-5A, Class ACOM(b) |
| ||||||||||||
950,000 | 0.000 | 04/17/25 | 941,735 | |||||||||||
|
| |||||||||||||
3,132,956 | ||||||||||||||
|
| |||||||||||||
| Home Equity(a) – 2.4% |
| ||||||||||||
| GMACM Home Equity Loan Trust Series 2007-HE3, Class 1A1 |
| ||||||||||||
37,138 | 7.000 | 09/25/37 | 36,892 | |||||||||||
| GMACM Home Equity Loan Trust Series 2007-HE3, Class 2A1 |
| ||||||||||||
83,820 | 6.746 | 09/25/37 | 83,956 | |||||||||||
| Sound Point CLO VI Ltd. Series 2014-2A, Class ACOM(b) |
| ||||||||||||
1,400,000 | 0.000 | 10/20/26 | 1,396,640 | |||||||||||
| Sound Point CLO VIII Ltd. Series 2015-1A, Class A(b) |
| ||||||||||||
900,000 | 2.410 | 04/15/27 | 900,021 | |||||||||||
| Sound Point CLO VIII Ltd. Series 2015-1A, Class B(b) |
| ||||||||||||
250,000 | 2.930 | 04/15/27 | 250,033 | |||||||||||
|
| |||||||||||||
2,667,542 | ||||||||||||||
|
| |||||||||||||
| Student Loans – 4.0% |
| ||||||||||||
| Access Group, Inc. Series 2005-2, Class A3(a) |
| ||||||||||||
176,343 | 1.096 | 11/22/24 | 175,060 | |||||||||||
|
|
The accompanying notes are an integral part of these financial statements. | 33 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST CORE FIXED INCOME FUND
Schedule of Investments (continued)
December 31, 2016
Principal Amount | Interest Rate | Maturity Date | Value | |||||||||||
Asset-Backed Securities(c) – (continued) | ||||||||||||||
| Student Loans – (continued) |
| ||||||||||||
| Chase Education Loan Trust Series 2007-A, Class A3 |
| ||||||||||||
$ | 57,881 | 1.067 | % | 12/28/23 | $ | 56,968 | ||||||||
| ECMC Group Student Loan Trust Series 2016-1A, Class A(a)(b) |
| ||||||||||||
557,081 | 2.106 | 07/26/66 | 555,438 | |||||||||||
| Edsouth Indenture No. 10 LLC Series 2015-2, Class A(a)(b) |
| ||||||||||||
392,353 | 1.756 | 12/25/56 | 389,642 | |||||||||||
| Navient Student Loan Trust Series 2016-5A, Class A(a)(b) |
| ||||||||||||
1,125,084 | 2.006 | 06/25/65 | 1,141,581 | |||||||||||
| Navient Student Loan Trust Series 2016-7A, Class A(a)(b) |
| ||||||||||||
543,412 | 1.906 | 03/25/66 | 548,952 | |||||||||||
| Nelnet Student Loan Trust Series 2006-2, Class A5(a) |
| ||||||||||||
371,258 | 0.982 | 01/25/30 | 369,265 | |||||||||||
| Northstar Education Finance, Inc. Series 2004-2, Class A3 |
| ||||||||||||
21,931 | 1.060 | 07/30/18 | 21,894 | |||||||||||
| Scholar Funding Trust Series 2010-A, Class A(a)(b) |
| ||||||||||||
158,747 | 1.640 | 10/28/41 | 155,651 | |||||||||||
| SLC Student Loan Trust Series 2006-1, Class A5(a) |
| ||||||||||||
500,000 | 1.073 | 03/15/27 | 493,690 | |||||||||||
| SLM Student Loan Trust Series 2005-3, Class A5(a) |
| ||||||||||||
196,806 | 0.972 | 10/25/24 | 195,737 | |||||||||||
| SLM Student Loan Trust Series 2006-2, Class A5(a) |
| ||||||||||||
272,538 | 0.992 | 07/25/25 | 271,878 | |||||||||||
|
| |||||||||||||
4,375,756 | ||||||||||||||
|
| |||||||||||||
TOTAL ASSET-BACKED SECURITIES | ||||||||||||||
(Cost $10,037,368) | $ | 10,176,254 | ||||||||||||
|
| |||||||||||||
Foreign Government Securities – 3.7% | ||||||||||||||
| Chile Government International Bond |
| ||||||||||||
$ | 468,000 | 3.125 | % | 01/21/26 | $ | 462,735 | ||||||||
| Colombia Government International Bond(a) |
| ||||||||||||
240,000 | 4.000 | (a) | 02/26/24 | 242,100 | ||||||||||
| Hashemite Kingdom of Jordan Government AID Bond(f) |
| ||||||||||||
700,000 | 2.503 | 10/30/20 | 716,450 | |||||||||||
| Indonesia Government International Bond(b) |
| ||||||||||||
230,000 | 4.750 | 01/08/26 | 237,762 | |||||||||||
| Israel Government AID Bond(f) |
| ||||||||||||
400,000 | 5.500 | 09/18/23 | 472,928 | |||||||||||
200,000 | 5.500 | 12/04/23 | 235,888 | |||||||||||
100,000 | 5.500 | 04/26/24 | 119,046 | |||||||||||
| KfW(g) |
| ||||||||||||
1,000,000 | 1.125 | 08/06/18 | 996,090 | |||||||||||
| Mexico Government International Bond |
| ||||||||||||
470,000 | 3.600 | 01/30/25 | 452,375 | |||||||||||
| Peruvian Government International Bond |
| ||||||||||||
110,000 | 6.550 | 03/14/37 | 138,050 | |||||||||||
|
| |||||||||||||
TOTAL FOREIGN GOVERNMENT SECURITIES | ||||||||||||||
(Cost $4,088,432) | $ | 4,073,424 | ||||||||||||
|
| |||||||||||||
Supranational – 0.2% | ||||||||||||||
| Inter-American Development Bank |
| ||||||||||||
$ | 200,000 | 1.000 | % | 02/27/18 | $ | 198,476 | ||||||||
(Cost $199,535) | ||||||||||||||
|
| |||||||||||||
Municipal Bonds – 0.8% | ||||||||||||||
| California – 0.3% |
| ||||||||||||
| California State Various Purpose GO Bonds Series 2010 |
| ||||||||||||
$ | 140,000 | 7.950 | % | 03/01/36 | $ | 163,148 | ||||||||
105,000 | 7.625 | 03/01/40 | 155,349 | |||||||||||
|
| |||||||||||||
318,497 | ||||||||||||||
|
| |||||||||||||
| Illinois – 0.2% |
| ||||||||||||
| Illinois State GO Bonds for Build America Bonds Series 2010-5 |
| ||||||||||||
250,000 | 7.350 | 07/01/35 | 270,545 | |||||||||||
|
| |||||||||||||
| Ohio – 0.3% |
| ||||||||||||
| American Municipal Power, Inc. RB Build America Bond Series | | ||||||||||||
250,000 | 6.270 | 02/15/50 | 303,188 | |||||||||||
|
| |||||||||||||
TOTAL MUNICIPAL BONDS | ||||||||||||||
(Cost $750,219) | $ | 892,230 | ||||||||||||
|
| |||||||||||||
U.S. Treasury Obligations – 17.3% | ||||||||||||||
| U.S. Treasury Bonds |
| ||||||||||||
$ | 2,700,000 | 3.625 | %(h) | 08/15/43 | $ | 2,995,434 | ||||||||
1,250,000 | 3.750 | 11/15/43 | 1,417,875 | |||||||||||
790,000 | 3.625 | 02/15/44 | 876,118 | |||||||||||
100,000 | 3.000 | 11/15/44 | 98,837 | |||||||||||
200,000 | 2.875 | 08/15/45 | 192,506 | |||||||||||
1,350,000 | 3.000 | 11/15/45 | 1,332,140 | |||||||||||
| U.S. Treasury Inflation Indexed Bonds (TIPS) |
| ||||||||||||
394,062 | 2.500 | 01/15/29 | 476,026 | |||||||||||
55,920 | 2.125 | 02/15/40 | 69,385 | |||||||||||
| U.S. Treasury Inflation Indexed Notes (TIPS) |
| ||||||||||||
1,464,008 | 0.125 | 04/15/18 | 1,477,857 | |||||||||||
618,972 | 0.125 | 04/15/19 | 626,951 | |||||||||||
104,725 | 0.125 | 01/15/23 | 104,074 | |||||||||||
259,680 | 0.375 | 07/15/23 | 262,308 | |||||||||||
424,756 | 0.625 | 01/15/24 | 432,631 | |||||||||||
585,373 | 0.125 | 07/15/24 | 575,878 | |||||||||||
512,728 | 0.375 | 07/15/25 | 510,492 | |||||||||||
| U.S. Treasury Notes |
| ||||||||||||
1,200,000 | 1.625 | 07/31/20 | 1,199,196 | |||||||||||
800,000 | 1.375 | 04/30/21 | 784,824 | |||||||||||
1,490,000 | 2.000 | 12/31/21 | 1,495,468 | |||||||||||
290,000 | 1.750 | 09/30/22 | 284,545 | |||||||||||
1,840,000 | 1.875 | 10/31/22 | 1,815,694 | |||||||||||
997,000 | 2.250 | 12/31/23 | 997,777 | |||||||||||
110,000 | 2.375 | 08/15/24 | 110,537 | |||||||||||
| U.S. Treasury STRIPS(i) |
| ||||||||||||
1,800,000 | 0.000 | 02/15/36 | 1,011,096 | |||||||||||
|
| |||||||||||||
TOTAL U.S. TREASURY OBLIGATIONS | ||||||||||||||
(Cost $18,946,647) | $ | 19,147,649 | ||||||||||||
|
|
34 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST CORE FIXED INCOME FUND
Shares | Distribution Rate | Value | ||||||
Investment Company(c)(j) – 0.0% | ||||||||
Goldman Sachs Financial Square Government Fund — |
| |||||||
289 | 0.455 | % | $ | 289 | ||||
(Cost $289) | ||||||||
| ||||||||
TOTAL INVESTMENTS – 98.6% | ||||||||
(Cost $107,999,480) | $ | 108,995,184 | ||||||
| ||||||||
OTHER ASSETS IN EXCESS OF LIABILITIES – 1.4% |
| 1,571,091 | ||||||
| ||||||||
NET ASSETS – 100.0% | $ | 110,566,275 | ||||||
|
The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. | ||
(a) | Securities with “Call” features. Maturity dates disclosed are the final maturity dates. | |
(b) | Exempt from registration under Rule 144A of the Securities Act of 1933. Under procedures approved by the Board of Trustees, such securities may be deemed liquid by the Investment Adviser and may be resold, normally to qualified institutional buyers in transactions exempt from registration. Total market value of Rule 144A securities amounts to $15,966,637, which represents approximately 14.4% of net assets as of December 31, 2016. | |
(c) | Variable rate security. Interest rate or distribution rate disclosed is that which is in effect on December 31, 2016. | |
(d) | Security has been determined to be illiquid by the Investment Adviser. At December 31, 2016, these securities amounted to $306,580 or approximately 0.3% of net assets. | |
(e) | Interest is based on the weighted net interest rate of the collateral. | |
(f) | Guaranteed by the United States Government. Total market value of these securities amounts to $1,544,312, which represents 1.40% of net assets as of December 31, 2016. |
(g) | Guaranteed by a foreign government until maturity. Total market value of these securities amounts to $996,090, which represents 0.90% of net assets as of December 31, 2016. | |
(h) | All or a portion of security is segregated as collateral for initial margin requirements on futures transactions. | |
(i) | Issued with a zero coupon. Income is recognized through the accretion of discount. | |
(j) | Represents an affiliated issuer. |
Investment Abbreviations: | ||
BA | —Banker Acceptance Rate | |
BBR | —Bank Bill Reference Rate | |
EURIBOR | —Euro Interbank Offered Rate | |
FHLB | —Federal Home Loan Bank | |
FHLMC | —Federal Home Loan Mortgage Corp. | |
FNMA | —Federal National Mortgage Association | |
GNMA | —Government National Mortgage Association | |
GO | —General Obligation | |
LIBOR | —London Interbank Offered Rate | |
NIBOR | —Norwegian Interbank Offered Rate | |
RB | —Revenue Bond | |
REMIC | —Real Estate Mortgage Investment Conduit | |
RMKT | —Remarketed | |
STIBOR | —Stockholm Interbank Offered Rate | |
STRIPS | —Separate Trading of Registered Interest and Principal of Securities | |
TIPS | —Treasury Inflation-Protected Securities | |
Currency Abbreviations: | ||
AUD | —Australian Dollar | |
CAD | —Canadian Dollar | |
CHF | —Swiss Franc | |
EUR | —Euro | |
GBP | —British Pound | |
JPY | —Japanese Yen | |
NOK | —Norwegian Krone | |
NZD | —New Zealand Dollar | |
SEK | —Swedish Krona | |
TWD | —Taiwan Dollar | |
USD | —United States Dollar |
The accompanying notes are an integral part of these financial statements. | 35 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST CORE FIXED INCOME FUND
Schedule of Investments (continued)
December 31, 2016
ADDITIONAL INVESTMENT INFORMATION
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS — At December 31, 2016, the Fund had the following forward foreign currency exchange contracts:
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS WITH UNREALIZED GAIN
Counterparty | Currency Purchased | Currency Sold | Settlement Date | Current Value | Unrealized Gain | |||||||||||||||
Morgan Stanley Co., Inc. | AUD | 117,000 | NZD | 121,236 | 3/15/2017 | $ | 84,288 | $ | 243 | |||||||||||
AUD | 56,389 | USD | 40,469 | 3/15/2017 | 40,623 | 154 | ||||||||||||||
CAD | 227,126 | USD | 168,000 | 3/15/2017 | 169,303 | 1,303 | ||||||||||||||
CHF | 422,572 | EUR | 393,415 | 3/15/2017 | 416,816 | 1,228 | ||||||||||||||
EUR | 53,565 | AUD | 76,429 | 3/15/2017 | 56,584 | 1,523 | ||||||||||||||
EUR | 160,000 | GBP | 134,340 | 3/15/2017 | 169,018 | 3,168 | ||||||||||||||
EUR | 158,640 | SEK | 1,516,537 | 3/15/2017 | 167,581 | 429 | ||||||||||||||
EUR | 602,761 | USD | 626,697 | 2/9/2017 | 635,708 | 9,011 | ||||||||||||||
EUR | 1,109,059 | USD | 1,162,032 | 3/15/2017 | 1,171,566 | 9,534 | ||||||||||||||
GBP | 68,724 | EUR | 80,000 | 3/15/2017 | 84,843 | 335 | ||||||||||||||
GBP | 69,000 | USD | 85,048 | 3/15/2017 | 85,184 | 136 | ||||||||||||||
JPY | 118,436,731 | USD | 1,009,000 | 3/15/2017 | 1,016,905 | 7,905 | ||||||||||||||
NOK | 2,197,741 | EUR | 241,000 | 3/15/2017 | 254,623 | 40 | ||||||||||||||
NOK | 323,342 | SEK | 339,865 | 3/15/2017 | 37,461 | 2 | ||||||||||||||
NOK | 292,422 | USD | 33,672 | 3/15/2017 | 33,879 | 207 | ||||||||||||||
NZD | 171,169 | USD | 118,008 | 3/15/2017 | 118,661 | 653 | ||||||||||||||
SEK | 25,200,957 | EUR | 2,591,629 | 3/15/2017 | 2,777,627 | 39,935 | ||||||||||||||
SEK | 3,741,994 | EUR | 383,377 | 3/22/2017 | 412,617 | 7,466 | ||||||||||||||
USD | 1,512,563 | AUD | 2,045,949 | 3/15/2017 | 1,473,927 | 38,636 | ||||||||||||||
USD | 64,468 | CAD | 84,349 | 1/20/2017 | 62,835 | 1,633 | ||||||||||||||
USD | 579,487 | CAD | 762,651 | 3/15/2017 | 568,490 | 10,997 | ||||||||||||||
USD | 629,565 | CAD | 843,756 | 3/22/2017 | 629,003 | 562 | ||||||||||||||
USD | 213,240 | EUR | 200,355 | 3/15/2017 | 211,647 | 1,593 | ||||||||||||||
USD | 316,889 | GBP | 253,466 | 1/6/2017 | 312,394 | 4,495 | ||||||||||||||
USD | 1,465,368 | GBP | 1,163,263 | 3/15/2017 | 1,436,110 | 29,258 | ||||||||||||||
USD | 117,240 | JPY | 12,792,324 | 1/11/2017 | 109,520 | 7,720 | ||||||||||||||
USD | 1,055,872 | JPY | 121,996,180 | 3/15/2017 | 1,047,467 | 8,405 | ||||||||||||||
USD | 56,594 | NOK | 476,270 | 3/15/2017 | 55,179 | 1,415 | ||||||||||||||
USD | 357,968 | NZD | 503,822 | 3/15/2017 | 349,269 | 8,699 | ||||||||||||||
USD | 199,992 | TWD | 6,370,635 | 1/12/2017 | 196,743 | 3,249 | ||||||||||||||
USD | 131,138 | TWD | 4,136,077 | 6/16/2017 | 128,040 | 3,097 | ||||||||||||||
TOTAL | $ | 203,031 |
36 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST CORE FIXED INCOME FUND
ADDITIONAL INVESTMENT INFORMATION (continued)
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS WITH UNREALIZED LOSS
Counterparty | Currency Purchased | Currency Sold | Settlement Date | Current Value | Unrealized Loss | |||||||||||||||
Morgan Stanley Co., Inc. | AUD | 120,526 | USD | 89,867 | 1/12/2017 | $ | 86,957 | $ | (2,910 | ) | ||||||||||
AUD | 811,746 | USD | 595,881 | 3/15/2017 | 584,792 | (11,089 | ) | |||||||||||||
CAD | 86,966 | USD | 65,502 | 1/20/2017 | 64,785 | (717 | ) | |||||||||||||
CAD | 558,790 | USD | 420,000 | 3/15/2017 | 416,528 | (3,472 | ) | |||||||||||||
EUR | 342,336 | SEK | 3,302,191 | 3/15/2017 | 361,629 | (2,335 | ) | |||||||||||||
EUR | 34,754 | USD | 37,156 | 3/15/2017 | 36,713 | (443 | ) | |||||||||||||
GBP | 68,115 | EUR | 80,000 | 3/15/2017 | 84,092 | (417 | ) | |||||||||||||
GBP | 68,000 | JPY | 9,847,420 | 3/15/2017 | 83,950 | (601 | ) | |||||||||||||
GBP | 299,534 | USD | 374,485 | 1/6/2017 | 369,174 | (5,311 | ) | |||||||||||||
GBP | 135,000 | USD | 167,964 | 3/15/2017 | 166,664 | (1,300 | ) | |||||||||||||
JPY | 20,899,034 | EUR | 170,947 | 3/15/2017 | 179,440 | (1,141 | ) | |||||||||||||
JPY | 19,492,714 | USD | 178,648 | 1/11/2017 | 166,885 | (11,763 | ) | |||||||||||||
JPY | 19,401,648 | USD | 168,000 | 3/15/2017 | 166,583 | (1,417 | ) | |||||||||||||
NOK | 5,226,545 | EUR | 580,114 | 3/15/2017 | 605,531 | (7,278 | ) | |||||||||||||
NZD | 460,638 | USD | 327,253 | 3/15/2017 | 319,333 | (7,920 | ) | |||||||||||||
USD | 168,000 | CAD | 226,548 | 3/15/2017 | 168,872 | (872 | ) | |||||||||||||
USD | 627,434 | EUR | 603,470 | 2/9/2017 | 636,456 | (9,022 | ) | |||||||||||||
USD | 881,348 | EUR | 840,676 | 3/15/2017 | 888,055 | (6,707 | ) | |||||||||||||
USD | 924,000 | JPY | 108,359,142 | 3/15/2017 | 930,378 | (6,378 | ) | |||||||||||||
USD | 132,410 | SEK | 1,208,000 | 1/27/2017 | 132,809 | (399 | ) | |||||||||||||
USD | 182,805 | SEK | 1,684,370 | 3/15/2017 | 185,651 | (2,846 | ) | |||||||||||||
TOTAL | $ | (84,338 | ) |
FORWARD SALES CONTRACTS — At December 31, 2016, the Fund had the following forward sales contracts:
Description | Interest Rate | Maturity Date(a) | Settlement Date | Principal Amount | Value | |||||||||||||||
FHLMC | 3.500 | % | TBA-30yr | 01/15/47 | $ | (1,000,000 | ) | $ | (1,024,063 | ) | ||||||||||
GNMA | 3.000 | TBA-30yr | 01/15/47 | (6,000,000 | ) | (6,076,875 | ) | |||||||||||||
TOTAL (Proceeds Received: $7,004,414) | $ | (7,100,938 | ) |
(a) | TBA (To Be Announced) Securities are sold on a forward commitment basis with an approximate principal amount and no defined maturity date. The actual principal and maturity date will be determined upon settlement when the specific mortgage pools are assigned. |
The accompanying notes are an integral part of these financial statements. | 37 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST CORE FIXED INCOME FUND
Schedule of Investments (continued)
December 31, 2016
ADDITIONAL INVESTMENT INFORMATION (continued)
FUTURES CONTRACTS — At December 31, 2016, the Fund had the following futures contracts:
Type | Number of Contracts Long (Short) | Expiration Date | Current Value | Unrealized Gain (Loss) | ||||||||||||
90 Day Sterling | 7 | March 2017 | $ | 1,074,090 | $ | 278 | ||||||||||
90 Day Sterling | 7 | June 2017 | 1,073,821 | 220 | ||||||||||||
90 Day Sterling | 7 | September 2017 | 1,073,605 | 324 | ||||||||||||
90 Day Sterling | 7 | December 2017 | 1,073,282 | 415 | ||||||||||||
Euro-Bund | 20 | March 2017 | 3,455,850 | 57,361 | ||||||||||||
Euro-OAT | (1) | March 2017 | (159,813 | ) | (1,342 | ) | ||||||||||
Fed Fund 30 Day Futures | (11) | April 2017 | (4,551,156 | ) | 279 | |||||||||||
U.S. Long Bonds | 6 | March 2017 | 903,938 | (839 | ) | |||||||||||
U.S. Ultra Long Treasury Bonds | 8 | March 2017 | 1,282,000 | 16,728 | ||||||||||||
2 Year U.S. Treasury Notes | 16 | March 2017 | 3,467,000 | 4,338 | ||||||||||||
3 Year Australian Government Bonds | 40 | March 2017 | 3,217,611 | (4,859 | ) | |||||||||||
5 Year U.S. Treasury Notes | 46 | March 2017 | 5,412,546 | (10,141 | ) | |||||||||||
10 Year U.S. Treasury Notes | 38 | March 2017 | 4,722,688 | 7,223 | ||||||||||||
10 Year U.S. Ultra Long Treasury Note | (1) | March 2017 | (134,063 | ) | 83 | |||||||||||
TOTAL | $ | 70,068 |
38 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST CORE FIXED INCOME FUND
ADDITIONAL INVESTMENT INFORMATION (continued)
SWAP CONTRACTS — At December 31, 2016, the Fund had the following swap contracts:
CENTRALLY CLEARED CREDIT DEFAULT SWAP CONTRACT
Market Value | ||||||||||||||||||||||||
Referenced Obligation | Notional Amount (000’s) | Rates Received (Paid) | Termination Date | Credit Spread on December 31, 2016(a) | Upfront Payments Made (Received) | Unrealized Gain (Loss) | ||||||||||||||||||
Protection Purchased: | ||||||||||||||||||||||||
CDX North America Investment Grade Index | $ | 480 | (1.000 | )% | 12/20/21 | 0.678 | % | $ | (5,485 | ) | $ | (1,927 | ) |
(a) | Credit spread on the Referenced Obligation, together with the period of expiration, are indicators of payment/performance risk. The likelihood of a credit event occurring which would require a fund or its counterparty to make a payment or otherwise be required to perform under the swap contract is generally greater as the credit spread and term of the swap contract increase. |
The accompanying notes are an integral part of these financial statements. | 39 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST CORE FIXED INCOME FUND
Schedule of Investments (continued)
December 31, 2016
ADDITIONAL INVESTMENT INFORMATION (continued)
CENTRALLY CLEARED INTEREST RATE SWAP CONTRACTS
Rates Exchanged | Market Value | |||||||||||||||||||||
Notional Amount (000’s) | Termination Date | Payments Received | Payments Made | Upfront Payments Made (Received) | Unrealized Gain (Loss) | |||||||||||||||||
SEK | 9,470 | 06/15/18 | 0.050% | 3 Month STIBOR | $ | 6,696 | $ | 1,113 | ||||||||||||||
9,950 | (a) | 09/15/18 | 0.330 | 3 Month STIBOR | 52 | (326 | ) | |||||||||||||||
NZD | 3,090 | (a) | 02/22/19 | 2.350 | 3 Month BBR | 803 | (8,455 | ) | ||||||||||||||
CAD | 4,500 | (a) | 03/15/19 | 1.000 | 3 Month BA | (12,448 | ) | 2,189 | ||||||||||||||
GBP | 3,160 | (a) | 03/15/19 | 0.600 | 3 Month LIBOR | 3,836 | 3,913 | |||||||||||||||
NOK | 4,170 | (a) | 03/15/19 | 1.250 | 6 Month NIBOR | (794 | ) | 368 | ||||||||||||||
$ | 3,720 | (a) | 03/15/19 | 3 Month LIBOR | 1.250% | 23,191 | (1,194 | ) | ||||||||||||||
5,680 | (a) | 12/19/19 | 2.250 | 3 Month LIBOR | (224 | ) | 7,812 | |||||||||||||||
CAD | 1,520 | (a) | 03/15/22 | 1.250 | 3 Month BA | (11,082 | ) | (3,007 | ) | |||||||||||||
EUR | 320 | (a) | 03/15/22 | 6 Month EURIBOR | 0.000 | 3,173 | (1,275 | ) | ||||||||||||||
NOK | 7,720 | (a) | 03/15/22 | 1.500 | 6 Month NIBOR | (5,303 | ) | 1,609 | ||||||||||||||
NZD | 680 | (a) | 03/15/22 | 3.000 | 3 Month BBR | 2,645 | (5,432 | ) | ||||||||||||||
SEK | 9,080 | (a) | 03/15/22 | 3 Month STIBOR | 0.500 | (7,178 | ) | (1,149 | ) | |||||||||||||
$ | 1,370 | (a) | 03/15/22 | 3 Month LIBOR | 1.500 | 30,084 | 4,130 | |||||||||||||||
1,290 | (a) | 12/19/23 | 3 Month LIBOR | 2.600 | (126 | ) | (9,964 | ) | ||||||||||||||
EUR | 170 | (a) | 08/16/24 | 0.250 | 6 Month EURIBOR | (831 | ) | (2,875 | ) | |||||||||||||
440 | (a) | 03/15/27 | 0.750 | 6 Month EURIBOR | (2,819 | ) | 5,226 | |||||||||||||||
GBP | 360 | (a) | 03/15/27 | 6 Month LIBOR | 1.500 | (2,392 | ) | (8,158 | ) | |||||||||||||
SEK | 1,260 | (a) | 03/15/27 | 3 Month STIBOR | 1.250 | (35 | ) | (1,290 | ) | |||||||||||||
$ | 500 | (a) | 03/15/27 | 1.750 | 3 Month LIBOR | (31,596 | ) | 4,041 | ||||||||||||||
GBP | 520 | (a) | 03/15/32 | 6 Month LIBOR | 1.750 | (6,227 | ) | (22,806 | ) | |||||||||||||
JPY | 5,130 | (a) | 03/15/37 | 6 Month LIBOR | 0.750 | (4 | ) | (714 | ) | |||||||||||||
EUR | 670 | (a) | 03/15/47 | 6 Month EURIBOR | 1.250 | 21,681 | (22,282 | ) | ||||||||||||||
GBP | 130 | (a) | 03/15/47 | 6 Month LIBOR | 1.750 | (5,941 | ) | (6,974 | ) | |||||||||||||
$ | 250 | (a) | 03/15/47 | 2.250 | 3 Month LIBOR | (22,420 | ) | 4,031 | ||||||||||||||
TOTAL | $ | (17,259 | ) | $ | (61,469 | ) |
(a) | Represents forward starting interest rate swaps whose effective dates of commencement of accruals and cash flows occur subsequent to December 31, 2016. |
40 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST EQUITY INDEX FUND
Schedule of Investments
December 31, 2016
Shares | Description | Value | ||||||
Common Stocks – 99.3% | ||||||||
| Automobiles & Components – 0.7% |
| ||||||
1,684 | BorgWarner, Inc. | $ | 66,417 | |||||
2,307 | Delphi Automotive plc | 155,376 | ||||||
33,574 | Ford Motor Co. | 407,253 | ||||||
11,833 | General Motors Co. | 412,262 | ||||||
2,147 | Goodyear Tire & Rubber Co. (The) | 66,278 | ||||||
1,500 | Harley-Davidson, Inc. | 87,510 | ||||||
|
| |||||||
1,195,096 | ||||||||
|
| |||||||
| Banks – 6.7% |
| ||||||
86,079 | Bank of America Corp. | 1,902,346 | ||||||
6,946 | BB&T Corp. | 326,601 | ||||||
24,265 | Citigroup, Inc. | 1,442,069 | ||||||
4,429 | Citizens Financial Group, Inc. | 157,805 | ||||||
1,490 | Comerica, Inc. | 101,484 | ||||||
6,379 | Fifth Third Bancorp | 172,041 | ||||||
9,526 | Huntington Bancshares, Inc. | 125,934 | ||||||
30,492 | JPMorgan Chase & Co. | 2,631,155 | ||||||
9,192 | KeyCorp | 167,938 | ||||||
1,333 | M&T Bank Corp. | 208,521 | ||||||
2,617 | People’s United Financial, Inc. | 50,665 | ||||||
4,128 | PNC Financial Services Group, Inc. (The) | 482,811 | ||||||
10,367 | Regions Financial Corp. | 148,870 | ||||||
4,142 | SunTrust Banks, Inc. | 227,189 | ||||||
13,631 | U.S. Bancorp | 700,224 | ||||||
38,508 | Wells Fargo & Co. | 2,122,176 | ||||||
1,723 | Zions Bancorporation | 74,158 | ||||||
|
| |||||||
11,041,987 | ||||||||
|
| |||||||
| Capital Goods – 7.4% |
| ||||||
5,136 | 3M Co. | 917,136 | ||||||
372 | Acuity Brands, Inc. | 85,880 | ||||||
813 | Allegion plc | 52,032 | ||||||
1,923 | AMETEK, Inc. | 93,458 | ||||||
3,785 | Arconic, Inc. | 70,174 | ||||||
4,908 | Boeing Co. (The) | 764,077 | ||||||
4,983 | Caterpillar, Inc. | 462,123 | ||||||
1,334 | Cummins, Inc. | 182,318 | ||||||
2,491 | Deere & Co. | 256,673 | ||||||
1,336 | Dover Corp. | 100,106 | ||||||
3,903 | Eaton Corp. plc | 261,852 | ||||||
5,497 | Emerson Electric Co. | 306,458 | ||||||
2,493 | Fastenal Co. | 117,121 | ||||||
1,146 | Flowserve Corp. | 55,065 | ||||||
1,224 | Fluor Corp. | 64,284 | ||||||
2,554 | Fortive Corp. | 136,971 | ||||||
1,370 | Fortune Brands Home & Security, Inc. | 73,240 | ||||||
2,427 | General Dynamics Corp. | 419,046 | ||||||
75,376 | General Electric Co. | 2,381,882 | ||||||
6,501 | Honeywell International, Inc. | 753,141 | ||||||
2,685 | Illinois Tool Works, Inc. | 328,805 | ||||||
2,197 | Ingersoll-Rand plc | 164,863 | ||||||
1,006 | Jacobs Engineering Group, Inc.* | 57,342 | ||||||
7,961 | Johnson Controls International plc | 327,914 | ||||||
648 | L-3 Communications Holdings, Inc. | 98,567 | ||||||
2,139 | Lockheed Martin Corp. | 534,622 | ||||||
Common Stocks – (continued) | ||||||||
| Capital Goods – (continued) |
| ||||||
2,866 | Masco Corp. | $ | 90,623 | |||||
1,502 | Northrop Grumman Corp. | 349,335 | ||||||
3,049 | PACCAR, Inc. | 194,831 | ||||||
1,140 | Parker-Hannifin Corp. | 159,600 | ||||||
1,411 | Pentair plc | 79,115 | ||||||
1,227 | Quanta Services, Inc.* | 42,761 | ||||||
2,487 | Raytheon Co. | 353,154 | ||||||
1,075 | Rockwell Automation, Inc. | 144,480 | ||||||
1,104 | Rockwell Collins, Inc. | 102,407 | ||||||
868 | Roper Technologies, Inc. | 158,913 | ||||||
513 | Snap-on, Inc. | 87,862 | ||||||
1,308 | Stanley Black & Decker, Inc. | 150,015 | ||||||
2,265 | Textron, Inc. | 109,988 | ||||||
429 | TransDigm Group, Inc. | 106,804 | ||||||
750 | United Rentals, Inc.* | 79,185 | ||||||
6,547 | United Technologies Corp. | 717,682 | ||||||
475 | W.W. Grainger, Inc. | 110,319 | ||||||
1,547 | Xylem, Inc. | 76,607 | ||||||
|
| |||||||
12,178,831 | ||||||||
|
| |||||||
| Commercial & Professional Services – 0.6% |
| ||||||
748 | Cintas Corp. | 86,439 | ||||||
291 | Dun & Bradstreet Corp. (The) | 35,304 | ||||||
1,054 | Equifax, Inc. | 124,614 | ||||||
2,880 | Nielsen Holdings plc | 120,816 | ||||||
1,596 | Pitney Bowes, Inc. | 24,243 | ||||||
1,970 | Republic Services, Inc. | 112,389 | ||||||
1,137 | Robert Half International, Inc. | 55,463 | ||||||
728 | Stericycle, Inc.* | 56,085 | ||||||
1,318 | Verisk Analytics, Inc.* | 106,982 | ||||||
3,503 | Waste Management, Inc. | 248,398 | ||||||
|
| |||||||
970,733 | ||||||||
|
| |||||||
| Consumer Durables & Apparel – 1.2% |
| ||||||
2,452 | Coach, Inc. | 85,869 | ||||||
2,840 | D.R. Horton, Inc. | 77,617 | ||||||
1,050 | Garmin Ltd. | 50,915 | ||||||
3,283 | Hanesbrands, Inc. | 70,814 | ||||||
593 | Harman International Industries, Inc. | 65,918 | ||||||
939 | Hasbro, Inc. | 73,045 | ||||||
1,204 | Leggett & Platt, Inc. | 58,852 | ||||||
1,593 | Lennar Corp. Class A | 68,387 | ||||||
3,016 | Mattel, Inc. | 83,091 | ||||||
1,428 | Michael Kors Holdings Ltd.* | 61,375 | ||||||
552 | Mohawk Industries, Inc.* | 110,223 | ||||||
4,003 | Newell Brands, Inc. | 178,734 | ||||||
11,348 | NIKE, Inc. Class B | 576,819 | ||||||
2,750 | PulteGroup, Inc. | 50,545 | ||||||
682 | PVH Corp. | 61,544 | ||||||
481 | Ralph Lauren Corp. | 43,444 | ||||||
1,605 | Under Armour, Inc. Class A*(a) | 46,625 | ||||||
1,616 | Under Armour, Inc. Class C* | 40,675 | ||||||
2,825 | VF Corp. | 150,714 | ||||||
660 | Whirlpool Corp. | 119,968 | ||||||
|
| |||||||
2,075,174 | ||||||||
|
|
The accompanying notes are an integral part of these financial statements. | 41 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST EQUITY INDEX FUND
Schedule of Investments (continued)
December 31, 2016
Shares | Description | Value | ||||||
Common Stocks – (continued) | ||||||||
| Consumer Services – 1.6% |
| ||||||
3,551 | Carnival Corp. | $ | 184,865 | |||||
255 | Chipotle Mexican Grill, Inc.* | 96,217 | ||||||
1,000 | Darden Restaurants, Inc. | 72,720 | ||||||
1,894 | H&R Block, Inc. | 43,543 | ||||||
2,751 | Marriott International, Inc. Class A | 227,453 | ||||||
7,063 | McDonald’s Corp. | 859,708 | ||||||
1,425 | Royal Caribbean Cruises Ltd. | 116,907 | ||||||
12,417 | Starbucks Corp. | 689,392 | ||||||
890 | Wyndham Worldwide Corp. | 67,969 | ||||||
656 | Wynn Resorts Ltd. | 56,751 | ||||||
2,976 | Yum! Brands, Inc. | 188,470 | ||||||
|
| |||||||
2,603,995 | ||||||||
|
| |||||||
| Diversified Financials – 5.3% |
| ||||||
458 | Affiliated Managers Group, Inc.* | 66,547 | ||||||
6,549 | American Express Co. | 485,150 | ||||||
1,326 | Ameriprise Financial, Inc. | 147,106 | ||||||
9,020 | Bank of New York Mellon Corp. (The) | 427,368 | ||||||
16,181 | Berkshire Hathaway, Inc. Class B* | 2,637,179 | ||||||
1,039 | BlackRock, Inc. | 395,381 | ||||||
4,117 | Capital One Financial Corp. | 359,167 | ||||||
10,227 | Charles Schwab Corp. (The) | 403,660 | ||||||
2,926 | CME Group, Inc. | 337,514 | ||||||
3,342 | Discover Financial Services | 240,925 | ||||||
2,444 | E*TRADE Financial Corp.* | 84,685 | ||||||
3,003 | Franklin Resources, Inc. | 118,859 | ||||||
3,167 | Goldman Sachs Group, Inc. (The)(b) | 758,338 | ||||||
5,076 | Intercontinental Exchange, Inc. | 286,388 | ||||||
3,504 | Invesco Ltd. | 106,311 | ||||||
2,680 | Leucadia National Corp. | 62,310 | ||||||
1,449 | Moody’s Corp. | 136,597 | ||||||
12,315 | Morgan Stanley | 520,309 | ||||||
993 | Nasdaq, Inc. | 66,650 | ||||||
2,568 | Navient Corp. | 42,192 | ||||||
1,809 | Northern Trust Corp. | 161,092 | ||||||
2,196 | S&P Global, Inc. | 236,158 | ||||||
3,120 | State Street Corp. | 242,486 | ||||||
6,620 | Synchrony Financial | 240,107 | ||||||
2,126 | T. Rowe Price Group, Inc. | 160,003 | ||||||
|
| |||||||
8,722,482 | ||||||||
|
| |||||||
| Energy – 7.5% |
| ||||||
4,654 | Anadarko Petroleum Corp. | 324,523 | ||||||
3,284 | Apache Corp. | 208,436 | ||||||
3,568 | Baker Hughes, Inc. | 231,813 | ||||||
3,946 | Cabot Oil & Gas Corp. | 92,179 | ||||||
5,166 | Chesapeake Energy Corp.* | 36,265 | ||||||
16,080 | Chevron Corp. | 1,892,616 | ||||||
812 | Cimarex Energy Co. | 110,351 | ||||||
1,139 | Concho Resources, Inc.* | 151,031 | ||||||
10,519 | ConocoPhillips | 527,423 | ||||||
4,511 | Devon Energy Corp. | 206,017 | ||||||
4,954 | EOG Resources, Inc. | 500,849 | ||||||
1,437 | EQT Corp. | 93,980 | ||||||
35,341 | Exxon Mobil Corp. | 3,189,879 | ||||||
2,016 | FMC Technologies, Inc.* | 71,629 | ||||||
|
| |||||||
Common Stocks – (continued) | ||||||||
| Energy – (continued) |
| ||||||
7,402 | Halliburton Co. | $ | 400,374 | |||||
897 | Helmerich & Payne, Inc. | 69,428 | ||||||
2,310 | Hess Corp. | 143,890 | ||||||
16,506 | Kinder Morgan, Inc. | 341,839 | ||||||
7,228 | Marathon Oil Corp. | 125,117 | ||||||
4,453 | Marathon Petroleum Corp. | 224,209 | ||||||
1,464 | Murphy Oil Corp. | 45,574 | ||||||
3,237 | National Oilwell Varco, Inc. | 121,193 | ||||||
1,766 | Newfield Exploration Co.* | 71,523 | ||||||
3,593 | Noble Energy, Inc. | 136,750 | ||||||
6,571 | Occidental Petroleum Corp. | 468,052 | ||||||
1,828 | ONEOK, Inc. | 104,945 | ||||||
3,762 | Phillips 66 | 325,074 | ||||||
1,426 | Pioneer Natural Resources Co. | 256,780 | ||||||
1,521 | Range Resources Corp. | 52,262 | ||||||
11,892 | Schlumberger Ltd. | 998,333 | ||||||
3,328 | Southwestern Energy Co.* | 36,009 | ||||||
5,940 | Spectra Energy Corp. | 244,075 | ||||||
973 | Tesoro Corp. | 85,089 | ||||||
3,110 | Transocean Ltd.*(a) | 45,841 | ||||||
3,839 | Valero Energy Corp. | 262,280 | ||||||
5,830 | Williams Cos., Inc. (The) | 181,546 | ||||||
|
| |||||||
12,377,174 | ||||||||
|
| |||||||
| Food & Staples Retailing – 2.1% |
| ||||||
3,748 | Costco Wholesale Corp. | 600,092 | ||||||
9,131 | CVS Health Corp. | 720,527 | ||||||
8,113 | Kroger Co. (The) | 279,980 | ||||||
4,264 | Sysco Corp. | 236,098 | ||||||
7,270 | Walgreens Boots Alliance, Inc. | 601,665 | ||||||
12,885 | Wal-Mart Stores, Inc. | 890,611 | ||||||
2,675 | Whole Foods Market, Inc. | 82,283 | ||||||
|
| |||||||
3,411,256 | ||||||||
|
| |||||||
| Food, Beverage & Tobacco – 5.3% |
| ||||||
16,598 | Altria Group, Inc. | 1,122,357 | ||||||
4,853 | Archer-Daniels-Midland Co. | 221,540 | ||||||
1,536 | Brown-Forman Corp. Class B | 68,997 | ||||||
1,622 | Campbell Soup Co. | 98,082 | ||||||
33,048 | Coca-Cola Co. (The) | 1,370,170 | ||||||
3,575 | Conagra Brands, Inc. | 141,391 | ||||||
1,541 | Constellation Brands, Inc. Class A | 236,251 | ||||||
1,545 | Dr. Pepper Snapple Group, Inc. | 140,085 | ||||||
5,090 | General Mills, Inc. | 314,409 | ||||||
1,166 | Hershey Co. (The) | 120,599 | ||||||
2,352 | Hormel Foods Corp. | 81,873 | ||||||
989 | J.M. Smucker Co. (The) | 126,651 | ||||||
2,186 | Kellogg Co. | 161,130 | ||||||
5,078 | Kraft Heinz Co. (The) | 443,411 | ||||||
979 | McCormick & Co., Inc. | 91,370 | ||||||
1,622 | Mead Johnson Nutrition Co. | 114,773 | ||||||
1,484 | Molson Coors Brewing Co. Class B | 144,408 | ||||||
13,195 | Mondelez International, Inc. Class A | 584,934 | ||||||
3,480 | Monster Beverage Corp.* | 154,303 | ||||||
12,255 | PepsiCo, Inc. | 1,282,241 | ||||||
13,255 | Philip Morris International, Inc. | 1,212,700 | ||||||
|
|
42 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST EQUITY INDEX FUND
Shares | Description | Value | ||||||
Common Stocks – (continued) | ||||||||
| Food, Beverage & Tobacco – (continued) |
| ||||||
7,035 | Reynolds American, Inc. | $ | 394,242 | |||||
2,508 | Tyson Foods, Inc. Class A | 154,694 | ||||||
|
| |||||||
8,780,611 | ||||||||
|
| |||||||
| Health Care Equipment & Services – 5.1% |
| ||||||
12,537 | Abbott Laboratories | 481,546 | ||||||
3,007 | Aetna, Inc. | 372,898 | ||||||
1,412 | AmerisourceBergen Corp. | 110,404 | ||||||
2,245 | Anthem, Inc. | 322,764 | ||||||
4,140 | Baxter International, Inc. | 183,568 | ||||||
1,810 | Becton Dickinson and Co. | 299,645 | ||||||
11,674 | Boston Scientific Corp.* | 252,509 | ||||||
643 | C. R. Bard, Inc. | 144,456 | ||||||
2,744 | Cardinal Health, Inc. | 197,486 | ||||||
1,473 | Centene Corp.* | 83,239 | ||||||
2,604 | Cerner Corp.* | 123,351 | ||||||
2,187 | Cigna Corp. | 291,724 | ||||||
426 | Cooper Cos., Inc. (The) | 74,520 | ||||||
5,186 | Danaher Corp. | 403,678 | ||||||
1,313 | DaVita, Inc.* | 84,295 | ||||||
2,021 | DENTSPLY SIRONA, Inc. | 116,672 | ||||||
1,862 | Edwards Lifesciences Corp.* | 174,469 | ||||||
1,009 | Envision Healthcare Corp.* | 63,860 | ||||||
5,254 | Express Scripts Holding Co.* | 361,423 | ||||||
2,538 | HCA Holdings, Inc.* | 187,863 | ||||||
692 | Henry Schein, Inc.* | 104,983 | ||||||
2,080 | Hologic, Inc.* | 83,450 | ||||||
1,266 | Humana, Inc. | 258,302 | ||||||
335 | Intuitive Surgical, Inc.* | 212,447 | ||||||
885 | Laboratory Corp. of America Holdings* | 113,616 | ||||||
1,917 | McKesson Corp. | 269,243 | ||||||
11,720 | Medtronic plc | 834,816 | ||||||
779 | Patterson Cos., Inc. | 31,962 | ||||||
1,213 | Quest Diagnostics, Inc. | 111,475 | ||||||
2,445 | St. Jude Medical, Inc. | 196,064 | ||||||
2,670 | Stryker Corp. | 319,893 | ||||||
8,103 | UnitedHealth Group, Inc. | 1,296,804 | ||||||
779 | Universal Health Services, Inc. Class B | 82,870 | ||||||
769 | Varian Medical Systems, Inc.* | 69,041 | ||||||
1,684 | Zimmer Biomet Holdings, Inc. | 173,789 | ||||||
|
| |||||||
8,489,125 | ||||||||
|
| |||||||
| Household & Personal Products – 1.9% |
| ||||||
2,157 | Church & Dwight Co., Inc. | 95,318 | ||||||
1,082 | Clorox Co. (The) | 129,862 | ||||||
7,605 | Colgate-Palmolive Co. | 497,671 | ||||||
4,108 | Coty, Inc. Class A | 75,217 | ||||||
1,899 | Estee Lauder Cos., Inc. (The) Class A | 145,255 | ||||||
3,045 | Kimberly-Clark Corp. | 347,495 | ||||||
22,848 | Procter & Gamble Co. (The) | 1,921,060 | ||||||
|
| |||||||
3,211,878 | ||||||||
|
| |||||||
| Insurance – 2.8% |
| ||||||
3,531 | Aflac, Inc. | 245,758 | ||||||
3,171 | Allstate Corp. (The) | 235,035 | ||||||
|
| |||||||
Common Stocks – (continued) | ||||||||
| Insurance – (continued) |
| ||||||
8,347 | American International Group, Inc. | $ | 545,143 | |||||
2,277 | Aon plc | 253,954 | ||||||
1,588 | Arthur J. Gallagher & Co. | 82,512 | ||||||
463 | Assurant, Inc. | 42,994 | ||||||
3,950 | Chubb Ltd. | 521,874 | ||||||
1,311 | Cincinnati Financial Corp. | 99,308 | ||||||
3,284 | Hartford Financial Services Group, Inc. (The) | 156,483 | ||||||
1,987 | Lincoln National Corp. | 131,679 | ||||||
2,394 | Loews Corp. | 112,111 | ||||||
4,444 | Marsh & McLennan Cos., Inc. | 300,370 | ||||||
9,400 | MetLife, Inc. | 506,566 | ||||||
2,298 | Principal Financial Group, Inc. | 132,962 | ||||||
4,880 | Progressive Corp. (The) | 173,240 | ||||||
3,666 | Prudential Financial, Inc. | 381,484 | ||||||
990 | Torchmark Corp. | 73,022 | ||||||
2,412 | Travelers Cos., Inc. (The) | 295,277 | ||||||
1,923 | Unum Group | 84,477 | ||||||
1,111 | Willis Towers Watson plc | 135,853 | ||||||
2,289 | XL Group Ltd. | 85,288 | ||||||
|
| |||||||
4,595,390 | ||||||||
|
| |||||||
| Materials – 2.8% |
| ||||||
1,847 | Air Products & Chemicals, Inc. | 265,636 | ||||||
1,002 | Albemarle Corp. | 86,252 | ||||||
753 | Avery Dennison Corp. | 52,876 | ||||||
1,527 | Ball Corp. | 114,632 | ||||||
2,053 | CF Industries Holdings, Inc. | 64,628 | ||||||
9,616 | Dow Chemical Co. (The) | 550,227 | ||||||
7,410 | E.I. du Pont de Nemours & Co. | 543,894 | ||||||
1,292 | Eastman Chemical Co. | 97,171 | ||||||
2,253 | Ecolab, Inc. | 264,097 | ||||||
1,149 | FMC Corp. | 64,987 | ||||||
10,104 | Freeport-McMoRan, Inc.* | 133,272 | ||||||
707 | International Flavors & Fragrances, Inc. | 83,306 | ||||||
3,509 | International Paper Co. | 186,188 | ||||||
2,832 | LyondellBasell Industries NV Class A | 242,929 | ||||||
536 | Martin Marietta Materials, Inc. | 118,740 | ||||||
3,764 | Monsanto Co. | 396,010 | ||||||
3,030 | Mosaic Co. (The) | 88,870 | ||||||
4,620 | Newmont Mining Corp. | 157,403 | ||||||
2,758 | Nucor Corp. | 164,156 | ||||||
2,268 | PPG Industries, Inc. | 214,916 | ||||||
2,461 | Praxair, Inc. | 288,405 | ||||||
1,601 | Sealed Air Corp. | 72,589 | ||||||
688 | Sherwin-Williams Co. (The) | 184,893 | ||||||
1,124 | Vulcan Materials Co. | 140,669 | ||||||
2,179 | WestRock Co. | 110,628 | ||||||
|
| |||||||
4,687,374 | ||||||||
|
| |||||||
| Media – 3.0% |
| ||||||
3,324 | CBS Corp. (Non-Voting) Class B | 211,473 | ||||||
1,854 | Charter Communications, Inc. Class A* | 533,804 | ||||||
20,294 | Comcast Corp. Class A | 1,401,301 | ||||||
|
|
The accompanying notes are an integral part of these financial statements. | 43 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST EQUITY INDEX FUND
Schedule of Investments (continued)
December 31, 2016
Shares | Description | Value | ||||||
Common Stocks – (continued) | ||||||||
| Media – (continued) |
| ||||||
1,393 | Discovery Communications, Inc. Class A* | $ | 38,182 | |||||
1,900 | Discovery Communications, Inc. Class C* | 50,882 | ||||||
3,281 | Interpublic Group of Cos., Inc. (The) | 76,808 | ||||||
3,213 | News Corp. Class A | 36,821 | ||||||
1,017 | News Corp. Class B | 12,000 | ||||||
2,024 | Omnicom Group, Inc. | 172,262 | ||||||
820 | Scripps Networks Interactive, Inc. Class A | 58,523 | ||||||
1,766 | TEGNA, Inc. | 37,775 | ||||||
6,576 | Time Warner, Inc. | 634,781 | ||||||
9,167 | Twenty-First Century Fox, Inc. Class A | 257,043 | ||||||
3,835 | Twenty-First Century Fox, Inc. Class B | 104,504 | ||||||
2,957 | Viacom, Inc. Class B | 103,791 | ||||||
12,464 | Walt Disney Co. (The) | 1,298,998 | ||||||
|
| |||||||
5,028,948 | ||||||||
|
| |||||||
| Pharmaceuticals, Biotechnology & Life Sciences – 8.4% |
| ||||||
13,919 | AbbVie, Inc. | 871,608 | ||||||
2,741 | Agilent Technologies, Inc. | 124,880 | ||||||
1,932 | Alexion Pharmaceuticals, Inc.* | 236,380 | ||||||
3,202 | Allergan plc* | 672,452 | ||||||
6,366 | Amgen, Inc. | 930,773 | ||||||
1,847 | Biogen, Inc.* | 523,772 | ||||||
14,212 | Bristol-Myers Squibb Co. | 830,549 | ||||||
6,591 | Celgene Corp.* | 762,908 | ||||||
8,328 | Eli Lilly & Co. | 612,524 | ||||||
1,642 | Endo International plc* | 27,044 | ||||||
11,203 | Gilead Sciences, Inc. | 802,247 | ||||||
1,234 | Illumina, Inc.* | 158,001 | ||||||
23,183 | Johnson & Johnson | 2,670,914 | ||||||
972 | Mallinckrodt plc* | 48,425 | ||||||
23,475 | Merck & Co., Inc. | 1,381,973 | ||||||
218 | Mettler-Toledo International, Inc.* | 91,246 | ||||||
3,693 | Mylan NV* | 140,888 | ||||||
950 | PerkinElmer, Inc. | 49,543 | ||||||
1,253 | Perrigo Co. plc | 104,287 | ||||||
51,683 | Pfizer, Inc. | 1,678,664 | ||||||
652 | Regeneron Pharmaceuticals, Inc.* | 239,343 | ||||||
3,362 | Thermo Fisher Scientific, Inc. | 474,378 | ||||||
2,159 | Vertex Pharmaceuticals, Inc.* | 159,054 | ||||||
682 | Waters Corp.* | 91,654 | ||||||
4,195 | Zoetis, Inc. | 224,558 | ||||||
|
| |||||||
13,908,065 | ||||||||
|
| |||||||
| Real Estate – 2.8% |
| ||||||
3,607 | American Tower Corp. (REIT) | 381,188 | ||||||
1,402 | Apartment Investment & Management Co. Class A (REIT) | 63,721 | ||||||
1,157 | AvalonBay Communities, Inc. (REIT) | 204,963 | ||||||
1,334 | Boston Properties, Inc. (REIT) | 167,791 | ||||||
2,492 | CBRE Group, Inc. Class A* | 78,473 | ||||||
2,933 | Crown Castle International Corp. (REIT) | 254,496 | ||||||
|
| |||||||
Common Stocks – (continued) | ||||||||
| Real Estate – (continued) |
| ||||||
1,246 | Digital Realty Trust, Inc. (REIT) | $ | 122,432 | |||||
598 | Equinix, Inc. (REIT) | 213,731 | ||||||
3,101 | Equity Residential (REIT) | 199,580 | ||||||
564 | Essex Property Trust, Inc. (REIT) | 131,130 | ||||||
1,082 | Extra Space Storage, Inc. (REIT) | 83,574 | ||||||
607 | Federal Realty Investment Trust (REIT) | 86,261 | ||||||
5,062 | General Growth Properties, Inc. (REIT) | 126,449 | ||||||
4,116 | HCP, Inc. (REIT) | 122,328 | ||||||
6,177 | Host Hotels & Resorts, Inc. (REIT) | 116,375 | ||||||
2,140 | Iron Mountain, Inc. (REIT) | 69,507 | ||||||
3,688 | Kimco Realty Corp. (REIT) | 92,790 | ||||||
1,019 | Macerich Co. (The) (REIT) | 72,186 | ||||||
977 | Mid-America Apartment Communities, Inc. (REIT) | 95,668 | ||||||
4,570 | Prologis, Inc. (REIT) | 241,250 | ||||||
1,261 | Public Storage (REIT) | 281,833 | ||||||
2,269 | Realty Income Corp. (REIT) | 130,422 | ||||||
2,666 | Simon Property Group, Inc. (REIT) | 473,668 | ||||||
888 | SL Green Realty Corp. (REIT) | 95,504 | ||||||
2,261 | UDR, Inc. (REIT) | 82,481 | ||||||
2,988 | Ventas, Inc. (REIT) | 186,810 | ||||||
1,474 | Vornado Realty Trust (REIT) | 153,841 | ||||||
3,076 | Welltower, Inc. (REIT) | 205,877 | ||||||
6,426 | Weyerhaeuser Co. (REIT) | 193,358 | ||||||
|
| |||||||
4,727,687 | ||||||||
|
| |||||||
| Retailing – 5.4% |
| ||||||
645 | Advance Auto Parts, Inc. | 109,082 | ||||||
3,361 | Amazon.com, Inc.* | 2,520,313 | ||||||
589 | AutoNation, Inc.* | 28,655 | ||||||
251 | AutoZone, Inc.* | 198,237 | ||||||
1,318 | Bed Bath & Beyond, Inc. | 53,564 | ||||||
2,353 | Best Buy Co., Inc. | 100,402 | ||||||
1,672 | CarMax, Inc.* | 107,660 | ||||||
2,148 | Dollar General Corp. | 159,102 | ||||||
2,006 | Dollar Tree, Inc.* | 154,823 | ||||||
1,014 | Expedia, Inc. | 114,866 | ||||||
1,154 | Foot Locker, Inc. | 81,807 | ||||||
1,834 | Gap, Inc. (The) | 41,155 | ||||||
1,265 | Genuine Parts Co. | 120,858 | ||||||
10,372 | Home Depot, Inc. (The) | 1,390,678 | ||||||
1,563 | Kohl’s Corp. | 77,181 | ||||||
2,060 | L Brands, Inc. | 135,630 | ||||||
2,564 | LKQ Corp.* | 78,587 | ||||||
7,465 | Lowe’s Cos., Inc. | 530,911 | ||||||
2,645 | Macy’s, Inc. | 94,717 | ||||||
3,655 | Netflix, Inc.* | 452,489 | ||||||
973 | Nordstrom, Inc. (a) | 46,636 | ||||||
817 | O’Reilly Automotive, Inc.* | 227,461 | ||||||
421 | Priceline Group, Inc. (The)* | 617,211 | ||||||
3,416 | Ross Stores, Inc. | 224,090 | ||||||
569 | Signet Jewelers Ltd. | 53,634 | ||||||
5,583 | Staples, Inc. | 50,526 | ||||||
4,787 | Target Corp. | 345,765 | ||||||
|
|
44 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST EQUITY INDEX FUND
Shares | Description | Value | ||||||
Common Stocks – (continued) | ||||||||
| Retailing – (continued) |
| ||||||
928 | Tiffany & Co. | $ | 71,855 | |||||
5,597 | TJX Cos., Inc. (The) | 420,503 | ||||||
1,091 | Tractor Supply Co. | 82,709 | ||||||
984 | TripAdvisor, Inc.* | 45,628 | ||||||
501 | Ulta Salon, Cosmetics & Fragrance, Inc.* | 127,725 | ||||||
679 | Urban Outfitters, Inc.* | 19,338 | ||||||
|
| |||||||
8,883,798 | ||||||||
|
| |||||||
| Semiconductors & Semiconductor Equipment – 3.3% |
| ||||||
2,615 | Analog Devices, Inc. | 189,901 | ||||||
9,264 | Applied Materials, Inc. | 298,949 | ||||||
3,384 | Broadcom Ltd. | 598,190 | ||||||
668 | First Solar, Inc.*(a) | 21,436 | ||||||
40,353 | Intel Corp. | 1,463,603 | ||||||
1,340 | KLA-Tencor Corp. | 105,431 | ||||||
1,359 | Lam Research Corp. | 143,687 | ||||||
2,061 | Linear Technology Corp. | 128,503 | ||||||
1,811 | Microchip Technology, Inc. | 116,176 | ||||||
8,980 | Micron Technology, Inc.* | 196,842 | ||||||
4,467 | NVIDIA Corp. | 476,807 | ||||||
1,119 | Qorvo, Inc.* | 59,005 | ||||||
12,653 | QUALCOMM, Inc. | 824,976 | ||||||
1,607 | Skyworks Solutions, Inc. | 119,979 | ||||||
8,492 | Texas Instruments, Inc. | 619,661 | ||||||
2,200 | Xilinx, Inc. | 132,814 | ||||||
|
| |||||||
5,495,960 | ||||||||
|
| |||||||
| Software & Services – 12.2% |
| ||||||
5,290 | Accenture plc Class A | 619,618 | ||||||
5,781 | Activision Blizzard, Inc. | 208,752 | ||||||
4,267 | Adobe Systems, Inc.* | 439,288 | ||||||
1,476 | Akamai Technologies, Inc.* | 98,420 | ||||||
502 | Alliance Data Systems Corp. | 114,707 | ||||||
2,522 | Alphabet, Inc. Class A* | 1,998,559 | ||||||
2,530 | Alphabet, Inc. Class C* | 1,952,705 | ||||||
1,667 | Autodesk, Inc.* | 123,375 | ||||||
3,846 | Automatic Data Processing, Inc. | 395,292 | ||||||
2,659 | CA, Inc. | 84,476 | ||||||
1,342 | Citrix Systems, Inc.* | 119,854 | ||||||
5,183 | Cognizant Technology Solutions Corp. Class A* | 290,404 | ||||||
1,321 | CSRA, Inc. | 42,061 | ||||||
8,915 | eBay, Inc.* | 264,686 | ||||||
2,590 | Electronic Arts, Inc.* | 203,988 | ||||||
19,945 | Facebook, Inc. Class A* | 2,294,672 | ||||||
2,785 | Fidelity National Information Services, Inc. | 210,657 | ||||||
1,828 | Fiserv, Inc.* | 194,280 | ||||||
1,352 | Global Payments, Inc. | 93,842 | ||||||
7,365 | International Business Machines Corp. | 1,222,516 | ||||||
2,113 | Intuit, Inc. | 242,171 | ||||||
8,125 | MasterCard, Inc. Class A | 838,906 | ||||||
66,279 | Microsoft Corp. | 4,118,577 | ||||||
25,499 | Oracle Corp. | 980,437 | ||||||
2,773 | Paychex, Inc. | 168,820 | ||||||
|
| |||||||
Common Stocks – (continued) | ||||||||
| Software & Services – (continued) |
| ||||||
9,541 | PayPal Holdings, Inc.* | $ | 376,583 | |||||
1,536 | Red Hat, Inc.* | 107,059 | ||||||
5,409 | salesforce.com, Inc.* | 370,300 | ||||||
5,175 | Symantec Corp. | 123,631 | ||||||
1,169 | Teradata Corp.* | 31,762 | ||||||
1,482 | Total System Services, Inc. | 72,662 | ||||||
774 | VeriSign, Inc.* | 58,878 | ||||||
15,898 | Visa, Inc. Class A | 1,240,362 | ||||||
4,226 | Western Union Co. (The) | 91,789 | ||||||
7,163 | Xerox Corp. | 62,533 | ||||||
7,552 | Yahoo!, Inc.* | 292,036 | ||||||
|
| |||||||
20,148,658 | ||||||||
|
| |||||||
| Technology Hardware & Equipment – 5.1% |
| ||||||
2,678 | Amphenol Corp. Class A | 179,962 | ||||||
45,460 | Apple, Inc. | 5,265,177 | ||||||
42,895 | Cisco Systems, Inc. | 1,296,287 | ||||||
8,120 | Corning, Inc. | 197,072 | ||||||
573 | F5 Networks, Inc.* | 82,925 | ||||||
1,120 | FLIR Systems, Inc. | 40,533 | ||||||
1,069 | Harris Corp. | 109,540 | ||||||
14,204 | Hewlett Packard Enterprise Co. | 328,681 | ||||||
14,639 | HP, Inc. | 217,243 | ||||||
3,102 | Juniper Networks, Inc. | 87,662 | ||||||
1,362 | Motorola Solutions, Inc. | 112,896 | ||||||
2,321 | NetApp, Inc. | 81,862 | ||||||
2,513 | Seagate Technology plc | 95,921 | ||||||
3,059 | TE Connectivity Ltd. | 211,927 | ||||||
2,403 | Western Digital Corp. | 163,284 | ||||||
|
| |||||||
8,470,972 | ||||||||
|
| |||||||
| Telecommunication Services – 2.6% |
| ||||||
52,320 | AT&T, Inc. | 2,225,170 | ||||||
4,711 | CenturyLink, Inc. | 112,028 | ||||||
10,443 | Frontier Communications Corp. | 35,297 | ||||||
2,443 | Level 3 Communications, Inc.* | 137,687 | ||||||
34,725 | Verizon Communications, Inc. | 1,853,621 | ||||||
|
| |||||||
4,363,803 | ||||||||
|
| |||||||
| Transportation – 2.3% |
| ||||||
1,032 | Alaska Air Group, Inc. | 91,569 | ||||||
4,394 | American Airlines Group, Inc. | 205,156 | ||||||
1,254 | C.H. Robinson Worldwide, Inc. | 91,868 | ||||||
7,951 | CSX Corp. | 285,680 | ||||||
6,269 | Delta Air Lines, Inc. | 308,372 | ||||||
1,520 | Expeditors International of Washington, Inc. | 80,499 | ||||||
2,081 | FedEx Corp. | 387,482 | ||||||
731 | J.B. Hunt Transport Services, Inc. | 70,958 | ||||||
960 | Kansas City Southern | 81,456 | ||||||
2,476 | Norfolk Southern Corp. | 267,581 | ||||||
433 | Ryder System, Inc. | 32,233 | ||||||
5,201 | Southwest Airlines Co. | 259,218 | ||||||
7,047 | Union Pacific Corp. | 730,633 | ||||||
2,481 | United Continental Holdings, Inc.* | 180,815 | ||||||
5,858 | United Parcel Service, Inc. Class B | 671,561 | ||||||
|
| |||||||
3,745,081 | ||||||||
|
|
The accompanying notes are an integral part of these financial statements. | 45 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST EQUITY INDEX FUND
Schedule of Investments (continued)
December 31, 2016
Shares | Description | Value | ||||||
Common Stocks – (continued) | ||||||||
| Utilities – 3.2% |
| ||||||
5,945 | AES Corp. | $ | 69,081 | |||||
2,026 | Alliant Energy Corp. | 76,765 | ||||||
2,123 | Ameren Corp. | 111,373 | ||||||
4,241 | American Electric Power Co., Inc. | 267,013 | ||||||
1,568 | American Water Works Co., Inc. | 113,460 | ||||||
3,794 | CenterPoint Energy, Inc. | 93,484 | ||||||
2,425 | CMS Energy Corp. | 100,929 | ||||||
2,647 | Consolidated Edison, Inc. | 195,031 | ||||||
5,311 | Dominion Resources, Inc. | 406,770 | ||||||
1,553 | DTE Energy Co. | 152,986 | ||||||
5,844 | Duke Energy Corp. | 453,611 | ||||||
2,757 | Edison International | 198,476 | ||||||
1,549 | Entergy Corp. | 113,805 | ||||||
2,678 | Eversource Energy | 147,906 | ||||||
7,837 | Exelon Corp. | 278,135 | ||||||
3,625 | FirstEnergy Corp. | 112,266 | ||||||
3,965 | NextEra Energy, Inc. | 473,659 | ||||||
2,848 | NiSource, Inc. | 63,055 | ||||||
2,677 | NRG Energy, Inc. | 32,820 | ||||||
4,231 | PG&E Corp. | 257,118 | ||||||
939 | Pinnacle West Capital Corp. | 73,270 | ||||||
5,823 | PPL Corp. | 198,273 | ||||||
4,258 | Public Service Enterprise Group, Inc. | 186,841 | ||||||
1,246 | SCANA Corp. | 91,307 | ||||||
2,060 | Sempra Energy | 207,318 | ||||||
8,424 | Southern Co. (The) | 414,377 | ||||||
2,751 | WEC Energy Group, Inc. | 161,346 | ||||||
4,411 | Xcel Energy, Inc. | 179,528 | ||||||
|
| |||||||
5,230,003 | ||||||||
|
| |||||||
TOTAL COMMON STOCKS | ||||||||
(Cost $73,526,696) | $ | 164,344,081 | ||||||
|
|
Principal Amount | Interest Rate | Maturity Date | Value | |||||||||||
Short-Term Investment – 0.0%(c)(d) | ||||||||||||||
| U.S. Government Obligation – 0.0% |
| ||||||||||||
| U.S. Treasury Bill |
| ||||||||||||
$ | 100,000 | 0.000 | % | 03/02/17 | $ | 99,922 | ||||||||
(Cost $99,930) | ||||||||||||||
|
| |||||||||||||
| TOTAL INVESTMENTS BEFORE SECURITIES LENDING REINVESTMENT VEHICLE | | ||||||||||||
(Cost $73,626,626) | $ | 164,444,003 | ||||||||||||
|
| |||||||||||||
Shares | Distribution Rate | Value | ||||||||||||
Securities Lending Reinvestment Vehicle(b)(e) – 0.1% | ||||||||||||||
| Goldman Sachs Financial Square Government Fund — | | ||||||||||||
153,725 | 0.455 | % | $ | 153,725 | ||||||||||
(Cost $153,725) | ||||||||||||||
|
| |||||||||||||
TOTAL INVESTMENTS – 99.4% | ||||||||||||||
(Cost $73,780,351) | $ | 164,597,728 | ||||||||||||
|
| |||||||||||||
| OTHER ASSETS IN EXCESS OF | | 953,128 | |||||||||||
|
| |||||||||||||
NET ASSETS – 100.0% | $ | 165,550,856 | ||||||||||||
|
|
The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. | ||
* | Non-income producing security. | |
(a) | All or a portion of security is on loan. | |
(b) | Represents an affiliated issuer. | |
(c) | Issued with a zero coupon. Income is recognized through the accretion of discount. | |
(d) | All or a portion of security is segregated as collateral for initial margin requirements on futures transactions. | |
(e) | Variable rate security. Interest rate or distribution rate disclosed is that which is in effect on December 31, 2016. |
Investment Abbreviation: | ||
REIT | —Real Estate Investment Trust |
46 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST EQUITY INDEX FUND
ADDITIONAL INVESTMENT INFORMATION
FUTURES CONTRACTS — At December 31, 2016, the Fund had the following futures contracts:
Type | Number of Contracts Long (Short) | Expiration Date | Current Value | Unrealized Gain (Loss) | ||||||||||
S&P 500 E-Mini Index | 10 | March 2017 | $ | 1,118,100 | $ | (7,123 | ) |
The accompanying notes are an integral part of these financial statements. | 47 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST GROWTH OPPORTUNITIES FUND
Schedule of Investments
December 31, 2016
Shares | Description | Value | ||||||
Common Stocks – 96.0% | ||||||||
| Banks – 3.7% |
| ||||||
41,635 | Eagle Bancorp, Inc.* | $ | 2,537,653 | |||||
36,006 | First Republic Bank | 3,317,593 | ||||||
|
| |||||||
5,855,246 | ||||||||
|
| |||||||
| Capital Goods – 15.5% |
| ||||||
45,432 | Fortive Corp. | 2,436,518 | ||||||
36,473 | Fortune Brands Home & Security, Inc. | 1,949,847 | ||||||
15,598 | Hubbell, Inc. | 1,820,287 | ||||||
12,547 | IDEX Corp. | 1,129,983 | ||||||
14,047 | John Bean Technologies Corp. | 1,207,340 | ||||||
10,229 | L-3 Communications Holdings, Inc. | 1,555,933 | ||||||
30,446 | Middleby Corp. (The)* | 3,921,749 | ||||||
24,842 | Roper Technologies, Inc. | 4,548,073 | ||||||
53,469 | Sensata Technologies Holding NV* | 2,082,618 | ||||||
81,049 | Xylem, Inc. | 4,013,546 | ||||||
|
| |||||||
24,665,894 | ||||||||
|
| |||||||
| Consumer Durables & Apparel – 3.3% |
| ||||||
52,116 | Kate Spade & Co.* | 973,006 | ||||||
56,121 | Newell Brands, Inc. | 2,505,802 | ||||||
8,887 | PVH Corp. | 801,963 | ||||||
40,271 | Under Armour, Inc. Class C* | 1,013,621 | ||||||
|
| |||||||
5,294,392 | ||||||||
|
| |||||||
| Consumer Services – 4.1% |
| ||||||
6,620 | Chipotle Mexican Grill, Inc.*(a) | 2,497,858 | ||||||
19,900 | Panera Bread Co. Class A* | 4,081,291 | ||||||
|
| |||||||
6,579,149 | ||||||||
|
| |||||||
| Diversified Financials – 6.7% |
| ||||||
16,463 | Affiliated Managers Group, Inc.* | 2,392,074 | ||||||
60,275 | Intercontinental Exchange, Inc. | 3,400,715 | ||||||
40,734 | Lazard Ltd. Class A | 1,673,760 | ||||||
36,894 | Northern Trust Corp. | 3,285,411 | ||||||
|
| |||||||
10,751,960 | ||||||||
|
| |||||||
| Energy – 1.5% |
| ||||||
13,070 | Concho Resources, Inc.* | 1,733,082 | ||||||
10,440 | Dril-Quip, Inc.* | 626,922 | ||||||
|
| |||||||
2,360,004 | ||||||||
|
| |||||||
| Food & Staples Retailing – 0.8% |
| ||||||
39,366 | Whole Foods Market, Inc. | 1,210,898 | ||||||
|
| |||||||
| Food, Beverage & Tobacco – 6.2% |
| ||||||
101,489 | Blue Buffalo Pet Products, Inc.* | 2,439,796 | ||||||
52,770 | Brown-Forman Corp. Class B | 2,370,428 | ||||||
16,936 | Molson Coors Brewing Co. Class B | 1,648,042 | ||||||
42,277 | Monster Beverage Corp.* | 1,874,562 | ||||||
21,208 | TreeHouse Foods, Inc.* | 1,531,006 | ||||||
|
| |||||||
9,863,834 | ||||||||
|
| |||||||
| Health Care Equipment & Services – 4.9% |
| ||||||
11,759 | C. R. Bard, Inc. | 2,641,777 | ||||||
32,605 | Edwards Lifesciences Corp.* | 3,055,089 | ||||||
11,853 | Nevro Corp.* | 861,239 | ||||||
|
| |||||||
Common Stocks – (continued) | ||||||||
| Health Care Equipment & Services – (continued) |
| ||||||
17,756 | VCA, Inc.* | $ | 1,218,949 | |||||
|
| |||||||
7,777,054 | ||||||||
|
| |||||||
| Materials – 5.6% |
| ||||||
23,986 | Ashland Global Holdings, Inc. | 2,621,430 | ||||||
26,660 | Avery Dennison Corp. | 1,872,065 | ||||||
57,492 | RPM International, Inc. | 3,094,795 | ||||||
2,992 | Sherwin-Williams Co. (The) | 804,070 | ||||||
25,636 | Valvoline, Inc.(a) | 551,174 | ||||||
|
| |||||||
8,943,534 | ||||||||
|
| |||||||
| Media – 1.0% |
| ||||||
22,897 | Scripps Networks Interactive, Inc. Class A | 1,634,159 | ||||||
|
| |||||||
| Pharmaceuticals, Biotechnology & Life Sciences – 8.8% |
| ||||||
11,774 | Acadia Pharmaceuticals, Inc.* | 339,562 | ||||||
51,510 | Agilent Technologies, Inc. | 2,346,796 | ||||||
28,089 | Alkermes plc* | 1,561,187 | ||||||
37,407 | Exelixis, Inc.* | 557,738 | ||||||
5,880 | Illumina, Inc.* | 752,875 | ||||||
17,802 | Incyte Corp.* | 1,785,007 | ||||||
7,405 | Mettler-Toledo International, Inc.* | 3,099,437 | ||||||
8,935 | Vertex Pharmaceuticals, Inc.* | 658,241 | ||||||
55,482 | Zoetis, Inc. | 2,969,951 | ||||||
|
| |||||||
14,070,794 | ||||||||
|
| |||||||
| Real Estate Investment Trusts – 2.0% |
| ||||||
9,187 | Equinix, Inc. | 3,283,526 | ||||||
|
| |||||||
| Retailing – 9.6% |
| ||||||
15,479 | Advance Auto Parts, Inc. | 2,617,809 | ||||||
18,876 | Expedia, Inc. | 2,138,273 | ||||||
39,103 | Five Below, Inc.* | 1,562,556 | ||||||
6,080 | O’Reilly Automotive, Inc.* | 1,692,733 | ||||||
50,893 | Ross Stores, Inc. | 3,338,581 | ||||||
15,409 | Ulta Salon, Cosmetics & Fragrance, Inc.* | 3,928,370 | ||||||
|
| |||||||
15,278,322 | ||||||||
|
| |||||||
| Semiconductors & Semiconductor Equipment – 0.7% |
| ||||||
20,509 | Qorvo, Inc.* | 1,081,439 | ||||||
|
| |||||||
| Software & Services – 15.9% |
| ||||||
74,231 | Black Knight Financial Services, Inc. Class A* | 2,805,932 | ||||||
34,858 | Electronic Arts, Inc.* | 2,745,416 | ||||||
31,773 | Fidelity National Information Services, Inc. | 2,403,310 | ||||||
11,379 | Fiserv, Inc.* | 1,209,360 | ||||||
18,577 | FleetCor Technologies, Inc.* | 2,629,017 | ||||||
7,594 | Gartner, Inc.* | 767,526 | ||||||
29,085 | Global Payments, Inc. | 2,018,790 | ||||||
32,679 | Intuit, Inc. | 3,745,340 | ||||||
27,957 | Match Group, Inc.*(a) | 478,065 | ||||||
21,498 | Mobileye NV* | 819,504 | ||||||
27,551 | Red Hat, Inc.* | 1,920,305 | ||||||
16,715 | ServiceNow, Inc.* | 1,242,593 | ||||||
|
|
48 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST GROWTH OPPORTUNITIES FUND
Shares | Description | Value | ||||||
Common Stocks – (continued) | ||||||||
| Software & Services – (continued) |
| ||||||
19,450 | Splunk, Inc.* | $ | 994,867 | |||||
33,185 | Total System Services, Inc. | 1,627,060 | ||||||
|
| |||||||
25,407,085 | ||||||||
|
| |||||||
| Technology Hardware & Equipment – 3.1% |
| ||||||
72,813 | Amphenol Corp. Class A | 4,893,034 | ||||||
|
| |||||||
| Telecommunication Services – 2.6% |
| ||||||
36,999 | Level 3 Communications, Inc.* | 2,085,263 | ||||||
19,745 | SBA Communications Corp. Class A* | 2,038,869 | ||||||
|
| |||||||
4,124,132 | ||||||||
|
| |||||||
TOTAL COMMON STOCKS | ||||||||
(Cost $123,529,971) | $ | 153,074,456 | ||||||
|
|
Shares | Distribution Rate | Value | ||||||
Investment Company(b)(c) – 2.6% | ||||||||
Goldman Sachs Financial Square Government Fund — Institutional Shares |
| |||||||
4,209,790 | 0.455 | % | $ | 4,209,790 | ||||
(Cost $4,209,790) | ||||||||
| ||||||||
TOTAL INVESTMENTS BEFORE SECURITIES LENDING REINVESTMENT VEHICLE | ||||||||
(Cost $127,739,761) | $ | 157,284,246 | ||||||
| ||||||||
Securities Lending Reinvestment Vehicle(b)(c) – 2.1% | ||||||||
Goldman Sachs Financial Square Government Fund — Institutional Shares |
| |||||||
3,236,725 | 0.455 | % | $ | 3,236,725 | ||||
(Cost $3,236,725) | ||||||||
| ||||||||
TOTAL INVESTMENTS – 100.7% | ||||||||
(Cost $130,976,486) | $ | 160,520,971 | ||||||
| ||||||||
LIABILITIES IN EXCESS OF |
| (1,079,356 | ) | |||||
| ||||||||
NET ASSETS – 100.0% | $ | 159,441,615 | ||||||
|
The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. | ||
* | Non-income producing security. | |
(a) | All or a portion of security is on loan. | |
(b) | Variable rate security. Interest rate or distribution rate disclosed is that which is in effect on December 31, 2016. | |
(c) | Represents an affiliated issuer. |
The accompanying notes are an integral part of these financial statements. | 49 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST HIGH QUALITY FLOATING RATE FUND
Schedule of Investments
December 31, 2016
Principal Amount | Interest Rate | Maturity Date | Value | |||||||||||
Mortgage-Backed Securities – 10.7% | ||||||||||||||
| Adjustable Rate FHLMC(a) – 4.3% |
| ||||||||||||
$ | 265,102 | 2.902 | % | 05/01/35 | $ | 278,285 | ||||||||
118,339 | 2.821 | 09/01/35 | 124,861 | |||||||||||
269,256 | 3.292 | 12/01/36 | 284,758 | |||||||||||
888,110 | 3.305 | 04/01/37 | 946,936 | |||||||||||
668,652 | 2.809 | 01/01/38 | 707,747 | |||||||||||
577,763 | 2.965 | 01/01/38 | 609,320 | |||||||||||
|
| |||||||||||||
2,951,907 | ||||||||||||||
|
| |||||||||||||
| Adjustable Rate FNMA(a) – 3.2% |
| ||||||||||||
72,509 | 2.625 | 05/01/33 | 75,070 | |||||||||||
200,511 | 2.833 | 05/01/35 | 211,571 | |||||||||||
500,891 | 2.676 | 06/01/35 | 526,515 | |||||||||||
764,192 | 2.958 | 11/01/35 | 797,423 | |||||||||||
105,163 | 2.804 | 12/01/35 | 111,031 | |||||||||||
379,401 | 3.141 | 03/01/37 | 400,243 | |||||||||||
|
| |||||||||||||
2,121,853 | ||||||||||||||
|
| |||||||||||||
| Adjustable Rate GNMA(a) – 0.5% |
| ||||||||||||
344,459 | 2.125 | 04/20/33 | 354,564 | |||||||||||
|
| |||||||||||||
| Agency Multi-Family – 2.7% |
| ||||||||||||
| FNMA |
| ||||||||||||
176,190 | 2.800 | 03/01/18 | 177,684 | |||||||||||
457,995 | 3.740 | 05/01/18 | 467,749 | |||||||||||
110,000 | 3.840 | 05/01/18 | 112,057 | |||||||||||
400,000 | 4.506 | 06/01/19 | 405,871 | |||||||||||
80,027 | 3.416 | 10/01/20 | 83,488 | |||||||||||
83,428 | 3.619 | 12/01/20 | 88,008 | |||||||||||
341,564 | 3.762 | �� | 12/01/20 | 359,495 | ||||||||||
177,804 | 4.381 | 06/01/21 | 192,563 | |||||||||||
|
| |||||||||||||
1,886,915 | ||||||||||||||
|
| |||||||||||||
TOTAL MORTGAGE-BACKED SECURITIES | ||||||||||||||
(Cost $7,315,766) | $ | 7,315,239 | ||||||||||||
|
| |||||||||||||
Collateralized Mortgage Obligations(a) – 36.4% | ||||||||||||||
| Agency Multi-Family – 2.2% |
| ||||||||||||
| FHLMC Multifamily Structured Pass-Through Certificates | | ||||||||||||
$ | 269,237 | 1.136 | % | 07/25/20 | $ | 269,163 | ||||||||
| FHLMC Multifamily Structured Pass-Through Certificates | | ||||||||||||
163,847 | 1.096 | 01/25/21 | 163,618 | |||||||||||
| FHLMC Multifamily Structured Pass-Through Certificates | | ||||||||||||
1,078,587 | 1.004 | 08/25/23 | 1,077,578 | |||||||||||
|
| |||||||||||||
1,510,359 | ||||||||||||||
|
| |||||||||||||
| Regular Floater – 34.2% |
| ||||||||||||
| FHLMC REMIC Series 3049, Class FP |
| ||||||||||||
262,633 | 1.054 | 10/15/35 | 260,887 | |||||||||||
| FHLMC REMIC Series 3208, Class FB(b) |
| ||||||||||||
165,939 | 1.104 | 08/15/36 | 165,301 | |||||||||||
|
| |||||||||||||
Collateralized Mortgage Obligations(a) – (continued) | ||||||||||||||
| Regular Floater – (continued) |
| ||||||||||||
| FHLMC REMIC Series 3208, Class FD(b) |
| ||||||||||||
247,249 | 1.104 | 08/15/36 | 247,058 | |||||||||||
| FHLMC REMIC Series 3208, Class FG(b) |
| ||||||||||||
995,633 | 1.104 | 08/15/36 | 994,865 | |||||||||||
| FHLMC REMIC Series 3307, Class FT |
| ||||||||||||
1,552,949 | 0.944 | 07/15/34 | 1,550,475 | |||||||||||
| FHLMC REMIC Series 3311, Class KF |
| ||||||||||||
2,635,711 | 1.044 | 05/15/37 | 2,627,368 | |||||||||||
| FHLMC REMIC Series 3371, Class FA(b) |
| ||||||||||||
619,216 | 1.304 | 09/15/37 | 623,530 | |||||||||||
| FHLMC REMIC Series 4174, Class FB |
| ||||||||||||
1,240,227 | 1.004 | 05/15/39 | 1,234,903 | |||||||||||
| FHLMC REMIC Series 4320, Class FD |
| ||||||||||||
578,614 | 1.104 | 07/15/39 | 577,277 | |||||||||||
| FHLMC REMIC Series 4477, Class FG |
| ||||||||||||
1,362,377 | 0.917 | 10/15/40 | 1,349,331 | |||||||||||
| FHLMC REMIC Series 4631, Class GF |
| ||||||||||||
2,970,462 | 1.204 | 11/15/46 | 2,961,314 | |||||||||||
| FNMA REMIC Series 2006-82, Class F |
| ||||||||||||
372,401 | 1.326 | 09/25/36 | 373,898 | |||||||||||
| FNMA REMIC Series 2006-96, Class FA |
| ||||||||||||
842,057 | 1.056 | 10/25/36 | 841,690 | |||||||||||
| FNMA REMIC Series 2007-114, Class A7 |
| ||||||||||||
400,000 | 0.956 | 10/27/37 | 389,288 | |||||||||||
| FNMA REMIC Series 2007-33, Class HF |
| ||||||||||||
144,326 | 1.106 | 04/25/37 | 143,558 | |||||||||||
| FNMA REMIC Series 2007-36, Class F |
| ||||||||||||
236,956 | 0.986 | 04/25/37 | 235,055 | |||||||||||
| FNMA REMIC Series 2007-85, Class FC |
| ||||||||||||
637,638 | 1.296 | 09/25/37 | 641,549 | |||||||||||
| FNMA REMIC Series 2008-8, Class FB |
| ||||||||||||
857,397 | 1.576 | 02/25/38 | 864,648 | |||||||||||
| FNMA REMIC Series 2011-63, Class FG |
| ||||||||||||
633,769 | 1.206 | 07/25/41 | 634,310 | |||||||||||
| FNMA REMIC Series 2012-35, Class QF |
| ||||||||||||
1,641,812 | 1.156 | 04/25/42 | 1,641,341 | |||||||||||
| FNMA REMIC Series 2016-1, Class FT |
| ||||||||||||
1,588,794 | 1.106 | 02/25/46 | 1,565,482 | |||||||||||
| GNMA Series 2005-48, Class AF |
| ||||||||||||
799,234 | 0.939 | 06/20/35 | 791,640 | |||||||||||
| GNMA Series 2012-98, Class FA |
| ||||||||||||
756,233 | 1.139 | 08/20/42 | 755,556 | |||||||||||
| NCUA Guaranteed Notes Trust Series 2011-R1, Class 1A(b) |
| ||||||||||||
1,950,387 | 1.102 | 01/08/20 | 1,951,758 | |||||||||||
|
| |||||||||||||
23,422,082 | ||||||||||||||
|
| |||||||||||||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS | ||||||||||||||
(Cost $25,010,626) | $ | 24,932,441 | ||||||||||||
|
| |||||||||||||
Commercial Mortgage-Backed Securities(a) – 0.2% | ||||||||||||||
| Agency Multi-Family – 0.2% |
| ||||||||||||
| FNMA ACES Series 2013-M11, Class FA |
| ||||||||||||
$ | 109,983 | 1.086 | % | 01/25/18 | $ | 109,799 | ||||||||
|
|
50 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST HIGH QUALITY FLOATING RATE FUND
Principal Amount | Interest Rate | Maturity Date | Value | |||||||||||
Commercial Mortgage-Backed Securities(a) – (continued) | ||||||||||||||
| Regular Floater(b) – 0.0% |
| ||||||||||||
| Banc of America Commercial Mortgage Trust Series 2006-3, | | ||||||||||||
$ | 2,617 | 5.889 | % | 07/10/44 | $ | 2,613 | ||||||||
|
| |||||||||||||
TOTAL COMMERCIAL MORTGAGE-BACKED SECURITIES | ||||||||||||||
(Cost $112,984) | $ | 112,412 | ||||||||||||
|
| |||||||||||||
U.S. Government Agency Security – 1.1% | ||||||||||||||
| FHLB |
| ||||||||||||
$ | 750,000 | 0.977 | % | 09/29/17 | $ | 751,761 | ||||||||
(Cost $750,666) | ||||||||||||||
|
| |||||||||||||
Asset-Backed Securities(a) – 36.3% | ||||||||||||||
| Automobile(b)(c) – 0.8% |
| ||||||||||||
| Chesapeake Funding II LLC Series 2016-2A, Class A2 |
| ||||||||||||
$ | 550,000 | 1.704 | % | 06/15/28 | $ | 552,218 | ||||||||
|
| |||||||||||||
| Collateralized Loan Obligations – 10.0% |
| ||||||||||||
| Acis CLO Ltd. Series 2013-2A, Class A(b)(c) |
| ||||||||||||
336,191 | 1.381 | 10/14/22 | 335,491 | |||||||||||
| Apidos CLO X Series 2012-10A, Class A(b)(c) |
| ||||||||||||
650,000 | 2.307 | 10/30/22 | 650,023 | |||||||||||
| Black Diamond CLO Ltd. Series 2006-1A, Class AD(c) |
| ||||||||||||
46,905 | 1.137 | 04/29/19 | 46,887 | |||||||||||
| Brentwood CLO Corp. Series 2006-1A, Class A1A(b)(c) |
| ||||||||||||
174,504 | 1.156 | 02/01/22 | 173,835 | |||||||||||
| Brentwood CLO Corp. Series 2006-1A, Class A1B(b)(c) |
| ||||||||||||
68,555 | 1.156 | 02/01/22 | 68,292 | |||||||||||
| Callidus Debt Partners CLO Fund VI Ltd. Series 6A, | | ||||||||||||
194,612 | 1.142 | 10/23/21 | 193,154 | |||||||||||
| Halcyon Loan Advisors Funding Ltd. Series 2014-1A, | | ||||||||||||
350,000 | 2.412 | 04/18/26 | 348,764 | |||||||||||
| Jamestown CLO III Ltd. Series 2013-3A, Class A1A(b)(c) |
| ||||||||||||
1,400,000 | 2.330 | 01/15/26 | 1,400,388 | |||||||||||
| Jamestown CLO VII Ltd. Series 2015-7A, Class A1(b)(c) |
| ||||||||||||
1,300,000 | 2.432 | 07/25/27 | 1,300,207 | |||||||||||
| OFSI Fund V Ltd. Series 2013-5A, Class A1LA(b)(c) |
| ||||||||||||
300,000 | 1.810 | 04/17/25 | 297,779 | |||||||||||
| OFSI Fund VI Ltd. Series 2014-6A, Class A1(b)(c) |
| ||||||||||||
350,000 | 1.910 | 03/20/25 | 346,181 | |||||||||||
| Parallel Ltd. Series 2015-1A, Class A(b)(c) |
| ||||||||||||
300,000 | 2.331 | 07/20/27 | 299,703 | |||||||||||
| Sound Point CLO XI Ltd. Series 2016-1A, Class A(b)(c) |
| ||||||||||||
700,000 | 2.531 | 07/20/28 | 702,473 | |||||||||||
| Westchester CLO Ltd. Series 2007-1X, Class A1A(b)(d) |
| ||||||||||||
269,409 | 1.111 | 08/01/22 | 268,963 | |||||||||||
| Z Capital Credit Partners CLO Ltd. Series 2015-1A, Class A1(b)(c) |
| ||||||||||||
400,000 | 2.210 | 07/16/27 | 396,166 | |||||||||||
|
| |||||||||||||
6,828,306 | ||||||||||||||
|
| |||||||||||||
Asset-Backed Securities(a) – (continued) | ||||||||||||||
| Credit Card – 3.8% |
| ||||||||||||
| Bank of America Credit Card Trust Series 2014-A1, Class A |
| ||||||||||||
1,000,000 | 1.084 | 06/15/21 | 1,002,053 | |||||||||||
| Capital One Multi-Asset Execution Trust Series 2016-A1, | | ||||||||||||
300,000 | 1.154 | 02/15/22 | 301,099 | |||||||||||
| CARDS II Trust Series 2016-1A, Class A(b)(c) |
| ||||||||||||
300,000 | 1.404 | 07/15/21 | 301,117 | |||||||||||
| Evergreen Credit Card Trust Series 2016-1, Class A(b)(c) |
| ||||||||||||
500,000 | 1.424 | 04/15/20 | 502,061 | |||||||||||
| Trillium Credit Card Trust II Series 2016-1A, Class A(b)(c) |
| ||||||||||||
500,000 | 1.476 | 05/26/21 | 502,332 | |||||||||||
|
| |||||||||||||
2,608,662 | ||||||||||||||
|
| |||||||||||||
| Student Loans – 21.7% |
| ||||||||||||
| Academic Loan Funding Trust Series 2013-1A, Class A(b)(c) |
| ||||||||||||
567,766 | 1.556 | 12/26/44 | 563,076 | |||||||||||
| Access Group, Inc. Series 2006-1, Class A2 |
| ||||||||||||
56,043 | 1.040 | 08/25/23 | 55,907 | |||||||||||
| Access Group, Inc. Series 2015-1, Class A(b)(c) |
| ||||||||||||
112,690 | 1.456 | 07/25/56 | 111,368 | |||||||||||
| Access to Loans for Learning Student Loan Corp. Series 2013-I, | | ||||||||||||
535,230 | 1.556 | 02/25/41 | 511,778 | |||||||||||
| ECMC Group Student Loan Trust Series 2016-1A, Class A(b)(c) |
| ||||||||||||
324,964 | 2.106 | 07/26/66 | 324,006 | |||||||||||
| Education Loan Asset-Backed Trust I Series 2013-1, Class A1(c) |
| ||||||||||||
361,512 | 1.556 | 06/25/26 | 357,795 | |||||||||||
| Educational Funding of the South, Inc. Series 2011-1, Class A2(b) |
| ||||||||||||
662,625 | 1.532 | 04/25/35 | 653,522 | |||||||||||
| Educational Services of America, Inc. Series 2010-1, Class A1(b)(c) |
| ||||||||||||
809,596 | 1.732 | 07/25/23 | 805,678 | |||||||||||
| Educational Services of America, Inc. Series 2013-1, Class A(b)(c) |
| ||||||||||||
105,533 | 1.326 | 02/26/29 | 104,136 | |||||||||||
| Educational Services of America, Inc. Series 2014-1, Class A(b)(c) |
| ||||||||||||
321,345 | 1.456 | 02/25/39 | 316,316 | |||||||||||
| EFS Volunteer No. 3 LLC Series 2012-1, Class A2(b)(c) |
| ||||||||||||
1,136,217 | 1.756 | 02/25/25 | 1,137,773 | |||||||||||
| GCO Education Loan Funding Trust Series 2006-1, Class A8L |
| ||||||||||||
514,602 | 1.060 | 05/25/25 | 508,209 | |||||||||||
| Goal Capital Funding Trust Series 2007-1, Class A3 |
| ||||||||||||
77,022 | 1.087 | 09/25/28 | 76,517 | |||||||||||
| Higher Education Funding I Series 2005-1, Class A4 |
| ||||||||||||
57,790 | 1.070 | 02/25/30 | 57,399 | |||||||||||
| Kentucky Higher Education Student Loan Corp. Series 2015-1, | | ||||||||||||
765,150 | 1.367 | 12/01/31 | 754,109 | |||||||||||
| Montana Higher Education Student Assistance Corp. | | ||||||||||||
917,055 | 1.562 | 05/20/30 | 917,899 | |||||||||||
| Navient Student Loan Trust Series 2016-2, Class A1(b)(c) |
| ||||||||||||
410,147 | 1.506 | 06/25/65 | 411,475 | |||||||||||
| Navient Student Loan Trust Series 2016-5A, Class A(b)(c) |
| ||||||||||||
1,369,668 | 2.006 | 06/25/65 | 1,389,750 | |||||||||||
|
|
The accompanying notes are an integral part of these financial statements. | 51 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST HIGH QUALITY FLOATING RATE FUND
Schedule of Investments (continued)
December 31, 2016
Principal Amount | Interest Rate | Maturity Date | Value | |||||||||||
Asset-Backed Securities(a) – (continued) | ||||||||||||||
| Student Loans – (continued) |
| ||||||||||||
| Navient Student Loan Trust Series 2016-7A, Class A(b)(c) |
| ||||||||||||
$ | 296,407 | 1.906 | % | 03/25/66 | $ | 299,429 | ||||||||
| Nelnet Student Loan Trust Series 2005-4, Class A3(b) |
| ||||||||||||
77,149 | 1.126 | 06/22/26 | 76,789 | |||||||||||
| Nelnet Student Loan Trust Series 2006-2, Class A5(b) |
| ||||||||||||
482,635 | 0.982 | 01/25/30 | 480,045 | |||||||||||
| Nelnet Student Loan Trust Series 2013-5A, Class A(b)(c) |
| ||||||||||||
109,215 | 1.386 | 01/25/37 | 107,304 | |||||||||||
| Panhandle-Plains Higher Education Authority, Inc. Series 2011-1, | | ||||||||||||
463,075 | 1.796 | 07/01/24 | 463,652 | |||||||||||
| Pennsylvania Higher Education Assistance Agency Series 2006-1, | | ||||||||||||
679,986 | 1.022 | 10/25/35 | 650,801 | |||||||||||
| Scholar Funding Trust Series 2010-A, Class A(b)(c) |
| ||||||||||||
282,217 | 1.640 | 10/28/41 | 276,713 | |||||||||||
| Scholar Funding Trust Series 2011-A, Class A(b)(c) |
| ||||||||||||
276,574 | 1.790 | 10/28/43 | 267,128 | |||||||||||
| SLM Student Loan Trust Series 2003-12, Class A5(b)(c) |
| ||||||||||||
100,658 | 1.243 | 09/15/22 | 100,434 | |||||||||||
| SLM Student Loan Trust Series 2003-14, Class A5(b) |
| ||||||||||||
41,459 | 1.112 | 01/25/23 | 41,311 | |||||||||||
| SLM Student Loan Trust Series 2005-9, Class A6(b) |
| ||||||||||||
621,179 | 0.238 | 10/26/26 | 621,177 | |||||||||||
| SLM Student Loan Trust Series 2006-2, Class A5(b) |
| ||||||||||||
381,554 | 0.992 | 07/25/25 | 380,629 | |||||||||||
| SLM Student Loan Trust Series 2006-4, Class A5(b) |
| ||||||||||||
215,777 | 0.982 | 10/27/25 | 215,537 | |||||||||||
| SLM Student Loan Trust Series 2007-1, Class A5(b) |
| ||||||||||||
1,023,480 | 0.972 | 01/26/26 | 1,013,566 | |||||||||||
| SLM Student Loan Trust Series 2008-5, Class A4(b) |
| ||||||||||||
174,627 | 2.582 | 07/25/23 | 175,593 | |||||||||||
| SLM Student Loan Trust Series 2013-3, Class A2(b) |
| ||||||||||||
37,099 | 1.056 | 05/26/20 | 37,006 | |||||||||||
| SLM Student Loan Trust Series 2014-1, Class A2(b) |
| ||||||||||||
55,231 | 1.136 | 07/26/21 | 55,223 | |||||||||||
| Utah State Board of Regents Series 2015-1, Class A(b) |
| ||||||||||||
519,646 | 1.356 | 02/25/43 | 507,024 | |||||||||||
| Wachovia Student Loan Trust Series 2005-1, Class A5(b) |
| ||||||||||||
49,768 | 1.012 | 01/26/26 | 49,260 | |||||||||||
|
| |||||||||||||
14,875,334 | ||||||||||||||
|
| |||||||||||||
TOTAL ASSET-BACKED SECURITIES | ||||||||||||||
(Cost $24,830,436) | $ | 24,864,520 | ||||||||||||
|
| |||||||||||||
U.S. Treasury Obligations – 8.9% | ||||||||||||||
| U.S. Treasury Inflation Indexed Notes (TIPS) |
| ||||||||||||
$ | 638,562 | 0.125 | % | 04/15/17 | $ | 640,069 | ||||||||
1,166,330 | 2.625 | 07/15/17 | 1,194,695 | |||||||||||
627,432 | 0.125 | 04/15/18 | 633,367 | |||||||||||
567,391 | 0.125 | 04/15/19 | 574,705 | |||||||||||
2,993,467 | 0.125 | 04/15/20 | 3,026,186 | |||||||||||
|
| |||||||||||||
TOTAL U.S. TREASURY OBLIGATIONS | ||||||||||||||
(Cost $6,044,490) | $ | 6,069,022 | ||||||||||||
|
| |||||||||||||
Shares | Distribution Rate | Value | ||||||||||||
Investment Company(a)(e) – 4.3% | ||||||||||||||
| Goldman Sachs Financial Square Government Fund — | | ||||||||||||
2,927,684 | 0.455% | $ | 2,927,684 | |||||||||||
(Cost $2,927,684) | ||||||||||||||
|
| |||||||||||||
TOTAL INVESTMENTS – 97.9% | ||||||||||||||
(Cost $66,992,652) | $ | 66,973,079 | ||||||||||||
|
| |||||||||||||
| OTHER ASSETS IN EXCESS OF | | 1,420,413 | |||||||||||
|
| |||||||||||||
| NET ASSETS – 100.0% |
| $ | 68,393,492 | ||||||||||
|
|
The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. | ||
(a) | Variable rate security. Interest rate or distribution rate disclosed is that which is in effect on December 31, 2016. | |
(b) | Securities with “Call” features. Maturity dates disclosed are the final maturity dates. | |
(c) | Exempt from registration under Rule 144A of the Securities Act of 1933. Under procedures approved by the Board of Trustees, such securities may be deemed liquid by the Investment Adviser and may be resold, normally to qualified institutional buyers in transactions exempt from registration. Total market value of Rule 144A securities amounts to $14,989,452, which represents approximately 21.9% of net assets as of December 31, 2016. | |
(d) | Security has been determined to be illiquid by the Investment Adviser. At December 31, 2016, these securities amounted to $268,963 or approximately 0.4% of net assets. | |
(e) | Represents an affiliated issuer. |
Investment Abbreviations: | ||
ACES | —Alternative Credit Enhancement Securities | |
FHLB | —Federal Home Loan Bank | |
FHLMC | —Federal Home Loan Mortgage Corp. | |
FNMA | —Federal National Mortgage Association | |
GNMA | —Government National Mortgage Association | |
REMIC | —Real Estate Mortgage Investment Conduit | |
TIPS | —Treasury Inflation-Protected Securities |
52 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST HIGH QUALITY FLOATING RATE FUND
ADDITIONAL INVESTMENT INFORMATION
|
FUTURES CONTRACTS — At December 31, 2016, the Fund had the following futures contracts:
Type | Number of Contracts Long (Short) | Expiration Date | Current Value | Unrealized Gain (Loss) | ||||||||||||
90 Day Eurodollar | 1 | March 2017 | $ | 247,400 | $ | (211 | ) | |||||||||
90 Day Eurodollar | 1 | June 2017 | 246,988 | (545 | ) | |||||||||||
90 Day Eurodollar | 1 | September 2017 | 246,613 | (831 | ) | |||||||||||
90 Day Eurodollar | 1 | December 2017 | 246,200 | (1,124 | ) | |||||||||||
90 Day Eurodollar | 1 | March 2018 | 245,900 | (1,361 | ) | |||||||||||
90 Day Eurodollar | 1 | June 2018 | 245,600 | (1,580 | ) | |||||||||||
U.S. Long Bonds | (8) | March 2017 | (1,205,250 | ) | (2,242 | ) | ||||||||||
U.S. Ultra Long Treasury Bonds | 3 | March 2017 | 480,750 | 5,642 | ||||||||||||
2 Year U.S. Treasury Notes | (10) | March 2017 | (2,166,875 | ) | 1,220 | |||||||||||
5 Year U.S. Treasury Notes | (25) | March 2017 | (2,941,602 | ) | 7,124 | |||||||||||
10 Year U.S. Treasury Notes | 2 | March 2017 | 248,563 | (1,139 | ) | |||||||||||
TOTAL | $ | 4,953 |
The accompanying notes are an integral part of these financial statements. | 53 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST FUNDS
Statements of Assets and Liabilities
December 31, 2016
Core Fixed Income Fund | Equity Index Fund | Growth Fund | High Quality Fund | |||||||||||||
Assets: | ||||||||||||||||
Investments in unaffiliated issuers, at value (cost $107,999,191, $73,277,864, $123,529,971 and $64,064,968)(a) | $ | 108,994,895 | $ | 163,685,665 | $ | 153,074,456 | $ | 64,045,395 | ||||||||
Investments in affiliated issuers, at value (cost $289, $348,762, $4,209,790 and $2,927,684) | 289 | 758,338 | 4,209,790 | 2,927,684 | ||||||||||||
Investments in affiliated securities lending reinvestment vehicle, at value which equals cost | — | 153,725 | 3,236,725 | — | ||||||||||||
Cash | 3,206,305 | 321,939 | 2,437,325 | 1,043,576 | ||||||||||||
Foreign currencies, at value (cost $62,945, $0, $0 and $0) | 63,335 | — | — | — | ||||||||||||
Receivables: | ||||||||||||||||
Investments sold on an extended-settlement basis | 9,073,016 | — | — | 97,497 | ||||||||||||
Interest and dividends | 677,605 | 210,289 | 42,502 | 102,994 | ||||||||||||
Collateral on certain derivative contracts(b) | 249,347 | — | — | 346,000 | ||||||||||||
Fund shares sold | 86,811 | 93,615 | 32,831 | 2,405 | ||||||||||||
Reimbursement from investment adviser | 20,792 | 23,675 | 25,121 | 21,178 | ||||||||||||
Investments sold | — | 624,080 | — | — | ||||||||||||
Foreign tax reclaims | — | 553 | — | — | ||||||||||||
Securities lending income | — | 444 | — | — | ||||||||||||
Unrealized gain on forward foreign currency exchange contracts | 203,031 | — | — | — | ||||||||||||
Variation margin on certain derivative contracts | 40,561 | — | — | — | ||||||||||||
Other assets | 381 | 388 | 390 | 378 | ||||||||||||
Total assets | 122,616,368 | 165,872,711 | 163,059,140 | 68,587,107 | ||||||||||||
Liabilities: | ||||||||||||||||
Unrealized loss on forward foreign currency exchange contracts | 84,338 | — | — | — | ||||||||||||
Variation margin on certain derivative contracts | — | 4,454 | — | 6,953 | ||||||||||||
Payables: | ||||||||||||||||
Forward sale contracts, at value (proceeds received $7,004,414, $0, $0 and $0) | 7,100,938 | — | — | — | ||||||||||||
Investments purchased | 2,485,901 | — | 1,299 | 790 | ||||||||||||
Investments purchased on an extended-settlement basis | 2,165,031 | — | — | — | ||||||||||||
Management fees | 37,117 | 29,576 | 118,417 | 17,598 | ||||||||||||
Distribution and Service fees and Transfer Agency fees | 25,110 | 38,026 | 24,121 | 15,802 | ||||||||||||
Fund shares redeemed | 21,581 | 25,537 | 145,099 | 21,181 | ||||||||||||
Payable upon return of securities loaned | — | 153,725 | 3,236,725 | — | ||||||||||||
Accrued expenses | 130,077 | 70,537 | 91,864 | 131,291 | ||||||||||||
Total liabilities | 12,050,093 | 321,855 | 3,617,525 | 193,615 | ||||||||||||
Net Assets: | ||||||||||||||||
Paid-in capital | 114,711,916 | 81,869,888 | 131,713,848 | 69,333,633 | ||||||||||||
Undistributed net investment income | 627,950 | 255,499 | 9,808 | 68,154 | ||||||||||||
Accumulated net realized loss | (5,799,076 | ) | (7,384,785 | ) | (1,826,526 | ) | (993,675 | ) | ||||||||
Net unrealized gain (loss) | 1,025,485 | 90,810,254 | 29,544,485 | (14,620 | ) | |||||||||||
NET ASSETS | $ | 110,566,275 | $ | 165,550,856 | $ | 159,441,615 | $ | 68,393,492 | ||||||||
Net Assets: | ||||||||||||||||
Institutional | $ | 90,372 | $ | — | $ | 3,517,869 | $ | 25,465 | ||||||||
Service | 110,475,903 | 165,550,856 | 155,923,746 | 66,710,102 | ||||||||||||
Advisor | — | — | — | 1,657,925 | ||||||||||||
Total Net Assets | $ | 110,566,275 | $ | 165,550,856 | $ | 159,441,615 | $ | 68,393,492 | ||||||||
Shares outstanding $0.001 par value (unlimited shares authorized): | ||||||||||||||||
Institutional | 8,519 | — | 518,607 | 2,447 | ||||||||||||
Service | 10,421,792 | 11,424,410 | 23,169,100 | 6,423,955 | ||||||||||||
Advisor | — | — | — | 159,409 | ||||||||||||
Net asset value, offering and redemption price per share: | ||||||||||||||||
Institutional | $10.61 | $— | $6.78 | $10.41 | ||||||||||||
Service | 10.60 | 14.49 | 6.73 | 10.38 | ||||||||||||
Advisor | — | — | — | 10.40 |
(a) Includes loaned securities having a market value of $148,712 and $3,167,831 for the Equity Index and Growth Opportunities Funds, respectively.
(b) Segregated for initial margin and/or collateral on transactions as follows:
Fund | Forwards | Futures | Swaps | |||||||||
Core Fixed Income | $ | 110,000 | $ | — | $ | 139,347 | ||||||
High Quality Floating Rate | — | 346,000 | — |
54 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST FUNDS
Statements of Operations
For the Fiscal Year Ended December 31, 2016
Core Fixed Income Fund | Equity Index Fund | Growth Fund | High Quality Fund | |||||||||||||
Investment income: | ||||||||||||||||
Interest | $ | 3,016,630 | $ | 380 | $ | — | $ | 971,668 | ||||||||
Dividends — unaffiliated issuers (net of foreign taxes withheld of $0, $415, $0 and $0) | — | 3,603,005 | 1,113,038 | — | ||||||||||||
Dividends — affiliated issuers | 2,143 | 8,978 | 2,126 | 8,958 | ||||||||||||
Securities lending income — affiliated issuer | — | 444 | — | — | ||||||||||||
Total investment income | 3,018,773 | 3,612,807 | 1,115,164 | 980,626 | ||||||||||||
Expenses: | ||||||||||||||||
Management fees | 443,959 | 488,899 | 1,637,779 | 276,158 | ||||||||||||
Distribution and Service fees(a) | 277,375 | 407,417 | 406,360 | 175,247 | ||||||||||||
Professional fees | 119,026 | 79,474 | 80,271 | 117,159 | ||||||||||||
Custody, accounting and administrative services | 73,897 | 53,812 | 50,052 | 51,943 | ||||||||||||
Printing and mailing costs | 48,325 | 87,046 | 61,608 | 63,388 | ||||||||||||
Transfer Agency fees(a) | 22,195 | 32,590 | 32,753 | 13,805 | ||||||||||||
Trustee fees | 17,436 | 15,302 | 15,533 | 15,361 | ||||||||||||
Other | 2,655 | 18,540 | 7,836 | 5,077 | ||||||||||||
Total expenses | 1,004,868 | 1,183,080 | 2,292,192 | 718,138 | ||||||||||||
Less — expense reductions | (261,428 | ) | (394,931 | ) | (572,451 | ) | (269,767 | ) | ||||||||
Net expenses | 743,440 | 788,149 | 1,719,741 | 448,371 | ||||||||||||
NET INVESTMENT INCOME (LOSS) | 2,275,333 | 2,824,658 | (604,577 | ) | 532,255 | |||||||||||
Realized and unrealized gain (loss): | ||||||||||||||||
Net realized gain (loss) from: | ||||||||||||||||
Investments — unaffiliated issuers (including commissions recaptured of, $0, $0, $5,982 and $0) | 558,733 | 9,477,446 | (776,503 | ) | 133,078 | |||||||||||
Investments — affiliated issuer | — | 26,420 | — | — | ||||||||||||
Futures contracts | (61,097 | ) | 121,616 | — | (74,960 | ) | ||||||||||
Swap contracts | 84,475 | — | — | — | ||||||||||||
Forward foreign currency exchange contracts | (260,940 | ) | — | — | — | |||||||||||
Foreign currency transactions | 20,006 | — | — | — | ||||||||||||
Net change in unrealized gain (loss) on: | ||||||||||||||||
Investments — unaffiliated issuers | 25,425 | 4,971,709 | 3,723,297 | 129,909 | ||||||||||||
Investments — affiliated issuers | — | 156,963 | — | — | ||||||||||||
Futures contracts | 109,453 | (6,229 | ) | — | (6,302 | ) | ||||||||||
Swap contracts | (82,053 | ) | — | — | — | |||||||||||
Forward foreign currency exchange contracts | 144,560 | — | — | — | ||||||||||||
Foreign currency translation | 548 | — | — | — | ||||||||||||
Net realized and unrealized gain | 539,110 | 14,747,925 | 2,946,794 | 181,725 | ||||||||||||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 2,814,443 | $ | 17,572,583 | $ | 2,342,217 | $ | 713,980 |
(a) Class specific Distribution and Service, and Transfer Agency fees were as follows:
Distribution and Service Fees | Transfer Agency Fees | |||||||||||||||||||
Fund | Service | Advisor | Institutional | Service | Advisor | |||||||||||||||
Core Fixed Income | $ | 277,375 | N/A | $ | 7 | $ | 22,188 | N/A | ||||||||||||
Equity Index | 407,417 | N/A | N/A | 32,590 | N/A | |||||||||||||||
Growth Opportunities | 406,360 | N/A | 247 | 32,506 | N/A | |||||||||||||||
High Quality Floating Rate | 168,015 | $ | 7,232 | 4 | 13,440 | $ | 361 |
The accompanying notes are an integral part of these financial statements. | 55 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST FUNDS
Statements of Changes in Net Assets
Core Fixed Income Fund | Equity Index Fund | |||||||||||||||
For the Fiscal Year Ended December 31, 2016 | For the Fiscal Year Ended December 31, 2015 | For the Fiscal Year Ended December 31, 2016 | For the Fiscal Year Ended December 31, 2015 | |||||||||||||
From operations: | ||||||||||||||||
Net investment income (loss) | $ | 2,275,333 | $ | 2,333,850 | $ | 2,824,658 | $ | 3,882,193 | ||||||||
Net realized gain (loss) | 341,177 | 824,785 | 9,625,482 | 9,868,912 | ||||||||||||
Net change in unrealized gain (loss) | 197,933 | (2,799,901 | ) | 5,122,443 | (11,884,918 | ) | ||||||||||
Net increase (decrease) in net assets resulting from operations | 2,814,443 | 358,734 | 17,572,583 | 1,866,187 | ||||||||||||
Distributions to shareholders: | ||||||||||||||||
From net investment income | ||||||||||||||||
Institutional Shares | (712 | ) | (693 | ) | — | — | ||||||||||
Service Shares | (2,237,128 | ) | (2,475,317 | ) | (3,549,296 | ) | (3,127,567 | ) | ||||||||
Advisor Shares | — | — | — | — | ||||||||||||
From net realized gains | ||||||||||||||||
Institutional Shares | — | — | — | — | ||||||||||||
Service Shares | — | — | (7,414,419 | ) | (9,730,333 | ) | ||||||||||
Total distributions to shareholders | (2,237,840 | ) | (2,476,010 | ) | (10,963,715 | ) | (12,857,900 | ) | ||||||||
From share transactions: | ||||||||||||||||
Proceeds from sales of shares | 18,825,312 | 17,192,161 | 3,310,921 | 3,490,618 | ||||||||||||
Reinvestment of distributions | 2,237,840 | 2,476,010 | 10,963,715 | 12,857,900 | ||||||||||||
Cost of shares redeemed | (16,023,575 | ) | (19,689,934 | ) | (24,627,725 | ) | (26,070,660 | ) | ||||||||
Net increase (decrease) in net assets resulting from share transactions | 5,039,577 | (21,763 | ) | (10,353,089 | ) | (9,722,142 | ) | |||||||||
TOTAL INCREASE (DECREASE) | 5,616,180 | (2,139,039 | ) | (3,744,221 | ) | (20,713,855 | ) | |||||||||
Net assets: | ||||||||||||||||
Beginning of year | 104,950,095 | 107,089,134 | 169,295,077 | 190,008,932 | ||||||||||||
End of year | $ | 110,566,275 | $ | 104,950,095 | $ | 165,550,856 | $ | 169,295,077 | ||||||||
Undistributed net investment income | $ | 627,950 | $ | 420,445 | $ | 255,499 | $ | 995,608 |
56 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST FUNDS
Growth Opportunities Fund | High Quality Floating Rate Fund | |||||||||||||
For the Fiscal Year Ended December 31, 2016 | For the Fiscal Year Ended December 31, 2015 | For the Fiscal Year Ended December 31, 2016 | For the Fiscal Year Ended December 31, 2015 | |||||||||||
$ | (604,577 | ) | $ | (682,142 | ) | $ | 532,255 | $ | 202,867 | |||||
(776,503 | ) | 13,086,912 | 58,118 | (91,487 | ) | |||||||||
3,723,297 | (22,032,924 | ) | 123,607 | (424,808 | ) | |||||||||
| 2,342,217 |
| (9,628,154 | ) | 713,980 | (313,428 | ) | |||||||
— | — | (314 | ) | (176 | ) | |||||||||
— | — | (665,766 | ) | (316,783 | ) | |||||||||
— | — | (15,910 | ) | (3,093 | ) | |||||||||
(23,519 | ) | (2,613 | ) | — | — | |||||||||
(1,048,654 | ) | (14,040,255 | ) | — | — | |||||||||
(1,072,173 | ) | (14,042,868 | ) | (681,990 | ) | (320,052 | ) | |||||||
18,099,066 | 9,813,897 | 9,233,882 | 8,890,822 | |||||||||||
1,072,173 | 14,042,868 | 681,989 | 320,052 | |||||||||||
(29,684,783 | ) | (33,053,396 | ) | (12,519,662 | ) | (12,538,797 | ) | |||||||
| (10,513,544 | ) | (9,196,631 | ) | (2,603,791 | ) | (3,327,923 | ) | ||||||
(9,243,500 | ) | (32,867,653 | ) | (2,571,801 | ) | (3,961,403 | ) | |||||||
168,685,115 | 201,552,768 | 70,965,293 | 74,926,696 | |||||||||||
$ | 159,441,615 | $ | 168,685,115 | $ | 68,393,492 | $ | 70,965,293 | |||||||
$ | 9,808 | $ | 16,914 | $ | 68,154 | $ | 61,441 |
The accompanying notes are an integral part of these financial statements. | 57 |
GOLDMAN SACHS VARIABLE INSURANCE CORE FIXED INCOME FUND
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Year
Income (loss) from investment operations | ||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of year | Net investment income(a) | Net realized and unrealized gain (loss) | Total from investment operations | Distributions to shareholders from net investment lncome | Net asset value, end of year | Total return(b) | Net assets, end of year (in 000s) | Ratio of net expenses to average net assets | Ratio of total expenses to average net assets | Ratio of net investment income to average net assets | Portfolio turnover rate(c) | |||||||||||||||||||||||||||||||||||||
FOR THE FISCAL YEARS ENDED DECEMBER 31, | ||||||||||||||||||||||||||||||||||||||||||||||||
2016 - Institutional | $ | 10.53 | $ | 0.24 | $ | 0.08 | $ | 0.32 | $ | (0.24 | ) | $ | 10.61 | 2.98 | % | $ | 90 | 0.43 | % | 0.65 | % | 2.28 | % | 329 | % | |||||||||||||||||||||||
2016 - Service | 10.53 | 0.22 | 0.07 | 0.29 | (0.22 | ) | 10.60 | 2.70 | 110,476 | 0.67 | 0.91 | 2.05 | 329 | |||||||||||||||||||||||||||||||||||
2015 - Institutional | 10.75 | 0.27 | (0.20 | ) | 0.07 | (0.29 | ) | 10.53 | 0.60 | 26 | 0.42 | 0.74 | 2.53 | 376 | ||||||||||||||||||||||||||||||||||
2015 - Service | 10.76 | 0.24 | (0.21 | ) | 0.03 | (0.26 | ) | 10.53 | 0.27 | 104,924 | 0.67 | 0.99 | 2.27 | 376 | ||||||||||||||||||||||||||||||||||
2014 - Institutional | 10.48 | 0.25 | 0.34 | 0.59 | (0.32 | ) | 10.75 | 5.68 | 26 | 0.44 | 0.65 | 2.31 | 353 | |||||||||||||||||||||||||||||||||||
2014 - Service | 10.47 | 0.22 | 0.36 | 0.58 | (0.29 | ) | 10.76 | 5.61 | 107,063 | 0.68 | 0.91 | 2.06 | 353 | |||||||||||||||||||||||||||||||||||
2013 - Institutional (Commenced April 30, 2013) | 10.91 | 0.15 | (0.38 | ) | (0.23 | ) | (0.20 | ) | 10.48 | (2.13 | ) | 24 | 0.43 | (d) | 0.69 | (d) | 2.10 | (d) | 557 | |||||||||||||||||||||||||||||
2013 - Service | 10.88 | 0.20 | (0.35 | ) | (0.15 | ) | (0.26 | ) | 10.47 | (1.35 | ) | 116,530 | 0.67 | 0.89 | 1.88 | 557 | ||||||||||||||||||||||||||||||||
2012 - Service | 10.43 | 0.17 | 0.52 | 0.69 | (0.24 | ) | 10.88 | 6.70 | 135,436 | 0.67 | 0.83 | 1.57 | 727 |
(a) | Calculated based on the average shares outstanding methodology. |
(b) | Assumes investment at the net asset value at the beginning of the year, reinvestment of all distributions, and a complete redemption of the investment at the net asset value at the end of the year. Total returns for periods less than one full year are not annualized. |
(c) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short term investments and certain derivatives. If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
(d) | Annualized. |
The accompanying notes are an integral part of these financial statements. | 58 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST EQUITY INDEX FUND
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Year
Income (loss) from investment operations | Distributions to shareholders | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of year | Net investment income(a) | Net realized and unrealized gain (loss) | Total from investment operations | From net investment Income | From net realized gains | Total distributions | Net asset value, end of year | Total return(b) | Net assets, end of year (in 000s) | Ratio of net expenses to average net assets | Ratio of total expenses to average net assets | Ratio of net investment income to average net assets | Portfolio turnover rate(c) | |||||||||||||||||||||||||||||||||||||||||||
FOR THE FISCAL YEARS ENDED DECEMBER 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2016 - Service | $ | 13.91 | $ | 0.25 | $ | 1.35 | $ | 1.60 | $ | (0.33 | ) | $ | (0.69 | ) | $ | (1.02 | ) | $ | 14.49 | 11.41 | % | $ | 165,551 | 0.48 | % | 0.73 | % | 1.73 | % | 3 | % | |||||||||||||||||||||||||
2015 - Service | 14.91 | 0.32 | (0.18 | ) | 0.14 | (0.28 | ) | (0.86 | ) | (1.14 | ) | 13.91 | 0.94 | 169,295 | 0.48 | 0.70 | 2.15 | 4 | ||||||||||||||||||||||||||||||||||||||
2014 - Service | 13.68 | 0.22 | 1.58 | 1.80 | (0.25 | ) | (0.32 | ) | (0.57 | ) | 14.91 | 13.22 | 190,009 | 0.49 | 0.71 | 1.55 | 2 | |||||||||||||||||||||||||||||||||||||||
2013 - Service | 10.54 | 0.20 | 3.15 | 3.35 | (0.21 | ) | — | (0.21 | ) | 13.68 | 31.83 | 193,899 | 0.49 | 0.73 | 1.61 | 3 | ||||||||||||||||||||||||||||||||||||||||
2012 - Service | 9.29 | 0.19 | 1.26 | 1.45 | (0.20 | ) | — | (0.20 | ) | 10.54 | 15.50 | 167,811 | 0.48 | 0.72 | 1.82 | 3 |
(a) | Calculated based on the average shares outstanding methodology. |
(b) | Assumes investment at the net asset value at the beginning of the year, reinvestment of all distributions, and a complete redemption of the investment at the net asset value at the end of the year. |
(c) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short term investments and certain derivatives. If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
The accompanying notes are an integral part of these financial statements. | 59 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST GROWTH OPPORTUNITIES FUND
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Year
Income (loss) from investment operations | ||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of year | Net investment loss(a) | Net realized and unrealized gain (loss) | Total from investment operations | Distributions to shareholders from net realized gains | Net asset value, end of year | Total return(b) | Net assets, end of year (in 000s) | Ratio of net expenses to average net assets | Ratio of total expenses to average net assets | Ratio of net investment loss to average net assets | Portfolio turnover rate(c) | |||||||||||||||||||||||||||||||||||||
FOR THE FISCAL YEARS ENDED DECEMBER 31, | ||||||||||||||||||||||||||||||||||||||||||||||||
2016 - Institutional | $ | 6.71 | $ | (0.02 | ) | $ | 0.14 | $ | 0.12 | $ | (0.05 | ) | $ | 6.78 | 1.71 | % | $ | 3,518 | 0.89 | % | 1.16 | % | (0.26 | )% | 63 | % | ||||||||||||||||||||||
2016 - Service | 6.68 | (0.02 | ) | 0.12 | 0.10 | (0.05 | ) | 6.73 | 1.42 | 155,924 | 1.05 | 1.40 | (0.37 | ) | 63 | |||||||||||||||||||||||||||||||||
2015 - Institutional | 7.72 | (0.01 | ) | (0.39 | ) | (0.40 | ) | (0.61 | ) | 6.71 | (5.20 | ) | 32 | 0.93 | 1.14 | (0.19 | ) | 57 | ||||||||||||||||||||||||||||||
2015 - Service | 7.69 | (0.03 | ) | (0.37 | ) | (0.40 | ) | (0.61 | ) | 6.68 | (5.20 | ) | 168,653 | 1.09 | 1.40 | (0.36 | ) | 57 | ||||||||||||||||||||||||||||||
2014 - Institutional | 8.59 | (0.02 | ) | 0.94 | 0.92 | (1.79 | ) | 7.72 | 11.32 | 33 | 1.01 | 1.15 | (0.24 | ) | 62 | |||||||||||||||||||||||||||||||||
2014 - Service | 8.58 | (0.03 | ) | 0.93 | 0.90 | (1.79 | ) | 7.69 | 11.10 | 201,519 | 1.17 | 1.39 | (0.39 | ) | 62 | |||||||||||||||||||||||||||||||||
2013 - Institutional (Commenced April 30, 2013) | 7.66 | (0.02 | ) | 1.52 | 1.50 | (0.57 | ) | 8.59 | 19.73 | 30 | 1.00 | (d) | 1.16 | (d) | (0.27 | )(d) | 42 | |||||||||||||||||||||||||||||||
2013 - Service | 6.93 | (0.04 | ) | 2.26 | 2.22 | (0.57 | ) | 8.58 | 32.20 | 201,872 | 1.16 | 1.39 | (0.47 | ) | 42 | |||||||||||||||||||||||||||||||||
2012 - Service | 6.34 | (0.02 | )(e) | 1.25 | 1.23 | (0.64 | ) | 6.93 | 19.37 | 171,870 | 1.15 | 1.39 | (0.26 | )(e) | 46 |
(a) | Calculated based on the average shares outstanding methodology. |
(b) | Assumes investment at the net asset value at the beginning of the year, reinvestment of all distributions, and a complete redemption of the investment at the net asset value at the end of the year. Total returns for periods less than one full year are not annualized. |
(c) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short term investments. If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
(d) | Annualized. |
(e) | Reflects income recognized from special dividends which amounted to $0.01 per share and 0.18% of average net assets. |
The accompanying notes are an integral part of these financial statements. | 60 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST HIGH QUALITY FLOATING RATE FUND
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Year
Income (loss) from investment operations | Distributions to shareholders | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of year | Net investment income(a) | Net realized and unrealized gain (loss) | Total from investment operations | From net investment income | From net realized loss | Total distributions | Net asset value, end of year | Total return(b) | Net assets, end of period (in 000s) | Ratio of net expenses to average net assets | Ratio of total expenses to average net assets | Ratio of net investment income to average net assets | Portfolio turnover rate(c) | |||||||||||||||||||||||||||||||||||||||||||
FOR THE FISCAL YEARS ENDED DECEMBER 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2016 - Institutional | $ | 10.40 | $ | 0.11 | $ | 0.03 | $ | 0.14 | $ | (0.13 | ) | $ | — | $ | (0.13 | ) | $ | 10.41 | 1.35 | % | $ | 25 | 0.39 | % | 0.78 | % | 1.03 | % | 47 | % | ||||||||||||||||||||||||||
2016 - Service | 10.38 | 0.08 | 0.02 | 0.10 | (0.10 | ) | — | (0.10 | ) | 10.38 | 1.00 | 66,710 | 0.65 | 1.04 | 0.77 | 47 | ||||||||||||||||||||||||||||||||||||||||
2016 - Advisor | 10.40 | 0.06 | 0.03 | 0.09 | (0.09 | ) | — | (0.09 | ) | 10.40 | 0.96 | 1,658 | 0.80 | 1.18 | 0.62 | 47 | ||||||||||||||||||||||||||||||||||||||||
2015 - Institutional | 10.49 | 0.06 | (0.08 | ) | (0.02 | ) | (0.07 | ) | — | (0.07 | ) | 10.40 | (0.16 | ) | 25 | 0.38 | 0.81 | 0.54 | 14 | |||||||||||||||||||||||||||||||||||||
2015 - Service | 10.47 | 0.03 | (0.07 | ) | (0.04 | ) | (0.05 | ) | — | (0.05 | ) | 10.38 | (0.42 | ) | 69,625 | 0.64 | 1.05 | 0.28 | 14 | |||||||||||||||||||||||||||||||||||||
2015 - Advisor | 10.49 | 0.01 | (0.06 | ) | (0.05 | ) | (0.04 | ) | — | (0.04 | ) | 10.40 | (0.57 | ) | 1,315 | 0.78 | 1.25 | 0.12 | 14 | |||||||||||||||||||||||||||||||||||||
2014 - Institutional | 10.51 | 0.05 | (0.03 | ) | 0.02 | (0.04 | ) | — | (0.04 | ) | 10.49 | 0.17 | 25 | 0.40 | 0.70 | 0.51 | 17 | |||||||||||||||||||||||||||||||||||||||
2014 - Service | 10.51 | 0.03 | (0.04 | ) | (0.01 | ) | (0.03 | ) | — | (0.03 | ) | 10.47 | (0.09 | ) | 74,892 | 0.66 | 0.96 | 0.25 | 17 | |||||||||||||||||||||||||||||||||||||
2014 - Advisor (Commenced | 10.51 | — | (d) | (0.02 | ) | (0.02 | ) | — | — | — | 10.49 | (0.10 | )* | 10 | 0.77 | (e) | 1.13 | (e) | 0.15 | (e) | 17 | |||||||||||||||||||||||||||||||||||
2013 - Institutional (Commenced | 10.56 | 0.02 | 0.03 | 0.05 | (0.04 | ) | (0.06 | ) | (0.10 | )(f) | 10.51 | 0.50 | 25 | 0.40 | (e) | 0.86 | (e) | 0.25 | (e) | 467 | ||||||||||||||||||||||||||||||||||||
2013 - Service | 10.58 | 0.01 | 0.03 | 0.04 | (0.05 | ) | (0.06 | ) | (0.11 | )(f) | 10.51 | 0.40 | 78,142 | 0.70 | 1.10 | 0.08 | 467 | |||||||||||||||||||||||||||||||||||||||
2012 - Service | 10.70 | 0.04 | 0.25 | 0.29 | (0.08 | ) | (0.33 | ) | (0.41 | ) | 10.58 | 2.78 | 68,893 | 0.79 | 1.06 | 0.36 | 1045 |
(a) | Calculated based on the average shares outstanding methodology. |
(b) | Assumes investment at the net asset value at the beginning of the year, reinvestment of all distributions, and a complete redemption of the investment at the net asset value at the end of the year.Total returns for periods less than one full year are not annualized. |
(c) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short term investments and certain derivatives. If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
(d) | Amount is less than $0.005 per share. |
(e) | Annualized. |
(f) | Included a distribution from capital of less than $0.01 per share. |
* | Represents cumulative total returns |
The accompanying notes are an integral part of these financial statements. | 61 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST FUNDS
Notes to Financial Statements
December 31, 2016
1. ORGANIZATION
Goldman Sachs Variable Insurance Trust (the “Trust” or “VIT”) is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company. The following table lists those series of the Trust that are included in this report (collectively, the “Funds” or individually a “Fund”), along with their corresponding share classes and respective diversification status under the Act:
Fund | Share Classes Offered | Diversified/ Non-diversified | ||
High Quality Floating Rate | Institutional, Service and Advisor | Diversified | ||
Core Fixed Income and Growth Opportunities | Institutional and Service | Diversified | ||
Equity Index | Service | Diversified |
Shares of the Trust are offered to a separate accounts of participating life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies.
Goldman Sachs Asset Management, L.P. (“GSAM”), an affiliate of Goldman, Sachs & Co. (“Goldman Sachs”), serves as investment adviser to the Funds pursuant to management agreements (the “Agreements”) with the Trust.
2. SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and require management to make estimates and assumptions that may affect the reported amounts and disclosures. Actual results may differ from those estimates and assumptions.
A. Investment Valuation — The Funds’ valuation policy is to value investments at fair value.
B. Investment Income and Investments — Investment income includes interest income, dividend income, net of any foreign withholding taxes, less any amounts reclaimable, and securities lending income. Interest income is accrued daily and adjusted for amortization of premiums and accretion of discounts. Dividend income is recognized on ex-dividend date or, for certain foreign securities, as soon as such information is obtained subsequent to the ex-dividend date. Investment transactions are reflected on trade date. Realized gains and losses are calculated using identified cost. Investment transactions are recorded on the following business day for daily net asset value (“NAV”) calculations. Any foreign capital gains tax is accrued daily based upon net unrealized gains, and is payable upon sale of such investments. Distributions received from the Funds’ investments in United States (“U.S.”) real estate investment trusts (“REITs”) may be characterized as ordinary income, net capital gain or a return of capital. A return of capital is recorded by the Funds as a reduction to the cost basis of the REIT.
For derivative contracts, realized gains and losses are recorded upon settlement of the contract. Upfront payments, if any, are made or received upon entering into a swap agreement and are reflected in the Statements of Assets and Liabilities. Upfront payments are recognized over the contract’s term/event as realized gains or losses, with the exception of forward starting interest rate swaps whose realized gains or losses are recognized from the effective start date. For securities with paydown provisions, principal payments received are treated as a proportionate reduction to the cost basis of the securities, and excess or shortfall amounts are recorded as income. For treasury inflation protected securities (“TIPS”), adjustments to principal due to inflation/deflation are reflected as increases/decreases to interest income with a corresponding adjustment to cost.
C. Class Allocations and Expenses — Investment income, realized and unrealized gain (loss), and non-class specific expenses of each Fund are allocated daily based upon the proportion of net assets of each class. Non-class specific expenses directly incurred by a Fund are charged to that Fund, while such expenses incurred by the Trust are allocated across the applicable Funds on a straight-line and/or pro-rata basis depending upon the nature of the expenses. Class specific expenses, where applicable, are borne by the respective share classes and include Distribution and Service and Transfer Agency fees.
62
GOLDMAN SACHS VARIABLE INSURANCE TRUST FUNDS
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
D. Federal Taxes and Distributions to Shareholders — It is each Fund’s policy to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Code”), applicable to regulated investment companies (mutual funds) and to distribute each year substantially all of its investment company taxable income and capital gains to its shareholders. Accordingly, the Funds are not required to make any provisions for the payment of federal income tax. Distributions to shareholders are recorded on the ex-dividend date. Income and capital gains distributions, if any, are declared and paid according to the following schedule:
Fund | Income Distributions Declared/Paid | Capital Gains Distributions Declared/Paid | ||
Core Fixed Income and High Quality Floating Rate | Quarterly | Annually | ||
Equity Index and Growth Opportunities | Annually | Annually |
Net capital losses are carried forward to future fiscal years and may be used to the extent allowed by the Code to offset any future capital gains. Utilization of capital loss carryforwards will reduce the requirement of future capital gains distributions.
The characterization of distributions to shareholders for financial reporting purposes is determined in accordance with federal income tax rules, which may differ from GAAP. The source of each Fund’s distributions may be shown in the accompanying financial statements as either from net investment income, net realized gain or capital. Certain components of the Funds’ net assets on the Statements of Assets and Liabilities reflect permanent GAAP/tax differences based on the appropriate tax character.
E. Foreign Currency Translation — The accounting records and reporting currency of the Funds are maintained in U.S. dollars. Assets and liabilities denominated in foreign currencies are translated into U.S. dollars using the current exchange rates at the close of each business day. The effect of changes in foreign currency exchange rates on investments is included within net realized and unrealized gain (loss) on investments. Changes in the value of other assets and liabilities as a result of fluctuations in foreign exchange rates are included in the Statements of Operations within net change in unrealized gain (loss) on foreign currency translations. Transactions denominated in foreign currencies are translated into U.S. dollars on the date the transaction occurred, the effects of which are included within net realized gain (loss) on foreign currency transactions.
F. Commission Recapture — GSAM, on behalf of certain Funds, may direct portfolio trades, subject to seeking best execution, to various brokers who have agreed to rebate a portion of the commissions generated. Such rebates are made directly to a Fund as cash payments and are included in net realized gain (loss) from investments on the Statements of Operations.
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS
The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The levels used for classifying investments are not necessarily an indication of the risk associated with investing in these investments. The three levels of the fair value hierarchy are described below:
Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 — Quoted prices in markets that are not active or financial instruments for which significant inputs are observable (including, but not limited to, quoted prices for similar investments, interest rates, foreign exchange rates, volatility and credit spreads), either directly or indirectly;
Level 3 — Prices or valuations that require significant unobservable inputs (including GSAM’s assumptions in determining fair value measurement).
63
GOLDMAN SACHS VARIABLE INSURANCE TRUST FUNDS
Notes to Financial Statements (continued)
December 31, 2016
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS (continued)
Changes in valuation techniques may result in transfers into or out of an assigned level within the hierarchy. In accordance with the Funds’ policy, transfers between different levels of the fair value hierarchy resulting from such changes are deemed to have occurred as of the beginning of the reporting period.
The Board of Trustees (“Trustees”) has approved Valuation Procedures that govern the valuation of the portfolio investments held by the Funds, including investments for which market quotations are not readily available. The Trustees have delegated to GSAM day-to-day responsibility for implementing and maintaining internal controls and procedures related to the valuation of the Funds’ portfolio investments. To assess the continuing appropriateness of pricing sources and methodologies, GSAM regularly performs price verification procedures and issues challenges as necessary to third party pricing vendors or brokers, and any differences are reviewed in accordance with the Valuation Procedures.
A. Level 1 and Level 2 Fair Value Investments — The valuation techniques and significant inputs used in determining the fair values for investments classified as Level 1 and Level 2 are as follows:
Equity Securities — Equity securities traded on a U.S. securities exchange or the NASDAQ system, or those located on certain foreign exchanges, including but not limited to the Americas, are valued daily at their last sale price or official closing price on the principal exchange or system on which they are traded. If there is no sale or official closing price or such price is believed by GSAM to not represent fair value, equity securities are valued at the last bid price for long positions and at the last ask price for short positions. To the extent these investments are actively traded, they are classified as Level 1 of the fair value hierarchy, otherwise they are generally classified as Level 2.
Unlisted equity securities for which market quotations are available are valued at the last sale price on the valuation date, or if no sale occurs, at the last bid price. These investments are generally classified as Level 2 of the fair value hierarchy.
Money Market Funds — Investments in the Goldman Sachs Financial Square Government Fund (“Underlying Fund”) are valued at the NAV of the Institutional Share class on the day of valuation. These investments are generally classified as Level 1 of the fair value hierarchy. For information regarding an Underlying Fund’s accounting policies and investment holdings, please see the Underlying Fund’s shareholder report.
Debt Securities — Debt securities for which market quotations are readily available are valued daily on the basis of quotations supplied by dealers or an independent pricing service approved by the Trustees. The pricing services may use valuation models or matrix pricing, which consider: (i) yield or price with respect to bonds that are considered comparable in characteristics such as rating, interest rate and maturity date or (ii) quotations from securities dealers to determine current value. Short-term debt obligations that mature in sixty days or less and that do not exhibit signs of credit deterioration are valued using available market quotations as provided by a third party pricing vendor or broker. Prior to October 11, 2016, such securities were valued at amortized cost. With the exception of treasury securities of G8 countries (not held in money market funds that utilize amortized cost as a valuation methodology), which are generally classified as Level 1, these investments are generally classified as Level 2 of the fair value hierarchy.
i. Mortgage-Backed and Asset-Backed Securities — Mortgage-backed securities represent direct or indirect participations in, or are collateralized by and payable from, mortgage loans secured by residential and/or commercial real estate property. Asset-backed securities include securities whose principal and interest payments are collateralized by pools of other assets or receivables. The value of certain mortgage-backed and asset-backed securities (including adjustable rate mortgage loans) may be particularly sensitive to changes in prevailing interest rates. The value of these securities may also fluctuate in response to the market’s perception of the creditworthiness of the issuers.
Asset-backed securities may present credit risks that are not presented by mortgage-backed securities because they generally do not have the benefit of a security interest in collateral that is comparable to mortgage assets. Some asset-backed securities may only have a subordinated claim on collateral.
Stripped mortgage-backed securities are usually structured with two different classes: one that receives substantially all interest payments (interest-only, or “IO” and/or high coupon rate with relatively low principal amount, or “IOette”), and the
64
GOLDMAN SACHS VARIABLE INSURANCE TRUST FUNDS
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS (continued)
other that receives substantially all principal payments (principal-only, or “PO”) from a pool of mortgage loans. Little to no principal will be received at the maturity of an IO; as a result, periodic adjustments are recorded to reduce the cost of the security until maturity. These adjustments are included in interest income.
ii. Mortgage Dollar Rolls — Mortgage dollar rolls are transactions whereby a Fund sells mortgage-backed-securities and simultaneously contracts with the same counterparty to repurchase similar securities on a specified future date. During the settlement period, a Fund will not be entitled to accrue interest and receive principal payments on the securities sold. The Funds account for mortgage dollar roll transactions as purchases and sales and realize gains and losses on these transactions.
iii. Treasury Inflation Protected Securities — TIPS are treasury securities in which the principal amount is adjusted daily to keep pace with inflation, as measured by the U.S. Consumer Pricing Index for Urban Consumers. The repayment of the original bond principal upon maturity is guaranteed by the full faith and credit of the U.S. Government.
iv. When-Issued Securities and Forward Commitments — When-issued securities, including TBA (“To Be Announced”) securities, are securities that are authorized but not yet issued in the market and purchased in order to secure what is considered to be an advantageous price or yield to a Fund. A forward commitment involves entering into a contract to purchase or sell securities, typically on an extended settlement basis, for a fixed price at a future date. The purchase of securities on a when-issued or forward commitment basis involves a risk of loss if the value of the security to be purchased declines before the settlement date. Conversely, the sale of securities on a forward commitment basis involves the risk that the value of the securities sold may increase before the settlement date. Although a Fund will generally purchase securities on a when-issued or forward commitment basis with the intention of acquiring the securities for its portfolio, the Fund may dispose of when-issued securities or forward commitments prior to settlement, which may result in a realized gain or loss.
Derivative Contracts — A derivative is an instrument whose value is derived from underlying assets, indices, reference rates or a combination of these factors. A Fund enters into derivative transactions to hedge against changes in interest rates, securities prices, and/or currency exchange rates, to increase total return, or to gain access to certain markets or attain exposure to other underliers.
Exchange-traded derivatives, including futures and options contracts, are valued at the last sale or settlement price and typically fall within Level 1 of the fair value hierarchy. Over-the-counter (“OTC”) and centrally cleared derivatives are valued using market transactions and other market evidence, including market-based inputs to models, calibration to market-clearing transactions, broker or dealer quotations, or other alternative pricing sources. Where models are used, the selection of a particular model to value OTC and centrally cleared derivatives depends upon the contractual terms of, and specific risks inherent in, the instrument, as well as the availability of pricing information in the market. Valuation models require a variety of inputs, including contractual terms, market prices, yield curves, credit curves, measures of volatility, voluntary and involuntary prepayment rates, loss severity rates and correlations of such inputs. For OTC and centrally cleared derivatives that trade in liquid markets, model inputs can generally be verified and model selection does not involve significant management judgment. OTC and centrally cleared derivatives are classified within Level 2 of the fair value hierarchy when significant inputs are corroborated by market evidence.
i. Forward Contracts — A forward contract is a contract between two parties to buy or sell an asset at a specified price on a future date. A forward contract settlement can occur on a cash or delivery basis. Forward contracts are marked-to-market daily using independent vendor prices, and the change in value, if any, is recorded as an unrealized gain or loss. Cash and certain investments may be used to collateralize forward contracts.
A forward foreign currency contract is a forward contract in which a Fund agrees to receive or deliver a fixed quantity of one currency for another, at a pre-determined price at a future date. All forward foreign currency exchange contracts are marked-to-market daily at the applicable forward rate. Non-deliverable forward foreign currency exchange contracts are settled with the counterparty in cash without the delivery of foreign currency.
ii. Futures Contracts — Futures contracts are contracts to buy or sell a standardized quantity of a specified commodity or security and are valued based on exchanged settlement prices or independent market quotes. Futures contracts are valued at the last settlement price, or in the absence of a sale, the last bid price for long positions and at the last ask price for short positions,
65
GOLDMAN SACHS VARIABLE INSURANCE TRUST FUNDS
Notes to Financial Statements (continued)
December 31, 2016
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS (continued)
at the end of each day on the board of trade or exchange upon which they are traded. Upon entering into a futures contract, a Fund deposits cash or securities in an account on behalf of the broker in an amount sufficient to meet the initial margin requirement. Subsequent payments are made or received by a Fund equal to the daily change in the contract value and are recorded as variation margin receivable or payable with a corresponding offset to unrealized gains or losses.
iii. Option — When a Fund writes call or put option contracts, an amount equal to the premium received is recorded as a liability and is subsequently marked-to-market to reflect the current value of the option written. Swaptions are options on interest rate swap contracts.
Upon the purchase of a call option or a put option by a Fund, the premium paid is recorded as an investment and subsequently marked-to-market to reflect the current value of the option. Certain options may be purchased with premiums to be determined on a future date. The premiums for these options are based upon implied volatility parameters at specified terms.
iv. Swap Contracts — Bilateral swap contracts are agreements in which a Fund and a counterparty agree to exchange periodic payments on a specified notional amount or make a net payment upon termination. Bilateral swap transactions are privately negotiated in the OTC market and payments are settled through direct payments between a Fund and the counterparty. By contrast, certain swap transactions are subject to mandatory central clearing. These swaps are executed through a derivatives clearing member (“DCM”), acting in an agency capacity, and submitted to a central counterparty (“CCP”) (“centrally cleared swaps”), in which case all payments are settled with the CCP through the DCM. Swaps are marked-to-market daily using pricing vendor quotations, counterparty or clearinghouse prices or model prices, and the change in value, if any, is recorded as an unrealized gain or loss. Upon entering into a swap contract, a Fund is required to satisfy an initial margin requirement by delivering cash or securities to the counterparty (or in some cases, segregated in a triparty account on behalf of the counterparty), which can be adjusted by any mark-to-market gains or losses pursuant to bilateral or centrally cleared arrangements. For centrally cleared swaps the daily change in valuation, if any, is recorded as a receivable or payable for variation margin.
An interest rate swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals, based upon or calculated by reference to changes in interest rates on a specified notional principal amount. The payment flows are usually netted against each other, with the difference being paid by one party to the other.
A credit default swap is an agreement that involves one party (the buyer of protection) making a stream of payments to another party (the seller of protection) in exchange for the right to receive protection on a reference security or obligation, including a group of assets or exposure to the performance of an index. A Fund’s investment in credit default swaps may involve greater risks than if the Fund had invested in the referenced obligation directly. Credit events are contract specific but may include bankruptcy, failure to pay, restructuring and obligation acceleration. If a Fund buys protection through a credit default swap and no credit event occurs, its payments are limited to the periodic payments previously made to the counterparty. Upon the occurrence of a specified credit event, a Fund, as a buyer of credit protection, is entitled to receive an amount equal to the notional amount of the swap and deliver to the seller the defaulted reference obligation in a physically settled trade. A Fund may also receive a net settlement amount in the form of cash or securities equal to the notional amount of the swap reduced by the recovery value of the reference obligation in a cash settled trade.
As a seller of protection, a Fund generally receives a payment stream throughout the term of the swap, provided that there is no credit event. In addition, if a Fund sells protection through a credit default swap, a Fund could suffer a loss because the value of the referenced obligation and the premium payments received may be less than the notional amount of the swap paid to the buyer of protection. Upon the occurrence of a specified credit event, a Fund, as a seller of credit protection, may be required to take possession of the defaulted reference obligation and pay the buyer an amount equal to the notional amount of the swap in a physically settled trade. A Fund may also pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap reduced by the recovery value of the reference obligation in a cash settled trade. Recovery values are at times established through the credit event auction process in which market participants are ensured that a
66
GOLDMAN SACHS VARIABLE INSURANCE TRUST FUNDS
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS (continued)
transparent price has been set for the defaulted security or obligation. In addition, a Fund is entitled to a return of any assets, which have been pledged as collateral to the counterparty upon settlement.
The maximum potential amount of future payments (undiscounted) that a Fund as seller of protection could be required to make under a credit default swap would be an amount equal to the notional amount of the agreement. These potential amounts would be partially offset by any recovery values of the respective referenced obligations or net amounts received from a settlement of a credit default swap for the same reference security or obligation where a Fund bought credit protection.
Short Term Investments — Short-term investments having a maturity of 60 days or less are valued using available market quotations as provided by a third party pricing vendor or broker. Prior to October 11, 2016, such securities were valued at amortized cost. These investments are classified as Level 2 of the fair value hierarchy.
B. Level 3 Fair Value Investments — To the extent that significant inputs to valuation models and other alternative pricing sources are unobservable, or if quotations are not readily available, or if GSAM believes that such quotations do not accurately reflect fair value, the fair value of the Funds’ investments may be determined under Valuation Procedures approved by the Trustees. GSAM, consistent with its procedures and applicable regulatory guidance, may make an adjustment to the most recent valuation prices of either domestic or foreign securities in light of significant events to reflect what it believes to be the fair value of the securities at the time of determining the Fund’s NAV. Significant events which could affect a large number of securities in a particular market may include, but are not limited to: significant fluctuations in U.S. or foreign markets; market dislocations; market disruptions; or unscheduled market closings. Significant events which could also affect a single issuer may include, but are not limited to: corporate actions such as reorganizations, mergers and buy-outs; ratings downgrades; and bankruptcies.
C. Fair Value Hierarchy — The following is a summary of the Funds’ investments and derivatives classified in the fair value hierarchy as of December 31, 2016:
CORE FIXED INCOME | ||||||||||||
Investment Type | Level 1 | Level 2 | Level 3 | |||||||||
Assets | ||||||||||||
Fixed Income | ||||||||||||
Corporate Bonds | $ | — | $ | 38,065,136 | $ | — | ||||||
Mortgage-Backed Securities | — | 29,368,049 | — | |||||||||
Collateralized Mortgage Obligations | — | 2,603,437 | — | |||||||||
Commercial Mortgage-Backed Securities | — | 1,721,757 | — | |||||||||
U.S. Treasury Obligations and/or Other U.S. Government Agencies | 19,147,649 | 2,748,483 | — | |||||||||
Asset-Backed Securities | — | 10,176,254 | — | |||||||||
Foreign Government Securities | — | 4,073,424 | — | |||||||||
Supranational | — | 198,476 | ||||||||||
Municipal Debt Obligations | — | 892,230 | — | |||||||||
Investment Company | 289 | — | — | |||||||||
Total | $ | 19,147,938 | $ | 89,847,246 | $ | — | ||||||
Liabilities | ||||||||||||
Fixed Income | ||||||||||||
Mortgage-Backed Securities — Forward Sales Contracts | $ | — | $ | (7,100,938 | ) | $ | — |
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GOLDMAN SACHS VARIABLE INSURANCE TRUST FUNDS
Notes to Financial Statements (continued)
December 31, 2016
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS (continued)
CORE FIXED INCOME (continued) | ||||||||||||
Derivative Type | Level 1 | Level 2 | Level 3 | |||||||||
Assets(a) | ||||||||||||
Forward Foreign Currency Exchange Contracts | $ | — | $ | 203,031 | $ | — | ||||||
Futures Contracts | 87,249 | — | — | |||||||||
Interest Rate Swap Contracts | — | 34,432 | — | |||||||||
Total | $ | 87,249 | $ | 237,463 | $ | — | ||||||
Liabilities(a) | ||||||||||||
Forward Foreign Currency Exchange Contracts | $ | — | $ | (84,338 | ) | $ | — | |||||
Futures Contracts | (17,181 | ) | — | — | ||||||||
Credit Default Swap Contract | — | (1,927 | ) | — | ||||||||
Interest Rate Swap Contracts | — | (95,901 | ) | — | ||||||||
Total | $ | (17,181 | ) | $ | (182,166 | ) | $ | — | ||||
EQUITY INDEX | ||||||||||||
Investment Type | Level 1 | Level 2 | Level 3 | |||||||||
Assets | ||||||||||||
Common Stock and/or Other Equity Investments(b) | ||||||||||||
North America | $ | 164,344,081 | $ | — | $ | — | ||||||
U.S. Treasury Obligations and/or Other U.S. Government Agencies | 99,922 | — | — | |||||||||
Securities Lending Reinvestment Vehicle | 153,725 | — | — | |||||||||
Total | $ | 164,597,728 | $ | — | $ | — | ||||||
Derivative Type | ||||||||||||
Liabilities(a) | ||||||||||||
Futures Contracts | $ | (7,123 | ) | $ | — | $ | — | |||||
GROWTH OPPORTUNITIES | ||||||||||||
Investment Type | Level 1 | Level 2 | Level 3 | |||||||||
Assets | ||||||||||||
Common Stock and/or Other Equity Investments(b) | ||||||||||||
North America | $ | 153,074,456 | $ | — | $ | — | ||||||
Investment Company | 4,209,790 | — | — | |||||||||
Securities Lending Reinvestment Vehicle | 3,236,725 | — | — | |||||||||
Total | $ | 160,520,971 | $ | — | $ | — |
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GOLDMAN SACHS VARIABLE INSURANCE TRUST FUNDS
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS (continued)
HIGH QUALITY FLOATING RATE | ||||||||||||
Investment Type | Level 1 | Level 2 | Level 3 | |||||||||
Assets | ||||||||||||
Fixed Income | ||||||||||||
U.S. Treasury Obligations and/or Other U.S. Government Agencies | $ | 6,069,022 | $ | 751,761 | $ | — | ||||||
Mortgage-Backed Securities | — | 7,315,239 | — | |||||||||
Collateralized Mortgage Obligations | — | 24,932,441 | — | |||||||||
Commercial Mortgage-Backed Securities | — | 112,412 | — | |||||||||
Asset-Backed Securities | — | 24,864,520 | — | |||||||||
Investment Company | 2,927,684 | — | — | |||||||||
Total | $ | 8,996,706 | $ | 57,976,373 | $ | — | ||||||
Derivative Type | ||||||||||||
Assets(a) | ||||||||||||
Futures Contracts | $ | 13,986 | $ | — | $ | — | ||||||
Liabilities(a) | ||||||||||||
Futures Contracts | $ | (9,033 | ) | $ | — | $ | — |
(a) | Amount shown represents unrealized gain (loss) at fiscal year end. |
(b) | Amounts are disclosed by continent to highlight the impact of time zone differences between local market close and the calculation of NAV. Security valuations are based on the principal exchange or system on which they are traded, which may differ from country of domicile noted in the table. |
For further information regarding security characteristics, see the Schedules of Investments.
4. INVESTMENTS IN DERIVATIVES
The following tables set forth, by certain risk types, the gross value of derivative contracts as of December 31, 2016. These instruments were used as part of the Funds’ investment strategies and to obtain and/or manage exposure related to the risks below. The values in the tables below exclude the effects of cash collateral received or posted pursuant to these derivative contracts, and therefore are not representative of the Funds’ net exposure.
Core Fixed Income
Risk | Statements of Assets and Liabilities | Assets | Statements of Assets and Liabilities | Liabilities | ||||||||||
Interest Rate | Variation margin on certain derivative contracts | $ | 121,681 | (a) | Variation margin on certain derivative contracts | $ | (113,082 | )(a) | ||||||
Credit | — | — | Variation margin on certain derivative contracts | (1,927 | )(a) | |||||||||
Currency | Receivables for unrealized gain on forward foreign currency exchange contracts | 203,031 | Payable for unrealized loss on forward foreign currency exchange contracts | (84,338 | ) | |||||||||
Total | $ | 324,712 | $ | (199,347 | ) |
69
GOLDMAN SACHS VARIABLE INSURANCE TRUST FUNDS
Notes to Financial Statements (continued)
December 31, 2016
4. INVESTMENTS IN DERIVATIVES (continued)
Fund | Risk | Statements of Assets and Liabilities | Assets(a) | Statements of Assets and Liabilities | Liabilities(a) | |||||||||
Equity Index | Equity | — | $ | — | Variation margin on certain derivative contracts | $ | (7,123 | ) | ||||||
High Quality Floating Rate | Interest Rate | Variation margin on certain derivative contracts | 13,986 | Variation margin on certain derivative contracts | (9,033 | ) |
(a) | Includes unrealized gain (loss) on futures contracts and centrally cleared swap contracts described in the Additional Investment Information sections of the Schedules of Investments. Only the variation margin as of December 31, 2016 is reported within the Statements of Assets and Liabilities. |
The following table sets forth, by certain risk types, the Fund’s gains (losses) related to these derivatives and their indicative volumes for the fiscal year ended December 31, 2016. These gains (losses) should be considered in the context that these derivative contracts may have been executed to create investment opportunities and/or economically hedge certain investments, and accordingly, certain gains (losses) on such derivative contracts may offset certain (losses) gains attributable to investments. These gains (losses) are included in “Net realized gain (loss)” or “Net change in unrealized gain (loss)” on the Statements of Operations:
Core Fixed Income
Risk | Statements of Operations | Net Realized Gain (Loss) | Net Change in Unrealized Gain (Loss) | Average Number of Contracts(a) | ||||||||||
Interest Rate | Net realized gain (loss) from investments, futures contracts and swap contracts/Net change in unrealized gain (loss) on futures contracts and swap contracts | $ | 93,313 | $ | 29,327 | 139 | ||||||||
Credit | Net realized gain (loss) from swap contracts/Net change in unrealized gain (loss) on swap contracts | (74,652 | ) | (1,927 | ) | 1 | ||||||||
Currency | Net realized gain (loss) from forward foreign currency exchange contracts/Net change in unrealized gain (loss) on forward foreign currency exchange contracts | (260,940 | ) | 144,560 | 228 | |||||||||
Total | $ | (242,279 | ) | $ | 171,960 | 368 |
(a) | Average number of contracts is based on the average of month end balances for the fiscal year ended December 31, 2016. |
The following table represents gains (losses) which are included in “Net realized gain (loss) from future transactions” and “Net change in unrealized gain (loss) on futures” in the Statements of Operations:
Fund | Risk | Net Realized Gain (Loss) | Net Change in Unrealized Gain (Loss) | Average Number of Contracts(a) | ||||||||||||
Equity Index | Equity | $ | 121,616 | $ | (6,229 | ) | 10 | |||||||||
High Quality Floating Rate | Interest Rate | (74,960 | ) | (6,302 | ) | 53 |
(a) | Average number of contracts is based on the average of month end balances for the fiscal year ended December 31, 2016. |
5. AGREEMENTS AND AFFILIATED TRANSACTIONS
A. Management Agreement — Under the Agreement, GSAM manages the Funds, subject to the general supervision of the Trustees.
As compensation for the services rendered pursuant to the Agreement, the assumption of the expenses related thereto and administration of the Funds’ business affairs, including providing facilities, GSAM is entitled to a management fee, accrued daily and paid monthly, equal to an annual percentage rate of each Fund’s average daily net assets.
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GOLDMAN SACHS VARIABLE INSURANCE TRUST FUNDS
5. AGREEMENTS AND AFFILIATED TRANSACTIONS (continued)
For the fiscal year ended December 31, 2016, contractual and effective net management fees with GSAM were at the following rates:
Contractual Management Rate | Effective Net | |||||||||||||||||||||||||||
Fund | First $1 billion | Next $1 billion | Next $3 billion | Next $3 billion | Over $8 billion | Effective Rate | ||||||||||||||||||||||
Core Fixed Income | 0.40 | % | 0.36 | % | 0.34 | % | 0.33 | % | 0.32 | % | 0.40 | % | 0.40 | % | ||||||||||||||
Growth Opportunities | 1.00 | 1.00 | 0.90 | 0.86 | 0.84 | 1.00 | 0.87 | * | ||||||||||||||||||||
High Quality Floating Rate | 0.40 | 0.36 | 0.34 | 0.33 | 0.32 | 0.40 | 0.30 | * |
^ | Effective Net Management Rate includes the impact of management fee waivers of affiliated Underlying Funds, if any. |
* | GSAM agreed to waive a portion of its management fee in order to achieve net management rates, as defined in the Funds’ most recent prospectuses. These waivers will be effective through at least April 29, 2017 and prior to such date GSAM may not terminate the arrangements without approval of the Trustees. |
The Core Fixed Income, Growth Opportunities and High Quality Floating Rate Funds invest in Institutional Shares of the Goldman Sachs Financial Square Government Fund, which is an affiliated Underlying Fund. GSAM has agreed to waive a portion of its management fee payable by the Funds in an amount equal to the management fee it earns as an investment adviser to any of the affiliated Underlying Funds in which the Funds invest. For the fiscal year ended December 31, 2016, GSAM waived $1,172, $952 and $5,289 of the Core Fixed Income, Growth Opportunities and High Quality Floating Rate Funds’ management fees, respectively.
The Agreement for the Equity Index Fund provides for a contractual management fee at an annual rate equal to 0.30% of the Fund’s average daily net assets. For the fiscal year ended December 31, 2016, GSAM agreed to waive a portion of its management fee in order to achieve the following effective annual rates which will remain in effect through April 29, 2017 and prior to such date GSAM may not terminate the arrangement without the approval of the Trustees:
Management Rate | ||||||
Fund | $0-$400 million | Over $400 million | Effective Rate | |||
Equity Index | 0.21% | 0.20% | 0.21% |
As authorized by the Agreement, GSAM has entered into a Sub-advisory Agreement with SSgA Funds Management, Inc. (“SSgA”) which serves as the sub-adviser to the Equity Index Fund and provides the day-to-day advice regarding the Fund’s portfolio transactions. As compensation for its services, SSgA is entitled to a fee, accrued daily and paid monthly by GSAM, at the following annual rates of the Fund’s average daily net assets: 0.03% on the first $50 million, 0.02% on the next $200 million, 0.01% on the next $750 million and 0.008% over $1 billion. The effective Sub-advisory fee was 0.02% for the fiscal year ended December 31, 2016.
B. Distribution and Service Plans — The Trust, on behalf of each Fund, has adopted Distribution and Service Plans (the “Plans”). Under the Plans, Goldman Sachs, which serves as distributor (the “Distributor”), is entitled to a fee accrued daily and paid monthly, for distribution services and personal and account maintenance services, which may then be paid by Goldman Sachs to authorized dealers, equal to, on an annual basis, 0.25% and 0.40% of the Fund’s average daily net assets attributable to Service and Advisor Shares, respectively. For the fiscal year ended December 31, 2016 for the Growth Opportunities Fund, Goldman Sachs agreed to waive distribution and services fees so as not to exceed an annual rate of 0.16% of average daily net assets of the Fund. This distribution and service fee waiver will remain in place through at least April 29, 2017, and prior to such date Goldman Sachs may not terminate the arrangement without the approval of the Trustees.
��
71
GOLDMAN SACHS VARIABLE INSURANCE TRUST FUNDS
Notes to Financial Statements (continued)
December 31, 2016
5. AGREEMENTS AND AFFILIATED TRANSACTIONS (continued)
C. Transfer Agency Agreement — Goldman Sachs also serves as the transfer agent of the Funds for a fee pursuant to the Transfer Agency Agreement. The fees charged for such transfer agency services are accrued daily and paid monthly at an annual rate of 0.02% of the average daily net assets for Institutional, Service and Advisor Shares.
D. Other Expense Agreements and Affiliated Transactions — GSAM has agreed to limit certain “Other Expenses” of the Funds (excluding acquired fund fees and expenses, transfer agency fees and expenses, taxes, interest, brokerage fees, shareholder meeting, litigation, indemnification and extraordinary expenses) to the extent such expenses exceed, on an annual basis, a percentage rate of the average daily net assets of each Fund. Such Other Expense reimbursements, if any, are accrued daily and paid monthly. In addition, the Funds are not obligated to reimburse GSAM for prior fiscal year expense reimbursements, if any. The Other Expense limitations as an annual percentage rate of average daily net assets for Core Fixed Income, Equity Index, Growth Opportunities and High Quality Floating Rate Funds are 0.004%, 0.004%, 0.004% and 0.074%, respectively. These Other Expense limitations will remain in place through at least April 29, 2017, and prior to such date GSAM may not terminate the arrangements without the approval of the Trustees. In addition, the Funds have entered into certain offset arrangements with the custodian and the transfer agent, which may result in a reduction of the Funds’ expenses and are received irrespective of the application of the “Other Expense” limitations described above.
For the fiscal year ended December 31, 2016, these expense reductions, including any fee waivers and Other Expense reimbursements, were as follows:
Fund | Management Fee Waiver | Distribution and Service Fee Waiver | Custody Fee Credits | Other Expense Reimbursement | Total Expense Reductions | |||||||||||||||
Core Fixed Income | $ | 1,172 | $ | — | $ | 3,364 | $ | 256,892 | $ | 261,428 | ||||||||||
Equity Index | 146,669 | — | 607 | 247,655 | 394,931 | |||||||||||||||
Growth Opportunities | 213,863 | 146,289 | 3,551 | 208,748 | 572,451 | |||||||||||||||
High Quality Floating Rate | 67,424 | — | 504 | 201,839 | 269,767 |
E. Line of Credit Facility — As of December 31, 2016, the Funds participated in a $1,100,000,000 committed, unsecured revolving line of credit facility (the “facility”) together with other funds of the Trust and certain registered investment companies having management agreements with GSAM or its affiliates. This facility is to be used for temporary emergency purposes, or to allow for an orderly liquidation of securities to meet redemption requests. The interest rate on borrowings is based on the federal funds rate. The facility also requires a fee to be paid by the Funds based on the amount of the commitment that has not been utilized. For the fiscal year ended December 31, 2016, the Funds did not have any borrowings under the facility.
F. Other Transactions with Affiliates — The following table provides information about the investment in shares of issuers of which a Fund is an affiliate as of and for the fiscal year ended December 31, 2016:
Fund | Name of Affiliated Issuer | Market Value 12/31/2015 | Purchases at Cost | Proceeds from Sales | Net Realized Gain (Loss) | Change in Unrealized Appreciation (Depreciation) | Market Value 12/31/2016 | Dividend Income | ||||||||||||||||||||||||
Equity Index | Goldman Sachs Group, Inc. (The) | $ | 669,374 | $ | — | $ | (94,419 | ) | $ | 26,420 | $ | 156,963 | $ | 758,338 | $ | 8,978 |
72
GOLDMAN SACHS VARIABLE INSURANCE TRUST FUNDS
5. AGREEMENTS AND AFFILIATED TRANSACTIONS (continued)
The following table provides information about the Funds’ investment in the Goldman Sachs Financial Square Government Fund as of and for the fiscal year ended December 31, 2016:
Fund | Market Value 12/31/2015 | Purchases at Cost | Proceeds from Sales | Market Value 12/31/2016 | Dividend Income | |||||||||||||||
Core Fixed Income | $ | — | $ | 28,997,569 | $ | (28,997,280 | ) | $ | 289 | $ | 2,143 | |||||||||
Growth Opportunities | — | 15,150,568 | (10,940,778 | ) | 4,209,790 | 2,126 | ||||||||||||||
High Quality Floating Rate | 10,347,519 | 25,242,743 | (32,662,578 | ) | 2,927,684 | 8,958 |
As of December 31, 2016, The Goldman Sachs Group, Inc. was the beneficial owner of approximately 30% and 100% of the Institutional Class Shares of the Core Fixed Income and High Quality Floating Rate Funds, respectively.
6. PORTFOLIO SECURITIES TRANSACTIONS
The cost of purchases and proceeds from sales and maturities of long-term securities for the fiscal year ended December 31, 2016 were as follows:
Fund | Purchases of U.S. Government and Agency Obligations | Purchases (Excluding U.S. Government and Agency Obligations) | Sales and Maturities of U.S. Government and Agency Obligations | Sales and Maturities (Excluding U.S. Government and Agency Obligations) | ||||||||||||||
Core Fixed Income | $ | 365,492,296 | $ | 21,080,596 | $ | 373,703,682 | $ | 23,025,494 | ||||||||||
Equity Index | — | 4,978,781 | — | 23,393,475 | ||||||||||||||
Growth Opportunities | — | 100,831,871 | — | 115,129,630 | ||||||||||||||
High Quality Floating Rate | 21,961,500 | 13,166,696 | 16,382,627 | 12,917,817 |
7. SECURITIES LENDING
The Growth Opportunities Fund may lend its securities through a securities lending agent, the Bank of New York Mellon (“BNYM”), to certain qualified borrowers. Pursuant to exemptive relief granted by the Securities and Exchange Commission (“SEC”) and the terms and conditions contained therein, the Equity Index Fund may lend its securities through a securities lending agent, Goldman Sachs Agency Lending (“GSAL”), a wholly-owned subsidiary of Goldman Sachs, to certain qualified borrowers including Goldman Sachs and affiliates. In accordance with the Funds’ securities lending procedures, the Funds receive cash collateral at least equal to the market value of the securities on loan. The market value of the loaned securities is determined at the close of business of the Funds, at their last sale price or official closing price on the principal exchange or system on which they are traded, and any additional required collateral is delivered to the Funds on the next business day. As with other extensions of credit, the Funds may experience delay in the recovery of its securities or incur a loss should the borrower of the securities breach its agreement with the Funds or become insolvent at a time when the collateral is insufficient to cover the cost of repurchasing securities on loan. Dividend income received from securities on loan may not be subject to withholding taxes and therefore withholding taxes paid may differ from the amounts listed in the Statements of Operations. Loans of securities are terminable at any time and as such 1) the remaining contractual maturities of the outstanding securities lending transactions are considered to be
73
GOLDMAN SACHS VARIABLE INSURANCE TRUST FUNDS
Notes to Financial Statements (continued)
December 31, 2016
7. SECURITIES LENDING (continued)
overnight and continuous and 2) the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.
The Equity Index and Growth Opportunities Funds invest the cash collateral received in connection with securities lending transactions in the Goldman Sachs Financial Square Government Fund (“Government Money Market Fund”), an affiliated series of the Trust. Prior to September 30, 2016, the cash collateral had been invested in the Goldman Sachs Financial Square Money Market Fund. The Government Money Market Fund is registered under the Act as an open end investment company, is subject to Rule 2a-7 under the Act, and is managed by GSAM, for which GSAM may receive an investment advisory fee of up to 0.205% on an annualized basis of the average daily net assets of the Government Money Market Fund.
In the event of a default by a borrower with respect to any loan, GSAL will and BNYM may exercise any and all remedies provided under the applicable borrower agreement to make the Funds whole. These remedies include purchasing replacement securities by applying the collateral held from the defaulting broker against the purchase cost of the replacement securities. If GSAL or BNYM are unable to purchase replacement securities, GSAL and/or BNYM will indemnify the Funds by paying the Funds an amount equal to the market value of the securities loaned minus the value of cash collateral received from the borrower for the loan, subject to an exclusion for any shortfalls resulting from a loss of value in such cash collateral due to reinvestment risk. The Fund’s loaned securities were all subject to enforceable Securities Lending Agreements, and the value of the collateral is at least equal to the value of the cash received. The amounts of the Fund’s overnight and continuous agreements collateralized by common stocks which represent the gross amounts of recognized liabilities for securities lending transactions outstanding as of December 31, 2016 are disclosed as “Payable upon return of securities loaned” on the Statements of Assets and Liabilities.
The Funds, GSAL and BNYM received compensation relating to the lending of the Funds’ securities. The amounts earned, if any, by the Funds for the fiscal year ended December 31, 2016 are reported under Investment Income on the Statements of Operations.
The table below details securities lending activity with affiliates of Goldman Sachs:
For the Fiscal Year ended December 31, 2016 | ||||||||||||||
Fund | Earnings of GSAL Relating to Securities Loaned | Amounts Received by the Funds from Lending to Goldman Sachs | Amounts Payable to Goldman Sachs upon Return of Securities Loaned as of December 31, 2016 | |||||||||||
Equity Index | $ | 52 | $ | 157 | $ | 19,950 |
The following table provides information about the Fund’s investment in the Government Money Market Fund for the fiscal year ended December 31, 2016:
Fund | Market Value | Purchases at Cost | Proceeds | Market Value | ||||||||||||
Equity Index | $ | — | $ | 584,350 | $ | (430,625 | ) | $ | 153,725 | |||||||
Growth Opportunities | — | 8,792,475 | (5,555,750 | ) | 3,236,725 |
74
GOLDMAN SACHS VARIABLE INSURANCE TRUST FUNDS
8. TAX INFORMATION
The tax character of distributions paid during the fiscal year ended December 31, 2016 was as follows:
Core Fixed Income | Equity Index | Growth Opportunities | High Quality Floating Rate | |||||||||||||
Distributions paid from: | ||||||||||||||||
Ordinary income | $ | 2,237,840 | $ | 3,613,751 | $ | — | $ | 681,990 | ||||||||
Net long-term capital gains | — | 7,349,964 | 1,072,082 | — | ||||||||||||
Total taxable distributions | 2,237,840 | $ | 10,963,715 | $ | 1,072,082 | $ | 681,990 |
The tax character of distributions paid during the fiscal year ended December 31, 2015, was as follows:
Core Fixed Income | Equity Index | Growth Opportunities | High Quality Floating Rate | |||||||||||||
Distributions paid from: | ||||||||||||||||
Ordinary income | $ | 2,476,010 | $ | 3,239,306 | $ | 80,573 | $ | 320,052 | ||||||||
Net long-term capital gains | — | 9,618,594 | 13,962,295 | — | ||||||||||||
Total taxable distributions | $ | 2,476,010 | $ | 12,857,900 | $ | 14,042,868 | $ | 320,052 |
As of December 31, 2016, the components of accumulated earnings (losses) on a tax-basis were as follows:
Core Fixed Income | Equity Index | Growth Opportunities | High Quality Floating Rate | |||||||||||||
Undistributed ordinary income — net | $ | 745,995 | $ | 202,574 | $ | — | $ | 68,154 | ||||||||
Undistributed long-term capital gains | — | 1,168,307 | — | — | ||||||||||||
Total undistributed earnings | $ | 745,995 | $ | 1,370,881 | $ | — | $ | 68,154 | ||||||||
Capital loss carryforwards: | ||||||||||||||||
Expiring 2018(1) | (4,214,815 | ) | — | — | — | |||||||||||
Perpetual short-term | — | — | (249,583 | ) | (206,576 | ) | ||||||||||
Perpetual long-term | — | — | — | (756,229 | ) | |||||||||||
Total capital loss carryforwards | $ | (4,214,815 | ) | $ | — | $ | (249,583 | ) | $ | (962,805 | ) | |||||
Timing differences ( § 857 (b)(9) deferred dividend, post October loss deferral, qualified late year loss and straddle loss deferrals) | (1,488,198 | ) | 2,338 | (711,289 | ) | (25,918 | ) | |||||||||
Unrealized gains (losses) — net | 811,377 | 82,918,192 | 28,688,639 | (19,572 | ) | |||||||||||
Total accumulated gains (losses) — net | (4,145,641 | ) | 84,291,411 | 27,727,767 | (940,141 | ) |
(1) | Expiration occurs on December 31 of the year indicated. The Core Fixed Income Fund utilized $538,600 of capital losses in the current fiscal year. |
75
GOLDMAN SACHS VARIABLE INSURANCE TRUST FUNDS
Notes to Financial Statements (continued)
December 31, 2016
8. TAX INFORMATION (continued)
As of December 31, 2016, the Funds’ aggregate security unrealized gains and losses based on cost for U.S. federal income tax purposes were as follows:
Core Fixed Income | Equity Index | Growth Opportunities | High Quality Floating Rate | |||||||||||||
Tax cost | $ | 108,024,483 | $ | 81,679,536 | $ | 131,832,332 | $ | 66,992,651 | ||||||||
Gross unrealized gain | 2,190,613 | 93,299,967 | 32,223,486 | 291,268 | ||||||||||||
Gross unrealized loss | (1,219,912 | ) | (10,381,775 | ) | (3,534,847 | ) | (310,840 | ) | ||||||||
Net unrealized security gain (loss) | $ | 970,701 | $ | 82,918,192 | $ | 28,688,639 | $ | (19,572 | ) | |||||||
Net unrealized loss on other investments | (159,324 | ) | — | — | — | |||||||||||
Net unrealized gain (loss) | $ | 811,377 | $ | 82,918,192 | $ | 28,688,639 | $ | (19,572 | ) |
The difference between GAAP-basis and tax-basis unrealized gains (losses) is attributable primarily to wash sales, net mark to market gains (losses) on regulated futures and foreign currency contracts, and differences in the tax treatment of underlying fund investments, real estate investment trust investments, securities on loan and swaps.
In order to present certain components of the Funds’ capital accounts on a tax-basis, certain reclassifications have been recorded to the Funds’ accounts. These reclassifications have no impact on the NAV of the Funds and result primarily from net operating losses, underlying fund investments, and differences in the tax treatment of foreign currency transactions, inflation protected securities, paydown gains and losses, swaps and real estate investment trust investments.
Fund | Paid-in Capital | Accumulated Net Realized Gain (Loss) | Undistributed Net Investment Income (Loss) | |||||||||||
Core Fixed Income | $ | — | $ | (170,012 | ) | $ | 170,012 | |||||||
Equity Index | (149,646 | ) | 165,117 | (15,471 | ) | |||||||||
Growth Opportunities | (604,668 | ) | 7,197 | 597,471 | ||||||||||
High Quality Floating Rate | — | (156,448 | ) | 156,448 |
GSAM has reviewed the Funds’ tax positions for all open tax years (the current and prior three years, as applicable) and has concluded that no provision for income tax is required in the Funds’ financial statements. Such open tax years remain subject to examination and adjustment by tax authorities.
9. OTHER RISKS
The Funds’ risks include, but are not limited to, the following:
Derivatives Risk — The Funds’ use of derivatives may result in loss. Derivative instruments, which may pose risks in addition to and greater than those associated with investing directly in securities, currencies or other instruments, may be illiquid or less liquid, volatile, difficult to price and leveraged so that small changes in the value of the underlying instruments may produce disproportionate losses to the Funds. Derivatives are also subject to counterparty risk, which is the risk that the other party in the transaction will not fulfill its contractual obligation. The use of derivatives is a highly specialized activity that involves investment techniques and risks different from those associated with investments in more traditional securities and instruments. Losses from derivatives can also result from a lack of correlation between changes in the value of derivative instruments and the portfolio assets (if any) being hedged.
76
GOLDMAN SACHS VARIABLE INSURANCE TRUST FUNDS
9. OTHER RISKS (continued)
Interest Rate Risk — When interest rates increase, fixed income securities or instruments held by a Fund will generally decline in value. Long-term fixed income securities or instruments will normally have more price volatility because of this risk than short-term fixed income securities or instruments. The risks associated with increasing rates are heightened given that interest rates are near historic lows, but may be expected to increase in the future with unpredictable effects on the markets and a Fund’s investments. Fluctuations in interest rates may also affect the liquidity of fixed income securities and instruments held by the Funds.
Investments in Other Investment Companies — As a shareholder of another investment company, including an exchange traded fund (“ETF”), a Fund will indirectly bear its proportionate share of any net management fees and other expenses paid by such other investment companies, in addition to the fees and expenses regularly borne by the Fund. ETFs are subject to risks that do not apply to conventional mutual funds, including but not limited to the following: (i) the market price of the ETF’s shares may trade at a premium or a discount to their NAV; and (ii) an active trading market for an ETF’s shares may not develop or be maintained.
Large Shareholder Transactions Risk — A Fund may experience adverse effects when certain large shareholders, such as other funds, participating insurance companies, accounts and Goldman Sachs affiliates, purchase or redeem large amounts of shares of a Fund. Such large shareholder redemptions may cause a Fund to sell portfolio securities at times when it would not otherwise do so, which may negatively impact a Fund’s NAV and liquidity. These transactions may also accelerate the realization of taxable income to shareholders if such sales of investments resulted in gains, and may also increase transaction costs. In addition, a large redemption could result in a Fund’s current expenses being allocated over a smaller asset base, leading to an increase in the Fund’s expense ratio. Similarly, large Fund share purchases may adversely affect a Fund’s performance to the extent that the Fund is delayed in investing new cash and is required to maintain a larger cash position than it ordinarily would.
Liquidity Risk — A Fund may make investments that are illiquid or that may become less liquid in response to market developments or adverse investor perceptions. Illiquid investments may be more difficult to value. Liquidity risk may also refer to the risk that a Fund will not be able to pay redemption proceeds within the allowable time period because of unusual market conditions, an unusually high volume of redemption requests, or other reasons. To meet redemption requests, a Fund may be forced to sell investments at an unfavorable time and/or under unfavorable conditions. Liquidity risk may be the result of, among other things, the reduced number and capacity of traditional market participants to make a market in fixed income securities or the lack of an active market. The potential for liquidity risk may be magnified by a rising interest rate environment or other circumstances where investor redemptions from fixed income mutual funds may be higher than normal, potentially causing increased supply in the market due to selling activity.
Market and Credit Risks — In the normal course of business, a Fund trades financial instruments and enters into financial transactions where risk of potential loss exists due to changes in the market (market risk). Additionally, a Fund may also be exposed to credit risk in the event that an issuer or guarantor fails to perform or that an institution or entity with which the Fund has unsettled or open transactions defaults.
Short Position Risk — A Fund may enter into a short position through a futures contract, an option or swap agreement or through short sales of any instrument that a Fund may purchase for investment. Taking short positions involves leverage of a Fund’s assets and presents various risks. If the value of the underlying instrument or market in which a Fund has taken a short position increases, then the Fund will incur a loss equal to the increase in value from the time that the short position was entered into plus any related interest payments or other fees. Taking short positions involves the risk that losses may be disproportionate, may exceed the amount invested, and may be unlimited.
77
GOLDMAN SACHS VARIABLE INSURANCE TRUST FUNDS
Notes to Financial Statements (continued)
December 31, 2016
10. INDEMNIFICATIONS
Under the Trust’s organizational documents, its Trustees, officers, employees and agents are indemnified, to the extent permitted by the Act and state law, against certain liabilities that may arise out of performance of their duties to the Funds. Additionally, in the course of business, the Funds enter into contracts that contain a variety of indemnification clauses. The Funds’ maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Funds that have not yet occurred. However, GSAM believes the risk of loss under these arrangements to be remote.
11. SUBSEQUENT EVENTS
Subsequent events after the Statements of Assets and Liabilities date have been evaluated and GSAM has concluded that there is no impact requiring adjustment or disclosure in the financial statements.
12. SUMMARY OF SHARE TRANSACTIONS
Share activity is as follows:
Core Fixed Income Fund | ||||||||||||||||
For the Fiscal Year Ended December 31, 2016 | For the Fiscal Year Ended December 31, 2015 | |||||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||||
Institutional Shares | ||||||||||||||||
Shares sold | 6,000 | $ | 64,838 | — | $ | — | ||||||||||
Reinvestment of distributions | 66 | 712 | 65 | 693 | ||||||||||||
Shares redeemed | (18 | ) | (188 | ) | — | — | ||||||||||
6,048 | 65,362 | 65 | 693 | |||||||||||||
Service Shares | ||||||||||||||||
Shares sold | 1,743,245 | 18,760,474 | 1,613,636 | 17,192,161 | ||||||||||||
Reinvestment of distributions | 206,845 | 2,237,128 | 232,121 | 2,475,317 | ||||||||||||
Shares redeemed | (1,488,768 | ) | (16,023,387 | ) | (1,839,915 | ) | (19,689,934 | ) | ||||||||
461,322 | 4,974,215 | 5,842 | (22,456 | ) | ||||||||||||
NET INCREASE (DECREASE) | 467,370 | $ | 5,039,577 | 5,907 | $ | (21,763 | ) |
Equity Index Fund | ||||||||||||||||
For the Fiscal Year Ended December 31, 2016 | For the Fiscal Year Ended December 31, 2015 | |||||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||||
Service Shares | ||||||||||||||||
Shares sold | 232,981 | $ | 3,310,921 | 231,558 | $ | 3,490,618 | ||||||||||
Reinvestment of distributions | 750,425 | 10,963,715 | 925,695 | 12,857,900 | ||||||||||||
Shares redeemed | (1,727,994 | ) | (24,627,725 | ) | (1,733,704 | ) | (26,070,660 | ) | ||||||||
NET DECREASE | (744,588 | ) | $ | (10,353,089 | ) | (576,451 | ) | $ | (9,722,142 | ) |
78
GOLDMAN SACHS VARIABLE INSURANCE TRUST FUNDS
12. SUMMARY OF SHARE TRANSACTIONS (continued)
Growth Opportunities Fund | ||||||||||||||||
For the Fiscal Year Ended December 31, 2016 | For the Fiscal Year Ended December 31, 2015 | |||||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||||
Institutional Shares | ||||||||||||||||
Shares sold | 524,410 | $ | 3,733,669 | — | $ | — | ||||||||||
Reinvestment of distributions | 3,423 | 23,519 | 392 | 2,613 | ||||||||||||
Shares redeemed | (13,935 | ) | (95,699 | ) | — | — | ||||||||||
513,898 | 3,661,489 | 392 | 2,613 | |||||||||||||
Service Shares | ||||||||||||||||
Shares sold | 2,139,566 | 14,365,397 | 1,275,515 | 9,813,897 | ||||||||||||
Reinvestment of distributions | 153,762 | 1,048,654 | 2,117,685 | 14,040,255 | ||||||||||||
Shares redeemed | (4,384,503 | ) | (29,589,084 | ) | (4,322,894 | ) | (33,053,396 | ) | ||||||||
(2,091,175 | ) | (14,175,033 | ) | (929,694 | ) | (9,199,244 | ) | |||||||||
NET DECREASE | (1,577,277 | ) | $ | (10,513,544 | ) | (929,302 | ) | $ | (9,196,631 | ) |
High Quality Floating Rate Fund | ||||||||||||||||
For the Fiscal Year Ended December 31, 2016 | For the Fiscal Year Ended December 31, 2015 | |||||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||||
Institutional Shares | ||||||||||||||||
Reinvestment of distributions | 31 | $ | 314 | 17 | $ | 176 | ||||||||||
31 | 314 | 17 | 176 | |||||||||||||
Service Shares | ||||||||||||||||
Shares sold | 615,563 | 6,386,630 | 591,898 | 6,176,818 | ||||||||||||
Reinvestment of distributions | 64,247 | 665,765 | 30,398 | 316,783 | ||||||||||||
Shares redeemed | (963,897 | ) | (9,999,019 | ) | (1,067,471 | ) | (11,135,815 | ) | ||||||||
(284,087 | ) | (2,946,624 | ) | (445,175 | ) | (4,642,214 | ) | |||||||||
Advisor Shares | ||||||||||||||||
Shares sold | 274,402 | 2,847,252 | 259,411 | 2,714,004 | ||||||||||||
Reinvestment of distributions | 1,533 | 15,910 | 296 | 3,093 | ||||||||||||
Shares redeemed | (243,055 | ) | (2,520,643 | ) | (134,130 | ) | (1,402,982 | ) | ||||||||
32,880 | 342,519 | 125,577 | 1,314,115 | |||||||||||||
NET DECREASE | (251,176 | ) | $ | (2,603,791 | ) | (319,581 | ) | $ | (3,327,923 | ) |
79
Report of Independent Registered Public Accounting Firm
To the Board of Trustees and Shareholders of the Goldman Sachs Variable Insurance Trust:
In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Goldman Sachs Core Fixed Income Fund, the Goldman Sachs Equity Index Fund, the Goldman Sachs Growth Opportunities Fund, and the Goldman Sachs High Quality Floating Rate Fund (collectively the “Funds”), funds of the Goldman Sachs Variable Insurance Trust, as of December 31, 2016, and the results of each of their operations, the changes in each of their net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities as of December 31, 2016 by correspondence with the custodian, brokers, transfer agent of the underlying funds and the application of alternative auditing procedures where securities purchased confirmations had not been received, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 14, 2017
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GOLDMAN SACHS VARIABLE INSURANCE TRUST FUNDS
Fund Expenses — Six Month Period Ended December 31, 2016 (Unaudited) |
As a shareholder of Institutional, Service or Advisor Shares of the Fund, you incur ongoing costs, including management fees, distribution and/or service (12b-1) fees (with respect to Service and Advisor Shares) and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Institutional Shares, Service Shares and Advisor Shares of the Funds and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from July 1, 2016 through December 31, 2016, which represents a period of 184 days of a 366 day year.
Actual Expenses — The first line under each share class in the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000=8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes — The second line under each share class in the table below provides information about hypothetical account values and hypothetical expenses based on the Funds’ actual net expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Funds’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Funds and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only. As a shareholder of the Fund you do not incur any transaction costs, such as sales charges, redemption fees, or exchange fees, but shareholders of other funds may incur such costs. The second line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds whose shareholders may incur transaction costs.
Core Fixed Income Fund | Equity Index Fund | Growth Opportunities Fund | High Quality Floating Rate Fund | |||||||||||||||||||||||||||||||||||||||||||||
Share Class | Beginning Account Value 07/01/16 | Ending Account Value 12/31/16 | Expenses Paid for the 6 Months Ended 12/31/16* | Beginning Account Value 07/01/16 | Ending Account Value 12/31/16 | Expenses Paid for the 6 Months Ended 12/31/16* | Beginning Account Value 07/01/16 | Ending Account Value 12/31/16 | Expenses Paid for the 6 Months Ended 12/31/16* | Beginning Account Value 07/01/16 | Ending Account Value 12/31/16 | Expenses Paid for the 6 Months Ended 12/31/16* | ||||||||||||||||||||||||||||||||||||
Institutional | ||||||||||||||||||||||||||||||||||||||||||||||||
Actual | $ | 1,000 | $ | 981.30 | $ | 2.19 | N/A | N/A | N/A | $ | 1,000 | $ | 993.40 | $ | 4.46 | $ | 1,000 | $ | 1,010.50 | $ | 1.97 | |||||||||||||||||||||||||||
Hypothetical 5% return | 1,000 | 1,022.92+ | 2.24 | N/A | N/A | N/A | 1,000 | 1,020.66+ | 4.52 | 1,000 | 1,023.18+ | 1.98 | ||||||||||||||||||||||||||||||||||||
Service | ||||||||||||||||||||||||||||||||||||||||||||||||
Actual | 1,000 | 979.80 | 3.33 | $ | 1,000 | $ | 1,075.80 | $ | 2.50 | 1,000 | 991.90 | 5.26 | 1,000 | 1,008.30 | 3.28 | |||||||||||||||||||||||||||||||||
Hypothetical 5% return | 1,000 | 1,021.77+ | 3.40 | 1,000 | 1,022.72+ | 2.44 | 1,000 | 1,019.86+ | 5.33 | 1,000 | 1,021.87+ | 3.30 | ||||||||||||||||||||||||||||||||||||
Advisor | ||||||||||||||||||||||||||||||||||||||||||||||||
Actual | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | 1,000 | 1,008.40 | 4.04 | ||||||||||||||||||||||||||||||||||||
Hypothetical 5% return | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | 1,000 | 1,021.11+ | 4.06 |
* | Expenses are calculated using each Fund’s annualized net expense ratio for each class, which represents the ongoing expenses as a percentage of net assets for the six months ended December 31, 2016. Expenses are calculated by multiplying the annualized net expense ratio by the average account value for the period; then multiplying the result by the number of days in the most recent fiscal half year; and then dividing that result by the number of days in the fiscal year. The annualized net expense ratios for the period were as follows: |
Fund | Institutional | Service | Advisor | |||||||||
Core Fixed Income | 0.44% | 0.67% | N/A | |||||||||
Equity Index | N/A | 0.48 | N/A | |||||||||
Growth Opportunities | 0.89 | 1.05 | N/A | |||||||||
High Quality Floating Rate | 0.39 | 0.65 | 0.80% |
+ | Hypothetical expenses are based on each Fund’s actual annualized net expense ratios and an assumed rate of return of 5% per year before expenses. |
81
GOLDMAN SACHS VARIABLE INSURANCE TRUST FUNDS
Trustees and Officers (Unaudited)
Independent Trustees
Name, Address and Age1 | Position(s) Held with the Trust | Term of Office and | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee3 | Other Directorships Held by Trustee4 | |||||||
Ashok N. Bakhru Age: 74 | Chairman of the Board of Trustees | Since 1996 (Trustee since 1991) | Mr. Bakhru is retired. He was formerly Director, Apollo Investment Corporation (a business development company) (2008-2013); President, ABN Associates (a management and financial consulting firm) (1994-1996 and 1998-2012); Trustee, Scholarship America (1998-2005); Trustee, Institute for Higher Education Policy (2003-2008); Director, Private Equity Investors — III and IV (1998-2007), and Equity-Linked Investors II (April 2002-2007).
Chairman of the Board of Trustees — Goldman Sachs Trust; Goldman Sachs Variable Insurance Trust; Goldman Sachs Trust II; Goldman Sachs BDC, Inc.; Goldman Sachs Private Middle Market Credit LLC; Goldman Sachs MLP Income Opportunities Fund; Goldman Sachs MLP and Energy Renaissance Fund; and Goldman Sachs ETF Trust. | 142 | None | |||||||
Kathryn A. Cassidy Age: 62 | Trustee | Since 2015 | Ms. Cassidy is retired. Formerly, she was Advisor to the Chairman (May 2014-December 2014); and Senior Vice President and Treasurer (2008-2014), General Electric Company & General Electric Capital Corporation (technology and financial services companies).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||||
Diana M. Daniels Age: 67 | Trustee | Since 2007 | Ms. Daniels is retired. Formerly, she was Vice President, General Counsel and Secretary, The Washington Post Company (1991-2006). Ms. Daniels is a Trustee Emeritus and serves as a Presidential Councillor of Cornell University (2013-Present); former Member of the Legal Advisory Board, New York Stock Exchange (2003-2006) and of the Corporate Advisory Board, Standish Mellon Management Advisors (2006-2007).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||||
Herbert J. Markley Age: 66 | Trustee | Since 2013 | Mr. Markley is retired. Formerly, he was Executive Vice President, Deere & Company (an agricultural and construction equipment manufacturer) (2007-2009); and President, Agricultural Division, Deere & Company (2001-2007). Previously, Mr. Markley served as an Advisory Board Member of Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust (June 2013-October 2013).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||||
Jessica Palmer Age: 67 | Trustee | Since 2007 | Ms. Palmer is retired. She is Director, Emerson Center for the Arts and Culture (2011-Present); and was formerly a Consultant, Citigroup Human Resources Department (2007-2008); Managing Director, Citigroup Corporate and Investment Banking (previously, Salomon Smith Barney/Salomon Brothers) (1984-2006). Ms. Palmer was a Member of the Board of Trustees of Indian Mountain School (private elementary and secondary school) (2004-2009).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||||
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GOLDMAN SACHS VARIABLE INSURANCE TRUST FUNDS
Trustees and Officers (Unaudited) (continued)
Independent Trustees
Name, Address and Age1 | Position(s) Held with the Trust | Term of Office and | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee3 | Other Directorships Held by Trustee4 | |||||||
Roy W. Templin Age: 56 | Trustee | Since 2013 | Mr. Templin is retired. He recently served as Chairman of the Board of Directors, Con-Way Incorporated (a transportation, logistics and supply chain management service company) (2014-2015); and was formerly Executive Vice President and Chief Financial Officer, Whirlpool Corporation (an appliance manufacturer and marketer) (2004-2012). Previously, Mr. Templin served as an Advisory Board Member of Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust (June 2013-October 2013).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||||
Gregory G. Weaver Age: 65 | Trustee | Since 2015 | Mr. Weaver is retired. He is Director, Verizon Communications Inc. (2015-Present); and was formerly Chairman and Chief Executive Officer, Deloitte & Touche LLP (a professional services firm) (2001-2005 and 2012-2014); and Member of the Board of Directors, Deloitte & Touche LLP (2006-2012).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | Verizon Communications Inc. | |||||||
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GOLDMAN SACHS VARIABLE INSURANCE TRUST FUNDS
Trustees and Officers (Unaudited) (continued)
Interested Trustees*
Name, Address and Age1 | Position(s) Held with the Trust | Term of Office and | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee3 | Other Directorships Held by Trustee4 | |||||||
James A. McNamara Age: 54 | President and Trustee | Since 2007 | Managing Director, Goldman Sachs (December 1998-Present); Director of Institutional Fund Sales, GSAM (April 1998-December 2000); and Senior Vice President and Manager, Dreyfus Institutional Service Corporation (January 1993- April 1998).
President and Trustee — Goldman Sachs Trust; Goldman Sachs Variable Insurance Trust; Goldman Sachs Trust II; Goldman Sachs MLP Income Opportunities Fund; Goldman Sachs MLP and Energy Renaissance Fund; and Goldman Sachs ETF Trust. | 140 | None | |||||||
Alan A. Shuch Age: 67 | Trustee | Since 1990 | Advisory Director — GSAM (May 1999-Present); Consultant to GSAM (December 1994-May 1999); and Limited Partner, Goldman Sachs (December 1994-May 1999).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||||
* | These persons are considered to be “Interested Trustees” because they hold positions with Goldman Sachs and own securities issued by The Goldman Sachs Group, Inc. Each Interested Trustee holds comparable positions with certain other companies of which Goldman Sachs, GSAM or an affiliate thereof is the investment adviser, administrator and/or distributor. |
1 | Each Trustee may be contacted by writing to the Trustee, c/o Goldman Sachs, 200 West Street, New York, New York, 10282, Attn: Caroline Kraus. Information is provided as of December 31, 2016. Alan A. Shuch served as Trustee until his retirement from the Board on December 31, 2016. |
2 | Subject to such policies as may be adopted by the Board from time-to-time, each Trustee holds office for an indefinite term, until the earliest of: (a) the election of his or her successor; (b) the date the Trustee resigns or is removed by the Board or shareholders, in accordance with the Trust’s Declaration of Trust; or (c) the termination of the Trust. The Board has adopted policies which provide that (a) no Trustee shall hold office for more than 15 years and (b) a Trustee shall retire as of December 31st of the calendar year in which he or she reaches his or her 74th birthday, unless a waiver of such requirement shall have been adopted by a majority of the other Trustees. These policies may be changed by the Trustees without shareholder vote. One Trustee has been granted a waiver from the foregoing policies which permits him to serve until December 31, 2017. |
3 | The Goldman Sachs Fund Complex includes certain other companies listed above for each respective Trustee. As of December 31, 2016, Goldman Sachs Trust consisted of 92 portfolios (89 of which offered shares to the public); Goldman Sachs Variable Insurance Trust consisted of 14 portfolios; Goldman Sachs Trust II consisted of 17 portfolios (16 of which offered shares to the public); Goldman Sachs BDC, Inc., Goldman Sachs Private Middle Market Credit LLC, Goldman Sachs MLP Income Opportunities Fund, and Goldman Sachs MLP and Energy Renaissance Fund each consisted of one portfolio; and Goldman Sachs ETF Trust consisted of 15 portfolios (eight of which offered shares to the public). Goldman Sachs Private Middle Market Credit LLC does not offer shares to the public. |
4 | This column includes only directorships of companies required to report to the Securities and Exchange Commission under the Securities Exchange Act of 1934 (i.e., “public companies”) or other investment companies registered under the Act. |
Additional information about the Trustees is available in the Funds’ Statement of Additional Information, which can be obtained from Goldman Sachs free of charge by calling this toll-free number (in the United States of America): 1-800-526-7384.
84
GOLDMAN SACHS VARIABLE INSURANCE TRUST FUNDS
Trustees and Officers (Unaudited) (continued)
Officers of the Trust*
Name, Address and Age1 | Position(s) Held with the Trust | Term of Office and | Principal Occupation(s) During Past 5 Years | |||
James A. McNamara 200 West Street New York, NY 10282 Age: 54 | Trustee and President | Since 2007 | Managing Director, Goldman Sachs (December 1998-Present); Director of Institutional Fund Sales, GSAM (April 1998-December 2000); and Senior Vice President and Manager, Dreyfus Institutional Service Corporation (January 1993-April 1998).
President and Trustee — Goldman Sachs Trust; Goldman Sachs Variable Insurance Trust; Goldman Sachs Trust II; Goldman Sachs MLP Income Opportunities Fund; Goldman Sachs MLP and Energy Renaissance Fund; and Goldman Sachs ETF Trust. | |||
Caroline L. Kraus 200 West Street New York, NY 10282 Age: 39 | Secretary | Since 2012 | Managing Director, Goldman Sachs (January 2016-Present); Vice President, Goldman Sachs (August 2006-December 2015); Associate General Counsel, Goldman Sachs (2012-Present); Assistant General Counsel, Goldman Sachs (August 2006-December 2011); and Associate, Weil, Gotshal & Manges, LLP (2002-2006).
Secretary — Goldman Sachs Trust (previously Assistant Secretary (2012)); Goldman Sachs Variable Insurance Trust (previously Assistant Secretary (2012)); Goldman Sachs Trust II; Goldman Sachs BDC, Inc.; Goldman Sachs Private Middle Market Credit LLC; Goldman Sachs Middle Market Lending LLC; Goldman Sachs MLP Income Opportunities Fund; Goldman Sachs MLP and Energy Renaissance Fund; and Goldman Sachs ETF Trust. | |||
Scott M. McHugh 200 West Street New York, NY 10282 Age: 45 | Treasurer, Senior Vice President and Principal Financial Officer | Since 2009 (Principal | Managing Director, Goldman Sachs (January 2016-Present); Vice President, Goldman Sachs (February 2007-December 2015); Assistant Treasurer of certain mutual funds administered by DWS Scudder (2005-2007); and Director (2005-2007), Vice President (2000-2005), and Assistant Vice President (1998-2000), Deutsche Asset Management or its predecessor (1998-2007).
Treasurer, Senior Vice President and Principal Financial Officer — Goldman Sachs Trust; Goldman Sachs Variable Insurance Trust; Goldman Sachs Trust II; Goldman Sachs MLP Income Opportunities Fund; Goldman Sachs MLP and Energy Renaissance Fund; and Goldman Sachs ETF Trust. | |||
* | Represents a partial list of officers of the Trust. Additional information about all the officers is available in the Funds’ Statement of Additional Information, which can be obtained from Goldman Sachs free of charge by calling this toll-free number (in the United States): 1-800-526-7384. |
1 | Information is provided as of December 31, 2016. |
2 | Officers hold office at the pleasure of the Board of Trustees or until their successors are duly elected and qualified. Each officer holds comparable positions with certain other companies of which Goldman Sachs, GSAM or an affiliate thereof is the investment adviser, administrator and/or distributor. |
Goldman Sachs Variable Insurance Trust — Tax Information (Unaudited)
For the fiscal year ended December 31, 2016, 100% of the dividends paid from net investment company taxable income by the Equity Index Fund qualify for the dividends received deduction available to corporations.
Pursuant to Section 852 of the Internal Revenue Code, the Equity Index and Growth Opportunities Funds designate $7,349,964 and $1,072,082 respectively, or, if different, the maximum amount allowable, as capital gain dividends paid during the fiscal year ended December 31, 2016.
85
TRUSTEES | OFFICERS | |
Ashok N. Bakhru, Chairman | James A. McNamara, President | |
Kathryn A. Cassidy | Scott M. McHugh, Treasurer, Senior Vice | |
Diana M. Daniels | President and Principal Financial Officer | |
Herbert J. Markley | Caroline L. Kraus, Secretary | |
James A. McNamara | ||
Jessica Palmer | ||
Roy W. Templin | ||
Gregory G. Weaver |
GOLDMAN, SACHS & CO.
Distributor and Transfer Agent
GOLDMAN SACHS ASSET MANAGEMENT, L.P.
Investment Adviser
200 West Street, New York,
New York 10282
Visit our web site at www.GSAMFUNDS.com to obtain the most recent month-end returns.
The reports concerning the Funds included in this shareholder report may contain certain forward-looking statements about the factors that may affect the performance of the Funds in the future. These statements are based on Fund management’s predictions and expectations concerning certain future events and their expected impact on the Funds, such as performance of the economy as a whole and of specific industry sectors, changes in the levels of interest rates, the impact of developing world events, and other factors that may influence the future performance of the Funds. Management believes these forward-looking statements to be reasonable, although they are inherently uncertain and difficult to predict. Actual events may cause adjustments in portfolio management strategies from those currently expected to be employed.
A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities and information regarding how the Funds voted proxies relating to portfolio securities for the 12-month period ended December 31 is available (i) without charge, upon request by calling 1-800-621-2550; and (ii) on the Securities and Exchange Commission (“SEC”) web site at http://www.sec.gov.
The Funds file their complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Form N-Qs are available on the SEC’s web site at http://www.sec.gov within 60 days after the Funds’ first and third fiscal quarters. The Funds’ Form N-Qs may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may also be obtained by calling 1-800-SEC-0330. Form N-Qs may be obtained upon request and without charge by calling 1-800-621-2550.
The website links provided are for your convenience only and are not an endorsement or recommendation by GSAM of any of these websites or the products or services offered. GSAM is not responsible for the accuracy and validity of the content of these websites.
Fund holdings and allocations shown are as of December 31, 2016 and may not be representative of future investments. Fund holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities. Current and future holdings are subject to risk.
References to indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only and do not imply that the portfolio will achieve similar results. The index composition may not reflect the manner in which a portfolio is constructed. While an adviser seeks to design a portfolio which reflects appropriate risk and return features, portfolio characteristics may deviate from those of the benchmark.
The Global Industry Classification Standard (“GICS”) was developed by and is the exclusive property and a service mark of Morgan Stanley Capital International Inc. (“MSCI”) and Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. (“S&P”) and is licensed for use by Goldman Sachs. Neither MSCI, S&P nor any other party involved in making or compiling the GICS or any GICS classifications makes any express or implied warranties or representations with respect to such standard or classification (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of such standard or classification. Without limiting any of the foregoing, in no event shall MSCI, S&P, any of their affiliates or any third party involved in making or compiling the GICS or any GICS classifications have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.
The portfolio risk management process includes an effort to monitor and manage risk, but does not imply low risk.
Shares of the Goldman Sachs VIT Funds are offered to separate accounts of participating life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Shares of the Fund are not offered directly to the general public. The variable annuity contracts and variable life insurance policies are described in the separate prospectuses issued by participating insurance companies. You should refer to those prospectuses for information about surrender charges, mortality and expense risk fees and other charges that may be assessed by participating insurance companies under the variable annuity contracts or variable life insurance policies. Such fees or charges, if any, may affect the return you may realize with respect to your investments. Ask your representative for more complete information. Please consider a fund’s objectives, risks and charges and expenses, and read the prospectus carefully before investing. The prospectus contains this and other information about the Fund.
This material is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus or summary prospectus, if applicable. Investors should consider the Fund’s objective, risks, and charges and expenses, and read the summary prospectus, if available, and/or the prospectus carefully before investing or sending money. The summary prospectus, if available, and the prospectus contain this and other information about the Fund and may be obtained from your authorized dealer or from Goldman, Sachs & Co. by calling 1-800-621-2550.
This report is prepared for the general information of contract owners and is not an offer of shares of the Goldman Sachs Variable Insurance Trust Funds.
© 2017 Goldman Sachs. All rights reserved.
VITMLTIAR-17/81021-TMPL-02/2017-468823
Goldman
Sachs Variable Insurance Trust
Goldman Sachs
Small Cap Equity Insights Fund
Annual Report
December 31, 2016
GOLDMAN SACHS VARIABLE INSURANCE TRUST SMALL CAP EQUITY INSIGHTS FUND
INVESTMENT OBJECTIVE
The Fund seeks long-term growth of capital.
Portfolio Management Discussion and Analysis
Below, the Goldman Sachs Quantitative Investment Strategies Team discusses the Goldman Sachs Variable Insurance Trust — Goldman Sachs Small Cap Equity Insights Fund’s (the “Fund”) performance and positioning for the 12-month period ended December 31, 2016 (the “Reporting Period”).
How did the Fund perform during the Reporting Period?
During the Reporting Period, the Fund’s Institutional and Service Shares generated average annual total returns of 23.13% and 22.92%, respectively. These returns compare to the 21.24% average annual total return of the Fund’s benchmark, the Russell 2000® Index (the “Russell Index”) during the same time period.
What economic and market factors most influenced the equity markets as a whole during the Reporting Period?
Representing the U.S. equity market, the S&P 500® Index gained 11.93% during the Reporting Period, despite a global rout at the start of the year, unexpected political events both domestically and abroad and a Federal Reserve (“Fed”) interest rate hike.
As the Reporting Period began in January 2016, U.S. equities were embroiled in a global rout, triggered by investor concerns about an intensifying economic slowdown in China and exacerbated by an oil price plunge. Following a December 2015 interest rate hike, the January 2016 Fed statement acknowledged these external risks and tightening financial conditions. U.S. equities stabilized in February 2016, as market sentiment improved on the more dovish tone set by global central banks. (Dovish language tends to suggest lower interest rates; opposite of hawkish.) U.S. equities were also supported by stronger economic data, rallying as fourth quarter 2015 U.S. Gross Domestic Product (“GDP”) came in above consensus expectations. In March 2016, the Fed kept interest rates on hold and surprised on the dovish side, reducing its forecast to two interest rate hikes in 2016, down from four. Along with receding global economic concerns, this helped to drive a recovery in U.S. equities. Released in March 2016, February 2016 unemployment data came in ahead of market consensus, with unemployment steady at 4.9% in spite of higher participation rates and declining underemployment.
Following the rebound in March 2016, market sentiment appeared to remain sanguine in April 2016, as oil prices rose and China economic growth concerns abated. U.S. equities fell near the end of the month as investors were disappointed by a lack of additional stimulus from the Bank of Japan and by a weaker than consensus expected first quarter U.S. GDP growth rate of 0.5%. Weaker than expected May 2016 payroll data drove expectations for a Fed interest rate hike in June 2016 temporarily lower, but subsequent hawkish Fed minutes revived market expectations. (Hawkish language tends to suggest higher interest rates; opposite of dovish.) The Fed ultimately held interest rates steady in June 2016 and signaled a slower pace of hikes, acknowledging the slowdown in the labor market. Markets were otherwise dominated in June 2016 by the U.K. referendum on membership in the European Union, popularly known as Brexit. U.S. equities sold off in the global risk-off, or heightened risk averse, sentiment in June 2016 following the surprise “leave” result. Markets rebounded in the latter days of the month owing to improving risk sentiment as markets digested the Brexit vote outcome and on dovish remarks from Bank of England Governor Carney.
In July 2016, U.S. equities were buoyed by strong economic data and corporate earnings, despite increased uncertainty post-Brexit. In her August 2016 Jackson Hole speech, Fed Chair Janet Yellen acknowledged the case for an interest rate hike had strengthened in the then-recent months. Along with strong labor market data and other hawkish comments from the Fed, this significantly increased the market-implied probability of an interest rate hike by year-end 2016, causing U.S. equities to sell off. In early September 2016, equities fell as the European Central Bank disappointed markets with its lack of commitment to extend quantitative easing. However, there was a subsequent rebound following the Fed’s decision in September 2016 to leave interest rates unchanged.
In October 2016, a combination of hawkish Fed commentary and mounting strong U.S. economic data led to increased market pricing for a December 2016 interest rate hike. U.S. GDP increased by 3.5% on an annualized basis for the third quarter of 2016, above consensus expectations and the strongest growth rate in two years. Following the unexpected victory of Donald Trump in the November 2016 U.S. elections, U.S. equities quickly reversed a short-lived sell-off and surged on anticipation of a pro-growth effect of Mr. Trump’s fiscal stimulus plan. The Fed raised rates 0.25% in December 2016, for the first time in a year but as had
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GOLDMAN SACHS VARIABLE INSURANCE TRUST SMALL CAP EQUITY INSIGHTS FUND
largely been anticipated, and set a more hawkish hike path for 2017, causing equities to decline, albeit modestly, following the announcement.
For the Reporting Period overall, energy, telecommunication services and financials were the best performing sectors in the S&P 500® Index by a wide margin. Industrials, materials, utilities and information technology also posted double-digit gains that outpaced the S&P 500® Index during the Reporting Period. The weakest performing sectors in the S&P 500® Index were real estate and health care, the only two to post negative absolute returns, followed by consumer staples and consumer discretionary, which were comparatively weak but generated positive returns during the Reporting Period.
Within the U.S. equity market, there was significant disparity in performance not only among sectors but also among the various capitalization and style segments. While all capitalization segments posted positive returns, small-cap stocks, as measured by the Russell 2000® Index, performed best, followed at some distance by mid-cap stocks, as measured by the Russell Midcap® Index, and then, large-cap stocks, as measured by the Russell 1000® Index. From a style perspective, value-oriented stocks significantly outpaced growth-oriented stocks across the capitalization spectrum. (All as measured by the Russell indices.)
What key factors were responsible for the Fund’s performance during the Reporting Period?
During the Reporting Period, the Fund outperformed the Russell Index on a relative basis. Stock selection driven by our quantitative model and three of its six investment themes contributed positively to relative returns.
What impact did the Fund’s investment themes have on performance during the Reporting Period?
As expected, and in keeping with our investment approach, our quantitative model and its six investment themes — Valuation, Profitability, Quality, Management, Momentum and Sentiment — had the greatest impact on relative performance. We use these themes to take a long-term view of market patterns and look for inefficiencies, selecting stocks for the Fund and overweighting or underweighting the ones chosen by the model. Over time and by design, the performance of any one of the model’s investment themes tends to have a low correlation with the model’s other themes, demonstrating the diversification benefit of the Fund’s theme-driven quantitative model. The variance in performance supports our research indicating that the diversification provided by the Fund’s different investment themes is a significant investment advantage over the long term, even though the Fund may experience underperformance in the short term. Of course, diversification does not protect an investor from market risk nor does it ensure a profit.
During the Reporting Period, three of our six investment themes contributed positively to the Fund’s relative performance. The Valuation, Sentiment and Quality themes contributed most positively to relative performance. Valuation attempts to capture potential mispricings of securities, typically by comparing a measure of the company’s intrinsic value to its market value. The Sentiment theme reflects selected investment views and decisions of individuals and financial intermediaries. The Quality theme assesses both firm and financial quality.
The Fund’s Momentum theme detracted most from the Fund’s relative performance, followed by Management. The Momentum theme seeks to predict drifts in stock prices caused by delayed investor reaction to company-specific information and information about related companies. The Management theme assesses the characteristics, policies and strategic decisions of company management.
The Profitability theme had a rather neutral effect on the Fund’s relative performance during the Reporting Period. The Profitability theme assesses whether a company is earning more than its cost of capital.
How did the Fund’s sector and industry allocations affect relative performance?
In constructing the Fund’s portfolio, we focus on picking stocks rather than making industry or sector bets. Consequently, the Fund is similar to its benchmark, the Russell Index, in terms of its sector allocation and style. We manage the Fund’s industry and sector exposure by including industry factors in our risk model and by explicitly penalizing industry and sector deviations from the benchmark index in optimization. Sector weights or changes in sector weights generally do not have a meaningful impact on relative performance.
Did stock selection help or hurt Fund performance during the Reporting Period?
We seek to outpace the Russell Index by overweighting stocks that we expect to outperform and underweighting those that we think may lag. We also build positions based on our thematic views. For example, the Fund aims to hold a basket of stocks with more favorable Momentum characteristics than the benchmark index. During the Reporting Period, stock selection overall contributed positively to the Fund’s relative performance.
2
GOLDMAN SACHS VARIABLE INSURANCE TRUST SMALL CAP EQUITY INSIGHTS FUND
Security selection in the information technology, industrials and financials sectors contributed most positively to the Fund’s relative returns. Stock selection in energy and materials detracted most from the Fund’s results relative to the Russell Index during the Reporting Period. Having overweight positions in energy and consumer discretionary relative to the Russell Index also detracted.
Which individual stock positions contributed the most to the Fund’s relative returns during the Reporting Period?
The Fund benefited most from overweight positions in commercial printer Quad/Graphics, utilities company Talen Energy and pawn shop owner and operator EZCorp. We chose to overweight Quad/Graphics because of our positive views on Quality and Value. Our positive views on Value and Quality led us to overweight Talen Energy. The Fund exited its position in Talen Energy by the end of the Reporting Period. The Fund was overweight EZCorp due to our positive view on Quality.
Which individual positions detracted from the Fund’s results during the Reporting Period?
Detracting most from the Fund’s results relative to its benchmark index were overweight positions in life sciences company Myriad Genetics, supercomputer manufacturer Cray and pharmaceutical products manufacturer Impax Laboratories. The Fund was overweight Myriad Genetics due to our positive views on Momentum and Value. Our positive views on Momentum and Profitability led us to overweight Cray. The Fund exited its position in Cray by the end of the Reporting Period. We chose to overweight Impax Laboratories because of our positive views on Sentiment and Value.
How did the Fund use derivatives during the Reporting Period?
During the Reporting Period, we did not use derivatives as part of an active management strategy to add value to the Fund’s results. However, we used equity index futures contracts, on an opportunistic basis, to equitize the Fund’s excess cash holdings. In other words, we put the Fund’s excess cash holdings to work by using them as collateral for the purchase of stock futures. The use of these futures contracts did not have a material impact on the Fund’s performance during the Reporting Period.
Did you make any enhancements to your quantitative models during the Reporting Period?
We continuously look for ways to improve our investment process. During the Reporting Period, we enhanced the Profitability theme for stocks within developed markets by introducing a factor that evaluates the geographic exposure of companies by tracking the physical locations of their branches, outlets and subsidiaries. We believe that a company with a footprint in growing parts of the world is better positioned relative to a company with a footprint in contracting parts. We are able to estimate this factor for more than 5,500 companies globally, which have more than one million subsidiaries spread across more than 47,000 cities in more than 200 countries. This extends our analysis of a company’s global footprint, which has focused historically on their revenue mix across markets.
In the U.S. investment region, we enhanced the Momentum theme by introducing a signal that evaluates linkages embedded within companies’ web pages. Embedded linkages are effective indicators of the similarity of the underlying businesses of companies across a variety of sectors, such as retail, media, hospitality, software, banks, airlines, etc.
We have undertaken research of various Environment, Social and Governance (“ESG”) metrics and their ability to forecast returns. We have enhanced our models with the following ESG related metrics:
∎ | Within the Quality theme in the U.S. and Europe investment regions, we have introduced an environmental impact factor. The factor measures the amount of environmental resources consumed to produce a unit of output for more than 2,000 companies. This factor helps to strategically tilt towards companies with a favorable environmental profile. |
∎ | Within the Momentum theme in the U.S. investment region, we have introduced the ESG topic signal. We use natural language processing techniques to read through more than 24,000 articles, collected since 1999, on Corporate Social Responsibility (“CSR”) activities to identify economic linkages among more than 1,000 companies. The signal aims to identify companies linked to each other by such common CSR themes and can dynamically adjust our positions accordingly. |
In the fourth quarter of 2016, we made a number of enhancements across a variety of investment themes. We made two enhancements to our Momentum theme. For U.S. investments, we now analyze corporate press-releases pulled directly from news wires to quickly identify new themes to which a company may be exposed. Leveraging natural language processing technology, we search for key words or phrases within the text of each press-release that may alert us to new trends affecting certain groups of companies. We then track performance of those companies to gauge, and capitalize on, momentum in these various thematic trends. Another way we seek to quantify the relationship between seemingly disparate companies is by exploring how frequently any two companies are mentioned together in the same news article. We recently extended coverage of this trend signal to now include
3
GOLDMAN SACHS VARIABLE INSURANCE TRUST SMALL CAP EQUITY INSIGHTS FUND
Japanese language news articles covering companies in Japan. We have created a repository of 1.4 billion news articles over the last five years with which we analyze about 2,000 stocks in Japan, including news articles written in Japanese.
We made an enhancement to our Sentiment theme in all regions by introducing a signal which focuses on measuring the amount of praise offered by analysts during company earnings calls. We analyze thousands of earnings call transcripts using natural language processing. By focusing on a key set of congratulatory words, we can measure the number of analysts issuing praise and gain a comprehensive view of investor sentiment about a company’s most recent quarterly earnings.
In the U.S. investment region, we introduced a signal within our Profitability theme that looks at credit card spending patterns as a real-time indicator of corporate profitability. Rather than waiting for quarterly earnings announcements, we evaluate over 74 billion credit card transactions which we use to link real-time consumer spending patterns to underlying companies.
Finally, we seek to identify strong management teams among Japanese companies through employee feedback data. We use natural language processing to analyze Japanese language employee comments on over 2,000 stocks in Japan. We link employee opinions to 50 topics which aim to identify companies that we believe have superior corporate culture.
What was the Fund’s sector positioning relative to its benchmark index at the end of the Reporting Period?
As of December 31, 2016, the Fund was overweight the consumer discretionary, industrials and materials sectors relative to the Russell Index. The Fund was underweight financials, consumer staples, information technology and real estate and was rather neutrally weighted in utilities, energy, telecommunication services and health care compared to the benchmark index on the same date.
Were there any changes to the Fund’s portfolio management team during the Reporting Period?
On February 5, 2016, Ron Hua, Chief Investment Officer of Equity Alpha Strategies for the Quantitative Investment Strategies (“QIS”) Team, announced his intention to retire from Goldman Sachs Asset Management, L.P. (“GSAM”). As such, effective that date, Mr. Hua no longer had portfolio management responsibility for the Fund.
Ron’s responsibilities were assumed by Armen Avanessians, Managing Director and Chief Investment Officer of GSAM’s QIS Team. The senior portfolio management team for the Fund remained Osman Ali, Len Ioffe and Dennis Walsh, each a Managing Director. Dennis Walsh continues to head research and portfolio management for the Fund. Len Ioffe continues to head portfolio implementation, and Osman Ali continues to head client strategy. Armen Avanessians continues to oversee all QIS strategies globally. Gary Chropuvka, Managing Director, continues to head QIS client strategy efforts globally.
As always, the QIS platform is organized into a series of specialist portfolio management teams that focus on generating and implementing investment ideas within their area of expertise. Investment decisions are made by these portfolio management teams, rather than by one portfolio manager or committee. Ultimate accountability for the Fund resides with the senior portfolio managers dedicated to each Team strategy, who oversee their respective research, portfolio management and implementation processes.
QIS employs a globally integrated team of more than 100 professionals, with an additional 85-plus professionals dedicated to trading, information technology and development of analytical tools.
What is your strategy going forward for the Fund?
Looking ahead, we continue to believe that less expensive stocks should outpace more expensive stocks, and stocks with good momentum are likely to outperform those with poor momentum. We intend to maintain our focus on seeking companies about which fundamental research analysts are becoming more positive as well as profitable companies with sustainable earnings and a track record of using their capital to enhance shareholder value. As such, we anticipate remaining fully invested with long-term performance likely to be the result of stock selection rather than sector or capitalization allocations.
We stand behind our investment philosophy that sound economic investment principles, coupled with a disciplined quantitative approach, can provide strong, uncorrelated returns over the long term. Our research agenda is robust, and we continue to enhance our existing models, add new proprietary forecasting signals and improve our trading execution as we seek to provide the most value to our shareholders.
4
GOLDMAN SACHS VARIABLE INSURANCE TRUST SMALL CAP EQUITY INSIGHTS FUND
Index Definitions
The Russell 2000® Index is an unmanaged index of common stock prices that measures the performance of the 2000 smallest companies in the Russell 3000® Index. The figures for the index do not include any deduction for fees, expenses or taxes. It is not possible to invest directly in an index.
The S&P 500® Index is the Standard & Poor’s 500 Composite Index of 500 stocks, an unmanaged index of common stock prices. The figures for the index do not include any deduction for fees, expenses or taxes. It is not possible to invest directly in an index.
The Russell Midcap® Index measures the performance of the 800 smallest companies in the Russell 1000® Index, which represents approximately 25% of the total market capitalization of the Russell 1000 Index. It is not possible to invest directly in an index.
The Russell 1000® Index measures the performance of the 1,000 largest companies in the Russell 3000® Index, which represents approximately 92% of the total market capitalization of the Russell 3000 Index. It is not possible to invest directly in an index.
5
FUND BASICS
Small Cap Equity Insights Fund
as of December 31, 2016
STANDARDIZED TOTAL RETURNS1
For the period ended 12/31/16 | One Year | Five Years | Ten Years | Since Inception | Inception Date | |||||||||||||
Institutional | 23.13 | % | 14.54 | % | 6.16 | % | 6.93 | % | 2/13/98 | |||||||||
Service | 22.92 | 14.26 | N/A | 7.71 | 8/31/07 |
1 | The Standardized Total Returns are average annual total returns as of the most recent calendar quarter-end. They assume reinvestment of all distributions at net asset value (“NAV”). Because Institutional Shares and Service Shares do not involve a sales charge, such a charge is not applied to their Standardized Total Returns. |
Total return figures in the above chart represent past performance and do not indicate future results, which will vary. The investment return and principal value of an investment will fluctuate and, therefore, an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the total return figures in the above chart. Please visit www.GSAMFUNDS.com to obtain the most recent month-end returns. Performance reflects fee waivers and/or expense limitations in effect during the periods shown. In their absence, performance would be reduced.
EXPENSE RATIOS2
Net Expense Ratio (Current) | Gross Expense Ratio (Before Waivers) | |||||||
Institutional | 0.81 | % | 0.99 | % | ||||
Service | 1.06 | 1.24 |
2 | The expense ratios of the Fund, both current (net of any fee waivers and/or expense limitations) and before waivers (gross of any fee waivers and/or expense limitations) are as set forth above according to the most recent publicly available Prospectuses for the Fund and may differ from the expense ratios disclosed in the Financial Highlights in this report. Pursuant to a contractual arrangement, the Fund’s fee waivers and/or expense limitations will remain in place through at least April 29, 2017, and prior to such date, the Investment Adviser may not terminate the arrangements without the approval of the Fund’s Board of Trustees. If these arrangements are discontinued in the future, the expense ratios may change without shareholder approval. |
TOP TEN HOLDINGS AS OF 12/31/163,4
Holding | % of Net Assets | Line of Business | ||||
Prosperity Bancshares, Inc. | 0.9% | Banks | ||||
Curtiss-Wright Corp. | 0.8 | Capital Goods | ||||
Hawaiian Holdings, Inc. | 0.8 | Transportation | ||||
Evercore Partners, Inc. Class A | 0.8 | Diversified Financials | ||||
First Industrial Realty Trust, Inc. (REIT) | 0.8 | Real Estate | ||||
Washington Federal, Inc. | 0.8 | Banks | ||||
American Equity Investment Life Holding Co. | 0.8 | Insurance | ||||
First Midwest Bancorp, Inc. | 0.8 | Banks | ||||
Benchmark Electronics, Inc. | 0.8 | Technology Hardware & Equipment | ||||
Southwest Gas Corp. | 0.8 | Utilities |
3 | The top 10 holdings may not be representative of the Fund’s future investments. |
4 | The Fund’s overall top ten holdings differ from the table above due to the exclusion of the Goldman Sachs Financial Square Government Fund (a securities lending reinvestment vehicle) which represents 0.8% of the Fund’s net assets as of 12/31/2016. |
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FUND BASICS
FUND VS. BENCHMARK SECTOR ALLOCATIONS5
As of December 31, 2016
5 | The Fund is actively managed and, as such, its composition may differ over time. Consequently, the Fund’s overall sector allocations may differ from percentages contained in the graph above. The graph categorizes investments using Global Industry Classification Standard (“GICS”); however, the sector classifications used by the portfolio management team may differ from GICS. The percentage shown for each investment category reflects the value of investments in that category as a percentage of market value (excluding investments in the securities lending reinvestment vehicle, if any). Underlying sector allocations of exchange traded funds and investment companies held by the Fund are not reflected in the graph above. Investments in the securities lending reinvestment vehicle represented 0.8% of the Fund’s net assets at December 31, 2016. The graph depicts the Fund’s investments but may not represent the Fund’s market exposure due to the exclusion of certain derivatives, if any, as listed in the Additional Investment Information section of the Schedule of Investments. |
7
GOLDMAN SACHS VARIABLE INSURANCE TRUST SMALL CAP EQUITY INSIGHTS FUND
Performance Summary
December 31, 2016
The following graph shows the value, as of December 31, 2016, of a $10,000 investment made on January 1, 2007 in Institutional Shares at NAV. For comparative purposes, the performance of the Fund’s benchmark, the Russell 2000® Index (with distributions reinvested), is shown. This performance data represents past performance and should not be considered indicative of future performance, which will fluctuate with changes in market conditions. These performance fluctuations may cause an investor’s shares, when redeemed, to be worth more or less than their original cost. Performance reflects Fund level expenses but does not reflect fees and expenses associated with any variable annuity contract or variable life insurance policy that uses the Fund as an investment option for any contract or policy. Had performance reflected all of those fees and expenses, performance would have been reduced. Performance reflects applicable fee waivers and/or expense limitations in effect during the periods shown, and in their absence, performance would be reduced. Performance of Service Shares will vary from Institutional Shares due to differences in class specific fees. In addition to the Investment Adviser’s decisions regarding issuer/industry investment selection and allocation, other factors may affect Fund performance. These factors include, but are not limited to, Fund operating fees and expenses, portfolio turnover, and subscription and redemption cash flows affecting the Fund.
Small Cap Equity Insights Fund’s 10 Year Performance
Performance of a $10,000 investment, with distributions reinvested, from January 1, 2007 through December 31, 2016.
Average Annual Total Return through December 31, 2016 | One Year | Five Years | Ten Years | Since Inception | ||||||
Institutional (Commenced February 13, 1998) | 23.13% | 14.54% | 6.16% | 6.93% | ||||||
Service (Commenced August 31, 2007) | 22.92% | 14.26% | N/A | 7.71% |
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GOLDMAN SACHS VARIABLE INSURANCE TRUST SMALL CAP EQUITY INSIGHTS FUND
Schedule of Investments
December 31, 2016
Shares | Description | Value | ||||||
Common Stocks – 97.4% | ||||||||
| Automobiles & Components – 3.1% |
| ||||||
9,929 | Cooper Tire & Rubber Co. | $ | 385,742 | |||||
5,574 | Cooper-Standard Holding, Inc.* | 576,240 | ||||||
31,079 | Dana, Inc. | 589,879 | ||||||
5,678 | Drew Industries, Inc. | 611,805 | ||||||
23,836 | Modine Manufacturing Co.* | 355,156 | ||||||
13,446 | Superior Industries International, Inc. | 354,302 | ||||||
2,463 | Tenneco, Inc.* | 153,864 | ||||||
|
| |||||||
3,026,988 | ||||||||
|
| |||||||
| Banks – 10.9% |
| ||||||
12,466 | Beneficial Bancorp, Inc. | 229,374 | ||||||
13,810 | Berkshire Hills Bancorp, Inc. | 508,899 | ||||||
2,941 | Capitol Federal Financial, Inc. | 48,409 | ||||||
21,940 | Central Pacific Financial Corp. | 689,355 | ||||||
26,465 | CVB Financial Corp. | 606,843 | ||||||
29,561 | Dime Community Bancshares, Inc. | 594,176 | ||||||
12,471 | FCB Financial Holdings, Inc. Class A* | 594,867 | ||||||
1,976 | First Busey Corp. | 60,821 | ||||||
797 | First Citizens BancShares, Inc. Class A | 282,935 | ||||||
2,915 | First Interstate BancSystem, Inc. Class A | 124,033 | ||||||
30,114 | First Midwest Bancorp, Inc. | 759,776 | ||||||
4,283 | FNB Corp. | 68,657 | ||||||
2,461 | Glacier Bancorp, Inc. | 89,162 | ||||||
8,809 | Hanmi Financial Corp. | 307,434 | ||||||
8,431 | HomeStreet, Inc.* | 266,420 | ||||||
5,071 | International Bancshares Corp. | 206,897 | ||||||
41,915 | OFG Bancorp | 549,087 | ||||||
18,763 | Oritani Financial Corp. | 351,806 | ||||||
12,798 | Prosperity Bancshares, Inc. | 918,640 | ||||||
28,331 | Radian Group, Inc. | 509,391 | ||||||
941 | Renasant Corp. | 39,729 | ||||||
2,793 | Sandy Spring Bancorp, Inc. | 111,692 | ||||||
16,291 | Sterling Bancorp | 381,209 | ||||||
28,089 | Umpqua Holdings Corp. | 527,511 | ||||||
21,754 | United Community Banks, Inc. | 644,354 | ||||||
22,261 | Washington Federal, Inc. | 764,665 | ||||||
1,206 | Wintrust Financial Corp. | 87,519 | ||||||
7,970 | WSFS Financial Corp. | 369,410 | ||||||
|
| |||||||
10,693,071 | ||||||||
|
| |||||||
| Capital Goods – 8.8% |
| ||||||
23,232 | Aegion Corp.* | 550,598 | ||||||
13,111 | Aircastle Ltd. | 273,364 | ||||||
1,436 | Altra Industrial Motion Corp. | 52,988 | ||||||
1,634 | Applied Industrial Technologies, Inc. | 97,060 | ||||||
830 | Argan, Inc. | 58,557 | ||||||
7,400 | Astec Industries, Inc. | 499,204 | ||||||
7,949 | AZZ, Inc. | 507,941 | ||||||
9,154 | Babcock & Wilcox Enterprises, Inc.* | 151,865 | ||||||
3,683 | Chart Industries, Inc.* | 132,662 | ||||||
2,686 | Comfort Systems USA, Inc. | 89,444 | ||||||
|
| |||||||
Common Stocks – (continued) | ||||||||
| Capital Goods – (continued) |
| ||||||
10,811 | Continental Building Products, Inc.* | $ | 249,734 | |||||
7,970 | Curtiss-Wright Corp. | 783,929 | ||||||
6,893 | DigitalGlobe, Inc.* | 197,484 | ||||||
2,753 | Ducommun, Inc.* | 70,367 | ||||||
9,959 | EMCOR Group, Inc. | 704,699 | ||||||
5,740 | Esterline Technologies Corp.* | 512,008 | ||||||
15,387 | General Cable Corp. | 293,122 | ||||||
14,910 | H&E Equipment Services, Inc. | 346,658 | ||||||
985 | Hyster-Yale Materials Handling, Inc. | 62,813 | ||||||
2,053 | Kadant, Inc. | 125,644 | ||||||
17,515 | LSI Industries, Inc. | 170,596 | ||||||
5,215 | Miller Industries, Inc. | 137,937 | ||||||
23,567 | MRC Global, Inc.* | 477,467 | ||||||
9,632 | Mueller Water Products, Inc. Class A | 128,202 | ||||||
938 | MYR Group, Inc.* | 35,344 | ||||||
15,372 | NCI Building Systems, Inc.* | 240,572 | ||||||
1,570 | Rush Enterprises, Inc. Class A* | 50,083 | ||||||
1,626 | Standex International Corp. | 142,844 | ||||||
3,725 | Tutor Perini Corp.* | 104,300 | ||||||
5,016 | Universal Forest Products, Inc. | 512,535 | ||||||
36,759 | Wabash National Corp.* | 581,527 | ||||||
4,501 | Woodward, Inc. | 310,794 | ||||||
|
| |||||||
8,652,342 | ||||||||
|
| |||||||
| Commercial & Professional Services – 6.3% |
| ||||||
3,155 | ACCO Brands Corp.* | 41,173 | ||||||
19,026 | Brady Corp. Class A | 714,426 | ||||||
10,189 | Brink’s Co. (The) | 420,296 | ||||||
4,262 | Essendant, Inc. | 89,076 | ||||||
6,705 | FTI Consulting, Inc.* | 302,262 | ||||||
8,302 | Heidrick & Struggles International, Inc. | 200,493 | ||||||
10,727 | Herman Miller, Inc. | 366,863 | ||||||
4,539 | HNI Corp. | 253,821 | ||||||
9,132 | Huron Consulting Group, Inc.* | 462,536 | ||||||
7,858 | Insperity, Inc. | 557,525 | ||||||
32,194 | Kimball International, Inc. Class B | 565,327 | ||||||
21,512 | Knoll, Inc. | 600,830 | ||||||
15,221 | McGrath RentCorp | 596,511 | ||||||
4,549 | On Assignment, Inc.* | 200,884 | ||||||
16,360 | Quad/Graphics, Inc. | 439,757 | ||||||
6,998 | RPX Corp.* | 75,578 | ||||||
3,176 | TrueBlue, Inc.* | 78,288 | ||||||
3,379 | WageWorks, Inc.* | 244,978 | ||||||
|
| |||||||
6,210,624 | ||||||||
|
| |||||||
| Consumer Durables & Apparel – 1.6% |
| ||||||
45,111 | Callaway Golf Co. | 494,416 | ||||||
2,729 | CSS Industries, Inc. | 73,874 | ||||||
8,895 | Ethan Allen Interiors, Inc. | 327,781 | ||||||
6,239 | Fossil Group, Inc.* | 161,340 | ||||||
4,110 | G-III Apparel Group Ltd.* | 121,492 | ||||||
5,724 | La-Z-Boy, Inc. | 177,730 | ||||||
|
|
The accompanying notes are an integral part of these financial statements. | 9 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST SMALL CAP EQUITY INSIGHTS FUND
Schedule of Investments (continued)
December 31, 2016
Shares | Description | Value | ||||||
Common Stocks – (continued) | ||||||||
| Consumer Durables & Apparel – (continued) |
| ||||||
9,632 | Smith & Wesson Holding Corp.*(a) | $ | 203,043 | |||||
|
| |||||||
1,559,676 | ||||||||
|
| |||||||
| Consumer Services – 5.5% |
| ||||||
6,530 | BJ’s Restaurants, Inc.* | 256,629 | ||||||
32,292 | Bloomin’ Brands, Inc. | 582,225 | ||||||
10,272 | Bob Evans Farms, Inc. | 546,573 | ||||||
13,657 | Boyd Gaming Corp.* | 275,462 | ||||||
16,061 | Bridgepoint Education, Inc.* | 162,698 | ||||||
4,263 | Capella Education Co. | 374,291 | ||||||
7,039 | Cheesecake Factory, Inc. (The) | 421,495 | ||||||
25,816 | Houghton Mifflin Harcourt Co.* | 280,104 | ||||||
14,395 | International Speedway Corp. Class A | 529,736 | ||||||
25,889 | K12, Inc.* | 444,255 | ||||||
10,930 | La Quinta Holdings, Inc.* | 155,315 | ||||||
472 | Marriott Vacations Worldwide Corp. | 40,049 | ||||||
32,333 | Penn National Gaming, Inc.* | 445,872 | ||||||
9,183 | Pinnacle Entertainment, Inc.* | 133,154 | ||||||
37,050 | Regis Corp.* | 537,966 | ||||||
4,039 | Texas Roadhouse, Inc. | 194,841 | ||||||
|
| |||||||
5,380,665 | ||||||||
|
| |||||||
| Diversified Financials – 4.3% |
| ||||||
115,864 | Anworth Mortgage Asset Corp. (REIT)(b) | 599,017 | ||||||
11,202 | Evercore Partners, Inc. Class A | 769,577 | ||||||
11,505 | EZCORP, Inc. Class A* | 122,528 | ||||||
6,262 | GAMCO Investors, Inc. Class A | 193,433 | ||||||
1,943 | Greenhill & Co., Inc. | 53,821 | ||||||
38,808 | Invesco Mortgage Capital, Inc. (REIT) | 566,597 | ||||||
36,129 | MTGE Investment Corp. (REIT) | 567,225 | ||||||
2,063 | Nelnet, Inc. Class A | 104,697 | ||||||
24,609 | New Residential Investment Corp. (REIT) | 386,854 | ||||||
9,189 | Piper Jaffray Cos.* | 666,203 | ||||||
16,083 | Western Asset Mortgage Capital Corp. (REIT) | 161,956 | ||||||
|
| |||||||
4,191,908 | ||||||||
|
| |||||||
| Energy – 3.0% |
| ||||||
5,446 | Archrock, Inc. | 71,887 | ||||||
1,646 | California Resources Corp.* | 35,043 | ||||||
20,395 | Callon Petroleum Co.* | 313,471 | ||||||
3,793 | Carrizo Oil & Gas, Inc.* | 141,669 | ||||||
67,843 | Denbury Resources, Inc.* | 249,662 | ||||||
17,835 | EP Energy Corp. Class A* | 116,819 | ||||||
4,148 | Green Plains, Inc. | 115,522 | ||||||
9,345 | Matador Resources Co.*(a) | 240,727 | ||||||
48,812 | McDermott International, Inc.* | 360,721 | ||||||
19,910 | Oasis Petroleum, Inc.* | 301,437 | ||||||
2,562 | Oil States International, Inc.* | 99,918 | ||||||
1,489 | PDC Energy, Inc.* | 108,072 | ||||||
|
| |||||||
Common Stocks – (continued) | ||||||||
| Energy – (continued) |
| ||||||
43,168 | Pioneer Energy Services Corp.* | $ | 295,701 | |||||
2,812 | RSP Permian, Inc.* | 125,472 | ||||||
8,572 | Scorpio Tankers, Inc. | 38,831 | ||||||
9,718 | Unit Corp.* | 261,123 | ||||||
1,224 | US Silica Holdings, Inc. | 69,376 | ||||||
|
| |||||||
2,945,451 | ||||||||
|
| |||||||
| Food, Beverage & Tobacco – 0.9% |
| ||||||
6,819 | Calavo Growers, Inc. | 418,687 | ||||||
2,184 | Fresh Del Monte Produce, Inc. | 132,416 | ||||||
1,583 | John B Sanfilippo & Son, Inc. | 111,427 | ||||||
1,453 | Lancaster Colony Corp. | 205,440 | ||||||
|
| |||||||
867,970 | ||||||||
|
| |||||||
| Health Care Equipment & Services – 4.5% |
| ||||||
12,897 | AngioDynamics, Inc.* | 217,572 | ||||||
284 | Atrion Corp. | 144,045 | ||||||
2,617 | Cantel Medical Corp. | 206,089 | ||||||
25,091 | Community Health Systems, Inc.* | 140,259 | ||||||
9,249 | Cynosure, Inc. Class A* | 421,754 | ||||||
12,546 | HMS Holdings Corp.* | 227,835 | ||||||
5,883 | Magellan Health, Inc.* | 442,696 | ||||||
11,005 | Masimo Corp.* | 741,737 | ||||||
4,660 | Medidata Solutions, Inc.* | 231,462 | ||||||
5,821 | Molina Healthcare, Inc.* | 315,847 | ||||||
7,042 | Natus Medical, Inc.* | 245,062 | ||||||
4,252 | Orthofix International NV* | 153,837 | ||||||
16,781 | Owens & Minor, Inc. | 592,202 | ||||||
13,615 | Triple-S Management Corp. Class B* | 281,831 | ||||||
|
| |||||||
4,362,228 | ||||||||
|
| |||||||
| Household & Personal Products – 0.2% |
| ||||||
6,125 | Central Garden & Pet Co. Class A* | 189,263 | ||||||
|
| |||||||
| Insurance – 2.3% |
| ||||||
33,738 | American Equity Investment Life Holding Co. | 760,455 | ||||||
10,757 | Argo Group International Holdings Ltd. | 708,886 | ||||||
10,096 | CNO Financial Group, Inc. | 193,338 | ||||||
21,913 | Genworth Financial, Inc. Class A* | 83,489 | ||||||
30,451 | Maiden Holdings Ltd. | 531,370 | ||||||
|
| |||||||
2,277,538 | ||||||||
|
| |||||||
| Materials – 7.1% |
| ||||||
3,886 | Carpenter Technology Corp. | 140,557 | ||||||
14,979 | Chemours Co. (The) | 330,886 | ||||||
33,501 | Commercial Metals Co. | 729,652 | ||||||
16,258 | GCP Applied Technologies, Inc.* | 434,901 | ||||||
2,936 | Greif, Inc. Class A | 150,646 | ||||||
10,165 | HB Fuller Co. | 491,071 | ||||||
8,664 | Innophos Holdings, Inc. | 452,781 | ||||||
2,690 | KapStone Paper and Packaging Corp. | 59,314 | ||||||
22,375 | Louisiana-Pacific Corp.* | 423,559 | ||||||
4,683 | Materion Corp. | 185,447 | ||||||
|
|
10 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST SMALL CAP EQUITY INSIGHTS FUND
Shares | Description | Value | ||||||
Common Stocks – (continued) | ||||||||
| Materials – (continued) |
| ||||||
8,866 | Minerals Technologies, Inc. | $ | 684,898 | |||||
10,770 | PolyOne Corp. | 345,071 | ||||||
23,234 | Schnitzer Steel Industries, Inc. Class A | 597,114 | ||||||
1,041 | Schweitzer-Mauduit International, Inc. | 47,397 | ||||||
2,602 | Stepan Co. | 212,011 | ||||||
14,087 | Summit Materials, Inc. Class A* | 335,136 | ||||||
17,501 | SunCoke Energy, Inc.* | 198,461 | ||||||
9,629 | Trinseo SA | 571,000 | ||||||
11,309 | Worthington Industries, Inc. | 536,499 | ||||||
|
| |||||||
6,926,401 | ||||||||
|
| |||||||
| Media – 0.1% |
| ||||||
8,184 | New Media Investment Group, Inc. | 130,862 | ||||||
|
| |||||||
| Pharmaceuticals, Biotechnology & Life Sciences – 7.5% |
| ||||||
3,513 | Acceleron Pharma, Inc.* | 89,652 | ||||||
15,359 | Acorda Therapeutics, Inc.* | 288,749 | ||||||
3,974 | AMAG Pharmaceuticals, Inc.* | 138,295 | ||||||
6,203 | ARIAD Pharmaceuticals, Inc.* | 77,165 | ||||||
18,241 | Array BioPharma, Inc.* | 160,338 | ||||||
6,108 | Blueprint Medicines Corp.* | 171,329 | ||||||
1,433 | Cambrex Corp.* | 77,310 | ||||||
3,048 | Catalent, Inc.* | 82,174 | ||||||
7,149 | Emergent BioSolutions, Inc.* | 234,773 | ||||||
8,779 | Exact Sciences Corp.* | 117,288 | ||||||
43,492 | Exelixis, Inc.* | 648,466 | ||||||
11,143 | FibroGen, Inc.* | 238,460 | ||||||
2,288 | Five Prime Therapeutics, Inc.* | 114,652 | ||||||
17,062 | Genomic Health, Inc.* | 501,452 | ||||||
26,698 | Horizon Pharma plc* | 431,974 | ||||||
10,936 | Impax Laboratories, Inc.* | 144,902 | ||||||
3,220 | Innoviva, Inc.* | 34,454 | ||||||
12,679 | Insys Therapeutics, Inc.*(a) | 116,647 | ||||||
37,529 | Ironwood Pharmaceuticals, Inc.* | 573,818 | ||||||
3,699 | Lexicon Pharmaceuticals, Inc.*(a) | 51,157 | ||||||
13,337 | MiMedx Group, Inc.*(a) | 118,166 | ||||||
2,908 | Momenta Pharmaceuticals, Inc.* | 43,765 | ||||||
17,795 | Myriad Genetics, Inc.* | 296,643 | ||||||
1,115 | Pacira Pharmaceuticals, Inc.* | 36,015 | ||||||
5,094 | PAREXEL International Corp.* | 334,778 | ||||||
87,665 | PDL BioPharma, Inc. | 185,850 | ||||||
1,409 | PRA Health Sciences, Inc.* | 77,664 | ||||||
11,089 | Prestige Brands Holdings, Inc.* | 577,737 | ||||||
3,411 | Progenics Pharmaceuticals, Inc.* | 29,471 | ||||||
876 | Prothena Corp. plc*(a) | 43,090 | ||||||
2,908 | Puma Biotechnology, Inc.* | 89,276 | ||||||
6,487 | Repligen Corp.* | 199,929 | ||||||
4,608 | Retrophin, Inc.* | 87,229 | ||||||
2,207 | Sarepta Therapeutics, Inc.* | 60,538 | ||||||
20,158 | SciClone Pharmaceuticals, Inc.* | 217,706 | ||||||
719 | TESARO, Inc.* | 96,691 | ||||||
989 | Ultragenyx Pharmaceutical, Inc.* | 69,537 | ||||||
8,630 | Vanda Pharmaceuticals, Inc.* | 137,649 | ||||||
|
| |||||||
Common Stocks – (continued) | ||||||||
| Pharmaceuticals, Biotechnology & Life Sciences – (continued) |
| ||||||
11,647 | Xencor, Inc.* | $ | 306,549 | |||||
|
| |||||||
7,301,338 | ||||||||
|
| |||||||
| Real Estate – 6.4% |
| ||||||
2,466 | CareTrust REIT, Inc. (REIT) | 37,779 | ||||||
9,303 | Colony Starwood Homes (REIT) | 268,020 | ||||||
3,638 | CoreSite Realty Corp. (REIT) | 288,748 | ||||||
17,791 | DiamondRock Hospitality Co. (REIT) | 205,130 | ||||||
27,286 | First Industrial Realty Trust, Inc. (REIT) | 765,372 | ||||||
2,456 | Hersha Hospitality Trust (REIT) | 52,804 | ||||||
20,827 | Hudson Pacific Properties, Inc. (REIT) | 724,363 | ||||||
12,378 | iStar, Inc. (REIT)* | 153,116 | ||||||
15,109 | Kennedy-Wilson Holdings, Inc. | 309,735 | ||||||
25,565 | Mack-Cali Realty Corp. (REIT) | 741,896 | ||||||
17,296 | New Senior Investment Group, Inc. (REIT) | 169,328 | ||||||
9,065 | Pennsylvania REIT (REIT) | 171,872 | ||||||
5,374 | PS Business Parks, Inc. (REIT) | 626,179 | ||||||
12,763 | QTS Realty Trust, Inc. Class A (REIT) | 633,683 | ||||||
10,992 | RLJ Lodging Trust (REIT) | 269,194 | ||||||
2,766 | Ryman Hospitality Properties, Inc. (REIT) | 174,286 | ||||||
28,923 | Summit Hotel Properties, Inc. (REIT) | 463,636 | ||||||
10,729 | Sunstone Hotel Investors, Inc. (REIT) | 163,617 | ||||||
2,470 | Xenia Hotels & Resorts, Inc. (REIT) | 47,967 | ||||||
|
| |||||||
6,266,725 | ||||||||
|
| |||||||
| Retailing – 5.1% |
| ||||||
21,746 | Aaron’s, Inc. | 695,654 | ||||||
30,124 | American Eagle Outfitters, Inc. | 456,981 | ||||||
2,048 | Asbury Automotive Group, Inc.* | 126,362 | ||||||
11,578 | Ascena Retail Group, Inc.* | 71,668 | ||||||
15,126 | Cato Corp. (The) Class A | 454,990 | ||||||
41,969 | Chico’s FAS, Inc. | 603,934 | ||||||
1,871 | Children’s Place, Inc. (The) | 188,877 | ||||||
1,331 | DSW, Inc. Class A | 30,147 | ||||||
23,645 | Finish Line, Inc. (The) Class A | 444,762 | ||||||
5,619 | Francesca’s Holdings Corp.* | 101,311 | ||||||
9,382 | FTD Cos., Inc.* | 223,667 | ||||||
26,996 | Liberty TripAdvisor Holdings, Inc. Class A* | 406,290 | ||||||
973 | Lithia Motors, Inc. Class A | 94,216 | ||||||
9,172 | Pier 1 Imports, Inc. | 78,329 | ||||||
20,008 | Rent-A-Center, Inc. | 225,090 | ||||||
10,195 | Select Comfort Corp.* | 230,611 | ||||||
11,189 | Shutterfly, Inc.* | 561,464 | ||||||
|
| |||||||
4,994,353 | ||||||||
|
| |||||||
| Semiconductors & Semiconductor Equipment – 3.9% |
| ||||||
6,751 | Advanced Energy Industries, Inc.* | 369,617 | ||||||
|
|
The accompanying notes are an integral part of these financial statements. | 11 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST SMALL CAP EQUITY INSIGHTS FUND
Schedule of Investments (continued)
December 31, 2016
Shares | Description | Value | ||||||
Common Stocks – (continued) | ||||||||
| Semiconductors & Semiconductor Equipment – (continued) |
| ||||||
16,212 | Advanced Micro Devices, Inc.* | $ | 183,844 | |||||
10,066 | Amkor Technology, Inc.* | 106,196 | ||||||
3,337 | Cabot Microelectronics Corp. | 210,798 | ||||||
7,969 | Cirrus Logic, Inc.* | 450,567 | ||||||
34,812 | Entegris, Inc.* | 623,135 | ||||||
10,772 | MaxLinear, Inc. Class A* | 234,830 | ||||||
54,667 | Photronics, Inc.* | 617,737 | ||||||
3,287 | Power Integrations, Inc. | 223,023 | ||||||
11,696 | Semtech Corp.* | 369,009 | ||||||
7,106 | Silicon Laboratories, Inc.* | 461,890 | ||||||
|
| |||||||
3,850,646 | ||||||||
|
| |||||||
| Software & Services – 5.3% |
| ||||||
31,756 | Bankrate, Inc.* | 350,904 | ||||||
7,346 | CommVault Systems, Inc.* | 377,584 | ||||||
17,933 | Convergys Corp. | 440,435 | ||||||
1,707 | Cornerstone OnDemand, Inc.* | 72,223 | ||||||
11,902 | CSG Systems International, Inc. | 576,057 | ||||||
86,569 | EarthLink Holdings Corp. | 488,249 | ||||||
2,534 | Fair Isaac Corp. | 302,103 | ||||||
973 | LogMeIn, Inc. | 93,943 | ||||||
6,472 | ManTech International Corp. Class A | 273,442 | ||||||
1,342 | MicroStrategy, Inc. Class A* | 264,911 | ||||||
16,697 | NIC, Inc. | 399,058 | ||||||
17,729 | Progress Software Corp. | 566,087 | ||||||
6,140 | QAD, Inc. Class A | 186,656 | ||||||
3,791 | Science Applications International Corp. | 321,477 | ||||||
2,694 | Take-Two Interactive Software, Inc.* | 132,787 | ||||||
8,180 | TiVo Corp.* | 170,962 | ||||||
9,316 | Travelport Worldwide Ltd. | 131,356 | ||||||
|
| |||||||
5,148,234 | ||||||||
|
| |||||||
| Technology Hardware & Equipment – 5.9% |
| ||||||
11,473 | AVX Corp. | 179,323 | ||||||
4,066 | Belden, Inc. | 304,015 | ||||||
24,723 | Benchmark Electronics, Inc.* | 754,051 | ||||||
14,598 | Finisar Corp.* | 441,881 | ||||||
7,421 | II-VI, Inc.* | 220,033 | ||||||
6,992 | Insight Enterprises, Inc.* | 282,756 | ||||||
7,509 | InterDigital, Inc. | 685,947 | ||||||
2,013 | Itron, Inc.* | 126,517 | ||||||
5,935 | Ixia* | 95,554 | ||||||
17,149 | Kimball Electronics, Inc.* | 312,112 | ||||||
1,386 | Methode Electronics, Inc. | 57,311 | ||||||
4,075 | NETGEAR, Inc.* | 221,476 | ||||||
7,528 | Rogers Corp.* | 578,226 | ||||||
7,121 | Sanmina Corp.* | 260,985 | ||||||
10,037 | Super Micro Computer, Inc.* | 281,538 | ||||||
38,864 | TTM Technologies, Inc.* | 529,716 | ||||||
25,153 | Viavi Solutions, Inc.* | 205,752 | ||||||
15,695 | Vishay Intertechnology, Inc. | 254,259 | ||||||
|
| |||||||
5,791,452 | ||||||||
|
| |||||||
Common Stocks – (continued) | ||||||||
| Telecommunication Services – 0.6% |
| ||||||
3,968 | Cogent Communications Holdings, Inc. | $ | 164,077 | |||||
8,539 | General Communication, Inc. Class A* | 166,083 | ||||||
9,976 | Spok Holdings, Inc. | 207,002 | ||||||
|
| |||||||
537,162 | ||||||||
|
| |||||||
| Transportation – 1.4% |
| ||||||
13,564 | Hawaiian Holdings, Inc.* | 773,148 | ||||||
1,347 | Marten Transport Ltd. | 31,385 | ||||||
12,105 | SkyWest, Inc. | 441,227 | ||||||
4,550 | Swift Transportation Co.* | 110,838 | ||||||
|
| |||||||
1,356,598 | ||||||||
|
| |||||||
| Utilities – 2.7% |
| ||||||
1,375 | ALLETE, Inc. | 88,261 | ||||||
6,666 | NRG Yield, Inc. Class C | 105,323 | ||||||
5,278 | ONE Gas, Inc. | 337,581 | ||||||
11,843 | Ormat Technologies, Inc. | 635,022 | ||||||
1,395 | Pattern Energy Group, Inc. | 26,491 | ||||||
15,917 | Portland General Electric Co. | 689,683 | ||||||
9,729 | Southwest Gas Corp. | 745,436 | ||||||
|
| |||||||
2,627,797 | ||||||||
|
| |||||||
TOTAL COMMON STOCKS | ||||||||
(Cost $80,905,821) | $ | 95,289,292 | ||||||
|
|
Units | Description | Value | ||||||
Right* – 0.0% | ||||||||
| Pharmaceuticals, Biotechnology & Life Sciences – 0.0% |
| ||||||
1,561 | Shire plc | $ | 2,365 | |||||
(Cost $0) | ||||||||
|
|
Shares | Distribution Rate | Value | ||||||
Investment Company(c)(d) – 1.2% | ||||||||
Goldman Sachs Financial Square Government Fund — Institutional Shares |
| |||||||
1,221,911 | 0.455 | % | $ | 1,221,911 | ||||
(Cost $1,221,911) | ||||||||
| ||||||||
TOTAL INVESTMENTS BEFORE SECURITIES LENDING REINVESTMENT VEHICLE | ||||||||
(Cost $82,127,732) | $ | 96,513,568 | ||||||
| ||||||||
12 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST SMALL CAP EQUITY INSIGHTS FUND
Shares | Distribution Rate | Value | ||||||
Securities Lending Reinvestment Vehicle(c)(d) – 0.8% | ||||||||
Goldman Sachs Financial Square Government Fund — Institutional Shares |
| |||||||
758,249 | 0.455 | % | $ | 758,249 | ||||
(Cost $758,249) | ||||||||
| ||||||||
TOTAL INVESTMENTS – 99.4% | ||||||||
(Cost $82,885,981) | $ | 97,271,817 | ||||||
| ||||||||
OTHER ASSETS IN EXCESS |
| 585,620 | ||||||
| ||||||||
NET ASSETS – 100.0% | $ | 97,857,437 | ||||||
|
The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. | ||
* | Non-income producing security. | |
(a) | All or a portion of security is on loan. | |
(b) | All or a portion of security is segregated as collateral for initial margin requirements on futures transactions. | |
(c) | Represents an affiliated issuer. | |
(d) | Variable rate security. Interest rate or distribution rate disclosed is that which is in effect on December 31, 2016. |
Investment Abbreviation: | ||
REIT | —Real Estate Investment Trust |
ADDITIONAL INVESTMENT INFORMATION
FUTURES CONTRACTS — At December 31, 2016, the Fund had the following futures contracts:
Type | Number of Contracts Long (Short) | Expiration Date | Current Value | Unrealized Gain (Loss) | ||||||||||
Russell 2000 Mini Index | 24 | March 2017 | $ | 1,628,280 | $ | (19,228 | ) |
The accompanying notes are an integral part of these financial statements. | 13 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST SMALL CAP EQUITY INSIGHTS FUND
Statement of Assets and Liabilities
December 31, 2016
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $80,905,821)(a) | $ | 95,291,657 | ||
Investments in affiliated issuers, at value (cost $1,221,911) | 1,221,911 | |||
Investments in affiliated securities lending reinvestment vehicle, at value which equals cost | 758,249 | |||
Cash | 1,475,001 | |||
Receivables: | ||||
Dividends | 147,804 | |||
Reimbursement from investment adviser | 25,436 | |||
Fund shares sold | 6,167 | |||
Securities lending income | 2,962 | |||
Other assets | 381 | |||
Total assets | 98,929,568 | |||
Liabilities: | ||||
Variation margin on certain derivative contracts | 6,835 | |||
Payables: | ||||
Payable upon return of securities loaned | 758,249 | |||
Fund shares redeemed | 152,289 | |||
Management fees | 58,117 | |||
Distribution and Service fees and Transfer Agency fees | 6,066 | |||
Investments purchased | 385 | |||
Accrued expenses | 90,190 | |||
Total liabilities | 1,072,131 | |||
Net Assets: | ||||
Paid-in capital | 82,017,257 | |||
Undistributed net investment income | 75,109 | |||
Accumulated net realized gain | 1,398,463 | |||
Net unrealized gain | 14,366,608 | |||
NET ASSETS | $ | 97,857,437 | ||
Net Assets: | ||||
Institutional | $ | 77,420,711 | ||
Service | 20,436,726 | |||
Total Net Assets | $ | 97,857,437 | ||
Shares outstanding $0.001 par value (unlimited shares authorized): | ||||
Institutional | 5,614,579 | |||
Service | 1,491,918 | |||
Net asset value, offering and redemption price per share: | ||||
Institutional | $13.79 | |||
Service | 13.70 |
(a) Includes loaned securities having a market value of $729,883.
14 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST SMALL CAP EQUITY INSIGHTS FUND
Statement of Operations
For the Fiscal Year Ended December 31, 2016
Investment income: | ||||
Dividends — unaffiliated issuers (net of foreign taxes withheld of $1,176) | $ | 1,329,249 | ||
Securities lending income — affiliated issuers | 39,524 | |||
Dividends — affiliated issuers | 1,208 | |||
Total investment income | 1,369,981 | |||
Expenses: | ||||
Management fees | 680,562 | |||
Professional fees | 86,622 | |||
Printing and mailing costs | 70,654 | |||
Custody, accounting and administrative services | 66,364 | |||
Distribution and Service fees — Service Shares | 48,528 | |||
Transfer Agency fees(a) | 18,147 | |||
Trustee fees | 15,483 | |||
Other | 5,508 | |||
Total expenses | 991,868 | |||
Less — expense reductions | (207,191 | ) | ||
Net expenses | 784,677 | |||
NET INVESTMENT INCOME | 585,304 | |||
Realized and unrealized gain (loss): | ||||
Net realized gain from: | ||||
Investments | 2,879,190 | |||
Futures contracts | 369,569 | |||
Net change in unrealized gain (loss) on: | ||||
Investments | 15,356,865 | |||
Futures contracts | (22,910 | ) | ||
Net realized and unrealized gain | 18,582,714 | |||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 19,168,018 |
(a) Institutional and Service Shares incurred Transfer Agency fees of $14,265 and $3,882, respectively.
The accompanying notes are an integral part of these financial statements. | 15 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST SMALL CAP EQUITY INSIGHTS FUND
Statement of Changes in Net Assets
For the Fiscal Year Ended December 31, 2016 | For the Fiscal Year Ended December 31, 2015 | |||||||
From operations: | ||||||||
Net investment income | $ | 585,304 | $ | 560,792 | ||||
Net realized gain | 3,248,759 | 10,703,703 | ||||||
Net change in unrealized gain (loss) | 15,333,955 | (12,937,958 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 19,168,018 | (1,673,463 | ) | |||||
Distributions to shareholders: | ||||||||
From net investment income | ||||||||
Institutional Shares | (805,471 | ) | (225,666 | ) | ||||
Service Shares | (170,271 | ) | (5,881 | ) | ||||
From net realized gains | ||||||||
Institutional Shares | (1,921,693 | ) | (9,544,423 | ) | ||||
Service Shares | (521,949 | ) | (2,555,468 | ) | ||||
Total distributions to shareholders | (3,419,384 | ) | (12,331,438 | ) | ||||
From share transactions: | ||||||||
Proceeds from sales of shares | 13,916,746 | 17,599,123 | ||||||
Reinvestment of distributions | 3,419,383 | 12,331,438 | ||||||
Cost of shares redeemed | (27,985,318 | ) | (35,954,038 | ) | ||||
Net decrease in net assets resulting from share transactions | (10,649,189 | ) | (6,023,477 | ) | ||||
TOTAL INCREASE (DECREASE) | 5,099,445 | (20,028,378 | ) | |||||
Net assets: | ||||||||
Beginning of year | 92,757,992 | 112,786,370 | ||||||
End of year | $ | 97,857,437 | $ | 92,757,992 | ||||
Undistributed net investment income | $ | 75,109 | $ | 501,507 |
16 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST SMALL CAP EQUITY INSIGHTS FUND
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Year
Income (loss) from investment operations | Distributions to shareholders | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year - Share Class | Net asset value, beginning of year | Net income(a) | Net realized and unrealized gain (loss) | Total from investment operations | From net investment income | From net realized gains | Total distributions | Net asset value, end of year | Total return(b) | Net assets, end of year (in 000s) | Ratio of net expenses to average net assets | Ratio of total expenses to average net assets | Ratio of net investment income to average net assets | Portfolio rate(c) | ||||||||||||||||||||||||||||||||||||||||||
FOR THE FISCAL YEARS ENDED DECEMBER 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2016 - Institutional | $ | 11.60 | $ | 0.11 | $ | 2.59 | $ | 2.70 | $ | (0.15 | ) | �� | $ | (0.36 | ) | $ | (0.51 | ) | $ | 13.79 | 23.13 | % | $ | 77,421 | 0.81 | % | 1.04 | % | 0.95 | % | 119 | % | ||||||||||||||||||||||||
2016 - Service | 11.52 | 0.08 | 2.58 | 2.66 | (0.12 | ) | (0.36 | ) | (0.48 | ) | 13.70 | 22.92 | 20,437 | 1.06 | 1.29 | 0.70 | 119 | |||||||||||||||||||||||||||||||||||||||
2015 - Institutional | 13.67 | 0.08 | (d) | (0.37 | ) | (0.29 | ) | (0.04 | ) | (1.74 | ) | (1.78 | ) | 11.60 | (2.13 | ) | 73,270 | 0.81 | 0.99 | 0.59 | (d) | 124 | ||||||||||||||||||||||||||||||||||
2015 - Service | 13.60 | 0.05 | (d) | (0.39 | ) | (0.34 | ) | — | (e) | (1.74 | ) | (1.74 | ) | 11.52 | (2.49 | ) | 19,488 | 1.06 | 1.24 | 0.34 | (d) | 124 | ||||||||||||||||||||||||||||||||||
2014 - Institutional | 15.07 | 0.08 | 0.90 | 0.98 | (0.12 | ) | (2.26 | ) | (2.38 | ) | 13.67 | 6.93 | 89,043 | 0.83 | 1.04 | 0.53 | 119 | |||||||||||||||||||||||||||||||||||||||
2014 - Service | 15.00 | 0.04 | 0.90 | 0.94 | (0.08 | ) | (2.26 | ) | (2.34 | ) | 13.60 | 6.69 | 23,744 | 1.08 | 1.29 | 0.28 | 119 | |||||||||||||||||||||||||||||||||||||||
2013 - Institutional | 12.71 | 0.11 | 4.37 | 4.48 | (0.16 | ) | (1.96 | ) | (2.12 | ) | 15.07 | 35.62 | 98,114 | 0.82 | 0.98 | 0.77 | 152 | |||||||||||||||||||||||||||||||||||||||
2013 - Service | 12.65 | 0.08 | 4.34 | 4.42 | (0.11 | ) | (1.96 | ) | (2.07 | ) | 15.00 | 35.38 | 25,932 | 1.07 | 1.23 | 0.52 | 152 | |||||||||||||||||||||||||||||||||||||||
2012 - Institutional | 11.40 | 0.19 | (f) | 1.27 | (g) | 1.46 | (0.15 | ) | — | (0.15 | ) | 12.71 | 12.79 | (g) | 82,961 | 0.81 | 0.97 | 1.55 | (f) | 95 | ||||||||||||||||||||||||||||||||||||
2012 - Service | 11.35 | 0.17 | (f) | 1.25 | (g) | 1.42 | (0.12 | ) | — | (0.12 | ) | 12.65 | 12.47 | (g) | 22,674 | 1.06 | 1.22 | 1.34 | (f) | 95 |
(a) | Calculated based on the average shares outstanding methodology. |
(b) | Assumes investment at the net asset value at the beginning of the year, reinvestment of all distributions, and a complete redemption of the investment at the net asset value at the end of the year. |
(c) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short term investments and certain derivatives. If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
(d) | Reflects income recognized from special dividends which amounted to $0.02 per share and 0.15% of average net assets. |
(e) | Amount is less than $0.005 per share. |
(f) | Reflects income recognized from special dividends which amounted to $0.08 per share and 0.62% of average net assets. |
(g) | Reflects payment from affiliate relating to certain investment transactions which amounted to $0.08 per share. Excluding such payment, the total return would have been 12.44% and 12.12%, respectively. |
The accompanying notes are an integral part of these financial statements. | 17 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST SMALL CAP EQUITY INSIGHTS FUND
Notes to Financial Statements
December 31, 2016
1. ORGANIZATION
Goldman Sachs Variable Insurance Trust (the “Trust” or “VIT”) is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company. The Trust includes the Goldman Sachs Small Cap Equity Insights Fund (the “Fund”). The Fund is a diversified portfolio under the Act offering two classes of shares — Institutional and Service Shares. Shares of the Trust are offered to separate accounts of participating life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies.
Goldman Sachs Asset Management, L.P. (“GSAM”), an affiliate of Goldman, Sachs & Co. (“Goldman Sachs”), serves as investment adviser to the Fund pursuant to a management agreement (the “Agreement”) with the Trust.
2. SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and require management to make estimates and assumptions that may affect the reported amounts and disclosures. Actual results may differ from those estimates and assumptions.
A. Investment Valuation — The Fund’s valuation policy is to value investments at fair value.
B. Investment Income and Investments — Investment income includes interest income, dividend income, net of any foreign withholding taxes, less any amounts reclaimable, and securities lending income. Interest income is accrued daily and adjusted for amortization of premiums and accretion of discounts. Dividend income is recognized on ex-dividend date or, for certain foreign securities, as soon as such information is obtained subsequent to the ex-dividend date. Investment transactions are reflected on trade date. Realized gains and losses are calculated using identified cost. Investment transactions are recorded on the following business day for daily net asset value (“NAV”) calculations. Any foreign capital gains tax is accrued daily based upon net unrealized gains, and is payable upon sale of such investments. Distributions received from the Fund’s investments in United States (“U.S.”) real estate investment trusts (“REITs”) may be characterized as ordinary income, net capital gain or a return of capital. A return of capital is recorded by the Fund as a reduction to the cost basis of the REIT.
For derivative contracts, realized gains and losses are recorded upon settlement of the contract.
C. Class Allocations and Expenses — Investment income, realized and unrealized gain (loss), and non-class specific expenses of the Fund are allocated daily based upon the proportion of net assets of each class. Non-class specific expenses directly incurred by the Fund are charged to the Fund, while such expenses incurred by the Trust are allocated across the Fund on a straight-line and/or pro-rata basis depending upon the nature of the expenses. Class specific expenses, where applicable, are borne by the respective share classes and include Distribution and Service and Transfer Agency fees.
D. Federal Taxes and Distributions to Shareholders — It is the Fund’s policy to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Code”), applicable to regulated investment companies (mutual funds) and to distribute each year substantially all of its investment company taxable income and capital gains to its shareholders. Accordingly, the Fund is not required to make any provisions for the payment of federal income tax. Distributions to shareholders are recorded on the ex-dividend date. Income and capital gains distributions, if any, are declared and paid annually.
Net capital losses are carried forward to future fiscal years and may be used to the extent allowed by the Code to offset any future capital gains. Losses that are carried forward will retain their character as either short-term or long-term capital losses. Utilization of capital loss carryforwards will reduce the requirement of future capital gains distributions.
The characterization of distributions to shareholders for financial reporting purposes is determined in accordance with federal income tax rules, which may differ from GAAP. The source of the Fund’s distributions may be shown in the accompanying financial statements as either from net investment income, net realized gain or capital. Certain components of the Fund’s net assets on the Statement of Assets and Liabilities reflect permanent GAAP/tax differences based on the appropriate tax character.
18
GOLDMAN SACHS VARIABLE INSURANCE TRUST SMALL CAP EQUITY INSIGHTS FUND
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS
The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The levels used for classifying investments are not necessarily an indication of the risk associated with investing in these investments. The three levels of the fair value hierarchy are described below:
Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 — Quoted prices in markets that are not active or financial instruments for which significant inputs are observable (including, but not limited to, quoted prices for similar investments, interest rates, foreign exchange rates, volatility and credit spreads), either directly or indirectly;
Level 3 — Prices or valuations that require significant unobservable inputs (including GSAM’s assumptions in determining fair value measurement).
Changes in valuation techniques may result in transfers into or out of an assigned level within the hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value hierarchy resulting from such changes are deemed to have occurred as of the beginning of the reporting period.
The Board of Trustees (“Trustees”) has approved Valuation Procedures that govern the valuation of the portfolio investments held by the Fund, including investments for which market quotations are not readily available. The Trustees have delegated to GSAM day-to-day responsibility for implementing and maintaining internal controls and procedures related to the valuation of the Fund’s portfolio investments. To assess the continuing appropriateness of pricing sources and methodologies, GSAM regularly performs price verification procedures and issues challenges as necessary to third party pricing vendors or brokers, and any differences are reviewed in accordance with the Valuation Procedures.
A. Level 1 and Level 2 Fair Value Investments — The valuation techniques and significant inputs used in determining the fair values for investments classified as Level 1 and Level 2 are as follows:
Equity Securities — Equity securities traded on a U.S. securities exchange or the NASDAQ system, or those located on certain foreign exchanges, including but not limited to the Americas, are valued daily at their last sale price or official closing price on the principal exchange or system on which they are traded. If there is no sale or official closing price or such price is believed by GSAM to not represent fair value, equity securities are valued at the last bid price for long positions and at the last ask price for short positions. To the extent these investments are actively traded, they are classified as Level 1 of the fair value hierarchy, otherwise they are generally classified as Level 2.
Unlisted equity securities for which market quotations are available are valued at the last sale price on the valuation date, or if no sale occurs, at the last bid price. These investments are generally classified as Level 2 of the fair value hierarchy.
Money Market Funds — Investments in the Goldman Sachs Financial Square Government Fund (“Underlying Fund”) are valued at the NAV of the Institutional Share class on the day of valuation. These investments are generally classified as Level 1 of the fair value hierarchy. For information regarding an Underlying Fund’s accounting policies and investment holdings, please see the Underlying Fund’s shareholder report.
Derivative Contracts — A derivative is an instrument whose value is derived from underlying assets, indices, reference rates or a combination of these factors. The Fund enters into derivative transactions to hedge against changes in interest rates, securities prices, and/or currency exchange rates, to increase total return, or to gain access to certain markets or attain exposure to other underliers.
Exchange-traded derivatives, including futures and options contracts, are valued at the last sale or settlement price and typically fall within Level 1 of the fair value hierarchy. Over-the-counter (“OTC”) and centrally cleared derivatives are valued
19
GOLDMAN SACHS VARIABLE INSURANCE TRUST SMALL CAP EQUITY INSIGHTS FUND
Notes to Financial Statements (continued)
December 31, 2016
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS (continued)
using market transactions and other market evidence, including market-based inputs to models, calibration to market-clearing transactions, broker or dealer quotations, or other alternative pricing sources. Where models are used, the selection of a particular model to value OTC and centrally cleared derivatives depends upon the contractual terms of, and specific risks inherent in, the instrument, as well as the availability of pricing information in the market. Valuation models require a variety of inputs, including contractual terms, market prices, yield curves, credit curves, measures of volatility, voluntary and involuntary prepayment rates, loss severity rates and correlations of such inputs. For OTC and centrally cleared derivatives that trade in liquid markets, model inputs can generally be verified and model selection does not involve significant management judgment. OTC and centrally cleared derivatives are classified within Level 2 of the fair value hierarchy when significant inputs are corroborated by market evidence.
i. Futures Contracts — Futures contracts are contracts to buy or sell a standardized quantity of a specified commodity or security and are valued based on exchanged settlement prices or independent market quotes. Futures contracts are valued at the last settlement price, or in the absence of a sale, the last bid price for long positions and at the last ask price for short positions, at the end of each day on the board of trade or exchange upon which they are traded. Upon entering into a futures contract, the Fund deposits cash or securities in an account on behalf of the broker in an amount sufficient to meet the initial margin requirement. Subsequent payments are made or received by the Fund equal to the daily change in the contract value and are recorded as variation margin receivable or payable with a corresponding offset to unrealized gains or losses.
B. Level 3 Fair Value Investments — To the extent that significant inputs to valuation models and other alternative pricing sources are unobservable, or if quotations are not readily available, or if GSAM believes that such quotations do not accurately reflect fair value, the fair value of the Fund’s investments may be determined under Valuation Procedures approved by the Trustees. GSAM, consistent with its procedures and applicable regulatory guidance, may make an adjustment to the most recent valuation prices of either domestic or foreign securities in light of significant events to reflect what it believes to be the fair value of the securities at the time of determining the Fund’s NAV. Significant events which could affect a large number of securities in a particular market may include, but are not limited to: significant fluctuations in U.S. or foreign markets; market dislocations; market disruptions; or unscheduled market closings. Significant events which could also affect a single issuer may include, but are not limited to: corporate actions such as reorganizations, mergers and buy-outs; ratings downgrades; and bankruptcies.
C. Fair Value Hierarchy — The following is a summary of the Fund’s investments and derivatives classified in the fair value hierarchy as of December 31, 2016:
Investment Type | Level 1 | Level 2 | Level 3 | |||||||||
Assets | ||||||||||||
Common Stock and/or Other Equity Investments(a) | ||||||||||||
North America | $ | 95,289,292 | $ | — | $ | 2,365 | ||||||
Investment Company | 1,221,911 | — | — | |||||||||
Securities Lending Reinvestment Vehicle | 758,249 | — | — | |||||||||
Total | $ | 97,269,452 | $ | — | $ | 2,365 | ||||||
Derivative Type | ||||||||||||
Liabilities(b) | ||||||||||||
Futures Contracts | $ | (19,228 | ) | $ | — | $ | — |
(a) | Amounts are disclosed by continent to highlight the impact of time zone differences between local market close and the calculation of net asset value. Security valuations are based on the principal exchange or system on which they are traded, which may differ from country of domicile noted in the table. |
(b) | Amount shown represents unrealized gain (loss) at fiscal year end. |
For further information regarding security characteristics, see the Schedule of Investments.
20
GOLDMAN SACHS VARIABLE INSURANCE TRUST SMALL CAP EQUITY INSIGHTS FUND
4. INVESTMENTS IN DERIVATIVES
The following table sets forth, by certain risk types, the gross value of derivative contracts as of December 31, 2016. These instruments were used as part of the Fund’s investment strategies and to obtain and/or manage exposure related to the risks below. The values in the table below exclude the effects of cash collateral received or posted pursuant to these derivative contracts, and therefore are not representative of the Fund’s net exposure.
Risk | Statement of Assets and Liabilities | Assets | Statement of Assets and Liabilities | Liabilities(a) | ||||||||||
Equity | Variation margin on certain derivative contracts | — | Variation margin on certain derivative contracts | $ | (19,228 | ) |
(a) | Includes unrealized gain (loss) on futures contracts described in the Additional Investment Information section of the Schedule of Investments. Only the variation margin as of December 31, 2016 is reported within the Statement of Assets and Liabilities. |
The following table sets forth, by certain risk types, the Fund’s gains (losses) related to these derivatives and their indicative volumes for the fiscal year ended December 31, 2016. These gains (losses) should be considered in the context that these derivative contracts may have been executed to create investment opportunities and/or economically hedge certain investments, and accordingly, certain gains (losses) on such derivative contracts may offset certain (losses) gains attributable to investments. These gains (losses) are included in “Net realized gain (loss)” or “Net change in unrealized gain (loss)” on the Statement of Operations:
Risk | Statement of Operations | Net Realized Gain (Loss) | Net Change in Unrealized Gain (Loss) | Average Number of Contracts(a) | ||||||||||
Equity | Net realized gain (loss) from futures contracts/Net change in unrealized gain (loss) on futures contracts | $ | 369,569 | $ | (22,910 | ) | 14 |
(a) | Average number of contracts is based on the average of month end balances for the fiscal year ended December 31, 2016. |
5. AGREEMENTS AND AFFILIATED TRANSACTIONS
A. Management Agreement — Under the Agreement, GSAM manages the Fund, subject to the general supervision of the Trustees.
As compensation for the services rendered pursuant to the Agreement, the assumption of the expenses related thereto and administration of the Fund’s business affairs, including providing facilities, GSAM is entitled to a management fee, accrued daily and paid monthly, equal to an annual percentage rate of the Fund’s average daily net assets.
For the fiscal year ended December 31, 2016, contractual and effective net management fees with GSAM were at the following rates:
Contractual Management Rate | ||||||||||||||||||||||
First $2 billion | Next $3 billion | Next $3 billion | Over $8 billion | Effective Rate | Effective Net Management Rate^ | |||||||||||||||||
0.75% | 0.68 | % | 0.65 | % | 0.64 | % | 0.75 | % | 0.70 | %* |
^ | Effective Net Management Rate includes the impact of management fee waivers of affiliated Underlying Funds, if any. |
* | GSAM agreed to waive a portion of its management fee in order to achieve a net management rate, as defined in the Fund’s most recent prospectus. This waiver will be effective through at least April 29, 2017, and prior to such date GSAM may not terminate the arrangement without approval of the Trustees. For the fiscal year ended December 31, 2016, GSAM waived $45,370 of its management fee. |
The Fund invests in Institutional Shares of the Goldman Sachs Financial Square Government Fund, which is an affiliated Underlying Fund. GSAM has agreed to waive a portion of its management fee payable by the Fund in an amount equal to the management fee it earns as an investment adviser to any of the affiliated Underlying Funds in which the Fund invests. For the fiscal year ended December 31, 2016, GSAM waived $588 of the Fund’s management fee.
21
GOLDMAN SACHS VARIABLE INSURANCE TRUST SMALL CAP EQUITY INSIGHTS FUND
Notes to Financial Statements (continued)
December 31, 2016
5. AGREEMENTS AND AFFILIATED TRANSACTIONS (continued)
B. Distribution and Service Plan — The Trust, on behalf of the Service Shares of the Fund, has adopted a Distribution and Service Plan (the “Plan”). Under the Plan, Goldman Sachs, which serves as distributor (the “Distributor”), is entitled to a fee accrued daily and paid monthly, for distribution services and personal and account maintenance services, which may then be paid by Goldman Sachs to authorized dealers, equal to, on an annual basis, 0.25% of the Fund’s average daily net assets attributable to Service Shares.
C. Transfer Agency Agreement — Goldman Sachs also serves as the transfer agent of the Fund for a fee pursuant to the Transfer Agency Agreement. The fees charged for such transfer agency services are accrued daily and paid monthly at an annual rate of 0.02% of the average daily net assets of Institutional and Service Shares.
D. Other Expense Agreements and Affiliated Transactions — GSAM has agreed to limit certain “Other Expenses” of the Fund (excluding acquired fund fees and expenses, transfer agency fees and expenses, taxes, interest, brokerage fees, shareholder meeting, litigation, indemnification, and extraordinary expenses) to the extent such expenses exceed, on an annual basis, a percentage rate of the average daily net assets of the Fund. Such Other Expense reimbursements, if any, are accrued daily and paid monthly. In addition, the Fund is not obligated to reimburse GSAM for prior fiscal year expense reimbursements, if any. The Other Expense limitation as an annual percentage rate of average daily net assets for the Fund is 0.094%. The Other Expense limitation will remain in place through at least April 29, 2017, and prior to such date GSAM may not terminate the arrangement without the approval of the Trustees. For the fiscal year ended December 31, 2016, GSAM reimbursed $159,295 to the Fund. In addition, the Fund has entered into certain offset arrangements with the custodian and the transfer agent, which may result in a reduction of the Fund’s expenses and are received irrespective of the application of the “Other Expense” limitation described above. For the fiscal year ended December 31, 2016, custody fee credits were $1,938.
E. Line of Credit Facility — As of December 31, 2016, the Fund participated in a $1,100,000,000 committed, unsecured revolving line of credit facility (the “facility”) together with other funds of the Trust and certain registered investment companies having management agreements with GSAM or its affiliates. This facility is to be used for temporary emergency purposes, or to allow for an orderly liquidation of securities to meet redemption requests. The interest rate on borrowings is based on the federal funds rate. The facility also requires a fee to be paid by the Fund based on the amount of the commitment that has not been utilized. For the fiscal year ended December 31, 2016, the Fund did not have any borrowings under the facility.
F. Other Transactions with Affiliates — The following table provides information about the Fund’s investment in the Goldman Sachs Financial Square Government Fund as of and for the fiscal year ended December 31, 2016:
Market Value 12/31/2015 | Purchases at Cost | Proceeds from Sales | Market Value 12/31/2016 | Dividend Income | ||||||||||||||
$ | — | $ | 9,661,148 | $ | (8,439,237 | ) | $ | 1,221,911 | $ | 1,208 |
6. PORTFOLIO SECURITIES TRANSACTIONS
The cost of purchases and proceeds from sales and maturities of long-term securities for the fiscal year ended December 31, 2016 were $106,002,814 and $119,181,689, respectively.
7. SECURITIES LENDING
Pursuant to exemptive relief granted by the Securities and Exchange Commission (“SEC”) and the terms and conditions contained therein, the Fund may lend its securities through a securities lending agent, Goldman Sachs Agency Lending (“GSAL”), a wholly-owned subsidiary of Goldman Sachs, to certain qualified borrowers including Goldman Sachs and affiliates. In accordance with the
22
GOLDMAN SACHS VARIABLE INSURANCE TRUST SMALL CAP EQUITY INSIGHTS FUND
7. SECURITIES LENDING (continued)
Fund’s securities lending procedures, the Fund receives cash collateral at least equal to the market value of the securities on loan. The market value of the loaned securities is determined at the close of business of the Fund, at their last sale price or official closing price on the principal exchange or system on which they are traded, and any additional required collateral is delivered to the Fund on the next business day. As with other extensions of credit, the Fund may experience delay in the recovery of its securities or incur a loss should the borrower of the securities breach its agreement with the Fund or become insolvent at a time when the collateral is insufficient to cover the cost of repurchasing securities on loan. Dividend income received from securities on loan may not be subject to withholding taxes and therefore withholding taxes paid may differ from the amounts listed in the Statement of Operations. Loans of securities are terminable at any time and as such 1) the remaining contractual maturities of the outstanding securities lending transactions are considered to be overnight and continuous and 2) the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.
The Fund invests the cash collateral received in connection with securities lending transactions in the Goldman Sachs Financial Square Government Fund (“Government Money Market Fund”), an affiliated series of the Trust. Prior to September 30, 2016, the cash collateral had been invested in the Goldman Sachs Financial Square Money Market Fund. The Government Money Market Fund is registered under the Act as an open end investment company, is subject to Rule 2a-7 under the Act, and is managed by GSAM, for which GSAM may receive an investment advisory fee of up to 0.205% on an annualized basis of the average daily net assets of the Government Money Market Fund.
In the event of a default by a borrower with respect to any loan, GSAL will exercise any and all remedies provided under the applicable borrower agreement to make the Fund whole. These remedies include purchasing replacement securities by applying the collateral held from the defaulting broker against the purchase cost of the replacement securities. If GSAL is unable to purchase replacement securities, GSAL will indemnify the Fund by paying the Fund an amount equal to the market value of the securities loaned minus the value of cash collateral received from the borrower for the loan, subject to an exclusion for any shortfalls resulting from a loss of value in such cash collateral due to reinvestment risk. The Fund’s loaned securities were all subject to enforceable Securities Lending Agreements, and the value of the collateral is at least equal to the value of the cash received. The amounts of the Fund’s overnight and continuous agreements collateralized by common stocks which represent the gross amounts of recognized liabilities for securities lending transactions outstanding as of December 31, 2016 are disclosed as “Payable upon return of securities loaned” on the Statement of Assets and Liabilities.
Both the Fund and GSAL received compensation relating to the lending of the Fund’s securities. The amounts earned, if any, by the Fund for the fiscal year ended December 31, 2016 are reported under Investment Income on the Statement of Operations.
The table below details securities lending activity with affiliates of Goldman Sachs:
For the Fiscal Year ended December 31, 2016 | ||||||||||
Earnings of GSAL Relating to Securities Loaned | Amounts Received by the Funds from Lending to Goldman Sachs | Amounts Payable to Goldman Sachs Upon Return of Securities Loaned as of December 31, 2016 | ||||||||
$ | 4,393 | $ | 2,856 | $ | 235,400 |
The following table provides information about the Fund’s investment in the Goldman Sachs Financial Square Money Market Fund for the fiscal year ended December 31, 2016:
Market Value | Purchases | Proceeds | Market Value 12/31/2016 | |||||||||||
$2,188,175 | $ | 16,398,319 | $ | (18,586,494 | ) | $ | — |
23
GOLDMAN SACHS VARIABLE INSURANCE TRUST SMALL CAP EQUITY INSIGHTS FUND
Notes to Financial Statements (continued)
December 31, 2016
7. SECURITIES LENDING (continued)
The following table provides information about the Fund’s investment in the Government Money Market Fund for the fiscal year ended December 31, 2016:
Market Value | Purchases | Proceeds from Sales | Market Value | |||||||||||
$ | — | $ | 5,235,584 | $ | (4,477,335 | ) | $ | 758,249 |
8. TAX INFORMATION
The tax character of distributions paid during the fiscal years ended December 31, 2015 and December 31, 2016 was as follows:
2015 | 2016 | |||||||
Distributions paid from: | ||||||||
Ordinary income | $ | 3,114,694 | $ | 1,002,797 | ||||
Net long-term capital gains | 9,216,744 | 2,416,587 | ||||||
Total taxable distributions | $ | 12,331,438 | $ | 3,419,384 |
As of December 31, 2016, the components of accumulated earnings (losses) on a tax-basis were as follows:
Undistributed ordinary income — net | $ | 29,115 | ||
Undistributed long-term capital gains | 1,708,149 | |||
Total undistributed earnings | $ | 1,737,264 | ||
Timing differences (§ 857(b)(9) Deferred Dividend) | $ | 34,156 | ||
Unrealized gains — net | 14,068,760 | |||
Total accumulated earnings | $ | 15,840,180 |
As of December 31, 2016, the Fund’s aggregate security unrealized gains and losses based on cost for U.S. federal income tax purposes were as follows:
Tax cost | $ | 83,203,057 | ||
Gross unrealized gain | 17,478,726 | |||
Gross unrealized loss | (3,409,966 | ) | ||
Net unrealized security gain | $ | 14,068,760 |
The difference between GAAP-basis and tax-basis unrealized gains (losses) is attributable primarily to wash sales, net mark to market gains (losses) on regulated futures contracts and differences in the tax treatment of underlying fund investments, passive foreign investment company investments, and real estate investment trust investments.
In order to present certain components of the Fund’s capital accounts on a tax-basis, the Fund has reclassified $35,960 from undistributed net investment income to accumulated net realized gain. This reclassification has no impact on the NAV of the Fund and results primarily from differences in the tax treatment of REIT investments and Underlying Fund investments.
24
GOLDMAN SACHS VARIABLE INSURANCE TRUST SMALL CAP EQUITY INSIGHTS FUND
8. TAX INFORMATION (continued)
GSAM has reviewed the Fund’s tax positions for all open tax years (the current and prior three years, as applicable) and has concluded that no provision for income tax is required in the Fund’s financial statements. Such open tax years remain subject to examination and adjustment by tax authorities.
9. OTHER RISKS
The Fund’s risks include, but are not limited to, the following:
Derivatives Risk — The Fund’s use of derivatives may result in loss. Derivative instruments, which may pose risks in addition to and greater than those associated with investing directly in securities, currencies, or other instruments, may be illiquid or less liquid, volatile, difficult to price and leveraged so that small changes in the value of the underlying instruments may produce disproportionate losses to the Fund. Derivatives are also subject to counterparty risk, which is the risk that the other party in the transaction will not fulfill its contractual obligation. The use of derivatives is a highly specialized activity that involves investment techniques and risks different from those associated with investments in more traditional securities and instruments. Losses from derivatives can also result from a lack of correlation between changes in the value of derivative instruments and the portfolio assets (if any) being hedged.
Investments in Other Investment Companies — As a shareholder of another investment company, including an exchange-traded fund (“ETF”), the Fund will indirectly bear its proportionate share of any net management fees and other expenses paid by such other investment companies, in addition to the fees and expenses regularly borne by the Fund. ETFs are subject to risks that do not apply to conventional mutual funds, including but not limited to the following: (i) the market price of an ETF’s shares may trade at a premium or a discount to their NAV; and (ii) an active trading market for an ETF’s shares may not develop or be maintained.
Large Shareholder Transactions Risk — The Fund may experience adverse effects when certain large shareholders, such as other funds, participating insurance companies, accounts and Goldman Sachs affiliates, purchase or redeem large amounts of shares of the Fund. Such large shareholder redemptions may cause the Fund to sell portfolio securities at times when it would not otherwise do so, which may negatively impact the Fund’s NAV and liquidity. These transactions may also accelerate the realization of taxable income to shareholders if such sales of investments resulted in gains, and may also increase transaction costs. In addition, a large redemption could result in the Fund’s current expenses being allocated over a smaller asset base, leading to an increase in the Fund’s expense ratio. Similarly, large Fund share purchases may adversely affect the Fund’s performance to the extent that the Fund is delayed in investing new cash and is required to maintain a larger cash position than it ordinarily would.
Liquidity Risk — The Fund may make investments that are illiquid or that may become less liquid in response to market developments or adverse investor perceptions. Illiquid investments may be more difficult to value. Liquidity risk may also refer to the risk that the Fund will not be able to pay redemption proceeds within the allowable time period because of unusual market conditions, an unusually high volume of redemption requests, or other reasons. To meet redemption requests, the Fund may be forced to sell investments at an unfavorable time and/or under unfavorable conditions.
Market and Credit Risks — In the normal course of business, the Fund trades financial instruments and enters into financial transactions where risk of potential loss exists due to changes in the market (market risk). Additionally, the Fund may also be exposed to credit risk in the event that an issuer or guarantor fails to perform or that an institution or entity with which the Fund has unsettled or open transactions defaults.
25
GOLDMAN SACHS VARIABLE INSURANCE TRUST SMALL CAP EQUITY INSIGHTS FUND
Notes to Financial Statements (continued)
December 31, 2016
10. INDEMNIFICATIONS
Under the Trust’s organizational documents, its Trustees, officers, employees and agents are indemnified, to the extent permitted by the Act and state law, against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the course of business, the Fund enters into contracts that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, GSAM believes the risk of loss under these arrangements to be remote.
11. SUBSEQUENT EVENTS
Subsequent events after the Statement of Assets and Liabilities date have been evaluated and GSAM has concluded that there is no impact requiring adjustment or disclosure in the financial statements.
12. SUMMARY OF SHARE TRANSACTIONS
Share activity is as follows:
For the Fiscal Year Ended December 31, 2016 | For the Fiscal Year Ended December 31, 2015 | |||||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||||
Institutional Shares | ||||||||||||||||
Shares sold | 1,055,485 | $ | 13,309,062 | 1,203,429 | $ | 17,154,427 | ||||||||||
Reinvestment of distributions | 196,058 | 2,727,164 | 842,249 | 9,770,089 | ||||||||||||
Shares redeemed | (1,955,267 | ) | (24,207,664 | ) | (2,240,010 | ) | (31,614,902 | ) | ||||||||
(703,724 | ) | (8,171,438 | ) | (194,332 | ) | (4,690,386 | ) | |||||||||
Service Shares | ||||||||||||||||
Shares sold | 52,803 | 607,684 | 32,525 | 444,696 | ||||||||||||
Reinvestment of distributions | 50,088 | 692,219 | 222,147 | 2,561,349 | ||||||||||||
Shares redeemed | (301,894 | ) | (3,777,654 | ) | (310,170 | ) | (4,339,136 | ) | ||||||||
(199,003 | ) | (2,477,751 | ) | (55,498 | ) | (1,333,091 | ) | |||||||||
NET DECREASE | (902,727 | ) | $ | (10,649,189 | ) | (249,830 | ) | $ | (6,023,477 | ) |
26
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Goldman Sachs Variable Insurance Trust and Shareholders of the
Goldman Sachs Small Cap Equity Insights Fund:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Goldman Sachs Small Cap Equity Insights Fund (the “Fund”), a fund of the Goldman Sachs Variable Insurance Trust, as of December 31, 2016, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities as of December 31, 2016 by correspondence with the custodian, brokers, transfer agent of the underlying funds and the application of alternative auditing procedures where securities purchased confirmations had not been received, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 14, 2017
27
GOLDMAN SACHS VARIABLE INSURANCE TRUST SMALL CAP EQUITY INSIGHTS FUND
Fund Expenses — Six Month Period Ended December 31, 2016 (Unaudited) |
As a shareholder of Institutional or Service Shares of the Fund, you incur ongoing costs, including management fees, distribution and/or service (12b-1) fees (with respect to Service Shares) and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Institutional Shares and Service Shares of the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from July 1, 2016 through December 31, 2016, which represents a period of 184 days of a 366 day year.
Actual Expenses — The first line under each share class in the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000=8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes — The second line under each share class in the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual net expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only. As a shareholder of the Fund you do not incur any transaction costs, such as sales charges, redemption fees, or exchange fees, but shareholders of other funds may incur such costs. The second line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds whose shareholders may incur transaction costs.
Share Class | Beginning Account Value 07/01/16 | Ending Account Value 12/31/16 | Expenses Paid for the 6 Months Ended 12/31/16* | |||||||||
Institutional | ||||||||||||
Actual | $ | 1,000 | $ | 1,193.90 | $ | 4.47 | ||||||
Hypothetical 5% return | 1,000 | 1,021.06 | + | 4.12 | ||||||||
Service | ||||||||||||
Actual | 1,000 | 1,192.60 | 5.84 | |||||||||
Hypothetical 5% return | 1,000 | 1,019.81 | + | 5.38 |
* | Expenses are calculated using the Fund’s annualized net expense ratio for each class, which represents the ongoing expenses as a percentage of net assets for the six months ended December 31, 2016. Expenses are calculated by multiplying the annualized net expense ratio by the average account value for the period; then multiplying the result by the number of days in the most recent fiscal half year; and then dividing that result by the number of days in the fiscal year. The annualized net expense ratios for the period were 0.81% and 1.06% for the Institutional and Service Shares, respectively. |
+ | Hypothetical expenses are based on the Fund’s actual annualized net expense ratios and an assumed rate of return of 5% per year before expenses. |
28
GOLDMAN SACHS VARIABLE INSURANCE TRUST SMALL CAP EQUITY INSIGHTS FUND
Trustees and Officers (Unaudited)
Independent Trustees
Name, Address and Age1 | Position(s) Held with the Trust | Term of Office and | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee3 | Other Directorships Held by Trustee4 | |||||||
Ashok N. Bakhru Age: 74 | Chairman of the Board of Trustees | Since 1996 (Trustee since 1991) | Mr. Bakhru is retired. He was formerly Director, Apollo Investment Corporation (a business development company) (2008-2013); President, ABN Associates (a management and financial consulting firm) (1994-1996 and 1998-2012); Trustee, Scholarship America (1998-2005); Trustee, Institute for Higher Education Policy (2003-2008); Director, Private Equity Investors — III and IV (1998-2007), and Equity-Linked Investors II (April 2002-2007).
Chairman of the Board of Trustees — Goldman Sachs Trust; Goldman Sachs Variable Insurance Trust; Goldman Sachs Trust II; Goldman Sachs BDC, Inc.; Goldman Sachs Private Middle Market Credit LLC; Goldman Sachs MLP Income Opportunities Fund; Goldman Sachs MLP and Energy Renaissance Fund; and Goldman Sachs ETF Trust. | 142 | None | |||||||
Kathryn A. Cassidy Age: 62 | Trustee | Since 2015 | Ms. Cassidy is retired. Formerly, she was Advisor to the Chairman (May 2014-December 2014); and Senior Vice President and Treasurer (2008-2014), General Electric Company & General Electric Capital Corporation (technology and financial services companies).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||||
Diana M. Daniels Age: 67 | Trustee | Since 2007 | Ms. Daniels is retired. Formerly, she was Vice President, General Counsel and Secretary, The Washington Post Company (1991-2006). Ms. Daniels is a Trustee Emeritus and serves as a Presidential Councillor of Cornell University (2013-Present); former Member of the Legal Advisory Board, New York Stock Exchange (2003-2006) and of the Corporate Advisory Board, Standish Mellon Management Advisors (2006-2007).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||||
Herbert J. Markley Age: 66 | Trustee | Since 2013 | Mr. Markley is retired. Formerly, he was Executive Vice President, Deere & Company (an agricultural and construction equipment manufacturer) (2007-2009); and President, Agricultural Division, Deere & Company (2001-2007). Previously, Mr. Markley served as an Advisory Board Member of Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust (June 2013-October 2013).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||||
Jessica Palmer Age: 67 | Trustee | Since 2007 | Ms. Palmer is retired. She is Director, Emerson Center for the Arts and Culture (2011-Present); and was formerly a Consultant, Citigroup Human Resources Department (2007-2008); Managing Director, Citigroup Corporate and Investment Banking (previously, Salomon Smith Barney/Salomon Brothers) (1984-2006). Ms. Palmer was a Member of the Board of Trustees of Indian Mountain School (private elementary and secondary school) (2004-2009).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||||
29
GOLDMAN SACHS VARIABLE INSURANCE TRUST SMALL CAP EQUITY INSIGHTS FUND
Trustees and Officers (Unaudited) (continued)
Independent Trustees
Name, Address and Age1 | Position(s) Held with the Trust | Term of Office and | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee3 | Other Directorships Held by Trustee4 | |||||||
Roy W. Templin Age: 56 | Trustee | Since 2013 | Mr. Templin is retired. He recently served as Chairman of the Board of Directors, Con-Way Incorporated (a transportation, logistics and supply chain management service company) (2014-2015); and was formerly Executive Vice President and Chief Financial Officer, Whirlpool Corporation (an appliance manufacturer and marketer) (2004-2012). Previously, Mr. Templin served as an Advisory Board Member of Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust (June 2013-October 2013).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||||
Gregory G. Weaver Age: 65 | Trustee | Since 2015 | Mr. Weaver is retired. He is Director, Verizon Communications Inc. (2015-Present); and was formerly Chairman and Chief Executive Officer, Deloitte & Touche LLP (a professional services firm) (2001-2005 and 2012-2014); and Member of the Board of Directors, Deloitte & Touche LLP (2006-2012).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | Verizon Communications Inc. | |||||||
30
GOLDMAN SACHS VARIABLE INSURANCE TRUST SMALL CAP EQUITY INSIGHTS FUND
Trustees and Officers (Unaudited) (continued)
Interested Trustees*
Name, Address and Age1 | Position(s) Held with the Trust | Term of Office and | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee3 | Other Directorships Held by Trustee4 | |||||||
James A. McNamara Age: 54 | President and Trustee | Since 2007 | Managing Director, Goldman Sachs (December 1998-Present); Director of Institutional Fund Sales, GSAM (April 1998-December 2000); and Senior Vice President and Manager, Dreyfus Institutional Service Corporation (January 1993- April 1998).
President and Trustee — Goldman Sachs Trust; Goldman Sachs Variable Insurance Trust; Goldman Sachs Trust II; Goldman Sachs MLP Income Opportunities Fund; Goldman Sachs MLP and Energy Renaissance Fund; and Goldman Sachs ETF Trust. | 140 | None | |||||||
Alan A. Shuch Age: 67 | Trustee | Since 1990 | Advisory Director — GSAM (May 1999-Present); Consultant to GSAM (December 1994-May 1999); and Limited Partner, Goldman Sachs (December 1994-May 1999).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||||
* | These persons are considered to be “Interested Trustees” because they hold positions with Goldman Sachs and own securities issued by The Goldman Sachs Group, Inc. Each Interested Trustee holds comparable positions with certain other companies of which Goldman Sachs, GSAM or an affiliate thereof is the investment adviser, administrator and/or distributor. |
1 | Each Trustee may be contacted by writing to the Trustee, c/o Goldman Sachs, 200 West Street, New York, New York, 10282, Attn: Caroline Kraus. Information is provided as of December 31, 2016. Alan A. Shuch served as Trustee until his retirement from the Board on December 31, 2016. |
2 | Subject to such policies as may be adopted by the Board from time-to-time, each Trustee holds office for an indefinite term, until the earliest of: (a) the election of his or her successor; (b) the date the Trustee resigns or is removed by the Board or shareholders, in accordance with the Trust’s Declaration of Trust; or (c) the termination of the Trust. The Board has adopted policies which provide that (a) no Trustee shall hold office for more than 15 years and (b) a Trustee shall retire as of December 31st of the calendar year in which he or she reaches his or her 74th birthday, unless a waiver of such requirement shall have been adopted by a majority of the other Trustees. These policies may be changed by the Trustees without shareholder vote. One Trustee has been granted a waiver from the foregoing policies which permits him to serve until December 31, 2017. |
3 | The Goldman Sachs Fund Complex includes certain other companies listed above for each respective Trustee. As of December 31, 2016, Goldman Sachs Trust consisted of 92 portfolios (89 of which offered shares to the public); Goldman Sachs Variable Insurance Trust consisted of 14 portfolios; Goldman Sachs Trust II consisted of 17 portfolios (16 of which offered shares to the public); Goldman Sachs BDC, Inc., Goldman Sachs Private Middle Market Credit LLC, Goldman Sachs MLP Income Opportunities Fund, and Goldman Sachs MLP and Energy Renaissance Fund each consisted of one portfolio; and Goldman Sachs ETF Trust consisted of 15 portfolios (eight of which offered shares to the public). Goldman Sachs Private Middle Market Credit LLC does not offer shares to the public. |
4 | This column includes only directorships of companies required to report to the Securities and Exchange Commission under the Securities Exchange Act of 1934 (i.e., “public companies”) or other investment companies registered under the Act. |
Additional information about the Trustees is available in the Fund’s Statement of Additional Information, which can be obtained from Goldman Sachs free of charge by calling this toll-free number (in the United States of America): 1-800-526-7384.
31
GOLDMAN SACHS VARIABLE INSURANCE TRUST SMALL CAP EQUITY INSIGHTS FUND
Trustees and Officers (Unaudited) (continued)
Officers of the Trust*
Name, Address and Age1 | Position(s) Held with the Trust | Term of Office and | Principal Occupation(s) During Past 5 Years | |||
James A. McNamara 200 West Street New York, NY 10282 Age: 54 | Trustee and President | Since 2007 | Managing Director, Goldman Sachs (December 1998-Present); Director of Institutional Fund Sales, GSAM (April 1998-December 2000); and Senior Vice President and Manager, Dreyfus Institutional Service Corporation (January 1993-April 1998).
President and Trustee — Goldman Sachs Trust; Goldman Sachs Variable Insurance Trust; Goldman Sachs Trust II; Goldman Sachs MLP Income Opportunities Fund; Goldman Sachs MLP and Energy Renaissance Fund; and Goldman Sachs ETF Trust. | |||
Caroline L. Kraus 200 West Street New York, NY 10282 Age: 39 | Secretary | Since 2012 | Managing Director, Goldman Sachs (January 2016-Present); Vice President, Goldman Sachs (August 2006-December 2015); Associate General Counsel, Goldman Sachs (2012-Present); Assistant General Counsel, Goldman Sachs (August 2006-December 2011); and Associate, Weil, Gotshal & Manges, LLP (2002-2006).
Secretary — Goldman Sachs Trust (previously Assistant Secretary (2012)); Goldman Sachs Variable Insurance Trust (previously Assistant Secretary (2012)); Goldman Sachs Trust II; Goldman Sachs BDC, Inc.; Goldman Sachs Private Middle Market Credit LLC; Goldman Sachs Middle Market Lending LLC; Goldman Sachs MLP Income Opportunities Fund; Goldman Sachs MLP and Energy Renaissance Fund; and Goldman Sachs ETF Trust. | |||
Scott M. McHugh 200 West Street New York, NY 10282 Age: 45 | Treasurer, Senior Vice President and Principal Financial Officer | Since 2009 (Principal | Managing Director, Goldman Sachs (January 2016-Present); Vice President, Goldman Sachs (February 2007-December 2015); Assistant Treasurer of certain mutual funds administered by DWS Scudder (2005-2007); and Director (2005-2007), Vice President (2000-2005), and Assistant Vice President (1998-2000), Deutsche Asset Management or its predecessor (1998-2007).
Treasurer, Senior Vice President and Principal Financial Officer — Goldman Sachs Trust; Goldman Sachs Variable Insurance Trust; Goldman Sachs Trust II; Goldman Sachs MLP Income Opportunities Fund; Goldman Sachs MLP and Energy Renaissance Fund; and Goldman Sachs ETF Trust. | |||
* | Represents a partial list of officers of the Trust. Additional information about all the officers is available in the Fund’s Statement of Additional Information, which can be obtained from Goldman Sachs free of charge by calling this toll-free number (in the United States): 1-800-526-7384. |
1 | Information is provided as of December 31, 2016. |
2 | Officers hold office at the pleasure of the Board of Trustees or until their successors are duly elected and qualified. Each officer holds comparable positions with certain other companies of which Goldman Sachs, GSAM or an affiliate thereof is the investment adviser, administrator and/or distributor. |
32
GOLDMAN SACHS VARIABLE INSURANCE TRUST SMALL CAP EQUITY INSIGHTS FUND
Goldman Sachs Variable Insurance Trust — Tax Information (Unaudited)
For the year ended December 31, 2016, 69.66% of the dividends paid from net investment company taxable income by the Small Cap Equity Insights Fund qualify for the dividends received deduction available to corporations.
Pursuant to Section 852 of the Internal Revenue Code, the Small Cap Equity Insights Fund designates $2,416,587 or, if different, the maximum amount allowable, as capital gain dividends paid during the fiscal year ended December 31, 2016.
33
TRUSTEES | OFFICERS | |
Ashok N. Bakhru, Chairman Kathryn A. Cassidy Diana M. Daniels Herbert J. Markley James A. McNamara Jessica Palmer Roy W. Templin Gregory G. Weaver | James A. McNamara, President Scott M. McHugh, Treasurer, Senior Vice President and Principal Financial Officer Caroline L. Kraus, Secretary |
GOLDMAN, SACHS & CO.
Distributor and Transfer Agent
GOLDMAN SACHS ASSET MANAGEMENT, L.P.
Investment Adviser
200 West Street, New York
New York 10282
Visit our web site at www.GSAMFUNDS.com to obtain the most recent month-end returns.
The reports concerning the Fund included in this shareholder report may contain certain forward-looking statements about the factors that may affect the performance of the Fund in the future. These statements are based on Fund management’s predictions and expectations concerning certain future events and their expected impact on the Fund, such as performance of the economy as a whole and of specific industry sectors, changes in the levels of interest rates, the impact of developing world events, and other factors that may influence the future performance of the Fund. Management believes these forward-looking statements to be reasonable, although they are inherently uncertain and difficult to predict. Actual events may cause adjustments in portfolio management strategies from those currently expected to be employed.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the Fund voted proxies relating to portfolio securities for the 12-month period ended December 31, 2016 is available (i) without charge, upon request by calling 1-800-621-2550; and (ii) on the Securities and Exchange Commission (“SEC”) web site at http://www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Form N-Qs are available on the SEC’s web site at http://www.sec.gov within 60 days after the Fund’s first and third fiscal quarters. The Fund’s Form N-Qs may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may also be obtained by calling 1-800-SEC-0330. Form N-Qs may be obtained upon request and without charge by calling 1-800-621-2550.
The website links provided are for your convenience only and are not an endorsement or recommendation by GSAM of any of these websites or the products or services offered. GSAM is not responsible for the accuracy and validity of the content of these websites.
Fund holdings and allocations shown are as of December 31, 2016 and may not be representative of future investments. Fund holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities. Current and future holdings are subject to risk.
References to indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only and do not imply that the portfolio will achieve similar results. The index composition may not reflect the manner in which a portfolio is constructed. While an adviser seeks to design a portfolio which reflects appropriate risk and return features, portfolio characteristics may deviate from those of the benchmark.
The Global Industry Classification Standard (“GICS”) was developed by and is the exclusive property and a service mark of Morgan Stanley Capital International Inc. (“MSCI”) and Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. (“S&P”) and is licensed for use by Goldman Sachs. Neither MSCI, S&P nor any other party involved in making or compiling the GICS or any GICS classifications makes any express or implied warranties or representations with respect to such standard or classification (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of such standard or classification. Without limiting any of the foregoing, in no event shall MSCI, S&P, any of their affiliates or any third party involved in making or compiling the GICS or any GICS classifications have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.
The portfolio risk management process includes an effort to monitor and manage risk, but does not imply low risk.
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VITSCAR-17/81099-TMPL-02/2017-469760/8.8k
Goldman
Sachs Variable Insurance Trust
Goldman Sachs
Strategic Growth Fund
Annual Report
December 31, 2016
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC GROWTH FUND
INVESTMENT OBJECTIVE
The Fund seeks long-term growth of capital.
Portfolio Management Discussion and Analysis
Below, the Goldman Sachs Growth Portfolio Management Team discusses the Goldman Sachs Variable Insurance Trust — Goldman Sachs Strategic Growth Fund’s (the “Fund”) performance and positioning for the 12-month period ended December 31, 2016 (the “Reporting Period”).
How did the Fund perform during the Reporting Period?
During the Reporting Period, the Fund’s Institutional and Service Shares generated average annual total returns of 1.98% and 1.69%, respectively. These returns compare to the 7.06% average annual total return of the Fund’s benchmark, the Russell 1000® Growth Index (with dividends reinvested) (the “Russell Index”), during the same time period.
What economic and market factors most influenced the equity markets as a whole during the Reporting Period?
Representing the U.S. equity market, the S&P 500® Index gained 11.93% during the Reporting Period, despite a global rout at the start of the year, unexpected political events both domestically and abroad and a Federal Reserve (“Fed”) interest rate hike.
As the Reporting Period began in January 2016, U.S. equities were embroiled in a global rout, triggered by investor concerns about an intensifying economic slowdown in China and exacerbated by an oil price plunge. Following a December 2015 interest rate hike, the January 2016 Fed statement acknowledged these external risks and tightening financial conditions. U.S. equities stabilized in February 2016, as market sentiment improved on the more dovish tone set by global central banks. (Dovish language tends to suggest lower interest rates; opposite of hawkish.) U.S. equities were also supported by stronger economic data, rallying as fourth quarter 2015 U.S. Gross Domestic Product (“GDP”) came in above consensus expectations. In March 2016, the Fed kept interest rates on hold and surprised on the dovish side, reducing its forecast to two interest rate hikes in 2016, down from four. Along with receding global economic concerns, this helped to drive a recovery in U.S. equities. Released in March 2016, February 2016 unemployment data came in ahead of market consensus, with unemployment steady at 4.9% in spite of higher participation rates and declining underemployment.
Following the rebound in March 2016, market sentiment appeared to remain sanguine in April 2016, as oil prices rose and China economic growth concerns abated. U.S. equities fell near the end of the month as investors were disappointed by a lack of additional stimulus from the Bank of Japan and by a weaker than consensus expected first quarter U.S. GDP growth rate of 0.5%. Weaker than expected May 2016 payroll data drove expectations for a Fed interest rate hike in June 2016 temporarily lower, but subsequent hawkish Fed minutes revived market expectations. (Hawkish language tends to suggest higher interest rates; opposite of dovish.) The Fed ultimately held interest rates steady in June 2016 and signaled a slower pace of hikes, acknowledging the slowdown in the labor market. Markets were otherwise dominated in June 2016 by the U.K. referendum on membership in the European Union, popularly known as Brexit. U.S. equities sold off in the global risk-off, or heightened risk averse, sentiment in June 2016 following the surprise “leave” result. Markets rebounded in the latter days of the month owing to improving risk sentiment as markets digested the Brexit vote outcome and on dovish remarks from Bank of England Governor Carney.
In July 2016, U.S. equities were buoyed by strong economic data and corporate earnings, despite increased uncertainty post-Brexit. In her August 2016 Jackson Hole speech, Fed Chair Janet Yellen acknowledged the case for an interest rate hike had strengthened in the then-recent months. Along with strong labor market data and other hawkish comments from the Fed, this significantly increased the market-implied probability of an interest rate hike by year-end 2016, causing U.S. equities to sell off. In early September 2016, equities fell as the European Central Bank disappointed markets with its lack of commitment to extend quantitative easing. However, there was a subsequent rebound following the Fed’s decision in September 2016 to leave interest rates unchanged.
In October 2016, a combination of hawkish Fed commentary and mounting strong U.S. economic data led to increased market pricing for a December 2016 interest rate hike. U.S. GDP increased by 3.5% on an annualized basis for the third quarter of 2016, above consensus expectations and the strongest growth rate in two years. Following the unexpected victory of Donald Trump in the November 2016 U.S. elections, U.S. equities quickly reversed a short-lived sell-off and surged on anticipation of a pro-growth effect of Mr. Trump’s fiscal stimulus plan. The Fed raised rates 0.25% in December 2016, for the first time in a year but as had
1
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC GROWTH FUND
largely been anticipated, and set a more hawkish hike path for 2017, causing equities to decline, albeit modestly, following the announcement.
For the Reporting Period overall, energy, telecommunication services and financials were the best performing sectors in the S&P 500® Index by a wide margin. Industrials, materials, utilities and information technology also posted double-digit gains that outpaced the S&P 500® Index during the Reporting Period. The weakest performing sectors in the S&P 500® Index were real estate and health care, the only two to post negative absolute returns, followed by consumer staples and consumer discretionary, which were comparatively weak but generated positive returns during the Reporting Period.
Within the U.S. equity market, there was significant disparity in performance not only among sectors but also among the various capitalization and style segments. While all capitalization segments posted positive returns, small-cap stocks, as measured by the Russell 2000® Index, performed best, followed at some distance by mid-cap stocks, as measured by the Russell Midcap® Index, and then, large-cap stocks, as measured by the Russell 1000® Index. From a style perspective, value-oriented stocks significantly outpaced growth-oriented stocks across the capitalization spectrum. (All as measured by the Russell indices.)
What key factors were responsible for the Fund’s performance during the Reporting Period?
The Fund generated positive absolute returns but its underperformance relative to the Russell Index during the Reporting Period can be attributed primarily to stock selection overall. Sector allocation also detracted, albeit more modestly.
Which equity market sectors most significantly affected Fund performance?
Detracting most from the Fund’s relative results during the Reporting Period was stock selection in the information technology, health care and industrials sectors. The only two sectors that contributed positively to the Fund’s relative results during the Reporting Period were financials and energy, where effective stock selection drove performance.
Which stocks detracted significantly from the Fund’s performance during the Reporting Period?
Detracting from the Fund’s results relative to the Russell Index were positions in online professional network provider LinkedIn, global pharmaceutical company Allergan and specialty retailer L Brands.
LinkedIn reported solid fourth quarter 2015 results, with revenues and earnings ahead of market estimates, and healthy user engagement. Of note, however, was top- and bottom-line guidance below market expectations, which led to a stock price decline. Specifically, its management attributed the slowdown to macroeconomic pressures in the Europe, Middle East and Africa (“EMEA”) and Asia-Pacific (“APAC”) regions and to plans to shut down its acquired Bizo asset. We believe these factors led investors to question the company’s growth outlook, which was additionally affected by foreign exchange headwinds. While we were optimistic on the company’s competitive positioning and offering, our concerns around its long-term business model and lower guidance led us to exit the Fund’s position in LinkedIn and invest in higher conviction ideas.
Volatility related to mergers and acquisitions Allergan had been involved in as well as concerns around drug pricing pressures weighed on the company’s stock during the Reporting Period. The company also reported third quarter 2016 results with revenues and earnings below market estimates. Despite the near-term volatility and underperformance, we continued to believe at the end of the Reporting Period that Allergan is a high quality growth business with meaningful financial flexibility going forward.
L Brands released positive first quarter 2016 earnings, but its margins declined beyond market expectations due primarily to a challenging retail environment. Additionally, Victoria’s Secret, one of L Brands’ flagship brands, was expected to eliminate non-core businesses, such as swimwear and certain accessory goods, due to deteriorating sales. There were also international challenges based on investment costs in China. Though we continue to like the company and its franchise, we decided to sell the Fund’s position in L Brands during the Reporting Period, as we believe the risk/reward opportunities became less attractive.
What were some of the Fund’s best-performing individual stocks?
Among those stocks the Fund benefited most from relative to the Russell Index were positions in water and wastewater applications service provider Xylem, data center real estate investment trust (“REIT”) Equinix and global apparel company PVH.
Xylem is a designer, manufacturer, and equipment and service provider for water and wastewater applications addressing the full-cycle of water from collection, distribution and use to the return of water to the environment. During the Reporting Period, the company reported solid quarterly results, beating market expectations for earnings and raising guidance. The company’s share price also rose as it announced in August 2016 its purchase of Sensus, a smart water meter company. The acquisition was viewed positively by investors as it further bolsters Xylem’s product offering and technological advantage. At the end of the Reporting
2
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC GROWTH FUND
Period, we were optimistic about Xylem’s margin expansion prospects and believed its management team had done well to position the company for sustainable long-term growth.
During the Reporting Period, Equinix reported solid quarterly results, positively exceeding market expectations for its organic revenue growth and earnings growth. During the first half of 2016, the company also benefited from a decline in U.S. Treasury yields, which generally favors REITs given their attractive yield and growth potential relative to bonds. At the end of the Reporting Period, we believed Equinix had substantial pipeline opportunities, particularly with enterprise customers willing to pay a higher price. We further believed continued integration with the company’s Telecity acquisition and a strategic partnership with Datang Telecom could further increase Equinix’s global presence and strengthen its competitive advantage. In our view, Equinix remains an asset with robust upside to its revenues and free cash flows, as it balances organic growth, low leverage and a sound capital structure.
After a tough environment in 2015, PVH reported during the first quarter of 2016 positive fourth quarter 2015 results with earnings ahead of market estimates, and its stock rebounded. PVH further benefited during the Reporting Period from an overall positive sentiment in its industry. At the end of the Reporting Period, we believed PVH is a leading franchise with dominant market share, strong pricing power and solid fundamentals. Particularly, established brand names Tommy Hilfiger and Calvin Klein have demonstrated international strength and have been a key source of growth. In our view, PVH remained well positioned for growth given what we view as its high quality of management and significant free cash flow generation ability.
How did the Fund use derivatives and similar instruments during the Reporting Period?
During the Reporting Period, we did not use derivatives as part of an active management strategy.
Did the Fund make any significant purchases or sales during the Reporting Period?
Among the purchases initiated during the Reporting Period, we established a Fund position in Eli Lilly, a leading pharmaceutical company with a history of innovation and a strong drug pipeline. The company is coming off its patent cliff years, and, in our view, entering a phase of growth driven by new products. We see its margins expanding as new drugs improve its overall product mix. We believe Eli Lilly is a high quality company with leading franchises, strong growth prospects and a healthy and improving financial profile. (Patent cliff is a colloquialism to denote the potential sharp decline in revenues upon patent expiration of one or more leading products of a firm. A patent cliff is when a firm’s revenues could “fall off a cliff” when one or more established products go off-patent, since these products can be replicated and sold at much cheaper prices by competitors. While it is applicable to any industry, in recent years the term “patent cliff” has come to be associated almost exclusively with the pharmaceutical industry.)
We established a Fund position in Northern Trust, an international financial services firm. Northern Trust is a company that the Fund had previously owned for its high quality fundamentals, including what we considered to be a solid balance sheet and cash position. We believe Northern Trust is well positioned to benefit from interest rate hikes and has significant organic growth opportunities within its custody and fund administration business. We are additionally positive on the company’s wealth management segment given its mix of both active and passive strategies. The company’s management expects to re-invest earnings into the business while targeting a meaningful return on equity, which could benefit shareholders. Northern Trust also has a high payout ratio and is well capitalized, in our view. Finally, we believe that Northern Trust may further benefit from potentially lower corporate tax rates. With what we view as an experienced management team and a high quality franchise, we are optimistic on Northern Trust’s growth prospects.
In addition to those sales already mentioned, we sold the Fund’s position in Starbucks. During the Reporting Period, Starbucks reported disappointing comparable same-store sales growth, which dampened investor sentiment, as it could be an indicator that its rate of growth is slowing more than the market expected. Though we continue to like the company and the strength of its franchise, we believe there are other ideas with more compelling risk/reward profiles.
Were there any notable changes in the Fund’s weightings during the Reporting Period?
In constructing the Fund’s portfolio, we focus on picking stocks rather than on making industry or sector bets. We seek to outpace the Russell Index by overweighting stocks that we expect to outperform and underweighting those that we think may lag. Consequently, changes in its sector weights are generally the direct result of individual stock selection or of stock appreciation or depreciation. That said, during the Reporting Period, the Fund’s exposure to energy and industrials increased compared to the Russell Index. The Fund’s allocations compared to the Russell Index in consumer discretionary, consumer staples and health care decreased.
3
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC GROWTH FUND
How was the Fund positioned relative to its benchmark index at the end of the Reporting Period?
At the end of December 2016, the Fund had overweighted positions relative to the Russell Index in the financials, energy and real estate sectors. On the same date, the Fund had underweighted positions compared to the Russell Index in consumer staples, materials and health care and was rather neutrally weighted to the Russell Index in industrials, consumer discretionary and information technology. The Fund had no exposure to the utilities and telecommunication services sectors at the end of the Reporting Period.
What is the Fund’s tactical view and strategy for the months ahead?
At the end of the Reporting Period, we believed the macroeconomic environment may be shifting from low growth to pro-growth. Following Donald Trump’s victory in the U.S. presidential election, we expect to see more aggressive fiscal and pro-business policy leading to stronger U.S. and global economic growth. Chief Executive Officer confidence is already increasing, according to end-of-2016 polls, and could reignite corporate “animal spirits,” economist John Maynard Keynes’ term for the confidence and willingness to invest that are essential for economic growth. We believe the U.S. equity bull market could extend through 2017. Stronger economic growth and revenue-driven earnings growth in the U.S. should be a positive backdrop for equities, in our view. Moreover, U.S. equities can do well in an environment of modestly rising interest rates and inflation, provided the underlying reason is healthy economic growth.
Even with this positive view for U.S. economic and revenue-driven earnings growth, we do believe the U.S. equity market remained expensive at the end of the Reporting Period. The median S&P 500® Index stock was trading in the 98th percentile relative to history, and the 12-month forward price-to-earnings ratio was the highest of the major regions. That said, we believe the U.S. equity market still offers significant opportunities at the stock level, as more policy details become available and investors begin to focus on company-specific impacts. In our view, policy changes from a more populist, protectionist and unconventional U.S. president will likely increase volatility and the dispersion of returns as investors consider the possible effects of those policies on individual stocks, creating a potentially beneficial environment for active managers.
Thus, regardless of market direction, we remain committed to our core philosophy and process. We intend to maintain a long-term time horizon, rather than forecast only the next quarter. We intend to continue to favor high quality growth businesses over breathtaking concepts. We intend to invest when we consider valuations to be attractive, rather than following the trend. These core beliefs have guided our team during the past 30 years; we believe they hold the answer for the next 30.
As always, we maintain our focus on seeking companies that we believe will generate long-term growth in today’s ever-changing market conditions.
4
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC GROWTH FUND
Index Definitions
The Russell 1000® Growth Index (with dividends reinvested) is an unmanaged market capitalization weighted index of the 1000 largest U.S. companies with higher price-to-book ratios and higher forecasted growth values. The figures for the index do not include any deduction for fees, expenses or taxes. It is not possible to invest directly in an index.
The Russell 2000® Index (with dividends reinvested) is an unmanaged index of common stock prices that measures the performance of the 2000 smallest companies in the Russell 3000® Index. The figures for the index do not include any deduction for fees, expenses or taxes. It is not possible to invest directly in an index.
The S&P 500® Index (with dividends reinvested) is the Standard & Poor’s composite index of 500 stocks, an unmanaged index of common stock prices. The figures for the index do not include any deduction for fees, expenses or taxes. It is not possible to invest directly in an index.
The Russell Midcap® Index measures the performance of the 800 smallest companies in the Russell 1000® Index, which represents approximately 25% of the total market capitalization of the Russell 1000 Index. It is not possible to invest directly in an index.
The Russell 1000® Index measures the performance of the 1,000 largest companies in the Russell 3000® Index, which represents approximately 92% of the total market capitalization of the Russell 3000® Index. It is not possible to invest directly in an index.
5
FUND BASICS
Strategic Growth Fund
as of December 31, 2016
STANDARDIZED TOTAL RETURNS1
For the period ended 12/31/16 | One Year | Five Years | Ten Years | Since Inception | Inception Date | |||||||||||||
Institutional | 1.98 | % | 13.71 | % | 6.87 | % | 5.07 | % | 4/30/98 | |||||||||
Service | 1.69 | 13.42 | 6.62 | 6.48 | 1/09/06 |
1 | The Standardized Total Returns are average annual total returns as of the most recent calendar quarter-end. They assume reinvestment of all distributions at net asset value (“NAV”). Because Institutional Shares and Service Shares do not involve a sales charge, such a charge is not applied to their Standardized Total Returns. |
Total return figures in the above chart represent past performance and do not indicate future results, which will vary. The investment return and principal value of an investment will fluctuate and, therefore, an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the total return figures in the above chart. Please visit www.GSAMFUNDS.com to obtain the most recent month-end returns. Performance reflects fee waivers and/or expense limitations in effect during the periods shown. In their absence, performance would be reduced.
EXPENSE RATIOS2
Net Expense Ratio (Current) | Gross Expense Ratio (Before Waivers) | |||||||
Institutional | 0.79 | % | 0.83 | % | ||||
Service | 1.04 | 1.08 |
2 | The expense ratios of the Fund, both current (net of any fee waivers and/or expense limitations) and before waivers (gross of any fee waivers and/or expense limitations) are as set forth above according to the most recent publicly available Prospectuses for the Fund and may differ from the expense ratios disclosed in the Financial Highlights in this report. Pursuant to a contractual arrangement, the Fund’s fee waivers and/or expense limitations will remain in place through at least April 29, 2017, and prior to such date, the Investment Adviser may not terminate the arrangements without the approval of the Fund’s Board of Trustees. If these arrangements are discontinued in the future, the expense ratios may change without shareholder approval. |
TOP TEN HOLDINGS AS OF 12/31/163
Holding | % of Net Assets | Line of Business | ||||
Apple, Inc. | 6.7% | Technology Hardware & Equipment | ||||
Microsoft Corp. | 3.8 | Software & Services | ||||
Amazon.com, Inc. | 3.6 | Retailing | ||||
Facebook, Inc. Class A | 3.5 | Software & Services | ||||
Alphabet, Inc. Class A | 3.1 | Software & Services | ||||
Comcast Corp. Class A | 2.8 | Media | ||||
Costco Wholesale Corp. | 2.6 | Food & Staples Retailing | ||||
McDonald’s Corp. | 2.3 | Consumer Services | ||||
MasterCard, Inc. Class A | 2.3 | Software & Services | ||||
Alphabet, Inc. Class C | 2.3 | Software & Services |
3 | The top 10 holdings may not be representative of the Fund’s future investments. |
6
FUND BASICS
FUND vs. BENCHMARK SECTOR ALLOCATIONS4
As of December 31, 2016
4 | The Fund is actively managed and, as such, its composition may differ over time. Consequently, the Fund’s overall sector allocations may differ from percentages contained in the graph above. The graph categorizes investments using Global Industry Classification Standard (“GICS”); however, the sector classifications used by the portfolio management team may differ from GICS. The percentage shown for each investment category reflects the value of investments in that category as a percentage of market value (excluding investments in the securities lending reinvestment vehicle). Underlying sector allocations of exchange traded funds and investment companies held by the Fund are not reflected in the graph above. Investments in the securities lending reinvestment vehicle represented 0.3% of the Fund’s net assets at December 31, 2016. |
7
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC GROWTH FUND
Performance Summary
December 31, 2016
The following graph shows the value, as of December 31, 2016, of a $10,000 investment made on January 1, 2007 in the Service Shares at NAV. For comparative purposes, the performance of the Fund’s benchmark, the Russell 1000® Growth Index (with distributions reinvested), is shown. This performance data represents past performance and should not be considered indicative of future performance, which will fluctuate with changes in market conditions. These performance fluctuations may cause an investor’s shares, when redeemed, to be worth more or less than their original cost. Performance reflects Fund level expenses but does not reflect fees and expenses associated with any variable annuity contract or variable life insurance policy that uses the Fund as an investment option for any contract or policy. Had performance reflected all of those fees and expenses, performance would have been reduced. Performance reflects applicable fee waivers and/or expense limitations in effect during the periods shown, and in their absence, performance would be reduced. Performance of Institutional Shares will vary from Service Shares due to differences in class specific fees. In addition to the Investment Adviser’s decisions regarding issuer/industry investment selection and allocation, other factors may affect Fund performance. These factors include, but are not limited to, Fund operating fees and expenses, portfolio turnover, and subscription and redemption cash flows affecting the Fund.
Strategic Growth Fund’s 10 Year Performance
Performance of a $10,000 investment, with distributions reinvested, from January 1, 2007 through December 31, 2016.
Average Annual Total Return through December 31, 2016 | One Year | Five Years | Ten Years | Since Inception | ||||
Institutional (Commenced April 30, 1998) | 1.98% | 13.71% | 6.87% | 5.07% | ||||
Service (Commenced January 9, 2006) | 1.69% | 13.42% | 6.62% | 6.48% |
8
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC GROWTH FUND
Schedule of Investments
December 31, 2016
Shares | Description | Value | ||||||
Common Stocks – 98.0% | ||||||||
| Banks – 1.6% |
| ||||||
79,724 | First Republic Bank | $ | 7,345,769 | |||||
|
| |||||||
| Capital Goods – 9.9% |
| ||||||
26,688 | 3M Co. | 4,765,676 | ||||||
17,872 | Boeing Co. (The) | 2,782,313 | ||||||
79,575 | Fortive Corp. | 4,267,607 | ||||||
79,472 | Fortune Brands Home & Security, Inc. | 4,248,573 | ||||||
13,300 | General Dynamics Corp. | 2,296,378 | ||||||
80,942 | Honeywell International, Inc. | 9,377,131 | ||||||
44,051 | Middleby Corp. (The)* | 5,674,210 | ||||||
16,209 | Northrop Grumman Corp. | 3,769,889 | ||||||
19,000 | Roper Technologies, Inc. | 3,478,520 | ||||||
113,398 | Xylem, Inc. | 5,615,469 | ||||||
|
| |||||||
46,275,766 | ||||||||
|
| |||||||
| Consumer Durables & Apparel – 3.4% |
| ||||||
148,012 | Kate Spade & Co.* | 2,763,384 | ||||||
72,517 | Newell Brands, Inc. | 3,237,884 | ||||||
156,239 | NIKE, Inc. Class B | 7,941,629 | ||||||
24,280 | PVH Corp. | 2,191,027 | ||||||
|
| |||||||
16,133,924 | ||||||||
|
| |||||||
| Consumer Services – 2.8% |
| ||||||
6,066 | Chipotle Mexican Grill, Inc.* | 2,288,823 | ||||||
89,394 | McDonald’s Corp. | 10,881,038 | ||||||
|
| |||||||
13,169,861 | ||||||||
|
| |||||||
| Diversified Financials – 4.0% |
| ||||||
16,582 | Affiliated Managers Group, Inc.* | 2,409,365 | ||||||
132,310 | Intercontinental Exchange, Inc. | 7,464,930 | ||||||
98,894 | Northern Trust Corp. | 8,806,511 | ||||||
|
| |||||||
18,680,806 | ||||||||
|
| |||||||
| Energy – 1.8% |
| ||||||
23,095 | Concho Resources, Inc.* | 3,062,397 | ||||||
64,815 | Schlumberger Ltd. | 5,441,219 | ||||||
|
| |||||||
8,503,616 | ||||||||
|
| |||||||
| Food & Staples Retailing – 4.4% |
| ||||||
76,176 | Costco Wholesale Corp. | 12,196,539 | ||||||
73,392 | Walgreens Boots Alliance, Inc. | 6,073,922 | ||||||
67,347 | Whole Foods Market, Inc. | 2,071,594 | ||||||
|
| |||||||
20,342,055 | ||||||||
|
| |||||||
| Food, Beverage & Tobacco – 3.6% |
| ||||||
49,087 | Brown-Forman Corp. Class B | 2,204,988 | ||||||
56,228 | Coca-Cola Co. (The) | 2,331,213 | ||||||
55,658 | Molson Coors Brewing Co. Class B | 5,416,080 | ||||||
104,444 | Monster Beverage Corp.* | 4,631,047 | ||||||
26,613 | Philip Morris International, Inc. | 2,434,823 | ||||||
|
| |||||||
17,018,151 | ||||||||
|
| |||||||
| Health Care Equipment & Services – 5.0% |
| ||||||
98,784 | Abbott Laboratories | 3,794,293 | ||||||
40,425 | Aetna, Inc. | 5,013,104 | ||||||
|
| |||||||
Common Stocks – (continued) | ||||||||
| Health Care Equipment & Services – (continued) |
| ||||||
192,044 | Boston Scientific Corp.* | $ | 4,153,912 | |||||
87,864 | Danaher Corp. | 6,839,334 | ||||||
35,793 | Edwards Lifesciences Corp.* | 3,353,804 | ||||||
|
| |||||||
23,154,447 | ||||||||
|
| |||||||
| Household & Personal Products – 0.5% |
| ||||||
29,720 | Estee Lauder Cos., Inc. (The) Class A | 2,273,283 | ||||||
|
| |||||||
| Materials – 2.0% |
| ||||||
26,826 | Ashland Global Holdings, Inc. | 2,931,813 | ||||||
17,182 | Sherwin-Williams Co. (The) | 4,617,491 | ||||||
74,044 | Valvoline, Inc.(a) | 1,591,946 | ||||||
|
| |||||||
9,141,250 | ||||||||
|
| |||||||
| Media – 4.8% |
| ||||||
191,254 | Comcast Corp. Class A | 13,206,089 | ||||||
87,389 | Walt Disney Co. (The) | 9,107,681 | ||||||
|
| |||||||
22,313,770 | ||||||||
|
| |||||||
| Pharmaceuticals, Biotechnology & Life Sciences – 8.7% |
| ||||||
67,648 | Agilent Technologies, Inc. | 3,082,043 | ||||||
18,084 | Alexion Pharmaceuticals, Inc.* | 2,212,577 | ||||||
29,542 | Allergan plc* | 6,204,115 | ||||||
43,983 | Celgene Corp.* | 5,091,032 | ||||||
132,076 | Eli Lilly & Co. | 9,714,190 | ||||||
42,716 | Gilead Sciences, Inc. | 3,058,893 | ||||||
32,817 | Incyte Corp.* | 3,290,561 | ||||||
48,284 | Vertex Pharmaceuticals, Inc.* | 3,557,082 | ||||||
81,719 | Zoetis, Inc. | 4,374,418 | ||||||
|
| |||||||
40,584,911 | ||||||||
|
| |||||||
| Real Estate Investment Trusts – 3.8% |
| ||||||
84,682 | American Tower Corp. | 8,949,194 | ||||||
24,058 | Equinix, Inc. | 8,598,570 | ||||||
|
| |||||||
17,547,764 | ||||||||
|
| |||||||
| Retailing – 9.7% |
| ||||||
22,600 | Amazon.com, Inc.* | 16,947,062 | ||||||
55,458 | Home Depot, Inc. (The) | 7,435,809 | ||||||
45,889 | Netflix, Inc.* | 5,681,058 | ||||||
11,198 | O’Reilly Automotive, Inc.* | 3,117,635 | ||||||
4,127 | Priceline Group, Inc. (The)* | 6,050,430 | ||||||
91,882 | Ross Stores, Inc. | 6,027,459 | ||||||
|
| |||||||
45,259,453 | ||||||||
|
| |||||||
| Semiconductors & Semiconductor Equipment – 1.2% |
| ||||||
23,718 | NXP Semiconductors NV* | 2,324,601 | ||||||
45,740 | Texas Instruments, Inc. | 3,337,648 | ||||||
|
| |||||||
5,662,249 | ||||||||
|
| |||||||
| Software & Services – 22.8% |
| ||||||
21,634 | Adobe Systems, Inc.* | 2,227,220 | ||||||
18,273 | Alphabet, Inc. Class A* | 14,480,439 | ||||||
13,884 | Alphabet, Inc. Class C* | 10,715,949 | ||||||
70,018 | Electronic Arts, Inc.* | 5,514,618 | ||||||
142,268 | Facebook, Inc. Class A* | 16,367,933 | ||||||
|
|
The accompanying notes are an integral part of these financial statements. | 9 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC GROWTH FUND
Schedule of Investments (continued)
December 31, 2016
Shares | Description | Value | ||||||
Common Stocks – (continued) | ||||||||
| Software & Services – (continued) |
| ||||||
50,031 | Fidelity National Information Services, Inc. | $ | 3,784,345 | |||||
29,334 | FleetCor Technologies, Inc.* | 4,151,348 | ||||||
59,045 | Intuit, Inc. | 6,767,147 | ||||||
105,322 | MasterCard, Inc. Class A | 10,874,496 | ||||||
285,063 | Microsoft Corp. | 17,713,815 | ||||||
56,373 | Mobileye NV* | 2,148,939 | ||||||
165,419 | Oracle Corp. | 6,360,361 | ||||||
74,144 | salesforce.com, Inc.* | 5,075,898 | ||||||
|
| |||||||
106,182,508 | ||||||||
|
| |||||||
| Technology Hardware & Equipment – 6.7% |
| ||||||
269,122 | Apple, Inc. | 31,169,710 | ||||||
|
| |||||||
| Transportation – 1.3% |
| ||||||
164,854 | CSX Corp. | 5,923,204 | ||||||
|
| |||||||
TOTAL COMMON STOCKS | ||||||||
(Cost $349,717,154) | $ | 456,682,497 | ||||||
|
|
Shares | Distribution Rate | Value | ||||||
Investment Company(b)(c) – 0.6% | ||||||||
Goldman Sachs Financial Square Government Fund — Institutional Shares |
| |||||||
3,017,318 | 0.455 | % | $ | 3,017,318 | ||||
(Cost $3,017,318) | ||||||||
| ||||||||
TOTAL INVESTMENTS BEFORE SECURITIES LENDING REINVESTMENT VEHICLE | ||||||||
(Cost $352,734,472) | $ | 459,699,815 | ||||||
| ||||||||
Securities Lending Reinvestment Vehicle(b)(c) – 0.3% | ||||||||
Goldman Sachs Financial Square Government Fund — |
| |||||||
1,612,600 | 0.455 | % | $ | 1,612,600 | ||||
(Cost $1,612,600) | ||||||||
| ||||||||
TOTAL INVESTMENTS – 98.9% | ||||||||
(Cost $354,347,072) | $ | 461,312,415 | ||||||
| ||||||||
OTHER ASSETS IN EXCESS OF LIABILITIES – 1.1% | 5,019,269 | |||||||
| ||||||||
NET ASSETS – 100% | $ | 466,331,684 | ||||||
|
The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. | ||
* | Non-income producing security. | |
(a) | All or a portion of security is on loan. | |
(b) | Represents an affiliated issuer. | |
(c) | Variable rate security. Interest rate or distribution rate disclosed is that which is in effect on December 31, 2016. |
10 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC GROWTH FUND
Statement of Assets and Liabilities
December 31, 2016
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $349,717,154)(a) | $ | 456,682,497 | ||
Investments in affiliated issuers, at value (cost $3,017,318) | 3,017,318 | |||
Investments in affiliated securities lending reinvestment vehicle, at value which equals cost | 1,612,600 | |||
Cash | 7,042,514 | |||
Receivables: | ||||
Dividends | 315,226 | |||
Fund shares sold | 22,512 | |||
Other assets | 2,413 | |||
Total assets | 468,695,080 | |||
Liabilities: | ||||
Payables: | ||||
Payable upon return of securities loaned | 1,612,600 | |||
Fund shares redeemed | 282,718 | |||
Management fees | 280,964 | |||
Distribution and Service fees and Transfer Agency fees | 86,077 | |||
Investments purchased | 1,120 | |||
Accrued expenses | 99,917 | |||
Total liabilities | 2,363,396 | |||
Net Assets: | ||||
Paid-in capital | 370,201,592 | |||
Undistributed net investment income | 338,876 | |||
Accumulated net realized loss | (11,174,127 | ) | ||
Net unrealized gain | 106,965,343 | |||
NET ASSETS | $ | 466,331,684 | ||
Net Assets: | ||||
Institutional | $ | 98,090,063 | ||
Service | 368,241,621 | |||
Total Net Assets | $ | 466,331,684 | ||
Shares outstanding $0.001 par value (unlimited shares authorized): | ||||
Institutional | 6,197,053 | |||
Service | 23,318,964 | |||
Net asset value, offering and redemption price per share: | ||||
Institutional | $15.83 | |||
Service | 15.79 |
(a) Includes loaned securities having a market value of $1,575,950.
The accompanying notes are an integral part of these financial statements. | 11 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC GROWTH FUND
Statement of Operations
For the Fiscal Year Ended December 31, 2016
Investment income: | ||||
Dividends — unaffiliated issuers | $ | 5,605,251 | ||
Dividends — affiliated issuers | 2,418 | |||
Total investment income | 5,607,669 | |||
Expenses: | ||||
Management fees | 3,321,341 | |||
Distribution and Service fees — Service Shares | 853,052 | |||
Printing and mailing costs | 108,641 | |||
Transfer Agency fees(a) | 88,561 | |||
Professional fees | 82,308 | |||
Custody, accounting and administrative services | 64,548 | |||
Trustee fees | 16,622 | |||
Other | 15,487 | |||
Total expenses | 4,550,560 | |||
Less — expense reductions | (189,324 | ) | ||
Net expenses | 4,361,236 | |||
NET INVESTMENT INCOME | 1,246,433 | |||
Realized and unrealized gain (loss): | ||||
Net realized loss from investments (including commissions recaptured of $7,712) | (9,005,334 | ) | ||
Net change in unrealized gain on investments | 10,424,749 | |||
Net realized and unrealized gain | 1,419,415 | |||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 2,665,848 |
(a) Institutional and Service Shares incurred Transfer Agency fees of $20,323 and $68,238, respectively.
12 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC GROWTH FUND
Statements of Changes in Net Assets
For the Fiscal Year Ended December 31, 2016 | For the Fiscal Year Ended December 31, 2015 | |||||||
From operations: | ||||||||
Net investment income | $ | 1,246,433 | $ | 1,727,870 | ||||
Net realized gain (loss) | (9,005,334 | ) | 18,938,378 | |||||
Net change in unrealized gain (loss) | 10,424,749 | (8,924,679 | ) | |||||
Net increase in net assets resulting from operations | 2,665,848 | 11,741,569 | ||||||
Distributions to shareholders: | ||||||||
From net investment income | ||||||||
Institutional Shares | (612,091 | ) | (396,858 | ) | ||||
Service Shares | (1,456,157 | ) | (411,298 | ) | ||||
From net realized gains | ||||||||
Institutional Shares | (9,912 | ) | (6,765,013 | ) | ||||
Service Shares | (37,218 | ) | (23,357,665 | ) | ||||
Total distributions to shareholders | (2,115,378 | ) | (30,930,834 | ) | ||||
From share transactions: | ||||||||
Proceeds from sales of shares | 159,844,337 | 105,471,558 | ||||||
Reinvestment of distributions | 2,115,378 | 30,930,834 | ||||||
Cost of shares redeemed | (166,944,892 | ) | (161,127,801 | ) | ||||
Net decrease in net assets resulting from share transactions | (4,985,177 | ) | (24,725,409 | ) | ||||
TOTAL DECREASE | (4,434,707 | ) | (43,914,674 | ) | ||||
Net assets: | ||||||||
Beginning of year | 470,766,391 | 514,681,065 | ||||||
End of year | $ | 466,331,684 | $ | 470,766,391 | ||||
Undistributed net investment income | $ | 338,876 | $ | 1,207,418 |
The accompanying notes are an integral part of these financial statements. | 13 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC GROWTH FUND
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Year
Income (loss) from investment operations | Distributions to shareholders | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year - Share Class | Net asset value, beginning of year | Net investment income(a) | Net and gain | Total from investment operations | From net investment income | From realized gain | Total distributions | Net asset value, end of year | Total return(b) | Net assets, end of year (in 000s) | Ratio of net expenses to average net assets | Ratio of total to average net assets | Ratio of net investment income to average net assets | Portfolio turnover | ||||||||||||||||||||||||||||||||||||||||||
FOR THE FISCAL YEARS ENDED DECEMBER 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2016 - Institutional | $ | 15.62 | $ | 0.07 | $ | 0.24 | $ | 0.31 | $ | (0.10 | ) | $ | — | (d) | $ | (0.10 | ) | $ | 15.83 | 1.98 | % | $ | 98,090 | 0.79 | % | 0.84 | % | 0.48 | % | 72 | % | |||||||||||||||||||||||||
2016 - Service | 15.59 | 0.03 | 0.23 | 0.26 | (0.06 | ) | — | (d) | (0.06 | ) | 15.79 | 1.69 | 368,242 | 1.04 | 1.08 | 0.22 | 72 | |||||||||||||||||||||||||||||||||||||||
2015 - Institutional | 16.16 | 0.09 | (e) | 0.46 | 0.55 | (0.06 | ) | (1.03 | ) | (1.09 | ) | 15.62 | 3.40 | 109,801 | 0.79 | 0.83 | 0.55 | (e) | 56 | |||||||||||||||||||||||||||||||||||||
2015 - Service | 16.13 | 0.05 | (e) | 0.46 | 0.51 | (0.02 | ) | (1.03 | ) | (1.05 | ) | 15.59 | 3.14 | 360,966 | 1.04 | 1.08 | 0.29 | (e) | 56 | |||||||||||||||||||||||||||||||||||||
2014 - Institutional | 17.64 | 0.07 | 2.24 | 2.31 | (0.07 | ) | (3.72 | ) | (3.79 | ) | 16.16 | 13.64 | 119,934 | 0.79 | 0.81 | 0.37 | 48 | |||||||||||||||||||||||||||||||||||||||
2014 - Service | 17.61 | 0.02 | 2.24 | 2.26 | (0.02 | ) | (3.72 | ) | (3.74 | ) | 16.13 | 13.38 | 394,747 | 1.04 | 1.08 | 0.12 | 48 | |||||||||||||||||||||||||||||||||||||||
2013 - Institutional | 13.86 | 0.06 | 4.42 | 4.48 | (0.07 | ) | (0.63 | ) | (0.70 | ) | 17.64 | 32.42 | 122,220 | 0.80 | 0.84 | 0.35 | 66 | |||||||||||||||||||||||||||||||||||||||
2013 - Service | 13.85 | 0.02 | 4.40 | 4.42 | (0.03 | ) | (0.63 | ) | (0.66 | ) | 17.61 | 32.00 | 391,219 | 1.05 | 1.09 | 0.10 | 66 | |||||||||||||||||||||||||||||||||||||||
2012 - Institutional | 11.64 | 0.10 | (f) | 2.21 | 2.31 | (0.09 | ) | — | (0.09 | ) | 13.86 | 19.83 | 106,119 | 0.80 | 0.84 | 0.79 | (f) | 42 | ||||||||||||||||||||||||||||||||||||||
2012 - Service | 11.63 | 0.07 | (f) | 2.21 | 2.28 | (0.06 | ) | — | (0.06 | ) | 13.85 | 19.57 | 304,065 | 1.05 | 1.09 | 0.56 | (f) | 42 |
(a) | Calculated based on the average shares outstanding methodology. |
(b) | Assumes investment at the net asset value at the beginning of the year, reinvestment of all distributions, and a complete redemption of the investment at the net asset value at the end of the year. |
(c) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short term investments. If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
(d) | Amount is less than $0.005 per share. |
(e) | Reflects income recognized from special dividends which amounted to $0.03 per share and 0.20% of average net assets. |
(f) | Reflects income recognized from special dividends which amounted to $0.04 per share and 0.27% of average net assets. |
The accompanying notes are an integral part of these financial statements. | 14 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC GROWTH FUND
Notes to Financial Statements
December 31, 2016
1. ORGANIZATION
Goldman Sachs Variable Insurance Trust (the “Trust” or “VIT”) is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company. The Trust includes the Goldman Sachs Strategic Growth Fund (the “Fund”). The Fund is a diversified portfolio under the Act offering two classes of shares — Institutional and Service Shares. Shares of the Trust are offered to separate accounts of participating life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies.
Goldman Sachs Asset Management, L.P. (“GSAM”), an affiliate of Goldman, Sachs & Co. (“Goldman Sachs”), serves as investment adviser to the Fund pursuant to a management agreement (the “Agreement”) with the Trust.
2. SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and require management to make estimates and assumptions that may affect the reported amounts and disclosures. Actual results may differ from those estimates and assumptions.
A. Investment Valuation — The Fund’s valuation policy is to value investments at fair value.
B. Investment Income and Investments — Investment income includes interest income, dividend income, net of any foreign withholding taxes, less any amounts reclaimable, and securities lending income. Interest income is accrued daily and adjusted for amortization of premiums and accretion of discounts. Dividend income is recognized on ex-dividend date or, for certain foreign securities, as soon as such information is obtained subsequent to the ex-dividend date. Investment transactions are reflected on trade date. Realized gains and losses are calculated using identified cost. Investment transactions are recorded on the following business day for daily net asset value (“NAV”) calculations. Any foreign capital gains tax is accrued daily based upon net unrealized gains, and is payable upon sale of such investments. Distributions received from the Fund’s investments in United States (“U.S.”) real estate investment trusts (“REITs”) may be characterized as ordinary income, net capital gain or a return of capital. A return of capital is recorded by the Fund as a reduction to the cost basis of the REIT.
C. Class Allocations and Expenses — Investment income, realized and unrealized gain (loss), and non-class specific expenses of the Fund are allocated daily based upon the proportion of net assets of each class. Non-class specific expenses directly incurred by the Fund are charged to the Fund, while such expenses incurred by the Trust are allocated across the Fund on a straight-line and/or pro-rata basis depending upon the nature of the expenses. Class specific expenses, where applicable, are borne by the respective share classes and include Distribution and Service and Transfer Agency fees.
D. Federal Taxes and Distributions to Shareholders — It is the Fund’s policy to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Code”), applicable to regulated investment companies (mutual funds) and to distribute each year substantially all of its investment company taxable income and capital gains to its shareholders. Accordingly, the Fund is not required to make any provisions for the payment of federal income tax. Distributions to shareholders are recorded on the ex-dividend date. Income and capital gains distributions, if any, are declared and paid annually.
Net capital losses are carried forward to future fiscal years and may be used to the extent allowed by the Code to offset any future capital gains. Losses that are carried forward will retain their character as either short-term or long-term capital losses. Utilization of capital loss carryforwards will reduce the requirement of future capital gains distributions.
The characterization of distributions to shareholders for financial reporting purposes is determined in accordance with federal income tax rules, which may differ from GAAP. The source of the Fund’s distributions may be shown in the accompanying financial statements as either from net investment income, net realized gain or capital. Certain components of the Fund’s net assets on the Statement of Assets and Liabilities reflect permanent GAAP/tax differences based on the appropriate tax character.
E. Commission Recapture — GSAM, on behalf of certain Funds, may direct portfolio trades, subject to seeking best execution, to various brokers who have agreed to rebate a portion of the commissions generated. Such rebates are made directly to the Fund as cash payments and are included in net realized gain (loss) from investments on the Statement of Operations.
15
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC GROWTH FUND
Notes to Financial Statements (continued)
December 31, 2016
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS
The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The levels used for classifying investments are not necessarily an indication of the risk associated with investing in these investments. The three levels of the fair value hierarchy are described below:
Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 — Quoted prices in markets that are not active or financial instruments for which significant inputs are observable (including, but not limited to, quoted prices for similar investments, interest rates, foreign exchange rates, volatility and credit spreads), either directly or indirectly;
Level 3 — Prices or valuations that require significant unobservable inputs (including GSAM’s assumptions in determining fair value measurement).
Changes in valuation techniques may result in transfers into or out of an assigned level within the hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value hierarchy resulting from such changes are deemed to have occurred as of the beginning of the reporting period.
The Board of Trustees (“Trustees”) has approved Valuation Procedures that govern the valuation of the portfolio investments held by the Fund, including investments for which market quotations are not readily available. The Trustees have delegated to GSAM day-to-day responsibility for implementing and maintaining internal controls and procedures related to the valuation of the Fund’s portfolio investments. To assess the continuing appropriateness of pricing sources and methodologies, GSAM regularly performs price verification procedures and issues challenges as necessary to third party pricing vendors or brokers, and any differences are reviewed in accordance with the Valuation Procedures.
A. Level 1 and Level 2 Fair Value Investments — The valuation techniques and significant inputs used in determining the fair values for investments classified as Level 1 and Level 2 are as follows:
Equity Securities — Equity securities traded on a U.S. securities exchange or the NASDAQ system, or those located on certain foreign exchanges, including but not limited to the Americas, are valued daily at their last sale price or official closing price on the principal exchange or system on which they are traded. If there is no sale or official closing price or such price is believed by GSAM to not represent fair value, equity securities are valued at the last bid price for long positions and at the last ask price for short positions. To the extent these investments are actively traded, they are classified as Level 1 of the fair value hierarchy, otherwise they are generally classified as Level 2.
Unlisted equity securities for which market quotations are available are valued at the last sale price on the valuation date, or if no sale occurs, at the last bid price. These investments are generally classified as Level 2 of the fair value hierarchy.
Money Market Funds — Investments in the Goldman Sachs Financial Square Government Fund (“Underlying Fund”) are valued at the NAV of the Institutional Share class on the day of valuation. These investments are generally classified as Level 1 of the fair value hierarchy. For information regarding an Underlying Fund’s accounting policies and investment holdings, please see the Underlying Fund’s shareholder report.
B. Level 3 Fair Value Investments — To the extent that significant inputs to valuation models and other alternative pricing sources are unobservable, or if quotations are not readily available, or if GSAM believes that such quotations do not accurately reflect fair value, the fair value of the Fund’s investments may be determined under Valuation Procedures approved by the Trustees. GSAM, consistent with its procedures and applicable regulatory guidance, may make an adjustment to the most recent valuation prices of either domestic or foreign securities in light of significant events to reflect what it believes to be the fair value of the securities at the time of determining the Fund’s NAV. Significant events which could affect a large number of securities in a particular market may include, but are not limited to: significant fluctuations in U.S. or foreign markets; market dislocations;
16
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC GROWTH FUND
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS (continued)
market disruptions; or unscheduled market closings. Significant events which could also affect a single issuer may include, but are not limited to: corporate actions such as reorganizations, mergers and buy-outs; ratings downgrades; and bankruptcies.
C. Fair Value Hierarchy — The following is a summary of the Fund’s investments classified in the fair value hierarchy as of December 31, 2016:
Investment Type | Level 1 | Level 2 | Level 3 | |||||||||
Assets | ||||||||||||
Common Stock and/or Other Equity Investments(a) | ||||||||||||
North America | $ | 456,682,497 | $ | — | $ | — | ||||||
Investment Company | 3,017,318 | — | — | |||||||||
Securities Lending Reinvestment Vehicle | 1,612,600 | — | — | |||||||||
Total | $ | 461,312,415 | $ | — | $ | — |
(a) | Amounts are disclosed by continent to highlight the impact of time zone differences between local market close and the calculation of NAV. Security valuations are based on the principal exchange or system on which they are traded, which may differ from country of domicile noted in the table. |
For further information regarding security characteristics, see the Schedule of Investments.
4. AGREEMENTS AND AFFILIATED TRANSACTIONS
A. Management Agreement — Under the Agreement, GSAM manages the Fund, subject to the general supervision of the Trustees.
As compensation for the services rendered pursuant to the Agreement, the assumption of the expenses related thereto and administration of the Fund’s business affairs, including providing facilities, GSAM is entitled to a management fee, accrued daily and paid monthly, equal to an annual percentage rate of the Fund’s average daily net assets.
For the fiscal year ended December 31, 2016, contractual and effective net management fees with GSAM were at the following rates:
Contractual Management Rate | Effective Net Management Rate^ | |||||||||||||||||||||||||
First $1 billion | Next $1 billion | Next $3 billion | Next $3 billion | Over $8 billion | Effective Rate | |||||||||||||||||||||
0.75% | 0.68 | % | 0.65 | % | 0.64 | % | 0.63 | % | 0.75 | % | 0.71 | %* |
^ | Effective Net Management Rate includes the impact of management fee waivers of affiliated Underlying Funds, if any. |
* | GSAM agreed to waive a portion of its management fee in order to achieve a net management rate, as defined in the Fund’s most recent prospectus. This waiver will be effective through at least April 29, 2017, and prior to such date GSAM may not terminate the arrangement without approval of the Trustees. For the fiscal year ended December 31, 2016, GSAM waived $177,139 of its management fee. |
The Fund invests in Institutional Shares of the Goldman Sachs Financial Square Government Fund, which is an affiliated Underlying Fund. GSAM has agreed to waive a portion of its management fee payable by the Fund in an amount equal to the management fee it earns as an investment adviser to any of the affiliated Underlying Funds in which the Fund invests. For the fiscal year ended December 31, 2016, GSAM waived $1,167 of the Fund’s management fee.
B. Distribution and Service Plan — The Trust, on behalf of the Service Shares of the Fund, has adopted a Distribution and Service Plan (the “Plan”). Under the Plan, Goldman Sachs, which serves as distributor (the “Distributor”), is entitled to a fee accrued daily and paid monthly, for distribution services and personal and account maintenance services, which may then be paid by Goldman Sachs to authorized dealers, equal to, on an annual basis, 0.25% of the Fund’s average daily net assets attributable to Service Shares.
17
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC GROWTH FUND
Notes to Financial Statements (continued)
December 31, 2016
4. AGREEMENTS AND AFFILIATED TRANSACTIONS (continued)
C. Transfer Agency Agreement — Goldman Sachs also serves as the transfer agent of the Fund for a fee pursuant to the Transfer Agency Agreement. The fees charged for such transfer agency services are accrued daily and paid monthly at an annual rate of 0.02% of the average daily net assets of Institutional and Service Shares.
D. Other Expense Agreements and Affiliated Transactions — GSAM has agreed to limit certain “Other Expenses” of the Fund (excluding acquired fund fees and expenses, transfer agency fees and expenses, taxes, interest, brokerage fees, shareholder meeting, litigation, indemnification and extraordinary expenses) to the extent such expenses exceed, on an annual basis, a percentage rate of the average daily net assets of the Fund. Such Other Expense reimbursements, if any, are accrued daily and paid monthly. In addition, the Fund is not obligated to reimburse GSAM for prior fiscal year expense reimbursements, if any. The Other Expense limitation as an annual percentage rate of average daily net assets for the Fund is 0.114%. The Other Expense limitation will remain in place through at least April 29, 2017, and prior to such date GSAM may not terminate the arrangement without the approval of the Trustees. For the fiscal year ended December 31, 2016, GSAM did not reimburse the Fund. In addition, the Fund has entered into certain offset arrangements with the custodian and the transfer agent, which may result in a reduction of the Fund’s expenses and are received irrespective of the application of the “Other Expense” limitation described above. For the fiscal year ended December 31, 2016, custody fee credits were $11,018.
E. Line of Credit Facility — As of December 31, 2016, the Fund participated in a $1,100,000,000 committed, unsecured revolving line of credit facility (the “facility”) together with other funds of the Trust and certain registered investment companies having management agreements with GSAM or its affiliates. This facility is to be used for temporary emergency purposes, or to allow for an orderly liquidation of securities to meet redemption requests. The interest rate on borrowings is based on the federal funds rate. The facility also requires a fee to be paid by the Fund based on the amount of the commitment that has not been utilized. For the fiscal year ended December 31, 2016, the Fund did not have any borrowings under the facility.
F. Other Transactions with Affiliates —The following table provides information about the Fund’s investment in the Goldman Sachs Financial Square Government Fund as of and for the fiscal year ended December 31, 2016:
Market Value 12/31/2015 | Purchases at Cost | Proceeds from Sales | Market Value 12/31/2016 | Dividend Income | ||||||||||||||
$ | — | $ | 25,901,734 | $ | (22,884,416 | ) | $ | 3,017,318 | $ | 2,418 |
5. PORTFOLIO SECURITIES TRANSACTIONS
The cost of purchases and proceeds from sales and maturities of long-term securities for the fiscal year ended December 31, 2016 were $312,358,861 and $319,992,558, respectively.
6. SECURITIES LENDING
The Fund may lend its securities through a securities lending agent, the Bank of New York Mellon (“BNYM”), to certain qualified borrowers. In accordance with the Fund’s securities lending procedures, the Fund receives cash collateral at least equal to the market value of the securities on loan. The market value of the loaned securities is determined at the close of business of the Fund, at their last sale price or official closing price on the principal exchange or system on which they are traded, and any additional required collateral is delivered to the Fund on the next business day. As with other extensions of credit, the Fund may experience delay in the recovery of its securities or incur a loss should the borrower of the securities breach its agreement with the Fund or become insolvent at a time when the collateral is insufficient to cover the cost of repurchasing securities on loan. Dividend income received from securities on loan may not be subject to withholding taxes and therefore withholding taxes paid may differ from the amounts listed in the Statement of Operations. Loans of securities are terminable at any time and as such 1) the remaining contractual maturities of the outstanding securities lending transactions are considered to be overnight and continuous and 2) the
18
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC GROWTH FUND
6. SECURITIES LENDING (continued)
borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.
The Fund invests the cash collateral received in connection with securities lending transactions in the Goldman Sachs Financial Square Government Fund (“Government Money Market Fund”), an affiliated series of the Trust. Government Money Market Fund is registered under the Act as an open end investment company, is subject to Rule 2a-7 under the Act, and is managed by GSAM, for which GSAM may receive an investment advisory fee of up to 0.205% on an annualized basis of the average daily net assets of the Government Money Market Fund.
In the event of a default by a borrower with respect to any loan, BNYM may exercise any and all remedies provided under the applicable borrower agreement to make the Fund whole. These remedies include purchasing replacement securities by applying the collateral held from the defaulting broker against the purchase cost of the replacement securities. If BNYM is unable to purchase replacement securities, BNYM will indemnify the Fund by paying the Fund an amount equal to the market value of the securities loaned minus the value of cash collateral received from the borrower for the loan, subject to an exclusion for any shortfalls resulting from a loss of value in such cash collateral due to reinvestment risk. The Fund’s loaned securities were all subject to enforceable Securities Lending Agreements, and the value of the collateral is at least equal to the value of the cash received. The amounts of the Fund’s overnight and continuous agreements collateralized by common stocks which represent the gross amounts of recognized liabilities for securities lending transactions outstanding as of December 31, 2016 are disclosed as “Payable upon return of securities loaned” on the Statement of Assets and Liabilities.
Both the Fund and BNYM received compensation relating to the lending of the Fund’s securities. The amounts earned, if any, by the Fund for the fiscal year ended December 31, 2016 are reported under Investment Income on the Statement of Operations.
The following table provides information about the Fund’s investment in the Government Money Market Fund for the fiscal year ended December 31, 2016:
Market Value | Purchases at | Proceeds | Market Value | |||||||||||
$— | $ | 1,722,550 | $ | (109,950 | ) | $ | 1,612,600 |
7. TAX INFORMATION
The tax character of distributions paid during the fiscal years ended December 31, 2015 and December 31, 2016 was as follows:
2015 | 2016 | |||||||
Distributions paid from: | ||||||||
Ordinary income | $ | 808,156 | $ | 2,068,520 | ||||
Net long-term capital gains | 30,122,678 | 46,858 | ||||||
Total taxable distributions | $ | 30,930,834 | $ | 2,115,378 |
As of December 31, 2016, the components of accumulated earnings (losses) on a tax-basis were as follows:
Undistributed ordinary income — net | $ | 313,201 | ||
Capital Loss Carryforward | ||||
Perpetual short-term | (7,500,559 | ) | ||
Timing differences (Post October Loss Deferral) | (388,260 | ) | ||
Unrealized gains — net | 103,705,710 | |||
Total accumulated gains — net | $ | 96,130,092 |
19
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC GROWTH FUND
Notes to Financial Statements (continued)
December 31, 2016
7. TAX INFORMATION (continued)
As of December 31, 2016, the Fund’s aggregate security unrealized gains and losses based on cost for U.S. federal income tax purposes were as follows:
Tax cost | $ | 357,606,705 | ||
Gross unrealized gain | 113,906,440 | |||
Gross unrealized loss | (10,200,730 | ) | ||
Net unrealized security gain | $ | 103,705,710 |
The difference between GAAP-basis and tax-basis unrealized gains (losses) is attributable primarily to wash sales, and differences in the tax treatment of underlying fund investments.
In order to present certain components of the Fund’s capital accounts on a tax-basis, the Fund has reclassified $46,727 from undistributed net investment income into accumulated net realized gain. This reclassification has no impact on the NAV of the Fund and results primarily from dividend redesignations and differences in the tax treatment of underlying fund investments.
GSAM has reviewed the Fund’s tax positions for all open tax years (the current and prior three years, as applicable) and has concluded that no provision for income tax is required in the Fund’s financial statements. Such open tax years remain subject to examination and adjustment by tax authorities.
8. OTHER RISKS
The Fund’s risks include, but are not limited to, the following:
Investments in Other Investment Companies — As a shareholder of another investment company, including an exchange-traded fund (“ETF”), the Fund will indirectly bear its proportionate share of any net management fees and other expenses paid by such other investment companies, in addition to the fees and expenses regularly borne by the Fund. ETFs are subject to risks that do not apply to conventional mutual funds, including but not limited to the following: (i) the market price of the ETF’s shares may trade at a premium or a discount to their NAV; and (ii) an active trading market for an ETF’s shares may not develop or be maintained.
Large Shareholder Transactions Risk — The Fund may experience adverse effects when certain large shareholders, such as other funds, participating insurance companies, accounts and Goldman Sachs affiliates, purchase or redeem large amounts of shares of the Fund. Such large shareholder redemptions may cause the Fund to sell portfolio securities at times when it would not otherwise do so, which may negatively impact the Fund’s NAV and liquidity. These transactions may also accelerate the realization of taxable income to shareholders if such sales of investments resulted in gains, and may also increase transaction costs. In addition, a large redemption could result in the Fund’s current expenses being allocated over a smaller asset base, leading to an increase in the Fund’s expense ratio. Similarly, large Fund share purchases may adversely affect the Fund’s performance to the extent that the Fund is delayed in investing new cash and is required to maintain a larger cash position than it ordinarily would.
Liquidity Risk — The Fund may make investments that are illiquid or that may become less liquid in response to market developments or adverse investor perceptions. Illiquid investments may be more difficult to value. Liquidity risk may also refer to the risk that the Fund will not be able to pay redemption proceeds within the allowable time period because of unusual market conditions, an unusually high volume of redemption requests, or other reasons. To meet redemption requests, the Fund may be forced to sell investments at an unfavorable time and/or under unfavorable conditions.
Market and Credit Risks — In the normal course of business, the Fund trades financial instruments and enters into financial transactions where risk of potential loss exists due to changes in the market (market risk). Additionally, the Fund may also be exposed to credit risk in the event that an issuer or guarantor fails to perform or that an institution or entity with which the Fund has unsettled or open transactions defaults.
20
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC GROWTH FUND
9. INDEMNIFICATIONS
Under the Trust’s organizational documents, its Trustees, officers, employees and agents are indemnified, to the extent permitted by the Act and state law, against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the course of business, the Fund enters into contracts that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, GSAM believes the risk of loss under these arrangements to be remote.
10. SUBSEQUENT EVENTS
Subsequent events after the Statement of Assets and Liabilities date have been evaluated and GSAM concluded that there is no impact requiring adjustment or disclosure in the financial statements.
11. SUMMARY OF SHARE TRANSACTIONS
Share activity is as follows:
For the Fiscal Year Ended December 31, 2016 | For the Fiscal Year Ended December 31, 2015 | |||||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||||
Institutional Shares | ||||||||||||||||
Shares sold | 278,581 | $ | 4,331,231 | 319,675 | $ | 5,242,157 | ||||||||||
Reinvestment of distributions | 39,022 | 622,003 | 458,800 | 7,161,871 | ||||||||||||
Shares redeemed | (1,150,547 | ) | (17,834,315 | ) | (1,170,524 | ) | (19,375,952 | ) | ||||||||
(832,944 | ) | (12,881,081 | ) | (392,049 | ) | (6,971,924 | ) | |||||||||
Service Shares | ||||||||||||||||
Shares sold | 9,970,382 | 155,513,106 | 5,956,788 | 100,229,401 | ||||||||||||
Reinvestment of distributions | 93,923 | 1,493,375 | 1,525,608 | 23,768,963 | ||||||||||||
Shares redeemed | (9,905,667 | ) | (149,110,577 | ) | (8,800,386 | ) | (141,751,849 | ) | ||||||||
158,638 | 7,895,904 | (1,317,990 | ) | (17,753,485 | ) | |||||||||||
NET DECREASE | (674,306 | ) | $ | (4,985,177 | ) | (1,710,039 | ) | $ | (24,725,409 | ) |
21
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Goldman Sachs Variable Insurance Trust and Shareholders of the
Goldman Sachs Strategic Growth Fund:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Goldman Sachs Strategic Growth Fund (the “Fund”), a fund of the Goldman Sachs Variable Insurance Trust, as of December 31, 2016, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities as of December 31, 2016 by correspondence with the custodian, brokers, transfer agent of the underlying funds and the application of alternative auditing procedures where securities purchased confirmations had not been received, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 14, 2017
22
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC GROWTH FUND
Fund Expenses — Six Month Period Ended December 31, 2016 (Unaudited) |
As a shareholder of Institutional or Service Shares of the Fund, you incur ongoing costs, including management fees, distribution and/or service (12b-1) fees (with respect to Service Shares) and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Institutional Shares and Service Shares of the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from July 1, 2016 through December 31, 2016, which represents a period of 184 days of a 366 day year.
Actual Expenses — The first line under each share class in the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000=8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes — The second line under each share class in the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual net expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only. As a shareholder of the Fund you do not incur any transaction costs, such as sales charges, redemption fees, or exchange fees, but shareholders of other funds may incur such costs. The second line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds whose shareholders may incur transaction costs.
Share Class | Beginning Account Value 07/01/16 | Ending Account Value 12/31/16 | Expenses Paid for the 6 Months Ended 12/31/16* | |||||||||
Institutional | ||||||||||||
Actual | $ | 1,000 | $ | 1,031.00 | $ | 4.03 | ||||||
Hypothetical 5% return | 1,000 | 1,021.17 | + | 4.01 | ||||||||
Service | ||||||||||||
Actual | 1,000 | 1,029.50 | 5.31 | |||||||||
Hypothetical 5% return | 1,000 | 1,019.91 | + | 5.28 |
* | Expenses are calculated using the Fund’s annualized net expense ratio for each class, which represents the ongoing expenses as a percentage of net assets for the six months ended December 31, 2016. Expenses are calculated by multiplying the annualized net expense ratio by the average account value for the period; then multiplying the result by the number of days in the most recent fiscal half year; and then dividing that result by the number of days in the fiscal year. The annualized net expense ratios for the period were 0.79% and 1.04% for the Institutional and Service Shares, respectively. |
+ | Hypothetical expenses are based on the Fund’s actual annualized net expense ratios and an assumed rate of return of 5% per year before expenses. |
23
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC GROWTH FUND
Trustees and Officers (Unaudited)
Independent Trustees
Name, Address and Age1 | Position(s) Held with the Trust | Term of Office and | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee3 | Other Directorships Held by Trustee4 | |||||||
Ashok N. Bakhru Age: 74 | Chairman of the Board of Trustees | Since 1996 (Trustee since 1991) | Mr. Bakhru is retired. He was formerly Director, Apollo Investment Corporation (a business development company) (2008-2013); President, ABN Associates (a management and financial consulting firm) (1994-1996 and 1998-2012); Trustee, Scholarship America (1998-2005); Trustee, Institute for Higher Education Policy (2003-2008); Director, Private Equity Investors — III and IV (1998-2007), and Equity-Linked Investors II (April 2002-2007).
Chairman of the Board of Trustees — Goldman Sachs Trust; Goldman Sachs Variable Insurance Trust; Goldman Sachs Trust II; Goldman Sachs BDC, Inc.; Goldman Sachs Private Middle Market Credit LLC; Goldman Sachs MLP Income Opportunities Fund; Goldman Sachs MLP and Energy Renaissance Fund; and Goldman Sachs ETF Trust. | 142 | None | |||||||
Kathryn A. Cassidy Age: 62 | Trustee | Since 2015 | Ms. Cassidy is retired. Formerly, she was Advisor to the Chairman (May 2014-December 2014); and Senior Vice President and Treasurer (2008-2014), General Electric Company & General Electric Capital Corporation (technology and financial services companies).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||||
Diana M. Daniels Age: 67 | Trustee | Since 2007 | Ms. Daniels is retired. Formerly, she was Vice President, General Counsel and Secretary, The Washington Post Company (1991-2006). Ms. Daniels is a Trustee Emeritus and serves as a Presidential Councillor of Cornell University (2013-Present); former Member of the Legal Advisory Board, New York Stock Exchange (2003-2006) and of the Corporate Advisory Board, Standish Mellon Management Advisors (2006-2007).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||||
Herbert J. Markley Age: 66 | Trustee | Since 2013 | Mr. Markley is retired. Formerly, he was Executive Vice President, Deere & Company (an agricultural and construction equipment manufacturer) (2007-2009); and President, Agricultural Division, Deere & Company (2001-2007). Previously, Mr. Markley served as an Advisory Board Member of Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust (June 2013-October 2013).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||||
Jessica Palmer Age: 67 | Trustee | Since 2007 | Ms. Palmer is retired. She is Director, Emerson Center for the Arts and Culture (2011-Present); and was formerly a Consultant, Citigroup Human Resources Department (2007-2008); Managing Director, Citigroup Corporate and Investment Banking (previously, Salomon Smith Barney/Salomon Brothers) (1984-2006). Ms. Palmer was a Member of the Board of Trustees of Indian Mountain School (private elementary and secondary school) (2004-2009).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||||
24
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC GROWTH FUND
Trustees and Officers (Unaudited) (continued)
Independent Trustees
Name, Address and Age1 | Position(s) Held with the Trust | Term of Office and | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee3 | Other Directorships Held by Trustee4 | |||||||
Roy W. Templin Age: 56 | Trustee | Since 2013 | Mr. Templin is retired. He recently served as Chairman of the Board of Directors, Con-Way Incorporated (a transportation, logistics and supply chain management service company) (2014-2015); and was formerly Executive Vice President and Chief Financial Officer, Whirlpool Corporation (an appliance manufacturer and marketer) (2004-2012). Previously, Mr. Templin served as an Advisory Board Member of Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust (June 2013-October 2013).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||||
Gregory G. Weaver Age: 65 | Trustee | Since 2015 | Mr. Weaver is retired. He is Director, Verizon Communications Inc. (2015-Present); and was formerly Chairman and Chief Executive Officer, Deloitte & Touche LLP (a professional services firm) (2001-2005 and 2012-2014); and Member of the Board of Directors, Deloitte & Touche LLP (2006-2012).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | Verizon Communications Inc. | |||||||
25
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC GROWTH FUND
Trustees and Officers (Unaudited) (continued)
Interested Trustees*
Name, Address and Age1 | Position(s) Held with the Trust | Term of Office and | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee3 | Other Directorships Held by Trustee4 | |||||||
James A. McNamara Age: 54 | President and Trustee | Since 2007 | Managing Director, Goldman Sachs (December 1998-Present); Director of Institutional Fund Sales, GSAM (April 1998-December 2000); and Senior Vice President and Manager, Dreyfus Institutional Service Corporation (January 1993- April 1998).
President and Trustee — Goldman Sachs Trust; Goldman Sachs Variable Insurance Trust; Goldman Sachs Trust II; Goldman Sachs MLP Income Opportunities Fund; Goldman Sachs MLP and Energy Renaissance Fund; and Goldman Sachs ETF Trust. | 140 | None | |||||||
Alan A. Shuch Age: 67 | Trustee | Since 1990 | Advisory Director — GSAM (May 1999-Present); Consultant to GSAM (December 1994-May 1999); and Limited Partner, Goldman Sachs (December 1994-May 1999).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||||
* | These persons are considered to be “Interested Trustees” because they hold positions with Goldman Sachs and own securities issued by The Goldman Sachs Group, Inc. Each Interested Trustee holds comparable positions with certain other companies of which Goldman Sachs, GSAM or an affiliate thereof is the investment adviser, administrator and/or distributor. |
1 | Each Trustee may be contacted by writing to the Trustee, c/o Goldman Sachs, 200 West Street, New York, New York, 10282, Attn: Caroline Kraus. Information is provided as of December 31, 2016. Alan A. Shuch served as Trustee until his retirement from the Board on December 31, 2016. |
2 | Subject to such policies as may be adopted by the Board from time-to-time, each Trustee holds office for an indefinite term, until the earliest of: (a) the election of his or her successor; (b) the date the Trustee resigns or is removed by the Board or shareholders, in accordance with the Trust’s Declaration of Trust; or (c) the termination of the Trust. The Board has adopted policies which provide that (a) no Trustee shall hold office for more than 15 years and (b) a Trustee shall retire as of December 31st of the calendar year in which he or she reaches his or her 74th birthday, unless a waiver of such requirement shall have been adopted by a majority of the other Trustees. These policies may be changed by the Trustees without shareholder vote. One Trustee has been granted a waiver from the foregoing policies which permits him to serve until December 31, 2017. |
3 | The Goldman Sachs Fund Complex includes certain other companies listed above for each respective Trustee. As of December 31, 2016, Goldman Sachs Trust consisted of 92 portfolios (89 of which offered shares to the public); Goldman Sachs Variable Insurance Trust consisted of 14 portfolios; Goldman Sachs Trust II consisted of 17 portfolios (16 of which offered shares to the public); Goldman Sachs BDC, Inc., Goldman Sachs Private Middle Market Credit LLC, Goldman Sachs MLP Income Opportunities Fund, and Goldman Sachs MLP and Energy Renaissance Fund each consisted of one portfolio; and Goldman Sachs ETF Trust consisted of 15 portfolios (eight of which offered shares to the public). Goldman Sachs Private Middle Market Credit LLC does not offer shares to the public. |
4 | This column includes only directorships of companies required to report to the Securities and Exchange Commission under the Securities Exchange Act of 1934 (i.e., “public companies”) or other investment companies registered under the Act. |
Additional information about the Trustees is available in the Fund’s Statement of Additional Information, which can be obtained from Goldman Sachs free of charge by calling this toll-free number (in the United States of America): 1-800-526-7384.
26
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC GROWTH FUND
Trustees and Officers (Unaudited) (continued)
Officers of the Trust*
Name, Address and Age1 | Position(s) Held with the Trust | Term of Office and | Principal Occupation(s) During Past 5 Years | |||
James A. McNamara 200 West Street New York, NY 10282 Age: 54 | Trustee and President | Since 2007 | Managing Director, Goldman Sachs (December 1998-Present); Director of Institutional Fund Sales, GSAM (April 1998-December 2000); and Senior Vice President and Manager, Dreyfus Institutional Service Corporation (January 1993-April 1998).
President and Trustee — Goldman Sachs Trust; Goldman Sachs Variable Insurance Trust; Goldman Sachs Trust II; Goldman Sachs MLP Income Opportunities Fund; Goldman Sachs MLP and Energy Renaissance Fund; and Goldman Sachs ETF Trust. | |||
Caroline L. Kraus 200 West Street New York, NY 10282 Age: 39 | Secretary | Since 2012 | Managing Director, Goldman Sachs (January 2016-Present); Vice President, Goldman Sachs (August 2006-December 2015); Associate General Counsel, Goldman Sachs (2012-Present); Assistant General Counsel, Goldman Sachs (August 2006-December 2011); and Associate, Weil, Gotshal & Manges, LLP (2002-2006).
Secretary — Goldman Sachs Trust (previously Assistant Secretary (2012)); Goldman Sachs Variable Insurance Trust (previously Assistant Secretary (2012)); Goldman Sachs Trust II; Goldman Sachs BDC, Inc.; Goldman Sachs Private Middle Market Credit LLC; Goldman Sachs Middle Market Lending LLC; Goldman Sachs MLP Income Opportunities Fund; Goldman Sachs MLP and Energy Renaissance Fund; and Goldman Sachs ETF Trust. | |||
Scott M. McHugh 200 West Street New York, NY 10282 Age: 45 | Treasurer, Senior Vice President and Principal Financial Officer | Since 2009 (Principal | Managing Director, Goldman Sachs (January 2016-Present); Vice President, Goldman Sachs (February 2007-December 2015); Assistant Treasurer of certain mutual funds administered by DWS Scudder (2005-2007); and Director (2005-2007), Vice President (2000-2005), and Assistant Vice President (1998-2000), Deutsche Asset Management or its predecessor (1998-2007).
Treasurer, Senior Vice President and Principal Financial Officer — Goldman Sachs Trust; Goldman Sachs Variable Insurance Trust; Goldman Sachs Trust II; Goldman Sachs MLP Income Opportunities Fund; Goldman Sachs MLP and Energy Renaissance Fund; and Goldman Sachs ETF Trust. | |||
* | Represents a partial list of officers of the Trust. Additional information about all the officers is available in the Fund’s Statement of Additional Information, which can be obtained from Goldman Sachs free of charge by calling this toll-free number (in the United States): 1-800-526-7384. |
1 | Information is provided as of December 31, 2016. |
2 | Officers hold office at the pleasure of the Board of Trustees or until their successors are duly elected and qualified. Each officer holds comparable positions with certain other companies of which Goldman Sachs, GSAM or an affiliate thereof is the investment adviser, administrator and/or distributor. |
27
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC GROWTH FUND
Goldman Sachs Variable Insurance Trust — Tax Information (Unaudited)
For the year ended December 31, 2016, 100% of the dividends paid from net investment company taxable income by the Strategic Growth Fund qualify for the dividends received deduction available to corporations.
Pursuant to Section 852 of the Internal Revenue Code, the Strategic Growth Fund designates $46,858 or, if different, the maximum amount allowable, as capital gain dividends paid during the fiscal year ended December 31, 2016.
28
TRUSTEES | OFFICERS | |
Ashok N. Bakhru, Chairman | James A. McNamara, President | |
Kathryn A. Cassidy | Scott M. McHugh, Treasurer, Senior Vice | |
Diana M. Daniels | President and Principal Financial Officer | |
Herbert J. Markley | Caroline L. Kraus, Secretary | |
James A. McNamara | ||
Jessica Palmer | ||
Roy W. Templin | ||
Gregory G. Weaver |
GOLDMAN, SACHS & CO.
Distributor and Transfer Agent
GOLDMAN SACHS ASSET MANAGEMENT, L.P.
Investment Adviser
200 West Street, New York
New York 10282
Visit our web site at www.GSAMFUNDS.com to obtain the most recent month-end returns.
The reports concerning the Fund included in this shareholder report may contain certain forward-looking statements about the factors that may affect the performance of the Fund in the future. These statements are based on Fund management’s predictions and expectations concerning certain future events and their expected impact on the Fund, such as performance of the economy as a whole and of specific industry sectors, changes in the levels of interest rates, the impact of developing world events, and other factors that may influence the future performance of the Fund. Management believes these forward-looking statements to be reasonable, although they are inherently uncertain and difficult to predict. Actual events may cause adjustments in portfolio management strategies from those currently expected to be employed.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the Fund voted proxies relating to portfolio securities for the 12-month period ended December 31 is available (i) without charge, upon request by calling 1-800-621-2550; and (ii) on the Securities and Exchange Commission (“SEC”) web site at http://www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Form N-Qs are available on the SEC’s web site at http://www.sec.gov within 60 days after the Fund’s first and third fiscal quarters. The Fund’s Form N-Qs may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may also be obtained by calling 1-800-SEC-0330. Form N-Qs may be obtained upon request and without charge by calling 1-800-621-2550.
The website links provided are for your convenience only and are not an endorsement or recommendation by GSAM of any of these websites or the products or services offered. GSAM is not responsible for the accuracy and validity of the content of these websites.
Fund holdings and allocations shown are as of December 31, 2016 and may not be representative of future investments. Fund holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities. Current and future holdings are subject to risk.
References to indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only and do not imply that the portfolio will achieve similar results. The index composition may not reflect the manner in which a portfolio is constructed. While an adviser seeks to design a portfolio which reflects appropriate risk and return features, portfolio characteristics may deviate from those of the benchmark.
The Global Industry Classification Standard (“GICS”) was developed by and is the exclusive property and a service mark of Morgan Stanley Capital International Inc. (“MSCI”) and Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. (“S&P”) and is licensed for use by Goldman Sachs. Neither MSCI, S&P nor any other party involved in making or compiling the GICS or any GICS classifications makes any express or implied warranties or representations with respect to such standard or classification (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of such standard or classification. Without limiting any of the foregoing, in no event shall MSCI, S&P, any of their affiliates or any third party involved in making or compiling the GICS or any GICS classifications have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.
The portfolio risk management process includes an effort to monitor and manage risk, but does not imply low risk.
Shares of the Goldman Sachs VIT Funds are offered to separate accounts of participating life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Shares of the Fund are not offered directly to the general public. The variable annuity contracts and variable life insurance policies are described in the separate prospectuses issued by participating insurance companies. You should refer to those prospectuses for information about surrender charges, mortality and expense risk fees and other charges that may be assessed by participating insurance companies under the variable annuity contracts or variable life insurance policies. Such fees or charges, if any, may affect the return you may realize with respect to your investments. Ask your representative for more complete information. Please consider a fund’s objectives, risks and charges and expenses, and read the prospectus carefully before investing. The prospectus contains this and other information about the Fund.
This material is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus or summary prospectus, if applicable. Investors should consider the Fund’s objective, risks, and charges and expenses, and read the summary prospectus, if available, and/or the prospectus carefully before investing or sending money. The summary prospectus, if available, and the prospectus contain this and other information about the Fund and may be obtained from your authorized dealer or from Goldman, Sachs & Co. by calling 1-800-621-2550.
This report is prepared for the general information of contract owners and is not an offer of shares of the Goldman Sachs Variable Insurance Trust — Goldman Sachs Strategic Growth Fund.
©2017 Goldman Sachs. All rights reserved.
VITGRWAR-17/80645-TMPL-02/2017-470462
Goldman
Sachs Variable Insurance Trust
Goldman Sachs
Strategic Income Fund
Annual Report
December 31, 2016
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
INVESTMENT OBJECTIVE
The Fund seeks total return comprised of income and capital appreciation.
Portfolio Management Discussion and Analysis
Below, the Goldman Sachs Fixed Income Portfolio Management Team discusses the Goldman Sachs Variable Insurance Trust — Goldman Sachs Strategic Income Fund’s (the “Fund”) performance and positioning for the 12-month period ended December 31, 2016 (the “Reporting Period”).
How did the Fund perform during the Reporting Period?
During the Reporting Period, the Fund’s Institutional, Service and Advisor Shares generated average annual total returns of 1.21%, 0.93% and 0.74%, respectively. These returns compare to the 0.66% average annual total return of the Fund’s benchmark, the Bank of America Merrill Lynch U.S. Dollar Three-Month LIBOR Constant Maturity Index (the “LIBOR Index”), during the same period.
We note that the Fund’s benchmark being the LIBOR Index is a means of emphasizing that the Fund has an unconstrained strategy. That said, this Fund employs a benchmark agnostic strategy and thus comparisons to a benchmark index are not particularly relevant.
What economic and market factors most influenced the Fund during the Reporting Period?
When the Reporting Period started, spread (or non-government bond) sectors retreated, selling off significantly from January to mid-February 2016. The selloff was driven by an increase in a number of perceived risks, including slowing Chinese economic activity, the possibility of persistent oil oversupply and deteriorating corporate bond fundamentals, as the U.S. credit cycle entered its later stage. Some of these risks eased in the second half of the first calendar quarter, as economic news from China improved, U.S. oil production showed signs of slowing, and commodity prices appeared to stabilize. As a result, spread sectors largely retraced their losses by the end of March 2016. Global central banks remained accommodative. The Bank of Japan (“BoJ”), in a surprise move at its January 2016 policy meeting, introduced a -0.1% interest rate, reaffirming its commitment to achieving a 2% inflation target. The European Central Bank (“ECB”) shifted its focus from currency depreciation to credit creation by leaving its deposit rate unchanged, expanding its asset purchase program to include purchases of non-financial corporate credit and announcing a new series of easing measures in the form of targeted long-term refinancing operations. In the U.S., the Federal Reserve (the “Fed”) left interest rates unchanged and reduced its previous forecast of four rate hikes in 2016 to two. After a sustained period of appreciation, the U.S. dollar weakened during the first quarter of 2016 due to generally tighter financial conditions, mixed U.S. economic data and the Fed’s more dovish commentary. (Dovish commentary tends to suggest lower interest rates; opposite of hawkish.)
During the second quarter of 2016, spread sectors rallied on stabilization of commodities prices as well as on declining fears about slowing Chinese economic growth and the potential for a U.S. economic recession. Global interest rates broadly declined amid continued accommodative monetary policy from the world’s central banks. In the U.S., minutes from the Fed’s April 2016 policy meeting, released in mid-May 2016, suggested Fed policymakers might raise interest rates in June 2016 if U.S. economic growth strengthened, employment data firmed and inflation rose toward the Fed’s 2% target. In early June 2016, however, the release of weak May 2016 employment data raised concerns about the health of the U.S. economy, pushing down expectations of a Fed rate hike. Indeed, the Fed did not raise interest rates at its June 2016 policy meeting. In the last week of June 2016, the unexpected “leave” vote in the U.K.’s referendum about membership in the European Union, popularly known as Brexit, renewed investor uncertainty about the path of global economic growth. Spread sectors withstood the Brexit vote relatively well, selling off at first but then recovering most of their losses afterwards. The U.S. dollar strengthened versus most global currencies during the second calendar quarter, though it weakened against the Japanese yen.
During the third calendar quarter, spread sectors continued to advance. Overall, global interest rates remained low, as the world’s central banks remained broadly accommodative. In July 2016, however, the Fed’s policy statement was more hawkish than most observers expected, reflecting cautious optimism amid the market’s relatively muted reaction to the Brexit outcome and strengthening U.S. economic data. (Hawkish implies higher interest rates; opposite of dovish.) The July 2016 U.S. non-farm payrolls report showed 255,000 new jobs added, exceeding market expectations and countering a disappointing second quarter 2016 gross domestic product (“GDP”) report that showed growth of 1.2%. The ECB kept interest rates unchanged during
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GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
July 2016. The BoJ, meanwhile, fell short of market expectations with the announcement of an equity purchase program and the absence of changes to key policy tools, such as an interest rate cut and increased government bond purchases. In August 2016, the Bank of England (“BoE”) unveiled a “timely, coherent and comprehensive package,” as described by Governor Mark Carney, which included a number of measures intended to help the U.K. economy navigate a post-Brexit environment. Although the ECB kept monetary policy unchanged during the month, the European and U.K. credit markets received technical, or supply/demand, support from the ongoing corporate bond purchases of central banks. In the U.S., non-farm payroll gains moderated in August 2016 and manufacturing and services data weakened, but continued hawkish comments from the Fed boosted market expectations of a rate hike by the end of 2016. However, at its September 2016 policy meeting, the Fed kept short-term interest rates unchanged. In Japan, during September 2016, the BoJ announced a new “yield curve control” framework designed to steepen Japan’s government bond yield curve and alleviate the impact on financial institutions of low longer-term rates. (A yield curve indicates a spectrum of maturities.) During the third quarter of 2016, the U.S. dollar depreciated versus many world currencies.
In the fourth quarter of 2016, spread sectors generally outperformed U.S. Treasury securities in a reversal from the volatile start to the calendar year. Commodity prices stabilized and crude oil prices rose following an agreement in November 2016 by the Organization of the Petroleum Exporting Countries (“OPEC”) and non-OPEC producers to cut production, which provided support for energy issuers within the corporate credit market as well as for oil-exporting emerging economies. Donald Trump’s victory in the November 2016 U.S. election marked an important regime change in monetary, fiscal and regulatory policy. Market expectations shifted toward a faster pace of Fed monetary policy tightening, increased fiscal stimulus and a potentially looser regulatory agenda. After the U.S. election, global interest rates rose and the U.S. dollar strengthened versus most developed market and emerging market currencies. The U.S. economy strengthened, with strong job growth and increased consumer spending reported. In December 2016, the Fed raised the targeted federal funds rate 0.25% to a range of between 0.50% and 0.75%. The rate hike resulted in a further rise in U.S. Treasury yields, with a notable increase in shorter-term yields, and additional appreciation in the U.S. dollar. In the Eurozone, the ECB announced it would reduce its monthly pace of asset purchases starting in April 2017 but said it would maintain its monetary easing policies throughout 2017. Meanwhile, Italy voted to reject constitutional reforms, while the outcome of Austria’s election defied the populist tide that had claimed victories in the U.K. and U.S. during 2016.
For the Reporting Period overall, high yield corporate bonds outperformed U.S. Treasuries, posting a double-digit gain. Sovereign emerging market debt and investment grade corporate bonds also outpaced U.S. Treasuries, followed by commercial mortgage-backed securities, agency securities and asset-backed securities. Mortgage-backed securities slightly underperformed U.S. Treasuries. The U.S. Treasury yield curve flattened during the Reporting Period and shifted upwards, though it steepened during the final three months of the calendar year. The yield on the bellwether 10-year U.S. Treasury rose approximately 16 basis points to end the Reporting Period at 2.43%. (A basis point is 1/100th of a percentage point. A flattening yield curve is one wherein the differential in yields between longer-term and shorter-term maturities narrows; opposite of steepening.)
What key factors were responsible for the Fund’s performance during the Reporting Period?
Our sector and country strategies contributed positively to the Fund’s performance during the Reporting Period. Within our sector strategies, the Fund was helped most by its positions in the securitized sector. This was offset somewhat by its positions in corporate credit, which detracted. Within our country strategy, the Fund benefited from its overweight in Europe and the U.S. versus its underweight in Japan and the U.K. In addition, an overweight in Canada versus an underweight in the U.S. added to results. The Fund was also modestly helped by an overweight in Australia.
Our duration and currency strategies detracted from Fund returns. Within our duration strategy, the Fund was hampered by its short duration position. Duration is a measure of sensitivity to changes in interest rates. Within our currency strategy, the Fund’s long position in the Mexican peso hurt performance. The currency came under extreme pressure after Donald Trump was elected U.S. president because of broad concerns about his future trade policies.
What fixed income market sectors most significantly affected Fund performance?
During the Reporting Period, the Fund benefited most from its positions in the securitized sector, led by its holdings of agency mortgage-backed securities and high-quality collateralized loan obligations (“CLOs”). Within our government/swaps strategy, steepening positions on the yield curves of various European countries added to performance. We implemented these positions based on our belief that European interest rates would rise. Exposure to U.S. Treasury inflation protected securities (“TIPS”) also bolstered returns. The Fund’s investments in municipal bonds, especially Puerto Rico municipal bonds, enhanced results. In addition, exposure to Brazilian local emerging market debt contributed positively.
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GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
Conversely, the Fund was hurt by its positions in corporate credit. More specifically, the Fund was underweight investment grade corporate bonds and high yield corporate bonds, both of which rallied strongly during the Reporting Period. Individual issue selection among high yield corporate bonds also detracted from performance during the Reporting Period.
Did the Fund’s duration and yield curve positioning strategy help or hurt its results during the Reporting Period?
The combined effect of the Fund’s tactical duration and yield curve positioning detracted from its performance. During the Reporting Period, we tactically moved the Fund in and out of a short duration position on the U.S. Treasury yield curve. The short duration position hurt performance during the first half of the Reporting Period, but provided modestly positive results in the second half when yields rose.
How did the Fund use derivatives and similar instruments during the Reporting Period?
We used derivatives and similar instruments for the efficient management of the Fund. These derivatives and similar instruments allowed us to manage interest rate, credit and currency risks more effectively by allowing us both to hedge and to apply active investment views with greater versatility and to afford greater risk management precision than we would otherwise be able to implement.
During the Reporting Period, we used interest rate and bond exchange traded futures contracts to implement duration and country strategies within the Fund, especially in the U.S. and Eurozone markets. Currency transactions were carried out using primarily over-the-counter (“OTC”) spot and forward foreign currency exchange contracts as well as by purchasing OTC options. Currency transactions were used as we sought both to enhance returns and to hedge the Fund’s portfolio against currency exchange rate fluctuations. We also employed forward sales contracts to implement long and short views within our currency strategy. In addition, we used written options contracts to express an outright term structure view and manage volatility (term structure, most often depicted as a yield curve, refers to the term structure of interest rates, which is the relationship between the yield to maturity and the time to maturity for pure discount bonds). The Fund also employed credit default swaps to manage exposure to fluctuations in credit spreads (or the differential in yields between Treasury securities and non-Treasury securities that are identical in all respects except for quality rating). Interest rate swaps were used to manage exposure to fluctuations in interest rates. Total return swaps were utilized to manage yield curve exposure across various strategies within the Fund.
During the Reporting Period, our currency strategy, which is implemented through derivatives, detracted from performance. Our duration strategy, which employs derivatives to implement interest rate views, also had a negative effect on results. Credit default swaps used to express our views on corporate credit and to manage the Fund’s exposure to credit spreads detracted from performance as well. Conversely, our country strategy, which utilizes derivatives to implement interest rate views, contributed positively.
Were there any notable changes in the Fund’s weightings during the Reporting Period?
The Fund is a broadly diversified, multi-sector portfolio designed to provide total return opportunities from across the fixed income spectrum, including government, securitized, corporate credit and emerging market fixed income sectors. During the Reporting Period, we were broadly cautious about corporate credit and focused the Fund primarily on high quality positions within the securitized sector. Within our currency strategy, we closely managed the Fund’s long position in the Mexican peso heading into the U.S. elections and chose to reduce that position after the result became clear. Within our country strategy, we added overweight positions in Canada and Australia versus an underweight in the U.S. This positioning was implemented as the Bank of Canada indicated plans to raise interest rates, and the Reserve Bank of Australia, which is balancing the impact of strengthening commodity prices and weak economic growth, left its overnight money market interest rate unchanged. We expect both central banks to maintain their easing biases in the near term. Within our duration strategy, we ended the Reporting Period with a short duration position on the U.S. Treasury yield curve, as U.S. Treasury yields trended higher after the Fed decided to raise interest rates at its December 2016 policy meeting. The Fed noted the hike was warranted given “realized and expected labor market conditions and inflation.” We believe the rise in U.S. Treasury yields, coupled with a stronger U.S. dollar, resulted in tighter financial conditions, though the impact appears to have been relatively modest given improved economic growth and the potential for higher oil prices.
How was the Fund positioned at the end of the Reporting Period?
At the end of the Reporting Period, we maintained a cautious stance on corporate credit, as we believe the U.S. is in the later stage of the credit cycle. Accordingly, the Fund was broadly underweight corporate credit, but held select positions in high yield corporate bonds and investment grade corporate bonds. In addition, the Fund held high-quality securitized assets, such as CLOs and Federal Family Education Loan Program (“FFELP”) student loan asset-backed securities. Within emerging markets debt, the Fund
3
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
was underweight China. It had modest exposure across Puerto Rico municipal bonds. Also, the Fund was positioned — primarily through our country and currency strategies — based on our view that global monetary policy divergence would continue into 2017. Through our country strategy, the Fund was overweight Canada and Australia and underweight the U.S. Through our currency strategy, the Fund was overweight in the U.S. dollar and underweight a basket of Asian currencies, such as the South Korean won and the Taiwan dollar. Within our duration strategy, the Fund held a short duration position on the U.S. Treasury yield curve at the end of the Reporting Period.
What is the Fund’s tactical view and strategy for the months ahead?
At the end of the Reporting Period, we expected the long economic recovery, which followed the 2008-2009 financial crisis, to continue during 2017. In our view, growth is poised to broaden to more countries, with the world economy drawing on more sources of strength than at any time since 2010.
In some respects, our outlook is an extension of our views at the start of the Reporting Period. However, we note the emergence of four transitional factors. First, populism is challenging globalism and creating new downside risks. Second, we believe concerns about low economic growth are giving way to concerns about inflation. Third, we believe the focus on monetary policy is shifting toward fiscal policy. Fourth, in our view, concerns about new regulation are moving toward hopes for deregulation.
Our three strongest convictions for the 2017 calendar year are continued strength in the U.S. economy; monetary policy divergence reaching new extremes, which we believe could potentially drive repricing across the interest rate markets; and higher volatility, largely fueled by political anxieties. We believe these developments point to more opportunity for relative value trades in the near term and indicate that risks from directional exposure to rising interest rates have increased. (Directional is defined as a strategy based on an assessment of a market’s, asset class’ or specific security’s anticipated direction.)
From an investment perspective, then, we considered relative value positions in interest rates and currencies more attractive than directional positions at the end of the Reporting Period. We also preferred securitized credit for its yield potential, while we were cautiously optimistic about corporate credit.
4
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
Index Definitions
The Bank of America Merrill Lynch U.S. Dollar Three-Month LIBOR Constant Maturity Index is based on the assumed purchase of a synthetic instrument having three months to maturity and with a coupon equal to the closing quote for three-month LIBOR. That issue is sold the following day (priced at a yield equal to the current day closing three-month LIBOR rate) and is rolled into a new three-month instrument. The index, therefore, will always have a constant maturity equal to exactly three months.
5
FUND BASICS
Strategic Income Fund
as of December 31, 2016
STANDARDIZED TOTAL RETURNS1
For the period ended 12/31/16 | One Year | Since Inception | Inception Date | |||||||
Institutional | 1.21 | % | -0.41 | % | 4/14/14 | |||||
Service | 0.93 | -0.72 | 4/14/14 | |||||||
Advisor | 0.74 | -0.85 | 4/14/14 |
1 | The Standardized Total Returns are average annual total returns as of the most recent calendar quarter-end. They assume reinvestment of all distributions at net asset value (“NAV”). Because Institutional, Service and Advisor Shares do not involve a sales charge, such a charge is not applied to their Standardized Total Returns. |
Total return figures in the above chart represent past performance and do not indicate future results, which will vary. The investment return and principal value of an investment will fluctuate and, therefore, an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the total return figures in the above chart. Please visit www.GSAMFUNDS.com to obtain the most recent month-end returns. Performance reflects fee waivers and/or expense limitations in effect during the periods shown. In their absence, performance would be reduced.
EXPENSE RATIOS2
Net Expense Ratio (Current) | Gross Expense Ratio (Before Waivers) | |||||||
Institutional | 0.87 | % | 1.69 | % | ||||
Service | 1.12 | 1.96 | ||||||
Advisor | 1.27 | 2.13 |
2 | The expense ratios of the Fund, both current (net of any fee waivers and/or expense limitations) and before waivers (gross of any fee waivers and/or expense limitations) are as set forth above according to the most recent publicly available Prospectuses for the Fund and may differ from the expense ratios disclosed in the Financial Highlights in this report. Pursuant to a contractual arrangement, the Fund’s fee waivers and/or expense limitations will remain in place through at least April 29, 2017, and prior to such date, the Investment Adviser may not terminate the arrangements without the approval of the Fund’s Board of Trustees. If these arrangements are discontinued in the future, the expense ratios may change without shareholder approval. |
6
FUND BASICS
FUND COMPOSITION3
3 | The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. Underlying sector allocations of exchange traded funds and investment companies held by the Fund are not reflected in the graph above. Figures in the graph may not sum to 100% due to the exclusion of other assets and liabilities. The graph depicts the Fund’s investments but may not represent the Fund’s market exposure due to the exclusion of certain derivatives, if any, as listed in the Additional Investment Information section of the Schedule of Investments. |
4 | “U.S. Government Agency Securities” include agency securities offered by companies such as the Federal Home Loan Bank (“FHLB”), which operate under a government charter. While they are required to report to a government regulator, their assets are not explicitly guaranteed by the government, and they otherwise operate like any other publicly traded company. |
5 | “Mortgage-Backed Securities” are guaranteed by the Government National Mortgage Association (“GNMA”), Federal National Mortgage Association (“FNMA”) or Federal Home Loan Mortgage Corp. (“FHLMC”). GNMA instruments are backed by the full faith and credit of the United States Government. |
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GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
Performance Summary
December 31, 2016
The following graph shows the value, as of December 31, 2016, of a $10,000 investment made on April 14, 2014 (commencement of the Fund’s operations) in Institutional Shares at NAV. For comparative purposes, the performance of the Fund’s benchmark, the Bank of America Merrill Lynch U.S. Dollar Three-Month LIBOR Constant Maturity Index, is shown. This performance data represents past performance and should not be considered indicative of future performance, which will fluctuate with changes in market conditions. These performance fluctuations may cause an investor’s shares, when redeemed, to be worth more or less than their original cost. Performance reflects Fund level expenses but does not reflect fees and expenses associated with any variable annuity contract or variable life insurance policy that uses the Fund as an investment option for any contract or policy. Had performance reflected all of those fees and expenses, performance would have been reduced. Performance reflects applicable fee waivers and/or expense limitations in effect during the periods shown, and in their absence, performance would be reduced. Performance of Service and Advisor Shares will vary from Institutional Shares due to differences in class specific fees. In addition to the Investment Adviser’s decisions regarding issuer/industry investment selection and allocation, other factors may affect Fund performance. These factors include, but are not limited to, Fund operating fees and expenses, portfolio turnover, and subscription and redemption cash flows affecting the Fund.
Strategic Income Fund’s Lifetime Performance
Performance of a $10,000 investment, with distributions reinvested, from April 14, 2014 through December 31, 2016.
Average Annual Total Return through December 31, 2016 | One Year | Since Inception | ||
Institutional (Commenced April 14, 2014) | 1.21% | -0.41% | ||
Service (Commenced April 14, 2014) | 0.93% | -0.72% | ||
Advisor (Commenced April 14, 2014) | 0.74% | -0.85% |
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GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
Schedule of Investments
December 31, 2016
Shares | Description | Value | ||||||
Common Stock – 0.2% | ||||||||
| Energy – 0.2% |
| ||||||
5,847 | Magnum Hunter Resources Corp.* | $ | 64,317 | |||||
(Cost $58,340) | ||||||||
|
|
Principal Amount | Interest Rate | Maturity Date | Value | |||||||||||
Corporate Bonds – 8.3% | ||||||||||||||
| Banks – 5.3% |
| ||||||||||||
| Cie de Financement Foncier SA |
| ||||||||||||
EUR | 200,000 | 3.750 | % | 01/24/17 | $ | 211,010 | ||||||||
| DNB Boligkreditt A/S |
| ||||||||||||
200,000 | 3.375 | 01/20/17 | 210,890 | |||||||||||
| HSBC SFH France SA |
| ||||||||||||
450,000 | 3.375 | 01/20/17 | 474,503 | |||||||||||
| Nordea Hypotek AB |
| ||||||||||||
480,000 | 3.500 | 01/18/17 | 506,050 | |||||||||||
| PNC Preferred Funding Trust II(a)(b)(c) |
| ||||||||||||
$ | 100,000 | 2.186 | 12/31/49 | 96,500 | ||||||||||
|
| |||||||||||||
1,498,953 | ||||||||||||||
|
| |||||||||||||
| Consumer Services – 0.2% |
| ||||||||||||
| MGM Resorts International |
| ||||||||||||
50,000 | 8.625 | 02/01/19 | 56,125 | |||||||||||
|
| |||||||||||||
| Containers & Packaging(a)(b) – 0.4% |
| ||||||||||||
| ARD Finance SA |
| ||||||||||||
EUR | 100,000 | 6.625 | 09/15/23 | 105,549 | ||||||||||
|
| |||||||||||||
| Energy – 0.8% |
| ||||||||||||
| Carrizo Oil & Gas, Inc.(b) |
| ||||||||||||
$ | 50,000 | 7.500 | 09/15/20 | 51,875 | ||||||||||
| Chesapeake Energy Corp.(a)(b) |
| ||||||||||||
25,000 | 8.000 | 01/15/25 | 25,500 | |||||||||||
| Halcon Resources Corp.(a)(b) |
| ||||||||||||
50,000 | 8.625 | 02/01/20 | 52,125 | |||||||||||
| Laredo Petroleum, Inc.(b) |
| ||||||||||||
25,000 | 5.625 | 01/15/22 | 24,969 | |||||||||||
| Petrobras Global Finance BV |
| ||||||||||||
20,000 | 4.875 | 03/17/20 | 19,679 | |||||||||||
30,000 | 8.375 | 05/23/21 | 32,319 | |||||||||||
| Petroleos Mexicanos |
| ||||||||||||
10,000 | 5.500 | 06/27/44 | 8,322 | |||||||||||
10,000 | 6.375 | 01/23/45 | 9,100 | |||||||||||
|
| |||||||||||||
223,889 | ||||||||||||||
|
| |||||||||||||
| Food & Beverage – 0.2% |
| ||||||||||||
| Constellation Brands, Inc. |
| ||||||||||||
50,000 | 7.250 | 05/15/17 | 51,000 | |||||||||||
|
| |||||||||||||
| Healthcare – 0.2% |
| ||||||||||||
| Tenet Healthcare Corp. |
| ||||||||||||
50,000 | 6.250 | 11/01/18 | 52,875 | |||||||||||
|
| |||||||||||||
Corporate Bonds – (continued) | ||||||||||||||
| Noncaptive-Financial – 0.3%(b) |
| ||||||||||||
| Nationstar Mortgage LLC |
| ||||||||||||
$ | 50,000 | 6.500 | % | 08/01/18 | $ | 50,750 | ||||||||
| Speedy Cash Intermediate Holdings Corp.(a) |
| ||||||||||||
25,000 | 10.750 | 05/15/18 | 23,750 | |||||||||||
|
| |||||||||||||
74,500 | ||||||||||||||
|
| |||||||||||||
| Pipelines – 0.2%(b)(c) |
| ||||||||||||
| Enterprise Products Operating LLC Series A |
| ||||||||||||
75,000 | 4.593 | 08/01/66 | 70,540 | |||||||||||
|
| |||||||||||||
| Wireless Telecommunications – 0.5% |
| ||||||||||||
| Sprint Communications, Inc. |
| ||||||||||||
50,000 | 9.125 | 03/01/17 | 50,500 | |||||||||||
50,000 | 8.375 | 08/15/17 | 51,750 | |||||||||||
| T-Mobile USA, Inc.(b) |
| ||||||||||||
50,000 | 6.250 | 04/01/21 | 51,937 | |||||||||||
|
| |||||||||||||
154,187 | ||||||||||||||
|
| |||||||||||||
| Wirelines Telecommunications – 0.2%(b) |
| ||||||||||||
| Windstream Services LLC |
| ||||||||||||
50,000 | 7.750 | 10/15/20 | 51,000 | |||||||||||
|
| |||||||||||||
TOTAL CORPORATE BONDS | ||||||||||||||
(Cost $2,313,157) | $ | 2,338,618 | ||||||||||||
|
| |||||||||||||
Mortgage-Backed Security – 0.6% | ||||||||||||||
| FNMA – 0.6% |
| ||||||||||||
$ | 147,530 | 6.000 | % | 09/01/36 | $ | 166,582 | ||||||||
(Cost $165,716) | ||||||||||||||
|
| |||||||||||||
Collateralized Mortgage Obligations – 12.2% | ||||||||||||||
| Adjustable Rate Non-Agency(c) – 1.3% |
| ||||||||||||
| Alternative Loan Trust Series 2005-51, Class 2A1(b) |
| ||||||||||||
$ | 46,858 | 1.039 | % | 11/20/35 | $ | 38,404 | ||||||||
| Alternative Loan Trust Series 2006-HY11, Class A1(b) |
| ||||||||||||
55,911 | 0.876 | 06/25/36 | 45,640 | |||||||||||
| Deutsche Alt-A Securities Mortgage Loan Trust | | ||||||||||||
37,774 | 0.896 | 07/25/47 | 32,942 | |||||||||||
| HomeBanc Mortgage Trust Series 2006-1, Class 3A2(b) |
| ||||||||||||
108,319 | 2.749 | 04/25/37 | 79,409 | |||||||||||
| IndyMac INDA Mortgage Loan Trust Series 2006-AR2, | | ||||||||||||
49,832 | 3.351 | 09/25/36 | 43,452 | |||||||||||
| JP Morgan Alternative Loan Trust Series 2006-A5, Class 1A1(b) |
| ||||||||||||
41,276 | 0.916 | 10/25/36 | 36,805 | |||||||||||
| Lehman XS Trust Series 2005-7N, Class 1A1A(b) |
| ||||||||||||
44,881 | 1.026 | 12/25/35 | 40,494 | |||||||||||
| Lehman XS Trust Series 2006-14N, Class 1A1A(b) |
| ||||||||||||
71,239 | 0.946 | 09/25/46 | 62,674 | |||||||||||
|
| |||||||||||||
379,820 | ||||||||||||||
|
|
The accompanying notes are an integral part of these financial statements. | 9 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
Schedule of Investments (continued)
December 31, 2016
Principal Amount | Interest Rate | Maturity Date | Value | |||||||||||
Collateralized Mortgage Obligations – (continued) | ||||||||||||||
| Agency Multi-Family – 3.3% |
| ||||||||||||
| FHLMC Multifamily Structured Pass-Through Certificates | | ||||||||||||
$ | 400,000 | 2.373 | % | 05/25/22 | $ | 399,649 | ||||||||
| FHLMC Multifamily Structured Pass-Through Certificates | | ||||||||||||
500,000 | 3.320 | 02/25/23 | 523,330 | |||||||||||
|
| |||||||||||||
922,979 | ||||||||||||||
|
| |||||||||||||
| Interest Only(d) – 4.6% |
| ||||||||||||
| FHLMC Series 2014-4314, Class SE(b) |
| ||||||||||||
1,030,155 | 5.346 | 03/15/44 | 182,929 | |||||||||||
| FHLMC Series 2014-4320, Class SD(b) |
| ||||||||||||
92,578 | 5.396 | 07/15/39 | 14,982 | |||||||||||
| FHLMC Series 2016-4583, Class ST(b) |
| ||||||||||||
922,019 | 5.296 | 05/15/46 | 180,251 | |||||||||||
| FNMA Series 2011-124, Class SC |
| ||||||||||||
477,253 | 5.794 | 12/25/41 | 89,446 | |||||||||||
| FNMA Series 2013-121, Class SA |
| ||||||||||||
772,618 | 5.344 | 12/25/43 | 125,107 | |||||||||||
| FNMA Series 2013-130, Class SN |
| ||||||||||||
773,662 | 5.894 | 10/25/42 | 145,994 | |||||||||||
| FNMA Series 2014-87, Class MS |
| ||||||||||||
428,392 | 5.494 | 01/25/45 | 70,613 | |||||||||||
| FNMA Series 2015-81, Class SA |
| ||||||||||||
317,953 | 4.944 | 11/25/45 | 45,100 | |||||||||||
| GNMA Series 2010-101, Class S(b) |
| ||||||||||||
726,251 | 5.261 | 08/20/40 | 126,097 | |||||||||||
| GNMA Series 2010-20, Class SE(b) |
| ||||||||||||
403,488 | 5.511 | 02/20/40 | 69,550 | |||||||||||
| GNMA Series 2010-31, Class SA(b) |
| ||||||||||||
125,906 | 5.011 | 03/20/40 | 20,012 | |||||||||||
| GNMA Series 2013-152, Class SG(b) |
| ||||||||||||
103,720 | 5.411 | 06/20/43 | 17,442 | |||||||||||
| GNMA Series 2013-181, Class SA(b) |
| ||||||||||||
434,135 | 5.361 | 11/20/43 | 72,694 | |||||||||||
| GNMA Series 2015-110, Class MS(b) |
| ||||||||||||
466,430 | 4.971 | 08/20/45 | 70,554 | |||||||||||
| GNMA Series 2015-159, Class HS(b) |
| ||||||||||||
342,884 | 5.461 | 11/20/45 | 58,185 | |||||||||||
|
| |||||||||||||
1,288,956 | ||||||||||||||
|
| |||||||||||||
| Regular Floater(b)(c) – 3.0% |
| ||||||||||||
| Alternative Loan Trust Series 2005-36, Class 2A1A |
| ||||||||||||
68,242 | 1.066 | 08/25/35 | 50,778 | |||||||||||
| Banc of America Alternative Loan Trust Series 2005-4, Class CB1 |
| ||||||||||||
196,322 | 0.992 | 05/25/35 | 158,200 | |||||||||||
| Connecticut Avenue Securities Series 2014-C03, Class 1M1 |
| ||||||||||||
5,263 | 1.956 | 07/25/24 | 5,270 | |||||||||||
| GreenPoint Mortgage Funding Trust Series 2006-AR1, Class A1A |
| ||||||||||||
382,198 | 1.046 | 02/25/36 | 333,836 | |||||||||||
| Mortgage Repurchase Agreement Financing Trust Series 2016-1, | | ||||||||||||
150,000 | 1.637 | 09/10/18 | 150,000 | |||||||||||
|
| |||||||||||||
Collateralized Mortgage Obligations – (continued) | ||||||||||||||
| Regular Floater(b)(c) – (continued) |
| ||||||||||||
| Mortgage Repurchase Agreement Financing Trust Series 2016-2, | | ||||||||||||
$ | 150,000 | 1.837 | % | 03/10/19 | $ | 150,000 | ||||||||
|
| |||||||||||||
848,084 | ||||||||||||||
|
| |||||||||||||
| TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS | | ||||||||||||
(Cost $3,372,562) | $ | 3,439,839 | ||||||||||||
|
| |||||||||||||
U.S. Government Agency Security – 2.9% | ||||||||||||||
| FHLB(c) |
| ||||||||||||
$ | 825,000 | 0.806 | % | 10/27/17 | $ | 826,226 | ||||||||
(Cost $825,000) | ||||||||||||||
|
| |||||||||||||
Asset-Backed Securities – 21.8% | ||||||||||||||
| Airlines(a)(b) – 0.2% |
| ||||||||||||
| Continental Airlines Pass-Through Certificates Series 2012-3, | | ||||||||||||
$ | 50,000 | 6.125 | % | 04/29/18 | $ | 51,938 | ||||||||
|
| |||||||||||||
| Collateralized Loan Obligations(a)(c) – 14.3% |
| ||||||||||||
| Acis CLO Ltd. Series 2014-4A, Class ACOM(b) |
| ||||||||||||
150,000 | 2.371 | 05/01/26 | 148,680 | |||||||||||
| Anchorage Capital CLO IV Ltd. Series 2014-4A, Class A1A(b) |
| ||||||||||||
250,000 | 2.340 | 07/28/26 | 250,005 | |||||||||||
| Apidos CLO X Series 2012-10A, Class A(b) |
| ||||||||||||
500,000 | 2.307 | 10/30/22 | 500,017 | |||||||||||
| Crown Point CLO III Ltd. Series 2015-3A, Class ACOM(b) |
| ||||||||||||
250,000 | 2.559 | 12/31/27 | 249,125 | |||||||||||
| GoldenTree Loan Opportunities IX Ltd. Series 2014-9A, | | ||||||||||||
250,000 | 2.238 | 10/29/26 | 249,998 | |||||||||||
| Halcyon Loan Advisors Funding Ltd. Series 2015-2A, Class A(b) |
| ||||||||||||
250,000 | 2.272 | 07/25/27 | 249,050 | |||||||||||
| Hildene CLO II Ltd. Series 2014-2A, Class A(b) |
| ||||||||||||
250,000 | 2.328 | 07/19/26 | 249,846 | |||||||||||
| Monroe Capital BSL CLO Ltd. Series 2015-1A, Class ACOM |
| ||||||||||||
200,000 | 2.469 | 05/22/27 | 199,640 | |||||||||||
| Ocean Trails CLO IV Series 2013-4A, Class A(b) |
| ||||||||||||
250,000 | 2.202 | 08/13/25 | 250,023 | |||||||||||
| OCP CLO Ltd. Series 2015-8A, Class A1(b) |
| ||||||||||||
250,000 | 2.410 | 04/17/27 | 250,110 | |||||||||||
| OCP CLO Ltd. Series 2016-12A, Class A1(b) |
| ||||||||||||
150,000 | 2.456 | 10/18/28 | 150,311 | |||||||||||
| OFSI Fund VI Ltd. Series 2014-6A, Class A1(b) |
| ||||||||||||
200,000 | 1.910 | 03/20/25 | 197,818 | |||||||||||
| OFSI Fund VII Ltd. Series 2014-7A, Class ACOM |
| ||||||||||||
100,000 | 2.520 | 10/18/26 | 99,500 | |||||||||||
| Regatta IV Funding Ltd. Series 2014-1A, Class ACOM(b) |
| ||||||||||||
250,000 | 0.000 | 07/25/26 | 249,100 | |||||||||||
| Trinitas CLO II Ltd. Series 2014-2A, Class ACOM(b) |
| ||||||||||||
250,000 | 0.000 | 07/15/26 | 246,875 | |||||||||||
|
|
10 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
Principal Amount | Interest Rate | Maturity Date | Value | |||||||||||
Asset-Backed Securities – (continued) | ||||||||||||||
| Collateralized Loan Obligations(a)(c) – (continued) |
| ||||||||||||
| Trinitas CLO III Ltd. Series 2015-3A, Class A2(b) |
| ||||||||||||
$ | 150,000 | 2.390 | % | 07/15/27 | $ | 149,943 | ||||||||
| Wasatch Ltd. Series 2006-1A, Class A1B |
| ||||||||||||
218,731 | 1.057 | 11/14/22 | 214,435 | |||||||||||
| Z Capital Credit Partners CLO Ltd. Series 2015-1A, | | ||||||||||||
150,000 | 2.471 | 07/16/27 | 148,755 | |||||||||||
|
| |||||||||||||
4,053,231 | ||||||||||||||
|
| |||||||||||||
| Home Equity(b) – 1.7% |
| ||||||||||||
| Citigroup Mortgage Loan Trust, Inc. Series 2006-WFH1, | | ||||||||||||
100,000 | 1.156 | 01/25/36 | 91,879 | |||||||||||
| Credit-Based Asset Servicing & Securitization LLC | | ||||||||||||
9,789 | 3.986 | 12/25/35 | 9,834 | |||||||||||
| Credit-Based Asset Servicing & Securitization LLC | | ||||||||||||
25,000 | 3.986 | 12/25/35 | 23,925 | |||||||||||
| GSAMP Trust Series 2006-HE8, Class A2C(c) |
| ||||||||||||
44,279 | 0.926 | 01/25/37 | 37,239 | |||||||||||
| Lehman XS Trust Series 2007-3, Class 1BA2(c) |
| ||||||||||||
43,044 | 1.793 | 03/25/37 | 33,380 | |||||||||||
| Morgan Stanley Mortgage Loan Trust Series 2006-16AX, | | ||||||||||||
149,991 | 0.926 | 11/25/36 | 61,321 | |||||||||||
| Saxon Asset Securities Trust Series 2007-2, Class A2C(c) |
| ||||||||||||
82,452 | 0.996 | 05/25/47 | 59,610 | |||||||||||
| Structured Asset Securities Corp. Mortgage Loan Trust | | ||||||||||||
100,000 | 1.226 | 05/25/35 | 93,272 | |||||||||||
| VOLT XXV LLC Series 2015-NPL8, Class A1(a)(e) |
| ||||||||||||
63,339 | 3.500 | 06/26/45 | 63,366 | |||||||||||
|
| |||||||||||||
473,826 | ||||||||||||||
|
| |||||||||||||
| Student Loans(b)(c) – 5.6% |
| ||||||||||||
| Access Group, Inc. Series 2006-1, Class A2 |
| ||||||||||||
7,472 | 1.040 | 08/25/23 | 7,454 | |||||||||||
| Access Group, Inc. Series 2015-1, Class A(a) |
| ||||||||||||
75,127 | 1.456 | 07/25/56 | 74,245 | |||||||||||
| Bank of America Student Loan Trust Series 2010-1A, Class A(a) |
| ||||||||||||
47,826 | 1.682 | 02/25/43 | 47,512 | |||||||||||
| ECMC Group Student Loan Trust Series 2016-1A, Class A(a) |
| ||||||||||||
139,270 | 2.106 | 07/26/66 | 138,860 | |||||||||||
| Navient Student Loan Trust Series 2016-5A, Class A(a) |
| ||||||||||||
293,500 | 2.006 | 06/25/65 | 297,804 | |||||||||||
| Navient Student Loan Trust Series 2016-7A, Class A(a) |
| ||||||||||||
148,203 | 1.906 | 03/25/66 | 149,714 | |||||||||||
| PHEAA Student Loan Trust Series 2016-1A, Class A(a) |
| ||||||||||||
186,672 | 1.906 | 09/25/65 | 187,141 | |||||||||||
| Scholar Funding Trust Series 2010-A, Class A(a) |
| ||||||||||||
52,916 | 1.640 | 10/28/41 | 51,884 | |||||||||||
| SLM Student Loan Trust Series 2003-14, Class A5 |
| ||||||||||||
27,639 | 1.112 | 01/25/23 | 27,541 | |||||||||||
|
| |||||||||||||
Asset-Backed Securities – (continued) | ||||||||||||||
| Student Loans(b)(c) – (continued) |
| ||||||||||||
| SLM Student Loan Trust Series 2007-1, Class A5 |
| ||||||||||||
$ | 232,609 | 0.972 | % | 01/26/26 | $ | 230,356 | ||||||||
| SLM Student Loan Trust Series 2008-5, Class A4 |
| ||||||||||||
87,314 | 2.582 | 07/25/23 | 87,797 | |||||||||||
| SLM Student Loan Trust Series 2012-3, Class A |
| ||||||||||||
129,869 | 1.406 | 12/26/25 | 126,410 | |||||||||||
| SunTrust Student Loan Trust Series 2006-1A, Class A4(a) |
| ||||||||||||
182,717 | 1.080 | 10/28/37 | 170,166 | |||||||||||
|
| |||||||||||||
1,596,884 | ||||||||||||||
|
| |||||||||||||
TOTAL ASSET-BACKED SECURITIES | ||||||||||||||
(Cost $6,131,027) | $ | 6,175,879 | ||||||||||||
|
| |||||||||||||
Foreign Government Securities – 7.5% | ||||||||||||||
| Brazilian Government International Bond(f) |
| ||||||||||||
BRL | 174,000 | 6.000 | % | 08/15/50 | $ | 163,415 | ||||||||
| Dominican Republic International Bond |
| ||||||||||||
$ | 100,000 | 5.875 | 04/18/24 | 100,000 | ||||||||||
100,000 | 5.500 | 01/27/25 | 96,250 | |||||||||||
| European Stability Mechanism Treasury Bill(g) |
| ||||||||||||
EUR | 1,400,000 | 0.000 | 01/12/17 | 1,473,938 | ||||||||||
| Indonesia Government International Bond |
| ||||||||||||
$ | 200,000 | 4.125 | 01/15/25 | 198,750 | ||||||||||
| Mexico Government International Bond Series M |
| ||||||||||||
MXN | 644,300 | 7.750 | 12/14/17 | 31,459 | ||||||||||
1,213,200 | 7.750 | 11/23/34 | 57,988 | |||||||||||
|
| |||||||||||||
TOTAL FOREIGN GOVERNMENT SECURITIES | ||||||||||||||
(Cost $2,305,198) | $ | 2,121,800 | ||||||||||||
|
| |||||||||||||
Municipal Bonds(b) – 1.5% | ||||||||||||||
| Puerto Rico – 1.5% |
| ||||||||||||
| Puerto Rico Commonwealth Aqueduct & Sewer Authority RB | | ||||||||||||
$ | 5,000 | 6.000 | % | 07/01/44 | $ | 3,794 | ||||||||
| Puerto Rico Commonwealth Aqueduct & Sewer Authority RB | | ||||||||||||
10,000 | 5.500 | 07/01/28 | 7,725 | |||||||||||
5,000 | 5.000 | 07/01/33 | 3,738 | |||||||||||
5,000 | 5.125 | 07/01/37 | 3,737 | |||||||||||
10,000 | 5.750 | 07/01/37 | 7,525 | |||||||||||
5,000 | 5.250 | 07/01/42 | 3,750 | |||||||||||
| Puerto Rico Commonwealth GO Bonds Series 2014 A(f) |
| ||||||||||||
100,000 | 8.000 | 07/01/35 | 67,250 | |||||||||||
| Puerto Rico Commonwealth GO Refunding for Public | | ||||||||||||
20,000 | 5.500 | 07/01/32 | 12,450 | |||||||||||
| Puerto Rico Sales Tax Financing Corp. RB First Subseries 2009 A |
| ||||||||||||
15,000 | 5.500 | 08/01/28 | 7,050 | |||||||||||
25,000 | 6.000 | 08/01/42 | 12,000 | |||||||||||
|
|
The accompanying notes are an integral part of these financial statements. | 11 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
Schedule of Investments (continued)
December 31, 2016
Principal Amount | Interest Rate | Maturity Date | Value | |||||||||||
Municipal Bonds(b) – (continued) | ||||||||||||||
| Puerto Rico – (continued) |
| ||||||||||||
| Puerto Rico Sales Tax Financing Corp. RB First Subseries 2010 A |
| ||||||||||||
$ | 15,000 | 5.500 | % | 08/01/37 | $ | 7,050 | ||||||||
155,000 | 5.375 | 08/01/39 | 72,850 | |||||||||||
115,000 | 5.500 | 08/01/42 | 54,050 | |||||||||||
| Puerto Rico Sales Tax Financing Corp. RB First Subseries 2010 C |
| ||||||||||||
10,000 | 5.375 | 08/01/38 | 4,700 | |||||||||||
55,000 | 6.000 | 08/01/39 | 26,675 | |||||||||||
105,000 | 5.250 | 08/01/41 | 49,350 | |||||||||||
| Puerto Rico Sales Tax Financing Corp. RB First | | ||||||||||||
170,000 | 5.000 | 08/01/43 | 79,900 | |||||||||||
| Puerto Rico Sales Tax Financing Corp. RB for Capital | | ||||||||||||
15,000 | 6.750 | 08/01/32 | 7,500 | |||||||||||
|
| |||||||||||||
431,094 | ||||||||||||||
|
| |||||||||||||
TOTAL MUNICIPAL BONDS | ||||||||||||||
(Cost $514,888) | $ | 431,094 | ||||||||||||
|
| |||||||||||||
Loan Participations(b)(c)(f)(h) – 0.7% | ||||||||||||||
| Electric – 0.1% |
| ||||||||||||
| Calpine Corp. |
| ||||||||||||
$ | 25,000 | 2.520 | % | 11/30/17 | $ | 25,073 | ||||||||
|
| |||||||||||||
| Energy – 0.0% |
| ||||||||||||
| American Energy — Marcellus, LLC |
| ||||||||||||
25,000 | 5.250 | 08/04/20 | 13,542 | |||||||||||
| Magnum Hunter Resources Corp. |
| ||||||||||||
8,794 | 16.000 | 04/15/19 | 8,794 | |||||||||||
|
| |||||||||||||
22,336 | ||||||||||||||
|
| |||||||||||||
| Entertainment – 0.1% |
| ||||||||||||
| Lions Gate Entertainment Corp. |
| ||||||||||||
25,000 | 3.750 | 12/08/23 | 25,125 | |||||||||||
|
| |||||||||||||
| Healthcare – 0.1% |
| ||||||||||||
| Valeant Pharmaceuticals International, Inc. |
| ||||||||||||
23,851 | 5.000 | 02/13/19 | 23,815 | |||||||||||
|
| |||||||||||||
| Media – 0.3% |
| ||||||||||||
| Checkout Holding Corp. |
| ||||||||||||
25,000 | 7.750 | 04/11/22 | 17,812 | |||||||||||
| Getty Images, Inc. |
| ||||||||||||
57,663 | 4.750 | 10/18/19 | 50,215 | |||||||||||
|
| |||||||||||||
68,027 | ||||||||||||||
|
| |||||||||||||
| Technology – 0.1% |
| ||||||||||||
| BMC Software Finance, Inc. |
| ||||||||||||
23,891 | 5.000 | 09/10/20 | 23,831 | |||||||||||
|
| |||||||||||||
TOTAL LOAN PARTICIPATIONS | ||||||||||||||
(Cost $199,551) | $ | 188,207 | ||||||||||||
|
| |||||||||||||
U.S. Treasury Obligations – 19.3% | ||||||||||||||
| U.S. Treasury Bonds |
| ||||||||||||
$ | 300,000 | 3.625 | % | 08/15/43 | $ | 332,826 | ||||||||
180,000 | 3.750 | 11/15/43 | 204,174 | |||||||||||
190,000 | 3.625 | 02/15/44 | 210,712 | |||||||||||
50,000 | 3.000 | 05/15/45 | 49,338 | |||||||||||
130,000 | 2.875 | 08/15/45 | 125,129 | |||||||||||
| U.S. Treasury Inflation Indexed Bonds (TIPS) |
| ||||||||||||
55,920 | 2.125 | 02/15/40 | 69,384 | |||||||||||
| U.S. Treasury Inflation Indexed Notes (TIPS) |
| ||||||||||||
515,810 | 0.125 | 04/15/19 | 522,459 | |||||||||||
103,223 | 0.125 | 04/15/20 | 104,351 | |||||||||||
314,175 | 0.125 | 01/15/23 | 312,221 | |||||||||||
155,808 | 0.375 | 07/15/23 | 157,385 | |||||||||||
264,690 | 0.125 | 07/15/24 | 260,397 | |||||||||||
12,232 | 0.375 | 07/15/25 | 12,179 | |||||||||||
| U.S. Treasury Notes |
| ||||||||||||
200,000 | 0.875 | 11/30/17 | 199,988 | |||||||||||
200,000 | 1.000 | 12/31/17 | 200,156 | |||||||||||
200,000 | 1.750 | 09/30/19 | 201,946 | |||||||||||
800,000 | 1.375 | 04/30/21 | 784,824 | |||||||||||
1,490,000 | 2.000 | 12/31/21 | 1,495,469 | |||||||||||
99,000 | 2.250 | 12/31/23 | 99,077 | |||||||||||
100,000 | 2.375 | 08/15/24 | 100,488 | |||||||||||
|
| |||||||||||||
TOTAL U.S. TREASURY OBLIGATIONS | ||||||||||||||
(Cost $5,510,593) | $ | 5,442,503 | ||||||||||||
|
|
Shares | Distribution Rate | Value | ||||||
Investment Company(c)(i) – 0.5% | ||||||||
Goldman Sachs Financial Square Government Fund — Institutional Shares |
| |||||||
143,083 | 0.455 | % | $ | 143,083 | ||||
(Cost $143,083) | ||||||||
|
12 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
Principal Amount | Interest Rate | Maturity Date | Value | |||||||||||
Short-Term Investments(g) – 24.9% | ||||||||||||||
| Foreign Government Security – 7.2% |
| ||||||||||||
| Mexico Government International Bond |
| ||||||||||||
MXN | 6,049,590 | 0.000 | % | 02/02/17 | $ | 290,239 | ||||||||
3,332,010 | 0.000 | 02/16/17 | 159,468 | |||||||||||
4,164,290 | 0.000 | 02/23/17 | 199,232 | |||||||||||
3,633,220 | 0.000 | 03/02/17 | 173,480 | |||||||||||
9,010,820 | 0.000 | 03/16/17 | 429,177 | |||||||||||
4,557,680 | 0.000 | 03/30/17 | 216,561 | |||||||||||
12,048,520 | 0.000 | 06/08/17 | 564,802 | |||||||||||
|
| |||||||||||||
2,032,959 | ||||||||||||||
|
| |||||||||||||
| U.S. Government Agency Security – 17.7% |
| ||||||||||||
| FNMA |
| ||||||||||||
5,000,000 | 0.000 | 01/03/17 | 5,000,000 | |||||||||||
|
| |||||||||||||
TOTAL SHORT-TERM INVESTMENTS | ||||||||||||||
(Cost $7,067,926) | $ | 7,032,959 | ||||||||||||
|
| |||||||||||||
TOTAL INVESTMENTS – 100.4% | ||||||||||||||
(Cost $28,607,041) | $ | 28,371,107 | ||||||||||||
|
| |||||||||||||
| LIABILITIES IN EXCESS OF OTHER ASSETS – (0.4)% |
| (100,528 | ) | ||||||||||
|
| |||||||||||||
NET ASSETS – 100.0% | $ | 28,270,579 | ||||||||||||
|
|
The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. | ||
* | Non-income producing security. | |
(a) | Exempt from registration under Rule 144A of the Securities Act of 1933. Under procedures approved by the Board of Trustees, such securities may be deemed liquid by the Investment Adviser and may be resold, normally to qualified institutional buyers in transactions exempt from registration. Total market value of Rule 144A securities amounts to $5,889,285, which represents approximately 20.8% of net assets as of December 31, 2016. | |
(b) | Securities with “Call” features. Maturity dates disclosed are the final maturity dates. | |
(c) | Variable rate security. Interest rate or distribution rate disclosed is that which is in effect on December 31, 2016. | |
(d) | Inverse floating rate security. Interest rate disclosed is that which is in effect on December 31, 2016. | |
(e) | Step Bond. Coupon rate is fixed for an initial period then it resets at a specified date and rate. | |
(f) | Security is currently in default. | |
(g) | Issued with a zero coupon. Income is recognized through the accretion of discount. | |
(h) | Bank Loans often require prepayments from excess cash flows or permit the borrower to repay at its election. The degree to which borrowers repay, whether as a contractual requirement or at their election, cannot be predicted with accuracy. As a result, the actual remaining maturity may be substantially less than the stated maturities shown. The stated interest rate represents the weighted average interest rate of all contracts within the loan facility on December 31, 2016. Bank Loans typically have rates of interest which are predetermined either daily, monthly, quarterly or semi-annually by reference to a base lending rate, plus a premium. These base lending rates are primarily the London-Interbank Offered Rate (“LIBOR”) and secondarily the prime rate offered by one or more major United States banks (the “Prime Rate”) and the certificate of deposit (“CD”) rate or other base lending rates used by commercial lenders. |
(i) | Represents an affiliated issuer. |
Investment Abbreviations: | ||
BA | —Banker Acceptance Rate | |
BBR | —Bank Bill Reference Rate | |
CD KSDA | —Certificates of Deposit by the Korean Securities Dealers Association | |
CDI | —Average One-Day Interbank Deposit | |
EURIBOR | —Euro Interbank Offered Rate | |
FHLB | —Federal Home Loan Bank | |
FHLMC | —Federal Home Loan Mortgage Corp. | |
FNMA | —Federal National Mortgage Association | |
GNMA | —Government National Mortgage Association | |
GO | —General Obligation | |
LIBOR | —London Interbank Offered Rate | |
NIBOR | —Norwegian Interbank Offered Rate | |
RB | —Revenue Bond | |
STIBOR | —Stockholm Interbank Offered Rate | |
TIIE | —Interbank Equilibrium Interest Rate | |
TIPS | —Treasury Inflation-Protected Securities | |
WIBOR | —Warsaw InterBank Offered Rate | |
Currency Abbreviations: | ||
ARS | —Argentina peso | |
AUD | —Australian Dollar | |
BRL | —Brazilian Real | |
CAD | —Canadian Dollar | |
CHF | —Swiss Franc | |
CLP | —Chilean Peso | |
CNH | —Chinese Renminbi | |
CNY | —Chinese Yuan | |
COP | —Colombian Peso | |
CZK | —Czech Koruna | |
EUR | —Euro | |
GBP | —British Pound | |
HUF | —Hungarian Forint | |
IDR | —Indonesian Rupiah | |
ILS | —Israel New Shekel | |
INR | —Indian Rupee | |
JPY | —Japanese Yen | |
KRW | —South Korean Won | |
MXN | —Mexican Peso | |
MYR | —Malaysian Ringgit | |
NOK | —Norwegian Krone | |
NZD | —New Zealand Dollar | |
PHP | —Philippines peso | |
PLN | —Polish Zloty | |
RUB | —Russian Ruble | |
SEK | —Swedish Krona | |
SGD | —Singapore Dollar | |
TRY | —Turkish Lira | |
TWD | —Taiwan Dollar | |
USD | —United States Dollar | |
ZAR | —South African Rand |
The accompanying notes are an integral part of these financial statements. | 13 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
Schedule of Investments (continued)
December 31, 2016
ADDITIONAL INVESTMENT INFORMATION
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS — At December 31, 2016, the Fund had the following forward foreign currency exchange contracts:
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS WITH UNREALIZED GAIN
Counterparty | Currency Purchased | Currency Sold | Settlement Date | Current Value | Unrealized Gain | |||||||||||||||
Morgan Stanley Co., Inc. | ARS | 608,033 | USD | 37,529 | 01/06/17 | $ | 38,190 | $ | 661 | |||||||||||
ARS | 556,614 | USD | 34,264 | 01/18/17 | 34,506 | 242 | ||||||||||||||
ARS | 281,102 | USD | 17,119 | 01/25/17 | 17,343 | 224 | ||||||||||||||
AUD | 79,000 | NZD | 81,860 | 03/15/17 | 56,913 | 164 | ||||||||||||||
BRL | 3,560,338 | USD | 1,064,352 | 01/04/17 | 1,093,908 | 29,556 | ||||||||||||||
BRL | 276,931 | USD | 82,499 | 02/02/17 | 84,323 | 1,824 | ||||||||||||||
CAD | 154,120 | USD | 114,000 | 03/15/17 | 114,883 | 883 | ||||||||||||||
CHF | 304,447 | EUR | 283,410 | 03/15/17 | 300,301 | 917 | ||||||||||||||
CLP | 18,320,956 | USD | 27,235 | 01/19/17 | 27,322 | 87 | ||||||||||||||
CNH | 826,831 | USD | 116,698 | 03/15/17 | 118,576 | 1,878 | ||||||||||||||
CNY | 546,642 | USD | 76,732 | 04/05/17 | 76,777 | 45 | ||||||||||||||
CZK | 4,292,868 | EUR | 159,275 | 06/21/17 | 169,173 | 47 | ||||||||||||||
EUR | 138,032 | CZK | 3,712,592 | 06/21/17 | 146,568 | 263 | ||||||||||||||
EUR | 109,000 | GBP | 91,512 | 03/15/17 | 115,143 | 2,167 | ||||||||||||||
EUR | 107,407 | SEK | 1,026,775 | 03/15/17 | 113,461 | 290 | ||||||||||||||
EUR | 672,043 | USD | 698,730 | 02/09/17 | 708,777 | 10,047 | ||||||||||||||
EUR | 881,465 | USD | 924,193 | 03/15/17 | 931,145 | 6,952 | ||||||||||||||
GBP | 46,389 | EUR | 54,000 | 03/15/17 | 57,269 | 226 | ||||||||||||||
GBP | 46,000 | USD | 56,699 | 03/15/17 | 56,790 | 91 | ||||||||||||||
HUF | 32,848,837 | EUR | 104,947 | 03/16/17 | 112,019 | 1,151 | ||||||||||||||
INR | 1,448,561 | USD | 21,266 | 01/09/17 | 21,318 | 52 | ||||||||||||||
INR | 14,182,981 | USD | 208,053 | 01/30/17 | 208,179 | 126 | ||||||||||||||
INR | 921,107 | USD | 13,486 | 02/03/17 | 13,514 | 28 | ||||||||||||||
JPY | 5,336,304 | EUR | 43,362 | 03/15/17 | 45,818 | 12 | ||||||||||||||
JPY | 80,294,392 | USD | 684,000 | 03/15/17 | 689,411 | 5,411 | ||||||||||||||
MYR | 108,000 | USD | 23,989 | 01/12/17 | 24,077 | 88 | ||||||||||||||
MYR | 57,111 | USD | 12,714 | 01/19/17 | 12,724 | 10 | ||||||||||||||
NOK | 994,329 | EUR | 109,000 | 03/15/17 | 115,199 | 57 | ||||||||||||||
PHP | 5,521,217 | USD | 110,768 | 01/19/17 | 111,034 | 266 | ||||||||||||||
PLN | 1,517,148 | EUR | 339,356 | 03/15/17 | 362,104 | 3,622 | ||||||||||||||
PLN | 3,217,716 | USD | 763,451 | 03/15/17 | 767,986 | 4,535 | ||||||||||||||
RUB | 2,714,516 | USD | 41,215 | 01/20/17 | 44,044 | 2,829 | ||||||||||||||
RUB | 29,236,483 | USD | 457,599 | 01/26/17 | 473,449 | 15,850 | ||||||||||||||
SEK | 19,645,787 | EUR | 2,020,188 | 03/15/17 | 2,165,342 | 31,294 | ||||||||||||||
SEK | 2,445,858 | EUR | 250,585 | 03/22/17 | 269,696 | 4,880 | ||||||||||||||
SEK | 1,303,000 | USD | 142,818 | 01/27/17 | 143,254 | 436 | ||||||||||||||
SEK | 481,095 | USD | 51,749 | 03/15/17 | 53,026 | 1,277 | ||||||||||||||
USD | 273,393 | AUD | 366,415 | 01/12/17 | 264,362 | 9,031 | ||||||||||||||
USD | 972,510 | AUD | 1,315,127 | 03/15/17 | 947,431 | 25,079 | ||||||||||||||
USD | 180,565 | BRL | 582,521 | 02/02/17 | 177,373 | 3,192 |
14 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
ADDITIONAL INVESTMENT INFORMATION (continued)
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS WITH UNREALIZED GAIN (continued)
Counterparty | Currency Purchased | Currency Sold | Settlement Date | Current Value | Unrealized Gain | |||||||||||||||
Morgan Stanley Co., Inc. (continued) | USD | 110,012 | CAD | 143,937 | 01/20/17 | $ | 107,226 | $ | 2,786 | |||||||||||
USD | 332,883 | CAD | 438,317 | 03/15/17 | 326,726 | 6,157 | ||||||||||||||
USD | 438,878 | CAD | 588,111 | 03/22/17 | 438,425 | 453 | ||||||||||||||
USD | 27,000 | CLP | 17,725,500 | 01/19/17 | 26,434 | 566 | ||||||||||||||
USD | 51,038 | CNH | 357,518 | 01/20/17 | 50,943 | 95 | ||||||||||||||
USD | 55,445 | CNH | 386,812 | 01/23/17 | 55,059 | 386 | ||||||||||||||
USD | 347,340 | CNH | 2,429,391 | 03/15/17 | 342,965 | 4,375 | ||||||||||||||
USD | 76,733 | CNH | 546,757 | 04/05/17 | 76,696 | 37 | ||||||||||||||
USD | 1,575,242 | EUR | 1,402,313 | 01/12/17 | 1,476,988 | 98,254 | ||||||||||||||
USD | 174,598 | EUR | 164,125 | 03/15/17 | 173,376 | 1,222 | ||||||||||||||
USD | 1,072,531 | GBP | 855,234 | 01/06/17 | 1,054,069 | 18,462 | ||||||||||||||
USD | 1,270,807 | GBP | 1,006,927 | 03/15/17 | 1,243,104 | 27,703 | ||||||||||||||
USD | 181,535 | IDR | 2,413,204,530 | 01/12/17 | 178,573 | 2,962 | ||||||||||||||
USD | 57,000 | IDR | 771,141,600 | 01/27/17 | 56,950 | 50 | ||||||||||||||
USD | 56,943 | ILS | 216,950 | 03/15/17 | 56,431 | 512 | ||||||||||||||
USD | 93,508 | JPY | 10,199,728 | 01/11/17 | 87,324 | 6,184 | ||||||||||||||
USD | 962,871 | JPY | 111,123,596 | 03/15/17 | 954,113 | 8,758 | ||||||||||||||
USD | 490,597 | KRW | 566,952,427 | 01/13/17 | 469,628 | 20,969 | ||||||||||||||
USD | 782,755 | KRW | 919,987,930 | 01/19/17 | 762,034 | 20,721 | ||||||||||||||
USD | 282,677 | KRW | 330,234,332 | 01/20/17 | 273,534 | 9,143 | ||||||||||||||
USD | 57,000 | KRW | 68,473,188 | 01/31/17 | 56,712 | 288 | ||||||||||||||
USD | 120,747 | KRW | 143,115,150 | 02/09/17 | 118,530 | 2,217 | ||||||||||||||
USD | 105,686 | MXN | 2,186,623 | 01/20/17 | 105,219 | 467 | ||||||||||||||
USD | 292,900 | MXN | 6,005,978 | 02/02/17 | 288,399 | 4,501 | ||||||||||||||
USD | 161,689 | MXN | 3,299,107 | 02/16/17 | 158,166 | 3,523 | ||||||||||||||
USD | 182,637 | MXN | 3,752,191 | 02/23/17 | 179,749 | 2,888 | ||||||||||||||
USD | 175,550 | MXN | 3,589,269 | 03/02/17 | 171,811 | 3,739 | ||||||||||||||
USD | 287,058 | MXN | 5,938,699 | 03/15/17 | 283,803 | 3,255 | ||||||||||||||
USD | 432,939 | MXN | 8,883,599 | 03/16/17 | 424,479 | 8,460 | ||||||||||||||
USD | 217,345 | MXN | 4,483,891 | 03/30/17 | 213,852 | 3,493 | ||||||||||||||
USD | 559,680 | MXN | 11,715,776 | 06/08/17 | 552,755 | 6,925 | ||||||||||||||
USD | 119,218 | MYR | 526,946 | 01/12/17 | 117,479 | 1,739 | ||||||||||||||
USD | 23,731 | NOK | 200,821 | 01/27/17 | 23,262 | 469 | ||||||||||||||
USD | 79,911 | NOK | 672,497 | 03/15/17 | 77,914 | 1,997 | ||||||||||||||
USD | 71,490 | NZD | 99,000 | 01/09/17 | 68,762 | 2,728 | ||||||||||||||
USD | 358,721 | NZD | 503,556 | 03/15/17 | 349,085 | 9,636 | ||||||||||||||
USD | 8,793 | PLN | 36,545 | 01/26/17 | 8,729 | 64 | ||||||||||||||
USD | 171,000 | RUB | 10,505,889 | 01/26/17 | 170,130 | 870 | ||||||||||||||
USD | 344,032 | SGD | 491,688 | 03/15/17 | 339,405 | 4,627 | ||||||||||||||
USD | 243,973 | TRY | 865,983 | 03/15/17 | 241,882 | 2,091 | ||||||||||||||
USD | 403,094 | TWD | 12,856,676 | 01/12/17 | 397,051 | 6,043 | ||||||||||||||
USD | 491,401 | TWD | 15,497,308 | 01/13/17 | 478,558 | 12,843 |
The accompanying notes are an integral part of these financial statements. | 15 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
Schedule of Investments (continued)
December 31, 2016
ADDITIONAL INVESTMENT INFORMATION (continued)
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS WITH UNREALIZED GAIN (continued)
Counterparty | Currency Purchased | Currency Sold | Settlement Date | Current Value | Unrealized Gain | |||||||||||||||
Morgan Stanley Co., Inc. (continued) | USD | 705,698 | TWD | 22,491,980 | 01/20/17 | $ | 694,114 | $ | 11,584 | |||||||||||
USD | 277,449 | TWD | 8,758,768 | 06/16/17 | 271,145 | 6,304 | ||||||||||||||
USD | 298,162 | TWD | 9,505,823 | 06/20/17 | 294,316 | 3,846 | ||||||||||||||
USD | 51,000 | ZAR | 707,827 | 03/15/17 | 50,862 | 138 | ||||||||||||||
ZAR | 813,357 | USD | 57,000 | 03/15/17 | 58,445 | 1,445 | ||||||||||||||
TOTAL | $ | 501,765 |
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS WITH UNREALIZED LOSS
Counterparty | Currency Purchased | Currency Sold | Settlement Date | Current Value | Unrealized Loss | |||||||||||||||
Morgan Stanley Co., Inc. | ARS | 374,000 | USD | 23,293 | 01/25/17 | $ | 23,075 | $ | (218 | ) | ||||||||||
AUD | 337,216 | USD | 251,436 | 01/12/17 | 243,295 | (8,141 | ) | |||||||||||||
AUD | 392,000 | USD | 287,429 | 03/15/17 | 282,401 | (5,028 | ) | |||||||||||||
CAD | 106,455 | USD | 80,181 | 01/20/17 | 79,303 | (878 | ) | |||||||||||||
CAD | 379,223 | USD | 285,000 | 03/15/17 | 282,677 | (2,323 | ) | |||||||||||||
CLP | 39,699,181 | USD | 59,253 | 01/19/17 | 59,204 | (49 | ) | |||||||||||||
CNH | 1,602,559 | USD | 227,374 | 03/15/17 | 225,491 | (1,883 | ) | |||||||||||||
CNY | 357,263 | USD | 51,038 | 01/20/17 | 51,034 | (4 | ) | |||||||||||||
CNY | 387,006 | USD | 55,445 | 01/23/17 | 55,222 | (223 | ) | |||||||||||||
COP | 67,608,541 | USD | 22,687 | 01/17/17 | 22,462 | (225 | ) | |||||||||||||
COP | 233,238,726 | USD | 77,488 | 01/26/17 | 77,340 | (148 | ) | |||||||||||||
CZK | 2,886,900 | EUR | 107,382 | 06/21/17 | 113,766 | (256 | ) | |||||||||||||
CZK | 3,810,029 | EUR | 142,543 | 09/20/17 | 151,476 | (650 | ) | |||||||||||||
CZK | 1,296,711 | EUR | 48,516 | 09/21/17 | 51,559 | (222 | ) | |||||||||||||
CZK | 4,910,115 | EUR | 183,551 | 11/21/17 | 196,447 | (194 | ) | |||||||||||||
CZK | 1,488,838 | EUR | 55,626 | 11/22/17 | 59,573 | (25 | ) | |||||||||||||
EUR | 113,450 | HUF | 35,454,505 | 03/16/17 | 119,851 | (1,054 | ) | |||||||||||||
EUR | 110,000 | PLN | 490,323 | 03/15/17 | 116,200 | (828 | ) | |||||||||||||
EUR | 358,593 | SEK | 3,452,924 | 03/15/17 | 378,804 | (1,776 | ) | |||||||||||||
EUR | 47,357 | USD | 50,630 | 03/15/17 | 50,026 | (604 | ) | |||||||||||||
GBP | 45,986 | EUR | 54,000 | 03/15/17 | 56,773 | (271 | ) | |||||||||||||
GBP | 46,000 | JPY | 6,661,490 | 03/15/17 | 56,789 | (406 | ) | |||||||||||||
GBP | 880,520 | USD | 1,095,172 | 01/06/17 | 1,085,235 | (9,937 | ) | |||||||||||||
GBP | 92,000 | USD | 114,439 | 03/15/17 | 113,579 | (860 | ) | |||||||||||||
IDR | 1,039,680,323 | USD | 78,823 | 01/09/17 | 77,009 | (1,814 | ) | |||||||||||||
IDR | 3,513,832,016 | USD | 265,168 | 01/12/17 | 260,017 | (5,151 | ) | |||||||||||||
IDR | 1,360,528,430 | USD | 101,746 | 01/17/17 | 100,610 | (1,136 | ) | |||||||||||||
INR | 6,078,420 | USD | 89,428 | 01/30/17 | 89,220 | (208 | ) | |||||||||||||
JPY | 22,414,736 | EUR | 183,383 | 03/15/17 | 192,454 | (1,264 | ) | |||||||||||||
JPY | 13,664,402 | USD | 123,510 | 01/11/17 | 116,986 | (6,524 | ) |
16 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
ADDITIONAL INVESTMENT INFORMATION (continued)
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS WITH UNREALIZED LOSS (continued)
Counterparty | Currency Purchased | Currency Sold | Settlement Date | Current Value | Unrealized Loss | |||||||||||||||
Morgan Stanley Co., Inc. (continued) | JPY | 13,164,799 | USD | 114,000 | 03/15/17 | $ | 113,034 | $ | (966 | ) | ||||||||||
KRW | 22,754,725 | USD | 19,544 | 01/13/17 | 18,848 | (696 | ) | |||||||||||||
KRW | 410,417,637 | USD | 345,458 | 01/19/17 | 339,951 | (5,507 | ) | |||||||||||||
KRW | 243,971,501 | USD | 203,337 | 01/20/17 | 202,082 | (1,255 | ) | |||||||||||||
KRW | 68,542,500 | USD | 57,000 | 01/31/17 | 56,770 | (230 | ) | |||||||||||||
MXN | 19,385,459 | USD | 945,751 | 03/15/17 | 926,407 | (19,344 | ) | |||||||||||||
MYR | 94,000 | USD | 21,171 | 01/09/17 | 20,957 | (214 | ) | |||||||||||||
MYR | 268,277 | USD | 60,243 | 01/19/17 | 59,770 | (473 | ) | |||||||||||||
NOK | 4,559,619 | EUR | 505,699 | 03/15/17 | 528,264 | (5,937 | ) | |||||||||||||
NZD | 102,858 | USD | 72,720 | 01/09/17 | 71,443 | (1,277 | ) | |||||||||||||
NZD | 471,152 | USD | 334,121 | 03/15/17 | 326,621 | (7,500 | ) | |||||||||||||
RUB | 7,005,785 | USD | 114,000 | 01/26/17 | 113,450 | (550 | ) | |||||||||||||
TRY | 527,926 | USD | 148,000 | 03/15/17 | 147,458 | (542 | ) | |||||||||||||
TWD | 9,313,806 | USD | 291,959 | 01/12/17 | 287,637 | (4,322 | ) | |||||||||||||
TWD | 3,877,445 | USD | 121,000 | 01/13/17 | 119,736 | (1,264 | ) | |||||||||||||
TWD | 1,822,148 | USD | 57,000 | 01/19/17 | 56,238 | (762 | ) | |||||||||||||
TWD | 5,488,747 | USD | 171,000 | 01/20/17 | 169,385 | (1,615 | ) | |||||||||||||
USD | 1,076,274 | BRL | 3,560,337 | 01/04/17 | 1,093,909 | (17,635 | ) | |||||||||||||
USD | 114,000 | CAD | 153,663 | 03/15/17 | 114,542 | (542 | ) | |||||||||||||
USD | 164,282 | CLP | 111,724,996 | 01/19/17 | 166,616 | (2,334 | ) | |||||||||||||
USD | 2,245,955 | EUR | 2,154,755 | 02/09/17 | 2,272,533 | (26,578 | ) | |||||||||||||
USD | 1,120,654 | EUR | 1,068,720 | 03/15/17 | 1,128,950 | (8,296 | ) | |||||||||||||
USD | 169,281 | HUF | 50,004,050 | 03/16/17 | 170,520 | (1,239 | ) | |||||||||||||
USD | 241,449 | INR | 16,468,004 | 01/30/17 | 241,720 | (271 | ) | |||||||||||||
USD | 627,000 | JPY | 73,538,764 | 03/15/17 | 631,407 | (4,407 | ) | |||||||||||||
USD | 116,656 | PHP | 5,847,260 | 01/19/17 | 117,590 | (934 | ) | |||||||||||||
USD | 354,000 | RUB | 22,354,618 | 01/26/17 | 362,007 | (8,007 | ) | |||||||||||||
USD | 139,112 | SEK | 1,269,140 | 01/27/17 | 139,531 | (419 | ) | |||||||||||||
USD | 57,000 | TRY | 204,093 | 03/15/17 | 57,006 | (6 | ) | |||||||||||||
USD | 23,000 | ZAR | 325,781 | 03/15/17 | 23,410 | (410 | ) | |||||||||||||
ZAR | 1,459,049 | USD | 105,414 | 03/15/17 | 104,842 | (572 | ) | |||||||||||||
TOTAL | $ | (176,404 | ) |
The accompanying notes are an integral part of these financial statements. | 17 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
Schedule of Investments (continued)
December 31, 2016
ADDITIONAL INVESTMENT INFORMATION (continued)
FUTURES CONTRACTS — At December 31, 2016, the Fund had the following futures contracts:
Type | Number of Contracts Long (Short) | Expiration Date | Current Value | Unrealized Gain (Loss) | ||||||||||||
3 Year Australian Government Bonds | 66 | March 2017 | $ | 5,309,058 | $ | (8,077 | ) | |||||||||
90 Day Sterling | 17 | March 2017 | 2,608,505 | 654 | ||||||||||||
90 Day Sterling | 17 | June 2017 | 2,607,851 | 686 | ||||||||||||
90 Day Sterling | 17 | September 2017 | 2,607,327 | 1,018 | ||||||||||||
90 Day Sterling | 17 | December 2017 | 2,606,542 | 1,339 | ||||||||||||
Euro-Bund | 30 | March 2017 | 5,183,775 | 83,698 | ||||||||||||
Euro-OAT | (3 | ) | March 2017 | (479,440 | ) | (4,727 | ) | |||||||||
Fed Fund 30 Day Futures | (12 | ) | April 2017 | (4,964,897 | ) | 304 | ||||||||||
U.S. Long Bonds | (9 | ) | March 2017 | (1,355,906 | ) | (16,235 | ) | |||||||||
10 Year U.S. Ultra Long Treasury Bond | (1 | ) | March 2017 | (134,063 | ) | 1,135 | ||||||||||
U.S. Ultra Long Treasury Bonds | 2 | March 2017 | 320,500 | 4,998 | ||||||||||||
2 Year U.S. Treasury Notes | (42 | ) | March 2017 | (9,100,875 | ) | 4,955 | ||||||||||
5 Year U.S. Treasury Notes | (65 | ) | March 2017 | (7,648,164 | ) | 7,266 | ||||||||||
10 Year U.S. Treasury Notes | (22 | ) | March 2017 | (2,734,188 | ) | 3,428 | ||||||||||
TOTAL | $ | 80,442 |
18 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
ADDITIONAL INVESTMENT INFORMATION (continued)
SWAP CONTRACTS — At December 31, 2016, the Fund had the following swap contracts:
CENTRALLY CLEARED CREDIT DEFAULT SWAP CONTRACTS
Market Value | ||||||||||||||||||||||||
Referenced Obligation | Notional Amount (000’s) | Rates Received (Paid) | Termination Date | Credit Spread on December 31, 2016 | Upfront Payments Made (Received) | Unrealized Gain (Loss) | ||||||||||||||||||
Protection Purchased: |
| |||||||||||||||||||||||
CDX North America High Yield Index | $ | 1,660 | (5.000 | )% | 12/20/21 | 3.548 | % | $ | (71,974 | ) | $ | (33,482 | ) | |||||||||||
CDX North America Investment Grade Index | 75 | (1.000 | ) | 12/20/21 | 0.678 | (857 | ) | (301 | ) | |||||||||||||||
TOTAL | $ | (72,831 | ) | $ | (33,783 | ) |
OVER THE COUNTER CREDIT DEFAULT SWAP CONTRACTS
Market Value | ||||||||||||||||||||||||||||
Counterparty | Referenced Obligation | Notional Amount (000’s) | Rates Received (Paid) | Termination Date | Credit Spread on December 31, 2016(a) | Upfront Payments Made (Received) | Unrealized Gain (Loss) | |||||||||||||||||||||
Protection Purchased: |
| |||||||||||||||||||||||||||
Bank of America NA | | People’s Republic of China, 4.250%, 10/28/27 | | $ | 210 | (1.000 | )% | 06/20/19 | 0.648 | % | $ | (662 | ) | $ | (1,205 | ) | ||||||||||||
| People’s Republic of China, 7.500%, 10/28/27 | | 170 | (1.000 | ) | 12/20/20 | 0.965 | 799 | (1,076 | ) | ||||||||||||||||||
| People’s Republic of China, 7.500%, 10/28/27 | | 130 | (1.000 | ) | 06/20/21 | 1.081 | 1,079 | (673 | ) | ||||||||||||||||||
Barclays Bank plc | | People’s Republic of China, 7.500%, 10/28/27 | | 120 | (1.000 | ) | 06/20/21 | 1.081 | 746 | (371 | ) | |||||||||||||||||
Deutsche Bank AG | | People’s Republic of China, 7.500%, 10/28/27 | | 220 | (1.000 | ) | 06/20/21 | 1.081 | 69 | 619 | ||||||||||||||||||
| People’s Republic of China, 7.500%, 10/28/27 | | 50 | (1.000 | ) | 12/20/21 | 1.173 | 99 | 290 | |||||||||||||||||||
JPMorgan Chase Bank NA | | People’s Republic of China, 4.250%, 10/28/27 | | 1,250 | (1.000 | ) | 06/20/19 | 0.648 | (2,964 | ) | (8,149 | ) | ||||||||||||||||
| People’s Republic of China, 7.500%, 10/28/27 | | 1,420 | (1.000 | ) | 12/20/20 | 0.965 | 8,968 | (11,286 | ) | ||||||||||||||||||
| People’s Republic of China, 7.500%, 10/28/27 | | 190 | (1.000 | ) | 06/20/21 | 1.081 | 690 | (97 | ) | ||||||||||||||||||
UBS AG |
| People’s Republic of China, 7.500%, 10/28/27 |
| 220 | (1.000 | ) | 06/20/21 | 1.081 | 944 | (257 | ) | |||||||||||||||||
TOTAL | $ | 9,768 | $ | (22,205 | ) |
The accompanying notes are an integral part of these financial statements. | 19 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
Schedule of Investments (continued)
December 31, 2016
ADDITIONAL INVESTMENT INFORMATION (continued)
CENTRALLY CLEARED INTEREST RATE SWAP CONTRACTS
Rates Exchanged | Market Value | |||||||||||||||||
Notional Amount (000’s) | Termination Date | Payments Received | Payments Made | Upfront Payments Made (Received) | Unrealized Gain (Loss) | |||||||||||||
SEK | 16,750 | 06/15/18 | 0.050% | 3 Month STIBOR | $ | 13,078 | $ | 734 | ||||||||||
14,290 | (a) | 09/15/18 | 0.330 | 3 Month STIBOR | 331 | (724 | ) | |||||||||||
NZD | 4,870 | (a) | 02/22/19 | 2.350 | 3 Month BBR | 1,227 | (13,286 | ) | ||||||||||
CAD | 7,200 | (a) | 03/15/19 | 1.000 | 3 Month BA | (19,808 | ) | 3,393 | ||||||||||
GBP | 4,270 | (a) | 03/15/19 | 0.600 | 3 Month LIBOR | 5,177 | 5,295 | |||||||||||
$ | 7,520 | (a) | 03/15/19 | 3 Month LIBOR | 1.250% | 44,759 | (290 | ) | ||||||||||
PLN | 90 | 06/17/19 | 3.048 | 6 Month WIBOR | 286 | 602 | ||||||||||||
90 | 06/17/19 | 6 Month WIBOR | 3.045 | 0 | (886 | ) | ||||||||||||
$ | 8,400 | (a) | 12/20/19 | 2.250 | 3 Month LIBOR | 2,692 | 8,458 | |||||||||||
MXN | 3,470 | (a) | 03/11/20 | 5.250 | 1 Month TIIE | (2,882 | ) | (7,293 | ) | |||||||||
PLN | 2,460 | 09/21/21 | 1.771 | 6 Month WIBOR | (2,982 | ) | (11,248 | ) | ||||||||||
MXN | 680 | (a) | 03/09/22 | 1 Month TIIE | 5.500 | 1,578 | 1,436 | |||||||||||
CAD | 2,520 | (a) | 03/15/22 | 1.250 | 3 Month BA | (18,372 | ) | (4,986 | ) | |||||||||
EUR | 600 | (a) | 03/15/22 | 6 Month EURIBOR | 0.000 | 5,932 | (2,374 | ) | ||||||||||
NOK | 13,320 | (a) | 03/15/22 | 1.500 | 6 Month NIBOR | (9,216 | ) | 2,841 | ||||||||||
NZD | 1,210 | (a) | 03/15/22 | 3.000 | 3 Month BBR | 4,707 | (9,666 | ) | ||||||||||
SEK | 17,590 | (a) | 03/15/22 | 3 Month STIBOR | 0.500 | (13,746 | ) | (2,385 | ) | |||||||||
$ | 1,940 | (a) | 03/15/22 | 3 Month LIBOR | 1.500 | 42,599 | 5,849 | |||||||||||
EUR | 230 | (a) | 08/16/24 | 0.250 | 6 Month EURIBOR | (1,108 | ) | (3,906 | ) | |||||||||
MXN | 2,110 | (a) | 03/03/27 | 6.000 | 1 Month TIIE | (4,695 | ) | (9,731 | ) | |||||||||
EUR | 370 | (a) | 03/15/27 | 0.750 | 6 Month EURIBOR | (2,371 | ) | 4,395 | ||||||||||
GBP | 510 | (a) | 03/15/27 | 6 Month LIBOR | 1.500 | (3,371 | ) | (11,574 | ) | |||||||||
SEK | 3,410 | (a) | 03/15/27 | 3 Month STIBOR | 1.250 | (96 | ) | (3,491 | ) | |||||||||
$ | 460 | (a) | 03/15/27 | 1.750 | 3 Month LIBOR | (29,702 | ) | 4,351 | ||||||||||
1,190 | (a) | 12/20/28 | 3 Month LIBOR | 2.790 | (1,005 | ) | (17,579 | ) | ||||||||||
GBP | 820 | (a) | 03/15/32 | 6 Month LIBOR | 1.750 | (9,922 | ) | (35,862 | ) | |||||||||
JPY | 18,470 | (a) | 03/15/37 | 6 Month LIBOR | 0.750 | (14 | ) | (2,572 | ) | |||||||||
EUR | 910 | (a) | 03/15/47 | 6 Month EURIBOR | 1.250 | 26,348 | (27,164 | ) | ||||||||||
GBP | 290 | (a) | 03/15/47 | 6 Month LIBOR | 1.750 | (13,262 | ) | (15,547 | ) | |||||||||
$ | 440 | (a) | 03/15/47 | 2.250 | 3 Month LIBOR | (40,223 | ) | 7,858 | ||||||||||
TOTAL | $ | (24,061 | ) | $ | (135,352 | ) |
(a) | Represents forward starting interest rate swaps whose effective dates of commencement of accruals and cash flows occur subsequent to December 31, 2016. |
20 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
ADDITIONAL INVESTMENT INFORMATION (continued)
OVER THE COUNTER INTEREST RATE SWAP CONTRACTS
Rates Exchanged | ||||||||||||||||||||||||
Counterparty | Notional Amount (000’s) | Termination Date | Payments Received | Payments Made | Unrealized Gain (Loss)(b) | |||||||||||||||||||
Bank of America NA | BRL | 3,396 | 01/02/17 | 15.530% | 1 Day CDI | $ | 17,605 | |||||||||||||||||
KRW | 290,710 | 11/04/17 | 2.060 | 3 Month CD KSDA | 1,425 | |||||||||||||||||||
BRL | 226 | 01/04/21 | 11.980 | 1 Day CDI | 2,084 | |||||||||||||||||||
292 | 01/04/21 | 11.704 | 1 Day CDI | 1,709 | ||||||||||||||||||||
274 | 01/04/21 | 11.763 | 1 Day CDI | 1,834 | ||||||||||||||||||||
KRW | 320,830 | 08/06/24 | 3 Month CD KSDA | 2.970% | (24,502 | ) | ||||||||||||||||||
Deutsche Bank AG | KRW | 142,230 | 10/06/17 | 2.245 | 3 Month CD KSDA | 932 | ||||||||||||||||||
209,280 | 10/15/17 | 2.253 | 3 Month CD KSDA | 1,368 | ||||||||||||||||||||
173,640 | 11/04/17 | 2.075 | 3 Month CD KSDA | 873 | ||||||||||||||||||||
JPMorgan Chase Bank NA | KRW | 1,612,725 | 07/29/17 | 1.630 | 3 Month CD KSDA | 1,692 | ||||||||||||||||||
TOTAL | $ | 5,020 |
(b) | There are no upfront payments on the swap contracts listed above, therefore the unrealized gains (losses) on the swap contracts are equal to their market value. |
The accompanying notes are an integral part of these financial statements. | 21 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
Statement of Assets and Liabilities
December 31, 2016
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $28,463,958) | $ | 28,228,024 | ||
Investments in affiliated issuers, at value (cost $143,083) | 143,083 | |||
Cash | 411,904 | |||
Foreign currencies, at value (cost $30,740) | 32,509 | |||
Receivables: | ||||
Collateral on certain derivative contracts(a) | 795,112 | |||
Interest and dividends | 139,492 | |||
Reimbursement from investment adviser | 37,308 | |||
Upfront payments made on swap contracts | 13,394 | |||
Fund shares sold | 6,373 | |||
Investments sold | 31 | |||
Unrealized gain on forward foreign currency exchange contracts | 501,765 | |||
Variation margin on certain derivative contracts | 16,421 | |||
Unrealized gain on swap contracts | 30,431 | |||
Other assets | 373 | |||
Total assets | 30,356,220 | |||
Liabilities: | ||||
Unrealized loss on forward foreign currency exchange contracts | 176,404 | |||
Unrealized loss on swap contracts | 47,616 | |||
Variation margin on certain derivative contracts | 35,044 | |||
Payables: | ||||
Investments purchased | 1,562,209 | |||
Fund shares redeemed | 48,346 | |||
Investments purchased on an extended-settlement basis | 23,733 | |||
Management fees | 13,789 | |||
Distribution and Service fees and Transfer Agency fees | 3,700 | |||
Upfront payments received on swap contracts | 3,626 | |||
Accrued expenses | 171,174 | |||
Total liabilities | 2,085,641 | |||
Net Assets: | ||||
Paid-in capital | 30,657,704 | |||
Distributions in excess of net investment income | (359,829 | ) | ||
Accumulated net realized loss | (2,013,625 | ) | ||
Net unrealized loss | (13,671 | ) | ||
NET ASSETS | $ | 28,270,579 | ||
Net Assets: | ||||
Institutional | $ | 18,892,302 | ||
Service | 9,808 | |||
Advisor | 9,368,469 | |||
Total Net Assets | $ | 28,270,579 | ||
Shares outstanding $0.001 par value (unlimited shares authorized): | ||||
Institutional | 2,065,575 | |||
Service | 1,073 | |||
Advisor | 1,027,054 | |||
Net asset value, offering and redemption price per share: | ||||
Institutional | $9.15 | |||
Service | 9.14 | |||
Advisor | 9.12 |
(a) | Includes amounts segregated for initial margin and/or collateral on forward foreign currency exchange contract transactions, futures transactions and swaps transactions of $190,000, $294,846 and $310,266, respectively. |
22 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
Statement of Operations
For the Fiscal Year Ended December 31, 2016
Investment income: | ||||
Interest | $ | 708,167 | ||
Dividends — affiliated issuers | 13,676 | |||
Dividends — unaffiliated issuers | 3,351 | |||
Total investment income | 725,194 | |||
Expenses: | ||||
Professional fees | 194,408 | |||
Management fees | 184,737 | |||
Custody, accounting and administrative services | 104,865 | |||
Printing and mailing costs | 70,595 | |||
Distribution and Service fees(a) | 32,390 | |||
Trustee fees | 16,715 | |||
Transfer Agency fees(a) | 6,159 | |||
Other | 8,122 | |||
Total expenses | 617,991 | |||
Less — expense reductions | (325,017 | ) | ||
Net expenses | 292,974 | |||
NET INVESTMENT INCOME | 432,220 | |||
Realized and unrealized gain (loss): | ||||
Net realized gain (loss) from: | ||||
Investments | (390,343 | ) | ||
Futures contracts | 193,568 | |||
Swap contracts | (296,180 | ) | ||
Forward foreign currency exchange contracts | (516,408 | ) | ||
Foreign currency transactions | 13,434 | |||
Net change in unrealized gain (loss) on: | ||||
Investments | 695,607 | |||
Futures contracts | 68,539 | |||
Swap contracts | (284,053 | ) | ||
Forward foreign currency exchange contracts | 345,459 | |||
Foreign currency translation | 4,952 | |||
Net realized and unrealized loss | (165,425 | ) | ||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 266,795 |
(a) Class specific Distribution and Service, and Transfer Agency fees were as follows:
Distribution and Service Fees | Transfer Agency Fees | |||||||||||||||||
Service | Advisor | Institutional | Service | Advisor | ||||||||||||||
$ | 25 | $ | 32,365 | $ | 4,537 | $ | 4 | $ | 1,618 |
The accompanying notes are an integral part of these financial statements. | 23 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
Statements of Changes in Net Assets
For the Fiscal Year Ended December 31, 2016 | For the Fiscal Year Ended December 31, 2015 | |||||||
From operations: | ||||||||
Net investment income | $ | 432,220 | $ | 471,993 | ||||
Net realized loss | (995,929 | ) | (175,206 | ) | ||||
Net change in unrealized gain (loss) | 830,504 | (847,108 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 266,795 | (550,321 | ) | |||||
Distributions to shareholders: | ||||||||
From net investment income | ||||||||
Institutional Shares | (512,567 | ) | (743,475 | ) | ||||
Service Shares | (206 | ) | (250 | ) | ||||
Advisor Shares | (173,760 | ) | (97,996 | ) | ||||
Total distributions to shareholders | (686,533 | ) | (841,721 | ) | ||||
From share transactions: | ||||||||
Proceeds from sales of shares | 6,037,854 | 16,426,940 | ||||||
Reinvestment of distributions | 686,533 | 841,721 | ||||||
Cost of shares redeemed | (11,746,277 | ) | (1,527,322 | ) | ||||
Net increase (decrease) in net assets resulting from share transactions | (5,021,890 | ) | 15,741,339 | |||||
TOTAL INCREASE (DECREASE) | (5,441,628 | ) | 14,349,297 | |||||
Net assets: | ||||||||
Beginning of year | 33,712,207 | 19,362,910 | ||||||
End of year | $ | 28,270,579 | $ | 33,712,207 | ||||
Undistributed (distributions in excess of) net investment income | $ | (359,829 | ) | $ | 97,298 |
24 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
Income (loss) from investment operations | ||||||||||||||||||||||||||||||||||||||||||||||||
Year - Share Class | Net asset value, beginning of period | Net investment income(a) | Net realized and unrealized loss | Total from investment operations | Distributions to shareholders from net investment income | Net asset value, end of period | Total return(b) | Net assets, end of period (in 000s) | Ratio of net expenses to average net assets | Ratio of total expenses to average net assets | Ratio of net investment income to average net assets | Portfolio turnover rate(c) | ||||||||||||||||||||||||||||||||||||
FOR THE FISCAL YEARS ENDED DECEMBER 31, | ||||||||||||||||||||||||||||||||||||||||||||||||
2016 - Institutional | $ | 9.25 | $ | 0.14 | $ | (0.02 | ) | $ | 0.12 | $ | (0.22 | ) | $ | 9.15 | 1.21 | % | $ | 18,892 | 0.85 | % | 1.88 | % | 1.52 | % | 142 | % | ||||||||||||||||||||||
2016 - Service | 9.25 | 0.11 | (0.03 | ) | 0.08 | (0.19 | ) | 9.14 | 0.93 | 10 | 1.13 | 2.20 | 1.22 | 142 | ||||||||||||||||||||||||||||||||||
2016 - Advisor | 9.23 | 0.10 | (0.02 | ) | 0.08 | (0.19 | ) | 9.12 | 0.74 | 9,368 | 1.25 | 2.38 | 1.07 | 142 | ||||||||||||||||||||||||||||||||||
2015 - Institutional | 9.70 | 0.16 | (0.34 | ) | (0.18 | ) | (0.27 | ) | 9.25 | (1.81 | ) | 28,036 | 0.86 | 1.82 | 1.71 | 176 | ||||||||||||||||||||||||||||||||
2015 - Service | 9.70 | 0.14 | (0.35 | ) | (0.21 | ) | (0.24 | ) | 9.25 | (2.16 | ) | 10 | 1.14 | 2.09 | 1.44 | 176 | ||||||||||||||||||||||||||||||||
2015 - Advisor | 9.69 | 0.13 | (0.36 | ) | (0.23 | ) | (0.23 | ) | 9.23 | (2.25 | ) | 5,666 | 1.26 | 2.26 | 1.35 | 176 | ||||||||||||||||||||||||||||||||
FOR THE PERIOD ENDED DECEMBER 31, | ||||||||||||||||||||||||||||||||||||||||||||||||
2014 - Institutional (Commenced April 14, 2014) | 10.00 | 0.09 | (0.14 | ) | (0.05 | ) | (0.25 | ) | 9.70 | (0.51 | ) | 18,180 | 0.86 | (d) | 2.77 | (d) | 1.23 | (d) | 157 | |||||||||||||||||||||||||||||
2014 - Service (Commenced April 14, 2014) | 10.00 | 0.07 | (0.14 | ) | (0.07 | ) | (0.23 | ) | 9.70 | (0.70 | ) | 10 | 1.13 | (d) | 3.05 | (d) | 0.96 | (d) | 157 | |||||||||||||||||||||||||||||
2014 - Advisor (Commenced April 14, 2014) | 10.00 | 0.09 | (0.17 | ) | (0.08 | ) | (0.23 | ) | 9.69 | (0.79 | ) | 1,173 | 1.26 | (d) | 2.64 | (d) | 1.30 | (d) | 157 |
(a) | Calculated based on the average shares outstanding methodology. |
(b) | Assumes investment at the net asset value at the beginning of the period, reinvestment of all distributions, and a complete redemption of the investment at the net asset value at the end of the period. Total returns for periods less than one full year are not annualized. |
(c) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short term investments and certain derivatives. If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
(d) | Annualized. |
The accompanying notes are an integral part of these financial statements. | 25 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
Notes to Financial Statements
December 31, 2016
1. ORGANIZATION
Goldman Sachs Variable Insurance Trust (the “Trust” or “VIT”) is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company. The Trust includes the Goldman Sachs Strategic Income Fund (the “Fund”). The Fund is a diversified Portfolio under the Act offering three classes of shares — Institutional, Service and Advisor Shares. Shares of the Trust are offered to separate accounts of participating life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies.
Goldman Sachs Asset Management, L.P. (“GSAM”), an affiliate of Goldman, Sachs & Co. (“Goldman Sachs”), serves as investment adviser to the Fund pursuant to a management agreement (the “Agreement”) with the Trust.
2. SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and require management to make estimates and assumptions that may affect the reported amounts and disclosures. Actual results may differ from those estimates and assumptions.
A. Investment Valuation — The Fund’s valuation policy is to value investments at fair value.
B. Investment Income and Investments — Investment income includes interest income, dividend income, net of any foreign withholding taxes, less any amounts reclaimable, and securities lending income. Interest income is accrued daily and adjusted for amortization of premiums and accretion of discounts. Dividend income is recognized on ex-dividend date or, for certain foreign securities, as soon as such information is obtained subsequent to the ex-dividend date. Investment transactions are reflected on trade date. Realized gains and losses are calculated using identified cost. Investment transactions are recorded on the following business day for daily net asset value (“NAV”) calculations. Any foreign capital gains tax is accrued daily based upon net unrealized gains, and is payable upon sale of such investments.
For derivative contracts, realized gains and losses are recorded upon settlement of the contract. Upfront payments, if any, are made or received upon entering into a swap agreement and are reflected in the Statement of Assets and Liabilities. Upfront payments are recognized over the contract’s term/event as realized gains or losses, with the exception of forward starting interest rate swaps whose realized gains or losses are recognized from the effective start date. For securities with paydown provisions, principal payments received are treated as a proportionate reduction to the cost basis of the securities, and excess or shortfall amounts are recorded as income. For treasury inflation protected securities (“TIPS”), adjustments to principal due to inflation/deflation are reflected as increases/decreases to interest income with a corresponding adjustment to cost.
C. Class Allocations and Expenses — Investment income, realized and unrealized gain (loss), and non-class specific expenses of the Fund are allocated daily based upon the proportion of net assets of each class. Non-class specific expenses directly incurred by the Fund are charged to the Fund, while such expenses incurred by the Trust are allocated across the Fund on a straight-line and/or pro-rata basis depending upon the nature of the expenses. Class specific expenses, where applicable, are borne by the respective share classes and include Distribution and Service and Transfer Agency fees.
D. Federal Taxes and Distributions to Shareholders — It is the Fund’s policy to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Code”), applicable to regulated investment companies (mutual funds) and to distribute each year substantially all of its investment company taxable income and capital gains to its shareholders. Accordingly, the Fund is not required to make any provisions for the payment of federal income tax. Distributions to shareholders are recorded on the ex-dividend date. Income distributions are declared and paid quarterly and capital gains distributions, if any, are declared and paid annually.
Net capital losses are carried forward to future fiscal years and may be used to the extent allowed by the Code to offset any future capital gains. Losses that are carried forward will retain their character as either short-term or long-term capital losses. Utilization of capital loss carryforwards will reduce the requirement of future capital gains distributions.
26
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
The characterization of distributions to shareholders for financial reporting purposes is determined in accordance with federal income tax rules, which may differ from GAAP. The source of the Fund’s distributions may be shown in the accompanying financial statements as either from net investment income, net realized gain or capital. Certain components of the Fund’s net assets on the Statement of Assets and Liabilities reflect permanent GAAP/tax differences based on the appropriate tax character.
E. Foreign Currency Translation — The accounting records and reporting currency of the Fund are maintained in United States (“U.S.”) dollars. Assets and liabilities denominated in foreign currencies are translated into U.S. dollars using the current exchange rates at the close of each business day. The effect of changes in foreign currency exchange rates on investments is included within net realized and unrealized gain (loss) on investments. Changes in the value of other assets and liabilities as a result of fluctuations in foreign exchange rates are included in the Statement of Operations within net change in unrealized gain (loss) on foreign currency translations. Transactions denominated in foreign currencies are translated into U.S. dollars on the date the transaction occurred, the effects of which are included within net realized gain (loss) on foreign currency transactions.
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS
The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The levels used for classifying investments are not necessarily an indication of the risk associated with investing in these investments. The three levels of the fair value hierarchy are described below:
Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 — Quoted prices in markets that are not active or financial instruments for which significant inputs are observable (including, but not limited to, quoted prices for similar investments, interest rates, foreign exchange rates, volatility and credit spreads), either directly or indirectly;
Level 3 — Prices or valuations that require significant unobservable inputs (including GSAM’s assumptions in determining fair value measurement).
Changes in valuation techniques may result in transfers into or out of an assigned level within the hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value hierarchy resulting from such changes are deemed to have occurred as of the beginning of the reporting period.
The Board of Trustees (“Trustees”) has approved Valuation Procedures that govern the valuation of the portfolio investments held by the Fund, including investments for which market quotations are not readily available. The Trustees have delegated to GSAM day-to-day responsibility for implementing and maintaining internal controls and procedures related to the valuation of the Fund’s portfolio investments. To assess the continuing appropriateness of pricing sources and methodologies, GSAM regularly performs price verification procedures and issues challenges as necessary to third party pricing vendors or brokers, and any differences are reviewed in accordance with the Valuation Procedures.
A. Level 1 and Level 2 Fair Value Investments — The valuation techniques and significant inputs used in determining the fair values for investments classified as Level 1 and Level 2 are as follows:
Equity Securities — Equity securities traded on a U.S. securities exchange or the NASDAQ system, or those located on certain foreign exchanges, including but not limited to the Americas, are valued daily at their last sale price or official closing price on the principal exchange or system on which they are traded. If there is no sale or official closing price or such price is believed by GSAM to not represent fair value, equity securities are valued at the last bid price for long positions and at the last ask price for
27
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
Notes to Financial Statements (continued)
December 31, 2016
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS (continued)
short positions. To the extent these investments are actively traded, they are classified as Level 1 of the fair value hierarchy, otherwise they are generally classified as Level 2.
Unlisted equity securities for which market quotations are available are valued at the last sale price on the valuation date, or if no sale occurs, at the last bid price. These investments are generally classified as Level 2 of the fair value hierarchy.
Money Market Funds — Investments in the Goldman Sachs Financial Square Government Fund (“Underlying Fund”) are valued at the NAV of the Institutional Share class on the day of valuation. These investments are generally classified as Level 1 of the fair value hierarchy. For information regarding an Underlying Fund’s accounting policies and investment holdings, please see the Underlying Fund’s shareholder report.
Debt Securities — Debt securities for which market quotations are readily available are valued daily on the basis of quotations supplied by dealers or an independent pricing service approved by the Trustees. The pricing services may use valuation models or matrix pricing, which consider: (i) yield or price with respect to bonds that are considered comparable in characteristics such as rating, interest rate and maturity date or (ii) quotations from securities dealers to determine current value. Short-term debt obligations that mature in sixty days or less and that do not exhibit signs of credit deterioration are valued using available market quotations as provided by a third party pricing vendor or broker. Prior to October 11, 2016, such securities were valued at amortized cost. With the exception of treasury securities of G8 countries (not held in money market funds that use amortized cost as a valuation methodology), which are generally classified as Level 1, these investments are generally classified as Level 2 of the fair value hierarchy.
i. Bank Loans — Bank loans (“Loans”) are interests in amounts owed by corporate, governmental, or other borrowers to lenders or lending syndicates. Loans are arranged through private negotiations between the borrower and one or more financial institutions (“Lenders”). The Fund’s investments in Loans are in the form of either participations in Loans (“Participations”) or assignments of all or a portion of Loans from third parties (“Assignments”). With respect to Participations, the Fund has the right to receive payments of principal, interest and any fees to which it is entitled from the Lender selling the Participations and only upon receipt by the Lender of the payments from the borrower. The Fund generally has no right to enforce compliance by the borrower with the terms of the loan agreement with respect to Participations. Conversely, Assignments result in the Fund having a direct contractual relationship with the borrower, and the Fund may be permitted to enforce compliance by the borrower with the terms of the loan agreement.
ii. Inverse Floaters — The interest rate on inverse floating rate securities (“inverse floaters”) resets in the opposite direction from the market rate of interest to which the inverse floaters are indexed. An inverse floater may be considered to be leveraged to the extent that its interest rate varies by a magnitude that exceeds the magnitude of the change in the index rate of interest. The higher the degree of leverage of an inverse floater, the greater the volatility of its market value.
iii. Mortgage-Backed and Asset-Backed Securities — Mortgage-backed securities represent direct or indirect participations in, or are collateralized by and payable from, mortgage loans secured by residential and/or commercial real estate property. Asset-backed securities include securities whose principal and interest payments are collateralized by pools of other assets or receivables. The value of certain mortgage-backed and asset-backed securities (including adjustable rate mortgage loans) may be particularly sensitive to changes in prevailing interest rates. The value of these securities may also fluctuate in response to the market’s perception of the creditworthiness of the issuers.
Asset-backed securities may present credit risks that are not presented by mortgage-backed securities because they generally do not have the benefit of a security interest in collateral that is comparable to mortgage assets. Some asset-backed securities may only have a subordinated claim on collateral.
Stripped mortgage-backed securities are usually structured with two different classes: one that receives substantially all interest payments (interest-only, or “IO” and/or high coupon rate with relatively low principal amount, or “IOette”), and the other that receives substantially all principal payments (principal-only, or “PO”) from a pool of mortgage loans. Little to no
28
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS (continued)
principal will be received at the maturity of an IO; as a result, periodic adjustments are recorded to reduce the cost of the security until maturity. These adjustments are included in interest income.
iv. Treasury Inflation Protected Securities — TIPS are treasury securities in which the principal amount is adjusted daily to keep pace with inflation, as measured by the U.S. Consumer Pricing Index for Urban Consumers. The repayment of the original bond principal upon maturity is guaranteed by the full faith and credit of the U.S. Government.
v. When-Issued Securities and Forward Commitments — When-issued securities, including TBA (“To Be Announced”) securities, are securities that are authorized but not yet issued in the market and purchased in order to secure what is considered to be an advantageous price or yield to the Fund. A forward commitment involves entering into a contract to purchase or sell securities, typically on an extended settlement basis, for a fixed price at a future date. The purchase of securities on a when-issued or forward commitment basis involves a risk of loss if the value of the security to be purchased declines before the settlement date. Conversely the sale of securities on a forward commitment basis involves the risk that the value of the securities sold may increase before the settlement date. Although the Fund will generally purchase securities on a when-issued or forward commitment basis with the intention of acquiring the securities for its portfolio, the Fund may dispose of when-issued securities or forward commitments prior to settlement, which may result in a realized gain or loss.
Derivative Contracts — A derivative is an instrument whose value is derived from underlying assets, indices, reference rates or a combination of these factors. The Fund enters into derivative transactions to hedge against changes in interest rates, securities prices, and/or currency exchange rates, to increase total return, or to gain access to certain markets or attain exposure to other underliers.
Exchange-traded derivatives, including futures and options contracts, are valued at the last sale or settlement price and typically fall within Level 1 of the fair value hierarchy. Over-the-counter (“OTC”) and centrally cleared derivatives are valued using market transactions and other market evidence, including market-based inputs to models, calibration to market-clearing transactions, broker or dealer quotations, or other alternative pricing sources. Where models are used, the selection of a particular model to value OTC and centrally cleared derivatives depends upon the contractual terms of, and specific risks inherent in, the instrument, as well as the availability of pricing information in the market. Valuation models require a variety of inputs, including contractual terms, market prices, yield curves, credit curves, measures of volatility, voluntary and involuntary prepayment rates, loss severity rates and correlations of such inputs. For OTC and centrally cleared derivatives that trade in liquid markets, model inputs can generally be verified and model selection does not involve significant management judgment. OTC and centrally cleared derivatives are classified within Level 2 of the fair value hierarchy when significant inputs are corroborated by market evidence.
i. Forward Contracts — A forward contract is a contract between two parties to buy or sell an asset at a specified price on a future date. A forward contract settlement can occur on a cash or delivery basis. Forward contracts are marked-to-market daily using independent vendor prices, and the change in value, if any, is recorded as an unrealized gain or loss. Cash and certain investments may be used to collateralize forward contracts.
A forward foreign currency contract is a forward contract in which the Fund agrees to receive or deliver a fixed quantity of one currency for another, at a pre-determined price at a future date. All forward foreign currency exchange contracts are marked-to-market daily at the applicable forward rate. Non-deliverable forward foreign currency exchange contracts are settled with the counterparty in cash without the delivery of foreign currency.
ii. Futures Contracts — Futures contracts are contracts to buy or sell a standardized quantity of a specified commodity or security and are valued based on exchanged settlement prices or independent market quotes. Futures contracts are valued at the last settlement price, or in the absence of a sale, the last bid price for long positions and at the last ask price for short positions, at the end of each day on the board of trade or exchange upon which they are traded. Upon entering into a futures contract, the Fund deposits cash or securities in an account on behalf of the broker in an amount sufficient to meet the initial margin requirement. Subsequent payments are made or received by the Fund equal to the daily change in the contract value and are recorded as variation margin receivable or payable with a corresponding offset to unrealized gains or losses.
29
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
Notes to Financial Statements (continued)
December 31, 2016
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS (continued)
iii. Option Contracts — When the Fund writes call or put option contracts, an amount equal to the premium received is recorded as a liability and is subsequently marked-to-market to reflect the current value of the option written. Swaptions are options on interest rate swap contracts.
Upon the purchase of a call option or a put option by the Fund, the premium paid is recorded as an investment and subsequently marked-to-market to reflect the current value of the option. Certain options may be purchased with premiums to be determined on a future date. The premiums for these options are based upon implied volatility parameters at specified terms.
iv. Swap Contracts — Bilateral swap contracts are agreements in which the Fund and a counterparty agree to exchange periodic payments on a specified notional amount or make a net payment upon termination. Bilateral swap transactions are privately negotiated in the OTC market and payments are settled through direct payments between the Fund and the counterparty. By contrast, certain swap transactions are subject to mandatory central clearing. These swaps are executed through a derivatives clearing member (“DCM”), acting in an agency capacity, and submitted to a central counterparty (“CCP”)(“centrally cleared swaps”), in which case all payments are settled with the CCP through the DCM. Swaps are marked-to-market daily using pricing vendor quotations, counterparty or clearinghouse prices or model prices, and the change in value, if any, is recorded as an unrealized gain or loss. Upon entering into a swap contract, the Fund is required to satisfy an initial margin requirement by delivering cash or securities to the counterparty (or in some cases, segregated in a triparty account on behalf of the counterparty), which can be adjusted by any mark-to-market gains or losses pursuant to bilateral or centrally cleared arrangements. For centrally cleared swaps the daily change in valuation, if any, is recorded as a receivable or payable for variation margin.
An interest rate swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals, based upon or calculated by reference to changes in interest rates on a specified notional principal amount. The payment flows are usually netted against each other, with the difference being paid by one party to the other.
A credit default swap is an agreement that involves one party (the buyer of protection) making a stream of payments to another party (the seller of protection) in exchange for the right to receive protection on a reference security or obligation, including a group of assets or exposure to the performance of an index. The Fund’s investment in credit default swaps may involve greater risks than if the Fund had invested in the referenced obligation directly. Credit events are contract specific but may include bankruptcy, failure to pay, restructuring and obligation acceleration. If the Fund buys protection through a credit default swap and no credit event occurs, its payments are limited to the periodic payments previously made to the counterparty. Upon the occurrence of a specified credit event, the Fund, as a buyer of credit protection, is entitled to receive an amount equal to the notional amount of the swap and deliver to the seller the defaulted reference obligation in a physically settled trade. The Fund may also receive a net settlement amount in the form of cash or securities equal to the notional amount of the swap reduced by the recovery value of the reference obligation in a cash settled trade.
As a seller of protection, the Fund generally receives a payment stream throughout the term of the swap, provided that there is no credit event. In addition, if the Fund sells protection through a credit default swap, the Fund could suffer a loss because the value of the referenced obligation and the premium payments received may be less than the notional amount of the swap paid to the buyer of protection. Upon the occurrence of a specified credit event, the Fund, as a seller of credit protection, may be required to take possession of the defaulted reference obligation and pay the buyer an amount equal to the notional amount of the swap in a physically settled trade. The Fund may also pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap reduced by the recovery value of the reference obligation in cash settled trade. Recovery values are at times established through the credit event auction process in which market participants are ensured that a transparent price has been set for the defaulted security or obligation. In addition, the Fund is entitled to a return of any assets, which have been pledged as collateral to the counterparty upon settlement.
The maximum potential amount of future payments (undiscounted) that the Fund as seller of protection could be required to make under a credit default swap would be an amount equal to the notional amount of the agreement. These potential
30
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS (continued)
amounts would be partially offset by any recovery values of the respective referenced obligations or net amounts received from a settlement of a credit default swap for the same reference security or obligation where the Fund bought credit protection.
Short Term Investments — Short-term investments having a maturity of 60 days or less are valued using available market quotations as provided by a third party pricing vendor or broker. Prior to October 11, 2016, such securities were valued at amortized cost. These investments are classified as Level 2 of the fair value hierarchy.
B. Level 3 Fair Value Investments — To the extent that significant inputs to valuation models and other alternative pricing sources are unobservable, or if quotations are not readily available, or if GSAM believes that such quotations do not accurately reflect fair value, the fair value of the Fund’s investments may be determined under Valuation Procedures approved by the Trustees. GSAM, consistent with its procedures and applicable regulatory guidance, may make an adjustment to the most recent valuation prices of either domestic or foreign securities in light of significant events to reflect what it believes to be the fair value of the securities at the time of determining the Fund’s NAV. Significant events which could affect a large number of securities in a particular market may include, but are not limited to: significant fluctuations in U.S. or foreign markets; market dislocations; market disruptions; or unscheduled market closings. Significant events which could also affect a single issuer may include, but are not limited to: corporate actions such as reorganizations, mergers and buy-outs; ratings downgrades; and bankruptcies.
C. Fair Value Hierarchy — The following is a summary of the Fund’s investments and derivatives classified in the fair value hierarchy as of December 31, 2016:
Investment Type | Level 1 | Level 2 | Level 3 | |||||||||
Assets | ||||||||||||
Common Stock and/or Other Equity Investments (a) | ||||||||||||
North America | $ | — | $ | 64,317 | $ | — | ||||||
Fixed Income | ||||||||||||
Corporate Bonds | — | 2,338,618 | — | |||||||||
Mortgage-Backed Security | — | 166,582 | — | |||||||||
Collateralized Mortgage Obligations | — | 3,439,839 | — | |||||||||
U.S. Treasury Obligations and/or Other U.S. Government Agency Securities | 5,442,503 | 826,226 | — | |||||||||
Asset-Backed Securities | — | 6,175,879 | — | |||||||||
Foreign Government Securities | — | 2,121,800 | — | |||||||||
Municipal Bonds | — | 431,094 | — | |||||||||
Loan Participations | — | 165,871 | 22,336 | |||||||||
Investment Company | 143,083 | — | — | |||||||||
Short-Term Investments | — | 7,032,959 | — | |||||||||
Total | $ | 5,585,586 | $ | 22,763,185 | $ | 22,336 | ||||||
Derivative Type | ||||||||||||
Assets(b) | ||||||||||||
Forward Foreign Currency Exchange Contracts | $ | — | $ | 501,765 | $ | — | ||||||
Futures Contracts | 109,481 | — | — | |||||||||
Credit Default Swaps Contracts | — | 909 | — | |||||||||
Interest Rate Swaps Contracts | — | 74,734 | — | |||||||||
Total | $ | 109,481 | $ | 577,408 | $ | — |
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GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
Notes to Financial Statements (continued)
December 31, 2016
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS (continued)
Derivative Type | Level 1 | Level 2 | Level 3 | |||||||||
Liabilities(b) | ||||||||||||
Forward Foreign Currency Exchange Contracts | $ | — | $ | (176,404 | ) | $ | — | |||||
Futures Contracts | (29,039 | ) | — | — | ||||||||
Credit Default Swaps Contracts | — | (56,897 | ) | — | ||||||||
Interest Rate Swaps Contracts | — | (205,066 | ) | — | ||||||||
Total | $ | (29,039 | ) | $ | (438,367 | ) | $ | — |
(a) | Amounts are disclosed by continent to highlight the impact of time zone differences between local market close and the calculation of net asset value. Security valuations are based on the principal exchange or system on which they are traded, which may differ from country of domicile noted in the table. |
(b) | Amount shown represents unrealized gain (loss) at fiscal year end. |
For further information regarding security characteristics, see the Schedule of Investments.
4. INVESTMENTS IN DERIVATIVES
The following table sets forth, by certain risk types, the gross value of derivative contracts as of December 31, 2016. These instruments were used as part of the Fund’s investment strategies and to obtain and/or manage exposure related to the risks below. The values in the table below exclude the effects of cash collateral received or posted pursuant to these derivative contracts, and therefore are not representative of the Fund’s net exposure.
Risk | Statement of Assets and Liabilities | Assets | Statement of Assets and Liabilities | Liabilities | ||||||||||
Credit | Receivable for unrealized gain on swap contracts and variation margin on certain derivative contracts | $ | 909 | Payable for unrealized loss on swap contracts and variation margin on certain derivative contracts | $ | (56,897 | )(a)(b) | |||||||
Currency | Receivable for unrealized gain on forward foreign currency exchange contracts | 501,765 | Payable for unrealized loss on forward foreign currency exchange contracts | (176,404 | ) | |||||||||
Interest Rate | Receivable for unrealized gain on swap contracts and variation margin on certain derivative contracts | 184,215 | (a) | Payable for unrealized loss on swap contracts and variation margin on certain derivative contracts | (234,105 | )(a)(b) | ||||||||
Total | $ | 686,889 | $ | (467,406 | ) |
(a) | Includes unrealized gain (loss) on futures contracts and centrally cleared swap contracts described in the Additional Investment Information section of the Schedule of Investments. Only the variation margin as of December 31, 2016 is reported within the Statement of Assets and Liabilities. |
(b) | Aggregate of amounts represents the payments to be made pursuant to bilateral agreements should counterparties exercise their “right to terminate” provisions based on, among others, the Fund’s performance, its failure to pay on its obligations or failure to pledge collateral. The amounts do not include incremental charges directly associated with the close-out of the agreements. They also do not reflect the fair value of any assets pledged as collateral which, through the daily margining process, substantially offsets the aforementioned amounts and for which the Funds are entitled to a full return. |
The following table sets forth, by certain risk types, the Fund’s gains (losses) related to these derivatives and their indicative volumes for the fiscal year ended December 31, 2016. These gains (losses) should be considered in the context that these derivative contracts may have been executed to create investment opportunities and/or economically hedge certain investments, and
32
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
4. INVESTMENTS IN DERIVATIVES (continued)
accordingly, certain gains (losses) on such derivative contracts may offset certain (losses) gains attributable to investments. These gains (losses) are included in “Net realized gain (loss)” or “Net change in unrealized gain (loss)” on the Statement of Operations:
Risk | Statement of Operations | Net Realized Gain (Loss) | Net Change in Unrealized Gain (Loss) | Average Number of Contracts(a) | ||||||||||
Credit | Net realized gain (loss) from swap contracts/Net change in unrealized gain (loss) on swap contracts | $ | (340,316 | ) | $ | (36,813 | ) | 18 | ||||||
Currency | Net realized gain (loss) from forward foreign currency exchange contracts/Net change in unrealized gain (loss) on forward foreign currency exchange contracts | (516,408 | ) | 345,459 | 425 | |||||||||
Interest Rate | Net realized gain (loss) from investments, future contracts and swap contracts/Net change in unrealized gain (loss) on future contracts and swap contracts | 233,795 | (178,701 | ) | 152 | |||||||||
Total | $ | (622,929 | ) | $ | 129,945 | 595 |
(a) | Average number of contracts is based on the average of month end balances for the fiscal year ended December 31, 2016. |
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 a bilateral agreement between the Fund and a counterparty that governs OTC derivatives (including forward foreign currency exchange contracts, and certain options and swaps), and typically contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of a default (close-out netting) or similar event, including the bankruptcy or insolvency of the counterparty.
Collateral and margin requirements differ between exchange traded derivatives and OTC derivatives. Margin requirements are established by the broker or clearing house for exchange-traded and centrally cleared derivatives (financial futures contracts, options and centrally cleared swaps) pursuant to governing agreements for those instrument types. Brokers can ask for margin in excess of the minimum in certain circumstances. Collateral terms are contract-specific for OTC derivatives. For 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 collateral currently pledged by the Fund and the counterparty. Additionally, the Fund may be required to post initial margin to the counterparty, the terms of which would be outlined in the confirmation of the OTC transaction.
For financial reporting purposes, cash collateral that has been pledged to cover obligations of the Fund and cash collateral received from the counterparty, if any, is reported separately on the Statement of Assets and Liabilities as receivables/payables for collateral on certain derivative contracts. Non-cash collateral pledged by the Fund, if any, is noted in the Schedule of Investments. Generally, the amount of collateral due from or to a counterparty must exceed a minimum transfer amount threshold before a transfer is required 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 attempts to mitigate counterparty risk by only entering into agreements with counterparties that the Investment Adviser believes to be of good standing and by monitoring the financial stability of those counterparties.
Additionally, the netting of assets and liabilities and the offsetting of collateral pledged or received are based on contractual netting/set-off provisions in the ISDA Master Agreement or similar agreements. However, in the event of a default or insolvency of a counterparty, a court could determine that such rights are not enforceable due to the restrictions or prohibitions against the right of setoff that may be imposed in accordance with a particular jurisdiction’s bankruptcy or insolvency laws.
33
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
Notes to Financial Statements (continued)
December 31, 2016
4. INVESTMENTS IN DERIVATIVES (continued)
The following table sets forth the Fund’s net exposure for derivative instruments that are subject to enforceable master netting arrangements or similar agreements as of December 31, 2016:
Derivative Assets(1) | Derivative Liabilities(1) |
|
|
| ||||||||||||||||||||||||
Counterparty | Forwards | Swaps | Forwards | Swaps | Net Derivative Assets (Liabilities) | Collateral (Received) Pledged(1) | Net Amount(2) | |||||||||||||||||||||
Bank of America N.A. | $ | — | $ | 24,657 | $ | — | $ | (27,456 | ) | $ | (2,799 | ) | $ | — | $ | (2,799 | ) | |||||||||||
Barclays Bank PLC | — | — | — | (371 | ) | (371 | ) | — | (371 | ) | ||||||||||||||||||
Deutsche Bank AG | — | 4,082 | — | — | 4,082 | — | 4,082 | |||||||||||||||||||||
JPMorgan Chase Bank N.A. | — | 1,692 | — | (19,532 | ) | (17,840 | ) | — | (17,840 | ) | ||||||||||||||||||
Morgan Stanley Co., Inc. | 501,765 | — | (176,404 | ) | — | 325,361 | 176,404 | 148,957 | ||||||||||||||||||||
UBS AG | — | — | — | (257 | ) | (257 | ) | — | (257 | ) | ||||||||||||||||||
Total | $ | 501,765 | $ | 30,431 | $ | (176,404 | ) | $ | (47,616 | ) | $ | 308,176 | $ | 176,404 | $ | 131,772 |
(1) | Gross amounts available for offset but not netted in the Statement of Assets and Liabilities. |
(2) | Net amount represents the net amount due (to) from counterparty in the event of a default based on the contractual set-off rights under the agreement. |
5. AGREEMENTS AND AFFILIATED TRANSACTIONS
A. Management Agreement — Under the Agreement, GSAM manages the Fund, subject to the general supervision of the Trustees.
As compensation for the services rendered pursuant to the Agreement, the assumption of the expenses related thereto and administration of the Fund’s business affairs, including providing facilities, GSAM is entitled to a management fee, accrued daily and paid monthly, equal to an annual percentage rate of the Fund’s average daily net assets.
For the fiscal year ended December 31, 2016, contractual and effective net management fees with GSAM were at the following rates:
Contractual Management Rate | ||||||||||||||||||||||||
First $1 billion | Next $1 billion | Next $3 billion | Next $3 billion | Over $8 billion | Effective Rate | Effective Net Management | ||||||||||||||||||
0.60% | 0.54 | % | 0.51 | % | 0.50 | % | 0.49 | % | 0.60 | % | 0.57 | % |
^ | Effective Net Management Rate includes the impact of management fee waivers of affiliated Underlying Funds, if any. |
The Fund invests in Institutional Shares of the Goldman Sachs Financial Square Government Fund, which is an affiliated Underlying Fund. GSAM has agreed to waive a portion of its management fee payable by the Fund in an amount equal to the management fee it earns as an investment adviser to any of the affiliated Underlying Funds in which the Fund invests. For the fiscal year ended December 31, 2016, GSAM waived $7,906 of the Fund’s management fee.
B. Distribution and Service Plans — The Trust, on behalf of the Fund, has adopted Distribution and Service Plans (“the Plans”). Under each Plan, Goldman Sachs, which serves as distributor (the “Distributor”), is entitled to a fee accrued daily and paid monthly, for distribution services and personal and account maintenance services, which may then be paid by Goldman Sachs to authorized dealers, equal to, on an annual basis, 0.25% and 0.40% of the Fund’s average daily net assets attributable to Service and Advisor Shares, respectively.
34
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
5. AGREEMENTS AND AFFILIATED TRANSACTIONS (continued)
C. Transfer Agency Agreement — Goldman Sachs also serves as the transfer agent of the Fund for a fee pursuant to the Transfer Agency Agreement. The fees charged for such transfer agency services are accrued daily and paid monthly at an annual rate of 0.02% of the average daily net assets of Institutional, Service and Advisor Shares.
D. Other Expense Agreements and Affiliated Transactions — GSAM has agreed to limit certain “Other Expenses” of the Fund (excluding acquired fund fees and expenses, transfer agency fees and expenses, taxes, interest, brokerage fees, shareholder meeting, litigation, indemnification and extraordinary expenses) to the extent such expenses exceed, on an annual basis, a percentage rate of the average daily net assets of the Fund. Such Other Expense reimbursements, if any, are accrued daily and paid monthly. In addition, the Fund is not obligated to reimburse GSAM for prior fiscal year expense reimbursements, if any. The Other Expense limitation as an annual percentage rate of average daily net assets for the Fund is 0.254%. The Other Expense limitation will remain in place through at least April 29, 2017, and prior to such date GSAM may not terminate the arrangement without the approval of the Trustees. For the fiscal year ended December 31, 2016, GSAM reimbursed $316,502 to the Fund. In addition, the Fund has entered into certain offset arrangements with the custodian and the transfer agent, which may result in a reduction of the Fund’s expenses and are received irrespective of the application of the “Other Expense” limitation described above. For the fiscal year ended December 31, 2016, custody fee credits were $609.
E. Line of Credit Facility — As of December 31, 2016, the Fund participated in a $1,100,000,000 committed, unsecured revolving line of credit facility (the “facility”) together with other funds of the Trust and certain registered investment companies having management agreements with GSAM or its affiliates. This facility is to be used for temporary emergency purposes, or to allow for an orderly liquidation of securities to meet redemption requests. The interest rate on borrowings is based on the federal funds rate. The facility also requires a fee to be paid by the Fund based on the amount of the commitment that has not been utilized. For the fiscal year ended December 31, 2016, the Fund did not have any borrowings under the facility.
F. Other Transactions with Affiliates — The following table provides information about the Fund’s investment in the Goldman Sachs Financial Square Government Fund as of and for the fiscal year ended December 31, 2016:
Market Value 12/31/15 | Purchases at Cost | Proceeds from Sales | Market Value 12/31/16 | Dividend Income | |||||||||||||||||||
$ | 2,716,785 | $ | 44,308,701 | $ | (46,882,403 | ) | $ | 143,083 | $ | 13,676 |
As of December 31, 2016, The Goldman Sachs Group, Inc. was the beneficial owner of approximately 45% of Institutional Class Shares and 100% of the Service Class Shares of the Fund.
6. PORTFOLIO SECURITIES TRANSACTIONS
The cost of purchases and proceeds from sales and maturities of long-term securities for the fiscal year ended December 31, 2016 were as follows:
Purchases of U.S. Government and Agency Obligations | Purchases (Excluding U.S. Government and Agency Obligations) | Sales and Maturities of U.S. Government and Agency Obligations | Sales and Maturities (Excluding U.S. Government and Agency Obligations) | |||||||||||
$ | 23,859,286 | $ | 6,962,805 | $ | 24,319,158 | $ | 16,728,285 |
35
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
Notes to Financial Statements (continued)
December 31, 2016
7. TAX INFORMATION
The tax character of distributions paid during the fiscal years ended December 31, 2015 and December 31, 2016 was as follows:
2015 | 2016 | |||||||
Distributions paid from ordinary income | $ | 841,721 | $ | 686,533 |
As of December 31, 2016, the components of accumulated earnings (losses) on a tax-basis were as follows:
Undistributed ordinary income — net | $ | 55,123 | ||
Capital loss carryforwards:(1) | ||||
Perpetual short-term | (1,452,510 | ) | ||
Perpetual long-term | (416,804 | ) | ||
Total capital loss carryforwards | $ | (1,869,314 | ) | |
Timing differences (Straddle Deferral) | (73,301 | ) | ||
Unrealized losses — net | (499,633 | ) | ||
Total accumulated losses — net | $ | (2,387,125 | ) |
(1) | Losses may be limited due to limitations under IRC Sections 381-384 |
As of December 31, 2016, the Fund’s aggregate security unrealized gains and losses based on cost for U.S. federal income tax purposes were as follows:
Tax cost | $ | 28,626,186 | ||
Gross unrealized gain | 227,621 | |||
Gross unrealized loss | (482,700 | ) | ||
Net unrealized security loss | (255,079 | ) | ||
Net unrealized loss on other investments | (244,554 | ) | ||
Net unrealized loss | $ | (499,633 | ) |
The difference between GAAP-basis and tax-basis unrealized gains (losses) is attributable primarily to wash sales, net mark to market gains (losses) on regulated futures and foreign currency contracts, and differences in the tax treatment of swap transactions.
In order to present certain components of the Fund’s capital accounts on a tax-basis, the Fund has reclassified $3,768 of paid-in capital and $202,814 of undistributed net investment income into accumulated investment gain (loss). These reclassifications have no impact on the NAV of the Fund and result primarily from certain non-deductible expenses, and differences in the tax treatment of swap transactions, foreign currency transactions, inflation protected securities and paydown gains and losses.
GSAM has reviewed the Fund’s tax positions for all open tax years (the current and prior three years, as applicable) and has concluded that no provision for income tax is required in the Fund’s financial statements. Such open tax years remain subject to examination and adjustment by tax authorities.
8. OTHER RISKS
The Fund’s risks include, but are not limited to, the following:
Derivatives Risk — The Fund’s use of derivatives may result in loss. Derivative instruments, which may pose risks in addition to and greater than those associated with investing directly in securities, currencies, or other instruments, may be illiquid or less liquid,
36
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
8. OTHER RISKS (continued)
volatile, difficult to price and leveraged so that small changes in the value of the underlying instruments may produce disproportionate losses to the Fund. Derivatives are also subject to counterparty risk, which is the risk that the other party in the transaction will not fulfill its contractual obligation. The use of derivatives is a highly specialized activity that involves investment techniques and risks different from those associated with investments in more traditional securities and instruments. Losses from derivatives can also result from a lack of correlation between changes in the value of derivative instruments and the portfolio assets (if any) being hedged.
Foreign and Emerging Countries Risk — Investing in foreign markets may involve special risks and considerations not typically associated with investing in the U.S. Foreign securities may be subject to risk of loss because of more or less foreign government regulation, less public information and less economic, political and social stability in the countries in which the Fund invests. The imposition of exchange controls, confiscations, trade restrictions (including tariffs) and other government restrictions by the U.S. or other governments, or from problems in share registration, settlement or custody, may also result in losses. Foreign risk also involves the risk of negative foreign currency rate fluctuations, which may cause the value of securities denominated in such foreign currency (or other instruments through which the Fund has exposure to foreign currencies) to decline in value. Currency exchange rates may fluctuate significantly over short periods of time. To the extent that the Fund also invests in securities of issuers located in emerging markets, these risks may be more pronounced.
Foreign Custody Risk — If the Fund invests in foreign securities, the Fund may hold such securities and cash with foreign banks, agents, and securities depositories appointed by the Fund’s custodian (each a “Foreign Custodian”). Some foreign custodians may be recently organized or new to the foreign custody business. In some countries, Foreign Custodians may be subject to little or no regulatory oversight over, or independent evaluation of, their operations. Further, the laws of certain countries may place limitations on the Fund’s ability to recover its assets if a Foreign Custodian enters bankruptcy. Investments in emerging markets may be subject to even greater custody risks than investments in more developed markets. Custody services in emerging market countries are very often undeveloped and may be considerably less well regulated than in more developed countries, and thus may not afford the same level of investor protection as would apply in developed countries.
Interest Rate Risk — When interest rates increase, fixed income securities or instruments held by the Fund will generally decline in value. Long-term fixed income securities or instruments will normally have more price volatility because of this risk than short-term fixed income securities or instruments. The risks associated with increasing rates are heightened given that interest rates are near historic lows, but may be expected to increase in the future with unpredictable effects on the markets and the Fund’s investments. Fluctuations in interest rates may also affect the liquidity of fixed income securities and instruments held by the Fund.
Investments in Other Investment Companies — As a shareholder of another investment company, including an exchange traded fund (“ETF”), the Fund will indirectly bear its proportionate share of any net management fees and other expenses paid by such other investment companies, in addition to the fees and expenses regularly borne by the Fund. ETFs are subject to risks that do not apply to conventional mutual funds, including but not limited to the following: (i) the market price of the ETF’s shares may trade at a premium or a discount to their NAV; and (ii) an active trading market for an ETF’s shares may not develop or be maintained.
Large Shareholder Transactions Risk — The Fund may experience adverse effects when certain large shareholders, such as other funds, participating insurance companies, accounts and Goldman Sachs affiliates, purchase or redeem large amounts of shares of the Fund. Such large shareholder redemptions may cause the Fund to sell portfolio securities at times when it would not otherwise do so, which may negatively impact the Fund’s NAV and liquidity. These transactions may also accelerate the realization of taxable income to shareholders if such sales of investments resulted in gains, and may also increase transaction costs. In addition, a large redemption could result in the Fund’s current expenses being allocated over a smaller asset base, leading to an increase in the Fund’s expense ratio. Similarly, large Fund share purchases may adversely affect the Fund’s performance to the extent that the Fund is delayed in investing new cash and is required to maintain a larger cash position than it ordinarily would.
37
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
Notes to Financial Statements (continued)
December 31, 2016
8. OTHER RISKS (continued)
Leverage Risk — Leverage creates exposure to potential gains and losses in excess of the initial amount invested. Borrowing and the use of derivatives may result in leverage and may make the Fund more volatile. When the Fund uses leverage, the sum of the Fund’s investment exposure may significantly exceed the amount of assets invested in the Fund, although these exposures may vary over time. Relatively small market movements may result in large changes in the value of a leveraged investment. The Fund will identify liquid assets on its books or otherwise cover transactions that may give rise to such risk, to the extent required by applicable law. The use of leverage may cause the Fund to liquidate portfolio positions to satisfy its obligations or to meet segregation requirements when it may not be advantageous to do so. The use of leverage by the Fund can substantially increase the adverse impact to which the Fund’s investment portfolio may be subject.
Liquidity Risk — The Fund may make investments that are illiquid or that may become less liquid in response to market developments or adverse investor perceptions. Illiquid investments may be more difficult to value. Liquidity risk may also refer to the risk that the Fund will not be able to pay redemption proceeds within the allowable time period because of unusual market conditions, an unusually high volume of redemption requests, or other reasons. To meet redemption requests, the Fund may be forced to sell investments at an unfavorable time and/or under unfavorable conditions. Liquidity risk may be the result of, among other things, the reduced number and capacity of traditional market participants to make a market in fixed income securities or the lack of an active market. The potential for liquidity risk may be magnified by a rising interest rate environment or other circumstances where investor redemptions from fixed income mutual funds may be higher than normal, potentially causing increased supply in the market due to selling activity.
Loan-Related Investments Risk — In addition to risks generally associated with debt investments, loan-related investments such as loan participations and assignments are subject to other risks. Although a loan obligation may be fully collateralized at the time of acquisition, the collateral may decline in value, be relatively illiquid, or lose all or substantially all of its value subsequent to investment. Many loan investments are subject to legal or contractual restrictions on resale and may be relatively illiquid and difficult to value. There is less readily available, reliable information about most loan investments than is the case for many other types of securities. Substantial increases in interest rates may cause an increase in loan obligation defaults. With respect to loan participations, the Fund may not always have direct recourse against a borrower if the borrower fails to pay scheduled principal and/or interest; may be subject to greater delays, expenses and risks than if the Fund had purchased a direct obligation of the borrower; and may be regarded as the creditor of the agent lender (rather than the borrower), subjecting the Fund to the creditworthiness of that lender as well. Investors in loans, such as the Fund, may not be entitled to rely on the anti-fraud protections of the federal securities laws, although they may be entitled to certain contractual remedies. The market for loan obligations may be subject to irregular trading activity, wide bid/ask spreads and extended trade settlement periods. Because transactions in many loans are subject to extended trade settlement periods, the Fund may not receive the proceeds from the sale of a loan for a period after the sale. As a result, sale proceeds related to the sale of loans may not be available to make additional investments or to meet the Fund’s redemption obligations for a period after the sale of the loans, and, as a result, the Fund may have to sell other investments or engage in borrowing transactions, such as borrowing from its credit facility, if necessary to raise cash to meet its obligations.
Senior Loans hold the most senior position in the capital structure of a business entity, and are typically secured with specific collateral, but are nevertheless usually rated below investment grade. Because Second Lien Loans are subordinated or unsecured and thus lower in priority of payment to Senior Loans, they are subject to the additional risk that the cash flow of the borrower and property securing the loan or debt, if any, may be insufficient to meet scheduled payments after giving effect to the senior secured obligations of the borrower. Second Lien Loans generally have greater price volatility than Senior Loans and may be less liquid.
Market and Credit Risks — In the normal course of business, the Fund trades financial instruments and enters into financial transactions where risk of potential loss exists due to changes in the market (market risk). Additionally, the Fund may also be exposed to credit risk in the event that an issuer or guarantor fails to perform or that an institution or entity with which the Fund has unsettled or open transactions defaults.
Short Position Risk — The Fund may enter into a short position through a futures contract, an option or swap agreement or through short sales of any instrument that the Fund may purchase for investment. Taking short positions involves leverage of the
38
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
8. OTHER RISKS (continued)
Fund’s assets and presents various risks. If the value of the underlying instrument or market in which the Fund has taken a short position increases, then the Fund will incur a loss equal to the increase in value from the time that the short position was entered into plus any related interest payments or other fees. Taking short positions involves the risk that losses may be disproportionate, may exceed the amount invested, and may be unlimited.
9. INDEMNIFICATIONS
Under the Trust’s organizational documents, its Trustees, officers, employees and agents are indemnified, to the extent permitted by the Act and state law, against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the course of business, the Fund enters into contracts that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, GSAM believes the risk of loss under these arrangements to be remote.
10. SUBSEQUENT EVENTS
Subsequent events after the Statement of Assets and Liabilities date have been evaluated and GSAM has concluded that there is no impact requiring adjustment or disclosure in the financial statements.
11. SUMMARY OF SHARE TRANSACTIONS
Share activity is as follows:
For the Fiscal Year Ended December 31, 2016 | For the Fiscal Year Ended December 31, 2015 | |||||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||||
Institutional Shares | ||||||||||||||||
Shares sold | 70,360 | $ | 639,958 | 1,105,959 | $ | 10,607,135 | ||||||||||
Reinvestment of distributions | 56,312 | 512,567 | 79,151 | 743,475 | ||||||||||||
Shares redeemed | (1,090,570 | ) | (9,938,886 | ) | (29,676 | ) | (280,472 | ) | ||||||||
(963,898 | ) | (8,786,361 | ) | 1,155,434 | 11,070,138 | |||||||||||
Service Shares | ||||||||||||||||
Reinvestment of distributions | 23 | 206 | 26 | 250 | ||||||||||||
23 | 206 | 26 | 250 | |||||||||||||
Advisor Shares | ||||||||||||||||
Shares sold | 592,401 | 5,397,896 | 614,049 | 5,819,805 | ||||||||||||
Reinvestment of distributions | 19,125 | 173,760 | 10,496 | 97,996 | ||||||||||||
Shares redeemed | (198,105 | ) | (1,807,391 | ) | (132,060 | ) | (1,246,850 | ) | ||||||||
413,421 | 3,764,265 | 492,485 | 4,670,951 | |||||||||||||
NET INCREASE (DECREASE) | (550,454 | ) | $ | (5,021,890 | ) | 1,647,945 | $ | 15,741,339 |
39
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Goldman Sachs Variable Insurance Trust and Shareholders of the
Goldman Sachs Strategic Income Fund:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Goldman Sachs Strategic Income Fund (the “Fund”), a fund of the Goldman Sachs Variable Insurance Trust, as of December 31, 2016, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities as of December 31, 2016 by correspondence with the custodian, brokers, transfer agent of the underlying funds and the application of alternative auditing procedures where securities purchased confirmations had not been received, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 14, 2017
40
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
Fund Expenses — Six Month Period Ended December 31, 2016 (Unaudited) |
As a shareholder of Institutional, Service or Advisor Shares of the Fund, you incur ongoing costs, including management fees, distribution and/or service (12b-1) fees (with respect to Service and Advisor Shares) and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Institutional, Service and Advisor Shares of the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from July 1, 2016 through December 31, 2016, which represents a period of 184 days of a 366 day year.
Actual Expenses — The first line under each share class in the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000=8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes — The second line under each share class in the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual net expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only. As a shareholder of the Fund you do not incur any transaction costs, such as sales charges, redemption fees, or exchange fees, but shareholders of other funds may incur such costs. The second line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds whose shareholders may incur transaction costs.
Share Class | Beginning Account Value 07/01/16 | Ending Account Value | Expenses Paid for the 6 Months Ended | |||||||||
Institutional | ||||||||||||
Actual | $ | 1,000 | $ | 1,025.30 | $ | 4.38 | ||||||
Hypothetical 5% return | 1,000 | 1,020.81 | + | 4.37 | ||||||||
Service | ||||||||||||
Actual | 1,000 | 1,022.80 | 5.80 | |||||||||
Hypothetical 5% return | 1,000 | 1,019.41 | + | 5.79 | ||||||||
Advisor | ||||||||||||
Actual | 1,000 | 1,022.20 | 6.40 | |||||||||
Hypothetical 5% return | 1,000 | 1,018.80 | + | 6.39 |
* | Expenses are calculated using the Fund’s annualized net expense ratio for each class, which represents the ongoing expenses as a percentage of net assets for the six months ended December 31, 2016. Expenses are calculated by multiplying the annualized net expense ratio by the average account value for the period; then multiplying the result by the number of days in the most recent fiscal half year; and then dividing that result by the number of days in the fiscal year. The annualized net expense ratios for the period were 0.86%, 1.14% and 1.26% for the Institutional, Service and Advisor Shares, respectively. |
+ | Hypothetical expenses are based on the Fund’s actual annualized net expense ratios and an assumed rate of return of 5% per year before expenses. |
41
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
Trustees and Officers (Unaudited)
Independent Trustees
Name, Address and Age1 | Position(s) Held with the Trust | Term of Office and | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee3 | Other Directorships Held by Trustee4 | |||||
Ashok N. Bakhru Age: 74 | Chairman of the Board of Trustees | Since 1996 (Trustee since 1991) | Mr. Bakhru is retired. He was formerly Director, Apollo Investment Corporation (a business development company) (2008-2013); President, ABN Associates (a management and financial consulting firm) (1994-1996 and 1998-2012); Trustee, Scholarship America (1998-2005); Trustee, Institute for Higher Education Policy (2003-2008); Director, Private Equity Investors — III and IV (1998-2007), and Equity-Linked Investors II (April 2002-2007).
Chairman of the Board of Trustees — Goldman Sachs Trust; Goldman Sachs Variable Insurance Trust; Goldman Sachs Trust II; Goldman Sachs BDC, Inc.; Goldman Sachs Private Middle Market Credit LLC; Goldman Sachs MLP Income Opportunities Fund; Goldman Sachs MLP and Energy Renaissance Fund; and Goldman Sachs ETF Trust. | 142 | None | |||||
Kathryn A. Cassidy Age: 62 | Trustee | Since 2015 | Ms. Cassidy is retired. Formerly, she was Advisor to the Chairman (May 2014-December 2014); and Senior Vice President and Treasurer (2008-2014), General Electric Company & General Electric Capital Corporation (technology and financial services companies).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||
Diana M. Daniels Age: 67 | Trustee | Since 2007 | Ms. Daniels is retired. Formerly, she was Vice President, General Counsel and Secretary, The Washington Post Company (1991-2006). Ms. Daniels is a Trustee Emeritus and serves as a Presidential Councillor of Cornell University (2013-Present); former Member of the Legal Advisory Board, New York Stock Exchange (2003-2006) and of the Corporate Advisory Board, Standish Mellon Management Advisors (2006-2007).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||
Herbert J. Markley Age: 66 | Trustee | Since 2013 | Mr. Markley is retired. Formerly, he was Executive Vice President, Deere & Company (an agricultural and construction equipment manufacturer) (2007-2009); and President, Agricultural Division, Deere & Company (2001-2007). Previously, Mr. Markley served as an Advisory Board Member of Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust (June 2013-October 2013).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||
Jessica Palmer Age: 67 | Trustee | Since 2007 | Ms. Palmer is retired. She is Director, Emerson Center for the Arts and Culture (2011-Present); and was formerly a Consultant, Citigroup Human Resources Department (2007-2008); Managing Director, Citigroup Corporate and Investment Banking (previously, Salomon Smith Barney/Salomon Brothers) (1984-2006). Ms. Palmer was a Member of the Board of Trustees of Indian Mountain School (private elementary and secondary school) (2004-2009).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||
42
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
Trustees and Officers (Unaudited) (continued)
Independent Trustees
Name, Address and Age1 | Position(s) Held with the Trust | Term of Office and | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee3 | Other Directorships Held by Trustee4 | |||||
Roy W. Templin Age: 56 | Trustee | Since 2013 | Mr. Templin is retired. He recently served as Chairman of the Board of Directors, Con-Way Incorporated (a transportation, logistics and supply chain management service company) (2014-2015); and was formerly Executive Vice President and Chief Financial Officer, Whirlpool Corporation (an appliance manufacturer and marketer) (2004-2012). Previously, Mr. Templin served as an Advisory Board Member of Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust (June 2013-October 2013).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||
Gregory G. Weaver Age: 65 | Trustee | Since 2015 | Mr. Weaver is retired. He is Director, Verizon Communications Inc. (2015-Present); and was formerly Chairman and Chief Executive Officer, Deloitte & Touche LLP (a professional services firm) (2001-2005 and 2012-2014); and Member of the Board of Directors, Deloitte & Touche LLP (2006-2012).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | Verizon Communications Inc. | |||||
43
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
Trustees and Officers (Unaudited) (continued)
Interested Trustees*
Name, Address and Age1 | Position(s) Held with the Trust | Term of Office and | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee3 | Other Directorships Held by Trustee4 | |||||
James A. McNamara Age: 54 | President and Trustee | Since 2007 | Managing Director, Goldman Sachs (December 1998-Present); Director of Institutional Fund Sales, GSAM (April 1998-December 2000); and Senior Vice President and Manager, Dreyfus Institutional Service Corporation (January 1993- April 1998).
President and Trustee — Goldman Sachs Trust; Goldman Sachs Variable Insurance Trust; Goldman Sachs Trust II; Goldman Sachs MLP Income Opportunities Fund; Goldman Sachs MLP and Energy Renaissance Fund; and Goldman Sachs ETF Trust. | 140 | None | |||||
Alan A. Shuch Age: 67 | Trustee | Since 1990 | Advisory Director — GSAM (May 1999-Present); Consultant to GSAM (December 1994-May 1999); and Limited Partner, Goldman Sachs (December 1994-May 1999).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||
* | These persons are considered to be “Interested Trustees” because they hold positions with Goldman Sachs and own securities issued by The Goldman Sachs Group, Inc. Each Interested Trustee holds comparable positions with certain other companies of which Goldman Sachs, GSAM or an affiliate thereof is the investment adviser, administrator and/or distributor. |
1 | Each Trustee may be contacted by writing to the Trustee, c/o Goldman Sachs, 200 West Street, New York, New York, 10282, Attn: Caroline Kraus. Information is provided as of December 31, 2016. Alan A. Shuch served as Trustee until his retirement from the Board on December 31, 2016. |
2 | Subject to such policies as may be adopted by the Board from time-to-time, each Trustee holds office for an indefinite term, until the earliest of: (a) the election of his or her successor; (b) the date the Trustee resigns or is removed by the Board or shareholders, in accordance with the Trust’s Declaration of Trust; or (c) the termination of the Trust. The Board has adopted policies which provide that (a) no Trustee shall hold office for more than 15 years and (b) a Trustee shall retire as of December 31st of the calendar year in which he or she reaches his or her 74th birthday, unless a waiver of such requirement shall have been adopted by a majority of the other Trustees. These policies may be changed by the Trustees without shareholder vote. One Trustee has been granted a waiver from the foregoing policies which permits him to serve until December 31, 2017. |
3 | The Goldman Sachs Fund Complex includes certain other companies listed above for each respective Trustee. As of December 31, 2016, Goldman Sachs Trust consisted of 92 portfolios (89 of which offered shares to the public); Goldman Sachs Variable Insurance Trust consisted of 14 portfolios; Goldman Sachs Trust II consisted of 17 portfolios (16 of which offered shares to the public); Goldman Sachs BDC, Inc., Goldman Sachs Private Middle Market Credit LLC, Goldman Sachs MLP Income Opportunities Fund, and Goldman Sachs MLP and Energy Renaissance Fund each consisted of one portfolio; and Goldman Sachs ETF Trust consisted of 15 portfolios (eight of which offered shares to the public). Goldman Sachs Private Middle Market Credit LLC does not offer shares to the public. |
4 | This column includes only directorships of companies required to report to the Securities and Exchange Commission under the Securities Exchange Act of 1934 (i.e., “public companies”) or other investment companies registered under the Act. |
Additional information about the Trustees is available in the Fund’s Statement of Additional Information, which can be obtained from Goldman Sachs free of charge by calling this toll-free number (in the United States of America): 1-800-526-7384.
44
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
Trustees and Officers (Unaudited) (continued)
Officers of the Trust*
Name, Address and Age1 | Position(s) Held with the Trust | Term of Office and | Principal Occupation(s) During Past 5 Years | |||
James A. McNamara 200 West Street New York, NY 10282 Age: 54 | Trustee and President | Since 2007 | Managing Director, Goldman Sachs (December 1998-Present); Director of Institutional Fund Sales, GSAM (April 1998-December 2000); and Senior Vice President and Manager, Dreyfus Institutional Service Corporation (January 1993-April 1998).
President and Trustee — Goldman Sachs Trust; Goldman Sachs Variable Insurance Trust; Goldman Sachs Trust II; Goldman Sachs MLP Income Opportunities Fund; Goldman Sachs MLP and Energy Renaissance Fund; and Goldman Sachs ETF Trust. | |||
Caroline L. Kraus 200 West Street New York, NY 10282 Age: 39 | Secretary | Since 2012 | Managing Director, Goldman Sachs (January 2016-Present); Vice President, Goldman Sachs (August 2006-December 2015); Associate General Counsel, Goldman Sachs (2012-Present); Assistant General Counsel, Goldman Sachs (August 2006-December 2011); and Associate, Weil, Gotshal & Manges, LLP (2002-2006).
Secretary — Goldman Sachs Trust (previously Assistant Secretary (2012)); Goldman Sachs Variable Insurance Trust (previously Assistant Secretary (2012)); Goldman Sachs Trust II; Goldman Sachs BDC, Inc.; Goldman Sachs Private Middle Market Credit LLC; Goldman Sachs Middle Market Lending LLC; Goldman Sachs MLP Income Opportunities Fund; Goldman Sachs MLP and Energy Renaissance Fund; and Goldman Sachs ETF Trust. | |||
Scott M. McHugh 200 West Street New York, NY 10282 Age: 45 | Treasurer, Senior Vice President and Principal Financial Officer | Since 2009 (Principal Financial Officer since 2013) | Managing Director, Goldman Sachs (January 2016-Present); Vice President, Goldman Sachs (February 2007-December 2015); Assistant Treasurer of certain mutual funds administered by DWS Scudder (2005-2007); and Director (2005-2007), Vice President (2000-2005), and Assistant Vice President (1998-2000), Deutsche Asset Management or its predecessor (1998-2007).
Treasurer, Senior Vice President and Principal Financial Officer — Goldman Sachs Trust; Goldman Sachs Variable Insurance Trust; Goldman Sachs Trust II; Goldman Sachs MLP Income Opportunities Fund; Goldman Sachs MLP and Energy Renaissance Fund; and Goldman Sachs ETF Trust. | |||
* | Represents a partial list of officers of the Trust. Additional information about all the officers is available in the Fund’s Statement of Additional Information, which can be obtained from Goldman Sachs free of charge by calling this toll-free number (in the United States): 1-800-526-7384. |
1 | Information is provided as of December 31, 2016. |
2 | Officers hold office at the pleasure of the Board of Trustees or until their successors are duly elected and qualified. Each officer holds comparable positions with certain other companies of which Goldman Sachs, GSAM or an affiliate thereof is the investment adviser, administrator and/or distributor. |
Goldman Sachs Variable Insurance Trust — Tax Information (Unaudited)
For the year ended December 31, 2016, 0.72% of the dividends paid from net investment company taxable income
by the Strategic Income Fund qualify for the dividends received deduction available to corporations.
45
TRUSTEES | OFFICERS | |
Ashok N. Bakhru, Chairman | James A. McNamara, President | |
Kathryn A. Cassidy | Scott M. McHugh, Treasurer, Senior Vice | |
Diana M. Daniels | President and Principal Financial Officer | |
Herbert J. Markley | Caroline L. Kraus, Secretary | |
James A. McNamara | ||
Jessica Palmer | ||
Roy W. Templin | ||
Gregory G. Weaver |
GOLDMAN, SACHS & CO.
Distributor and Transfer Agent
GOLDMAN SACHS ASSET MANAGEMENT, L.P.
Investment Adviser
200 West Street, New York
New York 10282
Visit our web site at www.GSAMFUNDS.com to obtain the most recent month-end returns.
The reports concerning the Fund included in this shareholder report may contain certain forward-looking statements about the factors that may affect the performance of the Fund in the future. These statements are based on Fund management’s predictions and expectations concerning certain future events and their expected impact on the Fund, such as performance of the economy as a whole and of specific industry sectors, changes in the levels of interest rates, the impact of developing world events, and other factors that may influence the future performance of the Fund. Management believes these forward-looking statements to be reasonable, although they are inherently uncertain and difficult to predict. Actual events may cause adjustments in portfolio management strategies from those currently expected to be employed.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the Fund voted proxies relating to portfolio securities for the 12-month period ended December 31 is available (i) without charge, upon request by calling 1-800-621-2550; and (ii) on the Securities and Exchange Commission (“SEC”) web site at http://www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Form N-Qs are available on the SEC’s web site at http://www.sec.gov within 60 days after the Fund’s first and third fiscal quarters. The Fund’s Form N-Qs may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may also be obtained by calling 1-800-SEC-0330. Form N-Qs may be obtained upon request and without charge by calling 1-800-621-2550.
The website links provided are for your convenience only and are not an endorsement or recommendation by GSAM of any of these websites or the products or services offered. GSAM is not responsible for the accuracy and validity of the content of these websites.
Fund holdings and allocations shown are as of December 31, 2016 and may not be representative of future investments. Fund holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities. Current and future holdings are subject to risk.
References to indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only and do not imply that the portfolio will achieve similar results. The index composition may not reflect the manner in which a portfolio is constructed. While an adviser seeks to design a portfolio which reflects appropriate risk and return features, portfolio characteristics may deviate from those of the benchmark.
The Global Industry Classification Standard (“GICS”) was developed by and is the exclusive property and a service mark of Morgan Stanley Capital International Inc. (“MSCI”) and Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. (“S&P”) and is licensed for use by Goldman Sachs. Neither MSCI, S&P nor any other party involved in making or compiling the GICS or any GICS classifications makes any express or implied warranties or representations with respect to such standard or classification (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of such standard or classification. Without limiting any of the foregoing, in no event shall MSCI, S&P, any of their affiliates or any third party involved in making or compiling the GICS or any GICS classifications have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.
The portfolio risk management process includes an effort to monitor and manage risk, but does not imply low risk.
Shares of the Goldman Sachs VIT Funds are offered to separate accounts of participating life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Shares of the Fund are not offered directly to the general public. The variable annuity contracts and variable life insurance policies are described in the separate prospectuses issued by participating insurance companies. You should refer to those prospectuses for information about surrender charges, mortality and expense risk fees and other charges that may be assessed by participating insurance companies under the variable annuity contracts or variable life insurance policies. Such fees or charges, if any, may affect the return you may realize with respect to your investments. Ask your representative for more complete information. Please consider a fund’s objectives, risks and charges and expenses, and read the prospectus carefully before investing. The prospectus contains this and other information about the Fund.
This material is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus or summary prospectus, if applicable. Investors should consider the Fund’s objective, risks, and charges and expenses, and read the summary prospectus, if available, and/or the prospectus carefully before investing or sending money. The summary prospectus, if available, and the prospectus contain this and other information about the Fund and may be obtained from your authorized dealer or from Goldman, Sachs & Co. by calling 1-800-621-2550.
This report is prepared for the general information of contract owners and is not an offer of shares of the Goldman Sachs Variable Insurance Trust – Goldman Sachs Strategic Income Fund.
© 2017 Goldman Sachs. All rights reserved.
VITSTIAR-17/81048-TMPL-02/2017-470823
Goldman
Sachs Variable Insurance Trust
Goldman Sachs
Strategic International Equity Fund
Annual Report
December 31, 2016
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INTERNATIONAL EQUITY FUND
INVESTMENT OBJECTIVE
The Fund seeks long-term growth of capital.
Portfolio Management Discussion and Analysis
Below, the Goldman Sachs International Equity Portfolio Management Team discusses the Goldman Sachs Variable Insurance Trust —Goldman Sachs Strategic International Equity Fund’s (the “Fund”) performance and positioning for the 12-month period ended December 31, 2016 (the “Reporting Period”).
How did the Fund perform during the Reporting Period?
During the Reporting Period, the Fund’s Institutional and Service Shares generated average annual total returns of -2.72% and
-2.86%, respectively. These returns compare to the 1.00% average annual total return of the Fund’s benchmark, the MSCI Europe, Australasia, Far East (“EAFE”) Index (Net, USD, Unhedged) (the “MSCI EAFE Index”), during the same time period.
What economic and market factors most influenced the international equity markets as a whole during the Reporting Period?
International equities, as measured by the MSCI EAFE Index, posted a return of 1.00% in U.S. dollar terms for the Reporting Period as a whole.
International equities suffered amid a global rout at the beginning of 2016, triggered by investor concerns of an intensifying economic slowdown in China and exacerbated by an oil price plunge. Sentiment improved following a dovish January European Central Bank (“ECB”) press conference on January 21, 2016, and the Bank of Japan’s (“BoJ”) introduction of negative interest rates. (Dovish language tends to suggest lower interest rates; opposite of hawkish.) In turn, international equities stabilized a bit in February 2016. However, the MSCI EAFE Index still fell 1.83% in February 2016. In March 2016, further central bank dovishness, along with receding global economic concerns and oil price stabilization, helped to finally drive a global equity market recovery. Notably, the ECB implemented heavy easing, cutting its deposit rate to -40 basis points, raising its monthly quantitative easing purchases, including those of corporate bonds, and unveiling a new series of four-year loans to banks. (A basis point is 1/100th of a percentage point.) The BoJ left its monetary policy unchanged in March 2016, but its rhetoric about negative interest rates heightened consensus expectations for further easing to come.
Market sentiment appeared to remain sanguine in April 2016, as oil prices rose and China economic growth concerns abated with modestly improving economic data. Both the ECB and BoJ were on hold, or did not make any monetary policy changes, in April 2016. BoJ inaction came as a major disappointment against consensus expectations of further easing, causing international equities to sell off once again and the yen to appreciate. Relative currency appreciation was exacerbated by U.S. dollar weakness following a weaker than expected first quarter U.S. Gross Domestic Product (“GDP”) release and an uneventful Federal Reserve (“Fed”) meeting during which rates were left unchanged.
In May 2016, weaker than market expected payroll data drove consensus expectations for a Fed rate hike in June 2016 temporarily lower, but subsequent hawkish Fed meeting minutes revived market expectations. (Hawkish language tends to suggest higher interest rates; opposite of dovish.) Equities rallied toward the end of May 2016 on anticipation of better economic data, rising oil prices and optimism that the economy could withstand rate hikes. Japanese equities also benefited from stronger than expected first quarter 2016 GDP growth and a weaker yen.
Markets were dominated in June 2016 by anticipation around the U.K. referendum on membership in the European Union, popularly known as the Brexit vote. International equities declined in the global risk-off, or heightened risk averse, sentiment that dominated the days following the June 23, 2016 vote given the surprise “leave” result. Markets rebounded in the latter days of June 2016 owing to improving risk appetite, as markets digested the outcome of the Brexit vote and on dovish remarks from Bank of England (“BoE”) Governor Carney. Still, the MSCI EAFE Index declined 3.36% in June 2016.
International equities rebounded strongly in July 2016, buoyed by consensus expectations of easier monetary policy and a rebound in risk appetite, despite the increased uncertainty post Brexit. Sentiment was propped up as BoE Governor Carney hinted at monetary easing during the summer. In August 2016, the BoE delivered, cutting its policy rates by 25 basis points and introducing a large extension to its quantitative easing program. However, investor concerns about an impending U.S. interest rate hike intensified following a strong July 2016 U.S. jobs report and Fed Chair Yellen’s hawkish Jackson Hole speech. In September 2016,
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GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INTERNATIONAL EQUITY FUND
international equities declined on the ECB’s lack of commitment to extend easing beyond March 2017. Still, there was a subsequent rebound following the Fed and BoJ decisions, which markets viewed as generally benign. The Fed left interest rates unchanged, while the BoJ introduced a 0% target for its 10-year government bond yield to exercise “yield curve control.”
In October 2016, the ECB minutes stressed a commitment to ongoing monthly bond-buying of 80 billion euros at least through March 2017, helping to dispel concerns about potential tapering. The U.K.’s first official GDP growth figure since the Brexit vote was more robust than consensus-expected at 0.5%. Japanese equities enjoyed strong performance owing to weakness of the yen, as BoJ governor Kuroda stated there was room for further easing if necessary to achieve its 2% inflation target. Following the unexpected victory of Donald Trump in the U.S. elections in November, international equity markets rallied on anticipation of a pro-growth impact of Mr. Trump’s fiscal stimulus plan. However, U.S. dollar appreciation against local currencies detracted from their U.S. dollar returns. The MSCI EAFE Index declined 1.98% in November 2016. The MSCI EAFE Index saw a 3.42% rally during an eventful December 2016, with the resignation of Prime Minister Renzi after Italian voters’ rejection of that nation’s constitutional reform referendum, the Fed’s first interest rate hike in a year and the ECB’s decision to slow its monthly pace of quantitative easing while extending the program to the end of 2017.
For the Reporting Period overall, energy and materials were the best performing sectors in the MSCI EAFE Index by a wide margin. Industrials, real estate and information technology also posted positive, albeit more modest, returns that outpaced the MSCI EAFE Index during the Reporting Period. The weakest performing sectors in the MSCI EAFE Index during the Reporting Period were health care and telecommunication services, followed at some distance by utilities, consumer staples, consumer discretionary and financials, each of which posted negative absolute returns.
From a country perspective, China was the best performing equity market in the MSCI EAFE Index by a wide margin during the Reporting Period, followed by Norway, Australia, Ireland and the Netherlands. Denmark was the weakest individual country constituent in the MSCI EAFE Index during the Reporting Period, followed at some distance by Italy, Belgium, Switzerland and Finland.
What key factors were responsible for the Fund’s performance during the Reporting Period?
The Fund’s underperformance relative to the MSCI EAFE Index during the Reporting Period can be primarily attributed to individual stock selection.
Which stocks detracted significantly from the Fund’s performance during the Reporting Period?
Among the biggest detractors from Fund performance relative to the MSCI EAFE Index during the Reporting Period were Spanish bank Banco Popular Espanol, Italian bank UniCredit and Swiss bank Credit Suisse—all European banks, which broadly performed poorly given uncertainty and negative sentiment following a “leave” majority in the U.K.’s referendum on European Union membership, popularly known as Brexit.
Banco Popular Espanol detracted most from the Fund’s results during the Reporting Period. Its stock was negatively affected by volatility in the Spanish market, largely driven by political uncertainty that had weighed on the financial sector’s outlook. However, at the end of the Reporting Period, we believed the concerns were transitory, as elections had concluded and near-term economic visibility was, in our view, forthcoming. We continued to like the bank due to what we believe is its strong presence in the small and medium-sized enterprise market and due to its improvements in asset quality, which we feel may well stabilize and improve the bank’s margins in 2017. More importantly, in our view, Banco Popular Espanol may also benefit from Spain’s recovering business environment, which we believe could be conducive to increased economic activity.
Shares of UniCredit sold off along with other Italian banks in January 2016 following increased concerns surrounding Italian non-performing loans. This came after the resolution of four small Italian banks at the end of 2015, which triggered the bail-in of their subordinated debt. (A non-performing loan is the sum of borrowed money upon which the debtor has not made his or her scheduled payments for at least 90 days. A non-performing loan is either in default or close to being in default. A bail-in occurs when the borrower’s creditors are forced to bear some of the burden by having a portion of their debt written off.) We believe these banks represented isolated cases and that asset quality in Italy is gradually improving. At the end of the Reporting Period, we believed UniCredit remained attractively valued relative to other European banks.
Credit Suisse detracted from the Fund’s results during the Reporting Period. In addition to the after-effect of the Brexit vote, the bank’s share price declined following reports of weaker than market-expected fourth quarter 2015 results, citing difficult market conditions amidst its transition to shrink its investment bank and focus on its private bank. Still, its core private bank performed well early in 2016, and at the end of the Reporting Period, we believed the stock still presented significant long-term value.
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GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INTERNATIONAL EQUITY FUND
What were some of the Fund’s best-performing individual stocks?
Among the greatest contributors to Fund performance relative to the MSCI EAFE Index during the Reporting Period were U.K. investment company Melrose Industries, German materials manufacturer Covestro and Japanese electric motors company Nidec.
Melrose Industries, a new purchase for the Fund during the Reporting Period, specializes in the acquisition and performance turnaround of global manufacturers. Its stock performed well throughout the Reporting Period, especially when the market began to recognize the upside potential of its Nortek deal in the third quarter of 2016. Nortek is mainly a U.S.-focused company with high exposure to residential and non-residential construction markets, a category we like as it could benefit from a strong U.S. economy going forward. At the end of the Reporting Period, we believed Melrose Industries’ strong management would likely continue to deliver margin improvement and create shareholder value from such synergies.
Covestro is a global leader in polyurethanes and polycarbonates and operates a coatings, adhesives and specialties business. In October 2015, the German health care company Bayer conducted an Initial Public Offering (“IPO”) of approximately 35% of its materials science business, known as Covestro. The Fund took part in the IPO and purchased what we believed to be a company trading at a significant discount to both its intrinsic value and competitors in the industry. The stock performed well in 2016 as investors began to recognize the intrinsic value of the company following the IPO. We sold the Fund’s position in Covestro by the end of the Reporting Period, taking profits.
Within the industrials sector, Nidec, a leading manufacturer of small precision motors, was a top contributor to the Fund’s relative returns. Nidec performed well after the company released its new fiscal year guidance. Despite the new guidance being slightly weaker than the market expected, the market reacted positively to its clear medium-term growth plan, led by the automotive components segment of its business. In July 2016, Nidec reported solid results and maintained its full-year guidance despite a negative currency impact, which we interpreted as a slight underlying upgrade. At the beginning of August 2016, the company announced an acquisition of the motor and electric power generation business of Emerson Electric for $1.2 billion. We think this acquisition is in line with Nidec’s goal of aggressively expanding its industrials and auto divisions given Emerson Electric’s significant exposure to the industrials and commercials segments. We also view this acquisition as complementary to Nidec’s current business and thus the acquisition came as another milestone in the company’s long-term story and shift toward new business areas. At the end of the Reporting Period, we believed Nidec would be able to grow its presence in high margin segments and was well positioned to benefit from the ongoing increase in the number of motors installed in a car.
Which equity market sectors most significantly affected Fund performance?
Stock selection and positioning in the financials, consumer staples and materials sectors detracted most from the Fund’s performance relative to the MSCI EAFE Index during the Reporting Period. Partially offsetting these detractors was effective security selection within the industrials, consumer discretionary and information technology sectors, which contributed positively to the Fund’s performance relative to the MSCI EAFE Index during the Reporting Period.
Which countries or regions most affected the Fund’s performance during the Reporting Period?
Typically, the Fund’s individual stock holdings will significantly influence the Fund’s performance within a particular country or region relative to the MSCI EAFE Index. This effect may be even more pronounced in countries that represent only a modest proportion of the MSCI EAFE Index.
That said, the countries that detracted most from the Fund’s performance during the Reporting Period were Switzerland, Italy and Spain, where stock selection overall hurt. The Fund’s effective stock selection in the U.K. contributed most positively to the Fund’s returns relative to the MSCI EAFE Index. Following at some distance were effective stock selection in the Netherlands and positioning in Japan, which also boosted relative results.
How did the Fund use derivatives and similar instruments during the Reporting Period?
During the Reporting Period, we did not use derivatives to hedge positions or as part of an active management strategy.
Did the Fund make any significant purchases or sales during the Reporting Period?
In addition to those purchases already mentioned, among the Fund’s other purchases during the Reporting Period were Intercontinental Hotels, Merlin Entertainment and Moncler.
We initiated a Fund position in U.K.-domiciled hotel group Intercontinental Hotels, which owns and manages mainstream to luxury hotel brands, including Holiday Inn, Crowne Plaza and InterContinental. With less than 10% of its revenues in the U.K., we believe
3
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INTERNATIONAL EQUITY FUND
the company’s strategy to focus on managing rather than owning a range of hotel brands has transformed its cash generating power. Backed by what we view as an excellent operating system, we believe further initiatives to improve its performance and brand differentiation should continue to drive returns for a company that we saw as attractively priced at the time of the Fund’s purchase.
We established a Fund position in U.K.-based Merlin Entertainment, the world’s second-largest theme park operator behind Disney, operating 114 attractions in 23 countries across four continents and most known for Legoland, Madame Tussauds and Sea Life. Approximately 30% of its revenues are in the U.K., and a weaker British pound should, in our view, 1) boost tourism into the country; 2) mean U.K. residents prefer “staycations,” or vacationing at home, as opposed to more expensive holidays abroad; and 3) translate into higher profits from its 70% business outside the U.K. We believe Merlin Entertainment has attractive growth prospects and spends a significant portion of its cash flow on growth opportunities.
We introduced Moncler, a French/Italian apparel brand, most known for its down jackets and sportswear, to the Fund during the Reporting Period. The company operates in a niche segment of luxury, where there is little competition and where it has continued to have strong momentum. We believe the company should benefit as what is known as the “affordable luxury” segment gains traction with millennials. There is substantial growth potential compared to other luxury brands, in our opinion, which have already over-expanded and are now seeing declining revenue growth. Moncler’s management team is thoughtful, in our view, about the longer-term sustainability of its business, recently choosing to bring its production in house, focus on new product lines and invest in digital/online. Its stock had underperformed the MSCI EAFE Index during the Reporting Period due to warm weather, weak sentiment around exposure to China and a small change in business strategy that concerned the market but which we view as positive. We see each of these headwinds as short-term and believe they created an attractive entry point for the Fund.
In addition to those sales already mentioned, we exited the Fund’s positions in Adidas, Start Today and Total.
German sports shoes, apparel and equipment company Adidas performed well during the Reporting Period. While we continue to like the company, we believe its valuation appeared stretched and thus decided to reallocate to what we view as more compelling investment opportunities.
Similarly, we sold the Fund’s position in Japanese Internet apparel shopping sites operator Start Today following a period of relative outperformance to the MSCI EAFE Index and as we viewed its valuation as having become stretched.
We exited the Fund’s position in French integrated oil company Total following a span of relative outperformance to the MSCI EAFE Index. We decided to redeploy capital in other opportunities in the energy sector.
Were there any notable changes in the Fund’s weightings during the Reporting Period?
In constructing the Fund’s portfolio, we focus on picking stocks rather than on making regional, country, sector or industry bets. We seek to outpace the benchmark index by overweighting stocks that we expect to outperform and underweighting those that we think may lag. Consequently, changes in its sector or country weights are generally the direct result of individual stock selection or of stock appreciation or depreciation. That said, the Fund’s allocations relative to the MSCI EAFE Index in consumer staples, utilities, telecommunication services and industrials increased, and its allocations relative to the MSCI EAFE Index in information technology, materials and financials decreased during the Reporting Period. From a country perspective, the Fund’s exposure to the U.K., Italy and Denmark increased relative to the MSCI EAFE Index during the Reporting Period, and its exposure to Germany, France, Japan and Australia decreased relative to the MSCI EAFE Index during the Reporting Period.
Were there any changes to the Fund’s portfolio management team during the Reporting Period?
There were no material changes to the Fund’s portfolio management team during the Reporting Period.
How was the Fund positioned relative to its benchmark index at the end of the Reporting Period?
At the end of December 2016, the Fund had a greater weighting than the MSCI EAFE Index in the consumer staples sector. The Fund had underweighted allocations to the financials, consumer discretionary and materials sectors and was rather neutrally weighted to the MSCI EAFE Index in the health care, utilities, telecommunication services, real estate, energy, information technology and industrials sectors at the end of the Reporting Period.
From a country perspective, the Fund had greater positions in the U.K., Italy, Ireland, Belgium and Denmark relative to the MSCI EAFE Index at the end of December 2016. The Fund had less exposure to Australia, Japan and France than the MSCI EAFE Index and was rather neutrally weighted to the MSCI EAFE Index in the remaining constituents of the MSCI EAFE Index at the end of the Reporting Period.
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GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INTERNATIONAL EQUITY FUND
As always, we remained focused on individual stock selection, with sector and country positioning being a secondary, but closely monitored, effect.
What is the Fund’s tactical view and strategy for the months ahead?
At the end of the Reporting Period, we believed the macroeconomic environment may be shifting from low growth to pro-growth. Following Donald Trump’s victory in the U.S. presidential election, we expect to see more aggressive fiscal and pro-business policy leading to stronger U.S. and global economic growth. Chief Executive Officer confidence is already increasing, according to end-of-2016 polls, and could reignite corporate “animal spirits,” economist John Maynard Keynes’ term for the confidence and willingness to invest that are essential for economic growth. We believe the global equity bull market could extend through 2017.
Stronger economic growth and revenue-driven earnings growth in the U.S., if realized, should be a positive backdrop for equities, in our view. Moreover, U.S. equities can do well in an environment of modestly rising interest rates and inflation, provided the underlying reason is healthy economic growth. At the same time, in our view, policy changes from a more populist, protectionist and unconventional U.S. president will likely increase volatility and the dispersion of returns as investors consider the possible effects of those policies on individual stocks, creating a potentially beneficial environment for active managers.
Our view on European equity markets remained neutral at the end of the Reporting Period, balancing the potential benefit from stronger global economic growth with political risks. We believe earnings upside potential remains the main driver of European equities, especially as European corporate earnings were still approximately 50% below their 2008 peak at the end of December 2016. In our view, many European companies can also benefit from U.S.-driven stronger global economic growth. We believe Europe’s biggest risk remains political, with strengthening populist sentiment challenging mainstream parties in national elections in the Netherlands, France and Germany in 2017.
We were more positive on Japan at the end of the Reporting Period, in light of the potential for a weak yen and rising inflation there. The increased potential for inflation and the strong U.S. dollar/weak yen is particularly helpful for Japan, in our view. The Japanese equity market is export-oriented, so a weaker yen tends to drive earnings growth. Consumption has yet to recover in Japan, but total take-home wages were growing given a tight labor market. Corporate balance sheets remain strong, in our opinion, and corporate governance continues to improve, both of which can potentially boost returns for shareholders. Prime Minister Abe’s popularity is high, enabling him better opportunity to push through structural reforms.
As always, we maintain our focus on seeking companies that we believe will generate long-term growth in today’s ever-changing market conditions.
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GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INTERNATIONAL EQUITY FUND
Index Definitions
The MSCI EAFE Index is a market capitalization-weighted composite of securities in 21 developed markets. The MSCI EAFE Index approximates the minimum possible dividend reinvestment. The dividend is reinvested after deduction for withholding tax, applying the rate to non-resident individuals who do not benefit from double taxation treaties. MSCI Barra uses withholding tax rates applicable to Luxembourg holding companies, as Luxembourg applies the highest rates. The MSCI EAFE Index is unmanaged and the figures for the Index do not include any deduction for fees or expenses. It is not possible to invest directly in an index.
6
FUND BASICS
Strategic International Equity Fund
as of December 31, 2016
STANDARDIZED TOTAL RETURNS1
For the period ended 12/31/16 | One Year | Five Years | Ten Years | Since Inception | Inception Date | |||||||||||||
Institutional | -2.72 | % | 6.47 | % | -0.38 | % | 3.12 | % | 1/12/98 | |||||||||
Service | -2.86 | 6.20 | -0.60 | 0.79 | 1/09/06 |
1 | The Standardized Total Returns are average annual total returns as of the most recent calendar quarter-end. They assume reinvestment of all distributions at net asset value (“NAV”). Because Institutional Shares and Service Shares do not involve a sales charge, such a charge is not applied to their Standardized Total Returns. |
Total return figures in the above chart represent past performance and do not indicate future results, which will vary. The investment return and principal value of an investment will fluctuate and, therefore, an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the total return figures in the above chart. Please visit www.GSAMFUNDS.com to obtain the most recent month-end returns.
Performance reflects fee waivers and/or expense limitations in effect during the periods shown. In their absence, performance would be reduced.
EXPENSE RATIOS2
Net Expense Ratio (Current) | Gross Expense Ratio (Before Waivers) | |||||||||||
Institutional | 0.87 | % | 1.06 | % | ||||||||
Service | 1.12 | 1.31 |
2 | The expense ratios of the Fund, both current (net of any fee waivers and/or expense limitations) and before waivers (gross of any fee waivers and/or expense limitations) are as set forth above according to the most recent publicly available Prospectuses for the Fund and may differ from the expense ratios disclosed in the Financial Highlights in this report. Pursuant to a contractual arrangement, the Fund’s fee waivers and/or expense limitations will remain in place through at least April 29, 2017, and prior to such date, the Investment Adviser may not terminate the arrangements without the approval of the Fund’s Board of Trustees. If these arrangements are discontinued in the future, the expense ratios may change without shareholder approval. |
TOP TEN HOLDINGS AS OF 12/31/163
Holding | % of Net Assets | Line of Business | Country | |||||
Royal Dutch Shell plc Class A | 5.4% | Energy | Netherlands | |||||
Anheuser-Busch InBev SA/NV | 3.3 | Food, Beverage & Tobacco | Belgium | |||||
Novartis AG (Registered) | 2.9 | Pharmaceuticals, Biotechnology & Life Sciences | Switzerland | |||||
Bayer AG (Registered) | 2.5 | Pharmaceuticals, Biotechnology & Life Sciences | Germany | |||||
Japan Tobacco, Inc. | 2.4 | Food, Beverage & Tobacco | Japan | |||||
Beiersdorf AG | 2.3 | Household & Personal Products | Germany | |||||
Klepierre (REIT) | 2.1 | Real Estate | France | |||||
Kerry Group plc Class A | 2.1 | Food, Beverage & Tobacco | Ireland | |||||
Hennes & Mauritz AB Class B | 2.1 | Retailing | Sweden | |||||
SAP SE | 2.0 | Software & Services | Germany |
3 | The top 10 holdings may not be representative of the Fund’s future investments. |
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FUND BASICS
Strategic International Equity Fund (continued)
as of December 31, 2016
FUND VS. BENCHMARK SECTOR ALLOCATIONS4
As of December 31, 2016
4 | The Fund is actively managed and, as such, its composition may differ over time. Consequently, the Fund’s overall sector allocations may differ from percentages contained in the graph above. The graph categorizes investments using Global Industry Classification Standard (“GICS”); however, the sector classifications used by the portfolio management team may differ from GICS. The percentage shown for each investment category reflects the value of investments in that category as a percentage of market value (excluding investments in the securities lending reinvestment vehicle, if any). Underlying sector allocations of exchange traded funds and investment companies held by the Fund are not reflected in the graph above. Investments in the securities lending reinvestment vehicle represented 0.5% of the Fund’s net assets at December 31, 2016. The graph depicts the Fund’s investments but may not represent the Fund’s market exposure due to the exclusion of certain derivatives, if any, as listed in the Additional Investment Information section of the Schedule of Investments. |
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GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INTERNATIONAL EQUITY FUND
Performance Summary
December 31, 2016
The following graph shows the value, as of December 31, 2016, of a $10,000 investment made on January 1, 2007 in the Service Shares at NAV. For comparative purposes, the performance of the Fund’s benchmark, the MSCI EAFE Index (Net, USD, Unhedged), is shown. This performance data represents past performance and should not be considered indicative of future performance, which will fluctuate with changes in market conditions. These performance fluctuations may cause an investor’s shares, when redeemed, to be worth more or less than their original cost. Performance reflects Fund level expenses but does not reflect fees and expenses associated with any variable annuity contract or variable life insurance policy that uses the Fund as an investment option for any contract or policy. Had performance reflected all of those fees and expenses, performance would have been reduced. Performance reflects applicable fee waivers and/or expense limitations in effect during the periods shown, and in their absence performance would be reduced. Performance of Institutional Shares will vary from Service Shares due to differences in class specific fees. In addition to the Investment Adviser’s decisions regarding issuer/industry/country investment selection and allocation, other factors may affect Fund performance. These factors include, but are not limited to, Fund operating fees and expenses, portfolio turnover, and subscription and redemption cash flows affecting the Fund.
Strategic International Equity Fund’s 10 Year Performance
Performance of a $10,000 investment, with distributions reinvested, from January 1, 2007 through December 31, 2016.
Average Annual Total Return through December 31, 2016 | One Year | Five Years | Ten Years | Since Inception | ||||
Institutional (Commenced January 12, 1998) | -2.72% | 6.47% | -0.38% | 3.12% | ||||
Service (Commenced January 9, 2006) | -2.86% | 6.20% | -0.60% | 0.79% |
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GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INTERNATIONAL EQUITY FUND
Schedule of Investments
December 31, 2016
Shares | Description | Value | ||||||
Common Stocks – 97.5% | ||||||||
| Australia – 3.5% |
| ||||||
115,676 | Australia & New Zealand Banking Group Ltd. (Banks) | $ | 2,532,283 | |||||
65,306 | BHP Billiton plc (Materials) | 1,039,869 | ||||||
164,161 | Computershare Ltd. (Software & Services) | 1,472,864 | ||||||
|
| |||||||
5,045,016 | ||||||||
|
| |||||||
| Austria – 1.2% |
| ||||||
62,672 | ams AG (Semiconductors & Semiconductor Equipment) | 1,775,927 | ||||||
|
| |||||||
| Belgium – 3.3% |
| ||||||
43,794 | Anheuser-Busch InBev SA/NV (Food, Beverage & Tobacco) | 4,635,330 | ||||||
|
| |||||||
| China – 0.6% |
| ||||||
486,000 | China Mengniu Dairy Co. Ltd. (Food, Beverage & Tobacco) | 931,883 | ||||||
|
| |||||||
| Denmark – 2.8% |
| ||||||
69,077 | Novo Nordisk A/S Class B (Pharmaceuticals, Biotechnology & Life Sciences) | 2,477,943 | ||||||
43,794 | Novozymes A/S Class B (Materials) | 1,507,036 | ||||||
|
| |||||||
3,984,979 | ||||||||
|
| |||||||
| Finland – 0.7% |
| ||||||
218,492 | Nokia OYJ (Technology Hardware & Equipment) | 1,047,923 | ||||||
|
| |||||||
| France – 8.7% |
| ||||||
20,800 | Air Liquide SA (Materials) | 2,312,934 | ||||||
75,301 | Klepierre (REIT) | 2,954,701 | ||||||
32,260 | Publicis Groupe SA (Media) | 2,222,861 | ||||||
54,369 | Rexel SA (Capital Goods) | 893,277 | ||||||
26,908 | Safran SA (Capital Goods) | 1,935,328 | ||||||
30,647 | Vinci SA (Capital Goods) | 2,084,751 | ||||||
|
| |||||||
12,403,852 | ||||||||
|
| |||||||
| Germany – 9.0% |
| ||||||
34,064 | Bayer AG (Registered) (Pharmaceuticals, Biotechnology & Life Sciences) | 3,548,905 | ||||||
39,448 | Beiersdorf AG (Household & Personal Products) | 3,341,555 | ||||||
160,378 | Commerzbank AG (Banks) | 1,221,085 | ||||||
45,787 | GEA Group AG (Capital Goods) | 1,837,452 | ||||||
32,475 | SAP SE (Software & Services) | 2,809,251 | ||||||
|
| |||||||
12,758,248 | ||||||||
|
| |||||||
| Ireland – 3.7% |
| ||||||
9,443,481 | Bank of Ireland (Banks)* | 2,329,051 | ||||||
41,081 | Kerry Group plc Class A (Food, Beverage & Tobacco) | 2,936,262 | ||||||
|
| |||||||
5,265,313 | ||||||||
|
| |||||||
Common Stocks – (continued) | ||||||||
| Italy – 5.6% |
| ||||||
375,641 | Enav SpA (Transportation)*(a) | $ | 1,296,278 | |||||
599,820 | Enel SpA (Utilities) | 2,636,628 | ||||||
71,896 | Moncler SpA (Consumer Durables & Apparel) | 1,249,303 | ||||||
2,295,502 | Telecom Italia SpA (Telecommunication Services)* | 2,026,790 | ||||||
287,282 | UniCredit SpA (Banks) | 824,997 | ||||||
|
| |||||||
8,033,996 | ||||||||
|
| |||||||
| Japan – 18.4% |
| ||||||
15,100 | Dentsu, Inc. (Media) | 710,052 | ||||||
17,100 | East Japan Railway Co. (Transportation) | 1,474,340 | ||||||
20,800 | Hoshizaki Corp. (Capital Goods) | 1,646,719 | ||||||
66,400 | Hoya Corp. (Health Care Equipment & Services) | 2,784,114 | ||||||
103,500 | Japan Tobacco, Inc. (Food, Beverage & Tobacco) | 3,397,246 | ||||||
57,400 | Kao Corp. (Household & Personal Products) | 2,717,023 | ||||||
94,800 | KDDI Corp. (Telecommunication Services) | 2,393,982 | ||||||
131,000 | Mitsubishi Estate Co. Ltd. (Real Estate) | 2,602,272 | ||||||
24,600 | Nidec Corp. (Capital Goods) | 2,117,831 | ||||||
127,600 | ORIX Corp. (Diversified Financials) | 1,985,999 | ||||||
23,400 | Pola Orbis Holdings, Inc. (Household & Personal Products) | 1,929,169 | ||||||
63,100 | Sumitomo Mitsui Financial Group, Inc. (Banks) | 2,403,036 | ||||||
|
| |||||||
26,161,783 | ||||||||
|
| |||||||
| Netherlands – 5.4% |
| ||||||
278,919 | Royal Dutch Shell plc Class A (Energy) | 7,699,151 | ||||||
|
| |||||||
| Singapore – 1.9% |
| ||||||
227,538 | DBS Group Holdings Ltd. (Banks) | 2,714,720 | ||||||
|
| |||||||
| Spain – 4.9% |
| ||||||
415,241 | Banco Bilbao Vizcaya Argentaria SA (Banks) | 2,798,278 | ||||||
766,618 | Banco Popular Espanol SA (Banks)(b) | 738,634 | ||||||
192,065 | EDP Renovaveis SA (Utilities) | 1,219,829 | ||||||
330,670 | Iberdrola SA (Utilities) | 2,165,188 | ||||||
|
| |||||||
6,921,929 | ||||||||
|
| |||||||
| Sweden – 3.7% |
| ||||||
105,899 | Hennes & Mauritz AB Class B (Retailing) | 2,935,638 | ||||||
81,339 | Svenska Cellulosa AB SCA Class B (Household & Personal Products) | 2,289,411 | ||||||
|
| |||||||
5,225,049 | ||||||||
|
|
10 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INTERNATIONAL EQUITY FUND
Shares | Description | Value | ||||||
Common Stocks – (continued) | ||||||||
| Switzerland – 9.3% |
| ||||||
120,413 | Credit Suisse Group AG (Registered) (Diversified Financials)* | $ | 1,720,826 | |||||
57,513 | Novartis AG (Registered) (Pharmaceuticals, Biotechnology & Life Sciences) | 4,182,546 | ||||||
6,167 | Syngenta AG (Registered) (Materials) | 2,436,600 | ||||||
158,557 | UBS Group AG (Registered) (Diversified Financials) | 2,479,112 | ||||||
39,426 | Wolseley plc (Capital Goods) | 2,406,807 | ||||||
|
| |||||||
13,225,891 | ||||||||
|
| |||||||
| United Kingdom – 13.1% |
| ||||||
274,524 | Aviva plc (Insurance) | 1,635,238 | ||||||
131,750 | BTG plc (Pharmaceuticals, Biotechnology & Life Sciences)* | 956,764 | ||||||
56,759 | InterContinental Hotels Group plc (Consumer Services) | 2,537,930 | ||||||
1,851,905 | Lloyds Banking Group plc (Banks) | 1,422,037 | ||||||
702,620 | Melrose Industries plc (Capital Goods) | 1,707,851 | ||||||
389,086 | Merlin Entertainments plc (Consumer Services)(a) | 2,147,947 | ||||||
473,096 | Rentokil Initial plc (Commercial & Professional Services) | 1,294,287 | ||||||
34,705 | Rio Tinto plc (Materials) | 1,324,968 | ||||||
240,770 | UBM plc (Media) | 2,167,238 | ||||||
266,910 | Virgin Money Holdings UK plc (Banks) | 995,701 | ||||||
980,108 | Vodafone Group plc (Telecommunication Services) | 2,411,928 | ||||||
|
| |||||||
18,601,889 | ||||||||
|
| |||||||
| United States – 1.7% |
| ||||||
42,295 | Shire plc (Pharmaceuticals, Biotechnology & Life Sciences) | 2,415,012 | ||||||
|
| |||||||
TOTAL COMMON STOCKS | ||||||||
(Cost $147,404,431) | $ | 138,847,891 | ||||||
|
| |||||||
Exchange Traded Fund – 1.6% | ||||||||
| United States – 1.6% |
| ||||||
46,335 | iShares MSCI Japan Fund | $ | 2,263,928 | |||||
(Cost $2,334,987) | ||||||||
|
| |||||||
Shares | Distribution Rate | Value | ||||||
Investment Company(c)(d) – 0.0% | ||||||||
Goldman Sachs Financial Square Government Fund — Institutional Shares |
| |||||||
10 | 0.455 | % | $ | 10 | ||||
(Cost $10) | ||||||||
| ||||||||
TOTAL INVESTMENTS BEFORE SECURITIES LENDING REINVESTMENT VEHICLE | ||||||||
(Cost $149,739,428) | $ | 141,111,829 | ||||||
| ||||||||
Securities Lending Reinvestment Vehicle(c)(d) – 0.5% | ||||||||
Goldman Sachs Financial Square Government Fund — Institutional Shares |
| |||||||
764,701 | 0.455 | % | $ | 764,701 | ||||
(Cost $764,701) | ||||||||
| ||||||||
TOTAL INVESTMENTS – 99.6% | ||||||||
(Cost $150,504,129) | $ | 141,876,530 | ||||||
| ||||||||
OTHER ASSETS IN EXCESS OF LIABILITIES – 0.4% |
| 546,409 | ||||||
| ||||||||
NET ASSETS – 100.0% | $ | 142,422,939 | ||||||
|
The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. | ||
* | Non-income producing security. | |
(a) | Exempt from registration under Rule 144A of the Securities Act of 1933. Under procedures approved by the Board of Trustees, such securities may be deemed liquid by the Investment Adviser and may be resold, normally to qualified institutional buyers in transactions exempt from registration. Total market value of Rule 144A securities amounts to $3,444,225, which represents approximately 2.4% of net assets as of December 31, 2016. | |
(b) | All or a portion of security is on loan. | |
(c) | Represents an affiliated issuer. | |
(d) | Variable rate security. Interest rate or distribution rate disclosed is that which is in effect on December 31, 2016. |
Investment Abbreviation: | ||
REIT | —Real Estate Investment Trust |
The accompanying notes are an integral part of these financial statements. | 11 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INTERNATIONAL EQUITY FUND
Statement of Assets and Liabilities
December 31, 2016
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $149,739,418)(a) | $ | 141,111,819 | ||
Investments in affiliated issuers, at value (cost $10) | 10 | |||
Investments in affiliated securities lending reinvestment vehicle, at value which equals cost | 764,701 | |||
Cash | 950,640 | |||
Foreign currencies, at value (cost $42,527) | 41,081 | |||
Receivables: | ||||
Foreign tax reclaims | 436,795 | |||
Dividends | 162,093 | |||
Reimbursement from investment adviser | 18,041 | |||
Fund shares sold | 3,905 | |||
Securities lending income | 3,763 | |||
Other assets | 387 | |||
Total assets | 143,493,235 | |||
Liabilities: | ||||
Payables: | ||||
Payable upon return of securities loaned | 764,701 | |||
Management fees | 96,635 | |||
Fund shares redeemed | 76,965 | |||
Distribution and Service fees and Transfer Agency fees | 24,437 | |||
Accrued expenses | 107,558 | |||
Total liabilities | 1,070,296 | |||
Net Assets: | ||||
Paid-in capital | 219,269,432 | |||
Distributions in excess of net investment income | (18,227 | ) | ||
Accumulated net realized loss | (68,156,428 | ) | ||
Net unrealized loss | (8,671,838 | ) | ||
NET ASSETS | $ | 142,422,939 | ||
Net Assets: | ||||
Institutional | $ | 37,061,183 | ||
Service | 105,361,756 | |||
Total Net Assets | $ | 142,422,939 | ||
Shares outstanding $0.001 par value (unlimited shares authorized): | ||||
Institutional | 4,233,325 | |||
Service | 12,004,434 | |||
Net asset value, offering and redemption price per share: | ||||
Institutional | $8.75 | |||
Service | 8.78 |
(a) Includes loaned securities having a market value of $705,172.
12 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INTERNATIONAL EQUITY FUND
Statement of Operations
For the Fiscal Year Ended December 31, 2016
Investment income: | ||||
Dividends — unaffiliated issuers (net of foreign taxes withheld of $377,212) | $ | 4,184,267 | ||
Dividends — affiliated issuers | 1,005 | |||
Securities lending income — affiliated issuer | 227 | |||
Total investment income | 4,185,499 | |||
Expenses: | ||||
Management fees | 1,263,525 | |||
Distribution and Service fees — Service Shares | 274,913 | |||
Professional fees | 94,333 | |||
Custody, accounting and administrative services | 79,526 | |||
Printing and mailing costs | 73,941 | |||
Transfer Agency fees(a) | 29,727 | |||
Trustee fees | 17,064 | |||
Other | 12,178 | |||
Total expenses | 1,845,207 | |||
Less — expense reductions | (254,168 | ) | ||
Net expenses | 1,591,039 | |||
NET INVESTMENT INCOME | 2,594,460 | |||
Realized and unrealized gain (loss): | ||||
Net realized loss from: | ||||
Investments | (4,029,063 | ) | ||
Foreign currency transactions | (45,525 | ) | ||
Net change in unrealized gain (loss) on: | ||||
Investments (including the effects of the net change in the foreign capital gain tax liability of $(176,824)) | (3,240,745 | ) | ||
Foreign currency translation | 80,362 | |||
Net realized and unrealized loss | (7,234,971 | ) | ||
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | (4,640,511 | ) |
(a) Institutional and Service Shares incurred Transfer Agency fees of $7,736 and $21,991, respectively.
The accompanying notes are an integral part of these financial statements. | 13 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INTERNATIONAL EQUITY FUND
Statement of Changes in Net Assets
For the Fiscal Year Ended December 31, 2016 | For the Fiscal Year Ended December 31, 2015 | |||||||
From operations: | ||||||||
Net investment income | $ | 2,594,460 | $ | 2,199,254 | ||||
Net realized gain (loss) | (4,074,588 | ) | 1,656,787 | |||||
Net change in unrealized loss | (3,160,383 | ) | (1,838,095 | ) | ||||
Net increase (decrease) in net assets resulting from operations | (4,640,511 | ) | 2,017,946 | |||||
Distributions to shareholders: | ||||||||
From net investment income | ||||||||
Institutional Shares | (781,242 | ) | (744,425 | ) | ||||
Service Shares | (1,944,283 | ) | (1,759,317 | ) | ||||
Total distributions to shareholders | (2,725,525 | ) | (2,503,742 | ) | ||||
From share transactions: | ||||||||
Proceeds from sales of shares | 10,750,740 | 10,473,455 | ||||||
Reinvestment of distributions | 2,725,525 | 2,503,742 | ||||||
Cost of shares redeemed | (22,234,915 | ) | (27,045,586 | ) | ||||
Net decrease in net assets resulting from share transactions | (8,758,650 | ) | (14,068,389 | ) | ||||
TOTAL DECREASE | (16,124,686 | ) | (14,554,185 | ) | ||||
Net assets: | ||||||||
Beginning of year | 158,547,625 | 173,101,810 | ||||||
End of year | $ | 142,422,939 | $ | 158,547,625 | ||||
Undistributed (distributions in excess of) net investment income | $ | (18,227 | ) | $ | 98,021 |
14 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INTERNATIONAL EQUITY FUND
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Year
Income (loss) from investment operations | ||||||||||||||||||||||||||||||||||||||||||||||||
Year - Share Class | Net asset value, beginning of year | Net investment income(a) | Net and gain (loss) | Total from investment operations | Distributions to from net investment income | Net asset value, end of year | Total return(b) | Net assets, end of year (in 000s) | Ratio of net expenses to average net assets | Ratio of total expenses to average net assets | Ratio of net investment income to average | Portfolio turnover rate(c) | ||||||||||||||||||||||||||||||||||||
FOR THE FISCAL YEARS ENDED DECEMBER 31, | ||||||||||||||||||||||||||||||||||||||||||||||||
2016 - Institutional | $ | 9.19 | 0.17 | (d) | $ | (0.42 | ) | $ | (0.25 | ) | $ | (0.19 | ) | $ | 8.75 | (2.72 | )% | $ | 37,061 | 0.89 | % | 1.06 | % | 1.94 | %(d) | 39 | % | |||||||||||||||||||||
2016 - Service | 9.21 | 0.15 | (d) | (0.42 | ) | (0.27 | ) | (0.16 | ) | 8.78 | (2.86 | ) | 105,362 | 1.14 | 1.31 | 1.68 | (d) | 39 | ||||||||||||||||||||||||||||||
2015 - Institutional | 9.26 | 0.14 | (e) | (0.04 | ) | 0.10 | (0.17 | ) | 9.19 | 1.05 | 41,737 | 0.89 | 1.06 | 1.42 | (e) | 58 | ||||||||||||||||||||||||||||||||
2015 - Service | 9.28 | 0.12 | (e) | (0.05 | ) | 0.07 | (0.14 | ) | 9.21 | 0.77 | 116,811 | 1.14 | 1.31 | 1.18 | (e) | 58 | ||||||||||||||||||||||||||||||||
2014 - Institutional | 10.43 | 0.39 | (f) | (1.18 | ) | (0.79 | ) | (0.38 | ) | 9.26 | (7.54 | ) | 46,871 | 0.99 | 1.04 | 3.75 | (f) | 74 | ||||||||||||||||||||||||||||||
2014 - Service | 10.44 | 0.36 | (f) | (1.17 | ) | (0.81 | ) | (0.35 | ) | 9.28 | (7.70 | ) | 126,230 | 1.24 | 1.29 | 3.47 | (f) | 74 | ||||||||||||||||||||||||||||||
2013 - Institutional | 8.56 | 0.16 | 1.89 | 2.05 | (0.18 | ) | 10.43 | 24.20 | 59,187 | 0.98 | 1.05 | 1.67 | 95 | |||||||||||||||||||||||||||||||||||
2013 - Service | 8.57 | 0.13 | 1.90 | 2.03 | (0.16 | ) | 10.44 | 23.73 | 152,513 | 1.23 | 1.30 | 1.42 | 95 | |||||||||||||||||||||||||||||||||||
2012 - Institutional | 7.20 | 0.16 | 1.38 | 1.54 | (0.18 | ) | 8.56 | 21.17 | 56,872 | 0.97 | 1.03 | 2.06 | 110 | |||||||||||||||||||||||||||||||||||
2012 - Service | 7.22 | 0.14 | 1.37 | 1.51 | (0.16 | ) | 8.57 | 20.82 | 139,250 | 1.22 | 1.28 | 1.80 | 110 |
(a) | Calculated based on the average shares outstanding methodology. |
(b) | Assumes investment at the net asset value at the beginning of the year, reinvestment of all distributions, and a complete redemption of the investment at the net asset value at the end of the year. |
(c) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short term investments. If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
(d) | Reflects income recognized from corporate actions which amounted to $0.03 per share and 0.36% of average net assets. |
(e) | Reflects income recognized from a corporate action which amounted to $0.02 per share and 0.17% of average net assets. |
(f) | Reflects income recognized from a corporate action which amounted to $0.22 per share and 2.10% of average net assets. |
The accompanying notes are an integral part of these financial statements. | 15 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INTERNATIONAL EQUITY FUND
Notes to Financial Statements
December 31, 2016
1. ORGANIZATION
Goldman Sachs Variable Insurance Trust (the “Trust” or “VIT”) is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company. The Trust includes the Goldman Sachs Strategic International Equity Fund (the “Fund”). The Fund is a diversified portfolio under the Act offering two classes of shares — Institutional and Service Shares. Shares of the Trust are offered to separate accounts of participating life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies.
Goldman Sachs Asset Management International (“GSAMI”), an affiliate of Goldman, Sachs & Co. (“Goldman Sachs”), serves as investment adviser to the Fund pursuant to a management agreement (the “Agreement”) with the Trust.
2. SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and require management to make estimates and assumptions that may affect the reported amounts and disclosures. Actual results may differ from those estimates and assumptions.
A. Investment Valuation — The Fund’s valuation policy is to value investments at fair value.
B. Investment Income and Investments — Investment income includes interest income, dividend income, net of any foreign withholding taxes, less any amounts reclaimable, and securities lending income. Interest income is accrued daily and adjusted for amortization of premiums and accretion of discounts. Dividend income is recognized on ex-dividend date or, for certain foreign securities, as soon as such information is obtained subsequent to the ex-dividend date. Investment transactions are reflected on trade date. Realized gains and losses are calculated using identified cost. Investment transactions are recorded on the following business day for daily net asset value (“NAV”) calculations. Any foreign capital gains tax is accrued daily based upon net unrealized gains, and is payable upon sale of such investments. Distributions received from the Fund’s investments in United States (“U.S.”) real estate investment trusts (“REITs”) may be characterized as ordinary income, net capital gain or a return of capital. A return of capital is recorded by the Fund as a reduction to the cost basis of the REIT.
C. Class Allocations and Expenses — Investment income, realized and unrealized gain (loss), and non-class specific expenses of the Fund are allocated daily based upon the proportion of net assets of each class. Non-class specific expenses directly incurred by the Fund are charged to the Fund, while such expenses incurred by the Trust are allocated across the Fund on a straight-line and/or pro-rata basis depending upon the nature of the expenses. Class specific expenses, where applicable, are borne by the respective share classes and include Distribution and Service and Transfer Agency fees.
D. Federal Taxes and Distributions to Shareholders — It is the Fund’s policy to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Code”), applicable to regulated investment companies (mutual funds) and to distribute each year substantially all of its investment company taxable income and capital gains to its shareholders. Accordingly, the Fund is not required to make any provisions for the payment of federal income tax. Distributions to shareholders are recorded on the ex-dividend date. Income and capital gains distributions, if any, are declared and paid annually.
Net capital losses are carried forward to future fiscal years and may be used to the extent allowed by the Code to offset any future capital gains. Utilization of capital loss carryforwards will reduce the requirement of future capital gains distributions.
The characterization of distributions to shareholders for financial reporting purposes is determined in accordance with federal income tax rules, which may differ from GAAP. The source of the Fund’s distributions may be shown in the accompanying financial statements as either from net investment income, net realized gain or capital. Certain components of the Fund’s net assets on the Statement of Assets and Liabilities reflect permanent GAAP/tax differences based on the appropriate tax character.
E. Foreign Currency Translation — The accounting records and reporting currency of the Fund are maintained in U.S. dollars. Assets and liabilities denominated in foreign currencies are translated into U.S. dollars using the current exchange rates at the close of each business day. The effect of changes in foreign currency exchange rates on investments is included within net realized and unrealized gain (loss) on investments. Changes in the value of other assets and liabilities as a result of fluctuations in foreign
16
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INTERNATIONAL EQUITY FUND
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
exchange rates are included in the Statement of Operations within net change in unrealized gain (loss) on foreign currency translations. Transactions denominated in foreign currencies are translated into U.S. dollars on the date the transaction occurred, the effects of which are included within net realized gain (loss) on foreign currency transactions.
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS
The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The levels used for classifying investments are not necessarily an indication of the risk associated with investing in these investments. The three levels of the fair value hierarchy are described below:
Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 — Quoted prices in markets that are not active or financial instruments for which significant inputs are observable (including, but not limited to, quoted prices for similar investments, interest rates, foreign exchange rates, volatility and credit spreads), either directly or indirectly;
Level 3 — Prices or valuations that require significant unobservable inputs (including GSAMI’s assumptions in determining fair value measurement).
Changes in valuation techniques may result in transfers into or out of an assigned level within the hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value hierarchy resulting from such changes are deemed to have occurred as of the beginning of the reporting period.
The Board of Trustees (“Trustees”) has approved Valuation Procedures that govern the valuation of the portfolio investments held by the Fund, including investments for which market quotations are not readily available. The Trustees have delegated to GSAMI day-to-day responsibility for implementing and maintaining internal controls and procedures related to the valuation of the Fund’s portfolio investments. To assess the continuing appropriateness of pricing sources and methodologies, GSAMI regularly performs price verification procedures and issues challenges as necessary to third party pricing vendors or brokers, and any differences are reviewed in accordance with the Valuation Procedures.
A. Level 1 and Level 2 Fair Value Investments — The valuation techniques and significant inputs used in determining the fair values for investments classified as Level 1 and Level 2 are as follows:
Equity Securities — Equity securities traded on a U.S. securities exchange or the NASDAQ system, or those located on certain foreign exchanges, including but not limited to the Americas, are valued daily at their last sale price or official closing price on the principal exchange or system on which they are traded. If there is no sale or official closing price or such price is believed by GSAMI to not represent fair value, equity securities are valued at the last bid price for long positions and at the last ask price for short positions. To the extent these investments are actively traded, they are classified as Level 1 of the fair value hierarchy, otherwise they are generally classified as Level 2.
Unlisted equity securities for which market quotations are available are valued at the last sale price on the valuation date, or if no sale occurs, at the last bid price. Securities traded on certain foreign securities exchanges are valued daily at fair value determined by an independent fair value service (if available) under Valuation Procedures approved by the Trustees and consistent with applicable regulatory guidance. The independent fair value service takes into account multiple factors including, but not limited to, movements in the securities markets, certain depositary receipts, futures contracts and foreign currency exchange rates that have occurred subsequent to the close of the foreign securities exchange. These investments are generally classified as Level 2 of the fair value hierarchy.
17
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INTERNATIONAL EQUITY FUND
Notes to Financial Statements (continued)
December 31, 2016
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS (continued)
Underlying Funds (including Money Market Funds) — Underlying Funds (“Underlying Funds”) include other investment companies and exchange-traded funds (“ETFs”). Investments in the Underlying Funds (except ETFs) are valued at the NAV per share of the Institutional Share class on the day of valuation. ETFs are valued daily at the last sale price or official closing price on the principal exchange or system on which the investment is traded. Because the Fund invests in Underlying Funds that fluctuate in value, the Fund’s shares will correspondingly fluctuate in value. To the extent these investments are actively traded, they are classified as Level 1 of the fair value hierarchy, otherwise they are generally classified as Level 2. For information regarding an Underlying Fund’s accounting policies and investment holdings, please see the Underlying Fund’s shareholder report.
B. Level 3 Fair Value Investments — To the extent that significant inputs to valuation models and other alternative pricing sources are unobservable, or if quotations are not readily available, or if GSAMI believes that such quotations do not accurately reflect fair value, the fair value of the Fund’s investments may be determined under Valuation Procedures approved by the Trustees. GSAMI, consistent with its procedures and applicable regulatory guidance, may make an adjustment to the most recent valuation prices of either domestic or foreign securities in light of significant events to reflect what it believes to be the fair value of the securities at the time of determining the Fund’s NAV. Significant events which could affect a large number of securities in a particular market may include, but are not limited to: significant fluctuations in U.S. or foreign markets; market dislocations; market disruptions; or unscheduled market closings. Significant events which could also affect a single issuer may include, but are not limited to: corporate actions such as reorganizations, mergers and buy-outs; ratings downgrades; and bankruptcies.
C. Fair Value Hierarchy — The following is a summary of the Fund’s investments classified in the fair value hierarchy as of December 31, 2016:
Investment Type | Level 1 | Level 2 | Level 3 | |||||||||
Assets | ||||||||||||
Common Stock and/or Other Equity Investments(a) | ||||||||||||
Asia | $ | — | $ | 29,808,386 | $ | — | ||||||
Australia and Oceania | — | 5,045,016 | — | |||||||||
Europe | — | 101,579,477 | — | |||||||||
North America | 2,263,928 | 2,415,012 | — | |||||||||
Investment Company | 10 | — | — | |||||||||
Securities Lending Reinvestment Vehicle | 764,701 | — | — | |||||||||
Total | $ | 3,028,639 | $ | 138,847,891 | $ | — |
(a) | Amounts are disclosed by continent to highlight the impact of time zone differences between local market close and the calculation of NAV. Security valuations are based on the principal exchange or system on which they are traded, which may differ from country of domicile noted in the table. The Fund utilizes fair value model prices provided by an independent fair value service for certain international equity securities, resulting in a Level 2 classification. |
For further information regarding security characteristics, see the Schedule of Investments.
4. AGREEMENTS AND AFFILIATED TRANSACTIONS
A. Management Agreement — Under the Agreement, GSAMI manages the Fund, subject to the general supervision of the Trustees.
As compensation for the services rendered pursuant to the Agreement, the assumption of the expenses related thereto and administration of the Fund’s business affairs, including providing facilities, GSAMI is entitled to a management fee, accrued daily and paid monthly, equal to an annual percentage rate of the Fund’s average daily net assets.
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GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INTERNATIONAL EQUITY FUND
4. AGREEMENTS AND AFFILIATED TRANSACTIONS (continued)
For the fiscal year ended December 31, 2016, contractual and effective net management fees with GSAMI were at the following rates:
Contractual Management Rate | ||||||||||||||||||||||||
First $1 billion | Next $1 billion | Next $3 billion | Next $3 billion | Over $8 billion | Effective Rate | Effective Net Management Rate^ | ||||||||||||||||||
0.85% | 0.77 | % | 0.73 | % | 0.72 | % | 0.71 | % | 0.85 | % | 0.81 | %* |
^ | Effective Net Management Rate includes the impact of management fee waivers of affiliated Underlying Funds, if any. |
* | GSAMI agreed to waive a portion of its management fee in order to achieve a net management rate, as defined in the Fund’s most recent prospectus. This waiver will be effective through at least April 29, 2017 and prior to such date GSAMI may not terminate the arrangement without approval of the Trustees. For the fiscal year ended December 31, 2016, GSAMI waived $59,461 of its management fee. |
The Fund invests in Institutional Shares of the Goldman Sachs Financial Square Government Fund, which is an affiliated Underlying Fund. GSAMI has agreed to waive a portion of its management fee payable by the Fund in an amount equal to the management fee it earns as an investment adviser to any of the affiliated Underlying Funds in which the Fund invests. For the fiscal year ended December 31, 2016, GSAMI waived $524 of the Fund’s management fee.
B. Distribution and Service Plan — The Trust, on behalf of the Service Shares of the Fund, has adopted a Distribution and Service Plan (the “Plan”). Under the Plan, Goldman Sachs, which serves as distributor (the “Distributor”), is entitled to a fee accrued daily and paid monthly, for distribution services and personal and account maintenance services, which may then be paid by Goldman Sachs to authorized dealers, equal to, on an annual basis, 0.25% of the Fund’s average daily net assets attributable to Service Shares.
C. Transfer Agency Agreement — Goldman Sachs also serves as the transfer agent of the Fund for a fee pursuant to the Transfer Agency Agreement. The fees charged for such transfer agency services are accrued daily and paid monthly at an annual rate of 0.02% of the average daily net assets of Institutional and Service Shares.
D. Other Expense Agreements and Affiliated Transactions — GSAMI has agreed to limit certain “Other Expenses” of the Fund (excluding acquired fund fees and expenses, transfer agency fees and expenses, taxes, interest, brokerage fees, shareholder meeting, litigation, indemnification and extraordinary expenses) to the extent such expenses exceed, on an annual basis, a percentage rate of the average daily net assets of the Fund. Such Other Expense reimbursements, if any, are accrued daily and paid monthly. In addition, the Fund is not obligated to reimburse GSAMI for prior fiscal year expense reimbursements, if any. The Other Expense limitation as an annual percentage rate of average daily net assets for the Fund is 0.044%. Prior to April 30, 2016, the Other Expense limitation for the Fund was 0.084%. The Other Expense limitation will remain in place through at least April 29, 2017, and prior to such date GSAMI may not terminate the arrangement without the approval of the Trustees. For the fiscal year ended December 31, 2016, GSAMI reimbursed $192,296 to the Fund. In addition, the Fund has entered into certain offset arrangements with the custodian and the transfer agent, which may result in a reduction of the Fund’s expenses and are received irrespective of the application of the “Other Expense” limitation described above. For the fiscal year ended December 31, 2016, custody fee credits were $1,887.
E. Line of Credit Facility — As of December 31, 2016, the Fund participated in a $1,100,000,000 committed, unsecured revolving line of credit facility (the “facility”) together with other funds of the Trust and certain registered investment companies having management agreements with GSAMI or its affiliates. This facility is to be used for temporary emergency purposes, or to allow for an orderly liquidation of securities to meet redemption requests. The interest rate on borrowings is based on the federal funds rate. The facility also requires a fee to be paid by the Fund based on the amount of the commitment that has not been utilized. For the fiscal year ended December 31, 2016, the Fund did not have any borrowings under the facility.
19
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INTERNATIONAL EQUITY FUND
Notes to Financial Statements (continued)
December 31, 2016
4. AGREEMENTS AND AFFILIATED TRANSACTIONS (continued)
F. Other Transactions with Affiliates — For the fiscal year ended December 31, 2016, Goldman Sachs earned $362 in brokerage commissions from portfolio transactions on behalf of the Fund.
The following table provides information about the Fund’s investment in the Goldman Sachs Financial Square Government Fund as of and for the fiscal year ended December 31, 2016:
Market Value 12/31/2015 | Purchases at Cost | Proceeds from Sales | Market Value 12/31/2016 | Dividend Income | ||||||||||||||
$ | — | $ | 9,450,026 | $ | (9,450,016 | ) | $ | 10 | $ | 1,005 |
5. PORTFOLIO SECURITIES TRANSACTIONS
The cost of purchases and proceeds from sales and maturities of long-term securities for the fiscal year ended December 31, 2016 were $ 57,733,876 and $ 65,501,697, respectively.
6. SECURITIES LENDING
Pursuant to exemptive relief granted by the Securities and Exchange Commission (“SEC”) and the terms and conditions contained therein, the Fund may lend its securities through a securities lending agent, Goldman Sachs Agency Lending (“GSAL”), a wholly-owned subsidiary of Goldman Sachs, to certain qualified borrowers including Goldman Sachs and affiliates. In accordance with the Fund’s securities lending procedures, the Fund receives cash collateral at least equal to the market value of the securities on loan. The market value of the loaned securities is determined at the close of business of the Fund, at their last sale price or official closing price on the principal exchange or system on which they are traded, and any additional required collateral is delivered to the Fund on the next business day. As with other extensions of credit, the Fund may experience delay in the recovery of its securities or incur a loss should the borrower of the securities breach its agreement with the Fund or become insolvent at a time when the collateral is insufficient to cover the cost of repurchasing securities on loan. Dividend income received from securities on loan may not be subject to withholding taxes and therefore withholding taxes paid may differ from the amounts listed in the Statement of Operations. Loans of securities are terminable at any time and as such 1) the remaining contractual maturities of the outstanding securities lending transactions are considered to be overnight and continuous and 2) the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.
The Fund invests the cash collateral received in connection with securities lending transactions in the Goldman Sachs Financial Square Government Fund (“Government Money Market Fund”), an affiliated series of the Trust. Prior to September 30, 2016, the cash collateral had been invested in the Goldman Sachs Financial Square Money Market Fund. The Government Money Market Fund is registered under the Act as an open end investment company, is subject to Rule 2a-7 under the Act, and is managed by GSAM, for which GSAM may receive an investment advisory fee of up to 0.205% on an annualized basis of the average daily net assets of the Government Money Market Fund.
In the event of a default by a borrower with respect to any loan, GSAL will exercise any and all remedies provided under the applicable borrower agreement to make the Fund whole. These remedies include purchasing replacement securities by applying the collateral held from the defaulting broker against the purchase cost of the replacement securities. If GSAL is unable to purchase replacement securities, GSAL will indemnify the Fund by paying the Fund an amount equal to the market value of the securities loaned minus the value of cash collateral received from the borrower for the loan, subject to an exclusion for any shortfalls resulting from a loss of value in such cash collateral due to reinvestment risk. The Fund’s loaned securities were all subject to enforceable Securities Lending Agreements, and the value of the collateral is at least equal to the value of the cash received. The amounts of the Fund’s overnight and continuous agreements collateralized by common stocks which represent the gross amounts of recognized liabilities for securities lending transactions outstanding as of December 31, 2016 are disclosed as “Payable upon return of securities loaned” on the Statement of Assets and Liabilities.
20
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INTERNATIONAL EQUITY FUND
6. SECURITIES LENDING (continued)
Both the Fund and GSAL received compensation relating to the lending of the Fund’s securities. The amounts earned, if any, by the Fund for the fiscal year ended December 31, 2016 are reported under Investment Income on the Statement of Operations. For the fiscal year ended December 31, 2016, GSAL earned $31 in fees as securities lending agent.
The following table provides information about the Fund’s investment in the Government Money Market Fund for the fiscal year ended December 31, 2016:
Market Value 12/31/2015 | Purchases at Cost | Proceeds from Sales | Market Value 12/31/2016 | |||||||||
$— | $ | 873,944 | $ | (109,243 | ) | $ | 764,701 |
7. TAX INFORMATION
The tax character of distributions paid during the fiscal years ended December 31, 2015 and December 31, 2016 was as follows:
2015 | 2016 | |||||||
Distributions paid from ordinary income | $ | 2,503,742 | $ | 2,725,525 |
As of December 31, 2016, the components of accumulated earnings (losses) on a tax-basis were as follows:
Undistributed ordinary income — net | $ | 149,376 | ||
Capital loss carryforwards: | ||||
Expiring 2017(1) | (63,558,058 | ) | ||
Perpetual long-term | (3,977,388 | ) | ||
Total capital loss carryforwards | $ | (67,535,446 | ) | |
Timing differences (Qualified Late Year Loss Deferral/Post October Loss Deferral) | (163,996 | ) | ||
Unrealized losses — net | (9,296,427 | ) | ||
Total accumulated losses — net | $ | (76,846,493 | ) |
(1) | Expiration occurs on December 31 of the year indicated. The Fund had capital loss carryforwards of $21,940,989 which expired in the current fiscal year. |
As of December 31, 2016, the Fund’s aggregate security unrealized gains and losses based on cost for U.S. federal income tax purposes were as follows:
Tax cost | $ | 151,128,718 | ||
Gross unrealized gain | 9,591,743 | |||
Gross unrealized loss | (18,843,931 | ) | ||
Net unrealized loss | $ | (9,252,188 | ) | |
Net unrealized security loss in other investments | (44,239 | ) | ||
Net unrealized loss | $ | (9,296,427 | ) |
The difference between GAAP-basis and tax-basis unrealized gains (losses) is attributable primarily to wash sales and differences in the tax treatment of passive foreign investment company investments.
In order to present certain components of the Fund’s capital accounts on a tax-basis, the Fund has reclassified $14,817 of undistributed net investment loss and $21,926,172 of accumulated net realized loss to paid-in capital. This reclassification has no
21
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INTERNATIONAL EQUITY FUND
Notes to Financial Statements (continued)
December 31, 2016
7. TAX INFORMATION (continued)
impact on the NAV of the Fund and results primarily from expired capital loss carryforwards and differences in the tax treatment of foreign currency transactions and passive foreign investment company investments.
GSAMI has reviewed the Fund’s tax positions for all open tax years (the current and prior three years, as applicable) and has concluded that no provision for income tax is required in the Fund’s financial statements. Such open tax years remain subject to examination and adjustment by tax authorities.
8. OTHER RISKS
The Fund’s risks include, but are not limited to, the following:
Foreign and Emerging Countries Risk — Investing in foreign markets may involve special risks and considerations not typically associated with investing in the U.S. Foreign securities may be subject to risk of loss because of more or less foreign government regulation, less public information and less economic, political and social stability in the countries in which the Fund invests. The imposition of exchange controls, confiscations, trade restrictions (including tariffs) and other government restrictions by the U.S. or other governments, or from problems in share registration, settlement or custody, may also result in losses. Foreign risk also involves the risk of negative foreign currency rate fluctuations, which may cause the value of securities denominated in such foreign currency (or other instruments through which the Fund has exposure to foreign currencies) to decline in value. Currency exchange rates may fluctuate significantly over short periods of time. To the extent that the Fund also invests in securities of issuers located in emerging markets, these risks may be more pronounced.
Foreign Custody Risk — If the Fund invests in foreign securities, the Fund may hold such securities and cash with foreign banks, agents, and securities depositories appointed by the Fund’s custodian (each a “Foreign Custodian”). Some foreign custodians may be recently organized or new to the foreign custody business. In some countries, Foreign Custodians may be subject to little or no regulatory oversight over, or independent evaluation of, their operations. Further, the laws of certain countries may place limitations on the Fund’s ability to recover its assets if a Foreign Custodian enters bankruptcy. Investments in emerging markets may be subject to even greater custody risks than investments in more developed markets. Custody services in emerging market countries are very often undeveloped and may be considerably less well regulated than in more developed countries, and thus may not afford the same level of investor protection as would apply in developed countries.
Investments in Other Investment Companies — As a shareholder of another investment company, including an exchange traded fund (“ETF”), the Fund will indirectly bear its proportionate share of any net management fees and other expenses paid by such other investment companies, in addition to the fees and expenses regularly borne by the Fund. ETFs are subject to risks that do not apply to conventional mutual funds, including but not limited to the following: (i) the market price of the ETF’s shares may trade at a premium or a discount to their NAV; and (ii) an active trading market for an ETF’s shares may not develop or be maintained.
Large Shareholder Transactions Risk — The Fund may experience adverse effects when certain large shareholders, such as other funds, participating insurance companies, accounts and Goldman Sachs affiliates, purchase or redeem large amounts of shares of the Fund. Such large shareholder redemptions may cause the Fund to sell portfolio securities at times when it would not otherwise do so, which may negatively impact the Fund’s NAV and liquidity. These transactions may also accelerate the realization of taxable income to shareholders if such sales of investments resulted in gains, and may also increase transaction costs. In addition, a large redemption could result in the Fund’s current expenses being allocated over a smaller asset base, leading to an increase in the Fund’s expense ratio. Similarly, large Fund share purchases may adversely affect the Fund’s performance to the extent that the Fund is delayed in investing new cash and is required to maintain a larger cash position than it ordinarily would.
Liquidity Risk — The Fund may make investments that are illiquid or that may become less liquid in response to market developments or adverse investor perceptions. Illiquid investments may be more difficult to value. Liquidity risk may also refer to the risk that the Fund will not be able to pay redemption proceeds within the allowable time period because of unusual market
22
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INTERNATIONAL EQUITY FUND
8. OTHER RISKS (continued)
conditions, an unusually high volume of redemption requests, or other reasons. To meet redemption requests, the Fund may be forced to sell investments at an unfavorable time and/or under unfavorable conditions.
Market and Credit Risks — In the normal course of business, the Fund trades financial instruments and enters into financial transactions where risk of potential loss exists due to changes in the market (market risk). Additionally, the Fund may also be exposed to credit risk in the event that an issuer or guarantor fails to perform or that an institution or entity with which the Fund has unsettled or open transactions defaults.
9. INDEMNIFICATIONS
Under the Trust’s organizational documents, its Trustees, officers, employees and agents are indemnified, to the extent permitted by the Act and state law, against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the course of business, the Fund enters into contracts that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, GSAMI believes the risk of loss under these arrangements to be remote.
10. SUBSEQUENT EVENTS
Subsequent events after the Statement of Assets and Liabilities date have been evaluated and GSAMI has concluded that there is no impact requiring adjustment or disclosure in the financial statements.
11. SUMMARY OF SHARE TRANSACTIONS
Share activity is as follows:
For the Fiscal Year Ended December 31, 2016 | For the Fiscal Year Ended December 31, 2015 | |||||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||||
Institutional Shares | ||||||||||||||||
Shares sold | 110,254 | $ | 974,934 | 78,427 | $ | 762,672 | ||||||||||
Reinvestment of distributions | 89,902 | 781,242 | 81,626 | 744,425 | ||||||||||||
Shares redeemed | (510,122 | ) | (4,546,751 | ) | (678,130 | ) | (6,709,975 | ) | ||||||||
(309,966 | ) | (2,790,575 | ) | (518,077 | ) | (5,202,878 | ) | |||||||||
Service Shares | ||||||||||||||||
Shares sold | 1,080,345 | 9,775,806 | 982,644 | 9,710,783 | ||||||||||||
Reinvestment of distributions | 223,224 | 1,944,283 | 192,485 | 1,759,317 | ||||||||||||
Shares redeemed | (1,984,717 | ) | (17,688,164 | ) | (2,092,691 | ) | (20,335,611 | ) | ||||||||
(681,148 | ) | (5,968,075 | ) | (917,562 | ) | (8,865,511 | ) | |||||||||
NET DECREASE | (991,114 | ) | $ | (8,758,650 | ) | (1,435,639 | ) | $ | (14,068,389 | ) |
23
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Goldman Sachs Variable Insurance Trust and Shareholders of the
Goldman Sachs Strategic International Equity Fund:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Goldman Sachs Strategic International Equity Fund (the “Fund”), a fund of the Goldman Sachs Variable Insurance Trust, as of December 31, 2016, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities as of December 31, 2016 by correspondence with the custodian, brokers, transfer agent of the underlying funds and the application of alternative auditing procedures where securities purchased confirmations had not been received, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 14, 2017
24
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INTERNATIONAL EQUITY FUND
Fund Expenses — Six Month Period Ended December 31, 2016 (Unaudited) |
As a shareholder of Institutional or Service Shares of the Fund, you incur ongoing costs, including management fees, distribution and/or service (12b-1) fees (with respect to Service Shares) and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Institutional Shares and Service Shares of the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from July 1, 2016 through December 31, 2016, which represents a period of 184 days of a 366 day year.
Actual Expenses — The first line under each share class in the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000=8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes — The second line under each share class in the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual net expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only. As a shareholder of the Fund you do not incur any transaction costs, such as sales charges, redemption fees, or exchange fees, but shareholders of other funds may incur such costs. The second line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds whose shareholders may incur transaction costs.
Share Class | Beginning Account Value 07/01/16 | Ending Account Value | Expenses Paid for the 6 Months Ended 12/31/16* | |||||||||
Institutional | ||||||||||||
Actual | $ | 1,000 | $ | 1,010.10 | $ | 4.40 | ||||||
Hypothetical 5% return | 1,000 | 1,020.76 | + | 4.42 | ||||||||
Service | ||||||||||||
Actual | 1,000 | 1,009.70 | 5.66 | |||||||||
Hypothetical 5% return | 1,000 | 1,019.51 | + | 5.69 |
* | Expenses are calculated using the Fund’s annualized net expense ratio for each class, which represents the ongoing expenses as a percentage of net assets for the six months ended December 31, 2016. Expenses are calculated by multiplying the annualized net expense ratio by the average account value for the period; then multiplying the result by the number of days in the most recent fiscal half year; and then dividing that result by the number of days in the fiscal year. The annualized net expense ratios for the period were 0.87% and 1.12% for Institutional and Service Shares, respectively. |
+ | Hypothetical expenses are based on the Fund’s actual annualized net expense ratios and an assumed rate of return of 5% per year before expenses. |
25
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INTERNATIONAL EQUITY FUND
Trustees and Officers (Unaudited)
Independent Trustees
Name, Address and Age1 | Position(s) Held with the Trust | Term of Office and | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee3 | Other Directorships Held by Trustee4 | |||||||
Ashok N. Bakhru Age: 74 | Chairman of the Board of Trustees | Since 1996 (Trustee since 1991) | Mr. Bakhru is retired. He was formerly Director, Apollo Investment Corporation (a business development company) (2008-2013); President, ABN Associates (a management and financial consulting firm) (1994-1996 and 1998-2012); Trustee, Scholarship America (1998-2005); Trustee, Institute for Higher Education Policy (2003-2008); Director, Private Equity Investors — III and IV (1998-2007), and Equity-Linked Investors II (April 2002-2007).
Chairman of the Board of Trustees — Goldman Sachs Trust; Goldman Sachs Variable Insurance Trust; Goldman Sachs Trust II; Goldman Sachs BDC, Inc.; Goldman Sachs Private Middle Market Credit LLC; Goldman Sachs MLP Income Opportunities Fund; Goldman Sachs MLP and Energy Renaissance Fund; and Goldman Sachs ETF Trust. | 142 | None | |||||||
Kathryn A. Cassidy Age: 62 | Trustee | Since 2015 | Ms. Cassidy is retired. Formerly, she was Advisor to the Chairman (May 2014-December 2014); and Senior Vice President and Treasurer (2008-2014), General Electric Company & General Electric Capital Corporation (technology and financial services companies).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||||
Diana M. Daniels Age: 67 | Trustee | Since 2007 | Ms. Daniels is retired. Formerly, she was Vice President, General Counsel and Secretary, The Washington Post Company (1991-2006). Ms. Daniels is a Trustee Emeritus and serves as a Presidential Councillor of Cornell University (2013-Present); former Member of the Legal Advisory Board, New York Stock Exchange (2003-2006) and of the Corporate Advisory Board, Standish Mellon Management Advisors (2006-2007).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||||
Herbert J. Markley Age: 66 | Trustee | Since 2013 | Mr. Markley is retired. Formerly, he was Executive Vice President, Deere & Company (an agricultural and construction equipment manufacturer) (2007-2009); and President, Agricultural Division, Deere & Company (2001-2007). Previously, Mr. Markley served as an Advisory Board Member of Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust (June 2013-October 2013).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||||
Jessica Palmer Age: 67 | Trustee | Since 2007 | Ms. Palmer is retired. She is Director, Emerson Center for the Arts and Culture (2011-Present); and was formerly a Consultant, Citigroup Human Resources Department (2007-2008); Managing Director, Citigroup Corporate and Investment Banking (previously, Salomon Smith Barney/Salomon Brothers) (1984-2006). Ms. Palmer was a Member of the Board of Trustees of Indian Mountain School (private elementary and secondary school) (2004-2009).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||||
26
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INTERNATIONAL EQUITY FUND
Trustees and Officers (Unaudited) (continued)
Independent Trustees
Name, Address and Age1 | Position(s) Held with the Trust | Term of Office and | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee3 | Other Directorships Held by Trustee4 | |||||||
Roy W. Templin Age: 56 | Trustee | Since 2013 | Mr. Templin is retired. He recently served as Chairman of the Board of Directors, Con-Way Incorporated (a transportation, logistics and supply chain management service company) (2014-2015); and was formerly Executive Vice President and Chief Financial Officer, Whirlpool Corporation (an appliance manufacturer and marketer) (2004-2012). Previously, Mr. Templin served as an Advisory Board Member of Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust (June 2013-October 2013).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||||
Gregory G. Weaver Age: 65 | Trustee | Since 2015 | Mr. Weaver is retired. He is Director, Verizon Communications Inc. (2015-Present); and was formerly Chairman and Chief Executive Officer, Deloitte & Touche LLP (a professional services firm) (2001-2005 and 2012-2014); and Member of the Board of Directors, Deloitte & Touche LLP (2006-2012).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | Verizon Communications Inc. | |||||||
27
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INTERNATIONAL EQUITY FUND
Trustees and Officers (Unaudited) (continued)
Interested Trustees*
Name, Address and Age1 | Position(s) Held with the Trust | Term of Office and | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee3 | Other Directorships Held by Trustee4 | |||||||
James A. McNamara Age: 54 | President and Trustee | Since 2007 | Managing Director, Goldman Sachs (December 1998-Present); Director of Institutional Fund Sales, GSAM (April 1998-December 2000); and Senior Vice President and Manager, Dreyfus Institutional Service Corporation (January 1993- April 1998).
President and Trustee — Goldman Sachs Trust; Goldman Sachs Variable Insurance Trust; Goldman Sachs Trust II; Goldman Sachs MLP Income Opportunities Fund; Goldman Sachs MLP and Energy Renaissance Fund; and Goldman Sachs ETF Trust. | 140 | None | |||||||
Alan A. Shuch Age: 67 | Trustee | Since 1990 | Advisory Director — GSAM (May 1999-Present); Consultant to GSAM (December 1994-May 1999); and Limited Partner, Goldman Sachs (December 1994-May 1999).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||||
* | These persons are considered to be “Interested Trustees” because they hold positions with Goldman Sachs and own securities issued by The Goldman Sachs Group, Inc. Each Interested Trustee holds comparable positions with certain other companies of which Goldman Sachs, GSAM or an affiliate thereof is the investment adviser, administrator and/or distributor. |
1 | Each Trustee may be contacted by writing to the Trustee, c/o Goldman Sachs, 200 West Street, New York, New York, 10282, Attn: Caroline Kraus. Information is provided as of December 31, 2016. Alan A. Shuch served as Trustee until his retirement from the Board on December 31, 2016. |
2 | Subject to such policies as may be adopted by the Board from time-to-time, each Trustee holds office for an indefinite term, until the earliest of: (a) the election of his or her successor; (b) the date the Trustee resigns or is removed by the Board or shareholders, in accordance with the Trust’s Declaration of Trust; or (c) the termination of the Trust. The Board has adopted policies which provide that (a) no Trustee shall hold office for more than 15 years and (b) a Trustee shall retire as of December 31st of the calendar year in which he or she reaches his or her 74th birthday, unless a waiver of such requirement shall have been adopted by a majority of the other Trustees. These policies may be changed by the Trustees without shareholder vote. One Trustee has been granted a waiver from the foregoing policies which permits him to serve until December 31, 2017. |
3 | The Goldman Sachs Fund Complex includes certain other companies listed above for each respective Trustee. As of December 31, 2016, Goldman Sachs Trust consisted of 92 portfolios (89 of which offered shares to the public); Goldman Sachs Variable Insurance Trust consisted of 14 portfolios; Goldman Sachs Trust II consisted of 17 portfolios (16 of which offered shares to the public); Goldman Sachs BDC, Inc., Goldman Sachs Private Middle Market Credit LLC, Goldman Sachs MLP Income Opportunities Fund, and Goldman Sachs MLP and Energy Renaissance Fund each consisted of one portfolio; and Goldman Sachs ETF Trust consisted of 15 portfolios (eight of which offered shares to the public). Goldman Sachs Private Middle Market Credit LLC does not offer shares to the public. |
4 | This column includes only directorships of companies required to report to the Securities and Exchange Commission under the Securities Exchange Act of 1934 (i.e., “public companies”) or other investment companies registered under the Act. |
Additional information about the Trustees is available in the Fund’s Statement of Additional Information, which can be obtained from Goldman Sachs free of charge by calling this toll-free number (in the United States of America): 1-800-526-7384.
28
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INTERNATIONAL EQUITY FUND
Trustees and Officers (Unaudited) (continued)
Officers of the Trust*
Name, Address and Age1 | Position(s) Held with the Trust | Term of Office and | Principal Occupation(s) During Past 5 Years | |||
James A. McNamara 200 West Street New York, NY 10282 Age: 54 | Trustee and President | Since 2007 | Managing Director, Goldman Sachs (December 1998-Present); Director of Institutional Fund Sales, GSAM (April 1998-December 2000); and Senior Vice President and Manager, Dreyfus Institutional Service Corporation (January 1993-April 1998).
President and Trustee — Goldman Sachs Trust; Goldman Sachs Variable Insurance Trust; Goldman Sachs Trust II; Goldman Sachs MLP Income Opportunities Fund; Goldman Sachs MLP and Energy Renaissance Fund; and Goldman Sachs ETF Trust. | |||
Caroline L. Kraus 200 West Street New York, NY 10282 Age: 39 | Secretary | Since 2012 | Managing Director, Goldman Sachs (January 2016-Present); Vice President, Goldman Sachs (August 2006-December 2015); Associate General Counsel, Goldman Sachs (2012-Present); Assistant General Counsel, Goldman Sachs (August 2006-December 2011); and Associate, Weil, Gotshal & Manges, LLP (2002-2006).
Secretary — Goldman Sachs Trust (previously Assistant Secretary (2012)); Goldman Sachs Variable Insurance Trust (previously Assistant Secretary (2012)); Goldman Sachs Trust II; Goldman Sachs BDC, Inc.; Goldman Sachs Private Middle Market Credit LLC; Goldman Sachs Middle Market Lending LLC; Goldman Sachs MLP Income Opportunities Fund; Goldman Sachs MLP and Energy Renaissance Fund; and Goldman Sachs ETF Trust. | |||
Scott M. McHugh 200 West Street New York, NY 10282 Age: 45 | Treasurer, Senior Vice President and Principal Financial Officer | Since 2009 (Principal | Managing Director, Goldman Sachs (January 2016-Present); Vice President, Goldman Sachs (February 2007-December 2015); Assistant Treasurer of certain mutual funds administered by DWS Scudder (2005-2007); and Director (2005-2007), Vice President (2000-2005), and Assistant Vice President (1998-2000), Deutsche Asset Management or its predecessor (1998-2007).
Treasurer, Senior Vice President and Principal Financial Officer — Goldman Sachs Trust; Goldman Sachs Variable Insurance Trust; Goldman Sachs Trust II; Goldman Sachs MLP Income Opportunities Fund; Goldman Sachs MLP and Energy Renaissance Fund; and Goldman Sachs ETF Trust. | |||
* | Represents a partial list of officers of the Trust. Additional information about all the officers is available in the Fund’s Statement of Additional Information, which can be obtained from Goldman Sachs free of charge by calling this toll-free number (in the United States): 1-800-526-7384. |
1 | Information is provided as of December 31, 2016. |
2 | Officers hold office at the pleasure of the Board of Trustees or until their successors are duly elected and qualified. Each officer holds comparable positions with certain other companies of which Goldman Sachs, GSAM or an affiliate thereof is the investment adviser, administrator and/or distributor. |
Goldman Sachs Variable Insurance Trust — Tax Information (Unaudited)
For the 2016 tax year, the Strategic International Equity Fund has elected to pass through a credit for taxes paid to foreign jurisdictions. The total amount of income received by the Strategic International Equity Fund from sources within foreign countries and possessions of the United States was $0.1838 per share, all of which is attributable to qualified passive income. The percentage of net investment income dividends paid by the Fund during the fiscal year ended December 31, 2016 from foreign sources was 98.71%. The total amount of foreign taxes paid by the Fund was $0.0236 per share.
29
TRUSTEES | OFFICERS | |
Ashok N. Bakhru, Chairman | James A. McNamara, President | |
Kathryn A. Cassidy | Scott M. McHugh, Treasurer, Senior Vice | |
Diana M. Daniels | President and Principal Financial Officer | |
Herbert J. Markley | Caroline L. Kraus, Secretary | |
James A. McNamara | ||
Jessica Palmer | ||
Roy W. Templin | ||
Gregory G. Weaver |
GOLDMAN, SACHS & CO.
Distributor and Transfer Agent
GOLDMAN SACHS ASSET MANAGEMENT INTERNATIONAL
Investment Adviser
Christchurch Court, 10-15 Newgate Street London, EC1A 7HD, England, United Kingdom
Visit our web site at www.GSAMFUNDS.com to obtain the most recent month-end returns.
The reports concerning the Fund included in this shareholder report may contain certain forward-looking statements about the factors that may affect the performance of the Fund in the future. These statements are based on Fund management’s predictions and expectations concerning certain future events and their expected impact on the Fund, such as performance of the economy as a whole and of specific industry sectors, changes in the levels of interest rates, the impact of developing world events, and other factors that may influence the future performance of the Fund. Management believes these forward-looking statements to be reasonable, although they are inherently uncertain and difficult to predict. Actual events may cause adjustments in portfolio management strategies from those currently expected to be employed.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended December 31 is available (i) without charge, upon request by calling 1-800-621-2550; and (ii) on the Securities and Exchange Commission (“SEC”) web site at http://www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Form N-Qs are available on the SEC’s web site at http://www.sec.gov within 60 days after the Fund’s first and third fiscal quarters. The Fund’s Form N-Qs may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may also be obtained by calling 1-800-SEC-0330. Form N-Qs may be obtained upon request and without charge by calling 1-800-621-2550.
The website links provided are for your convenience only and are not an endorsement or recommendation by GSAMI of any of these websites or the products or services offered. GSAMI is not responsible for the accuracy and validity of the content of these websites.
Economic and market forecasts presented herein reflect our judgment as of the date of this presentation and are subject to change without notice. These forecasts do not take into account the specific investment objectives, restrictions, tax and financial situation or other needs of any specific client. Actual data will vary and may not be reflected here. These forecasts are subject to high levels of uncertainty that may affect actual performance. Accordingly, these forecasts should be viewed as merely representative of a broad range of possible outcomes. These forecasts are estimated, based on assumptions, and are subject to significant revision and may change materially as economic and market conditions change. Goldman Sachs has no obligation to provide updates or changes to these forecasts. Case studies and examples are for illustrative purposes only.
Fund holdings and allocations shown are as of December 31, 2016 and may not be representative of future investments. Fund holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities. Current and future holdings are subject to risk.
References to indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only and do not imply that the portfolio will achieve similar results. The index composition may not reflect the manner in which a portfolio is constructed. While an adviser seeks to design a portfolio which reflects appropriate risk and return features, portfolio characteristics may deviate from those of the benchmark.
The Global Industry Classification Standard (“GICS”) was developed by and is the exclusive property and a service mark of Morgan Stanley Capital International Inc. (“MSCI”) and Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. (“S&P”) and is licensed for use by Goldman Sachs. Neither MSCI, S&P nor any other party involved in making or compiling the GICS or any GICS classifications makes any express or implied warranties or representations with respect to such standard or classification (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of such standard or classification. Without limiting any of the foregoing, in no event shall MSCI, S&P, any of their affiliates or any third party involved in making or compiling the GICS or any GICS classifications have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.
The portfolio risk management process includes an effort to monitor and manage risk, but does not imply low risk.
Shares of the Goldman Sachs VIT Funds are offered to separate accounts of participating life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Shares of the Fund are not offered directly to the general public. The variable annuity contracts and variable life insurance policies are described in the separate prospectuses issued by participating insurance companies. You should refer to those prospectuses for information about surrender charges, mortality and expense risk fees and other charges that may be assessed by participating insurance companies under the variable annuity contracts or variable life insurance policies. Such fees or charges, if any, may affect the return you may realize with respect to your investments. Ask your representative for more complete information. Please consider a fund’s objectives, risks and charges and expenses, and read the prospectus carefully before investing. The prospectus contains this and other information about the Fund.
This material is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus or summary prospectus, if applicable. Investors should consider the Fund’s objective, risks, and charges and expenses, and read the summary prospectus, if available, and/or the prospectus carefully before investing or sending money. The summary prospectus, if available, and the prospectus contain this and other information about the Fund and may be obtained from your authorized dealer or from Goldman, Sachs & Co. by calling 1-800-621-2550.
This report is prepared for the general information of contract owners and is not an offer of shares of the Goldman Sachs Variable Insurance Trust — Goldman Sachs Strategic International Equity Fund.
© 2017 Goldman Sachs. All rights reserved.
VITINTLAR-17/80647-TMPL-02-2017-469683
Goldman
Sachs Variable Insurance Trust
Goldman Sachs
U.S. Equity Insights Fund
Annual Report
December 31, 2016
GOLDMAN SACHS VARIABLE INSURANCE TRUST U.S. EQUITY INSIGHTS FUND
INVESTMENT OBJECTIVE
The Fund seeks long-term growth of capital and dividend income.
Portfolio Management Discussion and Analysis
Below, the Goldman Sachs Quantitative Investment Strategies Team discusses the Goldman Sachs Variable Insurance Trust — Goldman Sachs U.S. Equity Insights Fund’s (the “Fund”) performance and positioning for the 12-month period ended December 31, 2016 (the “Reporting Period”).
How did the Fund perform during the Reporting Period?
During the Reporting Period, the Fund’s Institutional and Service Shares generated average annual total returns of 10.70% and 10.44%, respectively. These returns compare to the 11.93% average annual total return of the Fund’s benchmark, the Standard & Poor’s 500® Index (the “S&P 500® Index”) during the same time period.
What economic and market factors most influenced the equity markets as a whole during the Reporting Period?
Representing the U.S. equity market, the S&P 500® Index gained 11.93% during the Reporting Period, despite a global rout at the start of the year, unexpected political events both domestically and abroad and a Federal Reserve (“Fed”) interest rate hike.
As the Reporting Period began in January 2016, U.S. equities were embroiled in a global rout, triggered by investor concerns about an intensifying economic slowdown in China and exacerbated by an oil price plunge. Following a December 2015 interest rate hike, the January 2016 Fed statement acknowledged these external risks and tightening financial conditions. U.S. equities stabilized in February 2016, as market sentiment improved on the more dovish tone set by global central banks. (Dovish language tends to suggest lower interest rates; opposite of hawkish.) U.S. equities were also supported by stronger economic data, rallying as fourth quarter 2015 U.S. Gross Domestic Product (“GDP”) came in above consensus expectations. In March 2016, the Fed kept interest rates on hold and surprised on the dovish side, reducing its forecast to two interest rate hikes in 2016, down from four. Along with receding global economic concerns, this helped to drive a recovery in U.S. equities. Released in March 2016, February 2016 unemployment data came in ahead of market consensus, with unemployment steady at 4.9% in spite of higher participation rates and declining underemployment.
Following the rebound in March 2016, market sentiment appeared to remain sanguine in April 2016, as oil prices rose and China economic growth concerns abated. U.S. equities fell near the end of the month as investors were disappointed by a lack of additional stimulus from the Bank of Japan and by a weaker than consensus expected first quarter U.S. GDP growth rate of 0.5%. Weaker than expected May 2016 payroll data drove expectations for a Fed interest rate hike in June 2016 temporarily lower, but subsequent hawkish Fed minutes revived market expectations. (Hawkish language tends to suggest higher interest rates; opposite of dovish.) The Fed ultimately held interest rates steady in June 2016 and signaled a slower pace of hikes, acknowledging the slowdown in the labor market. Markets were otherwise dominated in June 2016 by the U.K. referendum on membership in the European Union, popularly known as Brexit. U.S. equities sold off in the global risk-off, or heightened risk averse, sentiment in June 2016 following the surprise “leave” result. Markets rebounded in the latter days of the month owing to improving risk sentiment as markets digested the Brexit vote outcome and on dovish remarks from Bank of England Governor Carney.
In July 2016, U.S. equities were buoyed by strong economic data and corporate earnings, despite increased uncertainty post Brexit. In her August 2016 Jackson Hole speech, Fed Chair Janet Yellen acknowledged the case for an interest rate hike had strengthened in the then-recent months. Along with strong labor market data and other hawkish comments from the Fed, this significantly increased the market-implied probability of an interest rate hike by year-end 2016, causing U.S. equities to sell off. In early September 2016, equities fell as the European Central Bank disappointed markets with its lack of commitment to extend quantitative easing. However, there was a subsequent rebound following the Fed’s decision in September 2016 to leave interest rates unchanged.
In October 2016, a combination of hawkish Fed commentary and mounting strong U.S. economic data led to increased market pricing for a December 2016 interest rate hike. U.S. GDP increased by 3.5% on an annualized basis for the third quarter of 2016, above consensus expectations and the strongest growth rate in two years. Following the unexpected victory of Donald Trump in the November 2016 U.S. elections, U.S. equities quickly reversed a short-lived sell-off and surged on anticipation of a pro-growth effect of Mr. Trump’s fiscal stimulus plan. The Fed raised rates 0.25% in December 2016, for the first time in a year but as had
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GOLDMAN SACHS VARIABLE INSURANCE TRUST U.S. EQUITY INSIGHTS FUND
largely been anticipated and set a more hawkish hike path for 2017, causing equities to decline, albeit modestly, following the announcement.
For the Reporting Period overall, energy, telecommunication services and financials were the best performing sectors in the S&P 500® Index by a wide margin. Industrials, materials, utilities and information technology also posted double-digit gains that outpaced the S&P 500® Index during the Reporting Period. The weakest performing sectors in the S&P 500® Index were real estate and health care, the only two to post negative absolute returns, followed by consumer staples and consumer discretionary, which were comparatively weak but generated positive returns during the Reporting Period.
Within the U.S. equity market, there was significant disparity in performance not only among sectors but also among the various capitalization and style segments. While all capitalization segments posted positive returns, small-cap stocks, as measured by the Russell 2000® Index, performed best, followed at some distance by mid-cap stocks, as measured by the Russell Midcap® Index, and then, large-cap stocks, as measured by the Russell 1000® Index. From a style perspective, value-oriented stocks significantly outpaced growth-oriented stocks across the capitalization spectrum. (All as measured by the Russell indices.)
What key factors were responsible for the Fund’s performance during the Reporting Period?
During the Reporting Period, the Fund produced strong absolute gains but underperformed the S&P 500® Index largely due to stock selection driven by our quantitative model and two of our quantitative model’s six investment themes. Four of our quantitative model’s six investment themes contributed positively to the Fund’s relative returns.
What impact did the Fund’s investment themes have on performance during the Reporting Period?
As expected, and in keeping with our investment approach, our quantitative model and its six investment themes — Valuation, Profitability, Quality, Management, Momentum and Sentiment — had the greatest impact on relative performance. We use these themes to take a long-term view of market patterns and look for inefficiencies, selecting stocks for the Fund and overweighting or underweighting the ones chosen by the model. Over time and by design, the performance of any one of the model’s investment themes tends to have a low correlation with the model’s other themes, demonstrating the diversification benefit of the Fund’s theme-driven quantitative model. The variance in performance supports our research indicating that the diversification provided by the Fund’s different investment themes is a significant investment advantage over the long term, even though the Fund may experience underperformance in the short term. Of course, diversification does not protect an investor from market risk nor does it ensure a profit.
During the Reporting Period, two of our six investment themes — Momentum and Management — detracted from relative returns. The Momentum theme seeks to predict drifts in stock prices caused by delayed investor reaction to company-specific information and information about related companies. The Management theme assesses the characteristics, policies and strategic decisions of company management.
The other four investment themes added to the Fund’s relative returns. The Sentiment theme contributed most positively to the Fund’s relative performance during the Reporting Period, followed by Valuation and Quality. The Profitability theme also contributed positively, albeit to a lesser extent. The Sentiment theme reflects selected investment views and decisions of individuals and financial intermediaries. The Valuation theme attempts to capture potential mispricings of securities, typically by comparing a measure of the company’s intrinsic value to its market value. The Quality theme assesses both firm and financial quality. The Profitability theme assesses whether a company is earning more than its cost of capital.
How did the Fund’s sector and industry allocations affect relative performance?
In constructing the Fund’s portfolio, we focus on picking stocks rather than making industry or sector bets. Consequently, the Fund is similar to its benchmark, the S&P 500® Index, in terms of its industry and sector allocation and style. We manage the Fund’s industry and sector exposure by including industry factors in our risk model and by explicitly penalizing industry and sector deviations from the benchmark index in optimization. Sector weights or changes in sector weights generally do not have a meaningful impact on relative performance.
Did stock selection help or hurt Fund performance during the Reporting Period?
We seek to outpace the S&P 500® Index by overweighting stocks that we expect to outperform and underweighting those that we think may lag. We also build positions based on our thematic views. For example, the Fund aims to hold a basket of stocks with more favorable Momentum characteristics than the benchmark index. During the Reporting Period, stock selection overall detracted from the Fund’s relative performance.
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GOLDMAN SACHS VARIABLE INSURANCE TRUST U.S. EQUITY INSIGHTS FUND
Stock selection in the energy, information technology and health care sectors detracted most from the Fund’s results relative to the S&P 500® Index. Partially offsetting these detractors was effective stock selection in the industrials, consumer staples and materials sectors, which contributed positively to the Fund’s results relative to its benchmark index during the Reporting Period.
Which individual positions detracted from the Fund’s results during the Reporting Period?
Detracting most from the Fund’s results relative to its benchmark index were an underweight position in diversified financial institution Bank of America and overweight positions in health care equipment and services provider McKesson and petroleum refiner Marathon Petroleum. We chose to underweight Bank of America due to our negative views on Profitability and Sentiment. The Fund had an overweight position in McKesson based on our positive views on Sentiment and Quality. Positive views on Sentiment and Momentum drove the Fund’s overweight position in Marathon Petroleum.
Which individual stock positions contributed the most to the Fund’s relative returns during the Reporting Period?
The Fund benefited most from overweight positions in bank Citizens Financial Group and diversified carbon-steel producer and metals recycler Steel Dynamics and from an underweight position in specialty pharmaceuticals manufacturer Allergan. We chose to overweight Citizens Financial Group due to our positive views on Sentiment and Value. The Fund was overweight Steel Dynamics given our positive views on Sentiment and Quality. The underweight in Allergan was established because of our negative views on Quality and Profitability.
How did the Fund use derivatives during the Reporting Period?
During the Reporting Period, we did not use derivatives as part of an active management strategy to add value to the Fund’s results. However, we used equity index futures contracts, on an opportunistic basis, to equitize the Fund’s excess cash holdings. In other words, we put the Fund’s excess cash holdings to work by using them as collateral for the purchase of stock futures. The use of these futures contracts did not have a material impact on the Fund’s performance during the Reporting Period.
Did you make any enhancements to your quantitative models during the Reporting Period?
We continuously look for ways to improve our investment process. During the Reporting Period, we enhanced the Profitability theme for stocks within developed markets by introducing a factor that evaluates the geographic exposure of companies by tracking the physical locations of their branches, outlets and subsidiaries. We believe that a company with a footprint in growing parts of the world is better positioned relative to a company with a footprint in contracting parts. We are able to estimate this factor for more than 5,500 companies globally, which have more than one million subsidiaries spread across more than 47,000 cities in more than 200 countries. This extends our analysis of a company’s global footprint, which has focused historically on their revenue mix across markets.
In the U.S. investment region, we enhanced the Momentum theme by introducing a signal that evaluates linkages embedded within companies’ web pages. Embedded linkages are effective indicators of the similarity of the underlying businesses of companies across a variety of sectors, such as retail, media, hospitality, software, banks, airlines, etc.
We have undertaken research of various Environment, Social and Governance (“ESG”) metrics and their ability to forecast returns. We have enhanced our models with the following ESG related metrics:
∎ | Within the Quality theme in the U.S. and Europe investment regions, we have introduced an environmental impact factor. The factor measures the amount of environmental resources consumed to produce a unit of output for more than 2,000 companies. This factor helps to strategically tilt towards companies with a favorable environmental profile. |
∎ | Within the Momentum theme in the U.S. investment region, we have introduced the ESG topic signal. We use natural language processing techniques to read through more than 24,000 articles, collected since 1999, on Corporate Social Responsibility (“CSR”) activities to identify economic linkages among more than 1,000 companies. The signal aims to identify companies linked to each other by such common CSR themes and can dynamically adjust our positions accordingly. |
In the fourth quarter of 2016, we made a number of enhancements across a variety of investment themes. We made two enhancements to our Momentum theme. For U.S. investments, we now analyze corporate press-releases pulled directly from news wires to quickly identify new themes to which a company may be exposed. Leveraging natural language processing technology, we search for key words or phrases within the text of each press-release that may alert us to new trends affecting certain groups of companies. We then track performance of those companies to gauge, and capitalize on, momentum in these various thematic trends. Another way we seek to quantify the relationship between seemingly disparate companies is by exploring how frequently any two
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GOLDMAN SACHS VARIABLE INSURANCE TRUST U.S. EQUITY INSIGHTS FUND
companies are mentioned together in the same news article. We recently extended coverage of this trend signal to now include Japanese language news articles covering companies in Japan. We have created a repository of 1.4 billion news articles over the last five years with which we analyze about 2,000 stocks in Japan, including news articles written in Japanese.
We made an enhancement to our Sentiment theme in all regions by introducing a signal which focuses on measuring the amount of praise offered by analysts during company earnings calls. We analyze thousands of earnings call transcripts using natural language processing. By focusing on a key set of congratulatory words, we can measure the number of analysts issuing praise and gain a comprehensive view of investor sentiment about a company’s most recent quarterly earnings.
In the U.S. investment region, we introduced a signal within our Profitability theme that looks at credit card spending patterns as a real-time indicator of corporate profitability. Rather than waiting for quarterly earnings announcements, we evaluate over 74 billion credit card transactions which we use to link real-time consumer spending patterns to underlying companies.
Finally, we seek to identify strong management teams among Japanese companies through employee feedback data. We use natural language processing to analyze Japanese language employee comments on over 2,000 stocks in Japan. We link employee opinions to 50 topics which aim to identify companies that we believe have superior corporate culture.
What was the Fund’s sector positioning relative to its benchmark index at the end of the Reporting Period?
As of December 31, 2016, the Fund was overweight the health care, consumer staples, telecommunication services and materials sectors relative to the S&P 500® Index. The Fund was underweight financials, consumer discretionary, real estate, information technology and energy and was rather neutrally weighted in utilities and industrials compared to the benchmark index on the same date.
Were there any changes to the Fund’s portfolio management team during the Reporting Period?
On February 5, 2016, Ron Hua, Chief Investment Officer of Equity Alpha Strategies for the Quantitative Investment Strategies (“QIS”) Team, announced his intention to retire from Goldman Sachs Asset Management, L.P. (“GSAM”). As such, effective that date, Mr. Hua no longer had portfolio management responsibility for the Fund.
Ron’s responsibilities were assumed by Armen Avanessians, Managing Director and Chief Investment Officer of GSAM’s QIS Team. The senior portfolio management team for the Fund remained Osman Ali, Len Ioffe and Dennis Walsh, each a Managing Director. Dennis Walsh continues to head research and portfolio management for the Fund. Len Ioffe continues to head portfolio implementation, and Osman Ali continues to head client strategy. Armen Avanessians continues to oversee all QIS strategies globally. Gary Chropuvka, Managing Director, continues to head QIS client strategy efforts globally.
As always, the QIS platform is organized into a series of specialist portfolio management teams that focus on generating and implementing investment ideas within their area of expertise. Investment decisions are made by these portfolio management teams, rather than by one portfolio manager or committee. Ultimate accountability for the Fund resides with the senior portfolio managers dedicated to each Team strategy, who oversee their respective research, portfolio management and implementation processes.
In all, during the Reporting Period, one Vice President joined the Equity Alpha team and one Managing Director and five Vice Presidents left the Equity Alpha team. QIS employs a globally integrated team of more than 100 professionals, with an additional 85-plus professionals dedicated to trading, information technology and development of analytical tools.
What is your strategy going forward for the Fund?
Looking ahead, we continue to believe that less expensive stocks should outpace more expensive stocks, and stocks with good momentum are likely to outperform those with poor momentum. We intend to maintain our focus on seeking companies about which fundamental research analysts are becoming more positive as well as profitable companies with sustainable earnings and a track record of using their capital to enhance shareholder value. As such, we anticipate remaining fully invested with long-term performance likely to be the result of stock selection rather than sector or capitalization allocations.
We stand behind our investment philosophy that sound economic investment principles, coupled with a disciplined quantitative approach, can provide strong, uncorrelated returns over the long term. Our research agenda is robust, and we continue to enhance our existing models, add new proprietary forecasting signals and improve our trading execution as we seek to provide the most value to our shareholders.
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GOLDMAN SACHS VARIABLE INSURANCE TRUST U.S. EQUITY INSIGHTS FUND
Index Definitions
The S&P 500® Index is the Standard & Poor’s 500 Composite Index of 500 stocks, an unmanaged index of common stock prices. The figures for the index do not include any deduction for fees, expenses or taxes. It is not possible to invest directly in an index.
The Russell 2000® Index is an unmanaged index of common stock prices that measures the performance of the 2000 smallest companies in the Russell 3000® Index. The figures for the index do not include any deduction for fees, expenses or taxes. It is not possible to invest directly in an index.
The Russell Midcap® Index measures the performance of the 800 smallest companies in the Russell 1000® Index, which represents approximately 25% of the total market capitalization of the Russell 1000 Index. It is not possible to invest directly in an index.
The Russell 1000® Index measures the performance of the 1,000 largest companies in the Russell 3000® Index, which represents approximately 92% of the total market capitalization of the Russell 3000 Index. It is not possible to invest directly in an index.
5
FUND BASICS
U.S. Equity Insights Fund
as of December 31, 2016
STANDARDIZED TOTAL RETURNS1
For the period ended 12/31/16 | One Year | Five Years | Ten Years | Since Inception | Inception Date | |||||||||||||
Institutional | 10.70 | % | 15.13 | % | 5.96 | % | 5.66 | % | 02/13/98 | |||||||||
Service | 10.44 | 14.88 | 5.75 | 6.09 | 01/09/06 |
1 | The Standardized Total Returns are average annual total returns as of the most recent calendar quarter-end. They assume reinvestment of all distributions at net asset value (“NAV”). Because Institutional and Service Shares do not involve a sales charge, such a charge is not applied to their Standardized Total Returns. |
Total return figures in the above chart represent past performance and do not indicate future results, which will vary. The investment return and principal value of an investment will fluctuate and, therefore, an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the total return figures in the above chart. Please visit www.GSAMFUNDS.com to obtain the most recent month-end returns. Performance reflects fee waivers and/or expense limitations in effect during the periods shown. In their absence, performance would be reduced.
EXPENSE RATIOS2
Net Expense Ratio (Current) | Gross Expense Ratio (Before Waivers) | |||||||
Institutional | 0.64 | % | 0.71 | % | ||||
Service | 0.85 | 0.96 |
2 | The expense ratios of the Fund, both current (net of any fee waivers and/or expense limitations) and before waivers (gross of any fee waivers and/or expense limitations) are as set forth above according to the most recent publicly available Prospectuses for the Fund and may differ from the expense ratios disclosed in the Financial Highlights in this report. Pursuant to a contractual arrangement, the Fund’s fee waivers and/or expense limitations will remain in place through at least April 29, 2017, and prior to such date, the Investment Adviser may not terminate the arrangements without the approval of the Fund’s Board of Trustees. If these arrangements are discontinued in the future, the expense ratios may change without shareholder approval. |
TOP TEN HOLDINGS AS OF 12/31/163
Holding | % of Net Assets | Line of Business | ||||
AT&T, Inc. | 2.4% | Telecommunication Services | ||||
Apple, Inc. | 2.2 | Technology Hardware & Equipment | ||||
JPMorgan Chase & Co. | 1.9 | Banks | ||||
UnitedHealth Group, Inc. | 1.6 | Health Care Equipment & Services | ||||
Amazon.com, Inc. | 1.6 | Retailing | ||||
Amgen, Inc. | 1.6 | Pharmaceuticals, Biotechnology & Life Sciences | ||||
Wal-Mart Stores, Inc. | 1.5 | Food & Staples Retailing | ||||
Microsoft Corp. | 1.5 | Software & Services | ||||
Procter & Gamble Co. (The) | 1.5 | Household & Personal Products | ||||
CVS Health Corp. | 1.5 | Food & Staples Retailing |
3 | The top 10 holdings may not be representative of the Fund’s future investments. |
6
FUND BASICS
FUND vs. BENCHMARK SECTOR ALLOCATIONS4
As of December 31, 2016
4 | The Fund is actively managed and, as such, its composition may differ over time. Consequently, the Fund’s overall sector allocations may differ from percentages contained in the graph above. The graph categorizes investments using Global Industry Classification Standard (“GICS”); however, the sector classifications used by the portfolio management team may differ from GICS. The percentage shown for each investment category reflects the value of investments in that category as a percentage of market value (excluding investments in the securities lending reinvestment vehicle, if any). Underlying sector allocations of exchange traded funds and investment companies held by the Fund are not reflected in the graph above. The graph depicts the Fund’s investments but may not represent the Fund’s market exposure due to the exclusion of certain derivatives, if any, as listed in the Additional Investment Information section of the Schedule of Investments. |
7
GOLDMAN SACHS VARIABLE INSURANCE TRUST U.S. EQUITY INSIGHTS FUND
Performance Summary
December 31, 2016
The following graph shows the value, as of December 31, 2016, of a $10,000 investment made on January 1, 2007 in the Institutional Shares at NAV. For comparative purposes, the performance of the Fund’s benchmark, the S&P 500® Index, is shown. This performance data represents past performance and should not be considered indicative of future performance, which will fluctuate with changes in market conditions. These performance fluctuations may cause an investor’s shares, when redeemed, to be worth more or less than their original cost. Performance reflects Fund level expenses but does not reflect fees and expenses associated with any variable annuity contract or variable life insurance policy that uses the Fund as an investment option for any contract or policy. Had performance reflected all of those fees and expenses, performance would have been reduced. Performance reflects applicable fee waivers and/or expense limitations in effect during the periods shown, and in their absence, performance would be reduced. Performance of Service Shares will vary from Institutional Shares due to differences in class specific fees. In addition to the Investment Adviser’s decisions regarding issuer/industry investment selection and allocation, other factors may affect Fund performance. These factors include, but are not limited to, Fund operating fees and expenses, portfolio turnover, and subscription and redemption cash flows affecting the Fund.
U.S. Equity Insights Fund’s 10 Year Performance
Performance of a $10,000 investment, with distributions reinvested, from January 1, 2007 through December 31, 2016.
Average Annual Total Return through December 31, 2016 | One Year | Five Years | Ten Years | Since Inception | ||||
Institutional (Commenced February 13, 1998) | 10.70% | 15.13% | 5.96% | 5.66% | ||||
Service (Commenced January 9, 2006) | 10.44% | 14.88% | 5.75% | 6.09% |
8
GOLDMAN SACHS VARIABLE INSURANCE TRUST U.S. EQUITY INSIGHTS FUND
Schedule of Investments
December 31, 2016
Shares | Description | Value | ||||||
Common Stocks – 98.1% | ||||||||
| Automobiles & Components – 0.8% |
| ||||||
19,432 | Lear Corp. | $ | 2,572,214 | |||||
7,479 | Visteon Corp. | 600,863 | ||||||
|
| |||||||
3,173,077 | ||||||||
|
| |||||||
| Banks – 3.9% |
| ||||||
31,290 | Bank of America Corp. | 691,509 | ||||||
120,523 | Citizens Financial Group, Inc. | 4,294,234 | ||||||
81,526 | JPMorgan Chase & Co. | 7,034,879 | ||||||
11,651 | PNC Financial Services Group, Inc. (The) | 1,362,701 | ||||||
20,066 | Wells Fargo & Co. | 1,105,837 | ||||||
|
| |||||||
14,489,160 | ||||||||
|
| |||||||
| Capital Goods – 5.4% |
| ||||||
16,991 | AerCap Holdings NV* | 706,995 | ||||||
76,451 | AMETEK, Inc. | 3,715,519 | ||||||
20,006 | Eaton Corp. plc | 1,342,202 | ||||||
54,566 | General Electric Co. | 1,724,286 | ||||||
6,150 | Jacobs Engineering Group, Inc.* | 350,550 | ||||||
4,918 | L-3 Communications Holdings, Inc. | 748,077 | ||||||
20,006 | Northrop Grumman Corp. | 4,652,995 | ||||||
8,948 | Oshkosh Corp. | 578,130 | ||||||
14,735 | Owens Corning | 759,737 | ||||||
6,447 | Raytheon Co. | 915,474 | ||||||
45,290 | United Technologies Corp. | 4,964,690 | ||||||
|
| |||||||
20,458,655 | ||||||||
|
| |||||||
| Commercial & Professional Services – 0.6% |
| ||||||
23,151 | ManpowerGroup, Inc. | 2,057,429 | ||||||
|
| |||||||
| Consumer Durables & Apparel – 1.2% |
| ||||||
25,363 | D.R. Horton, Inc. | 693,171 | ||||||
9,762 | Mohawk Industries, Inc.* | 1,949,276 | ||||||
36,102 | NIKE, Inc. Class B | 1,835,065 | ||||||
|
| |||||||
4,477,512 | ||||||||
|
| |||||||
| Consumer Services – 1.2% |
| ||||||
24,903 | Carnival Corp. | 1,296,450 | ||||||
52,654 | International Game Technology plc | 1,343,730 | ||||||
6,576 | Vail Resorts, Inc. | 1,060,775 | ||||||
4,227 | Yum! Brands, Inc. | 267,696 | ||||||
19,191 | Yum! China Holdings, Inc.* | 501,269 | ||||||
|
| |||||||
4,469,920 | ||||||||
|
| |||||||
| Diversified Financials – 7.0% |
| ||||||
70,330 | AGNC Investment Corp. (REIT) | 1,275,083 | ||||||
178,111 | Ally Financial, Inc. | 3,387,671 | ||||||
11,439 | Ameriprise Financial, Inc. | 1,269,043 | ||||||
100,487 | Bank of New York Mellon Corp. (The) | 4,761,074 | ||||||
14,026 | Berkshire Hathaway, Inc. Class B* | 2,285,958 | ||||||
23,965 | Capital One Financial Corp. | 2,090,707 | ||||||
45,995 | Morgan Stanley | 1,943,289 | ||||||
47,406 | Northern Trust Corp. | 4,221,504 | ||||||
|
| |||||||
Common Stocks – (continued) | ||||||||
| Diversified Financials – (continued) |
| ||||||
55,752 | State Street Corp. | $ | 4,333,045 | |||||
22,390 | Synchrony Financial | 812,085 | ||||||
|
| |||||||
26,379,459 | ||||||||
|
| |||||||
| Energy – 6.2% |
| ||||||
52,743 | Baker Hughes, Inc. | 3,426,713 | ||||||
26,170 | Chevron Corp. | 3,080,209 | ||||||
8,164 | Cimarex Energy Co. | 1,109,487 | ||||||
1,485 | Concho Resources, Inc.* | 196,911 | ||||||
3,988 | Energen Corp.* | 229,988 | ||||||
21,298 | EOG Resources, Inc. | 2,153,228 | ||||||
38,908 | Exxon Mobil Corp. | 3,511,836 | ||||||
51,949 | FMC Technologies, Inc.* | 1,845,748 | ||||||
36,226 | Kinder Morgan, Inc. | 750,240 | ||||||
31,174 | Newfield Exploration Co.* | 1,262,547 | ||||||
50,856 | Noble Energy, Inc. | 1,935,579 | ||||||
19,722 | Oceaneering International, Inc. | 556,358 | ||||||
11,786 | Phillips 66 | 1,018,428 | ||||||
12,180 | Pioneer Natural Resources Co. | 2,193,253 | ||||||
4,525 | World Fuel Services Corp. | 207,743 | ||||||
|
| |||||||
23,478,268 | ||||||||
|
| |||||||
| Food & Staples Retailing – 3.6% |
| ||||||
69,683 | CVS Health Corp. | 5,498,686 | ||||||
37,801 | Sysco Corp. | 2,093,041 | ||||||
83,514 | Wal-Mart Stores, Inc. | 5,772,488 | ||||||
|
| |||||||
13,364,215 | ||||||||
|
| |||||||
| Food, Beverage & Tobacco – 3.9% |
| ||||||
45,478 | Altria Group, Inc. | 3,075,223 | ||||||
23,982 | Archer-Daniels-Midland Co. | 1,094,778 | ||||||
77,268 | Conagra Brands, Inc. | 3,055,950 | ||||||
7,898 | Kraft Heinz Co. (The) | 689,653 | ||||||
27,154 | PepsiCo, Inc. | 2,841,123 | ||||||
14,921 | Philip Morris International, Inc. | 1,365,122 | ||||||
38,463 | Tyson Foods, Inc. Class A | 2,372,398 | ||||||
|
| |||||||
14,494,247 | ||||||||
|
| |||||||
| Health Care Equipment & Services – 9.5% |
| ||||||
1,977 | Aetna, Inc. | 245,168 | ||||||
18,901 | Anthem, Inc. | 2,717,397 | ||||||
32,356 | Baxter International, Inc. | 1,434,665 | ||||||
31,239 | Boston Scientific Corp.* | 675,700 | ||||||
33,303 | Cigna Corp. | 4,442,287 | ||||||
59,855 | Danaher Corp. | 4,659,113 | ||||||
67,049 | Express Scripts Holding Co.* | 4,612,301 | ||||||
90,177 | Hologic, Inc.* | 3,617,901 | ||||||
20,579 | Humana, Inc. | 4,198,733 | ||||||
9,656 | McKesson Corp. | 1,356,185 | ||||||
37,451 | UnitedHealth Group, Inc. | 5,993,658 | ||||||
13,264 | WellCare Health Plans, Inc.* | 1,818,229 | ||||||
|
| |||||||
35,771,337 | ||||||||
|
|
The accompanying notes are an integral part of these financial statements. | 9 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST U.S. EQUITY INSIGHTS FUND
Schedule of Investments (continued)
December 31, 2016
Shares | Description | Value | ||||||
Common Stocks – (continued) | ||||||||
| Household & Personal Products – 3.5% |
| ||||||
68,722 | Colgate-Palmolive Co. | $ | 4,497,168 | |||||
26,603 | Kimberly-Clark Corp. | 3,035,934 | ||||||
65,435 | Procter & Gamble Co. (The) | 5,501,775 | ||||||
|
| |||||||
13,034,877 | ||||||||
|
| |||||||
| Insurance – 1.6% |
| ||||||
2,615 | Arch Capital Group Ltd.* | 225,648 | ||||||
4,154 | Prudential Financial, Inc. | 432,265 | ||||||
30,692 | Reinsurance Group of America, Inc. | 3,861,975 | ||||||
40,989 | XL Group Ltd. | 1,527,250 | ||||||
|
| |||||||
6,047,138 | ||||||||
|
| |||||||
| Materials – 4.3% |
| ||||||
14,103 | Air Products & Chemicals, Inc. | 2,028,293 | ||||||
20,287 | Celanese Corp. Series A | 1,597,398 | ||||||
32,557 | Crown Holdings, Inc.* | 1,711,522 | ||||||
8,108 | E.I. du Pont de Nemours & Co. | 595,127 | ||||||
13,919 | Eastman Chemical Co. | 1,046,848 | ||||||
20,935 | Graphic Packaging Holding Co. | 261,269 | ||||||
6,514 | Nucor Corp. | 387,713 | ||||||
36,650 | Owens-Illinois, Inc.* | 638,077 | ||||||
39,634 | Reliance Steel & Aluminum Co. | 3,152,488 | ||||||
7,809 | Sherwin-Williams Co. (The) | 2,098,591 | ||||||
76,377 | Steel Dynamics, Inc. | 2,717,494 | ||||||
|
| |||||||
16,234,820 | ||||||||
|
| |||||||
| Media – 2.5% |
| ||||||
29,734 | Interpublic Group of Cos., Inc. (The) | 696,073 | ||||||
129,196 | Liberty Global plc Series C* | 3,837,121 | ||||||
168,184 | Twenty-First Century Fox, Inc. Class A | 4,715,879 | ||||||
|
| |||||||
9,249,073 | ||||||||
|
| |||||||
| Pharmaceuticals, Biotechnology & Life Sciences – 7.1% |
| ||||||
48,610 | AbbVie, Inc. | 3,043,958 | ||||||
10,429 | Alexion Pharmaceuticals, Inc.* | 1,275,988 | ||||||
3,887 | Allergan plc* | 816,309 | ||||||
39,911 | Amgen, Inc. | 5,835,387 | ||||||
10,116 | Biogen, Inc.* | 2,868,695 | ||||||
36,982 | Celgene Corp.* | 4,280,667 | ||||||
21,634 | Johnson & Johnson | 2,492,453 | ||||||
6,813 | Mallinckrodt plc* | 339,424 | ||||||
69,382 | Merck & Co., Inc. | 4,084,518 | ||||||
7,320 | Thermo Fisher Scientific, Inc. | 1,032,852 | ||||||
9,177 | Vertex Pharmaceuticals, Inc.* | 676,070 | ||||||
|
| |||||||
26,746,321 | ||||||||
|
| |||||||
| Real Estate Investment Trusts – 1.5% | |||||||
8,316 | American Homes 4 Rent Class A | 174,470 | ||||||
42,765 | American Tower Corp. | 4,519,405 | ||||||
40,931 | Forest City Realty Trust, Inc. Class A | 853,002 | ||||||
|
| |||||||
5,546,877 | ||||||||
|
| |||||||
Common Stocks – (continued) | ||||||||
| Retailing – 3.8% |
| ||||||
7,864 | Amazon.com, Inc.* | $ | 5,896,978 | |||||
13,415 | Best Buy Co., Inc. | 572,418 | ||||||
1,574 | Expedia, Inc. | 178,303 | ||||||
7,686 | Kohl’s Corp. | 379,535 | ||||||
7,838 | Netflix, Inc.* | 970,344 | ||||||
1,427 | Pool Corp. | 148,893 | ||||||
1,009 | Priceline Group, Inc. (The)* | 1,479,254 | ||||||
61,866 | TJX Cos., Inc. (The) | 4,647,993 | ||||||
|
| |||||||
14,273,718 | ||||||||
|
| |||||||
| Semiconductors & Semiconductor Equipment – 4.1% |
| ||||||
142,189 | Applied Materials, Inc. | 4,588,439 | ||||||
31,865 | KLA-Tencor Corp. | 2,507,138 | ||||||
92,505 | Maxim Integrated Products, Inc. | 3,567,918 | ||||||
65,926 | Texas Instruments, Inc. | 4,810,620 | ||||||
|
| |||||||
15,474,115 | ||||||||
|
| |||||||
| Software & Services – 9.9% |
| ||||||
10,776 | Accenture plc Class A | 1,262,193 | ||||||
48,456 | Activision Blizzard, Inc. | 1,749,746 | ||||||
6,378 | Adobe Systems, Inc.* | 656,615 | ||||||
6,244 | Alphabet, Inc. Class A* | 4,948,058 | ||||||
6,269 | Alphabet, Inc. Class C* | 4,838,540 | ||||||
13,528 | CDK Global, Inc. | 807,486 | ||||||
45,221 | Citrix Systems, Inc.* | 4,038,688 | ||||||
88,322 | eBay, Inc.* | 2,622,280 | ||||||
44,901 | Facebook, Inc. Class A* | 5,165,860 | ||||||
4,197 | MasterCard, Inc. Class A | 433,340 | ||||||
91,381 | Microsoft Corp. | 5,678,415 | ||||||
44,485 | Nuance Communications, Inc.* | 662,826 | ||||||
100,047 | Oracle Corp. | 3,846,807 | ||||||
17,601 | Yahoo!, Inc.* | 680,631 | ||||||
|
| |||||||
37,391,485 | ||||||||
|
| |||||||
| Technology Hardware & Equipment – 5.0% |
| ||||||
72,659 | Apple, Inc. | 8,415,365 | ||||||
54,094 | CommScope Holding Co., Inc.* | 2,012,297 | ||||||
38,323 | Harris Corp. | 3,926,958 | ||||||
66,026 | Hewlett Packard Enterprise Co. | 1,527,841 | ||||||
203,251 | HP, Inc. | 3,016,245 | ||||||
|
| |||||||
18,898,706 | ||||||||
|
| |||||||
| Telecommunication Services – 4.2% |
| ||||||
212,378 | AT&T, Inc.(a) | 9,032,437 | ||||||
20,565 | Level 3 Communications, Inc.* | 1,159,044 | ||||||
10,896 | T-Mobile U.S., Inc.* | 626,629 | ||||||
96,200 | Verizon Communications, Inc. | 5,135,156 | ||||||
|
| |||||||
15,953,266 | ||||||||
|
| |||||||
| Transportation – 3.6% |
| ||||||
21,152 | Alaska Air Group, Inc. | 1,876,817 | ||||||
89,749 | Delta Air Lines, Inc. | 4,414,753 | ||||||
132,465 | JetBlue Airways Corp.* | 2,969,865 | ||||||
11,230 | Norfolk Southern Corp. | 1,213,626 | ||||||
42,270 | United Continental Holdings, Inc.* | 3,080,638 | ||||||
|
| |||||||
13,555,699 | ||||||||
|
|
10 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST U.S. EQUITY INSIGHTS FUND
Shares | Description | Value | ||||||
Common Stocks – (continued) | ||||||||
| Utilities – 3.7% |
| ||||||
152,894 | AES Corp. | $ | 1,776,628 | |||||
169,300 | CenterPoint Energy, Inc. | 4,171,552 | ||||||
136,636 | Great Plains Energy, Inc. | 3,736,995 | ||||||
159,970 | NiSource, Inc. | 3,541,736 | ||||||
8,177 | PG&E Corp. | 496,916 | ||||||
6,996 | Xcel Energy, Inc. | 284,737 | ||||||
|
| |||||||
14,008,564 | ||||||||
|
| |||||||
TOTAL COMMON STOCKS | ||||||||
(Cost $337,447,989) | $ | 369,027,938 | ||||||
|
|
Shares | Distribution Rate | Value | ||||||
Investment Company(b)(c) – 0.4% | ||||||||
Goldman Sachs Financial Square Government Fund — Institutional Shares |
| |||||||
1,470,057 | 0.455 | % | $ | 1,470,057 | ||||
(Cost $1,470,057) | ||||||||
| ||||||||
TOTAL INVESTMENTS – 98.5% | ||||||||
(Cost $338,918,046) | $ | 370,497,995 | ||||||
| ||||||||
OTHER ASSETS IN EXCESS OF LIABILITIES – 1.5% |
| 5,454,021 | ||||||
| ||||||||
NET ASSETS – 100.0% | $ | 375,952,016 | ||||||
|
The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. | ||
* | Non-income producing security. | |
(a) | All or a portion of security is segregated as collateral for initial margin requirements on futures transactions. | |
(b) | Represents an affiliated issuer. | |
(c) | Variable rate security. Interest rate or distribution rate disclosed is that which is in effect on December 31, 2016. |
Investment Abbreviation: | ||
REIT | —Real Estate Investment Trust |
The accompanying notes are an integral part of these financial statements. | 11 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST U.S. EQUITY INSIGHTS FUND
Schedule of Investments (continued)
December 31, 2016
ADDITIONAL INVESTMENT INFORMATION
FUTURES CONTRACTS — At December 31, 2016, the Fund had the following futures contracts:
Type | Number of Contracts Long (Short) | Expiration Date | Current Value | Unrealized Gain (Loss) | ||||||||||
S&P 500 E-Mini Index | 41 | March 2017 | $ | 4,584,210 | $ | (29,571 | ) |
12 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST U.S. EQUITY INSIGHTS FUND
Statement of Assets and Liabilities
December 31, 2016
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $337,447,989) | $ | 369,027,938 | ||
Investments in affiliated issuers, at value (cost $1,470,057) | 1,470,057 | |||
Cash | 5,793,950 | |||
Receivables: | ||||
Dividends | 371,922 | |||
Fund shares sold | 88,699 | |||
Reimbursement from investment adviser | 27,921 | |||
Other assets | 412 | |||
Total assets | 376,780,899 | |||
Liabilities: | ||||
Variation margin on certain derivative contracts | 18,243 | |||
Payables: | ||||
Fund shares redeemed | 492,250 | |||
Management fees | 199,170 | |||
Distribution and Service fees and Transfer Agency fees | 28,136 | |||
Investments purchased | 581 | |||
Accrued expenses | 90,503 | |||
Total liabilities | 828,883 | |||
Net Assets: | ||||
Paid-in capital | 338,592,066 | |||
Undistributed net investment income | 344,199 | |||
Accumulated net realized gain | 5,465,373 | |||
Net unrealized gain | 31,550,378 | |||
NET ASSETS | $ | 375,952,016 | ||
Net Assets: | ||||
Institutional | $ | 255,565,447 | ||
Service | 120,386,569 | |||
Total Net Assets | $ | 375,952,016 | ||
Shares outstanding $0.001 par value (unlimited shares authorized): | ||||
Institutional | 14,476,789 | |||
Service | 6,795,942 | |||
Net asset value, offering and redemption price per share: | ||||
Institutional | $17.65 | |||
Service | 17.71 |
The accompanying notes are an integral part of these financial statements. | 13 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST U.S. EQUITY INSIGHTS FUND
Statement of Operations
For the Fiscal Year Ended December 31, 2016
Investment income: | ||||
Dividends — unaffiliated issuers (net of foreign taxes withheld of $1,520) | $ | 7,057,967 | ||
Securities lending income — affiliated issuer | 3,800 | |||
Dividends — affiliated issuers | 2,655 | |||
Total investment income | 7,064,422 | |||
Expenses: | ||||
Management fees | 2,315,394 | |||
Distribution and Service fees — Service Shares | 296,646 | |||
Printing and mailing costs | 84,980 | |||
Transfer Agency fees(a) | 74,684 | |||
Professional fees | 67,661 | |||
Custody, accounting and administrative services | 61,912 | |||
Trustee fees | 15,345 | |||
Other | 12,279 | |||
Total expenses | 2,928,901 | |||
Less — expense reductions | (283,723 | ) | ||
Net expenses | 2,645,178 | |||
NET INVESTMENT INCOME | 4,419,244 | |||
Realized and unrealized gain (loss): | ||||
Net realized gain from: | ||||
Investments | 19,077,760 | |||
Futures contracts | 498,926 | |||
Net change in unrealized gain (loss) on: | ||||
Investments | 13,587,947 | |||
Futures contracts | (25,950 | ) | ||
Net realized and unrealized gain | 33,138,683 | |||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 37,557,927 |
(a) Institutional and Service Shares incurred Transfer Agency fees of $50,954 and $23,730, respectively.
14 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST U.S. EQUITY INSIGHTS FUND
Statements of Changes in Net Assets
For the Fiscal Year Ended December 31, 2016 | For the Fiscal Year Ended December 31, 2015 | |||||||
From operations: | ||||||||
Net investment income | $ | 4,419,244 | $ | 5,175,212 | ||||
Net realized gain | 19,576,686 | 11,268,621 | ||||||
Net change in unrealized gain (loss) | 13,561,997 | (17,308,308 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 37,557,927 | (864,475 | ) | |||||
Distributions to shareholders: | ||||||||
From net investment income | ||||||||
Institutional Shares | (3,237,561 | ) | (3,792,329 | ) | ||||
Service Shares | (1,277,330 | ) | (1,391,634 | ) | ||||
From net realized gains | ||||||||
Institutional Shares | (8,734,468 | ) | (16,773,187 | ) | ||||
Service Shares | (4,117,588 | ) | (7,603,702 | ) | ||||
Total distributions to shareholders | (17,366,947 | ) | (29,560,852 | ) | ||||
From share transactions: | ||||||||
Proceeds from sales of shares | 15,918,402 | 19,987,592 | ||||||
Reinvestment of distributions | 17,366,947 | 29,560,852 | ||||||
Cost of shares redeemed | (69,293,004 | ) | (78,448,750 | ) | ||||
Net decrease in net assets resulting from share transactions | (36,007,655 | ) | (28,900,306 | ) | ||||
TOTAL DECREASE | (15,816,675 | ) | (59,325,633 | ) | ||||
Net assets: | ||||||||
Beginning of year | 391,768,691 | 451,094,324 | ||||||
End of year | $ | 375,952,016 | $ | 391,768,691 | ||||
Undistributed net investment income | $ | 344,199 | $ | 451,593 |
The accompanying notes are an integral part of these financial statements. | 15 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST U.S. EQUITY INSIGHTS FUND
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Year
Income (loss) from investment operations | Distributions to shareholders | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year - Share Class | Net asset value, beginning of year | Net investment income(a) | Net realized and unrealized gain (loss) | Total from investment operations | From net investment Income | From net realized gains | Total distributions | Net asset value, end of year | Total return(b) | Net assets, end of year (in 000s) | Ratio of net expenses to average net assets | Ratio of total expenses to average net assets | Ratio of net investment income to average net assets | Portfolio turnover rate(c) | ||||||||||||||||||||||||||||||||||||||||||
FOR THE FISCAL YEARS ENDED DECEMBER 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2016 - Institutional | $ | 16.71 | $ | 0.22 | $ | 1.58 | $ | 1.80 | $ | (0.23 | ) | $ | (0.63 | ) | $ | (0.86 | ) | $ | 17.65 | 10.70 | % | $ | 255,565 | 0.64 | % | 0.70 | % | 1.25 | % | 204 | % | |||||||||||||||||||||||||
2016 - Service | 16.77 | 0.18 | 1.59 | 1.77 | (0.20 | ) | (0.63 | ) | (0.83 | ) | 17.71 | 10.44 | 120,387 | 0.85 | 0.95 | 1.04 | 204 | |||||||||||||||||||||||||||||||||||||||
2015 - Institutional | 18.12 | 0.23 | (0.27 | ) | (0.04 | ) | (0.25 | ) | (1.12 | ) | (1.37 | ) | 16.71 | (0.20 | ) | 269,238 | 0.64 | 0.71 | 1.29 | 200 | ||||||||||||||||||||||||||||||||||||
2015 - Service | 18.17 | 0.20 | (0.28 | ) | (0.08 | ) | (0.20 | ) | (1.12 | ) | (1.32 | ) | 16.77 | (0.41 | ) | 122,531 | 0.85 | 0.96 | 1.08 | 200 | ||||||||||||||||||||||||||||||||||||
2014 - Institutional | 16.52 | 0.21 | 2.47 | 2.68 | (0.26 | ) | (0.82 | ) | (1.08 | ) | 18.12 | 16.37 | 312,370 | 0.65 | 0.71 | 1.21 | 214 | |||||||||||||||||||||||||||||||||||||||
2014 - Service | 16.55 | 0.18 | 2.47 | 2.65 | (0.21 | ) | (0.82 | ) | (1.03 | ) | 18.17 | 16.18 | 138,725 | 0.86 | 0.96 | 1.01 | 214 | |||||||||||||||||||||||||||||||||||||||
2013 - Institutional | 12.14 | 0.20 | 4.35 | 4.55 | (0.17 | ) | — | (0.17 | ) | 16.52 | 37.52 | 307,589 | 0.65 | 0.71 | 1.36 | 207 | ||||||||||||||||||||||||||||||||||||||||
2013 - Service | 12.16 | 0.17 | 4.35 | 4.52 | (0.13 | ) | — | (0.13 | ) | 16.55 | 37.23 | 125,748 | 0.86 | 0.96 | 1.15 | 207 | ||||||||||||||||||||||||||||||||||||||||
2012 - Institutional | 10.80 | 0.20 | 1.36 | (d) | 1.56 | (0.22 | ) | — | (0.22 | ) | 12.14 | 14.42 | (d) | 262,759 | 0.64 | 0.72 | 1.71 | 134 | ||||||||||||||||||||||||||||||||||||||
2012 - Service | 10.82 | 0.18 | 1.35 | (d) | 1.53 | (0.19 | ) | — | (0.19 | ) | 12.16 | 14.10 | (d) | 99,892 | 0.85 | 0.97 | 1.51 | 134 |
(a) | Calculated based on the average shares outstanding methodology. |
(b) | Assumes investment at the net asset value at the beginning of the year, reinvestment of all distributions, and a complete redemption of the investment at the net asset value at the end of the year. |
(c) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short term investments and certain derivatives. If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
(d) | Reflects payment from affiliate relating to certain investment transactions which amounted to $0.01 per share and 0.07% of average net assets. Excluding such payment, the total return would have been 14.32% and 14.01%, respectively. |
The accompanying notes are an integral part of these financial statements. | 16 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST U.S. EQUITY INSIGHTS FUND
Notes to Financial Statements
December 31, 2016
1. ORGANIZATION
Goldman Sachs Variable Insurance Trust (the “Trust” or “VIT”) is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company. The Trust includes the Goldman Sachs U.S. Equity Insights Fund (the “Fund”). The Fund is a diversified portfolio under the Act offering two classes of shares — Institutional and Service Shares. Shares of the Trust are offered to separate accounts of participating life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies.
Goldman Sachs Asset Management, L.P. (“GSAM”), an affiliate of Goldman, Sachs & Co. (“Goldman Sachs”), serves as investment adviser to the Fund pursuant to a management agreement (the “Agreement”) with the Trust.
2. SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and require management to make estimates and assumptions that may affect the reported amounts and disclosures. Actual results may differ from those estimates and assumptions.
A. Investment Valuation — The Fund’s valuation policy is to value investments at fair value.
B. Investment Income and Investments — Investment income includes interest income, dividend income, net of any foreign withholding taxes, less any amounts reclaimable, and securities lending income. Interest income is accrued daily and adjusted for amortization of premiums and accretion of discounts. Dividend income is recognized on ex-dividend date or, for certain foreign securities, as soon as such information is obtained subsequent to the ex-dividend date. Investment transactions are reflected on trade date. Realized gains and losses are calculated using identified cost. Investment transactions are recorded on the following business day for daily net asset value (“NAV”) calculations. Any foreign capital gains tax is accrued daily based upon net unrealized gains, and is payable upon sale of such investments. Distributions received from the Fund’s investments in United States (“U.S.”) real estate investment trusts (“REITs”) may be characterized as ordinary income, net capital gain or a return of capital. A return of capital is recorded by the Fund as a reduction to the cost basis of the REIT. For derivative contracts, realized gains and losses are recorded upon settlement of the contract.
C. Class Allocations and Expenses — Investment income, realized and unrealized gain (loss), and non-class specific expenses of the Fund are allocated daily based upon the proportion of net assets of each class. Non-class specific expenses directly incurred by the Fund are charged to the Fund, while such expenses incurred by the Trust are allocated across the Fund on a straight-line and/or pro-rata basis depending upon the nature of the expenses. Class specific expenses, where applicable, are borne by the respective share classes and include Distribution and Service and Transfer Agency fees.
D. Federal Taxes and Distributions to Shareholders — It is the Fund’s policy to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Code”), applicable to regulated investment companies (mutual funds) and to distribute each year substantially all of its investment company taxable income and capital gains to its shareholders. Accordingly, the Fund is not required to make any provisions for the payment of federal income tax. Distributions to shareholders are recorded on the ex-dividend date. Income and capital gains distributions, if any, are declared and paid annually.
Net capital losses are carried forward to future fiscal years and may be used to the extent allowed by the Code to offset any future capital gains. Losses that are carried forward will retain their character as either short-term or long-term capital losses. Utilization of capital loss carryforwards will reduce the requirement of future capital gains distributions.
The characterization of distributions to shareholders for financial reporting purposes is determined in accordance with federal income tax rules, which may differ from GAAP. The source of the Fund’s distributions may be shown in the accompanying financial statements as either from net investment income, net realized gain or capital. Certain components of the Fund’s net assets on the Statement of Assets and Liabilities reflect permanent GAAP/tax differences based on the appropriate tax character.
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GOLDMAN SACHS VARIABLE INSURANCE TRUST U.S. EQUITY INSIGHTS FUND
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS
The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The levels used for classifying investments are not necessarily an indication of the risk associated with investing in these investments. The three levels of the fair value hierarchy are described below:
Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 — Quoted prices in markets that are not active or financial instruments for which significant inputs are observable (including, but not limited to, quoted prices for similar investments, interest rates, foreign exchange rates, volatility and credit spreads), either directly or indirectly;
Level 3 — Prices or valuations that require significant unobservable inputs (including GSAM’s assumptions in determining fair value measurement).
Changes in valuation techniques may result in transfers into or out of an assigned level within the hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value hierarchy resulting from such changes are deemed to have occurred as of the beginning of the reporting period.
The Board of Trustees (“Trustees”) has approved Valuation Procedures that govern the valuation of the portfolio investments held by the Fund, including investments for which market quotations are not readily available. The Trustees have delegated to GSAM day-to-day responsibility for implementing and maintaining internal controls and procedures related to the valuation of the Fund’s portfolio investments. To assess the continuing appropriateness of pricing sources and methodologies, GSAM regularly performs price verification procedures and issues challenges as necessary to third party pricing vendors or brokers, and any differences are reviewed in accordance with the Valuation Procedures.
A. Level 1 and Level 2 Fair Value Investments — The valuation techniques and significant inputs used in determining the fair values for investments classified as Level 1 and Level 2 are as follows:
Equity Securities — Equity securities traded on a U.S. securities exchange or the NASDAQ system, or those located on certain foreign exchanges, including but not limited to the Americas, are valued daily at their last sale price or official closing price on the principal exchange or system on which they are traded. If there is no sale or official closing price or such price is believed by GSAM to not represent fair value, equity securities are valued at the last bid price for long positions and at the last ask price for short positions. To the extent these investments are actively traded, they are classified as Level 1 of the fair value hierarchy, otherwise they are generally classified as Level 2.
Unlisted equity securities for which market quotations are available are valued at the last sale price on the valuation date, or if no sale occurs, at the last bid price. These investments are generally classified as Level 2 of the fair value hierarchy.
Money Market Funds — Investments in the Goldman Sachs Financial Square Government Fund (“Underlying Fund”) are valued at the NAV of the Institutional Share class on the day of valuation. These investments are generally classified as Level 1 of the fair value hierarchy. For information regarding an Underlying Fund’s accounting policies and investment holdings, please see the Underlying Fund’s shareholder report.
Derivative Contracts — A derivative is an instrument whose value is derived from underlying assets, indices, reference rates or a combination of these factors. The Fund enters into derivative transactions to hedge against changes in interest rates, securities prices, and/or currency exchange rates, to increase total return, or to gain access to certain markets or attain exposure to other underliers.
Exchange-traded derivatives, including futures and options contracts, are valued at the last sale or settlement price and typically fall within Level 1 of the fair value hierarchy. Over-the-counter (“OTC”) and centrally cleared derivatives are valued using market transactions and other market evidence, including market-based inputs to models, calibration to market-clearing
18
GOLDMAN SACHS VARIABLE INSURANCE TRUST U.S. EQUITY INSIGHTS FUND
Notes to Financial Statements (continued)
December 31, 2016
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS (continued)
transactions, broker or dealer quotations, or other alternative pricing sources. Where models are used, the selection of a particular model to value OTC and centrally cleared derivatives depends upon the contractual terms of, and specific risks inherent in, the instrument, as well as the availability of pricing information in the market. Valuation models require a variety of inputs, including contractual terms, market prices, yield curves, credit curves, measures of volatility, voluntary and involuntary prepayment rates, loss severity rates and correlations of such inputs. For OTC and centrally cleared derivatives that trade in liquid markets, model inputs can generally be verified and model selection does not involve significant management judgment. OTC and centrally cleared derivatives are classified within Level 2 of the fair value hierarchy when significant inputs are corroborated by market evidence.
i. Futures Contracts — Futures contracts are contracts to buy or sell a standardized quantity of a specified commodity or security and are valued based on exchanged settlement prices or independent market quotes. Futures contracts are valued at the last settlement price, or in the absence of a sale, the last bid price for long positions and at the last ask price for short positions, at the end of each day on the board of trade or exchange upon which they are traded. Upon entering into a futures contract, the Fund deposits cash or securities in an account on behalf of the broker in an amount sufficient to meet the initial margin requirement. Subsequent payments are made or received by the Fund equal to the daily change in the contract value and are recorded as variation margin receivable or payable with a corresponding offset to unrealized gains or losses.
B. Level 3 Fair Value Investments — To the extent that significant inputs to valuation models and other alternative pricing sources are unobservable, or if quotations are not readily available, or if GSAM believes that such quotations do not accurately reflect fair value, the fair value of the Fund’s investments may be determined under Valuation Procedures approved by the Trustees. GSAM, consistent with its procedures and applicable regulatory guidance, may make an adjustment to the most recent valuation prices of either domestic or foreign securities in light of significant events to reflect what it believes to be the fair value of the securities at the time of determining the Fund’s NAV. Significant events which could affect a large number of securities in a particular market may include, but are not limited to: significant fluctuations in U.S. or foreign markets; market dislocations; market disruptions; or unscheduled market closings. Significant events which could also affect a single issuer may include, but are not limited to: corporate actions such as reorganizations, mergers and buy-outs; ratings downgrades; and bankruptcies.
C. Fair Value Hierarchy — The following is a summary of the Fund’s investments and derivatives classified in the fair value hierarchy as of December 31, 2016:
Investment Type | Level 1 | Level 2 | Level 3 | |||||||||
Assets | ||||||||||||
Common Stock and/or Other Equity Investments(a) | ||||||||||||
North America | $ | 369,027,938 | $ | — | $ | — | ||||||
Investment Company | 1,470,057 | — | — | |||||||||
Total | $ | 370,497,995 | $ | — | $ | — | ||||||
Liabilities(b) | ||||||||||||
Futures Contracts | $ | (29,571 | ) | $ | — | $ | — |
(a) | Amounts are disclosed by continent to highlight the impact of time zone differences between local market close and the calculation of NAV. Security valuations are based on the principal exchange or system on which they are traded, which may differ from country of domicile noted in the table. |
(b) | Amount shown represents unrealized gain (loss) at fiscal year end. |
For further information regarding security characteristics, see the Schedule of Investments.
4. INVESTMENTS IN DERIVATIVES
The following table sets forth, by certain risk types, the gross value of derivative contracts as of December 31, 2016. These instruments were used as part of the Fund’s investment strategies and to obtain and/or manage exposure related to the risks below.
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GOLDMAN SACHS VARIABLE INSURANCE TRUST U.S. EQUITY INSIGHTS FUND
4. INVESTMENTS IN DERIVATIVES (continued)
The values in the table below exclude the effects of cash collateral received or posted pursuant to these derivative contracts, and therefore are not representative of the Fund’s net exposure.
Risk | Statement of Assets and Liabilities | Assets | Statement of Assets and Liabilities | Liabilities(a) | ||||||||||
Equity | Variation margin on certain derivative contracts | $ | — | Variation margin on certain derivative contracts | $ | (29,571 | ) |
(a) | Includes unrealized gain (loss) on futures contracts described in the Additional Investment Information section of the Schedule of Investments. Only the variation margin as of December 31, 2016 is reported within the Statement of Assets and Liabilities. |
The following table sets forth, by certain risk types, the Fund’s gains (losses) related to these derivatives and their indicative volumes for the fiscal year ended December 31, 2016. These gains (losses) should be considered in the context that these derivative contracts may have been executed to create investment opportunities and /or economically hedge certain investments, and accordingly, certain gains (losses) on such derivative contracts may offset certain (losses) gains attributable to investments. These gains (losses) are included in “Net realized gain (loss)” or “Net change in unrealized gain (loss)” on the Statement of Operations:
Risk | Statement of Operations | Net Realized Gain (Loss) | Net Change in Unrealized Gain (Loss) | Average Number of Contracts(a) | ||||||||||
Equity | Net realized gain (loss) from futures contracts/Net change in unrealized gain (loss) on futures contracts | $ | 498,926 | $ | (25,950 | ) | 41 |
(a) | Average number of contracts is based on the average of month end balances for the fiscal year ended December 31, 2016. |
5. AGREEMENTS AND AFFILIATED TRANSACTIONS
A. Management Agreement — Under the Agreement, GSAM manages the Fund, subject to the general supervision of the Trustees.
As compensation for the services rendered pursuant to the Agreement, the assumption of the expenses related thereto and administration of the Fund’s business affairs, including providing facilities, GSAM is entitled to a management fee, accrued daily and paid monthly, equal to an annual percentage rate of the Fund’s average daily net assets.
For the fiscal year ended December 31, 2016, contractual and effective net management fees with GSAM were at the following rates:
Contractual Management Rate | ||||||||||||||||||||||
First $1 billion | Next $1 billion | Next $3 billion | Next $3 billion | Over $8 billion | Effective Rate | |||||||||||||||||
0.62% | 0.59 | % | 0.56 | % | 0.55 | % | 0.54 | % | 0.62 | % |
The Fund invests in Institutional Shares of the Goldman Sachs Financial Square Government Fund, which is an affiliated Underlying Fund. GSAM has agreed to waive a portion of its management fee payable by the Fund in an amount equal to the management fee it earns as an investment adviser to any of the affiliated Underlying Funds in which the Fund invests. For the fiscal year ended December 31, 2016, GSAM waived $1,347 of the Fund’s management fee.
B. Distribution and Service Plan — The Trust, on behalf of the Service Shares of the Fund, has adopted a Distribution and Service Plan (the “Plan”). Under the Plan, Goldman Sachs, which serves as distributor (the “Distributor”), is entitled to a fee accrued daily and paid monthly, for distribution services and personal and account maintenance services, which may then be paid by Goldman Sachs to authorized dealers, equal to, on an annual basis, 0.25% of the Fund’s average daily net assets attributable to Service Shares. Goldman Sachs has agreed to waive distribution and service fees so as not to exceed an annual rate of 0.21% of the Fund’s average daily net assets attributable to Service Shares. The distribution and service fee waiver will remain in place through
20
GOLDMAN SACHS VARIABLE INSURANCE TRUST U.S. EQUITY INSIGHTS FUND
Notes to Financial Statements (continued)
December 31, 2016
5. AGREEMENTS AND AFFILIATED TRANSACTIONS (continued)
at least April 29, 2017, and prior to such date Goldman Sachs may not terminate the arrangement without the approval of the Trustees. For the fiscal year ended December 31, 2016, Goldman Sachs waived $47,464 in distribution and service fees for the Fund’s Service Shares.
C. Transfer Agency Agreement — Goldman Sachs also serves as the transfer agent of the Fund for a fee pursuant to the Transfer Agency Agreement. The fees charged for such transfer agency services are accrued daily and paid monthly at an annual rate of 0.02% of the average daily net assets of Institutional and Service Shares.
D. Other Expense Agreements and Affiliated Transactions — GSAM has agreed to limit certain “Other Expenses” of the Fund (excluding acquired fund fees and expenses, transfer agency fees and expenses, taxes, interest, brokerage fees, shareholder meeting, litigation, indemnification and extraordinary expenses) to the extent such expenses exceed, on an annual basis, a percentage rate of the average daily net assets of the Fund. Such Other Expense reimbursements, if any, are accrued daily and paid monthly. In addition, the Fund is not obligated to reimburse GSAM for prior fiscal year expense reimbursements, if any. The Other Expense limitation as an annual percentage rate of average daily net assets for the Fund is 0.004%. The Other Expense limitation will remain in place through at least April 29, 2017, and prior to such date GSAM may not terminate the arrangement without the approval of the Trustees. For the fiscal year ended December 31, 2016, GSAM reimbursed $227,235 to the Fund. In addition, the Fund has entered into certain offset arrangements with the custodian and the transfer agent, which may result in a reduction of the Fund’s expenses and are received irrespective of the application of the “Other Expense” limitation described above. For the fiscal year ended December 31, 2016, custody fee credits were $7,677.
E. Line of Credit Facility — As of December 31, 2016, the Fund participated in a $1,100,000,000 committed, unsecured revolving line of credit facility (the “facility”) together with other funds of the Trust and certain registered investment companies having management agreements with GSAM or its affiliates. This facility is to be used for temporary emergency purposes, or to allow for an orderly liquidation of securities to meet redemption requests. The interest rate on borrowings is based on the federal funds rate. The facility also requires a fee to be paid by the Fund based on the amount of the commitment that has not been utilized. For the fiscal year ended December 31, 2016, the Fund did not have any borrowings under the facility.
F. Other Transactions with Affiliates — The following table provides information about the Fund’s investment in the Goldman Sachs Financial Square Government Fund as of and for the fiscal year ended December 31, 2016:
Market Value 12/31/2015 | Purchases at Cost | Proceeds from Sales | Market Value 12/31/2016 | Dividend Income | ||||||||||||||
$ | — | $ | 20,877,486 | $ | (19,407,429 | ) | $ | 1,470,057 | $ | 2,655 |
6. PORTFOLIO SECURITIES TRANSACTIONS
The cost of purchases and proceeds from sales and maturities of long-term securities for the fiscal year ended December 31, 2016 were $746,616,849 and $793,907,673, respectively.
7. SECURITIES LENDING
Pursuant to exemptive relief granted by the Securities and Exchange Commission (“SEC”) and the terms and conditions contained therein, the Fund may lend its securities through a securities lending agent, Goldman Sachs Agency Lending (“GSAL”), a wholly-owned subsidiary of Goldman Sachs, to certain qualified borrowers including Goldman Sachs and affiliates. In accordance with the Fund’s securities lending procedures, the Fund receives cash collateral at least equal to the market value of the securities on loan. The market value of the loaned securities is determined at the close of business of the Fund, at their last sale price or official closing price on the principal exchange or system on which they are traded, and any additional required collateral is delivered to the Fund
21
GOLDMAN SACHS VARIABLE INSURANCE TRUST U.S. EQUITY INSIGHTS FUND
7. SECURITIES LENDING (continued)
on the next business day. As with other extensions of credit, the Fund may experience delay in the recovery of its securities or incur a loss should the borrower of the securities breach its agreement with the Fund or become insolvent at a time when the collateral is insufficient to cover the cost of repurchasing securities on loan. Dividend income received from securities on loan may not be subject to withholding taxes and therefore withholding taxes paid may differ from the amounts listed in the Statement of Operations. Loans of securities are terminable at any time and as such 1) the remaining contractual maturities of the outstanding securities lending transactions are considered to be overnight and continuous and 2) the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.
The Fund invests the cash collateral received in connection with securities lending transactions in the Goldman Sachs Financial Square Government Fund (“Government Money Market Fund”), an affiliated series of the Trust. Prior to September 30, 2016, the cash collateral had been invested in the Goldman Sachs Financial Square Money Market Fund. The Government Money Market Fund is registered under the Act as an open end investment company, is subject to Rule 2a-7 under the Act, and is managed by GSAM, for which GSAM may receive an investment advisory fee of up to 0.205% on an annualized basis of the average daily net assets of the Government Money Market Fund. The Fund currently has no borrowing outstanding at December 31, 2016.
In the event of a default by a borrower with respect to any loan, GSAL will exercise any and all remedies provided under the applicable borrower agreement to make the Fund whole. These remedies include purchasing replacement securities by applying the collateral held from the defaulting broker against the purchase cost of the replacement securities. If GSAL is unable to purchase replacement securities, GSAL will indemnify the Fund by paying the Fund an amount equal to the market value of the securities loaned minus the value of cash collateral received from the borrower for the loan, subject to an exclusion for any shortfalls resulting from a loss of value in such cash collateral due to reinvestment risk. The Fund’s loaned securities were all subject to enforceable Securities Lending Agreements, and the value of the collateral is at least equal to the value of the cash received. The amounts of the Fund’s overnight and continuous agreements collateralized by common stocks which represent the gross amounts of recognized liabilities for securities lending transactions outstanding as of December 31, 2016 are disclosed as “Payable upon return of securities loaned” on the Statement of Assets and Liabilities.
Both the Fund and GSAL received compensation relating to the lending of the Fund’s securities. The amounts earned, if any, by the Fund for the fiscal year ended December 31, 2016 are reported under Investment Income on the Statement of Operations.
The table below details securities lending activity with affiliates of Goldman Sachs:
For the fiscal year ended December 31, 2016 | ||||
Earnings of GSAL Relating to Securities Loaned | Amounts Received by the Funds from Lending to Goldman Sachs | Amounts Payable to Goldman Sachs Upon Return of Securities Loaned as of 12/31/16 | ||
$421 | $213 | $— |
The following table provides information about the Fund’s investment in the Goldman Sachs Financial Square Money Market Fund for the fiscal year ended December 31, 2016:
Market Value 12/31/2015 | Purchases at Cost | Proceeds from Sales | Market Value 12/31/2016 | |||||||||||
$754,400 | $ | 3,771,127 | $ | (4,525,527 | ) | $ | — |
22
GOLDMAN SACHS VARIABLE INSURANCE TRUST U.S. EQUITY INSIGHTS FUND
Notes to Financial Statements (continued)
December 31, 2016
8. TAX INFORMATION
The tax character of distributions paid during the fiscal years ended December 31, 2015 and December 31, 2016 was as follows:
2015 | 2016 | |||||||
Distributions paid from: | ||||||||
Ordinary income | $ | 13,481,690 | $ | 7,477,447 | ||||
Net long-term capital gains | 16,079,162 | 9,889,500 | ||||||
Total taxable distributions | $ | 29,560,852 | $ | 17,366,947 |
As of December 31, 2016, the components of accumulated earnings (losses) on a tax-basis were as follows:
Undistributed ordinary income — net | $ | 5,088,733 | ||
Undistributed long-term capital gains | 1,958,418 | |||
Total undistributed earnings | $ | 7,047,151 | ||
Timing differences (Deferred REIT Distributions) | 12,659 | |||
Unrealized gains — net | 30,300,140 | |||
Total accumulated gains — net | $ | 37,359,950 |
As of December 31, 2016, the Fund’s aggregate security unrealized gains and losses based on cost for U.S. federal income tax purposes were as follows:
Tax cost | $ | 340,197,855 | ||
Gross unrealized gain | 37,177,379 | |||
Gross unrealized loss | (6,877,239 | ) | ||
Net unrealized security gain | $ | 30,300,140 |
The difference between GAAP-basis and tax-basis unrealized gains (losses) is attributable primarily to wash sales and net mark to market gains (losses) on regulated futures contracts.
In order to present certain components of the Fund’s capital accounts on a tax-basis, the Fund has reclassified $11,747 from undistributed net investment income to accumulated net realized gain (loss). This reclassification has no impact on the NAV of the Fund and results primarily from differences in the tax treatment of underlying fund investments.
GSAM has reviewed the Fund’s tax positions for all open tax years (the current and prior three years, as applicable) and has concluded that no provision for income tax is required in the Fund’s financial statements. Such open tax years remain subject to examination and adjustment by tax authorities.
9. OTHER RISKS
The Fund’s risks include, but are not limited to, the following:
Derivatives Risk — The Fund’s use of derivatives may result in loss. Derivative instruments, which may pose risks in addition to and greater than those associated with investing directly in securities, currencies, or other instruments, may be illiquid or less liquid, volatile, difficult to price and leveraged so that small changes in the value of the underlying instruments may produce disproportionate losses to the Fund. Derivatives are also subject to counterparty risk, which is the risk that the other party in the transaction will not fulfill its contractual obligation. The use of derivatives is a highly specialized activity that involves investment techniques and risks different from those associated with investments in more traditional securities and instruments. Losses from
23
GOLDMAN SACHS VARIABLE INSURANCE TRUST U.S. EQUITY INSIGHTS FUND
9. OTHER RISKS (continued)
derivatives can also result from a lack of correlation between changes in the value of derivative instruments and the portfolio assets (if any) being hedged.
Investments in Other Investment Companies — As a shareholder of another investment company, including an exchange-traded fund (“ETF”), the Fund will indirectly bear its proportionate share of any net management fees and other expenses paid by such other investment companies, in addition to the fees and expenses regularly borne by the Fund. ETFs are subject to risks that do not apply to conventional mutual funds, including but not limited to the following: (i) the market price of an ETF’s shares may trade at a premium or a discount to their NAV; and (ii) an active trading market for an ETF’s shares may not develop or be maintained.
Large Shareholder Transactions Risk — The Fund may experience adverse effects when certain large shareholders, such as other funds, participating insurance companies, accounts and Goldman Sachs affiliates, purchase or redeem large amounts of shares of the Fund. Such large shareholder redemptions may cause the Fund to sell portfolio securities at times when it would not otherwise do so, which may negatively impact the Fund’s NAV and liquidity. These transactions may also accelerate the realization of taxable income to shareholders if such sales of investments resulted in gains, and may also increase transaction costs. In addition, a large redemption could result in the Fund’s current expenses being allocated over a smaller asset base, leading to an increase in the Fund’s expense ratio. Similarly, large Fund share purchases may adversely affect the Fund’s performance to the extent that the Fund is delayed in investing new cash and is required to maintain a larger cash position than it ordinarily would.
Liquidity Risk — The Fund may make investments that are illiquid or that may become less liquid in response to market developments or adverse investor perceptions. Illiquid investments may be more difficult to value. Liquidity risk may also refer to the risk that the Fund will not be able to pay redemption proceeds within the allowable time period because of unusual market conditions, an unusually high volume of redemption requests, or other reasons. To meet redemption requests, the Fund may be forced to sell investments at an unfavorable time and/or under unfavorable conditions.
Market and Credit Risks — In the normal course of business, the Fund trades financial instruments and enters into financial transactions where risk of potential loss exists due to changes in the market (market risk). Additionally, the Fund may also be exposed to credit risk in the event that an issuer or guarantor fails to perform or that an institution or entity with which the Fund has unsettled or open transactions defaults.
10. INDEMNIFICATIONS
Under the Trust’s organizational documents, its Trustees, officers, employees and agents are indemnified, to the extent permitted by the Act and state law, against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the course of business, the Fund enters into contracts that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, GSAM believes the risk of loss under these arrangements to be remote.
11. SUBSEQUENT EVENTS
Subsequent events after the Statement of Assets and Liabilities date have been evaluated and GSAM has concluded that there is no impact requiring adjustment or disclosure in the financial statements.
24
GOLDMAN SACHS VARIABLE INSURANCE TRUST U.S. EQUITY INSIGHTS FUND
Notes to Financial Statements (continued)
December 31, 2016
12. SUMMARY OF SHARE TRANSACTIONS
Share activity is as follows:
For the Fiscal Year Ended December 31, 2016 | For the Fiscal Year Ended December 31, 2015 | |||||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||||
Institutional Shares | ||||||||||||||||
Shares sold | 316,144 | $ | 5,403,266 | 430,772 | $ | 7,764,027 | ||||||||||
Reinvestment of distributions | 671,831 | 11,972,029 | 1,232,945 | 20,565,516 | ||||||||||||
Shares redeemed | (2,619,254 | ) | (44,715,813 | ) | (2,794,030 | ) | (50,484,586 | ) | ||||||||
(1,631,279 | ) | (27,340,518 | ) | (1,130,313 | ) | (22,155,043 | ) | |||||||||
Service Shares | ||||||||||||||||
Shares sold | 615,221 | 10,515,136 | 671,118 | 12,223,565 | ||||||||||||
Reinvestment of distributions | 301,729 | 5,394,918 | 537,356 | 8,995,336 | ||||||||||||
Shares redeemed | (1,427,118 | ) | (24,577,191 | ) | (1,538,497 | ) | (27,964,164 | ) | ||||||||
(510,168 | ) | (8,667,137 | ) | (330,023 | ) | (6,745,263 | ) | |||||||||
NET DECREASE | (2,141,447 | ) | $ | (36,007,655 | ) | (1,460,336 | ) | $ | (28,900,306 | ) |
25
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Goldman Sachs Variable Insurance Trust and Shareholders of the
Goldman Sachs U.S. Equity Insights Fund:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Goldman Sachs U.S. Equity Insights Fund (the “Fund”), a fund of the Goldman Sachs Variable Insurance Trust, as of December 31, 2016, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities as of December 31, 2016 by correspondence with the custodian, brokers, transfer agent of the underlying funds and the application of alternative auditing procedures where securities purchased confirmations had not been received, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 14, 2017
26
GOLDMAN SACHS VARIABLE INSURANCE TRUST U.S. EQUITY INSIGHTS FUND
Fund Expenses — Six Month Period Ended December 31, 2016 (Unaudited) |
As a shareholder of Institutional or Service Shares of the Fund, you incur ongoing costs, including management fees, distribution and/or service (12b-1) fees (with respect to Service Shares) and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Institutional Shares and Service Shares of the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from July 1, 2016 through December 31, 2016, which represents a period of 184 days of a 366 day year.
Actual Expenses — The first line under each share class in the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000=8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes — The second line under each share class in the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual net expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only. As a shareholder of the Fund you do not incur any transaction costs, such as sales charges, redemption fees, or exchange fees, but shareholders of other funds may incur such costs. The second line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds whose shareholders may incur transaction costs.
Share Class | Beginning Account Value 07/01/16 | Ending Account Value 12/31/16 | Expenses Paid for the 6 Months Ended 12/31/16* | |||||||||
Institutional | ||||||||||||
Actual | $ | 1,000 | $ | 1,088.40 | $ | 3.36 | ||||||
Hypothetical 5% return | 1,000 | 1,021.92 | + | 3.25 | ||||||||
Service | ||||||||||||
Actual | 1,000 | 1,087.20 | 4.46 | |||||||||
Hypothetical 5% return | 1,000 | 1,020.86 | + | 4.32 |
* | Expenses are calculated using the Fund’s annualized net expense ratio for each class, which represents the ongoing expenses as a percentage of net assets for the six months ended December 31, 2016. Expenses are calculated by multiplying the annualized net expense ratio by the average account value for the period; then multiplying the result by the number of days in the most recent fiscal half year; and then dividing that result by the number of days in the fiscal year. The annualized net expense ratios for the period were 0.64% and 0.85% for Institutional and Service Shares, respectively. |
+ | Hypothetical expenses are based on the Fund’s actual annualized net expense ratios and an assumed rate of return of 5% per year before expenses. |
27
GOLDMAN SACHS VARIABLE INSURANCE TRUST U.S. EQUITY INSIGHTS FUND
Trustees and Officers (Unaudited)
Independent Trustees
Name, Address and Age1 | Position(s) Held with the Trust | Term of Office and Length of Time Served2 | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee3 | Other Directorships Held by Trustee4 | |||||||
Ashok N. Bakhru Age: 74 | Chairman of the Board of Trustees | Since 1996 (Trustee since 1991) | Mr. Bakhru is retired. He was formerly Director, Apollo Investment Corporation (a business development company) (2008-2013); President, ABN Associates (a management and financial consulting firm) (1994-1996 and 1998-2012); Trustee, Scholarship America (1998-2005); Trustee, Institute for Higher Education Policy (2003-2008); Director, Private Equity Investors — III and IV (1998-2007), and Equity-Linked Investors II (April 2002-2007).
Chairman of the Board of Trustees — Goldman Sachs Trust; Goldman Sachs Variable Insurance Trust; Goldman Sachs Trust II; Goldman Sachs BDC, Inc.; Goldman Sachs Private Middle Market Credit LLC; Goldman Sachs MLP Income Opportunities Fund; Goldman Sachs MLP and Energy Renaissance Fund; and Goldman Sachs ETF Trust. | 142 | None | |||||||
Kathryn A. Cassidy Age: 62 | Trustee | Since 2015 | Ms. Cassidy is retired. Formerly, she was Advisor to the Chairman (May 2014-December 2014); and Senior Vice President and Treasurer (2008-2014), General Electric Company & General Electric Capital Corporation (technology and financial services companies).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||||
Diana M. Daniels Age: 67 | Trustee | Since 2007 | Ms. Daniels is retired. Formerly, she was Vice President, General Counsel and Secretary, The Washington Post Company (1991-2006). Ms. Daniels is a Trustee Emeritus and serves as a Presidential Councillor of Cornell University (2013-Present); former Member of the Legal Advisory Board, New York Stock Exchange (2003-2006) and of the Corporate Advisory Board, Standish Mellon Management Advisors (2006-2007).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||||
Herbert J. Markley Age: 66 | Trustee | Since 2013 | Mr. Markley is retired. Formerly, he was Executive Vice President, Deere & Company (an agricultural and construction equipment manufacturer) (2007-2009); and President, Agricultural Division, Deere & Company (2001-2007). Previously, Mr. Markley served as an Advisory Board Member of Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust (June 2013-October 2013).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||||
Jessica Palmer Age: 67 | Trustee | Since 2007 | Ms. Palmer is retired. She is Director, Emerson Center for the Arts and Culture (2011-Present); and was formerly a Consultant, Citigroup Human Resources Department (2007-2008); Managing Director, Citigroup Corporate and Investment Banking (previously, Salomon Smith Barney/Salomon Brothers) (1984-2006). Ms. Palmer was a Member of the Board of Trustees of Indian Mountain School (private elementary and secondary school) (2004-2009).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||||
28
GOLDMAN SACHS VARIABLE INSURANCE TRUST U.S. EQUITY INSIGHTS FUND
Trustees and Officers (Unaudited) (continued)
Independent Trustees
Name, Address and Age1 | Position(s) Held with the Trust | Term of Office and Length of Time Served2 | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee3 | Other Directorships Held by Trustee4 | |||||||
Roy W. Templin Age: 56 | Trustee | Since 2013 | Mr. Templin is retired. He recently served as Chairman of the Board of Directors, Con-Way Incorporated (a transportation, logistics and supply chain management service company) (2014-2015); and was formerly Executive Vice President and Chief Financial Officer, Whirlpool Corporation (an appliance manufacturer and marketer) (2004-2012). Previously, Mr. Templin served as an Advisory Board Member of Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust (June 2013-October 2013).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||||
Gregory G. Weaver Age: 65 | Trustee | Since 2015 | Mr. Weaver is retired. He is Director, Verizon Communications Inc. (2015-Present); and was formerly Chairman and Chief Executive Officer, Deloitte & Touche LLP (a professional services firm) (2001-2005 and 2012-2014); and Member of the Board of Directors, Deloitte & Touche LLP (2006-2012).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | Verizon Communications Inc. | |||||||
29
GOLDMAN SACHS VARIABLE INSURANCE TRUST U.S. EQUITY INSIGHTS FUND
Trustees and Officers (Unaudited) (continued)
Interested Trustees*
Name, Address and Age1 | Position(s) Held with the Trust | Term of Office and Length of Time Served2 | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee3 | Other Directorships Held by Trustee4 | |||||||
James A. McNamara Age: 54 | President and Trustee | Since 2007 | Managing Director, Goldman Sachs (December 1998-Present); Director of Institutional Fund Sales, GSAM (April 1998-December 2000); and Senior Vice President and Manager, Dreyfus Institutional Service Corporation (January 1993- April 1998).
President and Trustee — Goldman Sachs Trust; Goldman Sachs Variable Insurance Trust; Goldman Sachs Trust II; Goldman Sachs MLP Income Opportunities Fund; Goldman Sachs MLP and Energy Renaissance Fund; and Goldman Sachs ETF Trust. | 140 | None | |||||||
Alan A. Shuch Age: 67 | Trustee | Since 1990 | Advisory Director — GSAM (May 1999-Present); Consultant to GSAM (December 1994-May 1999); and Limited Partner, Goldman Sachs (December 1994-May 1999).
Trustee — Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust. | 106 | None | |||||||
* | These persons are considered to be “Interested Trustees” because they hold positions with Goldman Sachs and own securities issued by The Goldman Sachs Group, Inc. Each Interested Trustee holds comparable positions with certain other companies of which Goldman Sachs, GSAM or an affiliate thereof is the investment adviser, administrator and/or distributor. |
1 | Each Trustee may be contacted by writing to the Trustee, c/o Goldman Sachs, 200 West Street, New York, New York, 10282, Attn: Caroline Kraus. Information is provided as of December 31, 2016. Alan A. Shuch served as Trustee until his retirement from the Board on December 31, 2016. |
2 | Subject to such policies as may be adopted by the Board from time-to-time, each Trustee holds office for an indefinite term, until the earliest of: (a) the election of his or her successor; (b) the date the Trustee resigns or is removed by the Board or shareholders, in accordance with the Trust’s Declaration of Trust; or (c) the termination of the Trust. The Board has adopted policies which provide that (a) no Trustee shall hold office for more than 15 years and (b) a Trustee shall retire as of December 31st of the calendar year in which he or she reaches his or her 74th birthday, unless a waiver of such requirement shall have been adopted by a majority of the other Trustees. These policies may be changed by the Trustees without shareholder vote. One Trustee has been granted a waiver from the foregoing policies which permits him to serve until December 31, 2017. |
3 | The Goldman Sachs Fund Complex includes certain other companies listed above for each respective Trustee. As of December 31, 2016, Goldman Sachs Trust consisted of 92 portfolios (89 of which offered shares to the public); Goldman Sachs Variable Insurance Trust consisted of 14 portfolios; Goldman Sachs Trust II consisted of 17 portfolios (16 of which offered shares to the public); Goldman Sachs BDC, Inc., Goldman Sachs Private Middle Market Credit LLC, Goldman Sachs MLP Income Opportunities Fund, and Goldman Sachs MLP and Energy Renaissance Fund each consisted of one portfolio; and Goldman Sachs ETF Trust consisted of 15 portfolios (eight of which offered shares to the public). Goldman Sachs Private Middle Market Credit LLC does not offer shares to the public. |
4 | This column includes only directorships of companies required to report to the Securities and Exchange Commission under the Securities Exchange Act of 1934 (i.e., “public companies”) or other investment companies registered under the Act. |
Additional information about the Trustees is available in the Fund’s Statement of Additional Information, which can be obtained from Goldman Sachs free of charge by calling this toll-free number (in the United States of America): 1-800-526-7384.
30
GOLDMAN SACHS VARIABLE INSURANCE TRUST U.S. EQUITY INSIGHTS FUND
Trustees and Officers (Unaudited) (continued)
Officers of the Trust*
Name, Address and Age1 | Position(s) Held with the Trust | Term of Office and | Principal Occupation(s) During Past 5 Years | |||
James A. McNamara 200 West Street New York, NY 10282 Age: 54 | Trustee and President | Since 2007 | Managing Director, Goldman Sachs (December 1998-Present); Director of Institutional Fund Sales, GSAM (April 1998-December 2000); and Senior Vice President and Manager, Dreyfus Institutional Service Corporation (January 1993-April 1998).
President and Trustee — Goldman Sachs Trust; Goldman Sachs Variable Insurance Trust; Goldman Sachs Trust II; Goldman Sachs MLP Income Opportunities Fund; Goldman Sachs MLP and Energy Renaissance Fund; and Goldman Sachs ETF Trust. | |||
Caroline L. Kraus 200 West Street New York, NY 10282 Age: 39 | Secretary | Since 2012 | Managing Director, Goldman Sachs (January 2016-Present); Vice President, Goldman Sachs (August 2006-December 2015); Associate General Counsel, Goldman Sachs (2012-Present); Assistant General Counsel, Goldman Sachs (August 2006-December 2011); and Associate, Weil, Gotshal & Manges, LLP (2002-2006).
Secretary — Goldman Sachs Trust (previously Assistant Secretary (2012)); Goldman Sachs Variable Insurance Trust (previously Assistant Secretary (2012)); Goldman Sachs Trust II; Goldman Sachs BDC, Inc.; Goldman Sachs Private Middle Market Credit LLC; Goldman Sachs Middle Market Lending LLC; Goldman Sachs MLP Income Opportunities Fund; Goldman Sachs MLP and Energy Renaissance Fund; and Goldman Sachs ETF Trust. | |||
Scott M. McHugh 200 West Street New York, NY 10282 Age: 45 | Treasurer, Senior Vice President and Principal Financial Officer | Since 2009 (Principal | Managing Director, Goldman Sachs (January 2016-Present); Vice President, Goldman Sachs (February 2007-December 2015); Assistant Treasurer of certain mutual funds administered by DWS Scudder (2005-2007); and Director (2005-2007), Vice President (2000-2005), and Assistant Vice President (1998-2000), Deutsche Asset Management or its predecessor (1998-2007).
Treasurer, Senior Vice President and Principal Financial Officer — Goldman Sachs Trust; Goldman Sachs Variable Insurance Trust; Goldman Sachs Trust II; Goldman Sachs MLP Income Opportunities Fund; Goldman Sachs MLP and Energy Renaissance Fund; and Goldman Sachs ETF Trust. | |||
* | Represents a partial list of officers of the Trust. Additional information about all the officers is available in the Fund’s Statement of Additional Information, which can be obtained from Goldman Sachs free of charge by calling this toll-free number (in the United States): 1-800-526-7384. |
1 | Information is provided as of December 31, 2016. |
2 | Officers hold office at the pleasure of the Board of Trustees or until their successors are duly elected and qualified. Each officer holds comparable positions with certain other companies of which Goldman Sachs, GSAM or an affiliate thereof is the investment adviser, administrator and/or distributor. |
31
GOLDMAN SACHS VARIABLE INSURANCE TRUST U.S. EQUITY INSIGHTS FUND
Goldman Sachs Variable Insurance Trust — Tax Information (Unaudited)
For the year ended December 31, 2016, 55.27% of the dividends paid from net investment company taxable income by the U.S. Equity Insights Fund qualify for the dividends received deduction available to corporations.
Pursuant to Section 852 of the Internal Revenue Code, the U.S. Equity Insights Fund designates $9,889,500, or, if different, the maximum amount allowable, as capital gain dividends paid during the fiscal year ended December 31, 2016.
32
TRUSTEES | OFFICERS | |
Ashok N. Bakhru, Chairman | James A. McNamara, President | |
Kathryn A. Cassidy | Scott M. McHugh, Treasurer, Senior Vice | |
Diana M. Daniels | President and Principal Financial Officer | |
Herbert J. Markley | Caroline L. Kraus, Secretary | |
James A. McNamara | ||
Jessica Palmer | ||
Roy W. Templin | ||
Gregory G. Weaver |
GOLDMAN, SACHS & CO.
Distributor and Transfer Agent
GOLDMAN SACHS ASSET MANAGEMENT, L.P.
Investment Adviser
200 West Street, New York
New York 10282
Visit our web site at www.GSAMFUNDS.com to obtain the most recent month-end returns.
The reports concerning the Fund included in this shareholder report may contain certain forward-looking statements about the factors that may affect the performance of the Fund in the future. These statements are based on Fund management’s predictions and expectations concerning certain future events and their expected impact on the Fund, such as performance of the economy as a whole and of specific industry sectors, changes in the levels of interest rates, the impact of developing world events, and other factors that may influence the future performance of the Fund. Management believes these forward-looking statements to be reasonable, although they are inherently uncertain and difficult to predict. Actual events may cause adjustments in portfolio management strategies from those currently expected to be employed.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the Fund voted proxies relating to portfolio securities for the 12-month period ended December 31 is available (i) without charge, upon request by calling 1-800-621-2550; and (ii) on the Securities and Exchange Commission (“SEC”) web site at http://www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Form N-Qs are available on the SEC’s web site at http://www.sec.gov within 60 days after the Fund’s first and third fiscal quarters. The Fund’s Form N-Qs may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may also be obtained by calling 1-800-SEC-0330. Form N-Qs may be obtained upon request and without charge by calling 1-800-621-2550.
The website links provided are for your convenience only and are not an endorsement or recommendation by GSAM of any of these websites or the products or services offered. GSAM is not responsible for the accuracy and validity of the content of these websites.
Fund holdings and allocations shown are as of December 31, 2016 and may not be representative of future investments. Fund holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities. Current and future holdings are subject to risk.
References to indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only and do not imply that the portfolio will achieve similar results. The index composition may not reflect the manner in which a portfolio is constructed. While an adviser seeks to design a portfolio which reflects appropriate risk and return features, portfolio characteristics may deviate from those of the benchmark.
The Global Industry Classification Standard (“GICS”) was developed by and is the exclusive property and a service mark of Morgan Stanley Capital International Inc. (“MSCI”) and Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. (“S&P”) and is licensed for use by Goldman Sachs. Neither MSCI, S&P nor any other party involved in making or compiling the GICS or any GICS classifications makes any express or implied warranties or representations with respect to such standard or classification (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of such standard or classification. Without limiting any of the foregoing, in no event shall MSCI, S&P, any of their affiliates or any third party involved in making or compiling the GICS or any GICS classifications have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.
The portfolio risk management process includes an effort to monitor and manage risk, but does not imply low risk.
Shares of the Goldman Sachs VIT Funds are offered to separate accounts of participating life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Shares of the Fund are not offered directly to the general public. The variable annuity contracts and variable life insurance policies are described in the separate prospectuses issued by participating insurance companies. You should refer to those prospectuses for information about surrender charges, mortality and expense risk fees and other charges that may be assessed by participating insurance companies under the variable annuity contracts or variable life insurance policies. Such fees or charges, if any, may affect the return you may realize with respect to your investments. Ask your representative for more complete information. Please consider a fund’s objectives, risks and charges and expenses, and read the prospectus carefully before investing. The prospectus contains this and other information about the Fund.
This material is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus or summary prospectus, if applicable. Investors should consider the Fund’s objective, risks, and charges and expenses, and read the summary prospectus, if available, and/or the prospectus carefully before investing or sending money. The summary prospectus, if available, and the prospectus contain this and other information about the Fund and may be obtained from your authorized dealer or from Goldman, Sachs & Co. by calling 1-800-621-2550.
This report is prepared for the general information of contract owners and is not an offer of shares of the Goldman Sachs Variable Insurance Trust — Goldman Sachs U.S. Equity Insights Fund.
© 2017 Goldman Sachs. All rights reserved.
VITUSAR-17/81100-TMPL-02/2017-468821/8K
ITEM 2. | CODE OF ETHICS. |
(a) | As of the end of the period covered by this report, the registrant has adopted a code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party (the “Code of Ethics”). |
(b) | During the period covered by this report, no amendments were made to the provisions of the Code of Ethics. |
(c) | During the period covered by this report, the registrant did not grant any waivers, including an implicit waiver, from any provision of the Code of Ethics. |
(d) | A copy of the Code of Ethics is available as provided in Item 12(a)(1) of this report. |
ITEM 3. | AUDIT COMMITTEE FINANCIAL EXPERT. |
The registrant’s board of trustees has determined that the registrant has at least one “audit committee financial expert” (as defined in Item 3 of Form N-CSR) serving on its audit committee. Gregory G. Weaver is the “audit committee financial expert” and is “independent” (as each term is defined in Item 3 of Form N-CSR). |
ITEM 4. | PRINCIPAL ACCOUNTANT FEES AND SERVICES. |
Item 4 — Principal Accountant Fees and Services for the Goldman Sachs Variable Insurance Trust (“GSVIT”):
Table 1 – Items 4(a) - 4(d)
2016 | 2015 | Description of Services Rendered | ||||||||
Audit Fees: | ||||||||||
• PricewaterhouseCoopers (“PwC”) | $ | 466,305 | $ | 442,044 | Financial statement audits. | |||||
Audit-Related Fees | ||||||||||
PwC | $ | — | $ | 10,000 | Other attest services. | |||||
Tax Fees | ||||||||||
PwC | $ | 116,270 | $ | 116,270 | Tax compliance services provided in connection with the preparation and review of the Registrant’s tax returns. |
Items 4(b)(c) & (d) Table 2. Non-Audit Services to the GSVIT’s * that were pre-approved by the GSVIT’s Audit Committee pursuant to Rule 2-01(c)(7)(ii) of Regulation S-X
2016 | 2015 | Description of Services Rendered | ||||||||
Audit-Related Fees | ||||||||||
PwC | $ | 1,653,616 | $ | 1,653,616 | Internal control review performed in accordance with Statement on Standards for Attestation Engagements No. 16 and Semi-Annual Updates related to withholding tax accrual for non-US Jurisdictions. These fees are borne by the Funds’ adviser. |
* | These include the advisor (excluding sub-advisors) and any entity controlling, controlled by or under common control with the advisor that provides ongoing services to the registrant (hereinafter referred to as “service affiliates”). |
Item 4(e)(1) — Audit Committee Pre Approval Policies and Procedures
Pre-Approval of Audit and Non-Audit Services Provided to the Funds of the Goldman Sachs Variable Insurance Trust. The Audit and Non-Audit Services Pre-Approval Policy (the “Policy”) adopted by the Audit Committee of GSVIT sets forth the procedures and the conditions pursuant to which services performed by an independent auditor for GSVIT may be pre-approved. Services may be pre-approved specifically by the Audit Committee as a whole or, in certain circumstances, by the Audit Committee Chairman or the person designated as the Audit Committee Financial Expert. In addition, subject to specified cost limitations, certain services may be pre-approved under the provisions of the Policy. The Policy provides that the Audit Committee will consider whether the services provided by an independent auditor are consistent with the Securities and Exchange Commission’s rules on auditor independence. The Policy provides for periodic review and pre-approval by the Audit Committee of the services that may be provided by the independent auditor.
De Minimis Waiver. The pre-approval requirements of the Policy may be waived with respect to the provision of non-audit services that are permissible for an independent auditor to perform, provided (1) the aggregate amount of all such services provided constitutes no more than five percent of the total amount of revenues subject to pre-approval that was paid to the independent auditors during the fiscal year in which the services are provided; (2) such services were not recognized by GSVIT at the time of the engagement to be non-audit services; and (3) such services are promptly brought to the attention of the Audit Committee and approved prior to the completion of the audit by the Audit Committee or by one or more members of the Audit Committee to whom authority to grant such approvals has been delegated by the Audit Committee, pursuant to the pre-approval provisions of the Policy.
Pre-Approval of Non-Audit Services Provided to GSVIT’s Investment Advisers. The Policy provides that, in addition to requiring pre-approval of audit and non-audit services provided to GSVIT, the Audit Committee will pre-approve those non-audit services provided to GSVIT’s investment advisers (and entities controlling, controlled by or under common control with the investment advisers that provide ongoing services to GSVIT) where the engagement relates directly to the operations or financial reporting of GSVIT.
Item 4(e)(2) — 0% of the audit-related fees, tax fees and other fees listed in Table 1 were approved by GSVIT’s Audit Committee pursuant to the “de minimis” exception of Rule 2-01(c)(7)(i)(C) of Regulation S-X. In addition, 0% of the non-audit services to the GSVIT’s service affiliates listed in Table 2 were approved by GSVIT’s Audit Committee pursuant to the “de minimis” exception of Rule 2-01(c)(7)(i)(C) of Regulation S-X.
Item 4(f) — Not applicable.
Items 4(g) Aggregate Non-Audit Fees Disclosure
The aggregate non-audit fees billed to GSVIT for the twelve months ended December 31, 2016 and December 31, 2015 by PwC were approximately $116,270 and $126,270, respectively.
The aggregate non-audit fees billed to GSVIT’s adviser and service affiliates for non-audit services for the twelve months ended December 31, 2015 and December 31, 2014 by PwC were approximately $14.4 million and $10.2 million, respectively. The figures for these entities are not yet available for the twelve months ended December 31, 2016. With regard to the aggregate non-audit fees billed to GSVIT’s adviser and service affiliates, the 2015 and 2014 amounts include fees for non-audit services required to be pre-approved [see Table 2] and fees for non-audit services that did not require pre-approval since they did not directly relate to GSVIT’s operations or financial reporting.
Items 4(h) — GSVIT’s Audit Committee has considered whether the provision of non-audit services to GSVIT’s investment advisor and service affiliates that did not require pre-approval pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the auditor’s independence.
ITEM 5. | AUDIT COMMITTEE OF LISTED REGISTRANTS. |
Not applicable.
ITEM 6. | SCHEDULE OF INVESTMENTS |
Schedule of Investments is included as part of the Reports to Shareholders filed under Item 1.
ITEM 7. | DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable.
ITEM 8. | PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES |
Not applicable.
ITEM 9. | PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS |
Not applicable.
ITEM 10. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. |
There have been no material changes to the procedures by which shareholders may recommend nominees to the registrant’s board of trustees.
ITEM 11. | CONTROLS AND PROCEDURES. |
(a) | The registrant’s principal executive and principal financial officers or persons performing similar functions have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”)) are effective as of a date within 90 days of the filing date of this report that includes the disclosure required by this paragraph, based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act and 15d-15(b) under the Securities Exchange Act of 1934, as amended. |
(b) | There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the registrant’s second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect the registrant’s internal control over financial reporting. |
ITEM 12. | EXHIBITS. |
(a)(1) | Goldman Sachs Variable Insurance Trust’s Code of Ethics for Principal Executive and Senior Financial Officers is incorporated by reference to Exhibit 12(a)(1) of the registrant’s Form N-CSR filed on February 27, 2015. | |||
(a)(2) | Exhibit 99.CERT | Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 filed herewith | ||
Exhibit 99.906CERT | Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 filed herewith |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Goldman Sachs Variable Insurance Trust
/s/ James A. McNamara | ||
By: James A. McNamara | ||
Chief Executive Officer of | ||
Goldman Sachs Variable Insurance Trust | ||
Date: February 22, 2017 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
/s/ James A. McNamara | ||
By: James A. McNamara | ||
Chief Executive Officer of | ||
Goldman Sachs Variable Insurance Trust | ||
Date: February 22, 2017 | ||
/s/ Scott McHugh | ||
By: Scott McHugh | ||
Principal Financial Officer of | ||
Goldman Sachs Variable Insurance Trust | ||
Date: February 22, 2017 |