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, Suite 500, Chicago, Illinois 60606
(Address of principal executive offices) (Zip code)
Peter V. Bonanno, Esq. | Copies to: | |
Goldman, Sachs & Co. | Jeffrey A. Dalke, Esq. | |
One New York Plaza | Drinker Biddle & Reath LLP | |
New York, New York 10004 | One Logan Square | |
18th and Cherry Streets | ||
Philadelphia, PA 19103 | ||
(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: June 30, 2006
ITEM 1. | REPORTS TO STOCKHOLDERS. | |
The Semi-Annual Report to Stockholders is filed herewith. |
Shareholder Letter
Dear Shareholders:
This report provides an overview on the performance of the Goldman Sachs Variable Insurance Trust — Growth and Income Fund during the six-month reporting period that ended June 30, 2006.
Market Review
During the first half of 2006, the overall U.S. equity markets finished in positive territory, with the S&P 500 Index returning 2.71%. While the economy expanded and corporate profits remained strong, the headwinds from steadily rising interest rates, inflationary pressures, and the potential for additional Federal Reserve Board rate hikes tempered returns. From a market-cap perspective, small-cap stocks outperformed their mid- and large-cap counterparts over the six-month period, with the Russell 2000, Russell Midcap, and Russell 1000 Indexes returning 8.21%, 4.84%, and 2.76%, respectively. Within the mid-cap universe, value outperformed growth, as the Russell MidCap Value Index returned 7.02% and the Russell Midcap Growth Index returned 2.56%, respectively.
Investment Objective
The Fund seeks long-term growth of capital and growth of income.
Portfolio Composition
% of | ||||||
Company | Net Assets | Business | ||||
Exxon Mobil Corp. | 4.8 | % | Energy Resources | |||
Bank of America Corp. | 4.6 | Large Banks | ||||
J.P. Morgan Chase & Co. | 4.2 | Large Banks | ||||
Pfizer, Inc. | 3.9 | Drugs | ||||
Washington Mutual, Inc. | 3.1 | Specialty Financials | ||||
ConocoPhillips | 3.1 | Energy Resources | ||||
Entergy Corp. | 3.0 | Electric Utilities | ||||
Citigroup, Inc. | 2.7 | Large Banks | ||||
Wells Fargo & Co. | 2.5 | Large Banks | ||||
McDonald’s Corp. | 2.5 | Restaurants |
* Opinions expressed in this report represent our present opinions only. Reference to individual securities should not be construed as a commitment that such securities will be retained in the Fund. From time to time, the Fund may change the individual securities it holds, the number or types of securities held and the markets in which it invests. Fund holdings of stocks or bonds should not be relied upon in making investment decisions and should not be construed as research or investment advice regarding particular securities. References to individual securities do not constitute a recommendation to the investor to buy, hold or sell such securities. In addition, references to past performance of the Fund do not indicate future returns, which are not guaranteed and will vary. Furthermore, the value of shares of the Fund may fall as well as rise.
Performance Review
Over the six-month period that ended June 30, 2006, the Fund generated a cumulative total return of 6.02%. This return compares to the 6.56% cumulative total return of the Fund’s benchmark, the Russell 1000 Value Index (with dividends reinvested), over the same time period.
During the period, the Fund generated positive returns but trailed the gains in the benchmark. The Fund’s holdings in the Financials and Consumer Cyclicals sectors enhanced results, while its Technology and Energy stocks detracted from results.
In Consumer Cyclicals, auto safety provider, Autoliv, Inc., and department store retailer, J. C. Penney, Co., Inc., contributed to performance. Auto safety provider Autoliv has benefited from a low-cost labor structure. Additionally, the company has used recent free cash flow to improve its debt structure as well as to repurchase its own shares. J. C. Penney continued to perform strongly due to the company’s improved profitability and leadership. In Services, Walt Disney Co. and Comcast Corp. contributed to performance as both companies posted strong operating results across multiple business lines. We subsequently sold Walt Disney Co. to capture profits.
The Fund’s Technology holdings experienced pressures due to a combination of company-specific and sector-wide factors. Microsoft Corp. detracted from performance after the company moderated its outlook. The company also announced a shift in future spending patterns, which altered our original thesis and prompted us to sell the holding, despite its low valuation. While weak investor sentiment pressured shares of Activision, Inc., we remain positive on the long-term fundamentals for the video game maker. Within Energy, declines in natural gas prices weighed on Fund holdings, EOG Resources, Inc. and The Williams Companies, Inc. The winter of 2006 ranked as one of the warmest on record, resulting in weakness in natural gas fundamentals. Longer term, we remain positive on the prospects for these companies given their low cost structures, positive reserve trends, and disciplined management teams.
We thank you for your investment and look forward to serving your investment needs in the future.
Goldman Sachs Value Portfolio Management Team
July 18, 2006
Shares of the Goldman Sachs Variable Insurance Trust (“VIT”) Growth and Income Fund 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.
The VIT Growth and Income Fund invests primarily in large-capitalization U.S. equity investments and also invests in fixed income securities. The Fund’s equity investments will be subject to market risk so that the value of the securities in which it invests may go up or down in response to the prospects of individual companies, particular industry sectors and/or general economic conditions. Investments in fixed income securities are subject to the risks associated with debt securities including credit and interest rate risk. The Fund may invest in foreign securities, which may be more volatile and less liquid than investment in U.S. securities and will be subject to the risks of currency fluctuations and sudden economic or political developments. At times, the Fund may be unable to sell certain of its portfolio securities without a substantial drop in price, if at all.
SECTOR ALLOCATION AS OF JUNE 30, 2006† |
Percentage of Net Assets
† The Fund is actively managed and, as such, its composition may differ over time. The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. Short-term Investments include repurchase agreements and securities lending collateral. Figures in the above graph may not sum to 100% due to the exclusion of other assets and/or liabilities.
Schedule of Investments
Shares | Description | Value | ||||||||
Common Stocks – 95.8% | ||||||||||
Aerospace & Defense – 1.4% | ||||||||||
59,013 | General Dynamics Corp. | $ | 3,862,991 | |||||||
9,900 | The Boeing Co. | 810,909 | ||||||||
4,673,900 | ||||||||||
Biotechnology – 0.4% | ||||||||||
21,600 | Amgen, Inc.* | 1,408,968 | ||||||||
Brokers – 3.2% | ||||||||||
90,554 | Lehman Brothers Holdings, Inc. | 5,899,593 | ||||||||
21,500 | Merrill Lynch & Co., Inc. | 1,495,540 | ||||||||
53,996 | Morgan Stanley | 3,413,087 | ||||||||
10,808,220 | ||||||||||
Chemicals – 1.0% | ||||||||||
69,643 | Rohm & Haas Co. | 3,490,507 | ||||||||
Computer Hardware – 3.3% | ||||||||||
336,062 | Cisco Systems, Inc.* | 6,563,291 | ||||||||
138,968 | Hewlett-Packard Co. | 4,402,506 | ||||||||
10,965,797 | ||||||||||
Computer Software – 0.8% | ||||||||||
228,640 | Activision, Inc.* | 2,601,923 | ||||||||
Diversified Energy – 1.8% | ||||||||||
263,250 | The Williams Companies, Inc. | 6,149,520 | ||||||||
Drugs – 5.2% | ||||||||||
105,356 | Abbott Laboratories | 4,594,575 | ||||||||
555,008 | Pfizer, Inc. | 13,026,038 | ||||||||
17,620,613 | ||||||||||
Electric Utilities – 7.5% | ||||||||||
21,100 | Edison International | 822,900 | ||||||||
143,127 | Entergy Corp. | 10,126,235 | ||||||||
107,885 | Exelon Corp. | 6,131,105 | ||||||||
39,389 | FirstEnergy Corp. | 2,135,278 | ||||||||
20,900 | FPL Group, Inc. | 864,842 | ||||||||
165,390 | PPL Corp. | 5,342,097 | ||||||||
25,422,457 | ||||||||||
Energy Resources – 9.1% | ||||||||||
158,296 | ConocoPhillips | 10,373,137 | ||||||||
56,867 | EOG Resources, Inc. | 3,943,158 | ||||||||
264,120 | Exxon Mobil Corp. | 16,203,762 | ||||||||
30,520,057 | ||||||||||
Energy-MLP – 4.1% | ||||||||||
81,870 | Energy Transfer Partners LP | 3,655,495 | ||||||||
188,438 | Enterprise Products Partners LP | 4,692,106 | ||||||||
94,266 | Magellan Midstream Partners LP | 3,203,159 | ||||||||
67,937 | Williams Partners LP | 2,137,298 | ||||||||
13,688,058 | ||||||||||
Environmental & Other Services – 1.2% | ||||||||||
111,300 | Waste Management, Inc. | 3,993,444 | ||||||||
Financial Technology – 0.7% | ||||||||||
55,246 | First Data Corp. | 2,488,280 | ||||||||
Food & Beverage – 1.2% | ||||||||||
27,329 | Kraft Foods, Inc.(a) | 844,466 | ||||||||
139,326 | Unilever NV | 3,141,801 | ||||||||
3,986,267 | ||||||||||
Home Products – 1.9% | ||||||||||
200,888 | Newell Rubbermaid, Inc. | 5,188,937 | ||||||||
22,387 | The Clorox Co. | 1,364,935 | ||||||||
6,553,872 | ||||||||||
Large Banks – 14.0% | ||||||||||
322,990 | Bank of America Corp. | 15,535,819 | ||||||||
191,104 | Citigroup, Inc. | 9,218,857 | ||||||||
334,070 | J.P. Morgan Chase & Co. | 14,030,940 | ||||||||
127,267 | Wells Fargo & Co. | 8,537,070 | ||||||||
47,322,686 | ||||||||||
Media – 2.3% | ||||||||||
118,500 | Comcast Corp.* | 3,879,690 | ||||||||
216,756 | Time Warner, Inc. | 3,749,879 | ||||||||
7,629,569 | ||||||||||
Medical Products – 1.4% | ||||||||||
127,422 | Baxter International, Inc. | 4,684,033 | ||||||||
Mining – 0.5% | ||||||||||
32,000 | Nucor Corp. | 1,736,000 | ||||||||
Motor Vehicle – 0.7% | ||||||||||
42,701 | Autoliv, Inc. | 2,415,596 | ||||||||
Oil Services – 1.4% | ||||||||||
32,003 | Baker Hughes, Inc. | 2,619,446 | ||||||||
53,629 | BJ Services Co. | 1,998,216 | ||||||||
4,617,662 | ||||||||||
Paper & Packaging – 2.9% | ||||||||||
75,300 | International Paper Co. | 2,432,190 | ||||||||
212,784 | Packaging Corp. of America | 4,685,504 | ||||||||
72,320 | Plum Creek Timber Co., Inc. (REIT) | 2,567,360 | ||||||||
9,685,054 | ||||||||||
Parts & Equipment – 1.9% | ||||||||||
103,592 | United Technologies Corp. | 6,569,805 | ||||||||
Property Insurance – 3.9% | ||||||||||
46,826 | American International Group, Inc. | 2,765,075 | ||||||||
58,528 | PartnerRe Ltd. | 3,748,718 | ||||||||
67,904 | The Allstate Corp. | 3,716,386 | ||||||||
46,435 | XL Capital Ltd.(a) | 2,846,466 | ||||||||
13,076,645 | ||||||||||
Regional Banks – 2.0% | ||||||||||
147,476 | KeyCorp | 5,261,944 | ||||||||
11,621 | M&T Bank Corp. | 1,370,348 | ||||||||
6,632,292 | ||||||||||
4
Shares | Description | Value | ||||||||
Common Stocks – (continued) | ||||||||||
REITs – 4.4% | ||||||||||
70,364 | Apartment Investment & Management Co. (REIT) | $ | 3,057,316 | |||||||
136,300 | CapitalSource, Inc. | 3,197,598 | ||||||||
65,307 | Developers Diversified Realty Corp. | 3,407,719 | ||||||||
138,543 | iStar Financial, Inc. | 5,229,998 | ||||||||
14,892,631 | ||||||||||
Restaurants – 2.5% | ||||||||||
253,500 | McDonald’s Corp. | 8,517,600 | ||||||||
Retail Apparel – 2.5% | ||||||||||
122,593 | J. C. Penney Co., Inc. | 8,276,254 | ||||||||
Specialty Financials – 7.1% | ||||||||||
75,876 | AllianceBernstein Holding LP | 4,639,058 | ||||||||
89,291 | American Capital Strategies Ltd.(a) | 2,989,463 | ||||||||
138,171 | Apollo Investment Corp. | 2,553,400 | ||||||||
82,297 | Countrywide Financial Corp. | 3,133,870 | ||||||||
229,036 | Washington Mutual, Inc.(a) | 10,439,461 | ||||||||
23,755,252 | ||||||||||
Telecom Equipment – 1.1% | ||||||||||
179,800 | Motorola, Inc. | 3,622,970 | ||||||||
Telephone – 1.9% | ||||||||||
188,912 | Verizon Communications, Inc. | 6,326,663 | ||||||||
Tobacco – 2.0% | ||||||||||
93,377 | Altria Group, Inc. | 6,856,673 | ||||||||
Transports – 0.5% | ||||||||||
21,631 | United Parcel Service, Inc. Class B | 1,780,880 | ||||||||
TOTAL COMMON STOCKS | ||||||||||
(Cost $289,046,556) | $ | 322,770,148 | ||||||||
Principal | Interest | Maturity | ||||||||||||
Amount | Rate | Date | Value | |||||||||||
Repurchase Agreement(b) – 3.6% | ||||||||||||||
Joint Repurchase Agreement Account II | ||||||||||||||
$ | 12,200,000 | 5.28 | % | 07/03/2006 | $12,200,000 | |||||||||
Maturity Value: $12,205,364 | ||||||||||||||
(Cost $12,200,000) | ||||||||||||||
TOTAL INVESTMENTS BEFORE SECURITIES LENDING COLLATERAL | ||||||||||||||
(Cost $301,246,556) | $334,970,148 | |||||||||||||
Shares | Description | Value | ||||||||
Securities Lending Collateral – 4.5% | ||||||||||
15,105,925 | Boston Global Investment Trust – Enhanced Portfolio | $ | 15,105,925 | |||||||
(Cost $15,105,925) | ||||||||||
TOTAL INVESTMENTS – 103.9% | ||||||||||
(Cost $316,352,481) | $ | 350,076,073 | ||||||||
LIABILITIES IN EXCESS OF OTHER ASSETS – (3.9)% | (13,250,331 | ) | ||||||||
NET ASSETS – 100.0% | $ | 336,825,742 | ||||||||
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 portion of security is on loan. | |
(b) | Joint repurchase agreement was entered into on June 30, 2006. Additional Investment information appears on page 6. |
Investment Abbreviation: | ||||||
REIT | — | Real Estate Investment Trust | ||||
5
ADDITIONAL INVESTMENT INFORMATION |
JOINT REPURCHASE AGREEMENT ACCOUNT II — At June 30, 2006, the Fund had an undivided interest in the following Joint Repurchase Agreement Account II which equaled $12,200,000 in principal amount.
Principal | Interest | Maturity | Maturity | |||||||||||||
Repurchase Agreements | Amount | Rate | Date | Value | ||||||||||||
Banc of America Securities LLC | $ | 2,860,000,000 | 5.30% | 07/03/2006 | $ | 2,861,263,167 | ||||||||||
Barclays Capital PLC | 1,500,000,000 | 5.32 | 07/03/2006 | 1,500,665,000 | ||||||||||||
Bear Stearns | 500,000,000 | 5.31 | 07/03/2006 | 500,221,250 | ||||||||||||
Deutsche Bank Securities, Inc. | 1,000,000,000 | 5.20 | 07/03/2006 | 1,000,433,333 | ||||||||||||
Greenwich Capital Markets | 300,000,000 | 5.32 | 07/03/2006 | 300,133,000 | ||||||||||||
J.P. Morgan Securities, Inc. | 400,000,000 | 5.28 | 07/03/2006 | 400,176,000 | ||||||||||||
Merrill Lynch | 500,000,000 | 5.25 | 07/03/2006 | 500,218,750 | ||||||||||||
Morgan Stanley & Co. | 3,000,000,000 | 5.25 | 07/03/2006 | 3,001,312,500 | ||||||||||||
UBS Securities LLC | 1,050,000,000 | 5.25 | 07/03/2006 | 1,050,459,375 | ||||||||||||
UBS Securities LLC | 475,000,000 | 5.30 | 07/03/2006 | 475,209,792 | ||||||||||||
UBS Securities LLC | 400,000,000 | 5.34 | 07/03/2006 | 400,178,000 | ||||||||||||
Wachovia Capital Markets | 250,000,000 | 5.26 | 07/03/2006 | 250,109,583 | ||||||||||||
TOTAL | $ | 12,235,000,000 | $ | 12,240,379,750 | ||||||||||||
At June 30, 2006, the Joint Repurchase Agreement Account II was fully collateralized by Federal Home Loan Bank, 0.00% to 11.00%, due 07/07/2006 to 04/20/2016; Federal Home Loan Mortgage Association, 3.00% to 8.50%, due 02/01/2007 to 07/01/2036; Federal National Mortgage Association, 0.00% to 10.50%, due 02/01/2007 to 07/01/2036; and U.S. Treasury Bonds, 5.00% to 7.14%, due 11/13/2008 to 10/20/2018. The aggregate market value of the collateral, including accrued interest, was $12,492,409,737. |
6
Statement of Assets and Liabilities
Assets: | |||||||
Investment in securities, at value (identified cost $301,246,556)—including $14,786,120 of securities on loan | $ | 334,970,148 | |||||
Securities lending collateral, at value (cost $15,105,925) | 15,105,925 | ||||||
Cash | 1,137 | ||||||
Receivables: | |||||||
Investment securities sold | 2,986,406 | ||||||
Dividends and interest | 440,209 | ||||||
Fund shares sold | 34,130 | ||||||
Other assets | 3,336 | ||||||
Total assets | 353,541,291 | ||||||
Liabilities: | |||||||
Payables: | |||||||
Payable upon return of securities loaned | 15,105,925 | ||||||
Fund shares repurchased | 1,336,378 | ||||||
Amounts owed to affiliates | 216,045 | ||||||
Accrued expenses | 57,201 | ||||||
Total liabilities | 16,715,549 | ||||||
Net Assets: | |||||||
Paid-in capital | 291,299,880 | ||||||
Accumulated undistributed net investment income | 3,931,816 | ||||||
Accumulated net realized gain on investment transactions | 7,870,454 | ||||||
Net unrealized gain on investments | 33,723,592 | ||||||
NET ASSETS | $ | 336,825,742 | |||||
Total shares of beneficial interest outstanding, par value $0.001 (unlimited shares authorized) | 26,548,053 | ||||||
Net asset value, offering and redemption price per share | $ | 12.69 | |||||
7
Statement of Operations
Investment income: | ||||||
Dividends(a) | $ | 4,734,569 | ||||
Interest (including securities lending income of $2,993) | 183,723 | |||||
Total income | 4,918,292 | |||||
Expenses: | ||||||
Management fees | 1,228,373 | |||||
Transfer agent fees | 65,513 | |||||
Custody and accounting fees | 40,073 | |||||
Printing fees | 32,899 | |||||
Professional fees | 30,762 | |||||
Trustee fees | 6,803 | |||||
Registration fees | 629 | |||||
Other | 6,906 | |||||
Total expenses | 1,411,958 | |||||
Less — expense reductions | (1,090 | ) | ||||
Net expenses | 1,410,868 | |||||
NET INVESTMENT INCOME | 3,507,424 | |||||
Realized and unrealized gain on investment transactions: | ||||||
Net realized gain from investment transactions | 12,820,633 | |||||
Net change in unrealized gain on investments | 2,487,563 | |||||
Net realized and unrealized gain on investment transactions | 15,308,196 | |||||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 18,815,620 | ||||
(a) | Foreign taxes withheld on dividends were $11,743. |
8
Statements of Changes in Net Assets
For the | ||||||||||
Six Months Ended | For the | |||||||||
June 30, 2006 | Year Ended | |||||||||
(Unaudited) | December 31, 2005 | |||||||||
From operations: | ||||||||||
Net investment income | $ | 3,507,424 | $ | 5,198,685 | ||||||
Net realized gain on investment transactions | 12,820,633 | 22,131,005 | ||||||||
Payments by affiliates to reimburse certain security claims | — | 9,144 | ||||||||
Net change in unrealized gain (loss) on investments | 2,487,563 | (15,849,453 | ) | |||||||
Net increase in net assets resulting from operations | 18,815,620 | 11,489,381 | ||||||||
Distributions to shareholders: | ||||||||||
From net investment income | — | (5,139,069 | ) | |||||||
From share transactions: | ||||||||||
Proceeds from sales of shares | 25,637,077 | 58,037,222 | ||||||||
Reinvestment of dividends and distributions | — | 5,139,069 | ||||||||
Cost of shares repurchased | (20,778,851 | ) | (32,770,160 | ) | ||||||
Net increase in net assets resulting from share transactions | 4,858,226 | 30,406,131 | ||||||||
TOTAL INCREASE | 23,673,846 | 36,756,443 | ||||||||
Net assets: | ||||||||||
Beginning of period | 313,151,896 | 276,395,453 | ||||||||
End of period | $ | 336,825,742 | $ | 313,151,896 | ||||||
Accumulated undistributed net investment income | $ | 3,931,816 | $ | 424,392 | ||||||
Summary of share transactions: | ||||||||||
Shares sold | 2,048,372 | 4,906,882 | ||||||||
Shares issued on reinvestment of dividends and distributions | — | 428,971 | ||||||||
Shares repurchased | (1,657,799 | ) | (2,776,580 | ) | ||||||
NET INCREASE | 390,573 | 2,559,273 | ||||||||
9
Financial Highlights
Income (loss) from | Ratios assuming no | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
investment operations | expense reductions | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Distributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net | to | Ratio of | Ratio of | Ratio of | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset | realized | shareholders | Net asset | Net assets | Ratio of | net investment | total | net investment | ||||||||||||||||||||||||||||||||||||||||||||||||
value, | Net | and | Total from | from net | value, | at end of | net expenses | income to | expenses | income to | Portfolio | |||||||||||||||||||||||||||||||||||||||||||||
beginning | investment | unrealized | investment | investment | end of | Total | period | to average | average | to average | average | turnover | ||||||||||||||||||||||||||||||||||||||||||||
of period | income(a) | gain (loss) | operations | income | period | return(b) | (in 000s) | net assets | net assets | net assets | net assets | rate | ||||||||||||||||||||||||||||||||||||||||||||
For the Six Months Ended June 30, (Unaudited) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2006 | $ | 11.97 | $ | 0.13 | $ | 0.59 | $ | 0.72 | $ | — | $ | 12.69 | 6.02 | % | $ | 336,826 | 0.86 | %(c) | 2.14 | %(c) | 0.86 | %(c) | 2.14 | %(c) | 32 | % | ||||||||||||||||||||||||||||||
For the Years Ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2005 | 11.71 | 0.21 | 0.25 | 0.46 | (0.20 | ) | 11.97 | 3.93 | 313,152 | 0.88 | 1.77 | 0.88 | 1.77 | 46 | ||||||||||||||||||||||||||||||||||||||||||
2004 | 10.00 | 0.19 | 1.69 | 1.88 | (0.17 | ) | 11.71 | 18.80 | 276,395 | 0.86 | 1.75 | 0.86 | 1.75 | 58 | ||||||||||||||||||||||||||||||||||||||||||
2003 | 8.14 | 0.13 | 1.85 | 1.98 | (0.12 | ) | 10.00 | 24.36 | 230,316 | 1.02 | 1.44 | 1.20 | 1.26 | 51 | ||||||||||||||||||||||||||||||||||||||||||
2002 | 9.33 | 0.13 | (1.19 | ) | (1.06 | ) | (0.13 | ) | 8.14 | (11.34 | ) | 36,911 | 1.05 | 1.51 | 1.27 | 1.29 | 98 | |||||||||||||||||||||||||||||||||||||||
2001 | 10.34 | 0.05 | (1.02 | ) | (0.97 | ) | (0.04 | ) | 9.33 | (9.34 | ) | 40,593 | 1.00 | 0.49 | 1.17 | 0.32 | 48 | |||||||||||||||||||||||||||||||||||||||
(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 year are not annualized. |
(c) | Annualized. |
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements
1. ORGANIZATION |
2. SIGNIFICANT ACCOUNTING POLICIES |
A. Investment Valuation — Investments in equity securities and investment companies traded on a U.S. securities exchange or the NASDAQ system are valued daily at their last sale price or official closing price on the principal exchange or system on which they are traded. If no sale occurs, such securities are valued at the last bid price. Debt securities are valued at prices supplied by independent pricing services, broker/dealer-supplied valuations or matrix pricing systems. Unlisted equity securities for which market quotations are available are valued at the last sale price on valuation date, or if no sale occurs, at the last bid price. Investments in investment companies (other than those that are exchange traded) are valued at the net asset value per share on valuation date. Short-term debt obligations maturing in sixty days or less are valued at amortized cost, which approximates market value. Securities for which quotations are not readily available or are deemed not to reflect market value by the investment adviser are valued at fair value using methods approved by the Trust’s Board of Trustees.
B. Security Transactions and Investment Income — Security transactions are reflected as of the trade date. Realized gains and losses on sales of portfolio securities are calculated using the identified-cost basis. Dividend income is recorded on the ex-dividend date, net of foreign withholding taxes, if any, which are reduced by any amounts reclaimable by the Fund, where applicable. Interest income is recorded on the basis of interest accrued, premium amortized and discount accreted.
C. Expenses — Expenses incurred by the Trust that do not specifically relate to an individual Fund of the Trust are allocated to the Fund on a straight-line and/or “pro-rata” basis depending upon the nature of the expense.
D. Federal Taxes and Distributions to Shareholders — It is the Fund’s policy to comply with the requirements of the Internal Revenue Code (the “Code”) applicable to regulated investment companies and to distribute each year substantially all of its investment company taxable income and capital gains to its shareholders. Accordingly, no federal tax provisions are required. Dividends and distributions to shareholders are recorded on the ex-dividend date. Income distributions and capital gains distributions, if any, are declared and paid annually.
2. SIGNIFICANT ACCOUNTING POLICIES (continued) |
E. Segregation Transactions — As set forth in the prospectus, the Fund may enter into certain derivative transactions to seek to increase total return. Forward foreign currency exchange contracts, futures contracts, written options, when-issued securities and forward commitments represent examples of such transactions. As a result of entering into these transactions, the Fund is required to segregate or physically move liquid assets, on the books of their custodian or to respective counterparties, with a current value equal to or greater than the market value of the corresponding transactions.
F. Repurchase Agreements — Repurchase agreements involve the purchase of securities subject to the seller’s agreement to repurchase them at a mutually agreed upon date and price. 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. If the seller defaults or becomes insolvent, realization of the collateral by the Fund may be delayed or limited and there may be a decline in the value of the collateral during the period while the Fund seeks to assert its rights. The underlying securities for all repurchase agreements are held in safekeeping at the Fund’s custodian or designated subcustodians under triparty repurchase agreements.
3. AGREEMENTS |
Average Daily Net Assets | Annual Rate | |||
First $1 Billion | 0.75 | % | ||
Next $1 Billion | 0.68 | % | ||
Over $2 Billion | 0.65 | % | ||
GSAM has voluntarily agreed to limit certain “Other Expenses” of the Fund (excluding Management fees, Transfer Agency fees and expenses, taxes, interest, brokerage fees and litigation, indemnification costs, shareholder meeting and other extraordinary expenses exclusive of any offset arrangements) to the extent that such expenses exceed, on an annual basis, 0.114% of the average daily net assets of the Fund. Such expense reimbursements, if any, are computed daily and paid monthly. In addition, the Fund is not obligated to reimburse GSAM for prior fiscal year expense reimbursements, if any. For the six months ended June 30, 2006, GSAM made no reimbursements to the Fund.
3. AGREEMENTS (continued) |
4. PORTFOLIO SECURITIES TRANSACTIONS |
5. SECURITIES LENDING |
6. LINE OF CREDIT FACILITY |
7. TAX INFORMATION |
Capital loss carryforward:(1)(2) | |||||
Expiring 2010 | $ | (4,587,095 | ) | ||
Timing differences (related to the deferral of certain REIT dividends for tax purposes) | 35,266 | ||||
(1) | Expiration occurs on December 31 of the year indicated and utilization of these losses may be limited under the Code. |
(2) | During the year ended December 31, 2005, the Fund utilized $21,855,122 of capital loss carryforwards. |
At June 30, 2006, the Fund’s aggregate security unrealized gains and losses based on a cost for U.S. federal income tax purposes were as follows:
Tax cost | $ | 317,145,495 | ||
Gross unrealized gain | 38,194,937 | |||
Gross unrealized loss | (5,264,359 | ) | ||
Net unrealized security gain | $ | 32,930,578 | ||
The difference between book-basis and tax basis unrealized gains (losses) is attributable primarily to wash sales and return of capital distributions from underlying fund investments. The cumulative timing differences consist of deferred income distributions from underlying fund investments.
8. OTHER MATTERS |
Legal Proceedings — Purported class and derivative action lawsuits were filed in April and May 2004 in the United States District Court for the Southern District of New York against the Goldman Sachs Group, Inc. (“GSG”), GSAM and certain related parties, including certain Goldman Sachs Funds and the Trustees and Officers of the Goldman Sachs Trust. In June 2004, these lawsuits were consolidated into one action and in November 2004 a consolidated and amended complaint was filed against GSG, GSAM, Goldman Sachs Asset Management International (“GSAMI”), Goldman Sachs and certain related parties including certain Goldman Sachs Funds and the Trustees and Officers of the Trust. The Fund, along with other investment portfolios of the Trust, were named as nominal defendants in the amended complaint. Plaintiffs filed a second amended consolidated complaint on April 15, 2005. The second amended consolidated complaint alleges violations of the Act and the Investment Advisers Act of 1940. The complaint also asserts claims involving common law breach of fiduciary duty and unjust enrichment. The complaint alleges, among other things, that between April 2, 1999 and January 9, 2004 (the “Class Period”), GSAM and other defendants made improper and excessive brokerage commission and other payments to brokers that sold shares of the Goldman Sachs Funds and omitted statements of fact in registration statements and reports filed pursuant to the Act which were necessary to prevent such registration statements and reports from being materially false and misleading. The complaint further alleges that the Goldman Sachs Funds paid excessive and improper advisory fees to Goldman Sachs. The complaint also alleges that GSAM and GSAMI used 12b-1 fees for improper purposes and made improper use of soft dollars. The complaint further alleges that the Trust’s Officers and Trustees breached their fiduciary duties in connection with the foregoing. On January 13, 2006, all claims against the defendants were dismissed by the U.S. District Court. On February 22, 2006, the plaintiffs appealed this decision.
8. OTHER MATTERS (continued) |
New Accounting Pronouncement — On July 13, 2006, the Financial Accounting Standards Board (“FASB”) released FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Fund’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Adoption of FIN 48 is required for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. At this time, management is evaluating the implications of FIN 48 and its impact in the financial statements has not yet been determined.
Statement Regarding Basis for Approval of Management Agreement (Unaudited)
The Trustees oversee the management of Goldman Sachs Variable Insurance Trust (the “Trust”), and review the investment performance and expenses of the investment fund covered by this Report (the “Fund”) at regularly scheduled meetings held during the Fund’s fiscal year. In addition, the Trustees determine annually whether to approve and continue the Trust’s investment management agreement (the “Management Agreement”) with Goldman Sachs Asset Management, L.P. (the “Investment Adviser”) for the Fund.
The Management Agreement was most recently approved by the Trustees, including all of the Trustees who are not parties to the Management Agreement or “interested persons” (as defined in the Investment Company Act of 1940, as amended) of any party thereto (the “Independent Trustees”), on June 15, 2006 (the “Annual Contract Meeting”).
To assist the Trustees in their deliberations at the Annual Contract Meeting, and in addition to the reviews of the Fund’s investment performance, expenses and other matters at regularly scheduled Board meetings, the Trustees have a Contract Review Committee (the “Committee”) whose members include all of the Independent Trustees. The Committee held meetings on December 15, 2005, February 8, 2006 and May 10, 2006. At these Committee meetings, the Independent Trustees considered matters relating to the Management Agreement including: (a) the Fund’s investment performance; (b) the Fund’s management fee arrangements; (c) the Investment Adviser’s undertaking to reimburse certain expenses of the Fund that exceed a specified level; (d) the Investment Adviser’s potential economies of scale and the breakpoints for the fees payable by the Fund under the Management Agreement; (e) the relative expense level of the Fund; (f) the Investment Adviser’s profitability with respect to the Trust and the Fund; (g) information on the advisory fees charged by the Investment Adviser to institutional accounts; (h) the quality of the non-advisory services provided to the Fund; (i) the statutory and regulatory requirements applicable to the approval and continuation of mutual fund investment management agreements; (j) an evaluation of Trustees’ the contract review process provided by an outside third party; and (k) information on the processes followed by the third party mutual fund data provider engaged as part of the Trustees’ contract review (the “Outside Data Provider”) in producing investment performance and expense comparisons for the Fund.
At the Annual Contract Meeting, the Trustees reviewed the matters that were considered at the Committee meetings and also considered additional matters including: (a) a summary of fee concessions by the Investment Adviser and its affiliates with respect to the Goldman Sachs mutual funds since 2003; (b) the quality of the Investment Adviser’s services; (c) the structure, staff and capabilities of the Investment Adviser and its portfolio management team; (d) the groups within the Investment Adviser that support the portfolio management team, including the legal and compliance departments, the valuation oversight group, the risk and performance analytics group, the business planning team and the technology group; (e) the Investment Adviser’s business continuity and disaster recovery planning; (f) the Investment Adviser’s financial resources and its ability to hire and retain talented personnel; (g) the fees received by the Investment Adviser’s affiliates from the Fund for transfer agency, securities lending, distribution, portfolio brokerage and other services; (h) the terms of the Management Agreement; (i) the administrative services provided under the Management Agreement, including the nature and extent of the Investment Adviser’s oversight of the Fund’s other service providers, including the custodian and fund accounting agent; and (j) the Investment Adviser’s policies addressing various potential conflicts of interest. At the Annual Contract Meeting, the Trustees also considered at further length the Fund’s investment performance, fees and expenses, including the Fund’s expense trends over time and the breakpoints in the contractual fee rate under the Management Agreement approved in 2005.
In connection with the Committee meetings and the Annual Contract Meeting, the Trustees received written materials and oral presentations on the topics covered, and were advised by their independent legal counsel regarding their responsibilities under applicable law. Also, in conjunction with these meetings, the Trustees attended other sessions at which the Trustees reviewed the commission rates paid by the Fund on brokerage transactions, the Investment Adviser’s receipt of research services in connection with those transactions, and the payment of Rule 12b-1 distribution and service fees that are payable by the Fund on its Service Share Class. Information was also provided to the Trustees relating to the Fund’s portfolio turnover, revenue sharing by the Investment Adviser, portfolio manager compensation, the alignment of the interests of the Fund and the portfolio managers, the number and types of accounts managed by the portfolio managers, and other matters. During the course of their deliberations, the Independent Trustees met in executive sessions without employees of the Investment Adviser present.
The presentations made at the Contract Review Committee meetings and the Annual Contract Meeting encompassed the Fund and other mutual fund portfolios for which the Board of Trustees has responsibility. While the management agreements for the Fund and these other mutual fund portfolios were approved at the same Annual Contract Meeting, the Trustees considered the Management Agreement as it applied to the Fund separately.
In evaluating the Management Agreement at the Annual Contract Meeting, the Trustees relied upon their knowledge, resulting from their meetings and other interactions throughout the year, of the Investment Adviser, its services and the Fund. At those meetings the Trustees received materials relating to the Investment Adviser’s investment management and other services under the Management Agreement, including: (a) information on the investment performance of the Fund in comparison to other mutual funds and benchmark performance indices; (b) general investment outlooks in the markets in which the Fund invests; (c) compliance reports; and (d) expenses borne by the Fund. In addition, the Trustees were provided with disclosure materials regarding the Goldman Sachs mutual funds and their expenses that are provided to investors who invest in the funds, as well as information on the Goldman Sachs mutual funds’ competitive universe and discussed the broad range of other investment choices that are available to those investors.
In connection with their approval of the Management Agreement, the Trustees gave weight to various factors, but did not identify any particular factor as controlling their decision. As part of their review, the Trustees considered the nature, extent and quality of the services provided by the Investment Adviser. In this regard, the Trustees considered both the investment advisory services, and the other, non-advisory services, that are provided to the Fund by the Investment Adviser and its affiliates. These services include services as the Fund’s transfer agent, securities lending agent and distributor. In addition, affiliates of the Investment Adviser receive compensation in connection with the execution of the Fund’s portfolio securities transactions. The Trustees concluded that the Investment Adviser was both able to commit substantial financial and other resources to the operations of the Fund and had, in fact, continued to commit those resources in multiple areas including portfolio management, trading, technology, human resources, tax, treasury, legal, compliance, vendor oversight and risk management. The Trustees also believed that the Investment Adviser had made significant commitments to address regulatory compliance requirements applicable to the Fund and the Investment Adviser, including education and training initiatives.
The Trustees also considered the investment performance of the Fund and the Investment Adviser. In this regard, the Trustees compared the investment performance of the Fund to the performance of other SEC-registered funds and to rankings and ratings issued by the Outside Data Provider. The Trustees also reviewed the Fund’s investment performance relative to its performance benchmark. This information on the Fund’s investment performance was provided for one, three and five year periods. In addition, the Trustees considered the investment performance trends of the Fund over time, and reviewed the investment performance of the Fund in light of its investment objective and policies, as well as in light of periodic analyses of its quality and risk profile. In addition, the Trustees considered whether the Fund had operated within its investment policies, and its record of compliance with its investment limitations. The Trustees believed that the Fund was providing investment performance within a competitive range for long-term investors.
The Board of Trustees also considered the contractual fee rate payable by the Fund under the Management Agreement. In this regard, the Trustees considered information on the services rendered by the Investment Adviser to the Fund, which included both advisory and administrative services that were directed to the needs and operations of the Fund as a registered mutual fund. They also considered information that indicated that these mutual fund services differed in various significant respects from the services provided to the Investment Adviser’s institutional accounts, which generally paid lower fees. In addition, the fees paid by the Fund and the Fund’s total operating expense ratios (before and after expense reimbursements) were compared to similar information for mutual funds advised by other, unaffiliated investment management firms. Most of the comparisons of the Fund’s fee rates and total operating expense ratios were prepared by the Outside Data Provider.
More particularly, the Trustees reviewed analyses prepared by the Outside Data Provider of the expense rankings of the Fund. The analyses provided a comparison of the Fund’s management fee rates to a relevant peer group and a category universe; an expense analysis which compared the Fund’s expenses to a peer group and a category universe; and a five-year history comparing the Fund’s expenses to the category average. The analyses also compared the Fund’s transfer agency fees, custody and accounting fees and other expenses to a peer group and median. The Trustees believed that the comparisons provided by the Outside Data Provider were useful in evaluating the reasonableness of the management fees paid by the Fund. In addition, the Trustees considered the Investment Adviser’s voluntary undertaking to limit the Fund’s total expense ratio (excluding certain expenses) to a specified level.
The Board of Trustees also considered the breakpoints in the contractual fee rate under the Management Agreement for the Fund that were approved in 2005, which had been implemented at the following annual percentages of the average daily net assets of the Fund:
0.75% on the first $1 billion, 0.68% over $1 billion up to $2 billion and 0.65% over $2 billion. |
In approving these new fee breakpoints, the Trustees had reviewed information regarding the Investment Adviser’s potential economies of scale, and whether the Fund and its shareholders were participating in the benefits of these economies. In this regard, the Trustees considered the amount of assets in the Fund; the information provided by the Investment Adviser relating to the costs of the services provided by the Investment Adviser and its affiliates and the profits realized by them; and information comparing fee rates charged by the Investment Adviser with fee rates charged by other, unaffiliated investment managers to other mutual funds. Upon reviewing these matters again at the Annual Contract Meeting in 2006, the Trustees continued to believe that the fee breakpoints were a way to ensure that benefits of scalability would be passed along to shareholders at the specified asset levels.
The Trustees also considered the other benefits derived by the Investment Adviser and its affiliates from the Fund as stated above, including the fees received by them for transfer agency, securities lending, distribution and brokerage services, and the brokerage and research services received by the Investment Adviser in connection with the placement of brokerage transactions for the Fund. In this regard, the Trustees noted that the Investment Adviser had adopted a policy to cease obtaining third party non-broker research based on the Fund’s brokerage transactions. They also noted that during the past year the Fund had created a new share class, Service Shares, with a distribution and service plan under which an affiliate of the Investment Adviser would receive fees.
In addition, the Trustees reviewed the Investment Adviser’s pre-tax revenues and pre-tax margins with respect to the Trust and the Fund. In this regard the Trustees reviewed, among other things, profitability analyses and summaries, revenue and expense schedules, and expense allocation methodologies, as well as a report of independent accountants regarding the results of certain agreed-upon procedures to verify expense allocation calculations that were designed to assist the Trustees in their evaluation of the Investment Adviser’s schedules of revenues and expenses. The Trustees considered the Investment Adviser’s revenues and margins both in absolute terms and in comparison to the information on the reported margins earned by other asset management firms.
After deliberation and consideration of the information provided, including the factors described above, the Trustees concluded that the management fees paid by the Fund were reasonable in light of the services provided by the Investment Adviser, its costs and the Fund’s current and reasonably foreseeable asset levels, and that the Management Agreement should be approved and continued.
As a shareholder of the Fund, you incur ongoing costs, including management fees 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 January 1, 2006 through June 30, 2006. | ||
Actual Expenses — The first line of 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 for this period. | ||
Hypothetical Example for Comparison Purposes — The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual 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 (loads), 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. |
Expenses Paid | ||||||||||||
for the | ||||||||||||
Beginning | Ending | 6 months | ||||||||||
Account Value | Account Value | ended | ||||||||||
1/1/06 | 6/30/06 | 6/30/06* | ||||||||||
Actual | $ | 1,000 | $ | 1,060.20 | $ | 4.40 | ||||||
Hypothetical 5% return | 1,000 | 1,020.52 | + | 4.32 | ||||||||
* | Expenses are calculated using the Fund’s annualized expense ratio, which represents the ongoing expenses as a percentage of net assets for the six months ended June 30, 2006. Expenses are calculated by multiplying the annualized 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 expense ratio for the period was 0.86%. | ||
+ | Hypothetical expenses are based on the Fund’s actual annualized expense ratios and an assumed rate of return of 5% per year before expenses. |
TRUSTEES | OFFICERS | |
Ashok N. Bakhru, Chairman | Kaysie P. Uniacke, President | |
John P. Coblentz, Jr. | James A. Fitzpatrick, Vice President | |
Patrick T. Harker | James A. McNamara, Vice President | |
Mary Patterson McPherson | John M. Perlowski, Treasurer | |
Alan A. Shuch | Peter V. Bonanno, Secretary | |
Wilma J. Smelcer | ||
Richard P. Strubel | ||
Kaysie P. Uniacke | ||
GOLDMAN, SACHS & CO. Distributor and Transfer Agent | ||
GOLDMAN SACHS ASSET MANAGEMENT, L.P. Investment Adviser | ||
Visit our Web site at www.goldmansachsfunds.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 1-800-526-7384 (for Retail Shareholders) or 1-800-621-2550 (for Institutional Shareholders); and (ii) on the Securities and Exchange Commission Web site at http://www.sec.gov. | ||
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. Beginning the fiscal quarter ended September 30, 2004 and every first and third fiscal quarter thereafter, the Fund’s Form N-Q will become available on the SEC’s website at http://www.sec.gov within 60 days after the Fund’s first and third fiscal quarters. When available, 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. When available, Form N-Q may be obtained upon request and without charge by calling 1-800-621-2550. | ||
This material is not authorized for distribution to prospective investors unless preceded or accompanied by a current Prospectus. 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 Funds. | ||
Holdings and allocations shown may not be representative of current or future investments. Holdings and allocations may not include the Fund’s entire investment portfolio,which may change at any time. Fund holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities. | ||
Toll Free (in U.S.): 800-292-4726 | ||
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: Growth and Income Fund. | ||
Copyright 2006 Goldman, Sachs & Co. All rights reserved. Date of first use: August 18, 2006 | ||
VITG&ISAR/06-1200/08-06/41.3K |
GOLDMAN SACHS ASSET MANAGEMENT, L.P. 32 OLD SLIP, NEW YORK, NEW YORK 10005
Shareholder Letter
Dear Shareholders:
This report provides an overview on the performance of the Goldman Sachs Variable Insurance Trust — Structured U.S. Equity Fund during the six-month reporting period that ended June 30, 2006.
Market Review
The S&P 500 Index returned 2.71% in the first half of 2006. Eight of the ten sectors in the Index posted positive results in the first half of the year, led by the Energy (+13.7%) and Telecommunication Services (+12.0%) sectors. The Energy sector also contributed the most (weight times performance) to Index gains. From an investment style perspective, the Russell 1000 Value Index (+6.56%) outperformed the Russell 1000 Growth Index (-0.93%) in the first half of the year. From a market cap perspective, small-cap stocks outperformed mid-and large-cap stocks, with the Russell 2000, Russell MidCap and Russell 1000 Indexes returning 8.21%, 4.84%, and 2.76%, respectively.
Investment Objective
The Fund seeks long-term capital growth and dividend income.
Portfolio Composition
Top 10 Portfolio Holdings as of June 30, 2006*
% of | ||||||
Company | Net Assets | Business | ||||
Bank of America Corp. | 3.4 | % | Banks | |||
General Electric Co. | 3.3 | Industrial Conglomerates | ||||
Pfizer, Inc. | 3.1 | Pharmaceuticals | ||||
Procter & Gamble Co. | 3.0 | Household Products | ||||
J.P. Morgan Chase & Co. | 2.9 | Diversified Financials | ||||
Cisco Systems, Inc. | 2.5 | Communications Equipment | ||||
American International Group, Inc. | 2.5 | Insurance | ||||
Google, Inc. | 2.3 | Internet Software & Services | ||||
Hewlett-Packard Co. | 2.2 | Computers & Peripherals | ||||
Time Warner, Inc. | 2.2 | Media |
* Opinions expressed in this report represent our present opinions only. Reference to individual securities should not be construed as a commitment that such securities will be retained in the Fund. From time to time, the Fund may change the individual securities it holds, the number or types of securities held and the markets in which it invests. Fund holdings of stocks or bonds should not be relied upon in making investment decisions and should not be construed as research or investment advice regarding particular securities. References to individual securities do not constitute a recommendation to the investor to buy, hold or sell such securities. In addition, references to past performance of the Fund do not indicate future returns, which are not guaranteed and will vary. Furthermore, the value of shares of the Fund may fall as well as rise.
Performance Review
Over the six-month period that ended June 30, 2006, the Fund’s Institutional Shares generated a cumulative total return of 2.06%. This return compares to the 2.71% cumulative total return of the Fund’s benchmark, the Standard & Poor’s 500 Index (with dividends reinvested), over the same time period. For the period from the inception of the Service Class on January 9, 2006 to June 30, 2006, the Fund’s Service Shares generated a cumulative total return of -1.11%. This compares to the -0.31% cumulative total return of the Fund’s benchmark over the same time period.
Returns to the investment themes were mixed overall for the reporting period. Earnings Quality was the biggest detractor from relative returns. Conversely, Momentum was the biggest positive contributor to excess returns, followed by Management Impact, Valuation, and Profitability. Elsewhere, Analyst Sentiment was flat for the period.
Stock selection among sectors was negative overall in the first half of the year. The Fund’s holdings in the Energy and Industrials sectors were among the least successful selections. On the upside, stock selection in the Consumer Staples and Materials sectors contributed the most to relative returns for the period.
Despite positive results for most of our investment themes, we believe the performance shortfall during the reporting period was primarily the result of residual factors, such as stock-specific events. For example, in June, Jabil Circuit, Inc., in which the Fund held an overweight position relative to the benchmark, announced that it would miss its earnings target. At the same time, the company was the subject of a stock-options probe by the Securities and Exchange Commission. We believe this probe caused its stock price to drop substantially.
We thank you for your investment and look forward to serving your investment needs in the future.
Goldman Sachs Quantitative Equity Management Team
July 18, 2006
Shares of the Goldman Sachs Variable Insurance Trust (“VIT”) Structured U.S. Equity Fund 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.
The VIT Structured U.S. Equity Fund invests in a broadly diversified portfolio of U.S. stocks. The Fund is subject to market risks, as the share prices of the securities in the portfolio may go up or down. This could occur in response to the prospects of the companies issuing the stock, overall sector performance and/or general economic conditions.
SECTOR ALLOCATION AS OF JUNE 30, 2006† |
Percentage of Net Assets
† The Fund is actively managed and, as such, its composition may differ over time. The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. Short-term Investments include repurchase agreements and securities lending collateral. Figures in the above graph may not sum to 100% due to the exclusion of other assets and/or liabilities.
Schedule of Investments
Shares | Description | Value | ||||||||
Common Stocks – 99.4% | ||||||||||
Aerospace & Defense – 3.9% | ||||||||||
311,000 | Northrop Grumman Corp. | $ | 19,922,660 | |||||||
29,800 | Raytheon Co. | 1,328,186 | ||||||||
286,539 | The Boeing Co. | 23,470,409 | ||||||||
44,721,255 | ||||||||||
Banks – 7.1% | ||||||||||
798,522 | Bank of America Corp. | 38,408,908 | ||||||||
303,386 | Hudson City Bancorp, Inc. | 4,044,135 | ||||||||
13,869 | M&T Bank Corp. | 1,635,433 | ||||||||
307,700 | U.S. Bancorp | 9,501,776 | ||||||||
86,235 | UnionBanCal Corp. | 5,569,919 | ||||||||
330,600 | Wells Fargo & Co. | 22,176,648 | ||||||||
81,336,819 | ||||||||||
Beverages – 0.1% | ||||||||||
64,400 | Coca-Cola Enterprises, Inc. | 1,311,828 | ||||||||
Biotechnology – 2.5% | ||||||||||
130,090 | Amgen, Inc.* | 8,485,771 | ||||||||
57,500 | Biogen Idec, Inc.* | 2,663,975 | ||||||||
27,800 | Celgene Corp.* | 1,318,554 | ||||||||
203,200 | Genentech, Inc.* | 16,621,760 | ||||||||
29,090,060 | ||||||||||
Chemicals – 1.8% | ||||||||||
243,500 | Monsanto Co. | 20,500,265 | ||||||||
Commercial Services & Supplies – 1.4% | ||||||||||
34,800 | Global Payments, Inc. | 1,689,540 | ||||||||
64,500 | Manpower, Inc. | 4,166,700 | ||||||||
52,247 | Republic Services, Inc. | 2,107,644 | ||||||||
211,988 | Waste Management, Inc. | 7,606,129 | ||||||||
15,570,013 | ||||||||||
Communications Equipment – 2.5% | ||||||||||
1,478,140 | Cisco Systems, Inc.* | 28,868,074 | ||||||||
Computers & Peripherals – 2.8% | ||||||||||
803,300 | Hewlett-Packard Co. | 25,448,544 | ||||||||
355,800 | Western Digital Corp.* | 7,048,398 | ||||||||
32,496,942 | ||||||||||
Diversified Financials – 6.5% | ||||||||||
180,300 | AmeriCredit Corp.* | 5,033,976 | ||||||||
125,414 | Citigroup, Inc. | 6,049,971 | ||||||||
782,000 | J.P. Morgan Chase & Co. | 32,844,000 | ||||||||
328,000 | Merrill Lynch & Co., Inc. | 22,815,680 | ||||||||
58,080 | Moody’s Corp. | 3,163,037 | ||||||||
82,900 | Principal Financial, Inc. | 4,613,385 | ||||||||
74,520,049 | ||||||||||
Diversified Telecommunication Services – 3.1% | ||||||||||
662,000 | AT&T, Inc. | 18,463,180 | ||||||||
166,500 | CenturyTel, Inc. | 6,185,475 | ||||||||
130,185 | Embarq Corp.* | 5,336,285 | ||||||||
293,201 | Sprint Nextel Corp. | 5,861,088 | ||||||||
1 | Verizon Communications, Inc. | 34 | ||||||||
35,846,062 | ||||||||||
Electric Utilities – 4.0% | ||||||||||
249,700 | American Electric Power Co., Inc. | 8,552,225 | ||||||||
490,700 | PG&E Corp. | 19,274,696 | ||||||||
34,800 | Progress Energy, Inc. | 1,491,876 | ||||||||
273,370 | TXU Corp. | 16,344,792 | ||||||||
45,663,589 | ||||||||||
Electrical Equipment – 0.7% | ||||||||||
37,300 | Emerson Electric Co. | 3,126,113 | ||||||||
79,300 | Energizer Holdings, Inc.* | 4,644,601 | ||||||||
7,770,714 | ||||||||||
Electronic Equipment & Instruments – 0.9% | ||||||||||
21,516 | Agilent Technologies, Inc.* | 679,045 | ||||||||
224,500 | Jabil Circuit, Inc. | 5,747,200 | ||||||||
61,402 | PerkinElmer, Inc. | 1,283,302 | ||||||||
47,656 | Waters Corp.* | 2,115,926 | ||||||||
9,825,473 | ||||||||||
Energy Equipment & Services – 1.7% | ||||||||||
300,000 | Schlumberger Ltd. | 19,533,000 | ||||||||
Food & Drug Retailing – 0.9% | ||||||||||
151,400 | Safeway, Inc. | 3,936,400 | ||||||||
64,287 | SUPERVALU, Inc. | 1,973,611 | ||||||||
207,200 | The Kroger Co. | 4,529,392 | ||||||||
10,439,403 | ||||||||||
Food Products – 2.7% | ||||||||||
517,200 | Archer-Daniels-Midland Co. | 21,350,016 | ||||||||
37,279 | Dean Foods Co.* | 1,386,406 | ||||||||
578,100 | Tyson Foods, Inc. | 8,590,566 | ||||||||
31,326,988 | ||||||||||
Healthcare Equipment & Supplies – 0.4% | ||||||||||
137,400 | Applera Corp. – Applied Biosystems Group | 4,444,890 | ||||||||
Healthcare Providers & Services – 4.4% | ||||||||||
453,894 | AmerisourceBergen Corp. | 19,027,237 | ||||||||
224,200 | Express Scripts, Inc.* | 16,084,108 | ||||||||
27,369 | Humana, Inc.* | 1,469,715 | ||||||||
280,800 | McKesson Corp. | 13,276,224 | ||||||||
49,857,284 | ||||||||||
Hotels, Restaurants & Leisure – 1.5% | ||||||||||
244,400 | Darden Restaurants, Inc. | 9,629,360 | ||||||||
152,200 | Starbucks Corp.* | 5,747,072 | ||||||||
23,800 | Yum! Brands, Inc. | 1,196,426 | ||||||||
16,572,858 | ||||||||||
Household Durables – 0.1% | ||||||||||
19,600 | Whirlpool Corp. | 1,619,940 | ||||||||
Household Products – 3.5% | ||||||||||
85,700 | Colgate-Palmolive Co. | 5,133,430 | ||||||||
623,165 | Procter & Gamble Co. | 34,647,974 | ||||||||
39,781,404 | ||||||||||
4
Shares | Description | Value | ||||||||
Common Stocks – (continued) | ||||||||||
Industrial Conglomerates – 3.8% | ||||||||||
1,131,188 | General Electric Co. | $ | 37,283,956 | |||||||
54,123 | Reynolds American, Inc. | 6,240,382 | ||||||||
43,524,338 | ||||||||||
Insurance – 9.0% | ||||||||||
41,330 | AMBAC Financial Group, Inc. | 3,351,863 | ||||||||
476,400 | American International Group, Inc. | 28,131,420 | ||||||||
365,500 | Genworth Financial, Inc. | 12,734,020 | ||||||||
21,000 | Lincoln National Corp. | 1,185,240 | ||||||||
561,500 | Loews Corp. | 19,905,175 | ||||||||
305,263 | MBIA, Inc.(a) | 17,873,149 | ||||||||
22,700 | MetLife, Inc. | 1,162,467 | ||||||||
15,395 | Nationwide Financial Services, Inc. | 678,612 | ||||||||
55,500 | Radian Group, Inc. | 3,428,790 | ||||||||
196,300 | The Chubb Corp. | 9,795,370 | ||||||||
120,750 | W.R. Berkley Corp. | 4,121,197 | ||||||||
102,367,303 | ||||||||||
Internet Software & Services – 2.3% | ||||||||||
62,990 | Google, Inc.* | 26,413,597 | ||||||||
IT Consulting & Services – 1.5% | ||||||||||
337,700 | Computer Sciences Corp.* | 16,358,188 | ||||||||
24,200 | First Data Corp. | 1,089,968 | ||||||||
17,448,156 | ||||||||||
Leisure Equipment & Products – 0.1% | ||||||||||
86,600 | Hasbro, Inc. | 1,568,326 | ||||||||
Machinery – 1.0% | ||||||||||
139,696 | Caterpillar, Inc. | 10,404,558 | ||||||||
18,000 | Eaton Corp. | 1,357,200 | ||||||||
11,761,758 | ||||||||||
Media – 7.0% | ||||||||||
440,730 | CBS Corp. Class B | 11,921,747 | ||||||||
586,654 | Clear Channel Communications, Inc. | 18,156,941 | ||||||||
50,955 | Liberty Media Holding Corp. – Capital* | 4,268,500 | ||||||||
203,340 | The McGraw-Hill Companies, Inc. | 10,213,768 | ||||||||
332,786 | The Walt Disney Co. | 9,983,580 | ||||||||
1,455,729 | Time Warner, Inc. | 25,184,112 | ||||||||
79,728,648 | ||||||||||
Metals & Mining – 0.4% | ||||||||||
22,100 | Newmont Mining Corp. | 1,169,753 | ||||||||
65,428 | Nucor Corp. | 3,549,469 | ||||||||
4,719,222 | ||||||||||
Multiline Retail – 0.2% | ||||||||||
85,300 | Dillard’s, Inc. | 2,716,805 | ||||||||
Oil & Gas – 7.6% | ||||||||||
423,536 | Anadarko Petroleum Corp. | 20,198,432 | ||||||||
361,700 | Devon Energy Corp. | 21,850,297 | ||||||||
42,200 | EOG Resources, Inc. | 2,926,148 | ||||||||
53,900 | Equitable Resources, Inc. | 1,805,650 | ||||||||
314,466 | Exxon Mobil Corp. | 19,292,489 | ||||||||
232,900 | Sunoco, Inc. | 16,137,641 | ||||||||
68,420 | Ultra Petroleum Corp.* | 4,055,253 | ||||||||
86,265,910 | ||||||||||
Paper & Forest Products – 0.1% | ||||||||||
45,900 | Louisiana-Pacific Corp. | 1,005,210 | ||||||||
Pharmaceuticals – 6.1% | ||||||||||
188,482 | Johnson & Johnson | 11,293,841 | ||||||||
594,100 | Merck & Co., Inc. | 21,643,063 | ||||||||
1,507,515 | Pfizer, Inc. | 35,381,377 | ||||||||
38,100 | Watson Pharmaceuticals, Inc.* | 886,968 | ||||||||
69,205,249 | ||||||||||
Real Estate – 0.9% | ||||||||||
31,100 | AMB Property Corp. (REIT) | 1,572,105 | ||||||||
13,100 | Boston Properties, Inc. (REIT) | 1,184,240 | ||||||||
47,100 | New Century Financial Corp.(a) | 2,154,825 | ||||||||
92,100 | ProLogis (REIT) | 4,800,252 | ||||||||
9,711,422 | ||||||||||
Road & Rail – 0.4% | ||||||||||
13,600 | Burlington Northern Santa Fe Corp. | 1,077,800 | ||||||||
24,200 | Norfolk Southern Corp. | 1,287,924 | ||||||||
22,500 | Union Pacific Corp. | 2,091,600 | ||||||||
4,457,324 | ||||||||||
Semiconductor Equipment & Products – 1.8% | ||||||||||
61,609 | Freescale Semiconductor, Inc. Class B* | 1,811,305 | ||||||||
612,552 | Texas Instruments, Inc. | 18,554,200 | ||||||||
20,365,505 | ||||||||||
Software – 1.7% | ||||||||||
65,400 | Fair Isaac Corp. | 2,374,674 | ||||||||
409,940 | Microsoft Corp. | 9,551,602 | ||||||||
42,900 | Red Hat, Inc.* | 1,003,860 | ||||||||
245,311 | Synopsys, Inc.* | 4,604,487 | ||||||||
43,989 | VeriFone Holdings, Inc.* | 1,340,785 | ||||||||
18,875,408 | ||||||||||
Specialty Retail – 2.4% | ||||||||||
446,694 | AutoNation, Inc.* | 9,577,120 | ||||||||
278,456 | Circuit City Stores, Inc. | 7,579,572 | ||||||||
225,488 | Office Depot, Inc.* | 8,568,544 | ||||||||
49,400 | United Rentals, Inc.* | 1,579,812 | ||||||||
27,305,048 | ||||||||||
Textiles & Apparel – 0.2% | ||||||||||
62,002 | Jones Apparel Group, Inc. | 1,971,044 | ||||||||
Tobacco – 0.3% | ||||||||||
24,100 | Loews Corp. – Carolina Group | 1,238,017 | ||||||||
42,667 | UST, Inc.(a) | 1,928,122 | ||||||||
3,166,139 | ||||||||||
5
Shares | Description | Value | ||||||||
Common Stocks – (continued) | ||||||||||
Wireless Telecommunication Services – 0.1% | ||||||||||
10,700 | United States Cellular Corp.* | $ | 648,420 | |||||||
TOTAL COMMON STOCKS | ||||||||||
(Cost $1,054,731,822) | $ | 1,134,321,742 | ||||||||
Principal | Interest | Maturity | ||||||||||||
Amount | Rate | Date | Value | |||||||||||
Repurchase Agreement(b) – 0.4% | ||||||||||||||
Joint Repurchase Agreement Account II | ||||||||||||||
$ | 4,500,000 | 5.28 | % | 07/03/2006 | $ | 4,500,000 | ||||||||
Maturity Value: $4,501,979 | ||||||||||||||
(Cost $4,500,000) | ||||||||||||||
TOTAL INVESTMENTS BEFORE SECURITIES LENDING COLLATERAL | ||||||||||||||
(Cost $1,059,231,822) | $ | 1,138,821,742 | ||||||||||||
Shares | Description | Value | ||||||||
Securities Lending Collateral – 1.5% | ||||||||||
17,015,200 | Boston Global Investment Trust – Enhanced Portfolio | $ | 17,015,200 | |||||||
(Cost $17,015,200) | ||||||||||
TOTAL INVESTMENTS – 101.3% | ||||||||||
(Cost $1,076,247,022) | $ | 1,155,836,942 | ||||||||
LIABILITIES IN EXCESS OF OTHER ASSETS – (1.3)% | (14,414,273 | ) | ||||||||
NET ASSETS – 100.0% | $ | 1,141,422,669 | ||||||||
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 portion of security is on loan. | |
(b) | Joint repurchase agreement was entered into on June 30, 2006. Additional Investment information appears on page 7. |
Investment Abbreviation: | ||||||
REIT | — | Real Estate Investment Trust | ||||
ADDITIONAL INVESTMENT INFORMATION |
FUTURES CONTRACTS — At June 30, 2006, the following futures contracts were open as follows:
Number of | Settlement | Unrealized | ||||||||||||||
Type | Contracts Long | Month | Market Value | Gain | ||||||||||||
S&P 500 Index | 88 | September 2006 | $ | 5,629,360 | $ | 119,020 | ||||||||||
6
ADDITIONAL INVESTMENT INFORMATION (continued) |
JOINT REPURCHASE AGREEMENT ACCOUNT II — At June 30, 2006, the Fund had an undivided interest in the following Joint Repurchase Agreement Account II which equaled $4,500,000 in principal amount.
Principal | Interest | Maturity | Maturity | |||||||||||
Repurchase Agreements | Amount | Rate | Date | Value | ||||||||||
Banc of America Securities LLC | $ | 2,860,000,000 | 5.30 | % | 07/03/2006 | $ | 2,861,263,167 | |||||||
Barclays Capital PLC | 1,500,000,000 | 5.32 | 07/03/2006 | 1,500,665,000 | ||||||||||
Bear Stearns | 500,000,000 | 5.31 | 07/03/2006 | 500,221,250 | ||||||||||
Deutsche Bank Securities, Inc. | 1,000,000,000 | 5.20 | 07/03/2006 | 1,000,433,333 | ||||||||||
Greenwich Capital Markets | 300,000,000 | 5.32 | 07/03/2006 | 300,133,000 | ||||||||||
J.P. Morgan Securities, Inc. | 400,000,000 | 5.28 | 07/03/2006 | 400,176,000 | ||||||||||
Merrill Lynch | 500,000,000 | 5.25 | 07/03/2006 | 500,218,750 | ||||||||||
Morgan Stanley & Co. | 3,000,000,000 | 5.25 | 07/03/2006 | 3,001,312,500 | ||||||||||
UBS Securities LLC | 1,050,000,000 | 5.25 | 07/03/2006 | 1,050,459,375 | ||||||||||
UBS Securities LLC | 475,000,000 | 5.30 | 07/03/2006 | 475,209,792 | ||||||||||
UBS Securities LLC | 400,000,000 | 5.34 | 07/03/2006 | 400,178,000 | ||||||||||
Wachovia Capital Markets | 250,000,000 | 5.26 | 07/03/2006 | 250,109,583 | ||||||||||
TOTAL | $ | 12,235,000,000 | $ | 12,240,379,750 | ||||||||||
At June 30, 2006, the Joint Repurchase Agreement Account II was fully collateralized by Federal Home Loan Bank, 0.00% to 11.00%, due 07/07/2006 to 04/20/2016; Federal Home Loan Mortgage Association, 3.00% to 8.50%, due 02/01/2007 to 07/01/2036; Federal National Mortgage Association, 0.00% to 10.50%, due 02/01/2007 to 07/01/2036; and U.S. Treasury Bonds, 5.00% to 7.14%, due 11/13/2008 to 10/20/2018. The aggregate market value of the collateral, including accrued interest, was $12,492,409,737. |
7
Statement of Assets and Liabilities
Assets: | |||||||
Investment in securities, at value (identified cost $1,059,231,822) — including $16,654,409 of securities on loan | $ | 1,138,821,742 | |||||
Securities lending collateral, at value (cost $17,015,200) | 17,015,200 | ||||||
Cash(a) | 1,755,787 | ||||||
Receivables: | |||||||
Dividends and interest | 1,551,280 | ||||||
Fund shares sold | 775,962 | ||||||
Securities lending income | 1,325 | ||||||
Other assets | 7,731 | ||||||
Total assets | 1,159,929,027 | ||||||
Liabilities: | |||||||
Payables: | |||||||
Payable upon return of securities loaned | 17,015,200 | ||||||
Fund shares repurchased | 738,652 | ||||||
Amounts owed to affiliates | 649,811 | ||||||
Variation margin | 14,080 | ||||||
Accrued expenses | 88,615 | ||||||
Total liabilities | 18,506,358 | ||||||
Net Assets: | |||||||
Paid-in capital | 1,019,650,046 | ||||||
Accumulated undistributed net investment income | 6,128,025 | ||||||
Accumulated net realized gain on investment and futures | 35,935,658 | ||||||
Net unrealized gain on investments and futures | 79,708,940 | ||||||
NET ASSETS | $ | 1,141,422,669 | |||||
Net assets: | |||||||
Institutional | $ | 877,481,669 | |||||
Service | 263,941,000 | ||||||
Shares outstanding: | |||||||
Institutional | 65,499,050 | ||||||
Service | 19,708,819 | ||||||
Total shares of beneficial interest outstanding, $0.001 par value (unlimited shares authorized) | 85,207,869 | ||||||
Net asset value, offering and redemption price per share: | |||||||
Institutional | $ | 13.40 | |||||
Service | $ | 13.39 | |||||
(a) | Includes restricted cash of $1,351,150 relating to initial margin requirements on futures transactions. |
8
Statement of Operations
Investment income: | |||||||
Dividends | $ | 9,575,841 | |||||
Interest (including securities lending income of $11,904) | 233,031 | ||||||
Total income | 9,808,872 | ||||||
Expenses: | |||||||
Management fees | 3,616,174 | ||||||
Distribution and Service fees | 332,415 | ||||||
Transfer agent fees | 225,143 | ||||||
Custody and accounting fees | 96,378 | ||||||
Printing fees | 91,310 | ||||||
Professional fees | 29,712 | ||||||
Trustee fees | 6,803 | ||||||
Registration fees | 629 | ||||||
Other | 11,617 | ||||||
Total expenses | 4,410,181 | ||||||
Less — expense reductions | (228,850 | ) | |||||
Net expenses | 4,181,331 | ||||||
NET INVESTMENT INCOME | 5,627,541 | ||||||
Realized and unrealized gain (loss) on investment and future transactions: | |||||||
Net realized gain (loss) from: | |||||||
Investment transactions | 60,987,372 | ||||||
Futures transactions | (439,472 | ) | |||||
Net change in unrealized gain (loss) on: | |||||||
Investments | (53,229,833 | ) | |||||
Futures | 248,874 | ||||||
Net realized and unrealized gain on investment and future transactions | 7,566,941 | ||||||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 13,194,482 | |||||
9
Statements of Changes in Net Assets
For the | |||||||||||
Six Months Ended | For the | ||||||||||
June 30, 2006 | Year Ended | ||||||||||
(Unaudited) | December 31, 2005 | ||||||||||
From operations: | |||||||||||
Net investment income | $ | 5,627,541 | $ | 6,468,007 | |||||||
Net realized gain on investment and futures | 60,547,900 | 20,646,992 | |||||||||
Payment by affiliates to reimburse certain security claims | — | 1,193 | |||||||||
Net change in unrealized gain (loss) on investments and futures | (52,980,959 | ) | 25,704,439 | ||||||||
Net increase in net assets resulting from operations | $ | 13,194,482 | 52,820,631 | ||||||||
Distributions to shareholders: | |||||||||||
From net investment income | |||||||||||
Institutional Shares | — | (6,029,395 | ) | ||||||||
Service Shares | — | — | |||||||||
Total distributions to shareholders | — | (6,029,395 | ) | ||||||||
From share transactions: | |||||||||||
Proceeds from sales of shares | 71,903,127 | 283,997,163 | |||||||||
Proceeds received in connection with merger | 286,785,341 | — | |||||||||
Reinvestment of dividends and distributions | — | 6,029,395 | |||||||||
Cost of shares repurchased | (50,854,775 | ) | (37,560,740 | ) | |||||||
Net increase in net assets resulting from share transactions | 307,833,693 | 252,465,818 | |||||||||
TOTAL INCREASE | 321,028,175 | 299,257,054 | |||||||||
Net assets: | |||||||||||
Beginning of period | 820,394,494 | 521,137,440 | |||||||||
End of period | $ | 1,141,422,669 | $ | 820,394,494 | |||||||
Accumulated undistributed net investment income | $ | 6,128,025 | $ | 500,484 | |||||||
10
Financial Highlights
Income (loss) from | Ratios assuming no | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
investment operations | expense reductions | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net | Distributions to | Ratio of | Ratio of | Ratio of | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset | realized | shareholders | Net asset | Net assets, | Ratio of | net investment | total | net investment | ||||||||||||||||||||||||||||||||||||||||||||||||
value, | Net | and | Total from | from net | value, | end of | net expenses | income to | expenses | income | Portfolio | |||||||||||||||||||||||||||||||||||||||||||||
beginning | investment | unrealized | investment | investment | end of | Total | period | to average | average | to average | to average | turnover | ||||||||||||||||||||||||||||||||||||||||||||
Year — Share Class | of period | income(b) | gain (loss) | operations | income | period | return(c) | (in 000s) | net assets | net assets | net assets | net assets | rate | |||||||||||||||||||||||||||||||||||||||||||
For the Six Months ended June 30, (Unaudited) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2006 — Institutional | $ | 13.13 | $ | 0.07 | $ | 0.20 | $ | 0.27 | $ | — | $ | 13.40 | 2.06 | % | $ | 877,482 | 0.72 | %(d) | 1.02 | %(d) | 0.72 | %(d) | 1.02 | %(d) | 40 | % | ||||||||||||||||||||||||||||||
2006 — Service(a) | 13.54 | 0.06 | (0.21 | ) | (0.15 | ) | — | 13.39 | (1.11 | ) | 263,941 | 0.80 | (d) | 0.94 | (d) | 0.97 | (d) | 0.77 | (d) | 40 | ||||||||||||||||||||||||||||||||||||
For the Years ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2005 — Institutional | 12.42 | 0.13 | 0.68 | 0.81 | (0.10 | ) | 13.13 | 6.51 | 820,394 | 0.74 | 1.00 | 0.76 | 0.99 | 109 | ||||||||||||||||||||||||||||||||||||||||||
2004 — Institutional | 10.92 | 0.14 | 1.49 | 1.63 | (0.13 | ) | 12.42 | 14.94 | 521,137 | 0.75 | 1.26 | 0.78 | 1.23 | 128 | ||||||||||||||||||||||||||||||||||||||||||
2003 — Institutional | 8.49 | 0.07 | 2.43 | 2.50 | (0.07 | ) | 10.92 | 29.47 | 383,025 | 0.85 | 0.79 | 0.85 | 0.79 | 92 | ||||||||||||||||||||||||||||||||||||||||||
2002 — Institutional | 10.94 | 0.06 | (2.45 | ) | (2.39 | ) | (0.06 | ) | 8.49 | (21.89 | ) | 143,439 | 0.85 | 0.60 | 0.86 | 0.59 | 84 | |||||||||||||||||||||||||||||||||||||||
2001 — Institutional | 12.48 | 0.05 | (1.54 | ) | (1.49 | ) | (0.05 | ) | 10.94 | (11.94 | ) | 163,904 | 0.81 | 0.48 | 0.82 | 0.47 | 72 | |||||||||||||||||||||||||||||||||||||||
(a) | Service Share Class commenced on January 9, 2006. |
(b) | Calculated based on the average shares outstanding methodology. |
(c) | Assumes investment at the net asset value at the beginning of the period, reinvestment of all dividends and 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 a full year are not annualized. |
(d) | Annualized. |
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements
1. ORGANIZATION |
2. SIGNIFICANT ACCOUNTING POLICIES |
A. Investment Valuation — Investments in equity securities and investment companies traded on a U.S. securities exchange or the NASDAQ system are valued daily at their last sale price or official closing price on the principal exchange or system on which they are traded. If no sale occurs, such securities are valued at the last bid price. Debt securities are valued at prices supplied by independent pricing services, broker/dealer-supplied valuations or matrix pricing systems. Unlisted equity securities for which market quotations are available are valued at the last sale price on valuation date, or if no sale occurs, at the last bid price. Investments in investment companies (other than those that are exchange traded) are valued at the net asset value per share on valuation date. Short-term debt obligations maturing in sixty days or less are valued at amortized cost, which approximates market value. Securities for which quotations are not readily available or are deemed not to reflect market value by the investment adviser are valued at fair value using methods approved by the Trust’s Board of Trustees.
B. Security Transactions and Investment Income — Security transactions are reflected as of the trade date. Realized gains and losses on sales of portfolio securities are calculated using the identified-cost basis. Dividend income is recorded on the ex-dividend date, net of foreign withholding taxes, if any, which are reduced by any amounts reclaimable by the Fund, where applicable. Interest income is recorded on the basis of interest accrued, premium amortized and discount accreted.
C. Expenses — Expenses incurred by the Trust that do not specifically relate to an individual Fund of the Trust are allocated to the Fund on a straight-line and/or pro rata basis depending upon the nature of the expense. Service Shares bear all expenses and fees relating to their Distribution and Service Plan.
D. Federal Taxes and Distributions to Shareholders — It is the Fund’s policy to comply with the requirements of the Internal Revenue Code (the “Code”) applicable to regulated investment companies and to distribute each year substantially all of its investment company taxable income and capital gains to its shareholders. Accordingly, no federal tax provisions are required. Dividends and distributions to shareholders are recorded on the ex-dividend date. Income distributions and capital gains distributions, if any, are declared and paid annually.
2. SIGNIFICANT ACCOUNTING POLICIES (continued) |
E. Segregation Transactions — As set forth in the prospectus, the Fund may enter into certain derivative transactions to seek to increase total return. Forward foreign currency exchange contracts, futures contracts, written options, when-issued securities and forward commitments represent examples of such transactions. As a result of entering into these transactions, the Fund is required to segregate or physically move liquid assets, on the books of their custodian or to respective counterparties, with a current value equal to or greater than the market value of the corresponding transactions.
F. Repurchase Agreements — Repurchase agreements involve the purchase of securities subject to the seller’s agreement to repurchase them at a mutually agreed upon date and price. 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. If the seller defaults or becomes insolvent, realization of the collateral by the Fund may be delayed or limited and there may be a decline in the value of the collateral during the period while the Fund seeks to assert its rights. The underlying securities for all repurchase agreements are held in safekeeping at the Fund’s custodian or designated subcustodians under triparty repurchase agreements.
G. Futures Contracts — The Fund may enter into futures transactions to hedge against changes in interest rates, securities prices, currency exchange rates or to seek to increase total return. Futures contracts are valued at the last settlement price 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 is required to deposit with a broker, or the Fund’s custodian bank on behalf of the broker an amount of cash or securities equal to the minimum “initial margin” requirement of the associated futures exchange. Subsequent payments for futures contracts (“variation margin”) are paid or received by the Fund daily, dependent on the daily fluctuations in the value of the contracts, and are recorded for financial reporting purposes as unrealized gains or losses. When contracts are closed, the Fund realizes a gain or loss which is reported in the Statement of Operations.
3. AGREEMENTS |
Average Daily Net Assets | Annual Rate | |||
First $1 Billion | 0.65 | % | ||
Next $1 Billion | 0.59 | % | ||
Over $2 Billion | 0.56 | % | ||
3. AGREEMENTS (continued) |
In connection with the reorganization of the Allmerica Core Equity Fund into the Fund, GSAM has contractually agreed to reimburse the Fund as necessary to limit the total annual operating expenses of the Services Shares of the Fund to 0.81% until June 2007.
4. PORTFOLIO SECURITIES TRANSACTIONS |
5. SECURITIES LENDING |
5. SECURITIES LENDING (continued) |
6. LINE OF CREDIT FACILITY |
7. TAX INFORMATION |
Capital loss carryforward:(1)(2) | ||||
Expiring 2009 | $ | (6,318,404 | ) | |
Expiring 2010 | (13,059,084 | ) | ||
Expiring 2011 | (2,163,043 | ) | ||
Total capital loss carryforward | $ | (21,540,531 | ) | |
Timing differences (related to the deferral of certain REIT dividends for tax purposes) | 16,766 | |||
(1) | Expiration occurs on December 31 of the year indicated utilization of these losses may be limited under the Code. |
(2) | During the year ended December 31, 2005, the Fund utilized $22,704,467 of capital loss carryforwards. |
At June 30, 2006, the Fund’s aggregate security unrealized gains and losses based on cost for U.S. federal income tax purposes were as follows:
Tax cost | $ | 1,083,291,544 | ||
Gross unrealized gain | 101,444,318 | |||
Gross unrealized loss | (28,898,920 | ) | ||
Net unrealized security gain | $ | 72,545,398 | ||
The difference between book-basis and tax-basis unrealized gains (losses) is attributable primarily to wash sales financial futures contracts. The cumulative timing differences consists of deferred income distributions from underlying fund investments.
8. OTHER MATTERS |
8. OTHER MATTERS (continued) |
Merger and Reorganizations — At a meeting held on July 12, 2005, the Board of Trustees of the Trust approved an Agreement and Plan of Reorganization (the “Agreement”) providing for the tax-free acquisition of the Allmerica Investment Trust Core Equity Fund by the Goldman Sachs VIT Structured U.S. Equity Fund. Following the approval of the Board of Trustees and shareholders of the Allmerica Investment Trust Core Equity Fund, the acquisition was completed on January 9, 2006.
Acquired Fund’s | ||||||||||||
Shares | ||||||||||||
Exchanged Shares | Value of | Outstanding | ||||||||||
Survivor/Acquired Fund | of Survivor Issued | Exchanged Shares | on January 6, 2006 | |||||||||
Goldman Sachs VIT Structured U.S. Equity Fund Service Class/ Allmerica Investment Trust Core Equity Fund Service Class | 21,180,601 | $ | 286,785,341 | 154,899,319 | ||||||||
The following chart shows the Survivor Fund’s and Acquired Fund’s aggregate net assets (immediately before and after the completion of the acquisition) and the Acquired Fund’s unrealized appreciation.
Survivor Fund’s | Acquired Fund’s | Survivor Fund’s | ||||||||||||||
Aggregate | Aggregate | Aggregate | ||||||||||||||
Net Assets | Net Assets | Acquired Fund’s | Net Assets | |||||||||||||
before | before | Unrealized | immediately | |||||||||||||
Survivor/Acquired Fund | acquisition | acquisition | Appreciation | after acquisition | ||||||||||||
Goldman Sachs VIT Structured U.S. Equity Fund/ Allmerica Investment Trust Core Equity Fund | $ | 846,672,156 | $ | 286,785,341 | $ | 53,289,382 | $ | 1,133,457,497 | ||||||||
New Accounting Pronouncement — On July 13, 2006, the Financial Accounting Standards Board (“FASB”) released FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 provides guidance for how
8. OTHER MATTERS (continued) |
9. SUMMARY OF SHARE TRANSACTIONS |
For the Six Months Ended | For the Year Ended | |||||||||||||||
June 30, 2006 | December 31, 2005 | |||||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||||
Institutional Shares | ||||||||||||||||
Shares sold | 4,545,178 | $ | 61,599,907 | 23,122,045 | $ | 283,997,163 | ||||||||||
Reinvestment of dividends and distributions | — | — | 461,669 | 6,029,395 | ||||||||||||
Shares repurchased | (1,538,129 | ) | (20,734,792 | ) | (3,060,370 | ) | (37,560,740 | ) | ||||||||
3,007,049 | 40,865,115 | 20,523,344 | 252,465,818 | |||||||||||||
Service Shares* | ||||||||||||||||
Shares sold | 776,307 | 10,303,220 | — | — | ||||||||||||
Shares issued in connection with merger | 21,180,601 | 286,785,341 | — | — | ||||||||||||
Reinvestment of dividends and distributions | — | — | — | — | ||||||||||||
Shares repurchased | (2,248,089 | ) | (30,119,983 | ) | — | — | ||||||||||
19,708,819 | 266,968,578 | — | — | |||||||||||||
NET INCREASE | 22,716,468 | $ | 307,833,693 | 20,523,344 | $ | 252,465,818 | ||||||||||
* | Service Share Class commenced on January 9, 2006. |
Statement Regarding Basis for Approval of Management Agreement (Unaudited)
The Trustees oversee the management of Goldman Sachs Variable Insurance Trust (the “Trust”), and review the investment performance and expenses of the investment fund covered by this Report (the “Fund”) at regularly scheduled meetings held during the Fund’s fiscal year. In addition, the Trustees determine annually whether to approve and continue the Trust’s investment management agreement (the “Management Agreement”) with Goldman Sachs Asset Management, L.P. (the “Investment Adviser”) for the Fund.
for the Fund and these other mutual fund portfolios were approved at the same Annual Contract Meeting, the Trustees considered the Management Agreement as it applied to the Fund separately.
The Board of Trustees also considered the reduction in the contractual fee rate payable under the Management Agreement for the Fund that was approved by the Trustees in June 2004, and the breakpoints in the contractual fee rate under the Management Agreement for the Fund that were approved in 2005, which had been implemented at the following annual percentages of the average daily net assets of the Fund:
0.65% on the first $1 billion, 0.59% over $1 billion up to $2 billion and 0.56% over $2 billion. |
In approving these new fee breakpoints, the Trustees had reviewed information regarding the Investment Adviser’s potential economies of scale, and whether the Fund and its shareholders were participating in the benefits of these economies. In this regard, the Trustees considered the amount of assets in the Fund; the information provided by the Investment Adviser relating to the costs of the services provided by the Investment Adviser and its affiliates and the profits realized by them; and information comparing fee rates charged by the Investment Adviser with fee rates charged by other, unaffiliated investment managers to other mutual funds. Upon reviewing these matters again at the Annual Contract Meeting in 2006, the Trustees continued to believe that the fee breakpoints were a way to ensure that benefits of scalability would be passed along to shareholders at the specified asset levels.
As a shareholder of Institutional 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 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 January 1, 2006 through June 30, 2006. | ||
Actual Expenses — The first line under each share class of 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 for this period. | ||
Hypothetical Example for Comparison Purposes — The second line under each share class of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual 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 (loads), 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. |
Expenses Paid | ||||||||||||
for the | ||||||||||||
Beginning | Ending | 6 months | ||||||||||
Account Value | Account Value | ended | ||||||||||
1/1/06 | 6/30/06 | 6/30/06* | ||||||||||
Institutional | ||||||||||||
Actual | $ | 1,000 | $ | 1,020.60 | $ | 3.63 | ||||||
Hypothetical 5% return | 1,000 | 1,021.20 | + | 3.63 | ||||||||
Service# | ||||||||||||
Actual | $ | 1,000 | $ | 988.90 | $ | 3.73 | ||||||
Hypothetical 5% return | 1,000 | 1,019.68 | + | 3.78 | ||||||||
* | Expenses are calculated using the Fund’s annualized expense ratio for each class, which represents the ongoing expenses as a percentage of net assets for the six months ended June 30, 2006. Expenses are calculated by multiplying the annualized 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 expense ratios for the period were 0.72% and 0.80% for Institutional and Service Shares, respectively. | ||
# | Service Share Class commenced on January 9, 2006. The Beginning Account Value is as of January 9, 2006. | ||
+ | Hypothetical expenses are based on the Fund’s actual annualized expense ratios and an assumed rate of return of 5% per year before expenses. |
TRUSTEES | OFFICERS | |
Ashok N. Bakhru, Chairman | Kaysie P. Uniacke, President | |
John P. Coblentz, Jr. | James A. Fitzpatrick, Vice President | |
Patrick T. Harker | James A. McNamara, Vice President | |
Mary Patterson McPherson | John M. Perlowski, Treasurer | |
Alan A. Shuch | Peter V. Bonanno, Secretary | |
Wilma J. Smelcer | ||
Richard P. Strubel | ||
Kaysie P. Uniacke | ||
GOLDMAN, SACHS & CO. Distributor and Transfer Agent | ||
GOLDMAN SACHS ASSET MANAGEMENT, L.P. Investment Adviser | ||
Visit our Web site at www.goldmansachsfunds.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 1-800-526-7384 (for Retail Shareholders) or 1-800-621-2550 (for Institutional Shareholders); and (ii) on the Securities and Exchange Commission Web site at http://www.sec.gov. | ||
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. Beginning the fiscal quarter ended September 30, 2004 and every first and third fiscal quarter thereafter, the Fund’s Form N-Q will become available on the SEC’s website at http://www.sec.gov within 60 days after the Fund’s first and third fiscal quarters. When available, 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. When available, Form N-Q may be obtained upon request and without charge by calling 1-800-621-2550. | ||
This material is not authorized for distribution to prospective investors unless preceded or accompanied by a current Prospectus. 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 Funds. | ||
Holdings and allocations shown may not be representative of current or future investments. Holdings and allocations may not include the Fund’s entire investment portfolio,which may change at any time. Fund holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities. | ||
Effective May 1, 2006, the Variable Insurance Trust (VIT) CORESM U.S. Equity Fund was renamed the Variable Insurance Trust (VIT) Structured U.S. Equity Fund. | ||
CORESM is a registered service mark of Goldman, Sachs & Co. | ||
Toll Free (in U.S.): 800-292-4726 | ||
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: Structured U.S. Equity Fund. | ||
Copyright 2006 Goldman, Sachs & Co. All rights reserved. Date of first use: August 18, 2006 | ||
VITSTRCUSSAR/06-1198/08-06/40.0K |
GOLDMAN SACHS ASSET MANAGEMENT, L.P. 32 OLD SLIP, NEW YORK, NEW YORK 10005
Shareholder Letter
Dear Shareholders:
This report provides an overview on the performance of the Goldman Sachs Variable Insurance Trust — Structured Small Cap Equity Fund during the six-month reporting period that ended June 30, 2006.
Market Review
The S&P 500 Index returned 2.71% in the first half of 2006. Eight of the ten sectors in the Index posted positive results in the first half of the year, led by the Energy (+13.7%) and Telecommunication Services (+12.0%) sectors. The Energy sector also contributed the most (weight times performance) to Index gains. From an investment style perspective, the Russell 1000 Value Index (+6.56%) outperformed the Russell 1000 Growth Index (-0.93%) in the first half of the year. From a market cap perspective, small-cap stocks outperformed mid-and large-cap stocks, with the Russell 2000, Russell MidCap and Russell 1000 Indexes returning 8.21%, 4.84%, and 2.76%, respectively.
Investment Objective
The Fund seeks long-term growth of capital. The Fund seeks this objective through a broadly diversified portfolio of equity investments of U.S. issuers.
Portfolio Composition
Top 10 Portfolio Holdings as of June 30, 2006*
% of | ||||||
Company | Net Assets | Business | ||||
Veritas DGC, Inc. | 1.6 | % | Energy Equipment & Services | |||
Choice Hotels International, Inc. | 1.5 | Hotels, Restaurants & Leisure | ||||
Papa John’s International, Inc. | 1.5 | Hotels, Restaurants & Leisure | ||||
NewMarket Corp. | 1.4 | Chemicals | ||||
EMCOR Group, Inc. | 1.4 | Construction & Engineering | ||||
Applera Corp. — Applied Biosystems Group | 1.4 | Healthcare Equipment & Supplies | ||||
Eagle Materials, Inc. | 1.4 | Construction Materials | ||||
Ryerson Tull, Inc. | 1.4 | Metals & Mining | ||||
Swift Energy Co. | 1.4 | Oil & Gas | ||||
LandAmerica Financial Group, Inc. | 1.4 | Insurance |
* Opinions expressed in this report represent our present opinions only. Reference to individual securities should not be construed as a commitment that such securities will be retained in the Fund. From time to time, the Fund may change the individual securities it holds, the number or types of securities held and the markets in which it invests. Fund holdings of stocks or bonds should not be relied upon in making investment decisions and should not be construed as research or investment advice regarding particular securities. References to individual securities do not constitute a recommendation to the investor to buy, hold or sell such securities. In addition, references to past performance of the Fund do not indicate future returns, which are not guaranteed and will vary. Furthermore, the value of shares of the Fund may fall as well as rise.
Performance Review
Over the six-month period that ended June 30, 2006, the Fund generated a cumulative total return of 5.24%. This return compares to the 8.21% cumulative total return of the Fund’s benchmark, the Russell 2000 Index (with dividends reinvested), over the same time period.
Though returns to the investment themes were positive overall, the Fund underperformed its benchmark during the reporting period. Earnings Quality was the only Structured investment theme to detract from relative returns for the period. Meanwhile, Management Impact was the biggest positive contributor to relative returns, followed by Momentum, Profitability, Valuation, and Analyst Sentiment.
Stock selection among sectors was negative overall in the first half of the year. The Fund’s holdings in the Information Technology and Financials sectors were among the least successful selections. On the upside, stock selection in the Consumer Discretionary sector was the most successful for the reporting period.
Despite positive results overall for the themes, we believe that the shortfall for the period was primarily the result of residual factors, such as stock-specific events. For example, an overweight in Intergraph Corp. was the largest detractor from relative returns during the reporting period. Its stock fell substantially after issuing first quarter and fiscal year 2006 revenue guidance below analysts’ estimates.
We thank you for your investment and look forward to serving your investment needs in the future.
Goldman Sachs Quantitative Equity Management Team
July 18, 2006
Shares of the Goldman Sachs Variable Insurance Trust (“VIT”) Structured Small Cap Equity Fund 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.
The VIT Structured Small Cap Equity Fund invests in a broadly diversified portfolio of small-capitalization U.S. equity investments and is subject to market risk so that the value of the securities in which it invests may go up or down in response to the prospects of individual companies, particular industry sectors and/or general economic conditions. Stocks of smaller companies are often more volatile and less liquid and present greater risks than stocks of larger companies. At times, the Fund may be unable to sell certain of its portfolio securities without a substantial drop in price, if at all.
SECTOR ALLOCATION AS OF JUNE 30, 2006† |
Percentage of Net Assets
† The Fund is actively managed and, as such, its composition may differ over time. The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. Short-term Investments include repurchase agreements and securities lending collateral. Figures in the above graph may not sum to 100% due to the exclusion of other assets and/or liabilities.
Schedule of Investments
Shares | Description | Value | ||||||||
Common Stocks – 99.8% | ||||||||||
Aerospace & Defense – 1.4% | ||||||||||
20,600 | AAR Corp.* | $ | 457,938 | |||||||
9,200 | Cubic Corp. | 180,412 | ||||||||
31,900 | Kaman Corp. | 580,580 | ||||||||
35,600 | United Industrial Corp.(a) | 1,610,900 | ||||||||
2,829,830 | ||||||||||
Air Freight & Couriers – 0.2% | ||||||||||
7,500 | EGL, Inc.* | 376,500 | ||||||||
Banks – 8.0% | ||||||||||
5,973 | Accredited Home Lenders Holding Co.* | 285,569 | ||||||||
50,973 | Bank of Hawaii Corp. | 2,528,261 | ||||||||
11,883 | Cathay General Bancorp. | 432,304 | ||||||||
16,900 | Central Pacific Financial Corp. | 654,030 | ||||||||
37,400 | Chittenden Corp. | 966,790 | ||||||||
8,700 | City National Corp. | 566,283 | ||||||||
50,600 | Corus Bankshares, Inc.(a) | 1,324,708 | ||||||||
11,875 | CVB Financial Corp. | 185,963 | ||||||||
349 | First Bancorp | 7,329 | ||||||||
5,200 | First Citizens BancShares, Inc. | 1,042,600 | ||||||||
3,333 | First Financial Bankshares, Inc. | 121,788 | ||||||||
931 | First Regional Bancorp* | 81,928 | ||||||||
34,800 | FirstFed Financial Corp.*(a) | 2,006,916 | ||||||||
38,561 | Hanmi Financial Corp. | 749,626 | ||||||||
4,275 | IBERIABANK Corp. | 245,983 | ||||||||
34,500 | PFF Bancorp, Inc. | 1,144,020 | ||||||||
16,000 | Placer Sierra Bancshares | 371,040 | ||||||||
8,038 | Preferred Bank | 430,917 | ||||||||
19,694 | Provident Financial Services, Inc. | 353,507 | ||||||||
5,100 | S&T Bancorp, Inc. | 169,473 | ||||||||
37,759 | SVB Financial Group* | 1,716,524 | ||||||||
23,800 | Umpqua Holdings Corp. | 610,470 | ||||||||
1,200 | WSFS Financial Corp. | 73,740 | ||||||||
16,069,769 | ||||||||||
Beverages – 0.8% | ||||||||||
8,100 | Hansen Natural Corp.* | 1,541,997 | ||||||||
1,000 | National Beverage Corp.* | 14,350 | ||||||||
1,556,347 | ||||||||||
Biotechnology – 3.0% | ||||||||||
65,100 | Albany Molecular Research, Inc.* | 695,268 | ||||||||
117,000 | Alkermes, Inc.* | 2,213,640 | ||||||||
62,000 | Applera Corp. – Celera Genomics Group* | 802,900 | ||||||||
30,600 | Cephalon, Inc.* | 1,839,060 | ||||||||
28,999 | Exelixis, Inc.* | 291,440 | ||||||||
7,100 | Neurocrine Biosciences, Inc.* | 75,260 | ||||||||
12,000 | PDL BioPharma, Inc.* | 220,920 | ||||||||
6,138,488 | ||||||||||
Building Products – 0.1% | ||||||||||
3,300 | Universal Forest Products, Inc. | 207,009 | ||||||||
Chemicals – 2.1% | ||||||||||
23,498 | CF Industries Holdings, Inc. | 335,081 | ||||||||
20,400 | H.B. Fuller Co. | 888,828 | ||||||||
59,510 | NewMarket Corp. | 2,919,561 | ||||||||
4,143,470 | ||||||||||
Commercial Services & Supplies – 6.0% | ||||||||||
58,700 | Administaff, Inc. | 2,102,047 | ||||||||
13,600 | American Ecology Corp. | 360,400 | ||||||||
23,340 | Arbitron, Inc. | 894,622 | ||||||||
14,500 | Consolidated Graphics, Inc.* | 754,870 | ||||||||
30,700 | CSG Systems International, Inc.* | 759,518 | ||||||||
51,600 | Global Payments, Inc. | 2,505,180 | ||||||||
68,800 | Labor Ready, Inc.* | 1,558,320 | ||||||||
3,100 | Manpower, Inc. | 200,260 | ||||||||
24,015 | Pre-Paid Legal Services, Inc.(a) | 828,518 | ||||||||
11,500 | SOURCECORP, Inc.* | 285,085 | ||||||||
94,910 | Spherion Corp.* | 865,579 | ||||||||
52,700 | TeleTech Holdings, Inc.* | 667,182 | ||||||||
5,300 | United Stationers, Inc.* | 261,396 | ||||||||
12,042,977 | ||||||||||
Communications Equipment – 1.7% | ||||||||||
5,709 | Anaren, Inc.* | 116,977 | ||||||||
36,500 | DSP Group, Inc.* | 907,025 | ||||||||
45,000 | Optical Communication Products, Inc.* | 90,450 | ||||||||
52,000 | Polycom, Inc.* | 1,139,840 | ||||||||
84,500 | Tellabs, Inc.* | 1,124,695 | ||||||||
3,378,987 | ||||||||||
Computers & Peripherals – 1.8% | ||||||||||
73,300 | Intergraph Corp.* | 2,308,217 | ||||||||
26,976 | Komag, Inc.* | 1,245,752 | ||||||||
3,553,969 | ||||||||||
Construction & Engineering – 1.4% | ||||||||||
59,300 | EMCOR Group, Inc.* | 2,886,131 | ||||||||
Construction Materials – 1.4% | ||||||||||
59,700 | Eagle Materials, Inc. | 2,835,750 | ||||||||
Distributors – 1.0% | ||||||||||
67,840 | Brightpoint, Inc.* | 917,875 | ||||||||
35,030 | Handleman Co.(a) | 285,495 | ||||||||
10,200 | WESCO International, Inc.* | 703,800 | ||||||||
1,907,170 | ||||||||||
Diversified Financials – 2.8% | ||||||||||
9,300 | AmeriCredit Corp.* | 259,656 | ||||||||
64,100 | CBIZ, Inc.* | 474,981 | ||||||||
61,268 | CompuCredit Corp.* | 2,355,142 | ||||||||
4,200 | Investment Technology Group, Inc.* | 213,612 | ||||||||
6,900 | optionsXpress Holdings, Inc. | 160,839 | ||||||||
9,000 | Piper Jaffray Cos., Inc.* | 550,890 | ||||||||
46,646 | World Acceptance Corp.* | 1,656,866 | ||||||||
5,671,986 | ||||||||||
4
Shares | Description | Value | ||||||||
Common Stocks – (continued) | ||||||||||
Diversified Telecommunication Service – 0.1% | ||||||||||
12,536 | CT Communications, Inc. | $ | 286,698 | |||||||
Electric Utilities – 1.1% | ||||||||||
477 | Central Vermont Public Service Corp. | 8,815 | ||||||||
44,800 | NorthWestern Corp. | 1,538,880 | ||||||||
9,800 | Pepco Holdings, Inc. | 231,084 | ||||||||
31,500 | Sierra Pacific Resources* | 441,000 | ||||||||
2,219,779 | ||||||||||
Electrical Equipment – 2.6% | ||||||||||
55,600 | A.O. Smith Corp. | 2,577,616 | ||||||||
16,900 | Acuity Brands, Inc. | 657,579 | ||||||||
8,000 | Encore Wire Corp.* | 287,520 | ||||||||
12,700 | General Cable Corp.* | 444,500 | ||||||||
9,400 | The Genlyte Group, Inc.* | 680,842 | ||||||||
19,200 | Woodward Governor Co. | 585,792 | ||||||||
5,233,849 | ||||||||||
Electronic Equipment & Instruments – 3.4% | ||||||||||
27,900 | Coherent, Inc.* | 941,067 | ||||||||
29,400 | Exar Corp.* | 390,138 | ||||||||
60,100 | Greatbatch, Inc.* | 1,418,360 | ||||||||
14,838 | KEMET Corp.* | 136,806 | ||||||||
43,100 | MTS Systems Corp. | 1,702,881 | ||||||||
19,500 | Plexus Corp.* | 667,095 | ||||||||
13,400 | Tech Data Corp.* | 513,354 | ||||||||
9,100 | Technitrol, Inc. | 210,665 | ||||||||
32,300 | Tektronix, Inc. | 950,266 | ||||||||
6,930,632 | ||||||||||
Energy Equipment & Services – 2.2% | ||||||||||
17,200 | Helmerich & Payne, Inc. | 1,036,472 | ||||||||
7,800 | Hornbeck Offshore Services, Inc.* | 277,056 | ||||||||
61,900 | Veritas DGC, Inc.* | 3,192,802 | ||||||||
4,506,330 | ||||||||||
Food & Drug Retailing – 2.8% | ||||||||||
19,900 | Flowers Foods, Inc. | 569,936 | ||||||||
50,832 | Longs Drug Stores Corp. | 2,318,956 | ||||||||
183,083 | Terra Industries, Inc.*(a) | 1,166,238 | ||||||||
42,700 | The Great Atlantic & Pacific Tea Co., Inc.*(a) | 970,144 | ||||||||
34,200 | Wild Oats Markets, Inc.*(a) | 670,320 | ||||||||
5,695,594 | ||||||||||
Food Products – 0.9% | ||||||||||
10,500 | J & J Snack Foods Corp. | 347,235 | ||||||||
438 | Seaboard Corp. | 560,640 | ||||||||
23,300 | USANA Health Sciences, Inc.*(a) | 883,070 | ||||||||
1,790,945 | ||||||||||
Healthcare Equipment & Supplies – 4.2% | ||||||||||
88,500 | Applera Corp. – Applied Biosystems Group | 2,862,975 | ||||||||
3,200 | Bio-Rad Laboratories, Inc.* | 207,808 | ||||||||
10,600 | Computer Programs and Systems, Inc. | 423,576 | ||||||||
6,132 | Hologic, Inc.* | 302,675 | ||||||||
22,800 | Illumina, Inc.* | 676,248 | ||||||||
83,700 | Immucor, Inc.* | 1,609,551 | ||||||||
16,964 | Mentor Corp. | 737,934 | ||||||||
9,400 | STERIS Corp. | 214,884 | ||||||||
17,300 | SurModics, Inc.*(a) | 624,703 | ||||||||
59,800 | Thoratec Corp.* | 829,426 | ||||||||
1,839 | Zoll Medical Corp.* | 60,246 | ||||||||
8,550,026 | ||||||||||
Healthcare Providers & Services – 1.3% | ||||||||||
38,900 | Genesis HealthCare Corp.* | 1,842,693 | ||||||||
25,500 | Sunrise Senior Living, Inc.* | 705,075 | ||||||||
2,547,768 | ||||||||||
Hotels, Restaurants & Leisure – 3.7% | ||||||||||
50,500 | Choice Hotels International, Inc. | 3,060,300 | ||||||||
11,100 | Domino’s Pizza, Inc. | 274,614 | ||||||||
33,300 | Landry’s Restaurants, Inc. | 1,080,585 | ||||||||
89,300 | Papa John’s International, Inc.* | 2,964,760 | ||||||||
22,800 | Six Flags, Inc.*(a) | 128,136 | ||||||||
7,508,395 | ||||||||||
Household Durables – 1.2% | ||||||||||
89,200 | American Greetings Corp. | 1,874,092 | ||||||||
23,800 | Kimball International, Inc. Class B | 469,098 | ||||||||
2,343,190 | ||||||||||
Insurance – 4.3% | ||||||||||
10,500 | American Physicians Capital, Inc.* | 552,195 | ||||||||
9,600 | EMC Insurance Group, Inc. | 276,096 | ||||||||
6,300 | FBL Financial Group, Inc. | 204,120 | ||||||||
102,800 | Fremont General Corp. | 1,907,968 | ||||||||
42,500 | LandAmerica Financial Group, Inc.(a) | 2,745,500 | ||||||||
1,300 | National Western Life Insurance Co. | 311,545 | ||||||||
4,600 | Safety Insurance Group, Inc. | 218,730 | ||||||||
24,900 | SeaBright Insurance Holdings* | 401,139 | ||||||||
59,400 | Stewart Information Services Corp. | 2,156,814 | ||||||||
8,774,107 | ||||||||||
Internet Software & Services – 2.7% | ||||||||||
17,900 | Digital Insight Corp.* | 613,791 | ||||||||
54,800 | EarthLink, Inc.* | 474,568 | ||||||||
52,300 | InfoSpace, Inc.* | 1,185,641 | ||||||||
143,511 | RealNetworks, Inc.* | 1,535,568 | ||||||||
52,700 | Trizetto Group, Inc.* | 779,433 | ||||||||
18,200 | United Online, Inc. | 218,400 | ||||||||
35,000 | Websense, Inc.* | 718,900 | ||||||||
5,526,301 | ||||||||||
IT Consulting & Services – 0.6% | ||||||||||
69,313 | Agilysys, Inc. | 1,247,634 | ||||||||
5
Shares | Description | Value | ||||||||
Common Stocks – (continued) | ||||||||||
Machinery – 3.0% | ||||||||||
9,500 | AGCO Corp.* | $ | 250,040 | |||||||
1,700 | Ampco-Pittsburgh Corp. | 48,705 | ||||||||
89,700 | Applied Industrial Technologies, Inc. | 2,180,607 | ||||||||
12,100 | EnPro Industries, Inc.* | 406,560 | ||||||||
45,100 | JLG Industries, Inc. | 1,014,750 | ||||||||
15,700 | NACCO Industries, Inc. | 2,157,337 | ||||||||
6,057,999 | ||||||||||
Media – 1.1% | ||||||||||
7,600 | Catalina Marketing Corp. | 216,296 | ||||||||
75,800 | Netflix, Inc.*(a) | 2,062,518 | ||||||||
2,278,814 | ||||||||||
Metals & Mining – 2.4% | ||||||||||
102,600 | Ryerson Tull, Inc.(a) | 2,770,200 | ||||||||
28,700 | Steel Dynamics, Inc. | 1,886,738 | ||||||||
17,800 | USEC, Inc. | 210,930 | ||||||||
4,867,868 | ||||||||||
Multiline Retail – 0.6% | ||||||||||
11,800 | Big Lots, Inc.* | 201,544 | ||||||||
17,100 | Dillard’s, Inc. | 544,635 | ||||||||
22,400 | Retail Ventures, Inc.*(a) | 399,168 | ||||||||
5,653 | The Bon-Ton Stores, Inc. | 123,688 | ||||||||
1,269,035 | ||||||||||
Office Electronics – 0.5% | ||||||||||
81,860 | IKON Office Solutions, Inc. | 1,031,436 | ||||||||
Oil & Gas – 3.1% | ||||||||||
33,000 | Berry Petroleum Co. | 1,093,950 | ||||||||
11,635 | Harvest Natural Resources, Inc.* | 157,538 | ||||||||
26,400 | KCS Energy, Inc.* | 784,080 | ||||||||
7,700 | Petroleum Development Corp.* | 290,290 | ||||||||
64,400 | Swift Energy Co.* | 2,764,692 | ||||||||
31,400 | W&T Offshore, Inc.(a) | 1,221,146 | ||||||||
6,311,696 | ||||||||||
Paper & Forest Products – 0.4% | ||||||||||
36,400 | Louisiana-Pacific Corp. | 797,160 | ||||||||
Personal Products – 0.1% | ||||||||||
20,500 | Mannatech, Inc.(a) | 258,505 | ||||||||
Pharmaceuticals – 1.9% | ||||||||||
91,700 | Alpharma, Inc. | 2,204,468 | ||||||||
31,600 | Endo Pharmaceuticals Holdings, Inc.* | 1,042,168 | ||||||||
17,439 | New River Pharmaceuticals, Inc.*(a) | 497,011 | ||||||||
3,743,647 | ||||||||||
Real Estate – 7.1% | ||||||||||
47,292 | American Home Mortgage Investment Corp. (REIT) | 1,743,183 | ||||||||
50,800 | Anthracite Capital, Inc. (REIT) | 617,728 | ||||||||
26,900 | BioMed Realty Trust, Inc. (REIT) | 805,386 | ||||||||
121,600 | Commercial Net Lease Realty(a) | 2,425,920 | ||||||||
30,100 | Digital Realty Trust, Inc. (REIT) | 743,169 | ||||||||
3,715 | Entertainment Properties Trust (REIT) | 159,931 | ||||||||
29,900 | FelCor Lodging Trust, Inc. (REIT) | 650,026 | ||||||||
12,159 | Gramercy Capital Corp. (REIT) | 314,918 | ||||||||
6,500 | Jones Lang LaSalle, Inc. | 569,075 | ||||||||
16,965 | National Health Investors, Inc. (REIT) | 456,189 | ||||||||
46,000 | New Century Financial Corp. (REIT)(a) | 2,104,500 | ||||||||
14,100 | RAIT Investment Trust (REIT) | 411,720 | ||||||||
116,300 | Senior Housing Properties Trust (REIT) | 2,082,933 | ||||||||
83,700 | Spirit Finance Corp. (REIT) | 942,462 | ||||||||
10,400 | Trammell Crow Co.* | 365,768 | ||||||||
14,392,908 | ||||||||||
Road & Rail – 1.6% | ||||||||||
13,600 | Covenant Transport, Inc.* | 206,992 | ||||||||
48,000 | Dollar Thrifty Automotive Group, Inc.* | 2,163,360 | ||||||||
10,600 | SCS Transportation, Inc.* | 291,818 | ||||||||
24,300 | U. S. Xpress Enterprises, Inc.* | 656,586 | ||||||||
3,318,756 | ||||||||||
Semiconductor Equipment & Products – 3.0% | ||||||||||
334,600 | Applied Micro Circuits Corp.* | 913,458 | ||||||||
270,640 | Atmel Corp.* | 1,502,052 | ||||||||
91,975 | Cirrus Logic, Inc.* | 748,677 | ||||||||
26,000 | LSI Logic Corp.* | 232,700 | ||||||||
61,600 | MPS Group, Inc.* | 927,696 | ||||||||
29,546 | Netlogic Microsystems, Inc.*(a) | 952,858 | ||||||||
6,768 | Trident Microsystems, Inc.* | 128,457 | ||||||||
136,135 | TriQuint Semiconductor, Inc.* | 607,162 | ||||||||
6,013,060 | ||||||||||
Software – 3.8% | ||||||||||
14,900 | Ansoft Corp.* | 305,152 | ||||||||
18,400 | ANSYS, Inc.* | 879,888 | ||||||||
11,100 | Internet Security Systems, Inc.* | 209,235 | ||||||||
35,000 | JDA Software Group, Inc.* | 491,050 | ||||||||
48,600 | Lawson Software, Inc.* | 325,620 | ||||||||
22,800 | Merge Technologies, Inc.*(a) | 280,668 | ||||||||
19,300 | MicroStrategy, Inc.* | 1,882,136 | ||||||||
42,300 | Red Hat, Inc.* | 989,820 | ||||||||
20,100 | SPSS, Inc.* | 646,014 | ||||||||
20,300 | Synopsys, Inc.* | 381,031 | ||||||||
33,200 | TradeStation Group, Inc.* | 420,644 | ||||||||
30,100 | VeriFone Holdings, Inc.* | 917,448 | ||||||||
7,728,706 | ||||||||||
Specialty Retail – 6.1% | ||||||||||
10,000 | Christopher & Banks Corp. | 290,000 | ||||||||
72,341 | Circuit City Stores, Inc. | 1,969,122 | ||||||||
13,100 | Conn’s, Inc.* | 347,805 |
6
Shares | Description | Value | ||||||||
Common Stocks – (continued) | ||||||||||
Specialty Retail – (continued) | ||||||||||
11,000 | Dress Barn, Inc.* | $ | 278,850 | |||||||
41,080 | Group 1 Automotive, Inc. | 2,314,447 | ||||||||
25,400 | Lithia Motors, Inc. | 770,128 | ||||||||
92,625 | Payless ShoeSource, Inc.* | 2,516,621 | ||||||||
39,000 | Sonic Automotive, Inc. | 865,020 | ||||||||
23,150 | Stage Stores, Inc. | 763,950 | ||||||||
17,200 | United Auto Group, Inc. | 367,220 | ||||||||
55,200 | United Rentals, Inc.* | 1,765,296 | ||||||||
12,248,459 | ||||||||||
Textiles & Apparel – 2.1% | ||||||||||
52,300 | Brown Shoe Co. | 1,782,384 | ||||||||
56,300 | Kellwood Co. | 1,647,901 | ||||||||
30,600 | Skechers U.S.A., Inc.* | 737,766 | ||||||||
4,168,051 | ||||||||||
Trading Companies & Distributors – 0.1% | ||||||||||
4,100 | MSC Industrial Direct Co., Inc. | 195,037 | ||||||||
Wireless Telecommunication Services – 0.1% | ||||||||||
19,700 | Syniverse Holdings, Inc.* | 289,590 | ||||||||
TOTAL COMMON STOCKS | ||||||||||
(Cost $176,138,354) | $ | 201,730,358 | ||||||||
TOTAL INVESTMENTS BEFORE SECURITIES LENDING COLLATERAL | ||||||||||
(Cost $176,138,354) | $ | 201,730,358 | ||||||||
Securities Lending Collateral – 9.9% | ||||||||||
19,977,125 | Boston Global Investment Trust – Enhanced Portfolio | 19,977,125 | ||||||||
(Cost $19,977,125) | ||||||||||
TOTAL INVESTMENTS – 109.7% | ||||||||||
(Cost $196,115,479) | $ | 221,707,483 | ||||||||
LIABILITIES IN EXCESS OF OTHER ASSETS – (9.7)% | (19,521,231 | ) | ||||||||
NET ASSETS – 100.0% | $ | 202,186,252 | ||||||||
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 portion of security is on loan. |
Investment Abbreviation: | ||||||
REIT | — | Real Estate Investment Trust | ||||
ADDITIONAL INVESTMENT INFORMATION |
FUTURES CONTRACTS — At June 30, 2006, the following futures contracts were open as follows:
Number of | Settlement | Unrealized | ||||||||||||
Type | Contracts Long | Month | Market Value | Gain | ||||||||||
Russell 2000 Index | 2 | September 2006 | $ | 146,300 | $ | 9,136 | ||||||||
7
Statement of Assets and Liabilities
Assets: | |||||||
Investment in securities, at value (identified cost $176,138,354) — including $19,492,684 of securities on loan | $ | 201,730,358 | |||||
Securities lending collateral, at value (cost $19,977,125) | 19,977,125 | ||||||
Cash(a) | 350,000 | ||||||
Receivables: | |||||||
Fund shares sold | 316,139 | ||||||
Dividends and interest | 229,043 | ||||||
Securities lending income | 15,203 | ||||||
Reimbursement from adviser | 6,539 | ||||||
Variation margin | 2,020 | ||||||
Other assets | 2,353 | ||||||
Total assets | 222,628,780 | ||||||
Liabilities: | |||||||
Due to custodian | 129,313 | ||||||
Payables: | |||||||
Payable upon return of securities loaned | 19,977,125 | ||||||
Fund shares repurchased | 126,148 | ||||||
Amounts owed to affiliates | 125,033 | ||||||
Accrued expenses | 84,909 | ||||||
Total liabilities | 20,442,528 | ||||||
Net Assets: | |||||||
Paid-in capital | 166,561,974 | ||||||
Accumulated undistributed net investment income | 715,948 | ||||||
Accumulated net realized gain on investment and futures transactions | 9,307,190 | ||||||
Net unrealized gain on investments and futures transactions | 25,601,140 | ||||||
NET ASSETS | $ | 202,186,252 | |||||
Total shares of beneficial interest outstanding, par value $0.001 (unlimited shares authorized) | 13,792,410 | ||||||
Net asset value, offering and redemption price per share | $ | 14.66 | |||||
(a) | Includes restricted cash of $350,000 relating to initial margin requirements on futures transactions. |
8
Statement of Operations
Investment income: | |||||||
Dividends | $ | 1,247,399 | |||||
Interest (including securities lending income of $98,047) | 126,556 | ||||||
Total income | 1,373,955 | ||||||
Expenses: | |||||||
Management fees | 775,029 | ||||||
Transfer agent fees | 41,317 | ||||||
Custody and accounting fees | 53,545 | ||||||
Printing fees | 33,346 | ||||||
Professional fees | 26,719 | ||||||
Trustee fees | 6,803 | ||||||
Registration fees | 629 | ||||||
Other | 5,286 | ||||||
Total expenses | 942,674 | ||||||
Less — expense reductions | (35,091 | ) | |||||
Net expenses | 907,583 | ||||||
NET INVESTMENT INCOME | 466,372 | ||||||
Realized and unrealized gain on investment and futures transactions: | |||||||
Net realized gain from: | |||||||
Investment transactions | 8,117,867 | ||||||
Futures transactions | 84,878 | ||||||
Net change in unrealized gain on: | |||||||
Investments | 1,347,093 | ||||||
Futures | 36,614 | ||||||
Net realized and unrealized gain on investment and futures transactions | 9,586,452 | ||||||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 10,052,824 | |||||
9
Statements of Changes in Net Assets
For the | ||||||||||
Six Months Ended | For the | |||||||||
June 30, 2006 | Year Ended | |||||||||
(Unaudited) | December 31, 2005 | |||||||||
From operations: | ||||||||||
Net investment income | $ | 466,372 | $ | 691,364 | ||||||
Net realized gain on investment and futures transactions | 8,202,745 | 10,904,616 | ||||||||
Payment by affiliates to reimburse certain security claims | — | 16,973 | ||||||||
Net change in unrealized gain (loss) on investments and futures transactions | 1,383,707 | (1,038,569 | ) | |||||||
Net increase in net assets resulting from operations | 10,052,824 | 10,574,384 | ||||||||
Distributions to shareholders: | ||||||||||
From net investment income | — | (459,667 | ) | |||||||
From net realized gain on investment, futures and foreign currency related transactions | — | (17,009,088 | ) | |||||||
Total distributions to shareholders | — | (17,468,755 | ) | |||||||
From share transactions: | ||||||||||
Proceeds from sales of shares | 14,147,281 | 22,353,469 | ||||||||
Reinvestment of dividends and distributions | — | 17,468,455 | ||||||||
Cost of shares repurchased | (17,055,902 | ) | (29,706,807 | ) | ||||||
Net increase (decrease) in net assets resulting from share transactions | (2,908,621 | ) | 10,115,117 | |||||||
TOTAL INCREASE | 7,144,203 | 3,220,746 | ||||||||
Net assets: | ||||||||||
Beginning of period | 195,042,049 | 191,821,303 | ||||||||
End of period | $ | 202,186,252 | $ | 195,042,049 | ||||||
Accumulated undistributed net investment income | $ | 715,948 | $ | 249,576 | ||||||
Summary of share transactions: | ||||||||||
Shares sold | 945,363 | 1,522,405 | ||||||||
Shares issued on reinvestment of dividends and distributions | — | 1,224,164 | ||||||||
Shares repurchased | (1,151,652 | ) | (2,065,937 | ) | ||||||
NET INCREASE (DECREASE) | (206,289 | ) | 680,632 | |||||||
10
Financial Highlights
Income (loss) from | Ratios assuming no | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
investment operations | Distributions to shareholders | expense reductions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net | From | Ratio of | Ratio of | Ratio of | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset | realized | tax | From | Net asset | Net assets, | Ratio of | net investment | total | net investment | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
value, | Net | and | Total from | From net | return | net | value, | end of | net expenses | income | expenses | income | Portfolio | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
beginning | investment | unrealized | investment | investment | of | realized | Total | end of | Total | period | to average | to average | to average | to average | turnover | |||||||||||||||||||||||||||||||||||||||||||||||||||||
of period | income(a) | gain (loss) | operations | income | capital | gain | distributions | period | return(b) | (in 000s) | net assets | net assets | net assets | net assets | rate | |||||||||||||||||||||||||||||||||||||||||||||||||||||
For the Six Months ended June 30, (Unaudited) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2006 | $ | 13.93 | $ | 0.03 | $ | 0.70 | $ | 0.73 | $ | — | $ | — | $ | — | $ | — | $ | 14.66 | 5.24 | % | $ | 202,186 | 0.88 | %(c) | 0.45 | %(c) | 0.91 | %(c) | 0.42 | %(c) | 53 | % | ||||||||||||||||||||||||||||||||||||
For the Years ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2005 | 14.40 | 0.05 | 0.86 | 0.91 | (0.04 | ) | — | (1.34 | ) | (1.38 | ) | 13.93 | 6.07 | 195,042 | 0.89 | 0.37 | 0.93 | 0.33 | 119 | |||||||||||||||||||||||||||||||||||||||||||||||||
2004 | 12.99 | 0.02 | 2.10 | 2.12 | (0.03 | ) | — | (0.68 | ) | (0.71 | ) | 14.40 | 16.33 | 191,821 | 0.90 | 0.14 | 0.97 | 0.07 | 146 | |||||||||||||||||||||||||||||||||||||||||||||||||
2003 | 9.19 | 0.04 | 4.18 | 4.22 | (0.03 | ) | — | (0.39 | ) | (0.42 | ) | 12.99 | 46.00 | 181,765 | 1.03 | 0.40 | 1.25 | 0.18 | 141 | |||||||||||||||||||||||||||||||||||||||||||||||||
2002 | 10.84 | 0.03 | (1.65 | ) | (1.62 | ) | (0.03 | ) | — | — | (0.03 | ) | 9.19 | (14.97) | 47,005 | 1.04 | 0.25 | 1.29 | 0.00 | 128 | ||||||||||||||||||||||||||||||||||||||||||||||||
2001 | 10.40 | 0.03 | 0.44 | 0.47 | (0.02 | ) | (0.01 | ) | — | (0.03 | ) | 10.84 | 4.53 | 54,365 | 1.00 | 0.32 | 1.22 | 0.10 | 105 | |||||||||||||||||||||||||||||||||||||||||||||||||
(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 year are not annualized. |
(c) | Annualized. |
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements
1. ORGANIZATION |
2. SIGNIFICANT ACCOUNTING POLICIES |
A. Investment Valuation — Investments in equity securities and investment companies traded on a U.S. securities exchange or the NASDAQ system are valued daily at their last sale price or official closing price on the principal exchange or system on which they are traded. If no sale occurs, such securities are valued at the last bid price. Debt securities are valued at prices supplied by independent pricing services, broker/dealer-supplied valuations or matrix pricing systems. Unlisted equity securities for which market quotations are available are valued at the last sale price on valuation date, or if no sale occurs, at the last bid price. Investments in investment companies (other than those that are exchange traded) are valued at the net asset value per share on valuation date. Short-term debt obligations maturing in sixty days or less are valued at amortized cost, which approximates market value. Securities for which quotations are not readily available or are deemed not to reflect market value by the investment adviser are valued at fair value using methods approved by the Trust’s Board of Trustees.
B. Security Transactions and Investment Income — Security transactions are reflected as of the trade date. Realized gains and losses on sales of portfolio securities are calculated using the identified-cost basis. Dividend income is recorded on the ex-dividend date, net of foreign withholding taxes, if any, which are reduced by any amounts reclaimable by the Fund, where applicable. Interest income is recorded on the basis of interest accrued, premium amortized and discount accreted.
C. Expenses — Expenses incurred by the Trust that do not specifically relate to an individual Fund of the Trust are allocated to the Fund on a straight-line and/or “pro-rata” basis depending upon the nature of the expense.
D. Federal Taxes and Distributions to Shareholders — It is the Fund’s policy to comply with the requirements of the Internal Revenue Code (the “Code”) applicable to regulated investment companies and to distribute each year substantially all of its investment company taxable income and capital gains to its shareholders. Accordingly, no federal tax provisions are required. Dividends and distributions to shareholders are recorded on the ex-dividend date. Income distributions and capital gains distributions, if any, are declared and paid annually.
2. SIGNIFICANT ACCOUNTING POLICIES (continued) |
E. Segregation Transactions — As set forth in the prospectus, the Fund may enter into certain derivative transactions to seek to increase total return. Forward foreign currency exchange contracts, futures contracts, written options, when-issued securities and forward commitments represent examples of such transactions. As a result of entering into these transactions, the Fund is required to segregate or physically move liquid assets, on the books of their custodian or to respective counterparties, with a current value equal to or greater than the market value of the corresponding transactions.
F. Repurchase Agreements — Repurchase agreements involve the purchase of securities subject to the seller’s agreement to repurchase them at a mutually agreed upon date and price. 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. If the seller defaults or becomes insolvent, realization of the collateral by the Fund may be delayed or limited and there may be a decline in the value of the collateral during the period while the Fund seeks to assert its rights. The underlying securities for all repurchase agreements are held in safekeeping at the Fund’s custodian or designated subcustodians under triparty repurchase agreements.
G. Futures Contracts — The Fund may enter into futures transactions to hedge against changes in interest rates, securities prices, currency exchange rates or to seek to increase total return. Futures contracts are valued at the last settlement price 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 is required to deposit with a broker, or the Fund’s custodian bank on behalf of the broker an amount of cash or securities equal to the minimum “initial margin” requirement of the associated futures exchange. Subsequent payments for futures contracts (“variation margin”) are paid or received by the Fund daily, dependent on the daily fluctuations in the value of the contracts, and are recorded for financial reporting purposes as unrealized gains or losses. When contracts are closed, the Fund realizes a gain or loss which is reported in the Statement of Operations.
3. AGREEMENTS |
Average Daily Net Assets | Annual Rate | |||
First $2 Billion | 0.75 | % | ||
Over $2 Billion | 0.68 | % | ||
3. AGREEMENTS (continued) |
Additionally, effective July 1, 2005, GSAM has voluntarily agreed to waive a portion of its Management Fee equal to 0.02% of the Fund’s average daily net assets. For the six months ended June 30, 2006, GSAM waived approximately $21,000 of the Fund’s Management Fee.
4. PORTFOLIO SECURITIES TRANSACTIONS |
5. SECURITIES LENDING |
6. LINE OF CREDIT FACILITY |
7. TAX INFORMATION |
Tax cost | $ | 196,352,805 | ||
Gross unrealized gain | 31,370,091 | |||
Gross unrealized loss | (6,015,413 | ) | ||
Net unrealized security gain | $ | 25,354,678 | ||
The difference between book-basis and tax basis unrealized gains (losses) is attributable primarily to wash sales, futures contracts and return-of-capital distributions from underlying fund investments.
8. OTHER MATTERS |
8. OTHER MATTERS (continued) |
New Accounting Pronouncement — On July 13, 2006, the Financial Accounting Standards Board (“FASB”) released FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Fund’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Adoption of FIN 48 is required for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. At this time, management is evaluating the implications of FIN 48 and its impact in the financial statements has not yet been determined.
Statement Regarding Basis for Approval of Management Agreement (Unaudited)
The Trustees oversee the management of Goldman Sachs Variable Insurance Trust (the “Trust”), and review the investment performance and expenses of the investment fund covered by this Report (the “Fund”) at regularly scheduled meetings held during the Fund’s fiscal year. In addition, the Trustees determine annually whether to approve and continue the Trust’s investment management agreement (the “Management Agreement”) with Goldman Sachs Asset Management, L.P. (the “Investment Adviser”) for the Fund.
The Management Agreement was most recently approved by the Trustees, including all of the Trustees who are not parties to the Management Agreement or “interested persons” (as defined in the Investment Company Act of 1940, as amended) of any party thereto (the “Independent Trustees”), on June 15, 2006 (the “Annual Contract Meeting”).
To assist the Trustees in their deliberations at the Annual Contract Meeting, and in addition to the reviews of the Fund’s investment performance, expenses and other matters at regularly scheduled Board meetings, the Trustees have a Contract Review Committee (the “Committee”) whose members include all of the Independent Trustees. The Committee held meetings on December 15, 2005, February 8, 2006 and May 10, 2006. At these Committee meetings, the Independent Trustees considered matters relating to the Management Agreement including: (a) the Fund’s investment performance; (b) the Fund’s management fee arrangements; (c) the Investment Adviser’s undertaking to reimburse certain expenses of the Fund that exceed a specified level; (d) the Investment Adviser’s potential economies of scale and the breakpoint for the fees payable by the Fund under the Management Agreement; (e) the relative expense level of the Fund; (f) the Investment Adviser’s profitability with respect to the Trust and the Fund; (g) information on the advisory fees charged by the Investment Adviser to institutional accounts; (h) the quality of the non-advisory services provided to the Fund; (i) the statutory and regulatory requirements applicable to the approval and continuation of mutual fund investment management agreements; (j) an evaluation of Trustees’ the contract review process provided by an outside third party; and (k) information on the processes followed by the third party mutual fund data provider engaged as part of the Trustees’ contract review (the “Outside Data Provider”) in producing investment performance and expense comparisons for the Fund.
At the Annual Contract Meeting, the Trustees reviewed the matters that were considered at the Committee meetings and also considered additional matters including: (a) a summary of fee concessions by the Investment Adviser and its affiliates with respect to the Goldman Sachs mutual funds since 2003; (b) the quality of the Investment Adviser’s services; (c) the structure, staff and capabilities of the Investment Adviser and its portfolio management team; (d) the groups within the Investment Adviser that support the portfolio management team, including the legal and compliance departments, the valuation oversight group, the risk and performance analytics group, the business planning team and the technology group; (e) the Investment Adviser’s business continuity and disaster recovery planning; (f) the Investment Adviser’s financial resources and its ability to hire and retain talented personnel; (g) the fees received by the Investment Adviser’s affiliates from the Fund for transfer agency, securities lending, distribution, portfolio brokerage and other services; (h) the terms of the Management Agreement; (i) the administrative services provided under the Management Agreement, including the nature and extent of the Investment Adviser’s oversight of the Fund’s other service providers, including the custodian and fund accounting agent; and (j) the Investment Adviser’s policies addressing various potential conflicts of interest. At the Annual Contract Meeting, the Trustees also considered at further length the Fund’s investment performance, fees and expenses, including the Fund’s expense trends over time and the breakpoint in the contractual fee rate under the Management Agreement approved in 2005.
In connection with the Committee meetings and the Annual Contract Meeting, the Trustees received written materials and oral presentations on the topics covered, and were advised by their independent legal counsel regarding their responsibilities under applicable law. Also, in conjunction with these meetings, the Trustees attended other sessions at which the Trustees reviewed the commission rates paid by the Fund on brokerage transactions, the Investment Adviser’s receipt of research services in connection with those transactions, and the payment of Rule 12b-1 distribution and service fees that are payable by the Fund on its Service Share Class. Information was also provided to the Trustees relating to the Fund’s portfolio turnover, revenue sharing by the Investment Adviser, portfolio manager compensation, the alignment of the interests of the Fund and the portfolio managers, the number and types of accounts managed by the portfolio managers, and other matters. During the course of their deliberations, the Independent Trustees met in executive sessions without employees of the Investment Adviser present.
The presentations made at the Contract Review Committee meetings and the Annual Contract Meeting encompassed the Fund and other mutual fund portfolios for which the Board of Trustees has responsibility. While the management agreements for the Fund and these other mutual fund portfolios were approved at the same Annual Contract Meeting, the Trustees considered the Management Agreement as it applied to the Fund separately.
In evaluating the Management Agreement at the Annual Contract Meeting, the Trustees relied upon their knowledge, resulting from their meetings and other interactions throughout the year, of the Investment Adviser, its services and the Fund. At those meetings the Trustees received materials relating to the Investment Adviser’s investment management and other services under the Management Agreement, including: (a) information on the investment performance of the Fund in comparison to other mutual funds and benchmark performance indices; (b) general investment outlooks in the markets in which the Fund invests; (c) compliance reports; and (d) expenses borne by the Fund. In addition, the Trustees were provided with disclosure materials regarding the Goldman Sachs mutual funds and their expenses that are provided to investors who invest in the funds, as well as information on the Goldman Sachs mutual funds’ competitive universe and discussed the broad range of other investment choices that are available to those investors.
In connection with their approval of the Management Agreement, the Trustees gave weight to various factors, but did not identify any particular factor as controlling their decision. As part of their review, the Trustees considered the nature, extent and quality of the services provided by the Investment Adviser. In this regard, the Trustees considered both the investment advisory services, and the other, non-advisory services, that are provided to the Fund by the Investment Adviser and its affiliates. These services include services as the Fund’s transfer agent, securities lending agent and distributor. In addition, affiliates of the Investment Adviser receive compensation in connection with the execution of the Fund’s portfolio securities transactions. The Trustees concluded that the Investment Adviser was both able to commit substantial financial and other resources to the operations of the Fund and had, in fact, continued to commit those resources in multiple areas including portfolio management, trading, technology, human resources, tax, treasury, legal, compliance, vendor oversight and risk management. The Trustees also believed that the Investment Adviser had made significant commitments to address regulatory compliance requirements applicable to the Fund and the Investment Adviser, including education and training initiatives.
The Trustees also considered the investment performance of the Fund and the Investment Adviser. In this regard, the Trustees compared the investment performance of the Fund to the performance of other SEC-registered funds and to rankings and ratings issued by the Outside Data Provider. The Trustees also reviewed the Fund’s investment performance relative to its performance benchmark. This information on the Fund’s investment performance was provided for one, three and five year periods. In addition, the Trustees considered the investment performance trends of the Fund over time, and reviewed the investment performance of the Fund in light of its investment objective and policies, as well as in light of periodic analyses of its quality and risk profile. In addition, the Trustees considered whether the Fund had operated within its investment policies, and its record of compliance with its investment limitations. The Trustees believed that the Fund was providing investment performance within a competitive range for long-term investors.
The Board of Trustees also considered the contractual fee rate payable by the Fund under the Management Agreement. In this regard, the Trustees considered information on the services rendered by the Investment Adviser to the Fund, which included both advisory and administrative services that were directed to the needs and operations of the Fund as a registered mutual fund. They also considered information that indicated that these mutual fund services differed in various significant respects from the services provided to the Investment Adviser’s institutional accounts, which generally paid lower fees. In addition, the fees paid by the Fund and the Fund’s total operating expense ratios (before and after expense reimbursements) were compared to similar information for mutual funds advised by other, unaffiliated investment management firms. Most of the comparisons of the Fund’s fee rates and total operating expense ratios were prepared by the Outside Data Provider.
More particularly, the Trustees reviewed analyses prepared by the Outside Data Provider of the expense rankings of the Fund. The analyses provided a comparison of the Fund’s management fee rates to a relevant peer group and a category universe; an expense analysis which compared the Fund’s expenses to a peer group and a category universe; and a five-year history comparing the Fund’s expenses to the category average. The analyses also compared the Fund’s transfer agency fees, custody and accounting fees and other expenses to a peer group and median. The Trustees believed that the comparisons provided by the Outside Data Provider were useful in evaluating the reasonableness of the management fees paid by the Fund. In addition,
the Trustees considered the Investment Adviser’s voluntary undertaking to waive a portion of its management fees with respect to the Fund and to limit the Fund’s total expense ratio (excluding certain expenses) to a specified level.
The Board of Trustees also considered the breakpoint in the contractual fee rate under the Management Agreement for the Fund that was approved in 2005, which had been implemented at the following annual percentage of the average daily net assets of the Fund:
0.75% on the first $2 billion and 0.68% over $2 billion.
In approving this new fee breakpoint, the Trustees had reviewed information regarding the Investment Adviser’s potential economies of scale, and whether the Fund and its shareholders were participating in the benefits of these economies. In this regard, the Trustees considered the amount of assets in the Fund; the information provided by the Investment Adviser relating to the costs of the services provided by the Investment Adviser and its affiliates and the profits realized by them; and information comparing fee rates charged by the Investment Adviser with fee rates charged by other, unaffiliated investment managers to other mutual funds. Upon reviewing these matters again at the Annual Contract Meeting in 2006, the Trustees continued to believe that the fee breakpoint was a way to ensure that benefits of scalability would be passed along to shareholders at the specified asset level.
The Trustees also considered the other benefits derived by the Investment Adviser and its affiliates from the Fund as stated above, including the fees received by them for transfer agency, securities lending, distribution and brokerage services, and the brokerage and research services received by the Investment Adviser in connection with the placement of brokerage transactions for the Fund. In this regard, the Trustees noted that the Investment Adviser had adopted a policy to cease obtaining third party non-broker research based on the Fund’s brokerage transactions. They also noted that during the past year the Fund had created a new share class, Service Shares, with a distribution and service plan under which an affiliate of the Investment Adviser would receive fees.
In addition, the Trustees reviewed the Investment Adviser’s pre-tax revenues and pre-tax margins with respect to the Trust and the Fund. In this regard the Trustees reviewed, among other things, profitability analyses and summaries, revenue and expense schedules, and expense allocation methodologies, as well as a report of independent accountants regarding the results of certain agreed-upon procedures to verify expense allocation calculations that were designed to assist the Trustees in their evaluation of the Investment Adviser’s schedules of revenues and expenses. The Trustees considered the Investment Adviser’s revenues and margins both in absolute terms and in comparison to the information on the reported margins earned by other asset management firms.
After deliberation and consideration of the information provided, including the factors described above, the Trustees concluded that the management fees paid by the Fund were reasonable in light of the services provided by the Investment Adviser, its costs and the Fund’s current and reasonably foreseeable asset levels, and that the Management Agreement should be approved and continued.
As a shareholder of the Fund, you incur ongoing costs, including management fees 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 January 1, 2006 through June 30, 2006. | ||
Actual Expenses — The first line of 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 for this period. | ||
Hypothetical Example for Comparison Purposes — The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual 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 (loads), 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. |
Expenses Paid | ||||||||||||
for the | ||||||||||||
Beginning | Ending | 6 months | ||||||||||
Account Value | Account Value | ended | ||||||||||
1/1/06 | 6/30/06 | 6/30/06* | ||||||||||
Actual | $ | 1,000 | $ | 1,052.40 | $ | 4.47 | ||||||
Hypothetical 5% return | 1,000 | 1,020.44 | + | 4.40 | ||||||||
* | Expenses are calculated using the Fund’s annualized expense ratio, which represents the ongoing expenses as a percentage of net assets for the six months ended June 30, 2006. Expenses are calculated by multiplying the annualized 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 expense ratio for the period was 0.88%. |
+ | Hypothetical expenses are based on the Fund’s actual annualized expense ratios and an assumed rate of return of 5% per year before expenses. |
TRUSTEES | OFFICERS | |
Ashok N. Bakhru, Chairman | Kaysie P. Uniacke, President | |
John P. Coblentz, Jr. | James A. Fitzpatrick, Vice President | |
Patrick T. Harker | James A. McNamara, Vice President | |
Mary Patterson McPherson | John M. Perlowski, Treasurer | |
Alan A. Shuch | Peter V. Bonanno, Secretary | |
Wilma J. Smelcer | ||
Richard P. Strubel | ||
Kaysie P. Uniacke | ||
GOLDMAN, SACHS & CO. Distributor and Transfer Agent | ||
GOLDMAN SACHS ASSET MANAGEMENT, L.P. Investment Adviser | ||
Visit our Web site at www.goldmansachsfunds.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 1-800-526-7384 (for Retail Shareholders) or 1-800-621-2550 (for Institutional Shareholders); and (ii) on the Securities and Exchange Commission Web site at http://www.sec.gov. | ||
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. Beginning the fiscal quarter ended September 30, 2004 and every first and third fiscal quarter thereafter, the Fund’s Form N-Q will become available on the SEC’s website at http://www.sec.gov within 60 days after the Fund’s first and third fiscal quarters. When available, 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. When available, Form N-Q may be obtained upon request and without charge by calling 1-800-621-2550. | ||
This material is not authorized for distribution to prospective investors unless preceded or accompanied by a current Prospectus. 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 Funds. | ||
Holdings and allocations shown may not be representative of current or future investments. Holdings and allocations may not include the Fund’s entire investment portfolio,which may change at any time. Fund holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities. | ||
Effective May 1, 2006, the Variable Insurance Trust (VIT) CORESM Small Cap Equity Fund was renamed the Variable Insurance Trust (VIT) Structured Small Cap Equity Fund. CORESM is a registered service mark of Goldman, Sachs & Co. | ||
Toll Free (in U.S.): 800-292-4726 | ||
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: Structured Small Cap Equity Fund. | ||
Copyright 2006 Goldman, Sachs & Co. All rights reserved. Date of first use: August 18, 2006 | ||
VITSTRCSCSAR/06-1203/08-06/30.4K |
GOLDMAN SACHS ASSET MANAGEMENT, L.P. 32 OLD SLIP, NEW YORK, NEW YORK 10005
Shareholder Letter
Dear Shareholders:
This report provides an overview on the performance of the Goldman Sachs Variable Insurance Trust — Capital Growth Fund during the six-month reporting period that ended June 30, 2006.
Market Review
During the first half of 2006, the U.S. equity markets finished in positive territory. Energy and Utility companies continued to be favored by investors, producing significant returns. Conversely, sectors such as Healthcare and Technology lagged during the six-month period. The retail sector remained weak as a result of the overall market environment. The Federal Reserve Board raised short-term interest rates for the 17th consecutive time in June 2006. This was the first increase that was not accompanied by a statement indicating future interest rate hikes, which triggered a slight rally in the equities market at the end of June.
Investment Objective
The Fund seeks long-term growth of capital.
Portfolio Composition
% of | ||||||
Company | Net Assets | Business | ||||
Freddie Mac | 4.2 | % | Specialty Finance | |||
Microsoft Corp. | 3.6 | Computer Software | ||||
Baker Hughes, Inc. | 3.4 | Oil Well Services & Equipment | ||||
Suncor Energy, Inc. | 3.1 | Oil & Gas | ||||
The McGraw-Hill Cos., Inc. | 3.0 | Commercial Services | ||||
First Data Corp. | 2.9 | Computer Services | ||||
Google, Inc. | 2.9 | Internet & Online | ||||
Schlumberger Ltd. | 2.6 | Oil Well Services & Equipment | ||||
Yahoo!, Inc. | 2.5 | Internet & Online | ||||
PepsiCo., Inc. | 2.4 | Beverages |
* Opinions expressed in this report represent our present opinions only. Reference to individual securities should not be construed as a commitment that such securities will be retained in the Fund. From time to time, the Fund may change the individual securities it holds, the number or types of securities held and the markets in which it invests. Fund holdings of stocks or bonds should not be relied upon in making investment decisions and should not be construed as research or investment advice regarding particular securities. References to individual securities do not constitute a recommendation to the investor to buy, hold or sell such securities. In addition, references to past performance of the Fund do not indicate future returns, which are not guaranteed and will vary. Furthermore, the value of shares of the Fund may fall as well as rise.
Performance Review
Over the six-month period that ended June 30, 2006, the Fund’s Institutional Shares generated a cumulative total return of -0.56%. This return compares to the -0.93% cumulative total return of the Fund’s benchmark, the Russell 1000 Growth Index (with dividends reinvested), over the same time period. For the period from the inception of the Service Class on January 9, 2006 to June 30, 2006, the Fund’s Service Shares generated a cumulative total return of -3.81%. This compares to the -3.83% cumulative total return of the Fund’s benchmark over the same time period.
The Fund outperformed its benchmark during the reporting period, as a result of stock selection within the Energy and Technology sectors as well as strength in select Wireless Tower companies.
The Energy sector was a top contributor to performance during the six-month period as nearly all of the Fund’s holdings in the sector outperformed that sector in the Index. Schlumberger Ltd. declared a 2-for-1 stock split and increased its dividend by nearly 20% over the period. In addition to these shareholder-friendly actions, the company reported full-year and quarter-end earnings results that surpassed consensus expectations. Baker Hughes, Inc. exceeded earnings expectations, almost doubling profits from a year ago. Baker Hughes benefited from the industry’s increased efforts to find hydrocarbons, as well as several analyst upgrades. U.S. rig counts have been increasing (with over 1,600 total rigs currently in North America), this year’s forecast for hurricanes is severe, and energy prices spiked during the period — all of which have been factors driving the company’s growth. We believe that, as more oil wells are drilled to meet global demand, oil well services businesses like Schlumberger and Baker Hughes will continue to benefit.
Within the Technology sector, Google, Inc. and Cisco Systems, Inc. contributed to the Fund’s performance. Google announced first quarter earnings results were up 60% from a year ago, exceeding analyst expectations. The growth in earnings and revenue outpaced that of other major Internet-based companies, especially in its international operations, where revenue increased 91%. Cisco Systems enhanced results as it reported fiscal second quarter earnings that beat expectations. The company’s order growth is at its strongest level in over a year due to increased demand from its corporate customers. Many companies are focused on increasing the capacity and security of their networks and Cisco has been a beneficiary of this trend. In addition, the company was upgraded by several analysts who believe it should see accelerated revenue and profit growth in 2006. We believe Cisco is well positioned for growth as it has increased its sales force by approximately 30% in recent quarters.
The Fund’s wireless tower companies, Crown Castle International Corp. and American Tower Corp. were both up and contributed to performance during the period. Crown Castle enhanced fund performance, as the company reported results for the first quarter 2006 with strong earnings and total revenue up 14%. In mid-May, the company added more cell towers to its high quality portfolio with its acquisition of the private tower company, Mountain Cell. We believe Crown Castle has strategically managed its balance sheet by taking on large debt which it has effectively controlled using its free cash flow. American Tower contributed to performance as the company reported results for its first quarter of 2006 with total revenues up 74%. All areas of American Tower continued to perform well as the company fully completed its integration of SpectraSite. We believe American Tower’s operating margins are healthy and were aided by the strong performance of wireless carriers. We feel that
American Tower should benefit from a robust tower leasing environment as it enhances its operations.
In the Consumer Discretionary sector, we sold out of the Fund’s position in Carnival Corp. While the company met our investment criteria for its brand name in the cruising industry, dominant market share, and strong free cash flow, the company has been beset by economic factors that have put pressure on margins. With the increase in oil prices, Carnival’s energy costs have grown over 50% in the past year. However, Carnival has been able to manage this cost through its pricing power, passing these prices on to the consumer. Now we are concerned that, with strains on consumers due to high gas prices, Carnival will not have the pricing power it once had and we do not see the company being able to demonstrate its operating leverage anytime soon. We decided to exit the position and invest the proceeds in companies where we had more conviction going forward.
XM Satellite Radio Holdings, Inc. was down significantly during the period, despite a revenue increase of over 100% driven by strong subscriber growth during the first quarter. Its shares fell after management made some missteps, causing them to lower their outlook for 2006. XM has also been the subject of FCC and FTC investigations. We believe XM is still well positioned for strong growth, as the company expects cars pre-installed with its radios to increase significantly.
The Finance sector detracted from performance, as the government-sponsored enterprise (GSE) Freddie Mac was down during the period. Its shares fell in June as a result of overall weakness in the mortgage finance sector. The key issue that weighed on the sector was concerns about further interest rate hikes and inflation. In addition, a news article was released regarding the restriction of mortgage loan portfolio growth for the GSEs. It said the Treasury might use its authority to reject the GSE’s requests to issue debt, limiting their portfolio growth. This would circumvent the efforts by Congress to issue a new bill strengthening the regulation of the GSEs. We do not believe that the Treasury is likely to reject the GSE’s requests since it would serve to reinforce the implicit guarantee of the government to bail GSEs out in the event of a crisis. In our view, a bill strengthening the regulator will likely not be passed this year due to the lack of negotiations necessary to make a potential compromise. We are still favorable on Freddie Mac due, in part, to the fundamental strength of its franchise. On the positive side in the Finance sector, The Charles Schwab Corp. enhanced fund performance. Improving fundamentals helped its shares rally as assets increased 17% over the past year to $1.2 trillion — a record for the firm. In addition to the assets under management, which drives the bulk of its revenue, Schwab’s trading business grew 62% over the past year. While an increase in the daily average revenue trades (DARTs) is a net positive, we are more heartened by the growth in the asset base, which serves as a strong recurring revenue stream for the company.
We thank you for your investment and look forward to serving your investment needs in the future.
Goldman Sachs Growth Team
July 18, 2006
Shares of the Goldman Sachs Variable Insurance Trust (“VIT”) Capital Growth Fund 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.
The VIT Capital Growth Fund invests primarily in large-capitalization U.S. equity investments and is subject to market risk so that the value of the securities in which it invests may go up or down in response to the prospects of individual companies, particular industry sectors and/or general economic conditions. The Fund may invest in foreign securities, which may be more volatile and less liquid than investment in U.S. securities and will be subject to the risks of currency fluctuations and sudden economic or political developments. At times, the Fund may be unable to sell certain of its portfolio securities without a substantial drop in price, if at all. The Fund may participate in the Initial Public Offering (IPO) market, and a portion of the Fund’s returns consequently may be attributable to its investment in IPOs. The market value of IPO shares may fluctuate considerably due to factors such as the absence of a prior public market, unseasoned trading, and the small number of shares available for trading and limited information about the issuer. When a fund’s asset base is small, IPOs may have a magnified impact on the fund’s performance. As a fund’s assets grow, it is probable that the effect of the fund’s investment in IPOs on its total returns may not be as significant, which could reduce the fund’s performance.
SECTOR ALLOCATION AS OF JUNE 30, 2006† |
Percentage of Net Assets
† The Fund is actively managed and, as such, its composition may differ over time. The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. Short-term Investments include repurchase agreements and securities lending collateral. Figures in the above graph may not sum to 100% due to the exclusion of other assets and/or liabilities.
Schedule of Investments
Shares | Description | Value | ||||||||
Common Stocks – 99.2% | ||||||||||
Aerospace & Defense – 1.7% | ||||||||||
145,630 | United Technologies Corp. | $ | 9,235,855 | |||||||
Audio & Visual Equipment – 0.8% | ||||||||||
49,720 | Harman International Industries, Inc. | 4,244,596 | ||||||||
Beverages – 4.9% | ||||||||||
137,480 | Fortune Brands, Inc. | 9,762,455 | ||||||||
222,100 | PepsiCo., Inc. | 13,334,884 | ||||||||
96,275 | The Coca-Cola Co. | 4,141,750 | ||||||||
27,239,089 | ||||||||||
Biotechnology – 4.6% | ||||||||||
200,754 | Amgen, Inc.* | 13,095,183 | ||||||||
71,100 | Genentech, Inc.* | 5,815,980 | ||||||||
248,700 | MedImmune, Inc.* | 6,739,770 | ||||||||
25,650,933 | ||||||||||
Broadcasting & Cable/Satellite TV – 1.9% | ||||||||||
165,650 | Univision Communications, Inc.*(a) | 5,549,275 | ||||||||
327,350 | XM Satellite Radio Holdings, Inc.*(a) | 4,795,678 | ||||||||
10,344,953 | ||||||||||
Commercial Services – 5.0% | ||||||||||
202,890 | Moody’s Corp. | 11,049,389 | ||||||||
335,050 | The McGraw-Hill Companies, Inc. | 16,829,562 | ||||||||
27,878,951 | ||||||||||
Computer Hardware – 1.0% | ||||||||||
492,100 | EMC Corp.* | 5,398,337 | ||||||||
Computer Services – 2.9% | ||||||||||
360,191 | First Data Corp. | 16,223,003 | ||||||||
Computer Software – 5.2% | ||||||||||
204,625 | Electronic Arts, Inc.* | 8,807,060 | ||||||||
865,768 | Microsoft Corp. | 20,172,394 | ||||||||
28,979,454 | ||||||||||
Drugs & Medicine – 2.7% | ||||||||||
229,684 | Pfizer, Inc. | 5,390,684 | ||||||||
294,200 | Schering-Plough Corp. | 5,598,626 | ||||||||
97,535 | Wyeth | 4,331,529 | ||||||||
15,320,839 | ||||||||||
Financials – 6.2% | ||||||||||
11,600 | Chicago Mercantile Exchange Holdings, Inc. | 5,697,340 | ||||||||
63,100 | Franklin Resources, Inc. | 5,477,711 | ||||||||
53,900 | Legg Mason, Inc. | 5,364,128 | ||||||||
65,635 | Merrill Lynch & Co., Inc. | 4,565,571 | ||||||||
93,345 | Morgan Stanley | 5,900,337 | ||||||||
453,030 | The Charles Schwab Corp. | 7,239,419 | ||||||||
34,244,506 | ||||||||||
Foods – 1.1% | ||||||||||
113,500 | The Hershey Co. | 6,250,445 | ||||||||
Gaming/Lodging – 3.6% | ||||||||||
350,700 | Cendant Corp. | 5,712,903 | ||||||||
107,820 | Harrah’s Entertainment, Inc. | 7,674,628 | ||||||||
170,160 | Marriott International, Inc. | 6,486,499 | ||||||||
19,874,030 | ||||||||||
Health Care Services – 0.7% | ||||||||||
85,000 | Omnicare, Inc. | 4,030,700 | ||||||||
Household/Personal Care – 1.2% | ||||||||||
124,417 | Procter & Gamble Co. | 6,917,585 | ||||||||
Internet & Online – 5.3% | ||||||||||
38,310 | Google, Inc.* | 16,064,532 | ||||||||
415,074 | Yahoo!, Inc.* | 13,697,442 | ||||||||
29,761,974 | ||||||||||
Manufacturing – 1.1% | ||||||||||
84,700 | Rockwell Automation, Inc. | 6,099,247 | ||||||||
Medical Products – 5.3% | ||||||||||
42,950 | Fisher Scientific International, Inc.* | 3,137,497 | ||||||||
211,778 | Medtronic, Inc. | 9,936,624 | ||||||||
156,100 | St. Jude Medical, Inc.* | 5,060,762 | ||||||||
170,300 | Stryker Corp. | 7,171,333 | ||||||||
71,447 | Zimmer Holdings, Inc.* | 4,052,474 | ||||||||
29,358,690 | ||||||||||
Movies & Entertainment – 0.9% | ||||||||||
141,274 | Viacom, Inc. Class B* | 5,063,260 | ||||||||
Networking/Telecommunications Equipment – 3.4% | ||||||||||
673,190 | Cisco Systems, Inc.* | 13,147,401 | ||||||||
130,900 | Motorola, Inc. | 2,637,635 | ||||||||
49,400 | Research In Motion Ltd.* | 3,446,638 | ||||||||
19,231,674 | ||||||||||
Oil & Gas – 7.9% | ||||||||||
224,140 | Canadian Natural Resources Ltd. | 12,412,873 | ||||||||
351,100 | Chesapeake Energy Corp.(a) | 10,620,775 | ||||||||
95,600 | Quicksilver Resources, Inc.*(a) | 3,519,036 | ||||||||
212,520 | Suncor Energy, Inc. | 17,216,245 | ||||||||
43,768,929 | ||||||||||
Oil Well Services & Equipment – 6.0% | ||||||||||
232,538 | Baker Hughes, Inc. | 19,033,235 | ||||||||
218,040 | Schlumberger Ltd. | 14,196,585 | ||||||||
33,229,820 | ||||||||||
Pharmacy Benefit Manager – 2.0% | ||||||||||
130,965 | Caremark Rx, Inc. | 6,531,225 | ||||||||
81,790 | Medco Health Solutions, Inc.* | 4,684,931 | ||||||||
11,216,156 | ||||||||||
Producer Goods – 0.8% | ||||||||||
59,910 | W.W. Grainger, Inc. | 4,507,029 | ||||||||
Publishing – 1.4% | ||||||||||
150,755 | Lamar Advertising Co.* | 8,119,664 | ||||||||
6
Shares | Description | Value | ||||||||
Common Stocks – (continued) | ||||||||||
Retailing – 6.5% | ||||||||||
190,770 | Lowe’s Companies, Inc. | $ | 11,574,016 | |||||||
228,790 | Target Corp. | 11,180,967 | ||||||||
275,520 | Wal-Mart Stores, Inc. | 13,271,799 | ||||||||
36,026,782 | ||||||||||
Semiconductors – 4.8% | ||||||||||
168,384 | Intel Corp. | 3,190,877 | ||||||||
314,279 | Linear Technology Corp. | 10,525,204 | ||||||||
322,491 | QUALCOMM, Inc. | 12,922,214 | ||||||||
26,638,295 | ||||||||||
Specialty Finance – 6.2% | ||||||||||
104,660 | American Express Co. | 5,570,005 | ||||||||
110,907 | Fannie Mae | 5,334,627 | ||||||||
412,455 | Freddie Mac | 23,514,060 | ||||||||
34,418,692 | ||||||||||
Technology Services – 0.7% | ||||||||||
56,420 | Cognizant Technology Solutions Corp.* | 3,801,015 | ||||||||
Telecommunications – 3.4% | ||||||||||
402,290 | American Tower Corp.* | 12,519,266 | ||||||||
107,650 | Crown Castle International Corp.* | 3,718,231 | ||||||||
72,500 | NeuStar, Inc.* | 2,446,875 | ||||||||
18,684,372 | ||||||||||
TOTAL COMMON STOCKS | ||||||||||
(Cost $548,446,663) | $ | 551,758,875 | ||||||||
Principal | Interest | Maturity | ||||||||||||
Amount | Rate | Date | Value | |||||||||||
Repurchase Agreement(b) – 0.8% | ||||||||||||||
Joint Repurchase Agreement Account II | ||||||||||||||
$ | 4,200,000 | 5.28 | % | 07/03/2006 | $4,200,000 | |||||||||
Maturity Value: $4,201,847 | ||||||||||||||
(Cost $4,200,000) | ||||||||||||||
TOTAL INVESTMENTS BEFORE SECURITIES LENDING COLLATERAL | ||||||||||||||
(Cost $552,646,663) | $555,958,875 | |||||||||||||
Shares | Description | Value | ||||||||
Securities Lending Collateral – 3.2% | ||||||||||
17,652,450 | Boston Global Investment Trust – Enhanced Portfolio | $ | 17,652,450 | |||||||
(Cost $17,652,450) | ||||||||||
TOTAL INVESTMENTS – 103.2% | ||||||||||
(Cost $570,299,113) | $ | 573,611,325 | ||||||||
LIABILITIES IN EXCESS OF OTHER ASSETS – (3.2)% | (17,961,523 | ) | ||||||||
NET ASSETS – 100.0% | $ | 555,649,802 | ||||||||
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 portion of security is on loan. | |
(b) | Joint repurchase agreement was entered into on June 30, 2006. Additional Investment information appears on page 8. |
7
ADDITIONAL INVESTMENT INFORMATION |
JOINT REPURCHASE AGREEMENT ACCOUNT II — At June 30, 2006, the Fund had an undivided interest in the following Joint Repurchase Agreement Account II which equaled $4,200,000 in principal amount.
Principal | Interest | Maturity | Maturity | |||||||||||||
Repurchase Agreements | Amount | Rate | Date | Value | ||||||||||||
Banc of America Securities LLC | $ | 2,860,000,000 | 5.30% | 07/03/2006 | $ | 2,861,263,167 | ||||||||||
Barclays Capital PLC | 1,500,000,000 | 5.32 | 07/03/2006 | 1,500,665,000 | ||||||||||||
Bear Stearns | 500,000,000 | 5.31 | 07/03/2006 | 500,221,250 | ||||||||||||
Deutsche Bank Securities, Inc. | 1,000,000,000 | 5.20 | 07/03/2006 | 1,000,433,333 | ||||||||||||
Greenwich Capital Markets | 300,000,000 | 5.32 | 07/03/2006 | 300,133,000 | ||||||||||||
J.P. Morgan Securities, Inc. | 400,000,000 | 5.28 | 07/03/2006 | 400,176,000 | ||||||||||||
Merrill Lynch | 500,000,000 | 5.25 | 07/03/2006 | 500,218,750 | ||||||||||||
Morgan Stanley & Co. | 3,000,000,000 | 5.25 | 07/03/2006 | 3,001,312,500 | ||||||||||||
UBS Securities LLC | 1,050,000,000 | 5.25 | 07/03/2006 | 1,050,459,375 | ||||||||||||
UBS Securities LLC | 475,000,000 | 5.30 | 07/03/2006 | 475,209,792 | ||||||||||||
UBS Securities LLC | 400,000,000 | 5.34 | 07/03/2006 | 400,178,000 | ||||||||||||
Wachovia Capital Markets | 250,000,000 | 5.26 | 07/03/2006 | 250,109,583 | ||||||||||||
TOTAL | $ | 12,235,000,000 | $ | 12,240,379,750 | ||||||||||||
At June 30, 2006, the Joint Repurchase Agreement Account II was fully collateralized by Federal Home Loan Bank, 0.00% to 11.00%, due 07/07/2006 to 04/20/2016; Federal Home Loan Mortgage Association, 3.00% to 8.50%, due 02/01/2007 to 07/01/2036; Federal National Mortgage Association, 0.00% to 10.50%, due 02/01/2007 to 07/01/2036; and U.S. Treasury Bonds, 5.00% to 7.14%, due 11/13/2008 to 10/20/2018. The aggregate market value of the collateral, including accrued interest, was $12,492,409,737. |
8
Statement of Assets and Liabilities
Assets: | |||||||
Investment in securities, at value (identified cost $552,646,663) — including $17,175,839 of securities on loan | $ | 555,958,875 | |||||
Securities lending collateral, at value (cost $17,652,450) | 17,652,450 | ||||||
Cash | 110,080 | ||||||
Receivables: | |||||||
Fund shares sold | 350,471 | ||||||
Dividends and interest | 153,426 | ||||||
Securities lending income | 737 | ||||||
Other assets | 2,085 | ||||||
Total assets | 574,228,124 | ||||||
Liabilities: | |||||||
Payables: | |||||||
Payable upon return of securities loaned | 17,652,450 | ||||||
Fund shares repurchased | 405,367 | ||||||
Amounts owed to affiliates | 391,482 | ||||||
Accrued expenses | 129,023 | ||||||
Total liabilities | 18,578,322 | ||||||
Net Assets: | |||||||
Paid-in capital | 508,945,444 | ||||||
Accumulated undistributed net investment income | 266,345 | ||||||
Accumulated net realized gain on investment and foreign currency related transactions | 43,125,849 | ||||||
Net unrealized gain on investments and translation of assets and liabilities denominated in foreign currencies | 3,312,164 | ||||||
NET ASSETS | $ | 555,649,802 | |||||
Net Assets: | |||||||
Institutional | $ | 161,532,306 | |||||
Service | 394,117,496 | ||||||
Shares Outstanding: | |||||||
Institutional | 15,214,166 | ||||||
Service | 37,141,953 | ||||||
Total shares of beneficial interest outstanding, $0.001 par value (unlimited shares authorized) | 52,356,119 | ||||||
Net asset value, offering and redemption price per share: | |||||||
Institutional | $ | 10.62 | |||||
Service | $ | 10.61 | |||||
9
Statement of Operations
Investment income: | |||||||
Dividends(a) | $ | 2,829,148 | |||||
Interest (including securities lending income of $4,073) | 92,738 | ||||||
Total income | 2,921,886 | ||||||
Expenses: | |||||||
Management fees | 2,156,761 | ||||||
Distribution and Service fees | 508,337 | ||||||
Transfer agent fees | 115,027 | ||||||
Printing fees | 84,159 | ||||||
Custody and accounting fees | 56,157 | ||||||
Professional fees | 30,525 | ||||||
Trustee fees | 6,803 | ||||||
Registration fees | 629 | ||||||
Other | 5,499 | ||||||
Total expenses | 2,963,897 | ||||||
Less — expense reductions | (305,410 | ) | |||||
Net expenses | 2,658,487 | ||||||
NET INVESTMENT INCOME | 263,399 | ||||||
Realized and unrealized gain (loss) on investment and foreign currency transactions: | |||||||
Net realized gain (loss) from: | |||||||
Investment transactions (including commissions recaptured of $81,082) | 70,631,518 | ||||||
Foreign currency related transactions | (124 | ) | |||||
Net change in unrealized loss on: | |||||||
Investments | (87,491,675 | ) | |||||
Translation of assets and liabilities denominated in foreign currencies | (48 | ) | |||||
Net realized and unrealized loss on investment and foreign currency transactions | (16,860,329 | ) | |||||
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | (16,596,930 | ) | ||||
(a) | Foreign taxes withheld on dividends were $8,775. |
10
Statements of Changes in Net Assets
For the | |||||||||||
Six Months Ended | For the | ||||||||||
June 30, 2006 | Year Ended | ||||||||||
(Unaudited) | December 31, 2005 | ||||||||||
From operations: | |||||||||||
Net investment income | $ | 263,399 | $ | 252,902 | |||||||
Net realized gain on investment and foreign currency related transactions | 70,631,394 | 2,625,757 | |||||||||
Payment by affiliates to reimburse certain security claims | — | 2,915 | |||||||||
Net change in unrealized gain (loss) on investments, futures and translation of assets and liabilities denominated in foreign currencies | (87,491,723 | ) | 1,234,312 | ||||||||
Net increase (decrease) in net assets resulting from operations | (16,596,930 | ) | 4,115,886 | ||||||||
Distributions to shareholders: | |||||||||||
From net investment income | |||||||||||
Institutional Shares | — | (249,956 | ) | ||||||||
Service Shares | — | — | |||||||||
Total distributions to shareholders | — | (249,956 | ) | ||||||||
From share transactions: | |||||||||||
Proceeds from sales of shares | 7,699,056 | 11,639,337 | |||||||||
Proceeds received in connection with merger | 454,868,620 | — | |||||||||
Reinvestment of dividends and distributions | — | 249,956 | |||||||||
Cost of shares repurchased | (58,374,570 | ) | (34,389,302 | ) | |||||||
Net increase (decrease) in net assets resulting from share transactions | 404,193,106 | (22,500,009 | ) | ||||||||
TOTAL INCREASE (DECREASE) | 387,596,176 | (18,634,079 | ) | ||||||||
Net assets: | |||||||||||
Beginning of period | 168,053,626 | 186,687,705 | |||||||||
End of period | $ | 555,649,802 | $ | 168,053,626 | |||||||
Accumulated undistributed net investment income | $ | 266,345 | $ | 2,946 | |||||||
11
Financial Highlights
Income (loss) from | Ratios assuming no | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
investment operations | Distributions to shareholders | expense reductions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net | Ratio of | Ratio of | Ratio of | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset | realized | From | Net asset | Net assets, | Ratio of | net investment | total | net investment | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
value, | Net | and | Total from | From net | net | value, | end of | net expenses | income to | expenses | income to | Portfolio | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Year — Share | beginning | investment | unrealized | investment | investment | realized | Total | end of | Total | period | to average | average | to average | average | turnover | |||||||||||||||||||||||||||||||||||||||||||||||||
Class | of period | income(b) | gain (loss) | operations | income | gains | distributions | period | return(c) | (in 000s) | net assets | net assets | net assets | net assets | rate | |||||||||||||||||||||||||||||||||||||||||||||||||
For the Six Months ended June 30, (Unaudited) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2006 — Institutional | $ | 10.68 | $ | 0.01 | $ | (0.07 | ) | $ | (0.06 | ) | $ | — | $ | — | $ | — | $ | 10.62 | (0.56 | )% | $ | 161,532 | 0.86 | % (d) | 0.15 | % (d) | 0.86 | % (d) | 0.15 | % (d) | 46 | % | ||||||||||||||||||||||||||||||||
2006 — Service(a) | 11.03 | — | (0.42 | ) | (0.42 | ) | — | — | — | 10.61 | (3.81 | ) | 394,118 | 0.96 | (d) | 0.05 | (d) | 1.11 | (d) | (0.10 | )(d) | 46 | ||||||||||||||||||||||||||||||||||||||||||
For the Years ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2005 — Institutional | 10.39 | 0.02 | 0.29 | 0.31 | (0.02 | ) | — | (0.02 | ) | 10.68 | 2.94 | 168,054 | 0.90 | 0.15 | 0.90 | 0.15 | 35 | |||||||||||||||||||||||||||||||||||||||||||||||
2004 — Institutional | 9.59 | 0.07 | 0.80 | 0.87 | (0.07 | ) | — | (0.07 | ) | 10.39 | 9.09 | 186,688 | 0.89 | 0.69 | 0.89 | 0.69 | 45 | |||||||||||||||||||||||||||||||||||||||||||||||
2003 — Institutional | 7.77 | 0.03 | 1.81 | 1.84 | (0.02 | ) | — | (0.02 | ) | 9.59 | 23.74 | 179,694 | 1.02 | 0.38 | 1.43 | (0.03 | ) | 16 | ||||||||||||||||||||||||||||||||||||||||||||||
2002 — Institutional | 10.28 | 0.01 | (2.50 | ) | (2.49 | ) | (0.02 | ) | — | (0.02 | ) | 7.77 | (24.33 | ) | 18,052 | 1.10 | 0.16 | 1.77 | (0.51 | ) | 24 | |||||||||||||||||||||||||||||||||||||||||||
2001 — Institutional | 12.09 | 0.02 | (1.78 | ) | (1.76 | ) | (0.02 | ) | (0.03 | ) | (0.05 | ) | 10.28 | (14.46 | ) | 16,266 | 1.00 | 0.15 | 1.69 | (0.54 | ) | 39 | ||||||||||||||||||||||||||||||||||||||||||
(a) | Service Share Class commenced on January 9, 2006. |
(b) | Calculated based on the average shares outstanding methodology. |
(c) | Assumes investment at the net asset value at the beginning of the period, reinvestment of all dividends and 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 a full year are not annualized. |
(d) | Annualized. |
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements
1. ORGANIZATION |
2. SIGNIFICANT ACCOUNTING POLICIES |
A. Investment Valuation — Investments in equity securities and investment companies traded on a U.S. securities exchange or the NASDAQ system are valued daily at their last sale price or official closing price on the principal exchange or system on which they are traded. If no sale occurs, such securities are valued at the last bid price. Debt securities are valued at prices supplied by independent pricing services, broker/dealer-supplied valuations or matrix pricing systems. Unlisted equity securities for which market quotations are available are valued at the last sale price on valuation date, or if no sale occurs, at the last bid price. Investments in investment companies (other than those that are exchange traded) are valued at the net asset value per share on valuation date. Short-term debt obligations maturing in sixty days or less are valued at amortized cost, which approximates market value. Securities for which quotations are not readily available or are deemed not to reflect market value by the investment adviser are valued at fair value using methods approved by the Trust’s Board of Trustees.
B. Security Transactions and Investment Income — Security transactions are reflected as of the trade date. Realized gains and losses on sales of portfolio securities are calculated using the identified-cost basis. Dividend income is recorded on the ex-dividend date, net of foreign withholding taxes, if any, which are reduced by any amounts reclaimable by the Fund, where applicable. Interest income is recorded on the basis of interest accrued, premium amortized and discount accreted.
C. Expenses — Expenses incurred by the Trust that do not specifically relate to an individual Fund of the Trust are allocated to the Fund on a straight-line and/or “pro-rata” basis depending upon the nature of the expense. Service Shares bear all expenses and fees relating to their Distribution and Service Plan.
D. Federal Taxes and Distributions to Shareholders — It is the Fund’s policy to comply with the requirements of the Internal Revenue Code (the “Code”) applicable to regulated investment companies and to distribute each year substantially all of its investment company taxable income and capital gains to its shareholders. Accordingly, no federal tax provisions are required. Dividends and distributions to shareholders are recorded on the ex-dividend date. Income distributions and capital gains distributions, if any, are declared and paid annually.
E. Segregation Transactions — As set forth in the prospectus, the Fund may enter into certain derivative transactions to seek to increase total return. Forward foreign currency exchange contracts, futures contracts, written options, when-issued securities and forward commitments represent examples of such transactions. As a result of entering into these transactions, the Fund is required to segregate or physically move liquid assets, on the books of their custodian or to respective counterparties, with a current value equal to or greater than the market value of the corresponding transactions.
2. SIGNIFICANT ACCOUNTING POLICIES (continued) |
F. Repurchase Agreements — Repurchase agreements involve the purchase of securities subject to the seller’s agreement to repurchase them at a mutually agreed upon date and price. 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. If the seller defaults or becomes insolvent, realization of the collateral by the Fund may be delayed or limited and there may be a decline in the value of the collateral during the period while the Fund seeks to assert its rights. The underlying securities for all repurchase agreements are held in safekeeping at the Fund’s custodian or designated subcustodians under triparty repurchase agreements.
G. Commission Recapture — The Fund may direct portfolio trades, subject to obtaining 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 the net realized gain (loss) on investments in the Statement of Operations.
3. AGREEMENTS |
Average Daily Net Assets | Annual Rate | |||
First $1 Billion | 0.75 | % | ||
Next $1 Billion | 0.68 | % | ||
Over $2 Billion | 0.65 | % | ||
In connection with the reorganization of the Allmerica Select Growth Fund into the Fund, GSAM has contractually agreed to reimburse the Fund as necessary to limit the total annual operating expenses of the Services Shares of the Fund to 1.00% until June 2007.
3. AGREEMENTS (continued) |
The Trust has adopted, on behalf of Service Shares of the Fund, a Distribution and Service plan (the “Plan”). Under the Plan, Goldman Sachs is entitled to a monthly fee for distribution services equal to, on an annual basis, 0.25% of the Fund’s average daily net assets attributable to Service Shares. GSAM has voluntarily agreed to waive Distribution and Service fees for Service Shares so as not to exceed 0.10% for the Fund. This waiver may be modified or terminated at any time at the option of Goldman Sachs. For the six months ended June 30, 2006, GSAM waived $304,386 in Distribution and Service fees for the Fund.
4. PORTFOLIO SECURITIES TRANSACTIONS |
5. SECURITIES LENDING |
6. LINE OF CREDIT FACILITY |
7. TAX INFORMATION |
Capital loss carryforward:(1)(2) | |||||
Expiring 2008 | $ | (4,206,400 | ) | ||
Expiring 2009 | (13,983,325 | ) | |||
Expiring 2010 | (6,239,358 | ) | |||
Expiring 2011 | (1,064,803 | ) | |||
Total capital loss carryforward | $ | (25,493,886 | ) | ||
Timing differences (post-October losses) | (1,208,929 | ) | |||
(1) | Expiration occurs on December 31 of the year indicated utilization of these losses may be limited under the Code. |
(2) | During the year ended December 31, 2005, the Fund utilized $3,606,802 of capital loss carryforwards. |
Tax cost | $ | 575,288,100 | ||
Gross unrealized gain | 36,368,456 | |||
Gross unrealized loss | (38,045,231 | ) | ||
Net unrealized security loss | $ | (1,676,775 | ) | |
The difference between book-basis and tax basis unrealized gains (losses) is attributable primarily to wash sales.
8. OTHER MATTERS |
8. OTHER MATTERS (continued) |
Mergers and Reorganizations — At a meeting held on July 12, 2005, the Board of Trustees of the Trust approved an Agreement and Plan of Reorganization (the “Agreement”) providing for the tax-free acquisition of the Allmerica Select Growth Fund by the Goldman Sachs VIT Capital Growth Fund. Following the approval of the Board of Trustees and shareholders of the Allmerica Investment Trust Select Growth Fund, the acquisition was completed on January 9, 2006.
Acquired Fund’s | ||||||||||||
Exchanged Shares | Value of | Shares Outstanding | ||||||||||
Survivor/Acquired Fund | of Survivor Issued | Exchanged Shares | on January 6, 2006 | |||||||||
Goldman Sachs VIT Capital Growth Fund Service Class/ Allmerica Investment Trust Select Growth Fund Service Class | 41,239,222 | $ | 454,868,620 | 264,467,645 | ||||||||
The following chart shows the Survivor Fund’s and Acquired Fund’s aggregate net assets (immediately before and after the completion of the acquisition) and the Acquired Fund’s unrealized appreciation.
Survivor Fund’s | Acquired Fund’s | Survivor Fund’s | ||||||||||||||
Aggregate | Aggregate | Aggregate | ||||||||||||||
Net Assets | Net Assets | Acquired Fund’s | Net Assets | |||||||||||||
before | before | Unrealized | immediately | |||||||||||||
Survivor/Acquired Fund | acquisition | acquisition | Appreciation | after acquisition | ||||||||||||
Goldman Sachs VIT Capital Growth Fund/ Allmerica Investment Trust Select Growth Fund | $ | 173,497,578 | $ | 454,868,620 | $ | 74,244,861 | $ | 628,366,197 | ||||||||
New Accounting Pronouncement — On July 13, 2006, the Financial Accounting Standards Board (“FASB”) released FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Fund’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Adoption of FIN 48 is required for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. At this time, management is evaluating the implications of FIN 48 and its impact in the financial statements has not yet been determined.
9. SUMMARY OF SHARE TRANSACTIONS |
For the Six Months Ended | For the Year Ended | |||||||||||||||
June 30, 2006 | December 31, 2005 | |||||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||||
Institutional Shares | ||||||||||||||||
Shares sold | 647,961 | $ | 7,124,656 | 1,146,173 | $ | 11,639,337 | ||||||||||
Reinvestment of dividends and distributions | — | — | 23,144 | 249,956 | ||||||||||||
Shares repurchased | (1,175,794 | ) | (12,914,437 | ) | (3,389,711 | ) | (34,389,302 | ) | ||||||||
(527,833 | ) | (5,789,781 | ) | (2,220,394 | ) | (22,500,009 | ) | |||||||||
Service Shares* | ||||||||||||||||
Shares sold | 80,297 | 574,400 | — | — | ||||||||||||
Shares issued in connection with merger | 41,239,222 | 454,868,620 | — | — | ||||||||||||
Reinvestment of dividends and distributions | — | — | — | — | ||||||||||||
Shares repurchased | (4,177,566 | ) | (45,460,133 | ) | — | — | ||||||||||
37,141,953 | 409,982,887 | — | — | |||||||||||||
NET INCREASE (DECREASE) | 36,614,120 | $ | 404,193,106 | (2,220,394 | ) | $ | (22,500,009 | ) | ||||||||
* | Service Share Class commenced on January 9, 2006. |
Statement Regarding Basis for Approval of Management Agreement (Unaudited)
The Trustees oversee the management of Goldman Sachs Variable Insurance Trust (the “Trust”), and review the investment performance and expenses of the investment fund covered by this Report (the “Fund”) at regularly scheduled meetings held during the Fund’s fiscal year. In addition, the Trustees determine annually whether to approve and continue the Trust’s investment management agreement (the “Management Agreement”) with Goldman Sachs Asset Management, L.P. (the “Investment Adviser”) for the Fund.
The Management Agreement was most recently approved by the Trustees, including all of the Trustees who are not parties to the Management Agreement or “interested persons” (as defined in the Investment Company Act of 1940, as amended) of any party thereto (the “Independent Trustees”), on June 15, 2006 (the “Annual Contract Meeting”).
To assist the Trustees in their deliberations at the Annual Contract Meeting, and in addition to the reviews of the Fund’s investment performance, expenses and other matters at regularly scheduled Board meetings, the Trustees have a Contract Review Committee (the “Committee”) whose members include all of the Independent Trustees. The Committee held meetings on December 15, 2005, February 8, 2006 and May 10, 2006. At these Committee meetings, the Independent Trustees considered matters relating to the Management Agreement including: (a) the Fund’s investment performance; (b) the Fund’s management fee arrangements; (c) the Investment Adviser’s undertaking to reimburse certain expenses of the Fund that exceed a specified level; (d) the Investment Adviser’s potential economies of scale and the breakpoints for the fees payable by the Fund under the Management Agreement; (e) the relative expense level of the Fund; (f) the Investment Adviser’s profitability with respect to the Trust and the Fund; (g) information on the advisory fees charged by the Investment Adviser to institutional accounts; (h) the quality of the non-advisory services provided to the Fund; (i) the statutory and regulatory requirements applicable to the approval and continuation of mutual fund investment management agreements; (j) an evaluation of Trustees’ the contract review process provided by an outside third party; and (k) information on the processes followed by the third party mutual fund data provider engaged as part of the Trustees’ contract review (the “Outside Data Provider”) in producing investment performance and expense comparisons for the Fund.
At the Annual Contract Meeting, the Trustees reviewed the matters that were considered at the Committee meetings and also considered additional matters including: (a) a summary of fee concessions by the Investment Adviser and its affiliates with respect to the Goldman Sachs mutual funds since 2003; (b) the quality of the Investment Adviser’s services; (c) the structure, staff and capabilities of the Investment Adviser and its portfolio management team; (d) the groups within the Investment Adviser that support the portfolio management team, including the legal and compliance departments, the valuation oversight group, the risk and performance analytics group, the business planning team and the technology group; (e) the Investment Adviser’s business continuity and disaster recovery planning; (f) the Investment Adviser’s financial resources and its ability to hire and retain talented personnel; (g) the fees received by the Investment Adviser’s affiliates from the Fund for transfer agency, securities lending, distribution, portfolio brokerage and other services; (h) the terms of the Management Agreement; (i) the administrative services provided under the Management Agreement, including the nature and extent of the Investment Adviser’s oversight of the Fund’s other service providers, including the custodian and fund accounting agent; and (j) the Investment Adviser’s policies addressing various potential conflicts of interest. At the Annual Contract Meeting, the Trustees also considered at further length the Fund’s investment performance, fees and expenses, including the Fund’s expense trends over time and the breakpoints in the contractual fee rate under the Management Agreement approved in 2005.
In connection with the Committee meetings and the Annual Contract Meeting, the Trustees received written materials and oral presentations on the topics covered, and were advised by their independent legal counsel regarding their responsibilities under applicable law. Also, in conjunction with these meetings, the Trustees attended other sessions at which the Trustees reviewed the commission rates paid by the Fund on brokerage transactions, the Investment Adviser’s receipt of research services in connection with those transactions, and the payment of Rule 12b-1 distribution and service fees that are payable by the Fund on its Service Share Class. Information was also provided to the Trustees relating to the Fund’s portfolio turnover, revenue sharing by the Investment Adviser, portfolio manager compensation, the alignment of the interests of the Fund and the portfolio managers, the number and types of accounts managed by the portfolio managers, and other matters. During the course of their deliberations, the Independent Trustees met in executive sessions without employees of the Investment Adviser present.
The presentations made at the Contract Review Committee meetings and the Annual Contract Meeting encompassed the Fund and other mutual fund portfolios for which the Board of Trustees has responsibility. While the management agreements for the Fund and these other mutual fund portfolios were approved at the same Annual Contract Meeting, the Trustees considered the Management Agreement as it applied to the Fund separately.
In evaluating the Management Agreement at the Annual Contract Meeting, the Trustees relied upon their knowledge, resulting from their meetings and other interactions throughout the year, of the Investment Adviser, its services and the Fund. At those meetings the Trustees received materials relating to the Investment Adviser’s investment management and other services under the Management Agreement, including: (a) information on the investment performance of the Fund in comparison to other mutual funds and benchmark performance indices; (b) general investment outlooks in the markets in which the Fund invests; (c) compliance reports; and (d) expenses borne by the Fund. In addition, the Trustees were provided with disclosure materials regarding the Goldman Sachs mutual funds and their expenses that are provided to investors who invest in the funds, as well as information on the Goldman Sachs mutual funds’ competitive universe and discussed the broad range of other investment choices that are available to those investors.
In connection with their approval of the Management Agreement, the Trustees gave weight to various factors, but did not identify any particular factor as controlling their decision. As part of their review, the Trustees considered the nature, extent and quality of the services provided by the Investment Adviser. In this regard, the Trustees considered both the investment advisory services, and the other, non-advisory services, that are provided to the Fund by the Investment Adviser and its affiliates. These services include services as the Fund’s transfer agent, securities lending agent and distributor. In addition, affiliates of the Investment Adviser receive compensation in connection with the execution of the Fund’s portfolio securities transactions. The Trustees concluded that the Investment Adviser was both able to commit substantial financial and other resources to the operations of the Fund and had, in fact, continued to commit those resources in multiple areas including portfolio management, trading, technology, human resources, tax, treasury, legal, compliance, vendor oversight and risk management. The Trustees also believed that the Investment Adviser had made significant commitments to address regulatory compliance requirements applicable to the Fund and the Investment Adviser, including education and training initiatives.
The Trustees also considered the investment performance of the Fund and the Investment Adviser. In this regard, the Trustees compared the investment performance of the Fund to the performance of other SEC-registered funds and to rankings and ratings issued by the Outside Data Provider. The Trustees also reviewed the Fund’s investment performance relative to its performance benchmark. This information on the Fund’s investment performance was provided for one, three and five year periods. In addition, the Trustees considered the investment performance trends of the Fund over time, and reviewed the investment performance of the Fund in light of its investment objective and policies, as well as in light of periodic analyses of its quality and risk profile. In addition, the Trustees considered whether the Fund had operated within its investment policies, and its record of compliance with its investment limitations. The Trustees believed that the Fund was providing investment performance within a competitive range for long-term investors for the periods ended March 31, 2006, and that GSAM’s continued management would benefit the Fund and its shareholders.
The Board of Trustees also considered the contractual fee rate payable by the Fund under the Management Agreement. In this regard, the Trustees considered information on the services rendered by the Investment Adviser to the Fund, which included both advisory and administrative services that were directed to the needs and operations of the Fund as a registered mutual fund. They also considered information that indicated that these mutual fund services differed in various significant respects from the services provided to the Investment Adviser’s institutional accounts, which generally paid lower fees. In addition, the fees paid by the Fund and the Fund’s total operating expense ratios (before and after expense reimbursements) were compared to similar information for mutual funds advised by other, unaffiliated investment management firms. Most of the comparisons of the Fund’s fee rates and total operating expense ratios were prepared by the Outside Data Provider.
More particularly, the Trustees reviewed analyses prepared by the Outside Data Provider of the expense rankings of the Fund. The analyses provided a comparison of the Fund’s management fees to a relevant peer group and a category universe; an expense analysis which compared the Fund’s expenses to a peer group and a category universe; and a five-year history comparing the Fund’s expenses to the category average. The analyses also compared the Fund’s transfer agency fees, custody and accounting fees and other expenses to a peer group and median. The Trustees believed that the comparisons provided by
the Outside Data Provider were useful in evaluating the reasonableness of the management fees paid by the Fund. In addition, the Trustees considered the Investment Adviser’s voluntary undertaking to limit the Fund’s total expense ratio (excluding certain expenses) to a specified level. This voluntary undertaking is in addition to the Investment Adviser’s separate contractual agreement to reimburse the Fund as necessary to limit the total annual operating expenses of the Service Share of the Fund to a specified level until June 2007.
The Board of Trustees also considered the breakpoints in the contractual fee rate under the Management Agreement for the Fund that were approved in 2005, which had been implemented at the following annual percentages of the average daily net assets of the Fund:
0.75% on the first $1 billion, 0.68% over $1 billion up to $2 billion and 0.65% over $2 billion.
In approving these new fee breakpoints, the Trustees had reviewed information regarding the Investment Adviser’s potential economies of scale, and whether the Fund and its shareholders were participating in the benefits of these economies. In this regard, the Trustees considered the amount of assets in the Fund; the information provided by the Investment Adviser relating to the costs of the services provided by the Investment Adviser and its affiliates and the profits realized by them; and information comparing fee rates charged by the Investment Adviser with fee rates charged by other, unaffiliated investment managers to other mutual funds. Upon reviewing these matters again at the Annual Contract Meeting in 2006, the Trustees continued to believe that the fee breakpoints were a way to ensure that benefits of scalability would be passed along to shareholders at the specified asset levels.
The Trustees also considered the other benefits derived by the Investment Adviser and its affiliates from the Fund as stated above, including the fees received by them for transfer agency, securities lending, distribution and brokerage services, and the brokerage and research services received by the Investment Adviser in connection with the placement of brokerage transactions for the Fund. In this regard, the Trustees noted that the Investment Adviser had adopted a policy to cease obtaining third party non-broker research based on the Fund’s brokerage transactions. They also noted that during the past year the Fund had created a new share class, Service Shares, with a distribution and service plan under which an affiliate of the Investment Adviser would receive fees.
In addition, the Trustees reviewed the Investment Adviser’s pre-tax revenues and pre-tax margins with respect to the Trust and the Fund. In this regard the Trustees reviewed, among other things, profitability analyses and summaries, revenue and expense schedules, and expense allocation methodologies, as well as a report of independent accountants regarding the results of certain agreed-upon procedures to verify expense allocation calculations that were designed to assist the Trustees in their evaluation of the Investment Adviser’s schedules of revenues and expenses. The Trustees considered the Investment Adviser’s revenues and margins both in absolute terms and in comparison to the information on the reported margins earned by other asset management firms.
After deliberation and consideration of the information provided, including the factors described above, the Trustees concluded that the management fees paid by the Fund were reasonable in light of the services provided by the Investment Adviser, its costs and the Fund’s current and reasonably foreseeable asset levels, and that the Management Agreement should be approved and continued.
As a shareholder of Institutional 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 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 January 1, 2006 through June 30, 2006. | ||
Actual Expenses — The first line under each share class of 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 for this period. | ||
Hypothetical Example for Comparison Purposes — The second line under each share class of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual 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 (loads), 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. |
Expenses Paid | ||||||||||||
for the | ||||||||||||
Beginning | Ending | 6 months | ||||||||||
Account Value | Account Value | ended | ||||||||||
Share Class | 1/1/06 | 6/30/06 | 6/30/06* | |||||||||
Institutional | ||||||||||||
Actual | $ | 1,000.00 | $ | 994.40 | $ | 4.23 | ||||||
Hypothetical 5% return | 1,000.00 | 1,020.55 | + | 4.29 | ||||||||
Service# | ||||||||||||
Actual | 1,000.00 | 961.90 | 4.41 | |||||||||
Hypothetical 5% return | 1,000.00 | 1,018.93 | + | 4.54 | ||||||||
* | Expenses are calculated using the Fund’s annualized expense ratio for each class, which represents the ongoing expenses as a percentage of net assets for the six months ended June 30, 2006. Expenses are calculated by multiplying the annualized 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 expense ratios for the period were 0.86% and 0.96% for Institutional and Service Shares, respectively. | ||
# | Service Share Class commenced on January 9, 2006. The Beginning Account Value is as of January 9, 2006. | ||
+ | Hypothetical expenses are based on the Fund’s actual annualized expense ratios and an assumed rate of return of 5% per year before expenses. |
TRUSTEES | OFFICERS | |
Ashok N. Bakhru, Chairman | Kaysie P. Uniacke, President | |
John P. Coblentz, Jr. | James A. Fitzpatrick, Vice President | |
Patrick T. Harker | James A. McNamara, Vice President | |
Mary Patterson McPherson | John M. Perlowski, Treasurer | |
Alan A. Shuch | Peter V. Bonanno, Secretary | |
Wilma J. Smelcer | ||
Richard P. Strubel | ||
Kaysie P. Uniacke | ||
GOLDMAN, SACHS & CO. Distributor and Transfer Agent | ||
GOLDMAN SACHS ASSET MANAGEMENT, L.P. Investment Adviser | ||
Visit our Web site at www.goldmansachsfunds.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 1-800-526-7384 (for Retail Shareholders) or 1-800-621-2550 (for Institutional Shareholders); and (ii) on the Securities and Exchange Commission Web site at http://www.sec.gov. | ||
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. Beginning the fiscal quarter ended September 30, 2004 and every first and third fiscal quarter thereafter, the Fund’s Form N-Q will become available on the SEC’s website at http://www.sec.gov within 60 days after the Fund’s first and third fiscal quarters. When available, 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. When available, Form N-Q may be obtained upon request and without charge by calling 1-800-621-2550. | ||
This material is not authorized for distribution to prospective investors unless preceded or accompanied by a current Prospectus. 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 Funds. | ||
Holdings and allocations shown may not be representative of current or future investments. Holdings and allocations may not include the Fund’s entire investment portfolio, which may change at any time. Fund holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities. | ||
Toll Free (in U.S.): 800-292-4726 | ||
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: Capital Growth Fund. | ||
Copyright 2006 Goldman, Sachs & Co. All rights reserved. Date of first use: August 18, 2006 | ||
VITCGSAR/06-1199/08-06/35.2K |
GOLDMAN SACHS ASSET MANAGEMENT, L.P. 32 OLD SLIP, NEW YORK, NEW YORK 10005
Shareholder Letter
Dear Shareholders:
This report provides an overview on the performance of the Goldman Sachs Variable Insurance Trust — Mid Cap Value Fund during the six-month reporting period that ended June 30, 2006.
Market Review
During the first half of 2006, the overall U.S. equity markets finished in positive territory, with the S&P 500 Index returning 2.71%. While the economy expanded and corporate profits remained strong, the headwinds from steadily rising interest rates, inflationary pressures, and the potential for additional Federal Reserve Board rate hikes tempered returns. From a market-cap perspective, small-cap stocks outperformed their mid- and large-cap counterparts over the six-month period, with the Russell 2000, Russell Midcap, and Russell 1000 Indexes returning 8.21%, 4.84%, and 2.76%, respectively. Within the mid-cap universe, value outperformed growth, as the Russell MidCap Value Index returned 7.02% and the Russell Midcap Growth Index returned 2.56%, respectively.
Investment Objective
The Fund seeks long-term capital appreciation.
Portfolio Composition
Top 10 Portfolio Holdings as of June 30, 2006*
% of | ||||||
Company | Net Assets | Business | ||||
Range Resources Corp. | 3.1 | % | Oil & Refining | |||
Entergy Corp. | 2.5 | Electric Utilities | ||||
J.C. Penney Co., Inc. | 2.4 | Retail Apparel | ||||
AMBAC Financial Group, Inc. | 2.4 | Property Insurance | ||||
PPL Corp. | 2.2 | Electric Utilities | ||||
EOG Resources, Inc. | 2.2 | Energy Resources | ||||
Harrah’s Entertainment, Inc. | 2.2 | Hotel & Leisure | ||||
The Bear Stearns Companies, Inc. | 2.1 | Brokers | ||||
PG&E Corp. | 2.1 | Electric Utilities | ||||
Apartment Investment & Management Co. | 1.9 | REITs |
* Opinions expressed in this report represent our present opinions only. Reference to individual securities should not be construed as a commitment that such securities will be retained in the Fund. From time to time, the Fund may change the individual securities it holds, the number or types of securities held and the markets in which it invests. Fund holdings of stocks or bonds should not be relied upon in making investment decisions and should not be construed as research or investment advice regarding particular securities. References to individual securities do not constitute a recommendation to the investor to buy, hold or sell such securities. In addition, references to past performance of the Fund do not indicate future returns, which are not guaranteed and will vary. Furthermore, the value of shares of the Fund may fall as well as rise.
Performance Review
Over the six-month period that ended June 30, 2006, the Fund’s Institutional Shares generated a cumulative total return of 4.70%. This return compares to the 7.02% cumulative total return of the Fund’s benchmark, the Russell Midcap Value Index (with dividends reinvested), over the same time period. For the period from the inception of the Service Class on January 9, 2006 to June 30, 2006, the Fund’s Service Shares generated a cumulative total return of 1.88%. This return compares to the 3.97% cumulative total return of the Fund’s benchmark over the same time period.
During the reporting period, the Fund’s holdings in the Energy and Consumer Cyclicals sectors detracted from results. In contrast, its Basic Materials and Financials stocks generated solid returns.
Several of the Fund’s largest Energy holdings, such as EOG Resources, Inc., lagged the market as the winter of 2005/2006 ranked as one of the warmest on record, resulting in weakness in natural gas fundamentals. We continue to favor Energy companies with a mix of low cost structures, positive reserve trends, and disciplined management teams. In Technology, weak investor sentiment pressured shares of Activision, Inc. and Seagate Technology, but we remain positive on the long-term fundamentals for both companies. We believe Activision and Seagate offer excellent opportunities in the Technology field due to company-level improvements and shareholder-friendly actions. Other stocks that detracted from results during the reporting period were Lennar Corp. and MedImmune, Inc.
Across the portfolio, several individual stocks ranked as top performers. J. C. Penney Co., Inc., a top holding, continues to perform strongly due to the company’s improved profitability and leadership. Improved fundamentals at Allegheny Technologies, Inc. and Carpenter Technology Corp. also enhanced Fund results. We subsequently sold Carpenter Technology to capture profits. In Consumer Cyclicals, auto safety provider Autoliv, Inc. contributed to performance, despite troubles at U.S. automakers. Autoliv has benefited from a low-cost labor structure and limited exposure to U.S. automakers. Additionally, the company had used recent free cash flow to improve its debt structure, as well as to repurchase its own shares.
We thank you for your investment and look forward to serving your investment needs in the future.
Goldman Sachs Value Portfolio Management Team
July 18, 2006
Shares of the Goldman Sachs Variable Insurance Trust (“VIT”) Mid Cap Value Fund 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.
The VIT Mid Cap Value Fund invests primarily in mid-capitalization U.S. equity investments and is subject to market risk so that the value of the securities in which it invests may go up or down in response to the prospects of individual companies, particular industry sectors and/or general economic conditions. The securities of mid-capitalization companies involve greater risks than those associated with larger, more established companies and may be subject to more abrupt or erratic price movements. The Fund may invest in foreign securities, which may be more volatile and less liquid than investment in U.S. securities and will be subject to the risks of currency fluctuations and sudden economic or political developments. At times, the Fund may be unable to sell certain of its portfolio securities without a substantial drop in price, if at all. The Fund may invest in fixed income securities. Investments in fixed income securities are subject to the risks associated with debt securities including credit and interest rate risk.
SECTOR ALLOCATION AS OF JUNE 30, 2006† |
Percentage of Net Assets
† The Fund is actively managed and, as such, its composition may differ over time. The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. Short-term Investments include repurchase agreements and securities lending collateral. Figures in the above graph may not sum to 100% due to the exclusion of other assets and/or liabilities.
Schedule of Investments
Shares | Description | Value | ||||||||
Common Stocks – 97.7% | ||||||||||
Biotechnology – 0.9% | ||||||||||
634,267 | MedImmune, Inc.* | $ | 17,188,636 | |||||||
Brokers – 2.4% | ||||||||||
217,900 | E-Trade Financial Corp.* | 4,972,478 | ||||||||
295,519 | The Bear Stearns Companies, Inc. | 41,396,301 | ||||||||
46,368,779 | ||||||||||
Chemicals – 1.4% | ||||||||||
166,016 | Ashland, Inc. | 11,073,267 | ||||||||
333,827 | Rohm & Haas Co. | 16,731,409 | ||||||||
27,804,676 | ||||||||||
Computer Hardware – 4.4% | ||||||||||
446,093 | Amphenol Corp. | 24,963,364 | ||||||||
330,063 | Arrow Electronics, Inc.* | 10,628,029 | ||||||||
19,816 | NCR Corp.* | 726,058 | ||||||||
977,576 | Seagate Technology*(a) | 22,132,321 | ||||||||
304,045 | Tessera Technologies, Inc.* | 8,361,237 | ||||||||
531,819 | Zebra Technologies Corp.* | 18,166,937 | ||||||||
84,977,946 | ||||||||||
Computer Software – 1.4% | ||||||||||
2,353,197 | Activision, Inc.* | 26,779,382 | ||||||||
Construction – 1.3% | ||||||||||
559,717 | Lennar Corp. | 24,834,643 | ||||||||
Consumer Durables – 0.4% | ||||||||||
99,285 | Mohawk Industries, Inc.* | 6,984,700 | ||||||||
Defense/Aerospace – 1.9% | ||||||||||
221,104 | Alliant Techsystems, Inc.* | 16,881,290 | ||||||||
348,327 | Rockwell Collins, Inc. | 19,461,030 | ||||||||
36,342,320 | ||||||||||
Diversified Energy – 1.8% | ||||||||||
1,460,298 | The Williams Companies, Inc. | 34,112,561 | ||||||||
Drugs – 2.4% | ||||||||||
565,997 | Charles River Laboratories International, Inc.* | 20,828,689 | ||||||||
912,609 | IMS Health, Inc. | 24,503,552 | ||||||||
45,332,241 | ||||||||||
Electric Utilities – 12.0% | ||||||||||
365,393 | CMS Energy Corp.* | 4,728,185 | ||||||||
643,245 | DPL, Inc. | 17,238,966 | ||||||||
912,988 | Edison International | 35,606,532 | ||||||||
692,351 | Entergy Corp. | 48,983,833 | ||||||||
231,579 | FirstEnergy Corp. | 12,553,898 | ||||||||
391,838 | Northeast Utilities | 8,099,292 | ||||||||
1,022,494 | PG&E Corp. | 40,163,564 | ||||||||
1,328,027 | PPL Corp. | 42,895,272 | ||||||||
71,850 | Public Service Enterprise Group, Inc. | 4,750,722 | ||||||||
92,800 | Sierra Pacific Resources* | 1,299,200 | ||||||||
379,009 | Wisconsin Energy Corp. | 15,274,063 | ||||||||
231,593,527 | ||||||||||
Energy Resources – 3.8% | ||||||||||
613,766 | EOG Resources, Inc. | 42,558,534 | ||||||||
505,295 | Ultra Petroleum Corp.* | 29,948,835 | ||||||||
72,507,369 | ||||||||||
Environmental & Other Services – 1.4% | ||||||||||
934,690 | Allied Waste Industries, Inc.* | 10,618,079 | ||||||||
412,695 | Republic Services, Inc. | 16,648,116 | ||||||||
27,266,195 | ||||||||||
Food & Beverage – 1.5% | ||||||||||
312,963 | Pepsi Bottling Group, Inc. | 10,061,761 | ||||||||
665,292 | Smithfield Foods, Inc.* | 19,180,368 | ||||||||
29,242,129 | ||||||||||
Gas Utilities – 1.4% | ||||||||||
688,745 | AGL Resources, Inc. | 26,254,959 | ||||||||
Grocery – 0.5% | ||||||||||
384,200 | Safeway, Inc. | 9,989,200 | ||||||||
Health Insurance – 1.9% | ||||||||||
322,997 | Coventry Health Care, Inc.* | 17,745,455 | ||||||||
425,212 | Health Net, Inc.* | 19,206,826 | ||||||||
36,952,281 | ||||||||||
Home Products – 2.8% | ||||||||||
1,172,688 | Newell Rubbermaid, Inc. | 30,290,531 | ||||||||
384,650 | The Clorox Co. | 23,452,111 | ||||||||
53,742,642 | ||||||||||
Hotel & Leisure – 2.2% | ||||||||||
583,693 | Harrah’s Entertainment, Inc. | 41,547,268 | ||||||||
Information Services – 1.5% | ||||||||||
2,483,554 | BearingPoint, Inc.*(a) | 20,787,347 | ||||||||
1,402,957 | Unisys Corp.* | 8,810,570 | ||||||||
29,597,917 | ||||||||||
Life Insurance – 2.1% | ||||||||||
221,381 | Assurant, Inc. | 10,714,840 | ||||||||
342,374 | Lincoln National Corp. | 19,323,589 | ||||||||
172,804 | Torchmark Corp. | 10,492,659 | ||||||||
40,531,088 | ||||||||||
Media – 0.9% | ||||||||||
331,785 | Lamar Advertising Co.* | 17,869,940 | ||||||||
Medical Products – 0.2% | ||||||||||
170,157 | PerkinElmer, Inc. | 3,556,281 | ||||||||
Medical Providers – 0.5% | ||||||||||
550,902 | Apria Healthcare Group, Inc.* | 10,412,048 | ||||||||
Mining – 1.6% | ||||||||||
174,904 | Allegheny Technologies, Inc. | 12,110,353 | ||||||||
697,792 | Commercial Metals Co. | 17,933,254 | ||||||||
30,043,607 | ||||||||||
Motor Vehicle – 0.7% | ||||||||||
220,966 | Autoliv, Inc. | 12,500,047 | ||||||||
4
Shares | Description | Value | ||||||||
Common Stocks – (continued) | ||||||||||
Oil & Refining – 3.1% | ||||||||||
2,170,564 | Range Resources Corp. | $ | 59,017,635 | |||||||
Oil Services – 1.7% | ||||||||||
872,652 | BJ Services Co. | 32,515,013 | ||||||||
Paper & Packaging – 2.9% | ||||||||||
539,941 | MeadWestvaco Corp. | 15,080,552 | ||||||||
792,009 | Packaging Corp. of America | 17,440,038 | ||||||||
681,179 | Plum Creek Timber Co., Inc. (REIT) | 24,181,855 | ||||||||
56,702,445 | ||||||||||
Parts & Equipment – 2.9% | ||||||||||
362,506 | American Standard Companies, Inc. | 15,685,635 | ||||||||
186,174 | Carlisle Cos., Inc. | 14,763,598 | ||||||||
276,794 | Cooper Industries Ltd. | 25,719,698 | ||||||||
56,168,931 | ||||||||||
Property Insurance – 6.2% | ||||||||||
570,497 | AMBAC Financial Group, Inc. | 46,267,307 | ||||||||
267,179 | Everest Re Group Ltd. | 23,129,686 | ||||||||
338,197 | PartnerRe Ltd. | 21,661,518 | ||||||||
268,541 | RenaissanceRe Holdings Ltd. Series B | 13,013,497 | ||||||||
357,533 | The PMI Group, Inc. | 15,938,821 | ||||||||
120,010,829 | ||||||||||
Publishing – 0.6% | ||||||||||
343,311 | Dow Jones & Co., Inc.(a) | 12,019,318 | ||||||||
Regionals – 5.8% | ||||||||||
116,700 | City National Corp. | 7,596,003 | ||||||||
135,322 | Commerce Bancshares, Inc. | 6,772,866 | ||||||||
114,904 | FirstMerit Corp. | 2,406,090 | ||||||||
939,873 | KeyCorp | 33,534,669 | ||||||||
272,905 | M&T Bank Corp. | 32,180,957 | ||||||||
384,350 | Zions Bancorp. | 29,956,239 | ||||||||
112,446,824 | ||||||||||
REITs – 8.8% | ||||||||||
839,246 | Apartment Investment & Management Co. (REIT) | 36,465,239 | ||||||||
141,477 | Brandywine Realty Trust | 4,551,315 | ||||||||
471,442 | Developers Diversified Realty Corp. | 24,599,843 | ||||||||
915,944 | Equity Office Properties Trust (REIT)(a) | 33,441,115 | ||||||||
317,357 | Equity Residential Properties Trust | 14,195,379 | ||||||||
292,999 | Healthcare Realty Trust, Inc. | 9,332,018 | ||||||||
275,829 | Home Properties, Inc.(a) | 15,311,268 | ||||||||
607,081 | iStar Financial, Inc. | 22,917,308 | ||||||||
215,408 | Liberty Property Trust(a) | 9,521,034 | ||||||||
170,334,519 | ||||||||||
Retail Apparel – 3.4% | ||||||||||
694,834 | J. C. Penney Co., Inc. | 46,908,243 | ||||||||
680,816 | Ross Stores, Inc. | 19,096,889 | ||||||||
66,005,132 | ||||||||||
Semiconductors – 0.6% | ||||||||||
282,676 | Freescale Semiconductor, Inc.* | 8,197,604 | ||||||||
141,200 | National Semiconductor Corp. | 3,367,620 | ||||||||
11,565,224 | ||||||||||
Specialty Financials – 2.3% | ||||||||||
224,730 | American Capital Strategies Ltd.(a) | 7,523,961 | ||||||||
468,791 | CIT Group, Inc. | 24,513,081 | ||||||||
519,650 | Eaton Vance Corp. | 12,970,464 | ||||||||
45,007,506 | ||||||||||
Telecom Equipment – 0.5% | ||||||||||
552,639 | ADC Telecommunications, Inc.* | 9,317,494 | ||||||||
Telephone – 0.8% | ||||||||||
350,745 | Embarq Corp.* | 14,377,038 | ||||||||
Thrifts – 0.8% | ||||||||||
1,165,425 | Hudson City Bancorp, Inc. | 15,535,115 | ||||||||
Tobacco – 1.2% | ||||||||||
199,064 | Reynolds American, Inc.(a) | 22,952,079 | ||||||||
Transports – 1.7% | ||||||||||
527,356 | Norfolk Southern Corp. | 28,065,886 | ||||||||
130,119 | Swift Transportation Co., Inc.* | 4,132,580 | ||||||||
32,198,466 | ||||||||||
Trust/Processors – 1.1% | ||||||||||
381,064 | Northern Trust Corp. | 21,072,839 | ||||||||
TOTAL COMMON STOCKS | ||||||||||
(Cost $1,711,508,664) | $ | 1,881,578,789 | ||||||||
Principal | Interest | Maturity | ||||||||||||
Amount | Rate | Date | Value | |||||||||||
Repurchase Agreement(b) – 2.2% | ||||||||||||||
Joint Repurchase Agreement Account II | ||||||||||||||
$ | 42,800,000 | 5.28 | % | 07/03/2006 | $42,800,000 | |||||||||
Maturity Value: $42,818,818 | ||||||||||||||
(Cost $42,800,000) | ||||||||||||||
TOTAL INVESTMENTS BEFORE SECURITIES LENDING COLLATERAL | ||||||||||||||
(Cost $1,754,308,664) | $1,924,378,789 | |||||||||||||
5
Shares | Description | Value | ||||||||
Securities Lending Collateral – 3.8% | ||||||||||
73,272,825 | Boston Global Investment Trust – Enhanced Portfolio | $ | 73,272,825 | |||||||
(Cost $73,272,825) | ||||||||||
TOTAL INVESTMENTS – 103.7% | ||||||||||
(Cost $1,827,581,489) | $ | 1,997,651,614 | ||||||||
LIABILITIES IN EXCESS OF OTHER ASSETS – (3.7)% | (71,377,781 | ) | ||||||||
NET ASSETS – 100.0% | $ | 1,926,273,833 | ||||||||
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 portion of security is on loan. | |
(b) | Joint repurchase agreement was entered into on June 30, 2006. Additional Investment Information appears on page 7. |
Investment Abbreviation: | ||||||
REIT | — | Real Estate Investment Trust | ||||
6
ADDITIONAL INVESTMENT INFORMATION |
JOINT REPURCHASE AGREEMENT ACCOUNT II — At June 30, 2006, the Fund had an undivided interest in the following Joint Repurchase Agreement Account II which equaled $42,800,000 in principal amount.
Principal | Interest | Maturity | Maturity | |||||||||||
Repurchase Agreements | Amount | Rate | Date | Value | ||||||||||
Banc of America Securities LLC | $ | 2,860,000,000 | 5.30 | % | 07/03/2006 | $ | 2,861,263,167 | |||||||
Barclays Capital PLC | 1,500,000,000 | 5.32 | 07/03/2006 | 1,500,665,000 | ||||||||||
Bear Stearns | 500,000,000 | 5.31 | 07/03/2006 | 500,221,250 | ||||||||||
Deutsche Bank Securities, Inc. | 1,000,000,000 | 5.20 | 07/03/2006 | 1,000,433,333 | ||||||||||
Greenwich Capital Markets | 300,000,000 | 5.32 | 07/03/2006 | 300,133,000 | ||||||||||
J.P. Morgan Securities, Inc. | 400,000,000 | 5.28 | 07/03/2006 | 400,176,000 | ||||||||||
Merrill Lynch | 500,000,000 | 5.25 | 07/03/2006 | 500,218,750 | ||||||||||
Morgan Stanley & Co. | 3,000,000,000 | 5.25 | 07/03/2006 | 3,001,312,500 | ||||||||||
UBS Securities LLC | 1,050,000,000 | 5.25 | 07/03/2006 | 1,050,459,375 | ||||||||||
UBS Securities LLC | 475,000,000 | 5.30 | 07/03/2006 | 475,209,792 | ||||||||||
UBS Securities LLC | 400,000,000 | 5.34 | 07/03/2006 | 400,178,000 | ||||||||||
Wachovia Capital Markets | 250,000,000 | 5.26 | 07/03/2006 | 250,109,583 | ||||||||||
TOTAL | $ | 12,235,000,000 | $ | 12,240,379,750 | ||||||||||
At June 30, 2006, the Joint Repurchase Agreement Account II was fully collateralized by Federal Home Loan Bank, 0.00% to 11.00%, due 07/07/2006 to 04/20/2016; Federal Home Loan Mortgage Association, 3.00% to 8.50%, due 02/01/2007 to 07/01/2036; Federal National Mortgage Association, 0.00% to 10.50%, due 02/01/2007 to 07/01/2036; and U.S. Treasury Bonds, 5.00% to 7.14%, due 11/13/2008 to 10/20/2018. The aggregate market value of the collateral, including accrued interest, was $12,492,409,737. |
7
Statement of Assets and Liabilities
Assets: | |||||||
Investment in securities, at value (identified cost $1,754,308,664) — including $71,584,913 of securities on loan | $ | 1,924,378,789 | |||||
Securities lending collateral, at value (cost $73,272,825) | 73,272,825 | ||||||
Cash | 161,471 | ||||||
Receivables: | |||||||
Investment securities sold | 20,112,712 | ||||||
Dividends and interest | 2,719,964 | ||||||
Fund shares sold | 520,233 | ||||||
Other assets | 13,658 | ||||||
Total assets | 2,021,179,652 | ||||||
Liabilities: | |||||||
Payables: | |||||||
Payable upon return of securities loaned | 73,272,825 | ||||||
Investment securities purchased | 18,778,661 | ||||||
Fund shares repurchased | 1,397,900 | ||||||
Amounts owed to affiliates | 1,320,863 | ||||||
Accrued expenses | 135,570 | ||||||
Total liabilities | 94,905,819 | ||||||
Net Assets: | |||||||
Paid-in capital | 1,617,052,397 | ||||||
Accumulated undistributed net investment income | 10,861,388 | ||||||
Accumulated net realized gain on investment transactions | 128,289,923 | ||||||
Net unrealized gain on investments | 170,070,125 | ||||||
NET ASSETS | $ | 1,926,273,833 | |||||
Net assets: | |||||||
Institutional | $ | 1,649,513,265 | |||||
Service | 276,760,568 | ||||||
Shares outstanding: | |||||||
Institutional | 101,422,302 | ||||||
Service | 17,023,386 | ||||||
Total shares of beneficial interest outstanding, $0.001 par value (unlimited shares authorized) | 118,445,688 | ||||||
Net asset value, offering and redemption price per share: | |||||||
Institutional | $ | 16.26 | |||||
Service | $ | 16.26 | |||||
8
Statement of Operations
Investment income: | ||||||
Dividends | $ | 15,642,886 | ||||
Interest (including securities lending income of $23,620) | 1,484,946 | |||||
Total income | 17,127,832 | |||||
Expenses: | ||||||
Management fees | 7,382,464 | |||||
Transfer Agent fees | 369,128 | |||||
Distribution and Service fees | 345,020 | |||||
Custody and accounting fees | 126,525 | |||||
Printing fees | 89,692 | |||||
Professional fees | 30,762 | |||||
Trustee fees | 6,803 | |||||
Registration fees | 629 | |||||
Other | 17,355 | |||||
Total expenses | 8,368,378 | |||||
Less — expense reductions | (221,802 | ) | ||||
Net expenses | 8,146,576 | |||||
NET INVESTMENT INCOME | 8,981,256 | |||||
Realized and unrealized gain (loss) on investment transactions: | ||||||
Net realized gain from investment transactions (including commissions recaptured of $191,658) | 109,933,139 | |||||
Net change in unrealized loss on investments | (45,786,239 | ) | ||||
Net realized and unrealized gain on investment transactions | 64,146,900 | |||||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 73,128,156 | ||||
9
Statements of Changes in Net Assets
For the | |||||||||||
Six Months Ended | For the | ||||||||||
June 30, 2006 | Year Ended | ||||||||||
(Unaudited) | December 31, 2005 | ||||||||||
From operations: | |||||||||||
Net investment income | $ | 8,981,256 | $ | 9,578,739 | |||||||
Net realized gain on investment, futures and foreign currency related transactions | 109,933,139 | 132,448,454 | |||||||||
Payment by affiliates to reimburse certain security claims | — | 9,275 | |||||||||
Net change in unrealized gain (loss) on investments | (45,786,239 | ) | 493,340 | ||||||||
Net increase in net assets resulting from operations | 73,128,156 | 142,529,808 | |||||||||
Distributions to shareholders: | |||||||||||
From net investment income | |||||||||||
Institutional Shares | — | (7,785,943 | ) | ||||||||
Service Shares | — | — | |||||||||
From net realized gain | |||||||||||
Institutional Shares | — | (130,595,641 | ) | ||||||||
Service Shares | — | — | |||||||||
Total distributions to shareholders | — | (138,381,584 | ) | ||||||||
From share transactions: | |||||||||||
Proceeds from sales of shares | 214,110,649 | 445,767,317 | |||||||||
Proceeds received in connection with merger | 295,311,746 | — | |||||||||
Reinvestment of dividends and distributions | — | 138,381,584 | |||||||||
Cost of shares repurchased | (87,090,898 | ) | (74,634,247 | ) | |||||||
Net increase in net assets resulting from share transactions | 422,331,497 | 509,514,654 | |||||||||
TOTAL INCREASE | 495,459,653 | 513,662,878 | |||||||||
Net assets: | |||||||||||
Beginning of period | 1,430,814,180 | 917,151,302 | |||||||||
End of period | $ | 1,926,273,833 | $ | 1,430,814,180 | |||||||
Accumulated undistributed net investment income | $ | 10,861,388 | $ | 1,880,132 | |||||||
10
Financial Highlights
Income (loss) from | Ratios assuming no | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
investment operations | Distributions to shareholders | expense reductions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net | Ratio of | Ratio of | Ratio of | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset | realized | From | Net asset | Net assets, | Ratio of | net investment | total | net investment | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
value, | Net | and | Total from | From net | net | value, | end of | net expenses | income | expenses | income | Portfolio | ||||||||||||||||||||||||||||||||||||||||||||||||||||
beginning | investment | unrealized | investment | investment | realized | Total | end of | Total | period | to average | to average | to average | to average | turnover | ||||||||||||||||||||||||||||||||||||||||||||||||||
Year — Share Class | of period | income(b) | gain (loss) | operations | income | gains | distributions | period | return(c) | (in 000s) | net assets | net assets | net assets | net assets | rate | |||||||||||||||||||||||||||||||||||||||||||||||||
For the Six Months ended June 30, (Unaudited) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2006 — Institutional | $ | 15.53 | $ | 0.08 | $ | 0.65 | $ | 0.73 | $ | — | $ | — | $ | — | $ | 16.26 | 4.70 | % | $ | 1,649,513 | 0.87 | %(d) | 0.98 | %(d) | 0.87 | %(d) | 0.98 | %(d) | 25 | % | ||||||||||||||||||||||||||||||||||
2006 — Service(a) | 15.96 | 0.07 | 0.23 | 0.30 | — | — | — | 16.26 | 1.88 | 276,761 | 0.97 | (d) | 0.88 | (d) | 1.12 | (d) | 0.73 | (d) | 25 | |||||||||||||||||||||||||||||||||||||||||||||
For the Years ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2005 — Institutional | 15.28 | 0.13 | 1.82 | 1.95 | (0.10 | ) | (1.60 | ) | (1.70 | ) | 15.53 | 12.83 | 1,430,814 | 0.87 | 0.83 | 0.87 | 0.83 | 53 | ||||||||||||||||||||||||||||||||||||||||||||||
2004 — Institutional | 13.37 | 0.10 | 3.34 | 3.44 | (0.09 | ) | (1.44 | ) | (1.53 | ) | 15.28 | 25.88 | 917,151 | 0.88 | 0.67 | 0.88 | 0.67 | 72 | ||||||||||||||||||||||||||||||||||||||||||||||
2003 — Institutional | 10.61 | 0.12 | 2.89 | 3.01 | (0.11 | ) | (0.14 | ) | (0.25 | ) | 13.37 | 28.39 | 577,923 | 0.91 | 1.02 | 0.91 | 1.02 | 64 | ||||||||||||||||||||||||||||||||||||||||||||||
2002 — Institutional | 11.29 | 0.14 | (0.67 | ) | (0.53 | ) | (0.12 | ) | (0.03 | ) | (0.15 | ) | 10.61 | (4.69 | ) | 357,537 | 0.91 | 1.20 | 0.91 | 1.20 | 95 | |||||||||||||||||||||||||||||||||||||||||||
2001 — Institutional | 10.67 | 0.14 | 1.14 | 1.28 | (0.11 | ) | (0.55 | ) | (0.66 | ) | 11.29 | 12.05 | 243,521 | 0.93 | 1.27 | 0.94 | 1.26 | 82 | ||||||||||||||||||||||||||||||||||||||||||||||
(a) | Service Share Class commenced on January 9, 2006. |
(b) | Calculated based on the average shares outstanding methodology. |
(c) | Assumes investment at the net asset value at the beginning of the period, reinvestment of all dividends and 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 a full year are not annualized. |
(d) | Annualized. |
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements
1. ORGANIZATION |
2. SIGNIFICANT ACCOUNTING POLICIES |
A. Investment Valuation — Investments in equity securities and investment companies traded on a U.S. securities exchange or the NASDAQ system are valued daily at their last sale price or official closing price on the principal exchange or system on which they are traded. If no sale occurs, such securities are valued at the last bid price. Debt securities are valued at prices supplied by independent pricing services, broker/dealer-supplied valuations or matrix pricing systems. Unlisted equity securities for which market quotations are available are valued at the last sale price on valuation date, or if no sale occurs, at the last bid price. Investments in investment companies (other than those that are exchange traded) are valued at the net asset value per share on valuation date. Short-term debt obligations maturing in sixty days or less are valued at amortized cost, which approximates market value. Securities for which quotations are not readily available or are deemed not to reflect market value by the investment adviser are valued at fair value using methods approved by the Trust’s Board of Trustees.
B. Security Transactions and Investment Income — Security transactions are reflected as of the trade date. Realized gains and losses on sales of portfolio securities are calculated using the identified-cost basis. Dividend income is recorded on the ex-dividend date, net of foreign withholding taxes, if any, which are reduced by any amounts reclaimable by the Fund, where applicable. Interest income is recorded on the basis of interest accrued, premium amortized and discount accreted.
C. Expenses — Expenses incurred by the Trust that do not specifically relate to an individual Fund of the Trust are allocated to the Fund on a straight-line and/or “pro-rata” basis depending upon the nature of the expense. Service Shares bear all expenses and fees relating to their Distribution and Service Plan.
D. Federal Taxes and Distributions to Shareholders — It is the Fund’s policy to comply with the requirements of the Internal Revenue Code (the “Code”) applicable to regulated investment companies and to distribute each year substantially all of its investment company taxable income and capital gains to its shareholders. Accordingly, no federal tax provisions are required. Dividends and distributions to shareholders are recorded on the ex-dividend date. Income distributions and capital gains distributions, if any, are declared and paid annually.
2. SIGNIFICANT ACCOUNTING POLICIES (continued) |
E. Segregation Transactions — As set forth in the prospectus, the Fund may enter into certain derivative transactions to seek to increase total return. Forward foreign currency exchange contracts, futures contracts, written options, when-issued securities and forward commitments represent examples of such transactions. As a result of entering into these transactions, the Fund is required to segregate or physically move liquid assets, on the books of their custodian or to respective counterparties, with a current value equal to or greater than the market value of the corresponding transactions.
F. Repurchase Agreements — Repurchase agreements involve the purchase of securities subject to the seller’s agreement to repurchase them at a mutually agreed upon date and price. 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. If the seller defaults or becomes insolvent, realization of the collateral by the Fund may be delayed or limited and there may be a decline in the value of the collateral during the period while the Fund seeks to assert its rights. The underlying securities for all repurchase agreements are held in safekeeping at the Fund’s custodian or designated subcustodians under triparty repurchase agreements.
G. Commission Recapture — The Fund may direct portfolio trades, subject to obtaining 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 the net realized gain (loss) on investments in the Statement of Operations.
3. AGREEMENTS |
Average Daily Net Assets | Annual Rate | |||
First $2 Billion | 0.80 | % | ||
Over $2 Billion | 0.72 | % | ||
In connection with the reorganization of the Allmerica Select Value Opportunity Fund into the Fund, GSAM has contractually agreed to reimburse the Fund as necessary to limit the total annual operating expenses of the Services Shares of the Fund to 0.99% until June 2007.
3. AGREEMENTS (continued) |
4. PORTFOLIO SECURITIES TRANSACTIONS |
5. SECURITIES LENDING |
6. LINE OF CREDIT FACILITY |
6. LINE OF CREDIT FACILITY (continued) |
7. TAX INFORMATION |
Tax cost | $ | 1,828,269,468 | ||
Gross unrealized gain | 208,074,318 | |||
Gross unrealized loss | (38,692,172 | ) | ||
Net unrealized security gain | $ | 169,382,146 | ||
The difference between book-basis and tax basis unrealized gains (losses) is attributable primarily to wash sales and return of capital distributions from underlying fund investments.
8. OTHER MATTERS |
Legal Proceedings — Purported class and derivative action lawsuits were filed in April and May 2004 in the United States District Court for the Southern District of New York against the Goldman Sachs Group, Inc. (“GSG”), GSAM and certain related parties, including certain Goldman Sachs Funds and the Trustees and Officers of the Goldman Sachs Trust. In June 2004, these lawsuits were consolidated into one action and in November 2004 a consolidated and amended complaint was filed against GSG, GSAM, Goldman Sachs Asset Management International (“GSAMI”), Goldman Sachs and certain related parties including certain Goldman Sachs Funds and the Trustees and Officers of the Trust. The Fund, along with other investment portfolios of the Trust, were named as nominal defendants in the amended complaint. Plaintiffs filed a second amended consolidated complaint on April 15, 2005. The second amended consolidated complaint alleges violations of the Act and the Investment Advisers Act of 1940. The complaint also asserts claims involving common law breach of fiduciary duty and unjust enrichment. The complaint alleges, among other things, that between April 2, 1999 and January 9, 2004 (the “Class Period”), GSAM and other defendants made improper and excessive brokerage commission and other payments to brokers that sold shares of the Goldman Sachs Funds and omitted statements of fact in registration statements and reports filed pursuant to the Act which were necessary to prevent such registration statements and reports from being materially false and misleading. The complaint further alleges that the Goldman Sachs Funds paid excessive and improper advisory fees to Goldman Sachs. The complaint also alleges that GSAM and GSAMI used 12b-1 fees for improper purposes and made improper use of soft dollars. The complaint further alleges that the Trust’s Officers and Trustees breached their fiduciary duties in connection with the foregoing. On January 13, 2006, all claims against the defendants were dismissed by the U.S. District Court. On February 22, 2006, the plaintiffs appealed this decision.
8. OTHER MATTERS (continued) |
Mergers and Reorganizations — At a meeting held on July 12, 2005, the Board of Trustees of the Trust approved an Agreement and Plan of Reorganization (the “Agreement”) providing for the tax-free acquisition of the Allmerica Investment Trust Select Value Opportunity Fund by the Goldman Sachs VIT Mid Cap Value Fund. Following the approval of the Board of Trustees and shareholders of the Allmerica Investment Trust Select Value Opportunity Fund, the acquisition was completed on January 9, 2006.
Pursuant to the Agreement, the assets and liabilities of the Allmerica Investment Trust Select Value Opportunity Fund Service Class were transferred into the Goldman Sachs VIT Mid Cap Value Fund Service Class in a tax-free exchange as follows:
Acquired Fund’s | ||||||||||||
Exchanged Shares | Value of | Shares Outstanding | ||||||||||
Survivor/Acquired Fund | of Survivor Issued | Exchanged Shares | on January 6, 2006 | |||||||||
Goldman Sachs VIT Mid Cap Value Fund Service Class/ Allmerica Investment Trust Select Value Opportunity Fund Service Class | 18,503,242 | $ | 295,311,746 | 179,590,581 | ||||||||
The following chart shows the Survivor Fund’s and Acquired Fund’s aggregate net assets (immediately before and after the completion of the acquisition) and the Acquired Fund’s unrealized appreciation.
Survivor Fund’s | ||||||||||||||||
Survivor Fund’s | Acquired Fund’s | Aggregate Net | ||||||||||||||
Aggregate Net | Aggregate Net | Acquired Fund’s | Assets | |||||||||||||
Assets before | Assets before | Unrealized | immediately | |||||||||||||
Survivor/Acquired Fund | acquisition | acquisition | Appreciation | after acquisition | ||||||||||||
Goldman Sachs VIT Mid Cap Value/ Allmerica Investment Trust Select Value Opportunity Fund | $ | 1,475,213,407 | $ | 295,311,746 | $ | 43,643,427 | $ | 1,770,525,153 | ||||||||
New Accounting Pronouncement — On July 13, 2006, the Financial Accounting Standards Board (“FASB”) released FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Fund’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Adoption of FIN 48 is required for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. At this time, management is evaluating the implications of FIN 48 and its impact in the financial statements has not yet been determined.
9. SUMMARY OF SHARE TRANSACTIONS |
For the Six Months Ended | For the Year Ended | |||||||||||||||
June 30, 2006 | December 31, 2005 | |||||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||||
Institutional Shares | ||||||||||||||||
Shares sold | 12,459,809 | $ | 201,912,141 | 27,827,100 | $ | 445,767,317 | ||||||||||
Reinvestment of dividends and distributions | — | — | 8,956,843 | 138,381,584 | ||||||||||||
Shares repurchased | (3,158,678 | ) | (50,889,732 | ) | (4,668,033 | ) | (74,634,247 | ) | ||||||||
9,301,131 | 151,022,409 | 32,115,910 | 509,514,654 | |||||||||||||
Service Shares* | ||||||||||||||||
Shares sold | 771,611 | 12,198,508 | — | — | ||||||||||||
Shares issued in connection with merger | 18,503,242 | 295,311,746 | — | — | ||||||||||||
Reinvestment of dividends and distributions | — | — | — | — | ||||||||||||
Shares repurchased | (2,251,467 | ) | (36,201,166 | ) | — | — | ||||||||||
17,023,386 | 271,309,088 | — | — | |||||||||||||
NET INCREASE | 26,324,517 | $ | 422,331,497 | 32,115,910 | $ | 509,514,654 | ||||||||||
* | Service Share Class commenced on January 9, 2006. |
Statement Regarding Basis for Approval of Management Agreement (Unaudited)
The Trustees oversee the management of Goldman Sachs Variable Insurance Trust (the “Trust”), and review the investment performance and expenses of the investment fund covered by this Report (the “Fund”) at regularly scheduled meetings held during the Fund’s fiscal year. In addition, the Trustees determine annually whether to approve and continue the Trust’s investment management agreement (the “Management Agreement”) with Goldman Sachs Asset Management, L.P. (the “Investment Adviser”) for the Fund.
The Management Agreement was most recently approved by the Trustees, including all of the Trustees who are not parties to the Management Agreement or “interested persons” (as defined in the Investment Company Act of 1940, as amended) of any party thereto (the “Independent Trustees”), on June 15, 2006 (the “Annual Contract Meeting”).
To assist the Trustees in their deliberations at the Annual Contract Meeting, and in addition to the reviews of the Fund’s investment performance, expenses and other matters at regularly scheduled Board meetings, the Trustees have a Contract Review Committee (the “Committee”) whose members include all of the Independent Trustees. The Committee held meetings on December 15, 2005, February 8, 2006 and May 10, 2006. At these Committee meetings, the Independent Trustees considered matters relating to the Management Agreement including: (a) the Fund’s investment performance; (b) the Fund’s management fee arrangements; (c) the Investment Adviser’s undertaking to reimburse certain expenses of the Fund that exceed a specified level; (d) the Investment Adviser’s potential economies of scale and the breakpoint for the fees payable by the Fund under the Management Agreement; (e) the relative expense level of the Fund; (f) the Investment Adviser’s profitability with respect to the Trust and the Fund; (g) information on the advisory fees charged by the Investment Adviser to institutional accounts; (h) the quality of the non-advisory services provided to the Fund; (i) the statutory and regulatory requirements applicable to the approval and continuation of mutual fund investment management agreements; (j) an evaluation of Trustees’ the contract review process provided by an outside third party; and (k) information on the processes followed by the third party mutual fund data provider engaged as part of the Trustees’ contract review (the “Outside Data Provider”) in producing investment performance and expense comparisons for the Fund.
At the Annual Contract Meeting, the Trustees reviewed the matters that were considered at the Committee meetings and also considered additional matters including: (a) a summary of fee concessions by the Investment Adviser and its affiliates with respect to the Goldman Sachs mutual funds since 2003; (b) the quality of the Investment Adviser’s services; (c) the structure, staff and capabilities of the Investment Adviser and its portfolio management team; (d) the groups within the Investment Adviser that support the portfolio management team, including the legal and compliance departments, the valuation oversight group, the risk and performance analytics group, the business planning team and the technology group; (e) the Investment Adviser’s business continuity and disaster recovery planning; (f) the Investment Adviser’s financial resources and its ability to hire and retain talented personnel; (g) the fees received by the Investment Adviser’s affiliates from the Fund for transfer agency, securities lending, distribution, portfolio brokerage and other services; (h) the terms of the Management Agreement; (i) the administrative services provided under the Management Agreement, including the nature and extent of the Investment Adviser’s oversight of the Fund’s other service providers, including the custodian and fund accounting agent; and (j) the Investment Adviser’s policies addressing various potential conflicts of interest. At the Annual Contract Meeting, the Trustees also considered at further length the Fund’s investment performance, fees and expenses, including the Fund’s expense trends over time and the breakpoint in the contractual fee rate under the Management Agreement approved in 2005.
In connection with the Committee meetings and the Annual Contract Meeting, the Trustees received written materials and oral presentations on the topics covered, and were advised by their independent legal counsel regarding their responsibilities under applicable law. Also, in conjunction with these meetings, the Trustees attended other sessions at which the Trustees reviewed the commission rates paid by the Fund on brokerage transactions, the Investment Adviser’s receipt of research services in connection with those transactions, and the payment of Rule 12b-1 distribution and service fees that are payable by the Fund on its Service Share Class. Information was also provided to the Trustees relating to the Fund’s portfolio turnover, revenue sharing by the Investment Adviser, portfolio manager compensation, the alignment of the interests of the Fund and the portfolio managers, the number and types of accounts managed by the portfolio managers, and other matters. During the course of their deliberations, the Independent Trustees met in executive sessions without employees of the Investment Adviser present.
The presentations made at the Contract Review Committee meetings and the Annual Contract Meeting encompassed the Fund and other mutual fund portfolios for which the Board of Trustees has responsibility. While the management agreements for the Fund and these other mutual fund portfolios were approved at the same Annual Contract Meeting, the Trustees considered the Management Agreement as it applied to the Fund separately.
In evaluating the Management Agreement at the Annual Contract Meeting, the Trustees relied upon their knowledge, resulting from their meetings and other interactions throughout the year, of the Investment Adviser, its services and the Fund. At those meetings the Trustees received materials relating to the Investment Adviser’s investment management and other services under the Management Agreement, including: (a) information on the investment performance of the Fund in comparison to other mutual funds and benchmark performance indices; (b) general investment outlooks in the markets in which the Fund invests; (c) compliance reports; and (d) expenses borne by the Fund. In addition, the Trustees were provided with disclosure materials regarding the Goldman Sachs mutual funds and their expenses that are provided to investors who invest in the funds, as well as information on the Goldman Sachs mutual funds’ competitive universe and discussed the broad range of other investment choices that are available to those investors.
In connection with their approval of the Management Agreement, the Trustees gave weight to various factors, but did not identify any particular factor as controlling their decision. As part of their review, the Trustees considered the nature, extent and quality of the services provided by the Investment Adviser. In this regard, the Trustees considered both the investment advisory services, and the other, non-advisory services, that are provided to the Fund by the Investment Adviser and its affiliates. These services include services as the Fund’s transfer agent, securities lending agent and distributor. In addition, affiliates of the Investment Adviser receive compensation in connection with the execution of the Fund’s portfolio securities transactions. The Trustees concluded that the Investment Adviser was both able to commit substantial financial and other resources to the operations of the Fund and had, in fact, continued to commit those resources in multiple areas including portfolio management, trading, technology, human resources, tax, treasury, legal, compliance, vendor oversight and risk management. The Trustees also believed that the Investment Adviser had made significant commitments to address regulatory compliance requirements applicable to the Fund and the Investment Adviser, including education and training initiatives.
The Trustees also considered the investment performance of the Fund and the Investment Adviser. In this regard, the Trustees compared the investment performance of the Fund to the performance of other SEC-registered funds and to rankings and ratings issued by the Outside Data Provider. The Trustees also reviewed the Fund’s investment performance relative to its performance benchmark. This information on the Fund’s investment performance was provided for one, three and five year periods. In addition, the Trustees considered the investment performance trends of the Fund over time, and reviewed the investment performance of the Fund in light of its investment objective and policies, as well as in light of periodic analyses of its quality and risk profile. In addition, the Trustees considered whether the Fund had operated within its investment policies, and its record of compliance with its investment limitations. The Trustees believed that the Fund was providing investment performance within a competitive range for long-term investors.
The Board of Trustees also considered the contractual fee rate payable by the Fund under the Management Agreement. In this regard, the Trustees considered information on the services rendered by the Investment Adviser to the Fund, which included both advisory and administrative services that were directed to the needs and operations of the Fund as a registered mutual fund. They also considered information that indicated that these mutual fund services differed in various significant respects from the services provided to the Investment Adviser’s institutional accounts, which generally paid lower fees. In addition, the fees paid by the Fund and the Fund’s total operating expense ratios (before and after expense reimbursements) were compared to similar information for mutual funds advised by other, unaffiliated investment management firms. Most of the comparisons of the Fund’s fee rates and total operating expense ratios were prepared by the Outside Data Provider.
More particularly, the Trustees reviewed analyses prepared by the Outside Data Provider of the expense rankings of the Fund. The analyses provided a comparison of the Fund’s management fee rates to a relevant peer group and a category universe; an expense analysis which compared the Fund’s expenses to a peer group and a category universe; and a five-year history comparing the Fund’s expenses to the category average. The analyses also compared the Fund’s transfer agency fees, custody and accounting fees and other expenses to a peer group and median. The Trustees believed that the comparisons provided by the Outside Data Provider were useful in evaluating the reasonableness of the management fees paid by the Fund.
In addition, the Trustees considered the Investment Adviser’s voluntary undertaking to limit the Fund’s total expense ratio (excluding certain expenses) to a specified level. This voluntary undertaking is in addition to the Investment Adviser’s separate contractual agreement to reimburse the Fund as necessary to limit the total annual operating expenses of the Service Shares of the Fund to a specified level until June 2007.
The Board of Trustees also considered the breakpoint in the contractual fee rate under the Management Agreement for the Fund that was approved in 2005, which had been implemented at the following annual percentage of the average daily net assets of the Fund:
0.80% on the first $2 billion and 0.72% over $2 billion.
In approving this new fee breakpoint, the Trustees had reviewed information regarding the Investment Adviser’s potential economies of scale, and whether the Fund and its shareholders were participating in the benefits of these economies. In this regard, the Trustees considered the amount of assets in the Fund; the information provided by the Investment Adviser relating to the costs of the services provided by the Investment Adviser and its affiliates and the profits realized by them; and information comparing fee rates charged by the Investment Adviser with fee rates charged by other, unaffiliated investment managers to other mutual funds. Upon reviewing these matters again at the Annual Contract Meeting in 2006, the Trustees continued to believe that the fee breakpoint was a way to ensure that benefits of scalability would be passed along to shareholders at the specified asset level.
The Trustees also considered the other benefits derived by the Investment Adviser and its affiliates from the Fund as stated above, including the fees received by them for transfer agency, securities lending, distribution and brokerage services, and the brokerage and research services received by the Investment Adviser in connection with the placement of brokerage transactions for the Fund. In this regard, the Trustees noted that the Investment Adviser had adopted a policy to cease obtaining third party non-broker research based on the Fund’s brokerage transactions. They also noted that during the past year the Fund had created a new share class, Service Shares, with a distribution and service plan under which an affiliate of the Investment Adviser would receive fees.
In addition, the Trustees reviewed the Investment Adviser’s pre-tax revenues and pre-tax margins with respect to the Trust and the Fund. In this regard the Trustees reviewed, among other things, profitability analyses and summaries, revenue and expense schedules, and expense allocation methodologies, as well as a report of independent accountants regarding the results of certain agreed-upon procedures to verify expense allocation calculations that were designed to assist the Trustees in their evaluation of the Investment Adviser’s schedules of revenues and expenses. The Trustees considered the Investment Adviser’s revenues and margins both in absolute terms and in comparison to the information on the reported margins earned by other asset management firms.
After deliberation and consideration of the information provided, including the factors described above, the Trustees concluded that the management fees paid by the Fund were reasonable in light of the services provided by the Investment Adviser, its costs and the Fund’s current and reasonably foreseeable asset levels, and that the Management Agreement should be approved and continued.
As a shareholder of Institutional 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 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 January 1, 2006 through June 30, 2006. | ||
Actual Expenses — The first line under each share class of 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 for this period. | ||
Hypothetical Example for Comparison Purposes — The second line under each share class of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return 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 (loads), 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. |
Expenses Paid | ||||||||||||
for the | ||||||||||||
Beginning | Ending | 6 months | ||||||||||
Account Value | Account Value | ended | ||||||||||
1/1/06 | 6/30/06 | 6/30/06* | ||||||||||
Institutional | ||||||||||||
Actual | $ | 1,000 | $ | 1,047.00 | $ | 4.42 | ||||||
Hypothetical 5% return | 1,000 | 1,020.48 | + | 4.36 | ||||||||
Service# | ||||||||||||
Actual | $ | 1,000 | $ | 1,018.80 | $ | 4.59 | ||||||
Hypothetical 5% return | 1,000 | 1,018.88 | + | 4.59 | ||||||||
* | Expenses are calculated using the Fund’s annualized expense ratio for each class, which represents the ongoing expenses as a percentage of net assets for the six months ended June 30, 2006. Expenses are calculated by multiplying the annualized 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 expense ratios for the period were 0.87% and 0.97% for Institutional and Service Shares, respectively. | ||
# | Service Share Class commenced on January 9, 2006. The Beginning Account Value is as of January 9, 2006. | ||
+ | Hypothetical expenses are based on the Fund’s actual annualized expense ratios and an assumed rate of return of 5% per year before expenses. |
TRUSTEES | OFFICERS | |
Ashok N. Bakhru, Chairman | Kaysie P. Uniacke, President | |
John P. Coblentz, Jr. | James A. Fitzpatrick, Vice President | |
Patrick T. Harker | James A. McNamara, Vice President | |
Mary Patterson McPherson | John M. Perlowski, Treasurer | |
Alan A. Shuch | Peter V. Bonanno, Secretary | |
Wilma J. Smelcer | ||
Richard P. Strubel | ||
Kaysie P. Uniacke | ||
GOLDMAN, SACHS & CO. Distributor and Transfer Agent | ||
GOLDMAN SACHS ASSET MANAGEMENT, L.P. Investment Adviser | ||
Visit our Web site at www.goldmansachsfunds.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 1-800-526-7384 (for Retail Shareholders) or 1-800-621-2550 (for Institutional Shareholders); and (ii) on the Securities and Exchange Commission Web site at http://www.sec.gov. | ||
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. Beginning the fiscal quarter ended September 30, 2004 and every first and third fiscal quarter thereafter, the Fund’s Form N-Q will become available on the SEC’s website at http://www.sec.gov within 60 days after the Fund’s first and third fiscal quarters. When available, 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. When available, Form N-Q may be obtained upon request and without charge by calling 1-800-621-2550. | ||
This material is not authorized for distribution to prospective investors unless preceded or accompanied by a current Prospectus. 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 Funds. | ||
Holdings and allocations shown may not be representative of current or future investments. Holdings and allocations may not include the Fund’s entire investment portfolio,which may change at any time. Fund holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities. | ||
Toll Free (in U.S.): 800-292-4726 | ||
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: Mid Cap Value Fund. | ||
Copyright 2006 Goldman, Sachs & Co. All rights reserved. Date of first use: August 18, 2006 | ||
VITMIDCAPSAR/06-1202/08-06/28.7K |
GOLDMAN SACHS ASSET MANAGEMENT, L.P. 32 OLD SLIP, NEW YORK, NEW YORK 10005
Shareholder Letter
Dear Shareholders:
This report provides an overview on the performance of the Goldman Sachs Variable Insurance Trust — International Equity Fund during the six-month reporting period that ended June 30, 2006.
Market Overview
During the six-month reporting period, the international equity markets faced the steadily rising headwinds of continued strength in the euro and ongoing dollar weakness, steadily rising U.S. interest rates, fears of a slowdown in global economic growth, worries about Iran and the impact of high oil prices, and concerns about increasing inflationary pressures. Following very strong performance in the first four months of this year, higher-than-expected U.S. inflation data caused a spike in volatility in May. Stocks that had experienced large gains earlier in the year and those perceived to be higher risk were the first to suffer as the market saw a flight to quality and as investors shifted from equities into bonds. Commodity prices reached record highs at the start of the month, but these gains were quickly erased as prices retracted amid the correction in equity markets. In June, most international equity markets stabilized, with lower volatility and low trading volumes, but the month was still dominated by U.S. economic data and the likelihood of another U.S. interest rate hike. However, underlying corporate fundamentals remained strong with continued corporate earnings upgrades.
Investment Objective
The Fund seeks long-term capital appreciation.
Portfolio Composition
% of | ||||||||
Holding | Net Assets | Line of Business | Country | |||||
Amvescap PLC | 4.0 | % | Diversified Financials | United Kingdom | ||||
E. ON AG | 3.8 | Electric Utilities | Germany | |||||
GlaxoSmithKline PLC | 3.6 | Pharmaceuticals | United Kingdom | |||||
Millea Holdings, Inc. | 3.6 | Insurance | Japan | |||||
Vinci SA | 3.3 | Construction & Engineering | France | |||||
Prudential PLC | 3.3 | Insurance | United Kingdom | |||||
Esprit Holdings Ltd. | 3.0 | Specialty Retail | Hong Kong | |||||
Total SA | 3.0 | Oil & Gas | France | |||||
Novartis AG | 3.0 | Pharmaceuticals | Switzerland | |||||
Taiheiyo Cement Corp. | 2.9 | Construction Materials | Japan |
* Opinions expressed in this report represent our present opinions only. Reference to individual securities should not be construed as a commitment that such securities will be retained in the Fund. From time to time, the Fund may change the individual securities it holds, the number or types of securities held and the markets in which it invests. Fund holdings of stocks or bonds should not be relied upon in making investment decisions and should not be construed as research or investment advice regarding particular securities. References to individual securities do not constitute a recommendation to the investor to buy, hold or sell such securities. In addition, references to past performance of the Fund do not indicate future returns, which are not guaranteed and will vary. Furthermore, the value of shares of the Fund may fall as well as rise.
Performance Review
Over the six-month period that ended June 30, 2006, the Fund’s Institutional Shares generated a cumulative total return of 5.56%. This return compares to the 10.50% cumulative total return of the Fund’s benchmark, the Morgan Stanley Capital International (“MSCI”) Europe, Australasia and Far East (“EAFE”) Index (unhedged, with dividends reinvested), over the same time period. For the period from the inception of the Service Class on January 9, 2006 to June 30, 2006, the Fund’s Service Shares generated a cumulative total return of 0.08%. This return compares to the 5.26% cumulative total return of the Fund’s benchmark over the same time period.
During the six-month period, the Fund’s underperformance was driven primarily by weak stock selection, particularly within the Consumer Discretionary, Materials, and Telecommunication Services sectors. This was partially offset by strong stock selection within the Healthcare sector.
Techtronic Industries Co. Ltd. was a leading detractor from performance during the period. The company issued a profit warning following lower sales, higher restructuring and financing charges, and a sharp drop in sales when key customer Home Depot unilaterally changed its inventory holding period from 36 to 18 weeks. This prompted earnings downgrades from several analysts. Its shares also fell along with the Hang Seng Index, amid continued concerns that further measures to slow China’s economy may hurt Techtronic’s earnings growth. We continue to like the company as a result of its transformation from a pure original equipment manufacturer (OEM) to a manufacturer of world-class branded power tools and home appliances through timely acquisitions over the last few years. The company has also been increasing market share through growth into different segments of the market and is a beneficiary of the global outsourcing trend to Asia.
Carnival Corp., the world’s largest cruise line operator, also detracted from performance after the company issued a profit warning. Management lowered its guidance for 2006, citing negative consumer sentiment towards cruising as a result of hurricanes and a weakening low-income U.S. consumer. With the increase in oil prices, Carnival’s energy costs have grown over 50% in the past year. Carnival has been able to manage this cost through its pricing power, by passing its higher costs on to the consumer. We are concerned that, with strains on consumers due to high gas prices, Carnival will not have the pricing power it once had. In addition, the company has been increasing its capacity at a time when demand for cruises is declining. We sold out of the position as we believe there is further downside risk to its earnings going forward.
Schering-Plough Corp, the global pharmaceutical company, was the leading contributor to performance during the period after receiving two takeover bids. First, German pharmaceutical company Merck initially made an offer for Schering, but the bid was rejected by Schering’s management. Drug and chemical giant, Bayer, then stepped in with a higher bid and this was subsequently raised even further in order to win over Schering’s management. Schering’s largest shareholder, Alliance AG, indicated it will accept the offer and in the absence of Merck raising its bid or another suitor appearing, the deal is likely to be completed. The combined group will become the world’s twelfth-largest pharmaceutical company. We sold the Fund’s position during the period to capture profits.
Credit Agricole SA, France’s leading retail bank and life insurer, also contributed to performance after its business plan was well received by investors. In its domestic market, Credit Agricole seeks to improve the efficiency of its retail networks and increase cross-selling of its insurance products. Outside France, the company plans to invest €5 billion in small acquisitions of retail networks to increase its distribution power. The market reacted well to Credit Agricole’s proposed acquisition strategy.
We thank you for your investment and look forward to serving your investment needs in the future.
Goldman Sachs International Equity Portfolio Management Team
July 18, 2006
Shares of the Goldman Sachs Variable Insurance Trust (“VIT”) International Equity Fund 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.
The VIT International Equity Fund invests in equity investments in companies that are organized outside the United States or whose securities are principally traded outside the United States and is subject to market risk so that the value of the securities in which it invests may go up or down in response to the prospects of individual companies, particular industry sectors and/or general economic conditions. Foreign and emerging market securities may be more volatile than investments in U.S. securities and will be subject to the risks of currency fluctuations and sudden economic or political developments. At times, the Fund may be unable to sell certain of its portfolio securities without a substantial drop in price, if at all.
Schedule of Investments
Shares | Description | Value | ||||||||
Common Stocks – 99.9% | ||||||||||
Australia – 2.5% | ||||||||||
1,871,167 | Alumina Ltd. (Metals & Mining) | $ | 9,385,605 | |||||||
Austria – 2.5% | ||||||||||
161,788 | Erste Bank der oesterreichischen Sparkassen AG* (Banks) | 9,095,343 | ||||||||
France – 12.7% | ||||||||||
265,248 | Credit Agricole SA (Banks) | 10,066,162 | ||||||||
371,107 | France Telecom SA (Diversified Telecommunication Services) | 7,918,319 | ||||||||
100,304 | Technip SA (Energy Equipment & Services) | 5,526,732 | ||||||||
166,608 | Total SA*(a) (Oil & Gas) | 10,944,777 | ||||||||
118,145 | Vinci SA (Construction & Engineering) | 12,149,423 | ||||||||
46,605,413 | ||||||||||
Germany – 3.7% | ||||||||||
120,194 | E.ON AG (Electric Utilities) | 13,816,400 | ||||||||
Hong Kong – 6.0% | ||||||||||
1,357,500 | Esprit Holdings Ltd. (Specialty Retail) | 11,112,461 | ||||||||
10,966,000 | PICC Property and Casualty Co. Ltd. Class H (Insurance) | 4,033,663 | ||||||||
5,206,000 | Techtronic Industries Co. Ltd. (Machinery) | 7,042,394 | ||||||||
22,188,518 | ||||||||||
Italy – 2.4% | ||||||||||
202,014 | Fastweb* (Diversified Telecommunication Services) | 8,771,926 | ||||||||
Japan – 20.7% | ||||||||||
234,500 | Alpen Co. Ltd. (Private Placement) | 7,643,175 | ||||||||
224,200 | Credit Saison Co. Ltd. (Diversified Financials) | 10,622,820 | ||||||||
871,000 | Hitachi Metals Ltd. (Metals & Mining) | 8,577,168 | ||||||||
708 | Millea Holdings, Inc. (Insurance) | 13,179,366 | ||||||||
530,800 | Nomura Holdings, Inc. (Diversified Financials) | 9,968,671 | ||||||||
147,100 | Shin-Etsu Chemical Co. Ltd. (Chemicals) | 8,000,857 | ||||||||
2,933,000 | Taiheiyo Cement Corp. (Construction Materials) | 10,824,381 | ||||||||
148,300 | Union Tool Co. (Machinery) | 7,510,908 | ||||||||
76,327,346 | ||||||||||
Netherlands – 5.1% | ||||||||||
246,499 | ING Groep NV (Diversified Financials) | 9,676,945 | ||||||||
252,822 | TNT NV (Air Freight & Couriers) | 9,045,445 | ||||||||
18,722,390 | ||||||||||
Russia – 3.4% | ||||||||||
13,786 | LUKOIL ADR* (Oil & Gas) | 1,146,995 | ||||||||
89,064 | LUKOIL ADR* (Oil & Gas) | 7,375,809 | ||||||||
133,200 | Mobile Telesystems ADR (Wireless Telecommunication Services) | 3,921,408 | ||||||||
12,444,212 | ||||||||||
South Korea – 6.0% | ||||||||||
24,734 | Hyundai Motor Co. GDR(a)(b) (Private Placement) | 1,051,195 | ||||||||
227,129 | Hyundai Motor Co. Ltd. GDR(b) (Industrial Conglomerates) | 9,652,983 | ||||||||
300 | Samsung Electronics Co. Ltd. GDR(b) (Electronic Equipment & Instruments) | 94,161 | ||||||||
18,460 | Samsung Electronics Co. Ltd. GDR(b) (Semiconductor Equipment & Products) | 5,801,055 | ||||||||
21,900 | Samsung Electronics Co. Ltd. GDR – Preferred Shares(b) (Electronic Equipment & Instruments) | 5,327,175 | ||||||||
21,926,569 | ||||||||||
Spain – 2.7% | ||||||||||
483,808 | Banco Bilbao Vizcaya Argentaria SA (Banks) | 9,955,448 | ||||||||
Sweden – 2.7% | ||||||||||
238,020 | Svenska Cellulosa AB (SCA) Series B (Paper & Forest Products) | 9,826,849 | ||||||||
Switzerland – 8.5% | ||||||||||
147,689 | Credit Suisse Group (Banks) | 8,239,878 | ||||||||
10,654 | Nestle SA (Food Products) | 3,340,141 | ||||||||
202,075 | Novartis AG (Pharmaceuticals) | 10,905,274 | ||||||||
12,726 | Serono SA (Biotechnology) | 8,759,242 | ||||||||
31,244,535 | ||||||||||
Taiwan – 1.4% | ||||||||||
423,407 | Hon Hai Precision Industry Co. Ltd. GDR (Electronic Equipment & Instruments) | 5,131,694 | ||||||||
United Kingdom – 19.6% | ||||||||||
1,604,595 | Amvescap PLC (Diversified Financials) | 14,679,854 | ||||||||
1,369,453 | Bodycote International PLC (Machinery) | 6,422,223 | ||||||||
902,278 | Catlin Group Ltd. (Insurance) | 7,168,805 | ||||||||
477,702 | GlaxoSmithKline PLC (Pharmaceuticals) | 13,331,220 | ||||||||
1,072,502 | Prudential PLC (Insurance) | 12,127,717 |
4
Shares | Description | Value | ||||||||
Common Stocks – (continued) | ||||||||||
United Kingdom – (continued) | ||||||||||
4,862,204 | Vodafone Group PLC (Wireless Telecommunication Services) | $ | 10,348,424 | |||||||
2,265,977 | W.M. Supermarkets PLC (Food & Drug Retailing) | 8,140,536 | ||||||||
72,218,779 | ||||||||||
TOTAL COMMON STOCKS | ||||||||||
(Cost $345,081,296) | $ | 367,661,027 | ||||||||
TOTAL INVESTMENTS BEFORE SECURITIES LENDING COLLATERAL | ||||||||||
(Cost $345,081,296) | $ | 367,661,027 | ||||||||
Securities Lending Collateral – 1.5% | ||||||||||
5,349,325 | Boston Global Investment Trust – Enhanced Portfolio | |||||||||
(Cost $5,349,325) | $ | 5,349,325 | ||||||||
TOTAL INVESTMENTS – 101.4% | ||||||||||
(Cost $350,430,621) | $ | 373,010,352 | ||||||||
LIABILITIES IN EXCESS OF OTHER ASSETS – (1.4)% | (5,317,427 | ) | ||||||||
NET ASSETS – 100.0% | $ | 367,692,925 | ||||||||
As a % of | ||||||
Net Assets | ||||||
Industry Classifications† | ||||||
Air Freight & Couriers | 2.5 | % | ||||
Banks | 10.2 | |||||
Biotechnology | 2.4 | |||||
Chemicals | 2.2 | |||||
Construction & Engineering | 3.3 | |||||
Construction Materials | 2.9 | |||||
Diversified Financials | 12.2 | |||||
Diversified Telecommunication Services | 4.5 | |||||
Electric Utilities | 3.7 | |||||
Electronic Equipment & Instruments | 2.9 | |||||
Energy Equipment & Services | 1.5 | |||||
Food & Drug Retailing | 2.2 | |||||
Food Products | 0.9 | |||||
Industrial Conglomerates | 2.6 | |||||
Insurance | 9.9 | |||||
Machinery | 5.7 | |||||
Metals & Mining | 4.9 | |||||
Oil & Gas | 5.3 | |||||
Paper & Forest Products | 2.7 | |||||
Pharmaceuticals | 6.6 | |||||
Private Placement | 2.4 | |||||
Semiconductor Equipment & Products | 1.6 | |||||
Short-term Investments# | 1.4 | |||||
Specialty Retail | 3.0 | |||||
Wireless Telecommunication Services | 3.9 | |||||
TOTAL INVESTMENTS | 101.4 | % | ||||
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 portion of security is on loan. | |
(b) | Securities are exempt from registration under Rule 144A of the Securities Act of 1933. Under procedures approved by the Board of Trustees, such securities have been determined to be 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 $21,926,569, which represents approximately 6.0% of net assets as of June 30, 2006. | |
† | Industry concentrations greater than one-tenth of one percent are disclosed. | |
# | Short-term investments include securities lending collateral. |
Investment Abbreviations: | ||||||
ADR | — | American Depositary Receipt | ||||
GDR | — | Global Depositary Receipt | ||||
5
Statement of Assets and Liabilities
Assets: | |||||||
Investment in securities, at value (identified cost $345,081,296) — including $5,092,644 of securities on loan | $ | 367,661,027 | |||||
Securities lending collateral, at value (cost $5,349,325) | 5,349,325 | ||||||
Foreign currencies, at value (identified cost $215,619) | 218,639 | ||||||
Receivables: | |||||||
Dividends and interest | 926,294 | ||||||
Fund shares sold | 20,873 | ||||||
Securities lending income | 10,118 | ||||||
Other assets | 1,539 | ||||||
Total assets | 374,187,815 | ||||||
Liabilities: | |||||||
Due to custodian | 485,766 | ||||||
Payables: | |||||||
Payable upon return of securities loaned | 5,349,325 | ||||||
Amounts owed to affiliates | 311,366 | ||||||
Fund shares repurchased | 261,119 | ||||||
Accrued expenses | 87,314 | ||||||
Total liabilities | 6,494,890 | ||||||
Net Assets: | |||||||
Paid-in capital | 308,735,557 | ||||||
Accumulated undistributed net investment income | 4,081,855 | ||||||
Accumulated net realized gain on investment and foreign currency related transactions | 32,292,973 | ||||||
Net unrealized gain on investments and translation of assets and liabilities denominated in foreign currencies | 22,582,540 | ||||||
NET ASSETS | 367,692,925 | ||||||
Net assets: | |||||||
Institutional | $ | 114,488,789 | |||||
Service | 253,204,136 | ||||||
Shares outstanding: | |||||||
Institutional | 8,998,212 | ||||||
Service | 19,903,201 | ||||||
Total shares of beneficial interest outstanding, $0.001 par value (unlimited shares authorized) | 28,901,413 | ||||||
Net asset value, offering and redemption price per share: | |||||||
Institutional | $ | 12.72 | |||||
Service | $ | 12.72 | |||||
6
Statement of Operations
Investment income: | |||||||
Dividends(a) | $ | 5,889,212 | |||||
Interest (including securities lending income of $311,530) | 364,337 | ||||||
Total income | 6,253,549 | ||||||
Expenses: | |||||||
Management fees | 1,888,355 | ||||||
Distribution and Service fees | 325,153 | ||||||
Transfer agent fees | 75,534 | ||||||
Custody and accounting fees | 111,627 | ||||||
Printing fees | 51,177 | ||||||
Professional fees | 31,879 | ||||||
Trustee fees | 6,803 | ||||||
Registration fees | 624 | ||||||
Total expenses | 2,491,152 | ||||||
Less — expense reductions | (319,458 | ) | |||||
Net expenses | 2,171,694 | ||||||
NET INVESTMENT INCOME | 4,081,855 | ||||||
Realized and unrealized gain (loss) on investment and foreign currency transactions: | |||||||
Net realized gain (loss) from: | |||||||
Investment transactions | 76,096,065 | ||||||
Foreign currency related transactions | (83,653 | ) | |||||
Net change in unrealized gain (loss) on: | |||||||
Investments | (73,070,165 | ) | |||||
Translation of assets and liabilities denominated in foreign currencies | 3,995 | ||||||
Net realized and unrealized gain on investment and foreign currency transactions | 2,946,242 | ||||||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 7,028,097 | |||||
(a) | Foreign taxes withheld on dividends were $648,782. |
7
Statements of Changes in Net Assets
For the | |||||||||||
Six Months Ended | For the | ||||||||||
June 30, 2006 | Year Ended | ||||||||||
(Unaudited) | December 31, 2005 | ||||||||||
From operations: | |||||||||||
Net investment income | $ | 4,081,855 | $ | 837,993 | |||||||
Net realized gain on investment and foreign currency related transactions | 76,012,412 | 10,843,633 | |||||||||
Net change in unrealized gain (loss) on investments and translation of assets and liabilities denominated in foreign currencies | (73,066,170 | ) | 1,862,289 | ||||||||
Net increase in net assets resulting from operations | 7,028,097 | 13,543,915 | |||||||||
Distributions to shareholders: | |||||||||||
From net investment income | |||||||||||
Institutional Shares | — | (326,535 | ) | ||||||||
Service Shares | — | — | |||||||||
Total distributions to shareholders | — | (326,535 | ) | ||||||||
From share transactions: | |||||||||||
Proceeds from sales of shares | 5,744,532 | 7,590,092 | |||||||||
Proceeds received in connection with merger | 301,195,995 | — | |||||||||
Reinvestment of dividends and distributions | — | 326,450 | |||||||||
Cost of shares repurchased | (55,674,874 | ) | (20,358,779 | ) | |||||||
Net increase (decrease) in net assets resulting from share transactions | 251,265,653 | (12,442,237 | ) | ||||||||
TOTAL INCREASE | 258,293,750 | 775,143 | |||||||||
Net assets: | |||||||||||
Beginning of period | 109,399,175 | 108,624,032 | |||||||||
End of period | $ | 367,692,925 | $ | 109,399,175 | |||||||
Accumulated undistributed net investment income | $ | 4,081,855 | $ | — | |||||||
8
Financial Highlights
Income (loss) from | Ratios assuming no | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
investment operations | Distributions to shareholders | expense reductions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net | Ratio of | Ratio of | Ratio of | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset | realized | In excess | From | Net asset | Net assets, | Ratio of | net investment | total | net investment | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
value, | Net | and | Total from | From net | of net | net | value, | end of | net expenses | income | expenses | income (loss) | Portfolio | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year — Share | beginning | investment | unrealized | investment | investment | investment | realized | Total | end of | Total | period | to average | to average | to average | to average | turnover | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Class | of period | income(b) | gain (loss) | operations | income | income | gains | distributions | period | return(c) | (in 000s) | net assets | net assets | net assets | net assets | rate | ||||||||||||||||||||||||||||||||||||||||||||||||||||
For the Six Months ended June 30, (Unaudited) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2006 — Institutional | $ | 12.05 | $ | 0.14 | $ | 0.53 | $ | 0.67 | $ | — | $ | — | $ | — | $ | — | $ | 12.72 | 5.56 | % | $ | 114,489 | 1.14 | % (d) | 2.12 | % (d) | 1.15 | %(d) | 2.11 | % (d) | 27 | % | ||||||||||||||||||||||||||||||||||||
2006 — Service(a) | 12.71 | 0.13 | (0.12 | ) | 0.01 | — | — | — | — | 12.72 | 0.08 | 253,204 | 1.16 | (d) | 2.10 | (d) | 1.40 | (d) | 1.95 | (d) | 27 | |||||||||||||||||||||||||||||||||||||||||||||||
For the Years ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2005 — Institutional | 10.62 | 0.09 | 1.38 | 1.47 | (0.04 | ) | — | — | (0.04 | ) | 12.05 | 13.70 | 109,399 | 1.20 | 0.81 | 1.36 | 0.66 | 56 | ||||||||||||||||||||||||||||||||||||||||||||||||||
2004 — Institutional | 9.48 | 0.07 | 1.18 | 1.25 | (0.11 | ) | — | — | (0.11 | ) | 10.62 | 13.48 | 108,624 | 1.20 | 0.75 | 1.35 | 0.60 | 63 | ||||||||||||||||||||||||||||||||||||||||||||||||||
2003 — Institutional | 7.25 | 0.04 | 2.53 | 2.57 | (0.34 | ) | — | — | (0.34 | ) | 9.48 | 35.49 | 106,792 | 1.37 | 0.49 | 2.60 | (0.74 | ) | 49 | |||||||||||||||||||||||||||||||||||||||||||||||||
2002 — Institutional | 8.99 | 0.03 | (1.68 | ) | (1.65 | ) | (0.09 | ) | — | — | (0.09 | ) | 7.25 | (18.34 | ) | 13,214 | 1.46 | 0.32 | 2.96 | (1.18 | ) | 86 | ||||||||||||||||||||||||||||||||||||||||||||||
2001 — Institutional | 11.78 | 0.05 | (2.68 | ) | (2.63 | ) | (0.09 | ) | (0.04 | ) | (0.03 | ) | (0.16 | ) | 8.99 | (22.26 | ) | 17,773 | 1.35 | 0.47 | 2.05 | (0.23 | ) | 76 | ||||||||||||||||||||||||||||||||||||||||||||
(a) | Service Share Class commenced on January 9, 2006. |
(b) | Calculated based on the average shares outstanding methodology. |
(c) | Assumes investment at the net asset value at the beginning of the period, reinvestment of all dividends and 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 a full year are not annualized. |
(d) | Annualized. |
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements
1. | ORGANIZATION |
2. | SIGNIFICANT ACCOUNTING POLICIES |
A. Investment Valuation — Investments in equity securities traded on a foreign securities exchange are valued daily at fair value determined by an independent service (if available) under valuation procedures approved by the Board of Trustees consistent with applicable regulatory guidance. The independent service takes into account multiple factors including, but not limited to, movements in the U.S. securities markets, certain depositary receipts, futures contracts and foreign currency exchange rates.
B. Security Transactions and Investment Income — Security transactions are reflected as of the trade date. Realized gains and losses on sales of portfolio securities are calculated using the identified-cost basis. Dividend income is recorded on the ex-dividend date, net of foreign withholding taxes, if any, which are reduced by any amounts reclaimable by the Fund, where applicable. Interest income is recorded on the basis of interest accrued, premium amortized and discount accreted.
C. Expenses — Expenses incurred by the Trust that do not specifically relate to an individual Fund of the Trust are allocated to the Fund on a straight-line and/or “pro-rata” basis depending upon the nature of the expense. Service Shares bear all expenses and fees relating to their Distribution and Service Plan.
D. Federal Taxes and Distributions to Shareholders — It is the Fund’s policy to comply with the requirements of the Internal Revenue Code (the “Code”) applicable to regulated investment companies and to distribute each year substantially
2. SIGNIFICANT ACCOUNTING POLICIES (continued) |
E. Foreign Currency Translations — The books and records of the Fund are maintained in U.S. dollars. Amounts denominated in foreign currencies are translated into U.S. dollars on the following basis: (i) investment valuations, foreign currency and other assets and liabilities initially expressed in foreign currencies are converted each business day into U.S. dollars based upon current exchange rates; and (ii) purchases and sales of foreign investments, income and expenses are converted into U.S. dollars based upon currency exchange rates prevailing on the respective dates of such transactions.
F. Segregation Transactions — As set forth in the prospectus, the Fund may enter into certain derivative transactions to seek to increase total return. Forward foreign currency exchange contracts, futures contracts, written options, when-issued securities and forward commitments represent examples of such transactions. As a result of entering into these transactions, the Fund is required to segregate or physically move liquid assets, on the books of their custodian or to respective counterparty, with a current value equal to or greater than the market value of the corresponding transactions.
G. Forward Foreign Currency Exchange Contracts — The Fund may enter into forward foreign currency exchange contracts for the purchase or sale of a specific foreign currency at a fixed price on a future date as a hedge or cross-hedge against either specific transactions or portfolio positions. The Fund may also purchase and sell forward contracts to seek to increase total return. All commitments are “marked-to-market” daily at the applicable translation rates and any resulting unrealized gains or losses are recorded in the Fund’s financial statements. The Fund records realized gains or losses at the time a forward contract is offset by entry into a closing transaction or extinguished by delivery of the currency. Risks may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of their contracts and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar.
3. AGREEMENTS |
3. AGREEMENTS (continued) |
Average Daily Net Assets | Annual Rate | |||
First $1 Billion | 1.00% | |||
Next $1 Billion | 0.90% | |||
Over $2 Billion | 0.86% | |||
In connection with the reorganization of the Allmerica Select International Equity Fund into the Fund, GSAM has contractually agreed to reimburse the Fund as necessary to limit the total annual operating expenses of the Services Shares of the Fund to 1.22% until June 2007.
4. PORTFOLIO SECURITIES TRANSACTIONS |
5. SECURITIES LENDING |
5. SECURITIES LENDING (continued) |
6. LINE OF CREDIT FACILITY |
7. TAX INFORMATION |
Capital loss carryforward:(1)(2) | |||||
Expiring 2008 | $ | (6,413,975 | ) | ||
Expiring 2009 | (27,159,909 | ) | |||
Expiring 2010 | (8,409,296 | ) | |||
Expiring 2011 | (609,034 | ) | |||
Total capital loss carryforward | $ | (42,592,214 | ) | ||
(1) | Expiration occurs on December 31 of the year indicated utilization of these losses may be limited under the Code. |
(2) | During the year ended December 31, 2005, the Fund utilized $10,641,636 of capital loss carryforwards. |
At June 30, 2006, the Fund’s aggregate security unrealized gains and losses based on cost for U.S. federal income tax purposes was as follows:
Tax cost | $ | 354,487,815 | ||
Gross unrealized gain | 36,473,463 | |||
Gross unrealized loss | (17,950,926 | ) | ||
Net unrealized security gain | $ | 18,522,537 | ||
7. TAX INFORMATION (continued) |
8. OTHER MATTERS |
Mergers and Reorganizations — At a meeting held on July 12, 2005, the Board of Trustees of the Trust approved an Agreement and Plan of Reorganization (the “Agreement”) providing for the tax-free acquisition of the Allmerica Investment Trust Select International Equity Fund by the Goldman Sachs VIT International Equity Fund. Following the approval of the Board of Trustees and shareholders of the Allmerica Investment Trust Select International Equity Fund, the acquisition was completed on January 9, 2006.
Acquired Fund’s | ||||||||||||
Exchanged Shares | Value of | Shares Outstanding | ||||||||||
Survivor/Acquired Fund | of Survivor Issued | Exchanged Shares | on January 6, 2006 | |||||||||
Goldman Sachs VIT International Equity Fund Service Class/ Allmerica Investment Trust Select International Equity Fund Service Class | 23,697,561 | $ | 301,195,995 | 208,893,793 | ||||||||
8. OTHER MATTERS (continued) |
Survivor Fund’s | Acquired Fund’s | Survivor Fund’s | ||||||||||||||
Aggregate | Aggregate | Aggregate | ||||||||||||||
Net Assets | Net Assets | Acquired Fund’s | Net Assets | |||||||||||||
before | before | Unrealized | immediately | |||||||||||||
Survivor/Acquired Fund | acquisition | acquisition | Appreciation | after acquisition | ||||||||||||
Goldman Sachs VIT International Equity Fund/ Allmerica Investment Trust Select International Equity Fund | $ | 115,286,200 | $ | 301,195,995 | $ | 74,115,402 | $ | 416,482,195 | ||||||||
New Accounting Pronouncement — On July 13, 2006, the Financial Accounting Standards Board (“FASB”) released FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Fund’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Adoption of FIN 48 is required for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. At this time, management is evaluating the implications of FIN 48 and its impact in the financial statements has not yet been determined.
9. SUMMARY OF SHARE TRANSACTIONS |
For the Six Months Ended | For the Year Ended | |||||||||||||||
June 30, 2006 | December 31, 2005 | |||||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||||
Institutional Shares | ||||||||||||||||
Shares sold | 389,952 | $ | 5,029,836 | 693,983 | $ | 7,590,092 | ||||||||||
Reinvestment of dividends and distributions | — | — | 27,664 | 326,450 | ||||||||||||
Shares repurchased | (468,699 | ) | (6,041,928 | ) | (1,868,842 | ) | (20,358,779 | ) | ||||||||
(78,747 | ) | (1,012,092 | ) | (1,147,196 | ) | (12,442,237 | ) | |||||||||
Service Shares* | ||||||||||||||||
Shares sold | 56,576 | 714,696 | — | — | ||||||||||||
Shares issued in connection with merger | 23,697,561 | 301,195,995 | — | — | ||||||||||||
Reinvestment of dividends and distributions | — | — | — | — | ||||||||||||
Shares repurchased | (3,850,936 | ) | (49,632,946 | ) | — | — | ||||||||||
19,903,201 | 252,277,745 | — | — | |||||||||||||
NET INCREASE (DECREASE) | 19,824,454 | $ | 251,265,653 | (1,147,196 | ) | $ | (12,442,237 | ) | ||||||||
* | Service Share Class commenced on January 9, 2006. |
Statement Regarding Basis for Approval of Management Agreement (Unaudited)
The Trustees oversee the management of Goldman Sachs Variable Insurance Trust (the “Trust”), and review the investment performance and expenses of the investment fund covered by this Report (the “Fund”) at regularly scheduled meetings held during the Fund’s fiscal year. In addition, the Trustees determine annually whether to approve and continue the Trust’s investment management agreement (the “Management Agreement”) with Goldman Sachs Asset Management International (the “Investment Adviser”) for the Fund.
In connection with the Committee meetings and the Annual Contract Meeting, the Trustees received written materials and oral presentations on the topics covered, and were advised by their independent legal counsel regarding their responsibilities under applicable law. Also, in conjunction with these meetings, the Trustees attended other sessions at which the Trustees reviewed the commission rates paid by the Fund on brokerage transactions, the Investment Adviser’s receipt of research services in connection with those transactions, and the payment of Rule 12b-1 distribution and service fees that are payable by the Fund on its Service Share Class. Information was also provided to the Trustees relating to the Fund’s portfolio turnover, revenue sharing by the Investment Adviser, portfolio manager compensation, the alignment of the interests of the Fund and the portfolio managers, the number and types of accounts managed by the portfolio managers, and other matters. During the course of their deliberations, the Independent Trustees met in executive sessions without employees of the Investment Adviser present.
The Trustees also considered the investment performance of the Fund and the Investment Adviser. In this regard, the Trustees compared the investment performance of the Fund to the performance of other SEC-registered funds and to rankings and ratings issued by the Outside Data Provider. The Trustees also reviewed the Fund’s investment performance relative to its performance benchmark. This information on the Fund’s investment performance was provided for one, three and five year periods. In addition, the Trustees considered the investment performance trends of the Fund over time, and reviewed the investment performance of the Fund in light of its investment objective and policies, as well as in light of periodic analyses of its quality and risk profile. In addition, the Trustees considered whether the Fund had operated within its investment policies, and its record of compliance with its investment limitations. The Trustees believed that the Fund was providing investment performance within a competitive range for long-term investors. In this connection the Trustees noted the steps that had been taken to restructure the portfolio management team for the Fund in 2005, including the hiring of a new chief investment officer and the implementation of structural changes in the portfolio management process.
1.00% on the first $1 billion, 0.90% over $1 billion up to $2 billion and 0.86% over $2 billion. |
In approving these new fee breakpoints, the Trustees had reviewed information regarding the Investment Adviser’s potential economies of scale, and whether the Fund and its shareholders were participating in the benefits of these economies. In this regard, the Trustees considered the amount of assets in the Fund; the information provided by the Investment Adviser relating to the costs of the services provided by the Investment Adviser and its affiliates and the profits realized by them; and information comparing fee rates charged by the Investment Adviser with fee rates charged by other, unaffiliated investment managers to other mutual funds. Upon reviewing these matters again at the Annual Contract Meeting in 2006, the Trustees continued to believe that the fee breakpoints were a way to ensure that benefits of scalability would be passed along to shareholders at the specified asset levels.
The Trustees also considered the other benefits derived by the Investment Adviser and its affiliates from the Fund as stated above, including the fees received by them for transfer agency, securities lending, distribution and brokerage services, and the brokerage and research services received by the Investment Adviser in connection with the placement of brokerage transactions for the Fund. In this regard, the Trustees noted that the Investment Adviser had adopted a policy to cease obtaining third party non-broker research based on the Fund’s brokerage transactions. They also noted that during the past year the Fund had created a new share class, Service Shares, with a distribution and service plan under which an affiliate of the Investment Adviser would receive fees.
As a shareholder of Institutional 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 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 January 1, 2006 through June 30, 2006. | ||
Actual Expenses — The first line under each share class of 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 for this period. | ||
Hypothetical Example for Comparison Purposes — The second line under each share class of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual 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 (loads), 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. |
Expenses Paid | ||||||||||||
for the | ||||||||||||
Beginning | Ending | 6 months | ||||||||||
Account Value | Account Value | ended | ||||||||||
1/1/06 | 6/30/06 | 6/30/06* | ||||||||||
Institutional | ||||||||||||
Actual | $ | 1,000 | $ | 1,055.60 | $ | 5.81 | ||||||
Hypothetical 5% return | 1,000 | 1,019.14 | + | 5.70 | ||||||||
Service# | ||||||||||||
Actual | 1,000 | 1,000.80 | 5.44 | |||||||||
Hypothetical 5% return | 1,000 | 1,017.99 | + | 5.48 | ||||||||
* | Expenses are calculated using the Fund’s annualized expense ratio for each class, which represents the ongoing expenses as a percentage of net assets for the six months ended June 30, 2006. Expenses are calculated by multiplying the annualized expense ratio by the average account value for such 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 expense ratios for the period were 1.14% and 1.16% for Institutional and Service Shares, respectively. | ||
# | Service Share Class commenced on January 9, 2006. The Beginning Account Value is as of January 9, 2006. | ||
+ | Hypothetical expenses are based on the Fund’s actual expense ratios and an assumed rate of return of 5% per year before expenses. |
TRUSTEES | OFFICERS | |
Ashok N. Bakhru, Chairman | Kaysie P. Uniacke, President | |
John P. Coblentz, Jr. | James A. Fitzpatrick, Vice President | |
Patrick T. Harker | James A. McNamara, Vice President | |
Mary Patterson McPherson | John M. Perlowski, Treasurer | |
Alan A. Shuch | Peter V. Bonanno, Secretary | |
Wilma J. Smelcer | ||
Richard P. Strubel | ||
Kaysie P. Uniacke | ||
GOLDMAN, SACHS & CO. Distributor and Transfer Agent | ||
GOLDMAN SACHS ASSET MANAGEMENT INTERNATIONAL, L.P. Investment Adviser | ||
GOLDMAN SACHS ASSET MANAGEMENT INTERNATIONAL 133 Peterborough Court London, England EC4A 2BB | ||
Visit our Web site at www.goldmansachsfunds.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 1-800-526-7384 (for Retail Shareholders) or 1-800-621-2550 (for Institutional Shareholders); and (ii) on the Securities and Exchange Commission Web site at http://www.sec.gov. | ||
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. Beginning the fiscal quarter ended September 30, 2004 and every first and third fiscal quarter thereafter, the Fund’s Form N-Q will become available on the SEC’s website at http://www.sec.gov within 60 days after the Fund’s first and third fiscal quarters. When available, 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. When available, Form N-Q may be obtained upon request and without charge by calling 1-800-621-2550. | ||
This material is not authorized for distribution to prospective investors unless preceded or accompanied by a current Prospectus. 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 Funds. | ||
Holdings and allocations shown may not be representative of current or future investments. Holdings and allocations may not include the Fund’s entire investment portfolio, which may change at any time. Fund holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities. | ||
Toll Free (in U.S.): 800-292-4726 | ||
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: International Equity Fund. | ||
Copyright 2006 Goldman, Sachs & Co. All rights reserved. Date of first use: August 18, 2006 | ||
VITINTLSAR/06-1201/08-06/30.4K |
Shareholder Letter
Dear Shareholders:
This report provides an overview on the performance of the Goldman Sachs Variable Insurance Trust — Growth Opportunities Fund from its inception on January 9, 2006* through June 30, 2006.
Market Review
During the first half of 2006, the U.S. equity markets finished in positive territory. Energy and Utility companies continued to be favored by investors, producing significant returns. Conversely, sectors such as Health Care and Technology lagged during the six-month period. The Retail sector remained weak as a result of the overall market environment. The Federal Reserve Board raised short-term interest rates for the 17th consecutive time in June 2006. This was the first increase that was not accompanied by a statement indicating future interest rate hikes, which triggered a slight rally in the equities market at the end of June.
Investment Objective
The Fund seeks long-term growth of capital.
Portfolio Composition
% of | ||||||
Company | Net Assets | Business | ||||
Rockwell Automation, Inc. | 2.5 | % | Manufacturing | |||
Fortune Brands, Inc. | 2.3 | Beverages | ||||
Smith International, Inc. | 2.3 | Oil Well Services & Equipment | ||||
Linear Technology Corp. | 2.3 | Semiconductors/Semi-Cap Equipment | ||||
Alliance Data Systems Corp. | 2.2 | Commercial Services | ||||
Cameron International Corp. | 2.2 | Oil & Gas | ||||
Amphenol Corp. | 2.2 | Networking/Telecommunications Equipment | ||||
C.R. Bard, Inc. | 2.1 | Medical Products | ||||
W.W. Grainger, Inc. | 2.1 | Producer Goods | ||||
Crown Castle International | 2.1 | Telecommunications |
* The Goldman Sachs Variable Insurance Trust Growth Opportunities Fund first began operations as the Allmerica Select Capital Appreciation Fund (the “Predecessor AIT Fund”) of the Allmerica Investment Trust. On January 9, 2006, the Predecessor AIT Fund was reorganized as a new portfolio of the Goldman Sachs Variable Insurance Trust. Performance of the Predecessor AIT Fund prior to the reorganization is not provided in this letter because as part of the reorganization the Predecessor AIT Fund changed its investment adviser to Goldman Sachs Asset Management, L.P. In addition, the Goldman Sachs Fund that the Predecessor AIT Fund reorganized into had investment objectives and policies which were not identical to the Predecessor AIT Fund. Total return information about the Predecessor AIT Fund is provided in the Financial Highlights table, which is part of this report.
** Opinions expressed in this report represent our present opinions only. Reference to individual securities should not be construed as a commitment that such securities will be retained in the Fund. From time to time, the Fund may change the individual securities it holds, the number or types of securities held and the markets in which it invests. Fund holdings of stocks or bonds should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities. References to individual securities do not constitute a recommendation to the investor to buy, hold or sell such securities. In addition, references to past performance of the Fund do not indicate future returns, which are not guaranteed and will vary. Furthermore, the value of shares of the Fund may fall as well as rise.
Performance Review
For the period from the Fund’s inception on January 9, 2006 to June 30, 2006, the Fund’s Service Shares generated a cumulative total return of -4.60%. This return compares to the -0.88% cumulative total return of the Fund’s benchmark, the Russell Midcap Growth Index (with dividends reinvested), over the same time period.
Several of the Fund’s Technology holdings, including CNET Networks, Inc. and Activision, Inc. detracted from performance. Shares of CNET fell after the company reported a narrower-than-expected first-quarter loss, a soft revenue number and weak guidance. Despite the disappointing results, we believe CNET is well positioned to benefit from the growing opportunity in internet advertising as it continues to expand its audience and customer base, grow its core brands and add new ones. Shares of Activision were weak due to the challenging industry environment as consumers have had to wait to purchase new video games until back-ordered Xbox 360 consoles or next generation Sony and Nintendo consoles, which are due by the end of 2006, become available. We believe the video gaming industry will continue to grow and Activision has a strong franchise with high quality products.
Within the Consumer Discretionary sector, Chico’s FAS, Inc. and Williams-Sonoma, Inc. ended the period down. Williams-Sonoma’s first quarter earnings fell from the year-ago period on charges related to consolidation of Hold Everything storage-goods stores and stock option expenses. Women’s apparel retailer Chico’s benefited from stronger demand for its clothing for women over 35 which drove a nearly 20% increase in sales and double-digit profit growth in its fiscal first quarter. However, the stock fell as Chico’s lowered profit expectations for 2006. We believe growth of its core brand is stabilizing and investments in newer brands and square footage growth will impact short-term operating margins. We remain confident in Chico’s fundamentals and believe that these investments will prove to be strategically wise long-term actions. Since 2001 when we initiated a position in Chico’s, the stock has been a significant contributor to performance. In the past five years, the company has grown revenues by an annual 39% and net income 47% a year. With the stock down 33% over the second quarter, we took the opportunity to add to the Fund’s position at what we believe to be an attractive valuation.
XM Satellite Radio Holdings, Inc. was down significantly during the period, despite a revenue increase of over 100% driven by strong subscriber growth during the first quarter. Its shares fell after management made some missteps, causing them to lower their outlook for 2006. XM has also been the subject of FCC and FTC investigations. We believe XM is still well positioned for strong growth, as the company expects cars pre-installed with its radios to increase significantly.
In the Energy sector, oil services and equipment company Weatherford International Ltd. contributed to performance. Weatherford, a provider of equipment and services used for the drilling, completion, and production of oil and natural gas wells, was a top contributor to performance. The company’s stock rose to a new high for the year after it posted a larger-than-expected profit for the first quarter. The company benefited as high oil prices fueled continuing demand from exploration and production companies. All of its divisions posted improvements in profitability due to better product mix and pricing improvements.
In Producer Goods and Services, Alliance Data Systems Corp. and ARAMARK had strong returns. Alliance, a provider of transaction, credit and marketing services was up nearly 26% during the quarter, hitting a new high for the year. The company announced that first quarter earnings rose 52% from a year ago and growth was balanced across all three of its business segments. We believe the quarter’s record performance was driven by continued strength of the marketing services segment, as well as a significant increase of new clients in 2005. ARAMARK performed well as the company’s chief executive, Joseph Neubauer, announced his bid to buy out the company. Some analysts believe the move may be due to the fact that Neubauer thought the company was undervalued by the stock market. We believe ARAMARK’s contract catering business is an attractive growth opportunity long term. They are a low-capital, cash-generative business and the buyers may see the potential for longer-term growth as opposed to the shorter-term approach the stock market has taken recently. However, given the stock’s recent strong performance, it was sold to capture profits.
Within Healthcare, shares of Fisher Scientific International, Inc. reacted positively to the announcement of the company’s merger with Thermo Electron Corp. In addition, the distributor of scientific equipment and instruments said its fourth quarter income more than doubled, driven by strong revenue growth across its various business segments.
We thank you for your investment and look forward to serving your investment needs in the future.
Goldman Sachs Growth Equity Management Team
July 18, 2006
Shares of the Goldman Sachs Variable Insurance Trust (“VIT”) Growth Opportunities Fund 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.
The VIT Growth Opportunities Fund invests in U.S. equity investments with a primary focus on mid-cap companies. The Fund is subject to market risk so that the value of the securities in which it invests may go up or down in response to the prospects of individual companies, particular industry sectors and/or general economic conditions. The securities of mid-capitalization companies involve greater risks than those associated with larger, more established companies and may be subject to more abrupt or erratic price movements. The Fund may invest in foreign securities, which may be more volatile and less liquid than investment in U.S. securities and will be subject to the risks of currency fluctuations and sudden economic or political developments. At times, the Fund may be unable to sell certain of its portfolio securities without a substantial drop in price, if at all. The Fund may
participate in the Initial Public Offering (IPO) market, and a portion of the Fund’s returns consequently may be attributable to its investment in IPOs. The market value of IPO shares may fluctuate considerably due to factors such as the absence of a prior public market, unseasoned trading, and the small number of shares available for trading and limited information about the issuer. When a fund’s asset base is small, IPOs may have a magnified impact on the fund’s performance. As a fund’s assets grow, it is probable that the effect of the fund’s investment in IPOs on its total returns may not be as significant, which could reduce the fund’s performance.
SECTOR ALLOCATION AS OF JUNE 30, 2006† |
Percentage of Net Assets
† The Fund is actively managed and, as such, its composition may differ over time. The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. Short-term Investments include repurchase agreements and securities lending collateral, if any. Figures in the above graph may not sum to 100% due to the exclusion of other assets and/or liabilities.
Shareholder Letter
Dear Shareholders:
This report provides an overview on the performance of the Goldman Sachs Variable Insurance Trust — Equity Index Fund from its inception on January 9, 2006* through June 30, 2006.
Market Review
Although the global equity markets began the year on a positive note and finished the second quarter with an appealing upturn, their fluctuations during May and June sorely tested investors’ mettle. U.S. Federal Reserve Board (the “Fed”) Chairman, Ben Bernanke, continued to establish credibility as a central banker, but facile expectations that he could serenely continue to walk the fine line of moderate growth with limited inflation proved too difficult to meet. A heady mix of inflation-fighting wording and troublesome inflation data brought steady equity selling in May, driving volatility measures to levels not seen since 2004. As hedge funds and risk managers adjusted to reduced market stability, the market’s weakness continued into mid-June, when the report of core inflation put its annual rate at 2.4%, matching its highest level since 2002. This effectively sealed the fate of a 17th consecutive hike in the federal funds target rate, which did indeed come to pass two weeks later on June 29. When the Fed’s statement accompanying the June 29 decision, which lifted short-term rates to 5.25%, appeared distinctly more accommodative than a jittery consensus had feared, the first half of 2006 was able to end with a vigorous rally in both share prices and investor sentiment.
After touching its lowest level since last November on June 14th, the Fund’s benchmark, the S&P 500 Index (“S&P”) bounced sharply to finish the month of June with a scant but positive 0.14% return. Still, after a strong first quarter return of 4.21%, its May travails left the S&P with a -1.44% return for the second quarter and an uninspiring 2.71% return since the start of 2006.
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 Composition
% of | ||||||
Company | Net Assets | Business | ||||
Exxon Mobil Corp. | 3.2 | % | Oil & Gas | |||
General Electric Co. | 2.9 | Industrial Conglomerates | ||||
Citigroup, Inc. | 2.1 | Diversified Financials | ||||
Bank of America Corp. | 1.9 | Banks | ||||
Microsoft Corp. | 1.8 | Software | ||||
Procter & Gamble Co. | 1.6 | Household Products | ||||
Johnson & Johnson | 1.5 | Pharmaceuticals | ||||
Pfizer, Inc. | 1.5 | Pharmaceuticals | ||||
American International Group, Inc. | 1.3 | Insurance | ||||
Altria Group, Inc. | 1.3 | Tobacco |
* The Goldman Sachs Variable Insurance Trust Equity Index Fund first began operations as the Allmerica Equity Index Fund (the “Predecessor AIT Fund”) of the Allmerica Investment Trust. On January 9, 2006, the Predecessor AIT Fund was reorganized as a new portfolio of the Goldman Sachs Variable Insurance Trust. Performance of the Predecessor AIT Fund prior to the reorganization is not provided in this letter because as part of the reorganization the Predecessor AIT Fund changed its investment adviser to Goldman Sachs Asset Management, L.P. In addition, the Goldman Sachs Fund that the Predecessor AIT Fund reorganized into had investment objectives and policies which were not identical to the Predecessor AIT Fund. Total return information about the Predecessor AIT Fund is provided in the Financial Highlights table, which is part of this report.
** Opinions expressed in this report represent our present opinions only. Reference to individual securities should not be construed as a commitment that such securities will be retained in the Fund. From time to time, the Fund may change the individual securities it holds, the number or types of securities held and the markets in which it invests. Fund holdings of stocks or bonds should not be relied upon in making investment decisions and should not be construed as research or investment advice regarding particular securities. References to individual securities do not constitute a recommendation to the investor to buy, hold or sell such securities. In addition, references to past performance of the Fund do not indicate future returns, which are not guaranteed and will vary. Furthermore, the value of shares of the Fund may fall as well as rise.
Performance Review
For the period from the Fund’s inception on January 9, 2006 to June 30, 2006, the Fund’s Service Shares generated a cumulative total return of -0.50%. This return compares to the -0.31% cumulative total return of the Fund’s benchmark, the S&P 500 Index (with dividends reinvested), over the same time period. As these returns indicate, the Fund’s performance was largely in line with that of its benchmark during the reporting period.
The market turbulence during the second quarter put defensive equity sectors into a leadership role. The top groups in the S&P 500 Index in June were Telecommunications Services, returning 4.76%; Utilities, returning 2.41%; Energy, returning 2.09%; and Consumer Staples, with a 1.52% return. The latter three were also the best performers for the full second quarter, as Utilities returned 5.69%; Energy returned 4.28%; and Consumer Staples posted a 2.93% return. Although the Telecommunications group returned -0.56% from April through June, its year-to-date return of 13.81%, powered by its first quarter return of 14.45%, was highest among the S&P 500 Index sectors. Energy stocks, with a 13.79% year-to-date return, were in second place.
Away from the winning sectors, gains were scarce in the second quarter. After a strong showing in the first quarter, returning 4.13%, Information Technology was the most challenged area in the second quarter, returning -1.61% in June and -9.62% over the full second quarter. This resulted in a - -5.89% return during the first half of the year. Competitive pressures led to persistent erosion in the heavily weighted shares of erstwhile stalwarts such as Microsoft Corp., Intel Corp., and Dell, Inc., consigning Technology stocks to the bottom of the performance rankings. The only other sector in the red on a year-to-date basis was Healthcare. After posting a return of 1.26% in the first three months of 2006, the often defensive sector has been anything but in 2006, showing a -5.11% return for the second quarter and a -4.19% return since the start of the year. While shares of drug makers have stabilized after liability fears gripped the industry in 2005, manufacturers of medical devices have been extremely weak thus far in 2006. Equity in defibrillator makers has eroded on product defect concerns, while antitrust threats have emerged at orthopedics companies. Finally, shares in care provider UnitedHealth Group, Inc. which was among the first companies to attract unwanted attention for irregularities in its awards of stock options to senior executives, have started to level off after strong gains in recent years.
It comes as no surprise that the largest contributors to the return of the S&P 500 for the first six months of 2006 were two Energy stocks, Exxon Mobil Corp., returning 10.35%, and
Schlumberger Ltd., returning 34.60%, as well as Telecommunications firm BellSouth Corp., which posted a 36.16% return. The largest detractors for the reporting period were Information Technology company Intel Corp, returning -23.11%, Healthcare firm UnitedHealth Group, Inc., which posted a -27.90% return, and financial firm American International Group, Inc. (AIG), which returned -13.04%.
The largest three overall contributors to performance in the Index for the six-month period were Allegheny Technologies, Inc., which returned 92.55%; Archer-Daniels-Midland Co., which posted a 68.34% return; and NuCor Corp., which returned 65.55%. The biggest three detractors from performance for the same time period were Dana Corp., which returned -62.12%; KB Home, which posted a -36.40% return; and Goodyear Tire & Rubber Co., which returned -36.13%.
We thank you for your investment and look forward to serving your investment needs in the future.
August 2, 2006
Shares of the Goldman Sachs Variable Insurance Trust (“VIT”) Equity Index Fund 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.
The VIT Equity Index Fund invests in a broadly diversified portfolio of large-cap U.S. equity investments and is subject to market risk so that the value of the securities in which it invests may go up or down in response to the prospects of individual companies, particular industry sectors and/or general economic conditions. The Fund’s performance may vary substantially from the performance of the benchmark it tracks (S&P 500 Index) as a result of share purchases and redemptions, transaction costs, expenses and other factors. The Fund may make investments in derivative instruments, including options, futures, swaps, structured securities and other derivative investments. Derivative instruments may involve a high degree of financial risk. These risks include the risk that a small movement in the price of the underlying security or benchmark may result in a disproportionately large movement, unfavorable or favorable, in the price of the derivative instrument; risks of default by a counterparty, and the risks that transactions may not be liquid.
SECTOR ALLOCATION AS OF JUNE 30, 2006† |
Percentage of Net Assets
† The Fund is actively managed and, as such, its composition may differ over time. The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. Short-term Investments include repurchase agreements and securities lending collateral, if any. Figures in the above graph may not sum to 100% due to the exclusion of other assets and/or liabilities.
Shareholder Letter
Dear Shareholders:
This report provides an overview on the performance of the Goldman Sachs Variable Insurance Trust — Core Fixed Income Fund from its inception on January 9, 2006* through June 30, 2006.
Market Review
Treasury prices fell over the period in response to heightened inflationary pressures and mixed economic data. Sustained high energy prices and increased intermediate goods costs added to inflation concerns and prompted expectations of higher interest rates. Economic data, however, was mixed. While annualized first quarter GDP was revised upwards to 5.6% from 5.3%, suggesting resiliency in U.S. economic strength, much of the economic data pointed to a gradual moderation in economic growth. Weaker residential home prices, softer equity markets, and continued strength in commodity prices raised concerns regarding the strength of the consumer. As anticipated, the Federal Reserve Board raised the target federal funds rate in four 25-basis point increments to 5.25%. Overall, the 10-year Treasury yield rose 74 basis points over the period, closing at 5.14%.
Investment Objective
The Fund seeks a total return consisting of capital appreciation and income that exceeds the total return of the Lehman Brothers Aggregate Bond Index.
* The Goldman Sachs Variable Insurance Trust Core Fixed Income Fund first began operations as the Allmerica Select Investment Grade Income Fund (the “Predecessor AIT Fund”) of the Allmerica Investment Trust. On January 9, 2006, the Predecessor AIT Fund was reorganized as a new portfolio of the Goldman Sachs Variable Insurance Trust. Performance of the Predecessor AIT Fund prior to the reorganization is not provided in this letter because as part of the reorganization the Predecessor AIT Fund changed its investment adviser to Goldman Sachs Asset Management, L.P. In addition, the Goldman Sachs Fund that the Predecessor AIT Fund reorganized into had investment objectives and policies which were not identical to the Predecessor AIT Fund. Total return information about the Predecessor AIT Fund is provided in the Financial Highlights table, which is part of this report.
Performance Review
For the period from the Fund’s inception on January 9, 2006 to June 30, 2006, the Fund’s Service Shares generated a cumulative total return of –1.02%. This return compares to the –1.04% cumulative total return of the Fund’s benchmark, the Lehman Brothers Aggregate Bond Index (with dividends reinvested), over the same time period.
The Fund marginally outperformed its benchmark during the reporting period, driven by a combination of top-down and bottom-up strategies. The Fund continued to hold a short duration positioning, based on our belief that interest rates would move higher than was priced in to the market. This short duration strategy was a key contributor to returns as interest rates rose over the period. The Fund’s currency strategy, particularly an underweight in the Great Britain pound and euro exposure, detracted from returns. The Fund continued to hold an underweight exposure to the corporate sector over the period. This positioning modestly detracted as the sector outperformed over the period. The Fund’s government and agency security selection, particularly within Treasury Inflation Protected Securities (TIPS), contributed to returns. Within mortgages, a preference for securities that have less exposure to volatility, and housing turnover, such as 15-year mortgage-backed securities, super-senior adjustable rate mortgages, and collateralized mortgage-backed securities, benefited performance.
We thank you for your investment and look forward to serving your investment needs in the future.
Goldman Sachs Fixed Income Management Team
July 18, 2006
Shares of the Goldman Sachs Variable Insurance Trust (“VIT”) Core Fixed Income Fund 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.
The VIT Core Fixed Income Fund’s investments in fixed income securities are subject to the risks associated with debt securities including credit and interest rate risk. The guarantee on U.S. government securities applies only to the underlying securities of the Fund if held to maturity and not to the value of the Fund’s shares. The Fund’s investments in mortgage-backed securities are subject to prepayment risks. These risks may result in greater share price volatility. The Fund may make substantial investments in derivative instruments, including options, financial futures, Eurodollar futures contracts, swaps, option on swaps, structured securities and other derivative investments. Derivative instruments may involve a high degree of financial risk. These risks include the risk that a small movement in the price of the underlying security or benchmark may result in a disproportionately large movement, unfavorable or favorable, in the price of the derivative instrument; risks of default by a counterparty, and the risks that transactions may not be liquid. Foreign and emerging markets investments may be more volatile and less liquid than investment in U.S. securities and will be subject to the risks of currency fluctuations and political developments. At times, the Fund may be unable to sell certain of its portfolio securities without a substantial drop in price, if at all. The Fund may also engage in foreign currency transactions for hedging purposes including cross hedging or for speculative purposes. Forward foreign currency exchange contracts are subject to the risk that the counterparty to the contract will default on its obligations.
SECTOR ALLOCATION AS OF JUNE 30, 2006† |
Percentage of Net Assets
† The percentage shown for each investment sector reflects the value of investments in that sector as a percentage of net assets. Short-term investments include repurchase agreements, if any. “Quasi-governments” include agency securities offered by companies such as Fannie Mae and Freddie Mac, which operate under a government charter. While they have 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. Figures in the above graph may not sum to 100% due to the exclusion of other assets and/or liabilities.
Shareholder Letter
Dear Shareholders:
This report provides an overview on the performance of the Goldman Sachs Variable Insurance Trust — Government Income Fund from its inception on January 9, 2006* through June 30, 2006.
Market Review
Treasury prices fell over the period in response to heightened inflationary pressures and mixed economic data. Sustained high energy prices and increased intermediate goods costs added to inflation concerns, and prompted expectations of higher interest rates. Economic data, however, was mixed. While annualized first quarter gross domestic product was revised upwards to 5.6% from 5.3%, suggesting resiliency in U.S. economic strength, much of the economic data pointed to a gradual moderation in economic growth. Weaker residential home prices, softer equity markets, and continued strength in commodity prices raised concerns regarding the strength of the consumer. As anticipated, the Federal Reserve Board raised the target federal funds rate in four 25-basis point increments to 5.25%. Overall, the 10-year Treasury yield rose 74 basis points over the period, closing at 5.14%.
Investment Objective
The Fund seeks a high level of current income, consistent with safety of principal.
* The Goldman Sachs Variable Insurance Trust Government Income Fund first began operations as the Allmerica Government Bond Fund (the “Predecessor AIT Fund”) of the Allmerica Investment Trust. On January 9, 2006, the Predecessor AIT Fund was reorganized as a new portfolio of the Goldman Sachs Variable Insurance Trust. Performance of the Predecessor AIT Fund prior to the reorganization is not provided in this letter because as part of the reorganization the Predecessor AIT Fund changed its investment adviser to Goldman Sachs Asset Management, L.P. In addition, the Goldman Sachs Fund that the Predecessor AIT Fund reorganized into had investment objectives and policies which were not identical to the Predecessor AIT Fund. Total return information about the Predecessor AIT Fund is provided in the Financial Highlights table, which is part of this report.
Performance Review
For the period from the Fund’s inception on January 9, 2006 to June 30, 2006, the Fund’s Service Shares generated a cumulative total return of –0.51%. This return compares to the –0.79% cumulative total return of the Fund’s benchmark, the Lehman Brothers Government/Mortgage Index (with dividends reinvested), over the same time period.
The Fund outperformed its benchmark during the reporting period, driven by a combination of top-down and bottom-up strategies. We maintained a defensive posture over the period, positioning the Fund to have a shorter duration relative to the Index based on our belief that interest rates would move higher. Although higher interest rates were a drag on returns, our short duration strategy was a meaningful contributor to returns as interest rates rose over the period, driven primarily by heightened inflationary pressures. We maintained an underweight exposure to mortgages over the period. This was due to negative fundamentals, such as low spread and implied volatility. We did, however, take the opportunity to add value in security-specific trades, and security selection across the collateralized and government sectors were key drivers of performance over the period. Within mortgages, our focus has been on securities we believe had less exposure to implied volatility, and housing turnover, such as 15-year mortgage-backed securities, super-senior adjustable-rate mortgage floaters and collateralized mortgage-backed securities. Within the government sector, our selection of short-dated Treasury and agency securities enhanced returns.
We thank you for your investment and look forward to serving your investment needs in the future.
Goldman Sachs Fixed Income Management Team
July 18, 2006
Shares of the Goldman Sachs Variable Insurance Trust (“VIT”) Government Income Fund 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.
The VIT Government Income Fund’s net asset value and yield are not guaranteed by the U.S. government or by its agencies, instrumentalities or sponsored enterprises. Investments in fixed income securities are subject to the risks associated with debt securities including credit and interest rate risk. The guarantee on U.S. government securities applies only to the underlying securities of the Fund if held to maturity and not to the value of the Fund’s shares. The Fund’s investments in mortgage-backed securities are subject to prepayment risks. These risks may result in greater share price volatility. The Fund may make substantial investments in derivative instruments, including options, financial futures, Eurodollar futures contracts, swaps, option on swaps, structured securities and other derivative investments. Derivative instruments may involve a high degree of financial risk. These risks include the risk that a small movement in the price of the underlying security or benchmark may result in a disproportionately large movement, unfavorable or favorable, in the price of the derivative instrument, risks of default by a counterparty, and the risks that transactions may not be liquid.
SECTOR ALLOCATION AS OF JUNE 30, 2006† |
Percentage of Net Assets
† The percentage shown for each investment sector reflects the value of investments in that sector as a percentage of net assets. Short-term investments include repurchase agreements, if any. Figures in the above graph may not sum to 100% due to the exclusion of other assets and/or liabilities.
Shareholder Letter
Dear Shareholders:
This report provides an overview on the performance of the Goldman Sachs Variable Insurance Trust — Money Market Fund from its inception on January 9, 2006* through June 30, 2006.
Market Review
Economic data was mixed in the first half of 2006. We witnessed a strong economy in the first quarter with first quarter gross domestic product of 5.6%. In addition, the labor markets continued to show signs of strength in both payrolls and initial jobless claims. However, a variety of factors seem to have changed the U.S. economy in the second quarter of 2006, from a robust economy to one of more moderate growth. This slowdown was seen in several areas, including the housing market, manufacturing and the labor market.
The Federal Reserve Open Market Committee (“FOMC”) continued its tightening campaign in the first half of 2006 and raised the federal funds rate by 25 basis points at each of its four meetings. This brought the federal funds rate to 5.25%, a five-year high. In his second testimony as the Chairman of the Federal Reserve Board (the “Fed”), Ben Bernanke, maintained his concerns about inflation, as it was higher than the Fed had expected. Also in his testimony, he suggested that the recent core Consumer Price Index report was not enough to assure another rate increase. Other key economic data between now and the next FOMC meeting on August 8th will include home sales, GDP, and employment numbers.
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.
Standardized | Standardized | 30-Day | ||||||||||||||
7-Day Current | 7-Day Effective | Average | Weighted Avg. | |||||||||||||
As of June 30, 2006 | Yield | Yield | Yield | Maturity (days) | ||||||||||||
VIT Money Market Fund | 4.65 | % | 4.76 | % | 4.59 | % | 27 |
An investment in a money market portfolio is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although a money market portfolio seeks to preserve the value of an investment at $1.00 per share, it is possible to lose money by investing in a money market portfolio.
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.
* The Goldman Sachs Variable Insurance Trust Money Market Fund first began operations as the Allmerica Money Market Fund (the “Predecessor AIT Fund”) of the Allmerica Investment Trust. On January 9, 2006, the Predecessor AIT Fund was reorganized as a new portfolio of the Goldman Sachs Variable Insurance Trust. Performance of the Predecessor AIT Fund prior to the reorganization is not provided in this letter because as part of the reorganization the Predecessor AIT Fund changed its investment adviser to Goldman Sachs Asset Management, L.P. In addition, the Goldman Sachs Fund that the Predecessor AIT Fund reorganized into had investment objectives and policies which were not identical to the Predecessor AIT Fund. Total return information about the Predecessor AIT Fund is provided in the Financial Highlights table, which is part of this report.
Performance Review
For the period from its inception on January 9, 2006 to June 30, 2006, the Fund’s Service Shares generated a cumulative total return of 2.04%.
We maintained a neutral stance for the Fund’s portfolio during the reporting period, primarily purchasing securities on the shorter end of the yield curve, mainly in the one- to three-month sector. Throughout the period we maintained a weighted average maturity for the Fund in the 26-40 day range. The market had anticipated the four tightenings by the FOMC and, based on this assessment and the shape of the yield curve, we did not believe the longer end of the curve offered much value. We were able to marginally purchase securities in the one-year sector throughout the reporting period during times of sell-offs. Going forward, we will look for value on the longer end of the curve as we believe the FOMC may be approaching the end of its tightening cycle.
We thank you for your investment and look forward to serving your investment needs in the future.
Goldman Sachs Money Market Management Team
July 18, 2006
Shares of the Goldman Sachs Variable Insurance Trust (“VIT”) Money Market Fund 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.
SECTOR ALLOCATION AS OF JUNE 30, 2006† |
Tax-Exempt Fund
† The Fund is actively managed and, as such, its composition may differ over time. 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 chart may not sum to 100% due to the exclusion of other assets and/or liabilities.
Schedule of Investments
Shares | Description | Value | ||||||||
Common Stocks – 99.9% | ||||||||||
Aerospace & Defense – 1.9% | ||||||||||
57,800 | Alliant Techsystems, Inc.* | $ | 4,413,030 | |||||||
Apparel/Shoes – 3.6% | ||||||||||
140,780 | Chico’s FAS, Inc.* | 3,798,245 | ||||||||
66,600 | Coach, Inc.* | 1,991,340 | ||||||||
139,570 | Urban Outfitters, Inc.* | 2,441,079 | ||||||||
8,230,664 | ||||||||||
Audio & Visual Equipment – 2.0% | ||||||||||
54,300 | Harman International Industries, Inc. | 4,635,591 | ||||||||
Audio Technology – 0.8% | ||||||||||
73,900 | Dolby Laboratories, Inc.* | 1,721,870 | ||||||||
Auto Parts & Related – 1.5% | ||||||||||
250,700 | Gentex Corp. | 3,509,800 | ||||||||
Banks – 1.4% | ||||||||||
42,610 | Commerce Bancorp, Inc.(a) | 1,519,899 | ||||||||
66,870 | TCF Financial Corp. | 1,768,711 | ||||||||
3,288,610 | ||||||||||
Beverages – 2.3% | ||||||||||
74,710 | Fortune Brands, Inc. | 5,305,157 | ||||||||
Biotechnology – 1.4% | ||||||||||
117,200 | MedImmune, Inc.* | 3,176,120 | ||||||||
Broadcasting & Cable/Satellite TV – 3.8% | ||||||||||
82,200 | Cablevision Systems Corp.* | 1,763,190 | ||||||||
438,700 | Entravision Communications Corp.* | 3,759,659 | ||||||||
208,800 | XM Satellite Radio Holdings, Inc.* | 3,058,920 | ||||||||
8,581,769 | ||||||||||
Business Software & Services – 2.9% | ||||||||||
181,500 | Ceridian Corp.* | 4,435,860 | ||||||||
54,400 | ChoicePoint, Inc.* | 2,272,288 | ||||||||
6,708,148 | ||||||||||
Commercial Services – 4.2% | ||||||||||
87,040 | Alliance Data Systems Corp.* | 5,119,693 | ||||||||
15,500 | �� | Bankrate, Inc.*(a) | 585,280 | |||||||
70,400 | Iron Mountain, Inc.* | 2,631,552 | ||||||||
43,280 | Suntech Power Holdings Co., Ltd. ADR* | 1,222,660 | ||||||||
9,559,185 | ||||||||||
Computer Hardware – 2.0% | ||||||||||
110,000 | Jabil Circuit, Inc. | 2,816,000 | ||||||||
53,094 | Zebra Technologies Corp.* | 1,813,691 | ||||||||
4,629,691 | ||||||||||
Computer Software – 4.4% | ||||||||||
358,066 | Activision, Inc.* | 4,074,791 | ||||||||
111,530 | Cognos, Inc.* | 3,173,028 | ||||||||
61,000 | NAVTEQ* | 2,725,480 | ||||||||
9,973,299 | ||||||||||
Consumer Products & Services – 1.5% | ||||||||||
3,135 | Sotheby’s Holdings, Inc.* | 82,294 | ||||||||
80,600 | Weight Watchers International, Inc. | 3,295,734 | ||||||||
3,378,028 | ||||||||||
Drugs & Medicine – 1.3% | ||||||||||
90,700 | OSI Pharmaceuticals, Inc.*(a) | 2,989,472 | ||||||||
Electrical Equipment – 1.2% | ||||||||||
118,800 | Dresser-Rand Group, Inc.* | 2,789,424 | ||||||||
Financial Services – 1.8% | ||||||||||
119,700 | MoneyGram International, Inc. | 4,063,815 | ||||||||
Financials – 0.8% | ||||||||||
17,600 | Legg Mason, Inc. | 1,751,552 | ||||||||
Foods – 1.4% | ||||||||||
59,900 | The Hershey Co. | 3,298,693 | ||||||||
Gaming/Lodging – 1.6% | ||||||||||
31,580 | Harrah’s Entertainment, Inc. | 2,247,864 | ||||||||
51,200 | Hilton Hotels Corp. | 1,447,936 | ||||||||
3,695,800 | ||||||||||
Health Care Services – 3.9% | ||||||||||
64,800 | Covance, Inc.* | 3,967,056 | ||||||||
51,100 | Omnicare, Inc. | 2,423,162 | ||||||||
75,860 | VCA Antech, Inc.* | 2,422,210 | ||||||||
8,812,428 | ||||||||||
Homebuilding & Related – 1.9% | ||||||||||
100,500 | American Standard Companies, Inc. | 4,348,635 | ||||||||
Housewares – 1.8% | ||||||||||
123,400 | Williams-Sonoma, Inc. | 4,201,770 | ||||||||
Insurance – 1.3% | ||||||||||
96,100 | Willis Group Holdings Ltd. | 3,084,810 | ||||||||
Internet & Online – 1.2% | ||||||||||
355,100 | CNET Networks, Inc.* | 2,833,698 | ||||||||
Manufacturing – 4.5% | ||||||||||
20,300 | Chicago Bridge & Iron Co. NV | 490,245 | ||||||||
15,800 | ITT Corp. | 782,100 | ||||||||
99,900 | Pentair, Inc. | 3,415,581 | ||||||||
79,190 | Rockwell Automation, Inc. | 5,702,472 | ||||||||
10,390,398 | ||||||||||
Medical Products – 5.0% | ||||||||||
66,740 | C.R. Bard, Inc. | 4,889,372 | ||||||||
31,060 | Fisher Scientific International, Inc.* | 2,268,933 | ||||||||
129,000 | St. Jude Medical, Inc.* | 4,182,180 | ||||||||
11,340,485 | ||||||||||
Medical Supplies – 1.6% | ||||||||||
99,990 | Charles River Laboratories International, Inc.* | 3,679,632 | ||||||||
18
Shares | Description | Value | ||||||||
Common Stocks – (continued) | ||||||||||
Networking/Telecommunications Equipment – 4.9% | ||||||||||
89,710 | Amphenol Corp. | $ | 5,020,172 | |||||||
111,300 | FLIR Systems, Inc.* | 2,455,278 | ||||||||
51,750 | Research In Motion Ltd.* | 3,610,597 | ||||||||
11,086,047 | ||||||||||
Oil & Gas – 5.0% | ||||||||||
105,650 | Cameron International Corp.* | 5,046,901 | ||||||||
87,700 | Newfield Exploration Co.* | 4,292,038 | ||||||||
56,300 | Quicksilver Resources, Inc.*(a) | 2,072,403 | ||||||||
11,411,342 | ||||||||||
Oil Well Services & Equipment – 5.8% | ||||||||||
78,200 | Grant Prideco, Inc.* | 3,499,450 | ||||||||
117,900 | Smith International, Inc. | 5,243,013 | ||||||||
89,310 | Weatherford International Ltd.* | 4,431,562 | ||||||||
13,174,025 | ||||||||||
Producer Goods – 2.1% | ||||||||||
62,900 | W.W. Grainger, Inc. | 4,731,967 | ||||||||
Publishing – 2.0% | ||||||||||
85,200 | Lamar Advertising Co.* | 4,588,872 | ||||||||
Restaurants – 1.1% | ||||||||||
67,100 | P.F. Chang’s China Bistro, Inc.*(a) | 2,551,142 | ||||||||
Retailing – 0.9% | ||||||||||
71,000 | Advance Auto Parts, Inc. | 2,051,900 | ||||||||
Semiconductors/Semi-Cap Equipment – 7.8% | ||||||||||
51,900 | Advanced Micro Devices, Inc.* | 1,267,398 | ||||||||
77,900 | FormFactor, Inc.* | 3,476,677 | ||||||||
156,400 | Linear Technology Corp. | 5,237,836 | ||||||||
23,050 | Marvell Technology Group Ltd.* | 1,021,806 | ||||||||
34,900 | Microchip Technology, Inc. | 1,170,895 | ||||||||
126,000 | Tessera Technologies, Inc.* | 3,465,000 | ||||||||
94,700 | Xilinx, Inc. | 2,144,955 | ||||||||
17,784,567 | ||||||||||
Technology Services – 4.3% | ||||||||||
128,411 | Cogent, Inc.*(a) | 1,935,154 | ||||||||
63,410 | Cognizant Technology Solutions Corp.* | 4,271,932 | ||||||||
108,700 | NeuStar, Inc.* | 3,668,625 | ||||||||
9,875,711 | ||||||||||
Telecommunications – 3.0% | ||||||||||
69,000 | American Tower Corp.* | 2,147,280 | ||||||||
136,000 | Crown Castle International Corp.* | 4,697,440 | ||||||||
6,844,720 | ||||||||||
TOTAL COMMON STOCKS | ||||||||||
(Cost $235,677,381) | $ | 228,491,867 | ||||||||
Principal | Interest | Maturity | ||||||||||||
Amount | Rate | Date | Value | |||||||||||
Repurchase Agreement(b) – 0.2% | ||||||||||||||
Joint Repurchase Agreement Account II | ||||||||||||||
$ | 400,000 | 5.28 | % | 07/03/2006 | $ | 400,000 | ||||||||
Maturity Value: $400,175 | ||||||||||||||
(Cost $400,000) | ||||||||||||||
TOTAL REPURCHASE AGREEMENT | ||||||||||||||
(Cost $400,000) | $ | 400,000 | ||||||||||||
TOTAL INVESTMENTS BEFORE SECURITIES LENDING COLLATERAL | ||||||||||||||
(Cost $236,077,381) | $ | 228,891,867 | ||||||||||||
Shares | Description | Value | ||||||||
Securities Lending Collateral – 4.8% | ||||||||||
10,962,000 | Boston Global Investment Trust – Enhanced Portfolio | $ | 10,962,000 | |||||||
(Cost $10,962,000) | ||||||||||
TOTAL INVESTMENTS – 104.9% | ||||||||||
(Cost $247,039,381) | $ | 239,853,867 | ||||||||
LIABILITIES IN EXCESS OF | ||||||||||
OTHER ASSETS – (4.9)% | (11,293,773 | ) | ||||||||
NET ASSETS – 100.0% | $ | 228,560,094 | ||||||||
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 portion of security is on loan. | |
(b) | Joint repurchase agreement was entered into on June 30, 2006. Additional investment information appears on page 39. |
Investment Abbreviation: | ||||||
ADR | — | American Depositary Receipt | ||||
19
Schedule of Investments
Shares | Description | Value | ||||||||
Common Stocks – 98.9% | ||||||||||
Aerospace & Defense – 2.1% | ||||||||||
15,000 | General Dynamics Corp. | $ | 981,900 | |||||||
4,800 | Goodrich Corp. | 193,392 | ||||||||
4,600 | L-3 Communications Holdings, Inc. | 346,932 | ||||||||
13,182 | Lockheed Martin Corp. | 945,677 | ||||||||
12,792 | Northrop Grumman Corp. | 819,455 | ||||||||
16,600 | Raytheon Co. | 739,862 | ||||||||
6,200 | Rockwell Collins, Inc. | 346,394 | ||||||||
29,638 | The Boeing Co. | 2,427,649 | ||||||||
37,500 | United Technologies Corp. | 2,378,250 | ||||||||
9,179,511 | ||||||||||
Air Freight & Couriers – 1.1% | ||||||||||
11,300 | FedEx Corp. | 1,320,518 | ||||||||
2,000 | Ryder System, Inc. | 116,860 | ||||||||
40,300 | United Parcel Service, Inc. Class B | 3,317,899 | ||||||||
4,755,277 | ||||||||||
Airlines – 0.1% | ||||||||||
26,318 | Southwest Airlines Co. | 430,826 | ||||||||
Auto Components – 0.2% | ||||||||||
2,600 | Cooper Tire & Rubber Co.(a) | 28,964 | ||||||||
7,200 | Johnson Controls, Inc. | 591,984 | ||||||||
7,000 | The Goodyear Tire & Rubber Co.*(a) | 77,700 | ||||||||
698,648 | ||||||||||
Automobiles – 0.4% | ||||||||||
68,681 | Ford Motor Co. | 475,959 | ||||||||
21,000 | General Motors Corp.(a) | 625,590 | ||||||||
9,900 | Harley-Davidson, Inc. | 543,411 | ||||||||
1,644,960 | ||||||||||
Banks – 7.1% | ||||||||||
12,200 | AmSouth Bancorp. | 322,690 | ||||||||
169,028 | Bank of America Corp. | 8,130,247 | ||||||||
28,700 | Bank of New York Co., Inc. | 924,140 | ||||||||
20,200 | BB&T Corp. | 840,118 | ||||||||
5,950 | Comerica, Inc. | 309,341 | ||||||||
6,900 | Commerce Bancorp, Inc. | 246,123 | ||||||||
4,700 | Compass Bancshares, Inc. | 261,320 | ||||||||
20,505 | Fifth Third Bancorp. | 757,660 | ||||||||
4,300 | First Horizon National Corp. | 172,860 | ||||||||
9,500 | Golden West Financial Corp. | 704,900 | ||||||||
9,049 | Huntington Bancshares, Inc. | 213,375 | ||||||||
14,900 | KeyCorp | 531,632 | ||||||||
3,000 | M&T Bank Corp. | 353,760 | ||||||||
8,200 | Marshall & Ilsley Corp. | 375,068 | ||||||||
15,300 | Mellon Financial Corp. | 526,779 | ||||||||
20,300 | National City Corp. | 734,657 | ||||||||
17,050 | North Fork Bancorp., Inc. | 514,399 | ||||||||
6,800 | Northern Trust Corp. | 376,040 | ||||||||
10,900 | PNC Financial Services Group, Inc. | 764,853 | ||||||||
16,855 | Regions Financial Corp. | 558,238 | ||||||||
13,785 | Sovereign Bancorp, Inc. | 279,973 | ||||||||
13,500 | SunTrust Banks, Inc. | 1,029,510 | ||||||||
10,900 | Synovus Financial Corp. | 291,902 | ||||||||
66,034 | U.S. Bancorp | 2,039,130 | ||||||||
59,727 | Wachovia Corp. | 3,230,036 | ||||||||
35,640 | Washington Mutual, Inc. | 1,624,471 | ||||||||
62,230 | Wells Fargo & Co. | 4,174,388 | ||||||||
4,000 | Zions Bancorp. | 311,760 | ||||||||
30,599,370 | ||||||||||
Beverages – 2.1% | ||||||||||
28,800 | Anheuser-Busch Companies, Inc. | 1,312,992 | ||||||||
3,200 | Brown-Forman Corp. Class B | 228,640 | ||||||||
11,600 | Coca-Cola Enterprises, Inc. | 236,292 | ||||||||
7,600 | Constellation Brands, Inc.* | 190,000 | ||||||||
2,100 | Molson Coors Brewing Co. Class B | 142,548 | ||||||||
5,200 | Pepsi Bottling Group, Inc. | 167,180 | ||||||||
61,210 | PepsiCo., Inc. | 3,675,048 | ||||||||
76,100 | The Coca-Cola Co. | 3,273,822 | ||||||||
9,226,522 | ||||||||||
Biotechnology – 1.2% | ||||||||||
43,708 | Amgen, Inc.* | 2,851,073 | ||||||||
12,685 | Biogen Idec, Inc.* | 587,696 | ||||||||
9,700 | Genzyme Corp.* | 592,185 | ||||||||
16,800 | Gilead Sciences, Inc.* | 993,888 | ||||||||
8,900 | MedImmune, Inc.* | 241,190 | ||||||||
5,266,032 | ||||||||||
Building Products – 0.2% | ||||||||||
6,500 | American Standard Companies, Inc. | 281,255 | ||||||||
14,900 | Masco Corp. | 441,636 | ||||||||
722,891 | ||||||||||
Chemicals – 1.5% | ||||||||||
8,400 | Air Products & Chemicals, Inc. | 536,928 | ||||||||
2,600 | Ashland, Inc. | 173,420 | ||||||||
35,577 | Dow Chemical Co. | 1,388,570 | ||||||||
34,200 | E.I. du Pont de Nemours & Co. | 1,422,720 | ||||||||
2,900 | Eastman Chemical Co. | 156,600 | ||||||||
6,600 | Ecolab, Inc. | 267,828 | ||||||||
4,300 | Hercules, Inc.* | 65,618 | ||||||||
3,100 | International Flavors & Fragrances, Inc. | 109,244 | ||||||||
10,127 | Monsanto Co. | 852,592 | ||||||||
6,100 | PPG Industries, Inc. | 402,600 | ||||||||
11,900 | Praxair, Inc. | 642,600 | ||||||||
5,475 | Rohm & Haas Co. | 274,407 | ||||||||
2,600 | Sigma-Aldrich Corp. | 188,864 | ||||||||
6,481,991 | ||||||||||
Commercial Services & Supplies – 1.0% | ||||||||||
8,700 | Allied Waste Industries, Inc.* | 98,832 | ||||||||
5,100 | Apollo Group, Inc.* | 263,517 | ||||||||
4,200 | Avery Dennison Corp. | 243,852 |
20
Shares | Description | Value | ||||||||
Common Stocks – (continued) | ||||||||||
Commercial Services & Supplies – (continued) | ||||||||||
37,133 | Cendant Corp. | $ | 604,896 | |||||||
5,300 | Cintas Corp. | 210,728 | ||||||||
5,500 | Convergys Corp.* | 107,250 | ||||||||
4,900 | Equifax, Inc. | 168,266 | ||||||||
6,550 | Fiserv, Inc.* | 297,108 | ||||||||
12,000 | H&R Block, Inc. | 286,320 | ||||||||
4,900 | Monster Worldwide, Inc.* | 209,034 | ||||||||
8,200 | Pitney Bowes, Inc. | 338,660 | ||||||||
8,200 | R.R. Donnelley & Sons Co. | 261,990 | ||||||||
6,500 | Robert Half International, Inc. | 273,000 | ||||||||
5,208 | Sabre Holdings Corp. | 114,576 | ||||||||
20,135 | Waste Management, Inc. | 722,444 | ||||||||
4,200,473 | ||||||||||
Communications Equipment – 2.7% | ||||||||||
4,585 | ADC Telecommunications, Inc.* | 77,303 | ||||||||
6,300 | Andrew Corp.* | 55,818 | ||||||||
15,831 | Avaya, Inc.* | 180,790 | ||||||||
23,000 | Ciena Corp.* | 110,630 | ||||||||
226,000 | Cisco Systems, Inc.* | 4,413,780 | ||||||||
7,700 | Comverse Technology, Inc.* | 152,229 | ||||||||
57,500 | Corning, Inc.* | 1,390,925 | ||||||||
65,200 | JDS Uniphase Corp.* | 164,956 | ||||||||
21,200 | Juniper Networks, Inc.* | 338,988 | ||||||||
158,882 | Lucent Technologies, Inc.* | 384,495 | ||||||||
91,335 | Motorola, Inc. | 1,840,400 | ||||||||
62,200 | QUALCOMM, Inc. | 2,492,354 | ||||||||
16,300 | Tellabs, Inc.* | 216,953 | ||||||||
11,819,621 | ||||||||||
Computers & Peripherals – 3.4% | ||||||||||
31,500 | Apple Computer, Inc.* | 1,799,280 | ||||||||
84,300 | Dell, Inc.* | 2,057,763 | ||||||||
88,000 | EMC Corp.* | 965,360 | ||||||||
11,260 | Gateway, Inc.* | 21,394 | ||||||||
103,598 | Hewlett-Packard Co. | 3,281,985 | ||||||||
57,400 | International Business Machines Corp. | 4,409,468 | ||||||||
3,800 | Lexmark International, Inc.* | 212,154 | ||||||||
6,600 | NCR Corp.* | 241,824 | ||||||||
13,700 | Network Appliance, Inc.* | 483,610 | ||||||||
13,200 | Nvidia Corp.* | 281,028 | ||||||||
6,800 | SanDisk Corp.* | 346,664 | ||||||||
131,500 | Sun Microsystems, Inc.* | 545,725 | ||||||||
14,646,255 | ||||||||||
Construction & Engineering – 0.1% | ||||||||||
3,300 | Fluor Corp. | 306,669 | ||||||||
Construction Materials – 0.1% | ||||||||||
3,700 | Vulcan Materials Co. | 288,600 | ||||||||
Containers & Packaging – 0.2% | ||||||||||
4,100 | Ball Corp. | 151,864 | ||||||||
4,000 | Bemis Co., Inc. | 122,480 | ||||||||
5,400 | Pactiv Corp.* | 133,650 | ||||||||
3,108 | Sealed Air Corp. | 161,865 | ||||||||
4,300 | Temple-Inland, Inc. | 184,341 | ||||||||
754,200 | ||||||||||
Diversified Financials – 8.5% | ||||||||||
45,600 | American Express Co. | 2,426,832 | ||||||||
8,980 | Ameriprise Financial, Inc. | 401,137 | ||||||||
11,137 | Capital One Financial Corp. | 951,657 | ||||||||
7,300 | CIT Group, Inc. | 381,717 | ||||||||
184,140 | Citigroup, Inc. | 8,882,914 | ||||||||
22,698 | Countrywide Financial Corp. | 864,340 | ||||||||
15,300 | E-Trade Financial Corp.* | 349,146 | ||||||||
35,800 | Fannie Mae | 1,721,980 | ||||||||
3,300 | Federated Investors, Inc. Class B | 103,950 | ||||||||
5,430 | Franklin Resources, Inc. | 471,378 | ||||||||
25,500 | Freddie Mac | 1,453,755 | ||||||||
16,000 | Goldman Sachs Group, Inc. | 2,406,880 | ||||||||
128,625 | J.P. Morgan Chase & Co. | 5,402,250 | ||||||||
8,300 | Janus Capital Group, Inc. | 148,570 | ||||||||
4,700 | Legg Mason, Inc. | 467,744 | ||||||||
19,900 | Lehman Brothers Holdings, Inc. | 1,296,485 | ||||||||
34,200 | Merrill Lynch & Co., Inc. | 2,378,952 | ||||||||
9,200 | Moody’s Corp. | 501,032 | ||||||||
39,734 | Morgan Stanley | 2,511,586 | ||||||||
10,300 | Principal Financial, Inc. | 573,195 | ||||||||
15,171 | SLM Corp. | 802,849 | ||||||||
12,400 | State Street Corp. | 720,316 | ||||||||
9,800 | T. Rowe Price Group, Inc. | 370,538 | ||||||||
4,352 | The Bear Stearns Companies, Inc. | 609,628 | ||||||||
38,000 | The Charles Schwab Corp. | 607,240 | ||||||||
36,806,071 | ||||||||||
Diversified Telecommunication Services – 3.3% | ||||||||||
14,500 | ALLTEL Corp. | 925,535 | ||||||||
144,382 | AT&T, Inc. | 4,026,814 | ||||||||
67,000 | BellSouth Corp. | 2,425,400 | ||||||||
4,400 | CenturyTel, Inc. | 163,460 | ||||||||
12,400 | Citizens Communications Co. | 161,820 | ||||||||
5,641 | Embarq Corp.* | 231,204 | ||||||||
56,863 | Qwest Communications International, Inc.* | 460,021 | ||||||||
110,210 | Sprint Nextel Corp. | 2,203,098 | ||||||||
108,330 | Verizon Communications, Inc. | 3,627,972 | ||||||||
14,225,324 | ||||||||||
Electric Utilities – 2.8% | ||||||||||
24,100 | AES Corp.* | 444,645 | ||||||||
6,200 | Allegheny Energy, Inc.* | 229,834 | ||||||||
7,500 | Ameren Corp. | 378,750 | ||||||||
14,540 | American Electric Power Co., Inc. | 497,995 | ||||||||
12,098 | CenterPoint Energy, Inc. | 151,225 | ||||||||
8,800 | CMS Energy Corp.* | 113,872 | ||||||||
9,000 | Consolidated Edison, Inc. | 399,960 | ||||||||
6,550 | Constellation Energy Group, Inc. | 357,106 | ||||||||
12,950 | Dominion Resources, Inc. | 968,531 | ||||||||
6,800 | DTE Energy Co. | 277,032 | ||||||||
21
Shares | Description | Value | ||||||||
Common Stocks – (continued) | ||||||||||
Electric Utilities – (continued) | ||||||||||
12,000 | Edison International | $ | 468,000 | |||||||
7,800 | Entergy Corp. | 551,850 | ||||||||
24,900 | Exelon Corp. | 1,415,067 | ||||||||
12,300 | FirstEnergy Corp. | 666,783 | ||||||||
14,900 | FPL Group, Inc. | 616,562 | ||||||||
12,700 | PG&E Corp. | 498,856 | ||||||||
3,600 | Pinnacle West Capital Corp. | 143,676 | ||||||||
14,000 | PPL Corp. | 452,200 | ||||||||
8,977 | Progress Energy, Inc. | 384,844 | ||||||||
9,300 | Public Service Enterprise Group, Inc. | 614,916 | ||||||||
27,400 | Southern Co. | 878,170 | ||||||||
8,300 | TECO Energy, Inc. | 124,002 | ||||||||
17,080 | TXU Corp. | 1,021,213 | ||||||||
15,410 | Xcel Energy, Inc. | 295,564 | ||||||||
11,950,653 | ||||||||||
Electrical Equipment – 0.5% | ||||||||||
6,100 | American Power Conversion Corp. | 118,889 | ||||||||
3,500 | Cooper Industries Ltd. | 325,220 | ||||||||
15,300 | Emerson Electric Co. | 1,282,293 | ||||||||
6,500 | Rockwell Automation, Inc. | 468,065 | ||||||||
2,194,467 | ||||||||||
Electronic Equipment & Instruments – 0.4% | ||||||||||
15,824 | Agilent Technologies, Inc.* | 499,405 | ||||||||
6,700 | Jabil Circuit, Inc. | 171,520 | ||||||||
5,525 | Molex, Inc. | 185,474 | ||||||||
4,500 | PerkinElmer, Inc. | 94,050 | ||||||||
21,100 | Sanmina Corp.* | 97,060 | ||||||||
34,100 | Solectron Corp.* | 116,622 | ||||||||
10,016 | Symbol Technologies, Inc. | 108,073 | ||||||||
3,200 | Tektronix, Inc. | 94,144 | ||||||||
6,200 | Thermo Electron Corp.* | 224,688 | ||||||||
3,700 | Waters Corp.* | 164,280 | ||||||||
1,755,316 | ||||||||||
Energy Equipment & Services – 2.0% | ||||||||||
12,580 | Baker Hughes, Inc. | 1,029,673 | ||||||||
11,900 | BJ Services Co. | 443,394 | ||||||||
19,100 | Halliburton Co. | 1,417,411 | ||||||||
11,700 | Nabors Industries Ltd.* | 395,343 | ||||||||
6,400 | National-Oilwell Varco, Inc.* | 405,248 | ||||||||
5,000 | Noble Corp. | 372,100 | ||||||||
4,100 | Rowan Cos., Inc. | 145,919 | ||||||||
43,800 | Schlumberger Ltd. | 2,851,818 | ||||||||
12,027 | Transocean, Inc.* | 966,009 | ||||||||
13,100 | Weatherford International Ltd.* | 650,022 | ||||||||
8,676,937 | ||||||||||
Food & Drug Retailing – 1.1% | ||||||||||
30,400 | CVS Corp. | 933,280 | ||||||||
16,600 | Safeway, Inc. | 431,600 | ||||||||
7,473 | SUPERVALU, Inc. | 229,421 | ||||||||
22,900 | SYSCO Corp. | 699,824 | ||||||||
26,900 | The Kroger Co. | 588,034 | ||||||||
37,500 | Walgreen Co. | 1,681,500 | ||||||||
5,300 | Whole Foods Market, Inc. | 342,592 | ||||||||
4,906,251 | ||||||||||
Food Products – 1.2% | ||||||||||
24,249 | Archer-Daniels-Midland Co. | 1,000,999 | ||||||||
7,000 | Campbell Soup Co. | 259,770 | ||||||||
19,000 | ConAgra Foods, Inc. | 420,090 | ||||||||
4,900 | Dean Foods Co.* | 182,231 | ||||||||
13,100 | General Mills, Inc. | 676,746 | ||||||||
12,300 | H.J. Heinz Co. | 507,006 | ||||||||
9,000 | Kellogg Co. | 435,870 | ||||||||
4,800 | McCormick & Co., Inc. | 161,040 | ||||||||
27,900 | Sara Lee Corp. | 446,958 | ||||||||
6,500 | The Hershey Co. | 357,955 | ||||||||
9,800 | Tyson Foods, Inc. | 145,628 | ||||||||
8,350 | Wm. Wrigley Jr. Co. | 378,756 | ||||||||
4,973,049 | ||||||||||
Gas Utilities – 0.2% | ||||||||||
6,700 | KeySpan Corp. | 270,680 | ||||||||
1,700 | Nicor, Inc. | 70,550 | ||||||||
1,600 | Peoples Energy Corp. | 57,456 | ||||||||
9,513 | Sempra Energy | 432,651 | ||||||||
831,337 | ||||||||||
Healthcare Equipment & Supplies – 1.7% | ||||||||||
7,100 | Applera Corp. – Applied Biosystems Group | 229,685 | ||||||||
2,100 | Bausch & Lomb, Inc. | 102,984 | ||||||||
24,300 | Baxter International, Inc. | 893,268 | ||||||||
9,200 | Becton, Dickinson and Co. | 562,396 | ||||||||
9,325 | Biomet, Inc. | 291,779 | ||||||||
44,806 | Boston Scientific Corp.* | 754,533 | ||||||||
3,800 | C.R. Bard, Inc. | 278,388 | ||||||||
4,700 | Fisher Scientific International, Inc.* | 343,335 | ||||||||
7,500 | IMS Health, Inc. | 201,375 | ||||||||
44,800 | Medtronic, Inc. | 2,102,016 | ||||||||
2,000 | Millipore Corp.* | 125,980 | ||||||||
5,000 | Patterson Cos., Inc.* | 174,650 | ||||||||
13,500 | St. Jude Medical, Inc.* | 437,670 | ||||||||
10,800 | Stryker Corp. | 454,788 | ||||||||
9,170 | Zimmer Holdings, Inc.* | 520,123 | ||||||||
7,472,970 | ||||||||||
Healthcare Providers & Services – 2.5% | ||||||||||
20,892 | Aetna, Inc. | 834,217 | ||||||||
7,700 | AmerisourceBergen Corp. | 322,784 | ||||||||
15,500 | Cardinal Health, Inc | 997,115 | ||||||||
16,300 | Curemark Rx, Inc. | 812,881 | ||||||||
4,400 | CIGNA Corp. | 433,444 | ||||||||
5,800 | Coventry Health Care, Inc.* | 318,652 | ||||||||
5,400 | Express Scripts, Inc.* | 387,396 | ||||||||
15,200 | HCA, Inc. | 655,880 | ||||||||
22
Shares | Description | Value | ||||||||
Common Stocks – (continued) | ||||||||||
Healthcare Providers & Services – (continued) | ||||||||||
9,300 | Health Management Associates, Inc. | $ | 183,303 | |||||||
6,200 | Humana, Inc.* | 332,940 | ||||||||
4,600 | Laboratory Corp. of America Holdings* | 286,258 | ||||||||
3,100 | Manor Care, Inc. | 145,452 | ||||||||
11,314 | McKesson Corp. | 534,926 | ||||||||
6,000 | Quest Diagnostics, Inc. | 359,520 | ||||||||
18,650 | Tenet Healthcare Corp.* | 130,177 | ||||||||
50,000 | UnitedHealth Group, Inc. | 2,239,000 | ||||||||
23,600 | WellPoint, Inc.* | 1,717,372 | ||||||||
10,691,317 | ||||||||||
Hotels, Restaurants & Leisure – 1.5% | ||||||||||
16,200 | Carnival Corp. | 676,188 | ||||||||
4,500 | Darden Restaurants, Inc. | 177,300 | ||||||||
6,900 | Harrah’s Entertainment, Inc. | 491,142 | ||||||||
12,100 | Hilton Hotels Corp. | 342,188 | ||||||||
12,000 | International Game Technology | 455,280 | ||||||||
11,900 | Marriott International, Inc. | 453,628 | ||||||||
46,100 | McDonald’s Corp. | 1,548,960 | ||||||||
28,600 | Starbucks Corp. | 1,079,936 | ||||||||
8,000 | Starwood Hotels & Resorts Worldwide, Inc. | 482,720 | ||||||||
4,400 | Wendy’s International, Inc. | 256,476 | ||||||||
10,120 | Yum! Brands, Inc. | 508,732 | ||||||||
6,472,550 | ||||||||||
Household Durables – 0.6% | ||||||||||
4,600 | Centex Corp. | 231,380 | ||||||||
9,900 | D.R. Horton, Inc. | 235,818 | ||||||||
5,400 | Fortune Brands, Inc. | 383,454 | ||||||||
2,500 | Harman International Industries, Inc. | 213,425 | ||||||||
2,700 | KB Home | 123,795 | ||||||||
6,900 | Leggett & Platt, Inc. | 172,362 | ||||||||
5,200 | Lennar Corp. | 230,724 | ||||||||
10,433 | Newell Rubbermaid, Inc. | 269,484 | ||||||||
8,200 | Pulte Homes, Inc. | 236,078 | ||||||||
2,300 | Snap on Inc. | 92,966 | ||||||||
2,800 | The Black & Decker Corp. | 236,488 | ||||||||
2,700 | The Stanley Works | 127,494 | ||||||||
2,958 | Whirlpool Corp. | 244,479 | ||||||||
2,797,947 | ||||||||||
Household Products – 2.2% | ||||||||||
19,000 | Colgate-Palmolive Co. | 1,138,100 | ||||||||
17,140 | Kimberly Clark Corp. | 1,057,538 | ||||||||
121,478 | Procter & Gamble Co. | 6,754,177 | ||||||||
5,700 | The Clorox Co. | 347,529 | ||||||||
9,297,344 | ||||||||||
Industrial Conglomerates – 4.4% | ||||||||||
28,000 | 3M Co. | 2,261,560 | ||||||||
385,200 | General Electric Co. | 12,696,192 | ||||||||
30,575 | Honeywell International, Inc. | 1,232,173 | ||||||||
3,100 | Reynolds American, Inc. | 357,430 | ||||||||
4,900 | Textron, Inc. | 451,682 | ||||||||
75,237 | Tyco International Ltd. | 2,069,017 | ||||||||
19,068,054 | ||||||||||
Insurance – 4.6% | ||||||||||
12,100 | ACE Ltd. | 612,139 | ||||||||
18,500 | Aflac, Inc | 857,475 | ||||||||
3,900 | AMBAC Financial Group, Inc. | 316,290 | ||||||||
96,179 | American International Group, Inc. | 5,679,370 | ||||||||
11,950 | Aon Corp. | 416,099 | ||||||||
6,368 | Cincinnati Financial Corp. | 299,360 | ||||||||
13,500 | Genworth Financial, Inc. | 470,340 | ||||||||
11,300 | Hartford Financial Services Group, Inc. | 955,980 | ||||||||
10,660 | Lincoln National Corp. | 601,650 | ||||||||
15,000 | Loews Corp | 531,750 | ||||||||
20,500 | Marsh & McLennan Cos., Inc. | 551,245 | ||||||||
4,950 | MBIA, Inc. | 289,823 | ||||||||
28,000 | MetLife, Inc. | 1,433,880 | ||||||||
3,300 | MGIC Investment Corp. | 214,500 | ||||||||
29,200 | Progressive Corp. | 750,732 | ||||||||
18,300 | Prudential Financial, Inc. | 1,421,910 | ||||||||
4,400 | Safeco Corp. | �� | 247,940 | |||||||
23,638 | The Allstate Corp. | 1,293,708 | ||||||||
14,800 | The Chubb Corp. | 738,520 | ||||||||
25,690 | The St. Paul Travelers Cos., Inc. | 1,145,260 | ||||||||
3,700 | Torchmark Corp. | 224,664 | ||||||||
11,318 | UnumProvident Corp. | 205,195 | ||||||||
6,400 | XL Capital Ltd. | 392,320 | ||||||||
19,650,150 | ||||||||||
Internet & Catalog Retail – 0.1% | ||||||||||
11,400 | Amazon.com, Inc.* | 440,952 | ||||||||
Internet Software & Services – 1.4% | ||||||||||
42,800 | eBay, Inc.* | 1,253,612 | ||||||||
7,590 | Google, Inc.* | 3,182,715 | ||||||||
9,300 | VeriSign, Inc.* | 215,481 | ||||||||
46,300 | Yahoo!, Inc.* | 1,527,900 | ||||||||
6,179,708 | ||||||||||
IT Consulting & Services – 0.9% | ||||||||||
4,500 | Affiliated Computer Services, Inc.* | 232,245 | ||||||||
21,300 | Automatic Data Processing, Inc. | 965,955 | ||||||||
6,900 | Computer Sciences Corp.* | 334,236 | ||||||||
18,900 | Electronic Data Systems Corp. | 454,734 | ||||||||
28,449 | First Data Corp. | 1,281,343 | ||||||||
12,450 | Paychex, Inc. | 485,301 | ||||||||
13,500 | Unisys Corp.* | 84,780 | ||||||||
3,838,594 | ||||||||||
Leisure Equipment & Products – 0.2% | ||||||||||
3,600 | Brunswick Corp. | 119,700 | ||||||||
11,000 | Eastman Kodak Co. | 261,580 | ||||||||
23
Shares | Description | Value | ||||||||
Common Stocks – (continued) | ||||||||||
Leisure Equipment & Products – (continued) | ||||||||||
6,750 | Hasbro, Inc. | $ | 122,243 | |||||||
14,912 | Mattel, Inc. | 246,197 | ||||||||
749,720 | ||||||||||
Machinery – 1.6% | ||||||||||
24,800 | Caterpillar, Inc. | 1,847,104 | ||||||||
1,700 | Cummins, Inc. | 207,825 | ||||||||
8,800 | Danaher Corp. | 566,016 | ||||||||
8,600 | Deere & Co. | 718,014 | ||||||||
7,500 | Dover Corp. | 370,725 | ||||||||
5,500 | Eaton Corp. | 414,700 | ||||||||
15,200 | Illinois Tool Works, Inc. | 722,000 | ||||||||
12,300 | Ingersoll-Rand Co., Ltd. | 526,194 | ||||||||
7,000 | ITT Corp. | 346,500 | ||||||||
2,300 | Navistar International Corp.* | 56,603 | ||||||||
6,130 | PACCAR, Inc. | 504,989 | ||||||||
4,700 | Pall Corp. | 131,600 | ||||||||
4,575 | Parker Hannifin Corp. | 355,020 | ||||||||
6,767,290 | ||||||||||
Media – 3.4% | ||||||||||
28,564 | CBS Corp. Class B | 772,656 | ||||||||
18,400 | Clear Channel Communications, Inc. | 569,480 | ||||||||
78,478 | Comcast Corp.* | 2,569,370 | ||||||||
2,300 | Dow Jones & Co., Inc. | 80,523 | ||||||||
8,900 | Gannett Co., Inc. | 497,777 | ||||||||
16,900 | Interpublic Group of Cos., Inc.*(a) | 141,115 | ||||||||
1,700 | Meredith Corp. | 84,218 | ||||||||
5,700 | New York Times Co. | 139,878 | ||||||||
88,100 | News Corp. | 1,689,758 | ||||||||
6,200 | Omnicom Group, Inc. | 552,358 | ||||||||
3,200 | The E.W. Scripps Co. | 138,048 | ||||||||
13,300 | The McGraw-Hill Companies, Inc. | 668,059 | ||||||||
81,229 | The Walt Disney Co. | 2,436,870 | ||||||||
158,398 | Time Warner, Inc. | 2,740,285 | ||||||||
9,587 | Tribune Co.(a) | 310,907 | ||||||||
8,200 | Univision Communications, Inc.* | 274,700 | ||||||||
26,764 | Viacom, Inc. Class B* | 959,222 | ||||||||
14,625,224 | ||||||||||
Metals & Mining – 1.0% | ||||||||||
32,108 | Alcoa, Inc. | 1,039,015 | ||||||||
3,351 | Allegheny Technologies, Inc. | 232,023 | ||||||||
6,800 | CONSOL Energy, Inc. | 317,696 | ||||||||
6,700 | Freeport-McMoRan Copper & Gold, Inc. Series B | 371,247 | ||||||||
16,611 | Newmont Mining Corp. | 879,220 | ||||||||
11,500 | Nucor Corp. | 623,875 | ||||||||
7,500 | Phelps Dodge Corp. | 616,200 | ||||||||
3,920 | United States Steel Corp. | 274,871 | ||||||||
4,354,147 | ||||||||||
Multi-Utilities – 0.4% | ||||||||||
46,013 | Duke Energy Corp. | 1,351,402 | ||||||||
11,200 | Dynegy, Inc.* | 61,264 | ||||||||
10,400 | NiSource, Inc. | 227,136 | ||||||||
1,639,802 | ||||||||||
Multiline Retail – 2.4% | ||||||||||
4,300 | Big Lots, Inc.* | 73,444 | ||||||||
17,612 | Costco Wholesale Corp. | 1,006,174 | ||||||||
2,300 | Dillard’s, Inc. | 73,255 | ||||||||
12,187 | Dollar General Corp. | 170,374 | ||||||||
6,100 | Family Dollar Stores, Inc. | 149,023 | ||||||||
20,334 | Federated Department Stores, Inc. | 744,224 | ||||||||
8,600 | J. C. Penney Co., Inc. | 580,586 | ||||||||
12,500 | Kohl’s Corp.* | 739,000 | ||||||||
8,200 | Nordstrom, Inc. | 299,300 | ||||||||
3,600 | Sears Holdings Corp.* | 557,424 | ||||||||
32,000 | Target Corp. | 1,563,840 | ||||||||
92,800 | Wal-Mart Stores, Inc. | 4,470,176 | ||||||||
10,426,820 | ||||||||||
Office Electronics – 0.1% | ||||||||||
33,300 | Xerox Corp.* | 463,203 | ||||||||
Oil & Gas – 8.0% | ||||||||||
17,158 | Anadarko Petroleum Corp. | 818,265 | ||||||||
12,300 | Apache Corp. | 839,475 | ||||||||
13,700 | Chesapeake Energy Corp. | 414,425 | ||||||||
82,053 | Chevron Corp. | 5,092,209 | ||||||||
61,241 | ConocoPhillips | 4,013,123 | ||||||||
16,400 | Devon Energy Corp. | 990,724 | ||||||||
25,030 | El Paso Corp. | 375,450 | ||||||||
9,000 | EOG Resources, Inc. | 624,060 | ||||||||
224,160 | Exxon Mobil Corp. | 13,752,216 | ||||||||
9,000 | Hess Corp. | 475,650 | ||||||||
8,362 | Kerr-McGee Corp. | 579,904 | ||||||||
3,800 | Kinder Morgan, Inc. | 379,582 | ||||||||
13,356 | Marathon Oil Corp. | 1,112,555 | ||||||||
6,000 | Murphy Oil Corp. | 335,160 | ||||||||
15,800 | Occidental Petroleum Corp. | 1,620,290 | ||||||||
4,900 | Sunoco, Inc. | 339,521 | ||||||||
21,900 | The Williams Companies, Inc. | 511,584 | ||||||||
22,900 | Valero Energy Corp. | 1,523,308 | ||||||||
13,600 | XTO Energy, Inc. | 602,072 | ||||||||
34,399,573 | ||||||||||
Paper & Forest Products – 0.3% | ||||||||||
18,240 | International Paper Co. | 589,152 | ||||||||
4,200 | Louisiana-Pacific Corp. | 91,980 | ||||||||
6,598 | MeadWestvaco Corp. | 184,282 | ||||||||
9,200 | Weyerhaeuser Co. | 572,700 | ||||||||
1,438,114 | ||||||||||
Personal Products – 0.2% | ||||||||||
2,950 | Alberto-Culver Co. Class B | 143,724 | ||||||||
16,700 | Avon Products, Inc. | 517,700 | ||||||||
4,500 | Estee Lauder Companies, Inc. | 174,015 | ||||||||
835,439 | ||||||||||
24
Shares | Description | Value | ||||||||
Common Stocks – (continued) | ||||||||||
Pharmaceuticals – 6.6% | ||||||||||
56,500 | Abbott Laboratories | $ | 2,463,965 | |||||||
5,600 | Allergan, Inc. | 600,656 | ||||||||
4,000 | Barr Pharmaceuticals, Inc.* | 190,760 | ||||||||
73,100 | Bristol-Myers Squibb Co. | 1,890,366 | ||||||||
41,800 | Eli Lilly & Co. | 2,310,286 | ||||||||
12,000 | Forest Laboratories, Inc.* | 464,280 | ||||||||
5,690 | Hospira, Inc.* | 244,329 | ||||||||
109,660 | Johnson & Johnson | 6,570,827 | ||||||||
9,466 | King Pharmaceuticals, Inc.* | 160,922 | ||||||||
11,100 | Medco Health Solutions, Inc.* | 635,808 | ||||||||
80,800 | Merck & Co., Inc. | 2,943,544 | ||||||||
7,600 | Mylan Laboratories, Inc. | 152,000 | ||||||||
271,284 | Pfizer, Inc. | 6,367,035 | ||||||||
54,900 | Schering-Plough Corp. | 1,044,747 | ||||||||
4,000 | Watson Pharmaceuticals, Inc.* | 93,120 | ||||||||
49,900 | Wyeth | 2,216,059 | ||||||||
28,348,704 | ||||||||||
Real Estate – 0.9% | ||||||||||
3,700 | Apartment Investment & Management Co. (REIT) | 160,765 | ||||||||
7,800 | Archstone-Smith Trust (REIT) | 396,786 | ||||||||
3,400 | Boston Properties, Inc. (REIT) | 307,360 | ||||||||
13,800 | Equity Office Properties Trust (REIT) | 503,838 | ||||||||
10,400 | Equity Residential Properties Trust (REIT) | 465,192 | ||||||||
7,900 | Kimco Realty Corp. (REIT) | 288,271 | ||||||||
6,700 | Plum Creek Timber Co., Inc. (REIT) | 237,850 | ||||||||
9,100 | ProLogis (REIT) | 474,292 | ||||||||
3,100 | Public Storage, Inc. (REIT) | 235,290 | ||||||||
6,700 | Simon Property Group, Inc. (REIT) | 555,698 | ||||||||
4,400 | Vornado Realty Trust (REIT) | 429,220 | ||||||||
4,054,562 | ||||||||||
Road & Rail – 0.8% | ||||||||||
13,452 | Burlington Northern Santa Fe Corp. | 1,066,071 | ||||||||
8,100 | CSX Corp. | 570,564 | ||||||||
15,300 | Norfolk Southern Corp. | 814,266 | ||||||||
9,900 | Union Pacific Corp. | 920,304 | ||||||||
3,371,205 | ||||||||||
Semiconductor Equipment & Products – 2.7% | ||||||||||
18,000 | Advanced Micro Devices, Inc.* | 439,560 | ||||||||
13,600 | Altera Corp.* | 238,680 | ||||||||
13,400 | Analog Devices, Inc. | 430,676 | ||||||||
58,200 | Applied Materials, Inc. | 947,496 | ||||||||
16,250 | Broadcom Corp.* | 488,313 | ||||||||
15,216 | Freescale Semiconductor, Inc. Class B* | 447,350 | ||||||||
216,000 | Intel Corp. | 4,093,200 | ||||||||
7,200 | KLA-Tencor Corp. | 299,304 | ||||||||
11,300 | Linear Technology Corp. | 378,437 | ||||||||
15,300 | LSI Logic Corp.* | 136,935 | ||||||||
11,900 | Maxim Integrated Products, Inc. | 382,109 | ||||||||
27,200 | Micron Technology, Inc.* | 409,632 | ||||||||
12,400 | National Semiconductor Corp. | 295,740 | ||||||||
4,600 | Novellus Systems, Inc.* | 113,620 | ||||||||
7,400 | PMC-Sierra, Inc.* | 69,560 | ||||||||
6,400 | QLogic Corp.* | 110,336 | ||||||||
7,500 | Teradyne, Inc.* | 104,475 | ||||||||
57,700 | Texas Instruments, Inc. | 1,747,733 | ||||||||
13,100 | Xilinx, Inc. | 296,715 | ||||||||
11,429,871 | ||||||||||
Software – 3.1% | ||||||||||
22,200 | Adobe Systems, Inc.* | 673,992 | ||||||||
8,800 | Autodesk, Inc.* | 303,248 | ||||||||
8,100 | BMC Software, Inc.* | 193,590 | ||||||||
16,750 | CA, Inc. | 344,212 | ||||||||
6,800 | Citrix Systems, Inc.* | 272,952 | ||||||||
14,900 | Compuware Corp.* | 99,830 | ||||||||
11,300 | Electronic Arts, Inc.* | 486,352 | ||||||||
6,300 | Intuit Inc.* | 380,457 | ||||||||
324,900 | Microsoft Corp. | 7,570,170 | ||||||||
12,000 | Novell, Inc.* | 79,560 | ||||||||
144,420 | Oracle Corp.* | 2,092,646 | ||||||||
4,140 | Parametric Technology Corp.* | 52,619 | ||||||||
38,618 | Symantec Corp.* | 600,124 | ||||||||
13,149,752 | ||||||||||
Specialty Retail – 2.0% | ||||||||||
5,372 | AutoNation, Inc.* | 115,176 | ||||||||
1,900 | AutoZone, Inc.* | 167,580 | ||||||||
10,700 | Bed Bath & Beyond, Inc.* | 354,919 | ||||||||
15,050 | Best Buy Co., Inc. | 825,342 | ||||||||
5,800 | Circuit City Stores, Inc. | 157,876 | ||||||||
12,600 | Limited Brands, Inc. | 322,434 | ||||||||
28,800 | Lowe’s Companies, Inc. | 1,747,296 | ||||||||
10,600 | Office Depot, Inc.* | 402,800 | ||||||||
2,800 | OfficeMax, Inc. | 114,100 | ||||||||
5,300 | RadioShack Corp. | 74,200 | ||||||||
26,900 | Staples, Inc. | 654,208 | ||||||||
19,950 | The Gap, Inc. | 347,130 | ||||||||
76,697 | The Home Depot, Inc. | 2,744,985 | ||||||||
4,300 | The Sherwin-Williams Co. | 204,164 | ||||||||
17,100 | The TJX Companies, Inc. | 390,906 | ||||||||
5,400 | Tiffany & Co. | 178,308 | ||||||||
8,801,424 | ||||||||||
Textiles & Apparel – 0.3% | ||||||||||
14,000 | Coach, Inc.* | 418,600 | ||||||||
4,100 | Jones Apparel Group, Inc. | 130,339 | ||||||||
4,000 | Liz Claiborne, Inc. | 148,240 | ||||||||
7,000 | Nike, Inc. Class B | 567,000 | ||||||||
3,200 | VF Corp. | 217,344 | ||||||||
1,481,523 | ||||||||||
25
Shares | Description | Value | ||||||||
Common Stocks – (continued) | ||||||||||
Tobacco – 1.4% | ||||||||||
77,300 | Altria Group, Inc. | $ | 5,676,139 | |||||||
5,800 | UST, Inc. | 262,102 | ||||||||
5,938,241 | ||||||||||
Trading Companies & Distributors – 0.1% | ||||||||||
6,250 | Genuine Parts Co. | 260,375 | ||||||||
2,900 | W.W. Grainger, Inc. | 218,167 | ||||||||
478,542 | ||||||||||
TOTAL COMMON STOCKS | ||||||||||
(Cost $342,040,510) | $ | 426,003,993 | ||||||||
Principal | Interest | Maturity | ||||||||||||
Amount | Rate | Date | ||||||||||||
Value | ||||||||||||||
U.S. Government Agency Obligation – 0.1% | ||||||||||||||
United States Treasury Bills(c) | ||||||||||||||
$ | 500,000 | 4.73 | % | 09/07/2006 | $ | 495,533 | ||||||||
(Cost $495,533) | ||||||||||||||
Repurchase Agreement(b) – 0.7% | ||||||||||||||
Joint Repurchase Agreement Account II | ||||||||||||||
$ | 2,800,000 | 5.28 | % | 07/03/2006 | $ | 2,800,000 | ||||||||
Maturity Value: $2,801,231 | ||||||||||||||
(Cost $2,800,000) | ||||||||||||||
TOTAL INVESTMENTS BEFORE SECURITIES LENDING COLLATERAL | ||||||||||||||
(Cost $345,336,043) | $ | 429,299,526 | ||||||||||||
Shares | Description | Value | ||||||||
Securities Lending Collateral – 0.2% | ||||||||||
868,350 | Boston Global Investment Trust – Enhanced Portfolio | $ | 868,350 | |||||||
(Cost $868,350) | ||||||||||
TOTAL INVESTMENTS – 99.9% | ||||||||||
(Cost $346,204,393) | $ | 430,167,876 | ||||||||
OTHER ASSETS IN EXCESS OF LIABILITIES – 0.1% | 344,347 | |||||||||
NET ASSETS – 100.0% | $ | 430,512,223 | ||||||||
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 portion of security is on loan. | |
(b) | Joint repurchase agreement was entered into on June 30, 2006. Additional Investment information appears on page 39. | |
(c) | Security is segregated as collateral for initial margin requirement on futures transactions. |
Investment Abbreviations: | ||||||
AMBAC | — | Insured by American Municipal Bond Assurance Corp. | ||||
REIT | — | Real Estate Investment Trust | ||||
ADDITIONAL INVESTMENT INFORMATION |
FUTURES CONTRACTS — At June 30, 2006, the following futures contracts were open as follows:
Number of | Settlement | Unrealized | ||||||||||||||
Type | Contracts Long | Month | Market Value | Gain | ||||||||||||
S & P 500 Index | 83 | September 2006 | $ | 5,309,510 | $ | 135,026 | ||||||||||
26
Schedule of Investments
Principal | Interest | Maturity | ||||||||||||||
Amount | Rate | Date | ||||||||||||||
Value | ||||||||||||||||
Corporate Bonds – 15.6% | ||||||||||||||||
Automotive – 0.2% | ||||||||||||||||
DaimlerChrysler NA | ||||||||||||||||
$ | 550,000 | 8.500 | % | 01/18/31 | $ | 622,752 | ||||||||||
Banks – 4.7% | ||||||||||||||||
Asian Development Bank | ||||||||||||||||
5,000,000 | 0.000 | 10/01/15 | 3,339,348 | |||||||||||||
Commonwealth Bank of Australia(a)(b) | ||||||||||||||||
475,000 | 6.024 | 03/29/49 | 452,432 | |||||||||||||
Greater Bay Bancorp Series B | ||||||||||||||||
500,000 | 5.250 | 03/31/08 | 493,984 | |||||||||||||
MUFG Capital Finance 1 Ltd.(b) | ||||||||||||||||
850,000 | 6.346 | 07/29/49 | 819,902 | |||||||||||||
Nordbanken AB(a)(b) | ||||||||||||||||
2,100,000 | 8.950 | 11/29/49 | 2,281,404 | |||||||||||||
PNC Funding Corp. | ||||||||||||||||
2,000,000 | 5.750 | 08/01/06 | 2,000,122 | |||||||||||||
Popular North America, Inc. | ||||||||||||||||
1,425,000 | 5.650 | 04/15/09 | 1,412,890 | |||||||||||||
Resona Bank Ltd.(a)(b) | ||||||||||||||||
1,250,000 | 5.850 | 04/15/49 | 1,162,968 | |||||||||||||
Tokai Preferred Capital Co. LLC(a)(b) | ||||||||||||||||
1,250,000 | 9.980 | 12/29/49 | 1,340,910 | |||||||||||||
Wachovia Capital Trust III(b) | ||||||||||||||||
650,000 | 5.800 | 08/29/49 | 630,761 | |||||||||||||
13,934,721 | ||||||||||||||||
Electric – 1.7% | ||||||||||||||||
Calenergy, Inc. | ||||||||||||||||
1,250,000 | 7.520 | 09/15/08 | 1,299,509 | |||||||||||||
CenterPoint Energy, Inc. Series B | ||||||||||||||||
1,000,000 | 7.250 | 09/01/10 | 1,041,146 | |||||||||||||
MidAmerican Energy Holdings Co.(a) | ||||||||||||||||
400,000 | 6.125 | 04/01/36 | 373,912 | |||||||||||||
Pacific Gas & Electric Co. | ||||||||||||||||
1,800,000 | 6.050 | 03/01/34 | 1,699,509 | |||||||||||||
Progress Energy, Inc. | ||||||||||||||||
475,000 | 7.750 | 03/01/31 | 529,821 | |||||||||||||
4,943,897 | ||||||||||||||||
Energy – 0.2% | ||||||||||||||||
Amerada Hess Corp. | ||||||||||||||||
675,000 | 7.125 | 03/15/33 | 700,052 | |||||||||||||
Entertainment – 0.3% | ||||||||||||||||
Time Warner Entertainment Co. | ||||||||||||||||
750,000 | 8.375 | 03/15/23 | 834,249 | |||||||||||||
Environmental – 0.3% | ||||||||||||||||
Waste Management, Inc. | ||||||||||||||||
750,000 | 7.375 | 08/01/10 | 791,829 | |||||||||||||
Financial Companies – 1.1% | ||||||||||||||||
GATX Financial Corp. | ||||||||||||||||
1,000,000 | 8.875 | 06/01/09 | 1,067,413 | |||||||||||||
PHH Corp. | ||||||||||||||||
1,225,000 | 6.000 | 03/01/08 | 1,219,469 | |||||||||||||
Residential Capital Corp. | ||||||||||||||||
1,000,000 | 6.125 | 11/21/08 | 988,411 | |||||||||||||
3,275,293 | ||||||||||||||||
Food & Beverage – 0.5% | ||||||||||||||||
Nabisco, Inc. | ||||||||||||||||
1,000,000 | 7.050 | 07/15/07 | 1,013,569 | |||||||||||||
Tyson Foods, Inc. | ||||||||||||||||
550,000 | 8.250 | 10/01/11 | 582,264 | |||||||||||||
1,595,833 | ||||||||||||||||
Gaming – 0.5% | ||||||||||||||||
Harrahs Operating Co., Inc. | ||||||||||||||||
1,710,000 | 5.375 | 12/15/13 | 1,580,797 | |||||||||||||
Park Place Entertainment Corp. | ||||||||||||||||
11,000 | 8.500 | 11/15/06 | 11,098 | |||||||||||||
1,591,895 | ||||||||||||||||
Home Construction – 0.1% | ||||||||||||||||
D. R. Horton, Inc. | ||||||||||||||||
325,000 | 6.875 | 05/01/13 | 324,229 | |||||||||||||
Life Insurance – 0.8% | ||||||||||||||||
Phoenix Life Insurance Co.(a) | ||||||||||||||||
450,000 | 7.150 | 12/15/34 | 440,872 | |||||||||||||
Reinsurance Group of America, Inc.(b) | ||||||||||||||||
1,000,000 | 6.750 | 12/15/65 | 918,838 | |||||||||||||
ZFS Finance USA Trust I(a)(b) | ||||||||||||||||
1,000,000 | 6.150 | 12/15/65 | 958,071 | |||||||||||||
2,317,781 | ||||||||||||||||
Media - Cable – 0.6% | ||||||||||||||||
Cox Communications, Inc. | ||||||||||||||||
1,750,000 | 4.625 | 01/15/10 | 1,671,104 | |||||||||||||
Media - Non Cable(a) – 0.2% | ||||||||||||||||
Viacom, Inc. | ||||||||||||||||
300,000 | 5.750 | 04/30/11 | 294,665 | |||||||||||||
275,000 | 6.875 | 04/30/36 | 265,392 | |||||||||||||
560,057 | ||||||||||||||||
Pipelines – 0.2% | ||||||||||||||||
Enterprise Products Operating LP | ||||||||||||||||
450,000 | 5.600 | 10/15/14 | 425,994 | |||||||||||||
325,000 | 5.000 | 03/01/15 | 293,493 | |||||||||||||
719,487 | ||||||||||||||||
Property/Casualty Insurance – 1.4% | ||||||||||||||||
AON Capital Trust A | ||||||||||||||||
500,000 | 8.205 | 01/01/27 | 539,393 | |||||||||||||
Arch Capital Group Ltd. | ||||||||||||||||
475,000 | 7.350 | 05/01/34 | 483,478 |
27
Principal | Interest | Maturity | ||||||||||||||
Amount | Rate | Date | ||||||||||||||
Value | ||||||||||||||||
Corporate Bonds – (continued) | ||||||||||||||||
Property/Casualty Insurance – (continued) | ||||||||||||||||
Aspen Insurance Holdings Ltd. | ||||||||||||||||
$ | 400,000 | 6.000 | % | 08/15/14 | $ | 371,733 | ||||||||||
Endurance Specialty Holdings Ltd. | ||||||||||||||||
1,000,000 | 6.150 | 10/15/15 | 936,089 | |||||||||||||
Liberty Mutual Group(a) | ||||||||||||||||
700,000 | 6.500 | 03/15/35 | 611,231 | |||||||||||||
Marsh & McLennan Cos., Inc. | ||||||||||||||||
600,000 | 5.150 | 09/15/10 | 579,140 | |||||||||||||
650,000 | 5.750 | 09/15/15 | 613,585 | |||||||||||||
4,134,649 | ||||||||||||||||
REITs – 0.4% | ||||||||||||||||
iStar Financial, Inc. Series B | ||||||||||||||||
1,300,000 | 5.700 | 03/01/14 | 1,253,335 | |||||||||||||
Tobacco – 0.3% | ||||||||||||||||
Altria Group, Inc. | ||||||||||||||||
700,000 | 7.750 | 01/15/27 | 785,455 | |||||||||||||
Wireless Telecommunications – 1.1% | ||||||||||||||||
America Movil SA de CV | ||||||||||||||||
1,000,000 | 5.500 | 03/01/14 | 929,620 | |||||||||||||
AT&T Wireless Services, Inc. | ||||||||||||||||
500,000 | 8.750 | 03/01/31 | 609,788 | |||||||||||||
GTE Corp. | ||||||||||||||||
750,000 | 7.510 | 04/01/09 | 779,555 | |||||||||||||
Nextel Communications, Inc. | ||||||||||||||||
900,000 | 6.875 | 10/31/13 | 913,806 | |||||||||||||
3,232,769 | ||||||||||||||||
Wirelines Telecommunications – 1.0% | ||||||||||||||||
Deutsche Telekom International Finance BV | ||||||||||||||||
700,000 | 8.250 | 06/15/30 | 808,497 | |||||||||||||
Embarq Corp. | ||||||||||||||||
450,000 | 7.995 | 06/01/36 | 452,296 | |||||||||||||
Sprint Capital Corp. | ||||||||||||||||
1,000,000 | 6.875 | 11/15/28 | 1,006,619 | |||||||||||||
Telecom Italia Capital | ||||||||||||||||
800,000 | 4.950 | 09/30/14 | 716,206 | |||||||||||||
2,983,618 | ||||||||||||||||
TOTAL CORPORATE BONDS | ||||||||||||||||
(Cost $48,347,513) | $ | 46,273,005 | ||||||||||||||
Mortgage-Backed Obligations – 43.7% | ||||||||||||||||
Adjustable Rate FHLMC(b) – 2.3% | ||||||||||||||||
$ | 299,689 | 6.500 | % | 12/01/31 | $ | 302,695 | ||||||||||
2,846,125 | 4.847 | 09/01/35 | 2,782,540 | |||||||||||||
3,857,404 | 4.730 | 10/01/35 | 3,714,955 | |||||||||||||
6,800,190 | ||||||||||||||||
Adjustable Rate FNMA(b) – 4.9% | ||||||||||||||||
3,000,006 | 4.438 | 05/01/33 | 2,960,950 | |||||||||||||
1,861,079 | 3.851 | 10/01/33 | 1,825,611 | |||||||||||||
3,315,136 | 4.592 | 05/01/35 | 3,273,426 | |||||||||||||
3,643,859 | 5.355 | 09/01/35 | 3,590,313 | |||||||||||||
2,857,099 | 4.925 | 12/01/35 | 2,790,680 | |||||||||||||
14,440,980 | ||||||||||||||||
Adjustable Rate Non-Agency(b) – 4.6% | ||||||||||||||||
Countrywide Alternative Loan Trust Series 2005-59, Class 1A2A | ||||||||||||||||
1,446,043 | 5.647 | 11/20/35 | 1,450,855 | |||||||||||||
Indymac Index Mortgage Loan Trust Series 2006-AR2, Class 1A1A | ||||||||||||||||
2,432,198 | 5.543 | 04/25/46 | 2,434,151 | |||||||||||||
Indymac Index Mortgage Loan Trust Series 2006-AR4 Class A1A | ||||||||||||||||
2,454,429 | 5.533 | 05/25/46 | 2,454,429 | |||||||||||||
Luminent Mortgage Trust Series 2006-2, Class A1A | ||||||||||||||||
2,453,764 | 5.523 | 02/25/46 | 2,455,921 | |||||||||||||
Merrill Lynch Mortgage Investors, Inc. Series 2005-A9, Class 2A1C | ||||||||||||||||
3,000,000 | 5.175 | 12/25/35 | 2,910,577 | |||||||||||||
Washington Mutual, Inc. Series 2005-AR10, Class 1A3 | ||||||||||||||||
2,000,000 | 4.839 | 09/25/35 | 1,920,760 | |||||||||||||
13,626,693 | ||||||||||||||||
CMBS – 7.9% | ||||||||||||||||
Interest Only(b)(e) – 4.0% | ||||||||||||||||
Banc of America Commercial Mortgage, Inc. Series 2005-6, Class A4 | ||||||||||||||||
3,000,000 | 5.182 | 09/10/47 | 2,866,593 | |||||||||||||
GE Capital Commercial Mortgage Corp. Series 2005-C4, Class A4 | ||||||||||||||||
3,000,000 | 5.333 | 11/10/45 | 2,895,376 | |||||||||||||
Morgan Stanley Capital I Series 2006-T21, Class A4 | ||||||||||||||||
3,500,000 | 5.162 | 10/12/52 | 3,320,958 | |||||||||||||
Wachovia Bank Commercial Mortgage Trust Series 2005-C21, Class A4 | ||||||||||||||||
3,000,000 | 5.370 | 10/15/44 | 2,869,993 | |||||||||||||
11,952,920 | ||||||||||||||||
Sequential Fixed Rate – 3.9% | ||||||||||||||||
Bear Stearns Commercial Mortgage Securities Series 1999-WF2 Class A2 | ||||||||||||||||
2,700,000 | 7.080 | 07/15/31 | 2,784,707 | |||||||||||||
GE Capital Commercial Mortgage Corp. Series 2002-1A, Class A3 | ||||||||||||||||
2,700,000 | 6.269 | 12/10/35 | 2,761,070 | |||||||||||||
J.P. Morgan Chase Commercial Mortgage Securities Corp. Series 2005-LDP2 Class A4 | ||||||||||||||||
1,500,000 | 4.738 | 07/15/42 | 1,379,808 | |||||||||||||
LB-UBS Commercial Mortgage Trust Series 2006-C1, Class A4 | ||||||||||||||||
2,000,000 | 5.156 | 02/15/31 | 1,890,234 | |||||||||||||
28
Principal | Interest | Maturity | ||||||||||||||
Amount | Rate | Date | ||||||||||||||
Value | ||||||||||||||||
Mortgage-Backed Obligations – (continued) | ||||||||||||||||
Sequential Fixed Rate – (continued) | ||||||||||||||||
Morgan Stanley Dean Witter Capital I Series 2003-TOP9 Class A2 | ||||||||||||||||
$ | 2,700,000 | 4.740 | % | 11/13/36 | $ | 2,544,198 | ||||||||||
11,360,017 | ||||||||||||||||
TOTAL CMBS | $ | 23,312,937 | ||||||||||||||
CMOS – 1.8% | ||||||||||||||||
Interest Only – 0.0% | ||||||||||||||||
FNMA Series 2004-71, Class DI | ||||||||||||||||
737,220 | 0.000 | 04/25/34 | 50,474 | |||||||||||||
PAC – 1.5% | ||||||||||||||||
FHLMC | ||||||||||||||||
4,472,853 | 6.500 | 10/01/34 | 4,517,511 | |||||||||||||
Sequential Fixed Rate – 0.3% | ||||||||||||||||
FHLMC Series 2473, Class VM | ||||||||||||||||
698,915 | 6.000 | 10/15/07 | 698,706 | |||||||||||||
TOTAL CMOS | $ | 5,266,691 | ||||||||||||||
FHLB – 6.3% | ||||||||||||||||
10,129 | 7.500 | 01/01/07 | 10,167 | |||||||||||||
150,619 | 7.000 | 08/01/10 | 153,144 | |||||||||||||
300 | 7.000 | 09/01/11 | 306 | |||||||||||||
18,911 | 7.000 | 11/01/11 | 19,294 | |||||||||||||
41,056 | 7.000 | 12/01/11 | 41,887 | |||||||||||||
160,951 | 7.500 | 06/01/15 | 167,625 | |||||||||||||
364,784 | 7.000 | 07/01/16 | 374,129 | |||||||||||||
1,939,031 | 5.500 | 02/01/18 | 1,908,495 | |||||||||||||
274,679 | 5.500 | 09/01/18 | 270,353 | |||||||||||||
2,080 | 7.500 | 10/01/18 | 2,088 | |||||||||||||
32,058 | 9.500 | 08/01/19 | 34,402 | |||||||||||||
267,290 | 5.000 | 02/01/20 | 257,218 | |||||||||||||
1,277 | 9.500 | 08/01/20 | 1,374 | |||||||||||||
439,366 | 6.500 | 10/01/20 | 442,984 | |||||||||||||
34,678 | 9.500 | 02/01/21 | 37,084 | |||||||||||||
3,399,884 | 5.000 | 06/01/23 | 3,216,432 | |||||||||||||
48,853 | 6.500 | 01/01/24 | 49,331 | |||||||||||||
328,328 | 6.500 | 12/01/27 | 333,603 | |||||||||||||
175,171 | 6.000 | 03/01/29 | 173,313 | |||||||||||||
2,250 | 6.000 | 04/01/29 | 2,228 | |||||||||||||
366,000 | 6.500 | 12/01/31 | 369,565 | |||||||||||||
4,091 | 6.000 | 08/01/32 | 4,047 | |||||||||||||
547,893 | 7.000 | 12/01/32 | 561,581 | |||||||||||||
3,770,650 | 5.500 | 11/01/33 | 3,640,973 | |||||||||||||
4,630,512 | 5.500 | 01/01/34 | 4,471,264 | |||||||||||||
2,322,823 | 5.000 | 03/01/34 | 2,177,620 | |||||||||||||
18,720,507 | ||||||||||||||||
FHLMC – 8.1% | ||||||||||||||||
141,024 | 5.500 | 04/01/18 | 138,803 | |||||||||||||
1,206,444 | 4.500 | 12/01/18 | 1,141,108 | |||||||||||||
4,225,972 | 5.000 | 12/01/18 | 4,077,043 | |||||||||||||
643,427 | 4.000 | 02/01/19 | 594,191 | |||||||||||||
831,537 | 4.000 | 04/01/19 | 767,510 | |||||||||||||
1,328,475 | 4.000 | 05/01/19 | 1,226,186 | |||||||||||||
2,192,937 | 4.000 | 06/01/19 | 2,024,159 | |||||||||||||
5,708,907 | 5.000 | 11/01/19 | 5,507,717 | |||||||||||||
53,680 | 5.000 | 05/15/21 | 53,442 | |||||||||||||
100,600 | 7.500 | 12/01/29 | 104,199 | |||||||||||||
7,996 | 7.500 | 11/01/30 | 8,262 | |||||||||||||
855,287 | 7.000 | 05/01/32 | 876,656 | |||||||||||||
779,027 | 6.000 | 08/01/33 | 770,147 | |||||||||||||
5,000,000 | 4.500 | TBA-15yr | (c) | 4,723,440 | ||||||||||||
2,000,000 | 5.500 | TBA-15yr | (c) | 1,920,624 | ||||||||||||
23,933,487 | ||||||||||||||||
FNMA – 6.8% | ||||||||||||||||
23,535 | 6.500 | 05/01/08 | 23,846 | |||||||||||||
8,194 | 8.500 | 07/01/08 | 8,315 | |||||||||||||
1,808 | 8.000 | 04/01/09 | 1,827 | |||||||||||||
4,834 | 9.000 | 02/01/10 | 4,834 | |||||||||||||
108,534 | 6.000 | 08/01/13 | 108,919 | |||||||||||||
68,103 | 7.500 | 01/01/14 | 68,472 | |||||||||||||
516,623 | 7.500 | 08/01/15 | 536,168 | |||||||||||||
136,466 | 6.000 | 04/01/16 | 136,943 | |||||||||||||
262,973 | 6.500 | 05/01/16 | 266,611 | |||||||||||||
391,181 | 6.500 | 09/01/16 | 396,593 | |||||||||||||
514,182 | 6.500 | 11/01/16 | 521,295 | |||||||||||||
127,683 | 6.000 | 12/01/16 | 128,146 | |||||||||||||
978,167 | 6.000 | 02/01/17 | 981,591 | |||||||||||||
200,852 | 7.500 | 04/01/17 | 207,846 | |||||||||||||
1,497,360 | 6.000 | 10/01/17 | 1,502,601 | |||||||||||||
1,270,660 | 5.500 | 02/01/18 | 1,250,326 | |||||||||||||
1,410,231 | 5.000 | 05/01/18 | 1,362,638 | |||||||||||||
140,390 | 6.500 | 08/01/18 | 141,533 | |||||||||||||
566,325 | 7.000 | 08/01/18 | 582,291 | |||||||||||||
5,000,000 | 4.000 | 09/01/18 | 4,621,848 | |||||||||||||
754 | 7.000 | 07/01/25 | 773 | |||||||||||||
30,010 | 7.500 | 10/01/25 | 31,134 | |||||||||||||
14,247 | 7.000 | 11/01/25 | 14,639 | |||||||||||||
97,839 | 9.000 | 11/01/25 | 106,207 | |||||||||||||
4,985 | 7.000 | 08/01/27 | 5,112 | |||||||||||||
29,201 | 7.000 | 09/01/27 | 29,945 | |||||||||||||
1,173 | 7.000 | 01/01/28 | 1,205 | |||||||||||||
7,039 | 7.500 | 03/01/28 | 7,274 | |||||||||||||
965,131 | 6.000 | 02/01/29 | 955,639 | |||||||||||||
561,651 | 6.000 | 03/01/29 | 555,732 | |||||||||||||
224,556 | 6.500 | 03/01/29 | 226,873 | |||||||||||||
476,463 | 6.000 | 05/01/29 | 471,491 | |||||||||||||
57,452 | 6.500 | 05/01/29 | 58,037 | |||||||||||||
1,377,286 | 6.000 | 06/01/29 | 1,362,913 | |||||||||||||
354,018 | 6.500 | 06/01/29 | 357,646 | |||||||||||||
156,140 | 6.500 | 07/01/29 | 157,730 | |||||||||||||
305,039 | 6.500 | 08/01/29 | 308,186 | |||||||||||||
7,954 | 7.000 | 09/01/29 | 8,155 | |||||||||||||
150,690 | 6.500 | 10/01/29 | 152,247 | |||||||||||||
133,308 | 8.000 | 10/01/29 | 140,841 | |||||||||||||
189,771 | 6.500 | 11/01/29 | 191,732 | |||||||||||||
162,209 | 6.500 | 12/01/29 | 163,860 | |||||||||||||
29
Principal | Interest | Maturity | ||||||||||||||
Amount | Rate | Date | Value | |||||||||||||
Mortgage-Backed Obligations – (continued) | ||||||||||||||||
FNMA – (continued) | ||||||||||||||||
$ | 64,495 | 7.000 | % | 12/01/29 | $ | 66,202 | ||||||||||
20,518 | 7.500 | 12/01/29 | 21,272 | |||||||||||||
9,446 | 7.500 | 04/01/30 | 9,760 | |||||||||||||
6,267 | 8.500 | 04/01/30 | 6,730 | |||||||||||||
69,743 | 7.500 | 05/01/30 | 72,092 | |||||||||||||
13,574 | 8.000 | 05/01/30 | 14,316 | |||||||||||||
747 | 8.500 | 06/01/30 | 792 | |||||||||||||
13,463 | 7.500 | 08/01/30 | 13,910 | |||||||||||||
42,324 | 7.500 | 09/01/30 | 43,731 | |||||||||||||
326,129 | 6.500 | 04/01/31 | 329,190 | |||||||||||||
63,372 | 7.000 | 05/01/32 | 64,955 | |||||||||||||
458,724 | 7.000 | 06/01/32 | 470,022 | |||||||||||||
570,096 | 7.000 | 08/01/32 | 584,137 | |||||||||||||
183,707 | 8.000 | 08/01/32 | 193,930 | |||||||||||||
20,051,053 | ||||||||||||||||
GNMA – 1.1% | ||||||||||||||||
1,136 | 6.500 | 09/15/08 | 1,142 | |||||||||||||
105,015 | 7.000 | 03/15/12 | 107,016 | |||||||||||||
69,227 | 7.000 | 06/15/23 | 71,398 | |||||||||||||
23,151 | 7.000 | 10/15/25 | 23,901 | |||||||||||||
45,278 | 7.000 | 11/15/25 | 46,745 | |||||||||||||
4,816 | 7.000 | 02/15/26 | 4,973 | |||||||||||||
22,927 | 7.000 | 04/15/26 | 23,650 | |||||||||||||
9,933 | 7.000 | 03/15/27 | 10,261 | |||||||||||||
1,440 | 7.000 | 06/15/27 | 1,483 | |||||||||||||
26,579 | 7.000 | 10/15/27 | 27,384 | |||||||||||||
219,793 | 7.000 | 11/15/27 | 226,787 | |||||||||||||
12,940 | 7.000 | 01/15/28 | 13,331 | |||||||||||||
86,486 | 7.000 | 02/15/28 | 89,102 | |||||||||||||
47,815 | 7.000 | 03/15/28 | 49,331 | |||||||||||||
14,942 | 7.000 | 04/15/28 | 15,416 | |||||||||||||
2,051 | 7.000 | 05/15/28 | 2,114 | |||||||||||||
38,745 | 7.000 | 06/15/28 | 39,916 | |||||||||||||
66,983 | 7.000 | 07/15/28 | 69,013 | |||||||||||||
179,305 | 7.000 | 08/15/28 | 184,725 | |||||||||||||
67,880 | 7.000 | 09/15/28 | 70,017 | |||||||||||||
15,254 | 7.000 | 11/15/28 | 15,715 | |||||||||||||
6,380 | 7.500 | 11/15/30 | 6,621 | |||||||||||||
4,430 | 7.000 | 10/15/31 | 4,563 | |||||||||||||
1,513 | 7.000 | 12/15/31 | 1,561 | |||||||||||||
131,018 | 7.500 | 10/15/32 | 136,929 | |||||||||||||
2,036,502 | 6.000 | 08/20/34 | 2,018,695 | |||||||||||||
3,261,789 | ||||||||||||||||
TOTAL MORTGAGE-BACKED OBLIGATIONS | ||||||||||||||||
(Cost $132,500,937) | $ | 129,414,327 | ||||||||||||||
Agency Debentures – 27.8% | ||||||||||||||||
FHLB | ||||||||||||||||
$ | 16,000,000 | 4.000 | % | 03/10/08 | $ | 15,620,432 | ||||||||||
10,000,000 | 4.570 | 10/17/08 | 9,811,840 | |||||||||||||
10,000,000 | 5.823 | 05/06/09 | 10,100,580 | |||||||||||||
1,800,000 | 4.000 | 12/30/11 | 1,671,079 | |||||||||||||
6,990,000 | 4.875 | 12/14/12 | 6,753,633 | |||||||||||||
5,000,000 | 4.750 | 11/14/14 | 4,747,350 | |||||||||||||
FHLMC | ||||||||||||||||
3,305,000 | 4.250 | 02/28/07 | 3,277,175 | |||||||||||||
3,800,000 | 4.500 | 08/22/07 | 3,756,826 | |||||||||||||
FNMA | ||||||||||||||||
7,500,000 | 3.000 | 03/02/07 | 7,376,220 | |||||||||||||
10,000,000 | 3.860 | 02/22/08 | 9,747,540 | |||||||||||||
5,000,000 | 4.500 | 06/01/10 | 4,818,395 | |||||||||||||
Tennessee Valley Authority | ||||||||||||||||
2,960,000 | † | 4.875 | (e) | 12/15/06 | 2,912,959 | |||||||||||
2,000,000 | 5.375 | 04/01/56 | 1,889,920 | |||||||||||||
TOTAL AGENCY DEBENTURES | ||||||||||||||||
(Cost $83,914,837) | $ | 82,483,949 | ||||||||||||||
Asset-Backed Securities – 0.0% | ||||||||||||||||
Home Equity – 0.0% | ||||||||||||||||
Green Tree Home Improvement Loan Trust Series 1996-D Class HEM2 | ||||||||||||||||
$ | 72,744 | 8.300 | % | 09/15/27 | $ | 72,811 | ||||||||||
Manufactured Housing – 0.0% | ||||||||||||||||
Conseco Finance Securitizations Corp. Series 2000-6 Class A4 | ||||||||||||||||
2,566 | 6.770 | 09/01/32 | 2,566 | |||||||||||||
TOTAL ASSET-BACKED SECURITIES | ||||||||||||||||
(Cost $75,542) | $ | 75,377 | ||||||||||||||
U.S. Treasury Obligations – 11.7% | ||||||||||||||||
United States Treasury Bonds | ||||||||||||||||
$ | 4,100,000 | 4.875 | % | 05/15/09 | $ | 4,072,133 | ||||||||||
6,000,000 | 4.500 | 02/28/11 | 5,850,468 | |||||||||||||
United States Treasury Inflation Protected Securities | ||||||||||||||||
1,199,231 | 2.000 | 01/15/14 | 1,157,539 | |||||||||||||
1,139,215 | 1.875 | 07/15/15 | 1,080,477 | |||||||||||||
1,522,410 | 2.000 | 01/15/16 | 1,453,842 | |||||||||||||
United States Treasury Principal-Only Stripped Securities(f) | ||||||||||||||||
23,600,000 | 0.000 | 11/15/21 | 10,429,548 | |||||||||||||
8,000,000 | 0.000 | 11/15/24 | 3,025,280 | |||||||||||||
9,400,000 | 0.000 | 02/15/25 | 3,508,550 | |||||||||||||
1,300,000 | 0.000 | 08/15/25 | 473,815 | |||||||||||||
10,000,000 | 0.000 | 11/15/26 | 3,425,520 | |||||||||||||
TOTAL U.S. TREASURY OBLIGATIONS | ||||||||||||||||
(Cost $35,386,837) | $ | 34,477,172 | ||||||||||||||
TOTAL INVESTMENTS BEFORE REPURCHASE AGREEMENT – 98.8% | ||||||||||||||||
(Cost $300,225,666) | $ | 292,723,830 | ||||||||||||||
30
Principal | Interest | Maturity | ||||||||||||||
Amount | Rate | Date | Value | |||||||||||||
Repurchase Agreement(g) – 4.3% | ||||||||||||||||
Joint Repurchase Agreement Account II | ||||||||||||||||
$ | 12,800,000 | 5.276 | % | 07/03/06 | $ | 12,800,000 | ||||||||||
Maturity Value: $12,805,628 | ||||||||||||||||
(Cost $12,800,000) | ||||||||||||||||
TOTAL INVESTMENTS – 103.1% | ||||||||||||||||
(Cost $313,025,666) | $ | 305,523,830 | ||||||||||||||
LIABILITIES IN EXCESS OF | ||||||||||||||||
OTHER ASSETS – (3.1)% | (9,056,676 | ) | ||||||||||||||
NET ASSETS – 100.0% | $ | 296,467,154 | ||||||||||||||
The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. |
(a) | Securities are exempt from registration under Rule 144A of the Securities Act of 1933. Under procedures approved by the Board of Trustees, such securities have been determined to be 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 $8,181,857, which represents approximately 2.8% of net assets as of June 30, 2006. | |
(b) | Variable rate security. Interest rate disclosed is that which is in effect at June 30, 2006. | |
(c) | TBA (To Be Announced) Securities are purchased 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. Total market value of TBA securities amounts to $6,644,064 which represents approximately 2.2% of net assets as of June 30, 2006. | |
(d) | Represents security with notional or nominal principal amount. The actual effective yield of this security is different than the stated interest rate due to the amortization of related premiums or accretion of discounts. | |
(e) | Securities with “Put” features with resetting interest rates. Maturity dates disclosed are the next interest reset dates. | |
(f) | Security issued with a zero coupon. Income is recognized through the accretion of discount. | |
(g) | Joint repurchase agreement was entered into on June 30, 2006. Additional Investment information appears on page 39. |
Investment Abbreviations: | ||||||
CMBS | — | Commercial Mortgage Backed Securities | ||||
CMO | — | Collateralized Mortgage Obligations | ||||
FHLB | — | Federal Home Loan Bank | ||||
FHLMC | — | Federal Home Loan Mortgage Corp. | ||||
FNMA | — | Federal National Mortgage Association | ||||
GNMA | — | Government National Mortgage Association | ||||
PAC | — | Planned Amortization Class | ||||
REIT | — | Real Estate Investment Trust | ||||
31
ADDITIONAL INVESTMENT INFORMATION |
FUTURES CONTRACTS — At June 30, 2006, the following futures contacts were open as follows:
Number of | ||||||||||||||
Contracts | Settlement | Unrealized | ||||||||||||
Type | Long/(Short) | Month | Market Value | Gain (Loss) | ||||||||||
Eurodollars | 24 | September 2006 | $ | 5,665,200 | $ | (10,882 | ) | |||||||
U.S. Treasury Bonds | (236) | September 2006 | (25,170,875 | ) | 194,277 | |||||||||
2 Year U.S. Treasury Notes | 138 | September 2006 | 27,983,813 | (91,791 | ) | |||||||||
5 Year U.S. Treasury Notes | 152 | September 2006 | 15,717,750 | (71,233 | ) | |||||||||
10 Year U.S. Treasury Notes | 195 | September 2006 | 20,447,578 | (94,449 | ) | |||||||||
$ | 44,643,466 | $ | (74,078 | ) | ||||||||||
32
ADDITIONAL INVESTMENT INFORMATION (continued) |
Unrealized | ||||||||||||||||||||
Open Forward Foreign Currency | Expiration | Value on | ||||||||||||||||||
Purchase Contracts | Date | Settlement Date | Current Value | Gain | Loss | |||||||||||||||
Australian Dollar | 09/20/2006 | $ | 724,818 | $ | 729,884 | $ | 5,066 | $ | — | |||||||||||
Australian Dollar | 09/20/2006 | 1,182,000 | 1,175,006 | — | 6,994 | |||||||||||||||
Canadian Dollar | 09/20/2006 | 627,604 | 631,197 | 3,593 | — | |||||||||||||||
Euro | 09/20/2006 | 3,062,000 | 3,102,594 | 40,594 | — | |||||||||||||||
Great Britain Pound | 09/20/2006 | 935,000 | 944,092 | 9,092 | — | |||||||||||||||
Great Britain Pound | 09/20/2006 | 234,000 | 233,428 | — | 572 | |||||||||||||||
Japanese Yen | 09/20/2006 | 700,000 | 701,941 | 1,941 | — | |||||||||||||||
New Zealand Dollar | 09/20/2006 | 469,000 | 459,631 | — | 9,369 | |||||||||||||||
Norwegian Krone | 09/20/2006 | 4,905,070 | 4,869,257 | — | 35,813 | |||||||||||||||
Swedish Krona | 09/20/2006 | 1,666,863 | 1,687,851 | 20,988 | — | |||||||||||||||
Swiss Franc | 09/20/2006 | 4,529,116 | 4,568,407 | 39,291 | — | |||||||||||||||
TOTAL OPEN FORWARD FOREIGN CURRENCY PURCHASE CONTRACTS | $ | 19,035,471 | $ | 19,103,288 | $ | 120,565 | $ | 52,748 | ||||||||||||
Unrealized | ||||||||||||||||||||
Open Forward Foreign Currency | Expiration | Value on | ||||||||||||||||||
Sale Contracts | Date | Settlement Date | Current Value | Gain | Loss | |||||||||||||||
Australian Dollar | 09/20/2006 | $ | 941,000 | $ | 947,271 | $ | — | $ | 6,271 | |||||||||||
Canadian Dollar | 09/20/2006 | 2,354,000 | 2,341,225 | 12,775 | — | |||||||||||||||
Euro | 09/20/2006 | 7,757,908 | 7,881,647 | — | 123,739 | |||||||||||||||
Great Britain Pound | 09/20/2006 | 3,443,055 | 3,454,446 | — | 11,391 | |||||||||||||||
Japanese Yen | 09/20/2006 | 946,000 | 943,675 | 2,325 | — | |||||||||||||||
Japanese Yen | 09/20/2006 | 2,459,191 | 2,482,769 | — | 23,578 | |||||||||||||||
New Zealand Dollar | 09/20/2006 | 4,516,728 | 4,420,230 | 96,498 | — | |||||||||||||||
Norwegian Krone | 09/20/2006 | 942,000 | 939,243 | 2,757 | — | |||||||||||||||
Norwegian Krone | 09/20/2006 | 232,000 | 235,382 | — | 3,382 | |||||||||||||||
Swedish Krona | 09/20/2006 | 704,000 | 717,875 | — | 13,875 | |||||||||||||||
Swiss Franc | 09/20/2006 | 463,000 | 471,968 | — | 8,968 | |||||||||||||||
TOTAL OPEN FORWARD FOREIGN CURRENCY SALE CONTRACTS | $ | 24,758,882 | $ | 24,835,731 | $ | 114,355 | $ | 191,204 | ||||||||||||
33
Schedule of Investments
Principal | Interest | Maturity | ||||||||||||
Amount | Rate | Date | Value | |||||||||||
Mortgage-Backed Obligations – 64.6% | ||||||||||||||
Adjustable Rate FHLMC(a) – 2.0% | ||||||||||||||
$ | 948,708 | 4.847 | % | 09/01/35 | $ | 927,513 | ||||||||
964,351 | 4.730 | 10/01/35 | 928,739 | |||||||||||
1,856,252 | ||||||||||||||
Adjustable Rate FNMA(a) – 4.9% | ||||||||||||||
1,000,002 | 4.438 | 05/01/33 | 986,983 | |||||||||||
930,540 | 3.851 | 10/01/33 | 912,805 | |||||||||||
1,657,568 | 4.592 | 05/01/35 | 1,636,713 | |||||||||||
952,366 | 4.925 | 12/01/35 | 930,227 | |||||||||||
4,466,728 | ||||||||||||||
Adjustable Rate Non-Agency – 8.6% | ||||||||||||||
Bear Stearns Commercial Mortgage Securities | ||||||||||||||
500,000 | 5.712 | 09/11/38 | 496,303 | |||||||||||
Citigroup Commercial Mortgage Trust(a) | ||||||||||||||
500,000 | 5.721 | 03/15/49 | 495,727 | |||||||||||
Citigroup/Deutsche Bank Commercial Mortgage Trust(a) | ||||||||||||||
1,000,000 | 5.400 | 07/15/44 | 958,650 | |||||||||||
Commercial Mortgage Pass Through Certificates Series 2006-C7, Class A4(a) | ||||||||||||||
1,000,000 | 5.769 | 06/10/46 | 995,241 | |||||||||||
Countrywide Alternative Loan Trust Series 2005-59, Class 1A2A(a) | ||||||||||||||
964,029 | 5.647 | 11/20/35 | 967,237 | |||||||||||
Indymac Index Mortgage Loan Trust Series 2006-AR2, Class 1A1A(a) | ||||||||||||||
972,879 | 5.543 | 04/25/46 | 973,661 | |||||||||||
Luminent Mortgage Trust Series 2006-2, Class A1A(a) | ||||||||||||||
981,505 | 5.523 | 02/25/46 | 982,368 | |||||||||||
Merrill Lynch Mortgage Investors, Inc. Series 2005-A9, Class 2A1C(a) | ||||||||||||||
1,000,000 | 5.179 | 12/25/35 | 970,193 | |||||||||||
Washington Mutual, Inc. Series 2005-AR10, Class 1A3(a) | ||||||||||||||
1,000,000 | 4.839 | 09/25/35 | 960,380 | |||||||||||
7,799,760 | ||||||||||||||
FHLMC – 19.1% | ||||||||||||||
3,656 | 7.500 | 02/01/07 | 3,671 | |||||||||||
2,056,992 | 4.500 | 12/01/18 | 1,945,594 | |||||||||||
257,371 | 4.000 | 02/01/19 | 237,676 | |||||||||||
332,614 | 4.000 | 04/01/19 | 307,004 | |||||||||||
531,411 | 4.000 | 05/01/19 | 490,494 | |||||||||||
877,171 | 4.000 | 06/01/19 | 809,661 | |||||||||||
1,735,560 | 4.500 | 06/01/19 | 1,641,569 | |||||||||||
3,083 | 8.000 | 06/01/19 | 3,097 | |||||||||||
16,382 | 10.000 | 03/01/21 | 17,694 | |||||||||||
33,889 | 6.500 | 06/01/23 | 34,519 | |||||||||||
1,509,253 | 6.500 | 10/01/34 | 1,524,322 | |||||||||||
9,000,000 | 4.500 | TBA-15yr (b) | 8,502,192 | |||||||||||
1,000,000 | 5.000 | TBA-15yr (b) | 962,188 | |||||||||||
1,000,000 | 5.500 | TBA-15yr (b) | 960,312 | |||||||||||
17,439,993 | ||||||||||||||
FNMA – 10.3% | ||||||||||||||
11,853 | 7.500 | 03/01/07 | $ | 11,918 | ||||||||||
1,085 | 8.000 | 04/01/09 | 1,096 | |||||||||||
103,188 | 5.000 | 11/01/17 | 99,608 | |||||||||||
445,273 | 5.000 | 12/01/17 | 429,821 | |||||||||||
394,084 | 5.000 | 01/01/18 | 380,411 | |||||||||||
1,123,904 | 5.000 | 02/01/18 | 1,084,907 | |||||||||||
327,588 | 5.000 | 03/01/18 | 316,213 | |||||||||||
515,379 | 5.000 | 04/01/18 | 497,472 | |||||||||||
193,769 | 5.000 | 05/01/18 | 187,038 | |||||||||||
1,025,824 | 5.000 | 06/01/18 | 990,183 | |||||||||||
31,368 | 5.000 | 07/01/18 | 30,278 | |||||||||||
2,000,000 | 4.000 | 09/01/18 | 1,848,739 | |||||||||||
643,307 | 5.000 | 11/01/18 | 620,956 | |||||||||||
918,328 | 5.000 | 12/01/18 | 886,422 | |||||||||||
1,058,692 | 5.000 | 04/01/19 | 1,021,908 | |||||||||||
985,367 | 5.000 | 06/01/19 | 951,131 | |||||||||||
29,489 | 8.000 | 09/01/21 | 31,063 | |||||||||||
9,389,164 | ||||||||||||||
GNMA – 0.0% | ||||||||||||||
4,423 | 6.500 | 06/15/09 | 4,460 | |||||||||||
20,799 | 7.000 | 06/15/12 | 21,387 | |||||||||||
25,847 | ||||||||||||||
CMOs – 19.6% | ||||||||||||||
Interest Only(a)(c)(d) – 0.1% | ||||||||||||||
FNMA Series 2004-47, Class EI | ||||||||||||||
465,845 | 0.000 | 06/25/34 | 28,678 | |||||||||||
FNMA Series 2004-62, Class DI | ||||||||||||||
195,617 | 0.000 | 07/25/33 | 12,471 | |||||||||||
41,149 | ||||||||||||||
PAC – 18.7% | ||||||||||||||
FNMA Series 2003-32, Class PD | ||||||||||||||
7,000,000 | 4.000 | 07/25/22 | 6,878,746 | |||||||||||
FNMA Series 2003-70, Class BS | ||||||||||||||
5,812,335 | 4.000 | 04/25/22 | 5,705,202 | |||||||||||
FNMA Series 2719, Class GC | ||||||||||||||
4,580,000 | 5.000 | 06/15/26 | 4,457,580 | |||||||||||
17,041,528 | ||||||||||||||
Principal Only(d)(f)(e) – 0.9% | ||||||||||||||
FHLMC Series 235, Class PO | ||||||||||||||
586,908 | 0.000 | 02/01/36 | 398,729 | |||||||||||
FNMA Series 363, Class 1 | ||||||||||||||
571,708 | 0.000 | 11/01/35 | 388,992 | |||||||||||
787,721 | ||||||||||||||
TOTAL CMOs | $ | 17,870,398 | ||||||||||||
TOTAL MORTGAGE-BACKED OBLIGATIONS | ||||||||||||||
(Cost $59,891,683) | $ | 58,848,142 | ||||||||||||
34
Principal | Interest | Maturity | ||||||||||||
Amount | Rate | Date | Value | |||||||||||
Agency Debentures – 25.4% | ||||||||||||||
FHLB | ||||||||||||||
$ | 7,000,000 | 3.500 | % | 04/06/09 | $ | 6,639,115 | ||||||||
4,500,000 | 4.000 | 12/19/11 | 4,145,630 | |||||||||||
9,500,000 | 4.000 | 12/30/11 | 8,819,582 | |||||||||||
FNMA | ||||||||||||||
3,000,000 | 3.860 | 02/22/08 | 2,924,262 | |||||||||||
Tennessee Valley Authority | ||||||||||||||
700,000 | 5.375 | 04/01/56 | 661,472 | |||||||||||
TOTAL AGENCY DEBENTURES | ||||||||||||||
(Cost $23,917,617) | $ | 23,190,061 | ||||||||||||
U.S. Treasury Obligations – 9.2% | ||||||||||||||
United States Treasury Bonds | ||||||||||||||
$ | 3,900,000 | 4.500 | % | 02/15/09 | $ | 3,838,302 | ||||||||
United States Treasury Inflation Protected Securities | ||||||||||||||
436,084 | 2.000 | 01/15/14 | 420,923 | |||||||||||
414,260 | 1.875 | 07/15/15 | 392,901 | |||||||||||
304,482 | 2.000 | 01/15/16 | 290,768 | |||||||||||
United States Treasury Principal-Only Stripped Securities(f) | ||||||||||||||
3,600,000 | 0.000 | 11/15/21 | 1,590,948 | |||||||||||
2,000,000 | 0.000 | 11/15/22 | 837,496 | |||||||||||
900,000 | 0.000 | 08/15/25 | 328,026 | |||||||||||
1,900,000 | 0.000 | 11/15/26 | 650,849 | |||||||||||
TOTAL U.S. TREASURY OBLIGATIONS | ||||||||||||||
(Cost $8,524,473) | $ | 8,350,213 | ||||||||||||
TOTAL INVESTMENTS BEFORE REPURCHASE AGREEMENT – 99.2% | ||||||||||||||
(Cost $92,333,773) | $ | 90,388,416 | ||||||||||||
Repurchase Agreement(g) – 13.7% | ||||||||||||||
Joint Repurchase Agreement Account II | ||||||||||||||
$ | 12,500,000 | 5.276 | % | 07/03/06 | $ | 12,500,000 | ||||||||
Maturity Value: $12,505,496 | ||||||||||||||
(Cost $12,500,000) | ||||||||||||||
TOTAL INVESTMENTS – 112.9% | ||||||||||||||
(Cost $104,833,773) | $ | 102,888,416 | ||||||||||||
LIABILITIES IN EXCESS OF OTHER ASSETS – (12.9)% | (11,762,033 | ) | ||||||||||||
NET ASSETS – 100.0% | $ | 91,126,383 | ||||||||||||
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 disclosed is that which is in effect at June 30, 2006. | |
(b) | TBA (To Be Announced) Securities are purchased 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. Total market value of TBA securities amounts to $10,424,692 which represents approximately 11.4% of net assets as of June 30, 2006. | |
(c) | Represents security with notional or nominal principal amount. The actual effective yield of this security is different than the stated interest rate due to the amortization of related premiums or accretion of discounts. | |
(d) | Securities not registered under the Securities Act of 1933, as amended. Such securities have been determined to be illiquid by the Investment Adviser. At June 30, 2006, these securities amounted to $828,870 or approximately 1.0% of net assets. | |
(e) | Security issued with a zero coupon. Income is recognized through the accretion of discount. | |
(f) | Principal only securities represent the right to receive monthly payments of principal on an underlying pool of mortgages. | |
(g) | Joint repurchase agreement was entered into on June 30, 2006. Additional Investment information appears on page 39. |
Investment Abbreviations: | ||||||
CMO | — | Collateralized Mortgage Obligations | ||||
FHLB | — | Federal Home Loan Bank | ||||
FHLMC | — | Federal Home Loan Mortgage Corp. | ||||
FNMA | — | Federal National Mortgage Association | ||||
GNMA | — | Government National Mortgage Association | ||||
PAC | — | Planned Amortization Class | ||||
35
ADDITIONAL INVESTMENT INFORMATION |
FUTURES CONTRACTS — At June 30, 2006, the following futures contracts were open as follows:
Number of | Settlement | Unrealized | ||||||||||||
Type | Contracts Long (Short) | Month | Market Value | Gain (Loss) | ||||||||||
Eurodollars | 10 | September 2006 | $ | 2,360,500 | $ | (4,534 | ) | |||||||
U.S. Treasury Bonds | 13 | September 2006 | 1,386,531 | (3,460 | ) | |||||||||
2 Year U.S. Treasury Notes | 85 | September 2006 | 17,236,406 | (61,869 | ) | |||||||||
5 Year U.S. Treasury Notes | (81 | ) | September 2006 | (8,375,906 | ) | 49,453 | ||||||||
10 Year U.S. Treasury Notes | 64 | September 2006 | 6,711,000 | (49,792 | ) | |||||||||
$ | 19,318,531 | $ | (70,202 | ) | ||||||||||
36
Schedule of Investments
Principal | Interest | Maturity | Amortized | |||||||||||||
Amount | Rate | Date | Cost | |||||||||||||
Bank Note – 1.4% | ||||||||||||||||
National City Bank | ||||||||||||||||
$ | 3,000,000 | 4.79 | % | 01/16/2007 | $ | 3,000,000 | ||||||||||
Certificate of Deposit – 4.7% | ||||||||||||||||
Citibank, N.A. | ||||||||||||||||
$ | 10,000,000 | 5.20 | % | 08/31/2006 | $ | 10,000,000 | ||||||||||
Commercial Paper and Corporate Obligations – 36.1% | ||||||||||||||||
Bear Stearns Cos., Inc | ||||||||||||||||
$ | 5,000,000 | 5.32 | % | 07/03/2006 | $ | 4,998,522 | ||||||||||
CRC Funding LLC | ||||||||||||||||
5,000,000 | 5.05 | 07/25/2006 | 4,983,167 | |||||||||||||
Danske Corp. | ||||||||||||||||
4,625,000 | 5.35 | 08/24/2006 | 4,587,885 | |||||||||||||
FCAR Owner Trust Series II | ||||||||||||||||
5,000,000 | 5.15 | 07/12/2006 | 4,992,132 | |||||||||||||
Fountain Square Commercial Funding Corp. | ||||||||||||||||
5,000,000 | 5.29 | 08/18/2006 | 4,964,733 | |||||||||||||
Galleon Capital LLC | ||||||||||||||||
5,000,000 | 5.20 | 08/09/2006 | 4,971,833 | |||||||||||||
General Electric Capital Corp. | ||||||||||||||||
5,000,000 | 5.19 | 09/06/2006 | 4,951,704 | |||||||||||||
Grampian Funding LLC | ||||||||||||||||
5,494,000 | 5.13 | 08/29/2006 | 5,447,809 | |||||||||||||
Kitty Hawk Funding Corp. | ||||||||||||||||
7,000,000 | 5.20 | 07/17/2006 | 6,983,822 | |||||||||||||
KLIO Funding Corp. | ||||||||||||||||
5,000,000 | 5.27 | 07/20/2006 | 4,986,106 | |||||||||||||
Nordeutsche Landesbank Luxembourg | ||||||||||||||||
7,700,000 | 4.96 | 07/10/2006 | 7,690,452 | |||||||||||||
Park Granada LLC | ||||||||||||||||
5,000,000 | 5.06 | 07/13/2006 | 4,991,567 | |||||||||||||
Svenska Handlesbanken, Inc. | ||||||||||||||||
7,000,000 | 5.36 | 08/22/2006 | 6,945,805 | |||||||||||||
Ticonderoga Funding LLC | ||||||||||||||||
5,000,000 | 5.15 | 07/12/2006 | 4,992,132 | |||||||||||||
TOTAL COMMERCIAL PAPER AND CORPORATE OBLIGATIONS | $ | 76,487,669 | ||||||||||||||
Extendables(a) – 9.4% | ||||||||||||||||
IBM Corp.(c) | ||||||||||||||||
$ | 10,000,000 | 5.14 | % | 07/09/2007 | $ | 10,000,000 | ||||||||||
Merrill Lynch & Co., Inc. | ||||||||||||||||
2,000,000 | 5.18 | 07/16/2007 | 2,000,000 | |||||||||||||
Nordea Bank AB(c) | ||||||||||||||||
4,000,000 | 5.15 | 07/12/2007 | 4,000,000 | |||||||||||||
Wells Fargo & Co | ||||||||||||||||
4,000,000 | 5.09 | 07/03/2007 | 4,000,000 | |||||||||||||
TOTAL EXTENDABLES | $ | 20,000,000 | ||||||||||||||
U.S. Government Agency Obligation – 2.4% | ||||||||||||||||
FNMA | ||||||||||||||||
5,000,000 | 4.00 | 08/08/2006 | 5,000,000 | |||||||||||||
Variable Rate Obligations(a) – 10.8% | ||||||||||||||||
Caterpillar Financial Services Corp. | ||||||||||||||||
$ | 7,864,000 | 5.14 | % | 07/10/2006 | $ | 7,864,000 | ||||||||||
Credit Suisse First Boston, Inc. | ||||||||||||||||
5,000,000 | 5.14 | 05/18/2007 | 5,000,000 | |||||||||||||
Lehman Brothers Holdings, Inc. | ||||||||||||||||
5,000,000 | 5.20 | 06/26/2007 | 5,000,000 | |||||||||||||
National City Bank of Indiana | ||||||||||||||||
5,000,000 | 4.98 | 04/04/2007 | 4,999,976 | |||||||||||||
TOTAL VARIABLE RATE OBLIGATIONS | $ | 22,863,976 | ||||||||||||||
Yankee Certificates of Deposit – 6.6% | ||||||||||||||||
DePfa Bank Europe PLC | ||||||||||||||||
$ | 10,000,000 | 5.34 | % | 08/08/2006 | $ | 10,000,000 | ||||||||||
Deutsche Bank AG | ||||||||||||||||
2,000,000 | 4.80 | 01/29/2007 | 2,000,000 | |||||||||||||
Deutsche Bank AG | ||||||||||||||||
2,000,000 | 5.09 | 02/28/2007 | 2,000,000 | |||||||||||||
TOTAL YANKEE CERTIFICATES OF DEPOSIT | $ | 14,000,000 | ||||||||||||||
TOTAL INVESTMENTS BEFORE REPURCHASE AGREEMENT – 71.4% | $ | 151,351,645 | ||||||||||||||
37
Principal | Interest | Maturity | ||||||||||||||
Amount | Rate | Date | Value | |||||||||||||
Repurchase Agreements(b) – 28.7% | ||||||||||||||||
Joint Repurchase Agreement Account II | ||||||||||||||||
$ | 60,800,000 | 5.28 | % | 07/03/2006 | $ | 60,800,000 | ||||||||||
Maturity Value: $60,826,732 | ||||||||||||||||
(Cost $60,800,000) | ||||||||||||||||
TOTAL INVESTMENTS – 100.1% | $ | 212,151,645 | ||||||||||||||
LIABILITIES IN EXCESS OF OTHER ASSETS – (0.1)% | (120,221 | ) | ||||||||||||||
NET ASSETS – 100.0% | $ | 212,031,424 | ||||||||||||||
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 index is based on either Federal Funds, U.S. Treasury Bill, or LIBOR. | |
(b) | Joint repurchase agreement was entered into on June 30, 2006. Additional Investment information appears on page 39. |
(c) | Securities are exempt from registration under Rule 144A of the Securities Act of 1933. Under procedures approved by the Board of Trustees, such securities have been determined to be liquid by the Investment Advisor and may be resold, normally to qualified institutional buyers in transactions exempt from registration. Total market value of Rule 144A securities amounts to $14,000,000, which represents approximately 6.6% of net assets as of June 30, 2006. |
Maturity dates represent either the stated date on the security or the next interest reset date for floating rate securities. |
Investment Abbreviation: | ||||||
FNMA—Federal National Mortgage Association | ||||||
38
ADDITIONAL INVESTMENT INFORMATION |
JOINT REPURCHASE AGREEMENT ACCOUNT II — At June 30, 2006, the Funds had undivided interests in the Joint Repurchase Agreement Account II, as follows:
Principal | ||||
Fund | Amount | |||
Growth Opportunities | $ | 400,000 | ||
Equity Index | 2,800,000 | |||
Core Fixed Income | 12,800,000 | |||
Government Income | 12,500,000 | |||
Money Market | 60,800,000 | |||
Principal | Interest | Maturity | Maturity | |||||||||||||
Repurchase Agreements | Amount | Rate | Date | Value | ||||||||||||
Banc of America Securities LLC | $ | 2,860,000,000 | 5.30% | 07/03/2006 | $ | 2,861,263,167 | ||||||||||
Barclays Capital PLC | 1,500,000,000 | 5.32 | 07/03/2006 | 1,500,665,000 | ||||||||||||
Bear Stearns | 500,000,000 | 5.31 | 07/03/2006 | 500,221,250 | ||||||||||||
Deutsche Bank Securities, Inc. | 1,000,000,000 | 5.20 | 07/03/2006 | 1,000,433,333 | ||||||||||||
Greenwich Capital Markets | 300,000,000 | 5.32 | 07/03/2006 | 300,133,000 | ||||||||||||
J.P. Morgan Securities, Inc. | 400,000,000 | 5.28 | 07/03/2006 | 400,176,000 | ||||||||||||
Merrill Lynch | 500,000,000 | 5.25 | 07/03/2006 | 500,218,750 | ||||||||||||
Morgan Stanley & Co. | 3,000,000,000 | 5.25 | 07/03/2006 | 3,001,312,500 | ||||||||||||
UBS Securities LLC | 1,050,000,000 | 5.25 | 07/03/2006 | 1,050,459,375 | ||||||||||||
UBS Securities LLC | 475,000,000 | 5.30 | 07/03/2006 | 475,209,792 | ||||||||||||
UBS Securities LLC | 400,000,000 | 5.34 | 07/03/2006 | 400,178,000 | ||||||||||||
Wachovia Capital Markets | 250,000,000 | 5.26 | 07/03/2006 | 250,109,583 | ||||||||||||
TOTAL | $ | 12,235,000,000 | $ | 12,240,379,750 | ||||||||||||
At June 30, 2006, the Joint Repurchase Agreement Account II was fully collateralized by Federal Home Loan Bank, 0.00% to 11.00%, due 07/07/2006 to 04/20/2016; Federal Home Loan Mortgage Association, 3.00% to 8.50%, due 02/01/2007 to 07/01/2036; Federal National Mortgage Association, 0.00% to 10.50%, due 02/01/2007 to 07/01/2036; and U.S. Treasury Bonds, 5.00% to 7.14%, due 11/13/2008 to 10/20/2018. The aggregate market value of the collateral, including accrued interest, was $12,492,409,737. |
39
Statements of Assets and Liabilities
Growth | |||||||
Opportunities | |||||||
Fund | |||||||
Assets: | |||||||
Investment in securities, at value (identified cost $236,077,381, $345,336,043, $313,025,666, $92,333,773 and $151,351,645, respectively — including $10,693,260, $845,616, $0, $0, and $0 of securities on loan respectively | $ | 228,891,867 | |||||
Repurchase Agreement at value (cost $0, $0, $0, $12,500,000 and $60,800,000 respectively) | — | ||||||
Securities lending collateral, at value (cost $10,962,000, $868,350, $0, $0, and $0, respectively) | 10,962,000 | ||||||
Cash(a) | 3,366 | ||||||
Foreign currencies, at value (identified cost $1,015, $0, $0, $0, $0, respectively) | 1,006 | ||||||
Receivables: | |||||||
Investment securities sold | — | ||||||
Dividends and interest, at value | 64,888 | ||||||
Variation margin | — | ||||||
Forward foreign currency exchange contracts, at value | — | ||||||
Reimbursement from adviser | 14,884 | ||||||
Securities lending income | 1,470 | ||||||
Total assets | 239,939,481 | ||||||
Liabilities: | |||||||
Payables: | |||||||
Investment securities purchased | — | ||||||
Payable upon return of securities loaned | 10,962,000 | ||||||
Fund shares repurchased | 153,394 | ||||||
Amounts owed to affiliates | 214,268 | ||||||
Variation margin | — | ||||||
Forward foreign currency exchange contracts, at value | — | ||||||
Accrued expenses | 49,725 | ||||||
Total liabilities | 11,379,387 | ||||||
Net Assets: | |||||||
Paid-in capital | 145,452,947 | ||||||
Accumulated undistributed net investment income (loss) | (755,544 | ) | |||||
Accumulated net realized gain (loss) on investment, futures and foreign currency related transactions | 91,048,214 | ||||||
Net unrealized gain (loss) on investments, futures and transactions of assets and liabilities denominated in foreign currencies | (7,185,523 | ) | |||||
NET ASSETS | $ | 228,560,094 | |||||
Total shares of beneficial interest outstanding, $0.001 par value (unlimited number of shares authorized) | 23,961,491 | ||||||
Net asset value, offering and redemption price per share: | $ | 9.54 | |||||
(a) | Includes restricted cash of $44,968, and $63,930, relating to initial margin requirements and collateral on futures transactions for the Core Fixed Income and Government Income Funds, respectively. |
40
Equity | Core Fixed | Government | Money | |||||||||||||
Index Fund | Income Fund | Income Fund | Market Fund | |||||||||||||
$ | 429,299,526 | $ | 305,523,830 | $ | 90,388,416 | $ | 151,351,645 | |||||||||
— | — | 12,500,000 | 60,800,000 | |||||||||||||
868,350 | — | — | — | |||||||||||||
167,586 | 226,858 | 211,971 | 5,975 | |||||||||||||
— | — | — | — | |||||||||||||
1,307,048 | 9,415,586 | 10,484,375 | — | |||||||||||||
491,278 | 2,225,345 | 384,510 | 559,462 | |||||||||||||
— | 191,887 | 160,293 | — | |||||||||||||
— | 234,920 | — | — | |||||||||||||
5,301 | 26,415 | 20,276 | 13,958 | |||||||||||||
723 | — | — | — | |||||||||||||
432,139,812 | 317,844,841 | 114,149,841 | 212,731,040 | |||||||||||||
— | 20,668,865 | 22,771,014 | — | |||||||||||||
868,350 | — | — | — | |||||||||||||
528,487 | 219,193 | 116,692 | 544,651 | |||||||||||||
120,515 | 133,137 | 51,515 | 90,291 | |||||||||||||
13,280 | — | — | — | |||||||||||||
— | 243,952 | — | — | |||||||||||||
96,957 | 112,540 | 84,237 | 64,674 | |||||||||||||
1,627,589 | 21,377,687 | 23,023,458 | 699,616 | |||||||||||||
488,065,206 | 314,130,024 | 97,276,970 | 212,033,292 | |||||||||||||
3,538,745 | 101,990 | 45,450 | — | |||||||||||||
(145,190,237 | ) | (10,179,914 | ) | (4,180,478 | ) | (1,868 | ) | |||||||||
84,098,509 | (7,584,946 | ) | (2,015,559 | ) | — | |||||||||||
$ | 430,512,223 | $ | 296,467,154 | $ | 91,126,383 | $ | 212,031,424 | |||||||||
43,258,380 | 30,580,475 | 9,343,031 | 212,031,424 | |||||||||||||
$ | 9.95 | $ | 9.69 | $ | 9.75 | $ | 1.00 | |||||||||
41
Statements of Operations
Growth | |||||||
Opportunities | |||||||
Fund | |||||||
Investment income: | |||||||
Dividends(a) | $ | 646,846 | |||||
Interest (including securities lending income of $5,991, $7,422, $0, $0 and $0, respectively) | 65,640 | ||||||
Total income | 712,486 | ||||||
Expenses: | |||||||
Management fees | 1,277,003 | ||||||
Distribution and Service fees | 315,673 | ||||||
Custody and accounting fees | 45,549 | ||||||
Transfer agent fees | 48,554 | ||||||
Professional fees | 25,158 | ||||||
Printing fees | 12,323 | ||||||
Trustee fees | 7,347 | ||||||
Other | 7,110 | ||||||
Total expenses | 1,738,717 | ||||||
Less — expense reductions | (270,687 | ) | |||||
Net expenses | 1,468,030 | ||||||
NET INVESTMENT INCOME (LOSS) | (755,544 | ) | |||||
Realized and unrealized gain (loss) on investment, futures and foreign currency related transactions: | |||||||
Net realized gain (loss) from: | |||||||
Investment transactions | 86,622,265 | ||||||
Futures transactions | — | ||||||
Foreign currency related transactions | 31,561 | ||||||
Net change in unrealized gain (loss) on: | |||||||
Investments | (88,282,487 | ) | |||||
Futures | — | ||||||
Translation of assets and liabilities denominated in foreign currencies | (9 | ) | |||||
Net realized and unrealized gain (loss) on investment, futures and foreign currency related transactions | (1,628,670 | ) | |||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | (2,384,214 | ) | ||||
(a) | For the Growth Opportunities Fund, foreign taxes withheld on dividends were $91. |
42
Equity | Core Fixed | Government | Money | |||||||||||||
Index Fund | Income Fund | Income Fund | Market Fund | |||||||||||||
$ | 4,350,257 | $ | — | $ | — | $ | — | |||||||||
114,631 | 7,880,937 | 2,242,253 | 5,167,049 | |||||||||||||
4,464,888 | 7,880,937 | 2,242,253 | 5,167,049 | |||||||||||||
688,956 | 632,544 | 262,181 | 380,820 | |||||||||||||
574,130 | 388,660 | 120,177 | 269,881 | |||||||||||||
131,586 | 113,899 | 69,478 | 34,254 | |||||||||||||
88,308 | 59,781 | 18,485 | 41,511 | |||||||||||||
25,773 | 25,408 | 24,807 | 24,878 | |||||||||||||
12,323 | 12,323 | 12,323 | 12,323 | |||||||||||||
7,347 | 7,347 | 7,347 | 7,347 | |||||||||||||
7,110 | 7,110 | 7,110 | 7,110 | |||||||||||||
1,535,533 | 1,247,072 | 521,908 | 778,124 | |||||||||||||
(571,984 | ) | (382,718 | ) | (187,168 | ) | (238,972 | ) | |||||||||
963,549 | 864,354 | 334,740 | 539,152 | |||||||||||||
3,501,339 | 7,016,583 | 1,907,513 | 4,627,897 | |||||||||||||
13,675,692 | (5,259,930 | ) | (1,624,539 | ) | — | |||||||||||
(306,620 | ) | (119,246 | ) | (82,502 | ) | — | ||||||||||
— | (269,882 | ) | — | — | ||||||||||||
(4,399,159 | ) | (4,421,826 | ) | (452,998 | ) | — | ||||||||||
135,026 | (74,078 | ) | (70,202 | ) | — | |||||||||||
— | (9,032 | ) | — | — | ||||||||||||
9,104,939 | (10,153,994 | ) | (2,230,241 | ) | — | |||||||||||
$ | 12,606,278 | $ | (3,137,411 | ) | $ | (322,728 | ) | $ | 4,627,897 | |||||||
43
Statements of Changes in Net Assets
Growth Opportunities Fund | ||||||||||
For the | ||||||||||
Six Months Ended | For the | |||||||||
June 30, 2006 | Year Ended | |||||||||
(Unaudited) | December 31, 2005 | |||||||||
From operations: | ||||||||||
Net investment income (loss) | $ | (755,544 | ) | $ | (1,385,951 | ) | ||||
Net realized gain (loss) from investment, futures and foreign currency related transactions | 86,653,826 | 40,227,353 | ||||||||
Net change in unrealized gain (loss) on investments, futures and translation of assets and liabilities denominated in foreign currency | (88,282,496 | ) | (2,140,031 | ) | ||||||
Net increase (decrease) in net assets resulting from operations | (2,384,214 | ) | 36,701,371 | |||||||
Distributions to shareholders: | ||||||||||
From net investment income | — | — | ||||||||
From net realized gain | — | (66,125,528 | ) | |||||||
Tax return of capital | — | — | ||||||||
Total distributions to shareholders | — | (66,125,528 | ) | |||||||
From share transactions: | ||||||||||
Proceeds from sales of shares | 101,279 | 1,523,762 | ||||||||
Reinvestment of dividends and distributions | — | 66,125,528 | ||||||||
Cost of shares repurchased | (42,980,000 | ) | (63,757,175 | ) | ||||||
Net increase (decrease) in net assets resulting from share transactions | (42,878,721 | ) | 3,892,115 | |||||||
TOTAL DECREASE | (45,262,935 | ) | (25,532,042 | ) | ||||||
Net assets: | ||||||||||
Beginning of period | 273,823,029 | 299,355,071 | ||||||||
End of period | $ | 228,560,094 | $ | 273,823,029 | ||||||
Accumulated undistributed net investment income (loss) | $ | (755,544 | ) | $ | — | |||||
Summary of share transactions: | ||||||||||
Shares sold | 10,000 | 668,774 | ||||||||
Impact of conversion of shares due to merger | (105,942,206 | ) | — | |||||||
Shares issued on reinvestment of dividends and distributions | — | 31,789,823 | ||||||||
Shares repurchased | (4,912,110 | ) | — | |||||||
NET INCREASE (DECREASE) | (110,844,316 | ) | 32,458,597 | |||||||
44
Equity Index Fund | Core Fixed Income Fund | Government Income Fund | Money Market Fund | |||||||||||||||||||||||||||||
For the | For the | For the | For the | |||||||||||||||||||||||||||||
Six Months Ended | For the | Six Months Ended | For the | Six Months Ended | For the | Six Months Ended | For the | |||||||||||||||||||||||||
June 30, 2006 | Year Ended | June 30, 2006 | Year Ended | June 30, 2006 | Year Ended | June 30, 2006 | Year Ended | |||||||||||||||||||||||||
(Unaudited) | December 31, 2005 | (Unaudited) | December 31, 2005 | (Unaudited) | December 31, 2005 | (Unaudited) | December 31, 2005 | |||||||||||||||||||||||||
$ | 3,501,339 | $ | 7,153,922 | $ | 7,016,583 | $ | 14,804,890 | $ | 1,907,513 | $ | 3,645,011 | $ | 4,627,897 | $ | 6,625,258 | |||||||||||||||||
13,369,072 | 604,471 | (5,649,058 | ) | (42,163 | ) | (1,707,041 | ) | (291,847 | ) | — | (1,868 | ) | ||||||||||||||||||||
(4,264,133 | ) | 13,306,879 | (4,504,936 | ) | (8,164,069 | ) | (523,200 | ) | (1,607,735 | ) | — | — | ||||||||||||||||||||
12,606,278 | 21,065,272 | (3,137,411 | ) | 6,598,658 | (322,728 | ) | 1,745,429 | 4,627,897 | 6,623,390 | |||||||||||||||||||||||
— | (7,221,232 | ) | (6,429,234 | ) | (17,062,085 | ) | (1,885,903 | ) | (3,996,071 | ) | (4,627,897 | ) | (6,646,008 | ) | ||||||||||||||||||
— | — | — | — | — | — | — | — | |||||||||||||||||||||||||
— | — | — | — | — | — | — | (56,233 | ) | ||||||||||||||||||||||||
— | (7,221,232 | ) | (6,429,234 | ) | (17,062,085 | ) | (1,885,903 | ) | (3,996,071 | ) | (4,627,897 | ) | (6,702,241 | ) | ||||||||||||||||||
26,957 | 15,944,208 | 4,229,548 | 13,661,274 | 3,677,954 | 3,171,313 | 65,594,857 | 109,105,489 | |||||||||||||||||||||||||
— | 7,221,232 | 6,429,234 | 17,062,085 | 1,885,903 | 3,996,071 | 4,427,150 | 6,702,241 | |||||||||||||||||||||||||
(71,708,105 | ) | (142,459,001 | ) | (37,485,959 | ) | (89,617,770 | ) | (14,997,553 | ) | (31,008,367 | ) | (80,206,318 | ) | (158,191,711 | ) | |||||||||||||||||
(71,681,148 | ) | (119,293,561 | ) | (26,827,177 | ) | (58,894,411 | ) | (9,433,696 | ) | (23,840,983 | ) | (10,184,311 | ) | (42,383,981 | ) | |||||||||||||||||
(59,074,870 | ) | (105,449,521 | ) | (36,393,822 | ) | (69,357,838 | ) | (11,642,327 | ) | (26,091,625 | ) | (10,184,311 | ) | (42,462,832 | ) | |||||||||||||||||
489,587,093 | 595,036,614 | 332,860,976 | 402,218,814 | 102,768,710 | 128,860,335 | 222,215,735 | 264,678,567 | |||||||||||||||||||||||||
$ | 430,512,223 | $ | 489,587,093 | $ | 296,467,154 | $ | 332,860,976 | $ | 91,126,383 | $ | 102,768,710 | $ | 212,031,424 | $ | 222,215,735 | |||||||||||||||||
$ | 3,538,745 | $ | 37,406 | $ | 101,990 | $ | (485,359 | ) | $ | 45,450 | $ | 23,840 | $ | — | $ | — | ||||||||||||||||
2,653 | 6,111,008 | 423,738 | 12,685,160 | 371,977 | 2,946,864 | 65,594,857 | 109,105,487 | |||||||||||||||||||||||||
(127,249,407 | ) | — | (281,251,666 | ) | — | (85,825,236 | ) | — | — | — | ||||||||||||||||||||||
— | 2,707,229 | 660,251 | 15,973,918 | 192,723 | 3,735,449 | 4,427,150 | 6,702,241 | |||||||||||||||||||||||||
(8,061,972 | ) | (53,625,297 | ) | (4,517,602 | ) | (83,108,605 | ) | (2,216,563 | ) | (28,811,809 | ) | (80,206,318 | ) | (158,191,711 | ) | |||||||||||||||||
(135,308,726 | ) | (44,807,060 | ) | (284,685,279 | ) | (54,449,527 | ) | (87,477,099 | ) | (22,129,496 | ) | (10,184,311 | ) | (42,383,983 | ) | |||||||||||||||||
45
Financial Highlights
Ratios | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
assuming | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income (loss) from | Distributions to | no expense | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
investment operations | shareholders | reductions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net | Ratio of | Ratio of | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset | realized | From | Net asset | Net assets | Ratio of | net investment | total | |||||||||||||||||||||||||||||||||||||||||||||||||
value, | Net | and | Total from | net | value, | at end | net expenses | loss | expenses | Portfolio | ||||||||||||||||||||||||||||||||||||||||||||||
beginning | investment | unrealized | investment | realized | Total | end of | Total | of period | to average | to average | to average | turnover | ||||||||||||||||||||||||||||||||||||||||||||
of period | loss(a) | gain (loss) | operations | gains | distributions | period | return(b) | (in 000s) | net assets | net assets | net assets | rate | ||||||||||||||||||||||||||||||||||||||||||||
For the Six Months ended June 30, (Unaudited)(c) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2006 | $ | 9.69 | $ | (0.03 | ) | $ | (0.12 | ) | $ | (0.15 | ) | $ | — | $ | — | $ | 9.54 | (1.50 | )% | $ | 228,560 | 1.16 | % (d)(f) | (0.60 | )% (d)(e) | 1.37 | % (d)(f) | 117 | % | |||||||||||||||||||||||||||
For the Years ended December 31,(c) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2005 | 10.90 | (0.05 | ) | 1.54 | 1.49 | (2.70 | ) | (2.70 | ) | 9.69 | 14.68 | 273,823 | 1.15 | (0.50 | ) | 1.15 | 27 | |||||||||||||||||||||||||||||||||||||||
2004 | 10.13 | (0.07 | ) | 1.78 | 1.71 | (0.94 | ) | (0.94 | ) | 10.90 | 18.62 | 299,355 | 1.14 | (0.70 | ) | 1.15 | 38 | |||||||||||||||||||||||||||||||||||||||
2003 | 7.25 | (0.07 | ) | 2.95 | 2.88 | — | — | 10.13 | 39.71 | 296,204 | 1.11 | (0.70 | ) | 1.13 | 46 | |||||||||||||||||||||||||||||||||||||||||
2002 | 9.25 | (0.07 | ) | (1.93 | ) | (2.00 | ) | — | — | 7.25 | (21.60 | ) | 287,593 | 1.05 | (0.70 | ) | 1.06 | 41 | ||||||||||||||||||||||||||||||||||||||
2001 | 10.12 | (0.05 | ) | (0.09 | ) | (0.14 | ) | (0.73 | ) | (0.73 | ) | 9.25 | (1.14 | ) | 435,864 | 0.93 | (0.51 | ) | 0.94 | 44 | ||||||||||||||||||||||||||||||||||||
(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 dividends and 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. The Goldman Sachs Growth Opportunities Fund first began operations as the Allmerica Select Capital Appreciation Fund (the “Predecessor AIT Fund”) of the Allmerica Investment Trust. On January 9, 2006, the Predecessor AIT Fund was reorganized as a new portfolio of the Goldman Sachs Variable Insurance Trust. Performance prior to January 9, 2006 is that of the Predecessor AIT Fund. Total return information of the Predecessor AIT Fund is provided in the above table because the Predecessor AIT Fund is considered the accounting survivor of the reorganization. As part of the reorganization, the Predecessor AIT Fund changed its investment adviser to Goldman Sachs Asset Management, L.P. In addition, the Goldman Sachs Fund that the Predecessor AIT Fund reorganized into had investment objectives and policies which were not identical to the Predecessor AIT Fund. |
(c) | The Goldman Sachs Growth Opportunities Fund (“the Fund”) first began operations as the Allmerica Select Capital Appreciation Fund (the “Predecessor AIT Fund”) of the Allmerica Investment Trust. On January 9, 2006, the Predecessor AIT Fund was reorganized as a new portfolio of the Goldman Sachs Variable Insurance Trust and is the accounting survivor. The financial highlights for the Growth Opportunities Fund as set forth here to include the historical financial highlights of the Allmerica Select Capital Appreciation Fund. In connection with such acquisition, the Goldman Sachs Growth Opportunities Fund issued service classes to the former shareholders of the Allmerica Select Capital Appreciation Fund at $10.00 per share. Historical per-share amounts prior to the Fund reorganization have been adjusted to reflect the conversion ratio utilized for the reorganization. |
(d) | Annualized. |
(e) | Ratio of Net Investment Income assuming no expense reductions is (0.81)%. |
(f) | Expense ratio includes the affect of operating expenses of the Predecessor Fund prior to Reorganization. |
The accompanying notes are an integral part of these financial statements.
Financial Highlights
�� | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ratios | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
assuming | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
no | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income (loss) from | expense | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
investment operations | Distributions to shareholders | reductions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net | Ratio of | Ratio of | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset | realized | From | Net asset | Net assets, | Ratio of | net investment | total | |||||||||||||||||||||||||||||||||||||||||||||||||||||
value, | Net | and | Total from | From net | net | value, | end | net expenses | income | expenses | Portfolio | |||||||||||||||||||||||||||||||||||||||||||||||||
beginning | investment | unrealized | investment | investment | realized | Total | end of | Total | of period | to average | to average | to average | turnover | |||||||||||||||||||||||||||||||||||||||||||||||
of period | income(a) | gain (loss) | operations | income | gains | distributions | period | return(b) | (in 000s) | net assets | net assets | net assets | rate | |||||||||||||||||||||||||||||||||||||||||||||||
For the Six Months ended June 30, (Unaudited)(c) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2006 | $ | 9.71 | $ | 0.08 | $ | 0.16 | $ | 0.24 | $ | — | $ | — | $ | — | $ | 9.95 | 2.48 | % | $ | 430,512 | 0.42 | % (d)(f) | 1.52 | % (d)(e) | 0.67 | % (d)(f) | 2 | % | ||||||||||||||||||||||||||||||||
For the Years ended December 31,(c) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2005 | 9.43 | 0.13 | 0.28 | 0.41 | (0.13 | ) | — | (0.13 | ) | 9.71 | 4.38 | 489,587 | 0.52 | 1.35 | 0.52 | 7 | ||||||||||||||||||||||||||||||||||||||||||||
2004 | 8.69 | 0.14 | 0.74 | 0.88 | (0.14 | ) | — | (0.14 | ) | 9.43 | 10.32 | 595,037 | 0.50 | 1.53 | 0.52 | 4 | ||||||||||||||||||||||||||||||||||||||||||||
2003 | 6.88 | 0.10 | 1.81 | 1.91 | (0.10 | ) | — | (0.10 | ) | 8.69 | 27.83 | 666,455 | 0.45 | 1.37 | 0.50 | 23 | ||||||||||||||||||||||||||||||||||||||||||||
2002 | 9.62 | 0.10 | (2.19 | ) | (2.09 | ) | (0.10 | ) | (0.55 | ) | (0.65 | ) | 6.88 | (22.22 | ) | 342,683 | 0.45 | 1.16 | 0.47 | 10 | ||||||||||||||||||||||||||||||||||||||||
2001 | 11.68 | 0.11 | (1.49 | ) | (1.38 | ) | (0.10 | ) | (0.58 | ) | (0.68 | ) | 9.62 | (12.02 | ) | 517,315 | 0.32 | 1.02 | 0.34 | 21 | ||||||||||||||||||||||||||||||||||||||||
(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 dividends and 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. The Goldman Sachs Equity Index Fund first began operations as the Allmerica Equity Index Fund (the “Predecessor AIT Fund”) of the Allmerica Investment Trust. On January 9, 2006, the Predecessor AIT Fund was reorganized as a new portfolio of the Goldman Sachs Variable Insurance Trust. Performance prior to January 9, 2006 is that of the Predecessor AIT Fund. Total return information of the Predecessor AIT Fund is provided in the above table because the Predecessor AIT Fund is considered the accounting survivor of the reorganization. As part of the reorganization, the Predecessor AIT Fund changed its investment adviser to Goldman Sachs Asset Management, L.P. In addition, the Goldman Sachs Fund that the Predecessor AIT Fund reorganized into had investment objectives and policies which were not identical to the Predecessor AIT Fund. |
(c) | The Goldman Sachs Equity Index Fund (“the Fund”) first began operations as the Allmerica Equity Index Fund (the “Predecessor AIT Fund”) of the Allmerica Investment Trust. On January 9, 2006, the Predecessor AIT Fund was reorganized as a new portfolio of the Goldman Sachs Variable Insurance Trust and is the accounting survivor. The financial highlights for the Equity Index Fund as set forth here to include the historical financial highlights of the Allmerica Equity Index Fund. In connection with such acquisition, the Goldman Sachs Equity Index Fund issued service classes to the former shareholders of the Allmerica Equity Index Fund at $10.00 per share. Historical per-share amounts prior to the Fund reorganization have been adjusted to reflect the conversion ratio utilized for the reorganization. |
(d) | Annualized. |
(e) | Ratio of Net Investment Income assuming no expense reductions is 1.27%. |
(f) | Expense ratio includes the affect of operating expenses of the Predecessor Fund prior to Reorganization. |
The accompanying notes are an integral part of these financial statements.
Financial Highlights
Ratios | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
assuming | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income (loss) from | no expense | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
investment operations | Distributions to shareholders | reductions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net | Ratio of | Ratio of | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset | realized | From | Net asset | Net assets, | Ratio of | net investment | total | |||||||||||||||||||||||||||||||||||||||||||||||||||||
value, | Net | and | Total from | From net | net | value, | end of | net expenses | income | expenses | Portfolio | |||||||||||||||||||||||||||||||||||||||||||||||||
beginning | investment | unrealized | investment | investment | realized | Total | end of | Total | period | to average | to average | to average | turnover | |||||||||||||||||||||||||||||||||||||||||||||||
of period | income(a) | gain (loss) | operations | income | gains | distributions | period | return(b) | (in 000s) | net assets | net assets | net assets | rate | |||||||||||||||||||||||||||||||||||||||||||||||
For the Six Months ended June 30, (Unaudited)(c) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2006 | $ | 9.98 | $ | 0.22 | $ | (0.30 | ) | $ | (0.08 | ) | $ | (0.21 | ) | $ | — | $ | (0.21 | ) | $ | 9.69 | (0.84 | )% | $ | 296,467 | 0.55 | % (d)(f) | 4.50 | %(d)(e) | 0.80 | % (d)(f) | 115 | % | ||||||||||||||||||||||||||||
For the Years ended December 31,(c) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2005 | 10.29 | 0.42 | (0.24 | ) | 0.18 | (0.49 | ) | — | (0.49 | ) | 9.98 | 1.84 | 332,861 | 0.64 | 4.05 | 0.64 | 110 | |||||||||||||||||||||||||||||||||||||||||||
2004 | 10.58 | 0.41 | — | 0.41 | (0.56 | ) | (0.14 | ) | (0.70 | ) | 10.29 | 3.98 | 402,219 | 0.64 | 3.78 | 0.64 | 113 | |||||||||||||||||||||||||||||||||||||||||||
2003 | 10.72 | 0.38 | (0.03 | ) | 0.35 | (0.49 | ) | — | (0.49 | ) | 10.58 | 3.31 | 530,199 | 0.63 | 3.42 | 0.63 | 192 | |||||||||||||||||||||||||||||||||||||||||||
2002 | 10.46 | 0.51 | 0.32 | 0.83 | (0.57 | ) | — | (0.57 | ) | 10.72 | 8.14 | 620,074 | 0.58 | 4.85 | 0.58 | 130 | ||||||||||||||||||||||||||||||||||||||||||||
2001 | 10.27 | 0.61 | 0.19 | 0.80 | (0.61 | ) | — | (0.61 | ) | 10.46 | 7.94 | 571,582 | 0.47 | 5.79 | 0.47 | 114 | ||||||||||||||||||||||||||||||||||||||||||||
(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 dividends and 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. The Goldman Sachs Core Fixed Income Fund first began operations as the Allmerica Select Investment Grade Income Fund (the “Predecessor AIT Fund”) of the Allmerica Investment Trust. On January 9, 2006, the Predecessor AIT Fund was reorganized as a new portfolio of the Goldman Sachs Variable Insurance Trust. Performance prior to January 9, 2006 is that of the Predecessor AIT Fund. Total return information of the Predecessor AIT Fund is provided in the above table because the Predecessor AIT Fund is considered the accounting survivor of the reorganization. As part of the reorganization, the Predecessor AIT Fund changed its investment adviser to Goldman Sachs Asset Management, L.P. In addition, the Goldman Sachs Fund that the Predecessor AIT Fund reorganized into had investment objectives and policies which were not identical to the Predecessor AIT Fund. |
(c) | The Goldman Sachs Core Fixed Income Fund (“the Fund”) first began operations as the Allmerica Select Investment Grade Income Fund (the “Predecessor AIT Fund”) of the Allmerica Investment Trust. On January 9, 2006, the Predecessor AIT Fund was reorganized as a new portfolio of the Goldman Sachs Variable Insurance Trust and is the accounting survivor. The financial highlights for the Core Fixed Income Fund as set forth here to include the historical financial highlights of the Allmerica Select Investment Grade Income Fund. In connection with such acquisition, the Goldman Sachs Core Fixed Income Fund issued service classes to the former shareholders of the Allmerica Select Investment Grade Income Fund at $10.00 per share. Historical per-share amounts prior to the Fund reorganization have been adjusted to reflect the conversion ratio utilized for the reorganization. |
(d) | Annualized. |
(e) | Ratio of Net Investment Income assuming no expense reductions is 4.25%. |
(f) | Expense ratio includes the affect of operating expenses of the Predecessor Fund prior to Reorganization. |
The accompanying notes are an integral part of these financial statements.
Financial Highlights
Ratios | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
assuming | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
no | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income (loss) from | Distributions to | expense | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
investment operations | shareholders | reductions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net | Ratio of | Ratio of | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset | Net | realized | Net asset | Net assets, | Ratio of | net investment | total | |||||||||||||||||||||||||||||||||||||||||||||||||
value, | investment | and | Total from | From net | value, | end of | net expenses | income (loss) | expenses | Portfolio | ||||||||||||||||||||||||||||||||||||||||||||||
beginning | income | unrealized | investment | investment | Total | end of | Total | period | to average | to average | to average | turnover | ||||||||||||||||||||||||||||||||||||||||||||
of period | (loss)(a) | gain (loss) | operations | income | distributions | period | return(b) | (in 000s) | net assets | net assets | net assets | rate | ||||||||||||||||||||||||||||||||||||||||||||
For the Six Months ended June 30, (Unaudited)(c) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2006 | $ | 9.98 | $ | 0.20 | $ | (0.23 | ) | $ | (0.03 | ) | $ | (0.20 | ) | $ | (0.20 | ) | $ | 9.75 | (0.32 | )% | $ | 91,126 | 0.69 | % (d)(f) | 3.96 | %(d)(e) | 1.08 | % (d)(f) | 153 | % | ||||||||||||||||||||||||||
For the Years ended December 31,(c) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2005 | 10.19 | 0.32 | (0.16 | ) | 0.16 | (0.37 | ) | (0.37 | ) | 9.98 | 1.55 | 102,769 | 0.74 | 3.18 | 0.74 | 44 | ||||||||||||||||||||||||||||||||||||||||
2004 | 10.39 | 0.28 | (0.07 | ) | 0.21 | (0.41 | ) | (0.41 | ) | 10.19 | 2.12 | 128,860 | 0.73 | 3.02 | 0.73 | 77 | ||||||||||||||||||||||||||||||||||||||||
2003 | 10.63 | 0.28 | (0.10 | ) | 0.18 | (0.42 | ) | (0.42 | ) | 10.39 | 1.67 | 20,018 | 0.71 | 2.82 | 0.71 | 55 | ||||||||||||||||||||||||||||||||||||||||
2002 | 10.13 | 0.39 | 0.54 | 0.93 | (0.42 | ) | (0.42 | ) | 10.63 | 9.28 | 291,995 | 0.68 | 3.48 | 0.68 | 79 | |||||||||||||||||||||||||||||||||||||||||
2001 | 9.89 | 0.46 | 0.28 | 0.74 | (0.50 | ) | (0.50 | ) | 10.13 | 7.63 | 116,514 | 0.58 | 4.52 | 0.58 | 190 | |||||||||||||||||||||||||||||||||||||||||
(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 dividends and 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. The Goldman Sachs Government Income Fund first began operations as the Allmerica Government Bond Fund (the “Predecessor AIT Fund”) of the Allmerica Investment Trust. On January 9, 2006, the Predecessor AIT Fund was reorganized as a new portfolio of the Goldman Sachs Variable Insurance Trust. Performance prior to January 9, 2006 is that of the Predecessor AIT Fund. Total return information of the Predecessor AIT Fund is provided in the above table because the Predecessor AIT Fund is considered the accounting survivor of the reorganization. As part of the reorganization, the Predecessor AIT Fund changed its investment adviser to Goldman Sachs Asset Management, L.P. In addition, the Goldman Sachs Fund that the Predecessor AIT Fund reorganized into had investment objectives and policies which were not identical to the Predecessor AIT Fund. |
(c) | The Goldman Sachs Government Income Fund (“the Fund”) first began operations as the Allmerica Government Bond Fund (the “Predecessor AIT Fund”) of the Allmerica Investment Trust. On January 9, 2006, the Predecessor AIT Fund was reorganized as a new portfolio of the Goldman Sachs Variable Insurance Trust and is the accounting survivor. The financial highlights for the Government Income Fund as set forth here to include the historical financial highlights of the Allmerica Government Bond Fund. In connection with such acquisition, the Goldman Sachs Government Income Fund issued service classes to the former shareholders of the Allmerica Government Bond Fund at $10.00 per share. Historical per-share amounts prior to the Fund reorganization have been adjusted to reflect the conversion ratio utilized for the reorganization. |
(d) | Annualized. |
(e) | Ratio of Net Investment Income assuming no expense reductions is 3.57%. |
(f) | Expense ratio includes the affect of operating expenses of the Predecessor Fund prior to Reorganization. |
The accompanying notes are an integral part of these financial statements.
Financial Highlights
Ratios | ||||||||||||||||||||||||||||||||||||||||||||||||
assuming | ||||||||||||||||||||||||||||||||||||||||||||||||
no | ||||||||||||||||||||||||||||||||||||||||||||||||
Income (loss) from | Distributions to | expense | ||||||||||||||||||||||||||||||||||||||||||||||
investment operations | shareholders | reductions | ||||||||||||||||||||||||||||||||||||||||||||||
Ratio of | Ratio of | |||||||||||||||||||||||||||||||||||||||||||||||
Net asset | Net asset | Net assets, | Ratio of | net investment | total | |||||||||||||||||||||||||||||||||||||||||||
value, | Net | Total from | From net | value, | end of | net expenses | income | expenses | ||||||||||||||||||||||||||||||||||||||||
beginning | investment | investment | investment | Total | end of | Total | period | to average | to average | to average | ||||||||||||||||||||||||||||||||||||||
of period | income(a) | operations | income | distributions | period | return(b) | (in 000s) | net assets | net assets | net assets | ||||||||||||||||||||||||||||||||||||||
For the Six Months ended June 30, (Unaudited) | ||||||||||||||||||||||||||||||||||||||||||||||||
2006 | $ | 1.00 | $ | 0.02 | $ | 0.02 | $ | (0.02 | ) | $ | (0.02 | ) | $ | 1.00 | 2.12 | % | $ | 212,031 | 0.50 | % (c)(e) | 4.28 | % (c)(d) | 0.72 | % (c)(e) | ||||||||||||||||||||||||
For the Years ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||
2005 | 1.00 | 0.03 | 0.03 | (0.03 | ) | (0.03 | ) | 1.00 | 2.75 | 222,194 | 0.55 | 2.65 | 0.55 | |||||||||||||||||||||||||||||||||||
2004 | 1.00 | 0.01 | 0.01 | (0.01 | ) | (0.01 | ) | 1.00 | 0.91 | 264,679 | 0.52 | 0.88 | 0.52 | |||||||||||||||||||||||||||||||||||
2003 | 1.00 | 0.01 | 0.01 | (0.01 | ) | (0.01 | ) | 1.00 | 0.80 | 377,155 | 0.53 | 0.82 | 0.53 | |||||||||||||||||||||||||||||||||||
2002 | 1.00 | 0.02 | 0.02 | (0.02 | ) | (0.02 | ) | 1.00 | 1.66 | 704,805 | 0.45 | 1.63 | 0.45 | |||||||||||||||||||||||||||||||||||
2001 | 1.00 | 0.04 | 0.04 | (0.04 | ) | (0.04 | ) | 1.00 | 4.28 | 604,657 | 0.36 | 4.11 | 0.36 | |||||||||||||||||||||||||||||||||||
(a) | Calculated based on the average shares outstanding methodology. |
(b) | Assumes investment at the net asset value. Returns for periods less than one full year are not annualized. The Goldman Sachs Money Market Fund first began operations as the Allmerica Money Market Fund (the “Predecessor AIT Fund”) of the Allmerica Investment Trust. On January 9, 2006, the Predecessor AIT Fund was reorganized as a new portfolio of the Goldman Sachs Variable Insurance Trust. Performance prior to January 9, 2006 is that of the Predecessor AIT Fund. Total return information of the Predecessor AIT Fund is provided in the above table because the Predecessor AIT Fund is considered the accounting survivor of the reorganization. As part of the reorganization, the Predecessor AIT Fund changed its investment adviser to Goldman Sachs Asset Management, L.P. In addition, the Goldman Sachs Fund that the Predecessor AIT Fund reorganized into had investment policies which were not identical to the Predecessor AIT Fund. |
(c) | Annualized. |
(d) | Ratio of Net Investment Income assuming no expense reductions is 4.06%. |
(e) | Expense ratio includes the affect of the operating expenses of the Predecessor Fund prior to Reorganization. |
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements
1. ORGANIZATION |
2. SIGNIFICANT ACCOUNTING POLICIES |
A. Investment Valuation — Investments in equity securities and investment companies traded on a U.S. securities exchange or the NASDAQ system are valued daily at their last sale price or official closing price on the principal exchange or system on which they are traded. If no sale occurs, such securities are valued at the last bid price. Debt securities are valued at prices supplied by independent pricing services, broker/dealer-supplied valuations or matrix pricing systems. Unlisted equity securities for which market quotations are available are valued at the last sale price on valuation date, or if no sale occurs, at the last bid price. Investments in investment companies (other than those that are exchange traded) are valued at the net asset value per share on valuation date. Short-term debt obligations maturing in sixty days or less are valued at amortized cost, which approximates market value. Securities for which quotations are not readily available or deemed not to reflect market value by the investment adviser are valued at fair value using methods approved by the Trust’s Board of Trustees.
B. Security Transactions and Investment Income — Security transactions are reflected as of the trade date. Realized gains and losses on sales of portfolio securities are calculated using the identified cost basis. Dividend income is recorded on the ex-dividend date, net of foreign withholding taxes, if any, which are reduced by any amounts reclaimable by the Funds. Interest income is recorded on the basis of interest accrued, premium amortized and discount accreted.
2. SIGNIFICANT ACCOUNTING POLICIES (continued) |
C. Expenses — Expenses incurred by the Trust that do not specifically relate to an individual Fund of the Trust are allocated to the Fund on a straight-line or “pro-rata” basis depending upon the nature of the expense.
D. Federal Taxes and Distributions to Shareholders — It is each Fund’s policy to comply with the requirements of the Internal Revenue Code (the “Code”) applicable to regulated investment companies and to distribute each year substantially all of its investment company taxable income and capital gains to its shareholders. Accordingly, no federal tax provisions are required.
E. Foreign Currency Translations — The books and records of the Funds are maintained in U.S. dollars. Amounts denominated in foreign currencies are translated into U.S. dollars on the following basis: (i) investment valuations, foreign currency and other assets and liabilities initially expressed in foreign currencies are converted each business day into U.S. dollars based upon current exchange rates; and (ii) purchases and sales of foreign investments, income and expenses are converted into U.S. dollars based upon currency exchange rates prevailing on the respective dates of such transactions.
F. Segregation Transactions — As set forth in the prospectus, Funds may enter into certain derivative transactions to seek to increase total return. Forward foreign currency exchange contracts, futures contracts, written options, when-issued securities and forward commitments represent examples of such transactions. As a result of entering into these transactions, the Funds are required to segregate or physically move liquid assets, on the books of their custodian or to respective counterparties, with a current value equal to or greater than the market value of the corresponding transactions.
G. Forward Foreign Currency Exchange Contracts — The Core Fixed Income Fund may enter into forward foreign currency exchange contracts for the purchase or sale of a specific foreign currency at a fixed price on a future date as a hedge or cross-hedge against either specific transactions or portfolio positions. The Fund may also purchase and sell forward contracts to seek to increase total return. All commitments are “marked-to-market” daily at the applicable translation rates and any resulting unrealized gains or losses are recorded in the Fund’s financial statements. The Fund records realized gains or losses at the time a forward contract is offset by entry into a closing transaction or extinguished by delivery of the currency. Risks may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of their contracts and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar.
2. SIGNIFICANT ACCOUNTING POLICIES (continued) |
H. Futures Contracts — The Funds, except for the Money Market Fund, may enter into futures transactions to hedge against changes in interest rates, securities prices, currency exchange rates or to seek to increase total return. Futures contracts are valued at the last settlement price or in the absence of a sale 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 last bid price, a Fund is required to deposit with a broker, or the Fund’s custodian bank on behalf of the broker an amount of cash or securities equal to the minimum “initial margin” requirement of the associated futures exchange. Subsequent payments for futures contracts (“variation margin”) are paid or received by the Fund daily, dependent on the daily fluctuations in the value of the contracts, and are recorded for financial reporting purposes as unrealized gains or losses. When contracts are closed, the Fund realizes a gain or loss which is reported in the Statement of Operations.
I. Forward Commitments — The Growth Opportunities, Core Fixed Income, Government Income and Money Market Funds may enter into contracts to purchase securities for a fixed price at a specified future date beyond customary settlement time (“forward commitments”). If the Funds do so, they will maintain cash or other liquid obligations having a value in an amount at all times sufficient to meet the purchase price. Forward commitments involve a risk of loss if the value of the security to be purchased declines prior to the settlement date. Although the Funds generally will enter into forward commitments with the intention of acquiring securities for their portfolios, they may dispose of a commitment prior to settlement if their Sub-Adviser deems it appropriate to do so.
J. Repurchase Agreements — Repurchase agreements involve the purchase of securities subject to the seller’s agreement to repurchase them at a mutually agreed upon date and price. During the term of a repurchase agreement, the value of the underlying securities held as collateral on behalf of the Funds, including accrued interest, is required to exceed the value of the repurchase agreement, including accrued interest. If the seller defaults or becomes insolvent, realization of the collateral by the Funds may be delayed or limited and there may be a decline in the value of the collateral during the period while the Funds assert their rights. The underlying securities for all repurchase agreements are held in safekeeping at the Funds’ custodian or designated subcustodians under triparty repurchase agreements.
K. Forward Sales Contracts — The Core Fixed Income and Government Income Funds may enter into forward security sales of mortgage-backed securities in which the Funds sell securities in the current month for delivery of securities, defined by pool-stipulated characteristics, on a specified future date. The value of the contract is recorded as a liability on the Fund’s records with the difference between its market value and cash proceeds received being recorded as an unrealized gain or loss. Gains or losses are realized upon delivery of the security sold.
L. Treasury Inflation-Protected Securities — The Funds may invest in Treasury Inflation-Protected Securities (“TIPS”), specially structured bonds for which the principal amount is adjusted daily to keep pace with inflation, as measured by the U.S. Consumer Pricing Index (“CPI”). The adjustments for interest income due to inflation are reflected in interest income in the Statements of Operations. TIPS are backed by the full faith and credit of the U.S. Government.
3. AGREEMENTS |
Management Fee | Average Daily | |||||||
Fund | Annual Rate | Net Assets | ||||||
Growth Opportunities | 1.00% | First $2 Billion | ||||||
0.90% | Over $2 Billion | |||||||
Core Fixed Income | 0.40% | First $1 Billion | ||||||
0.36% | Next $1 Billion | |||||||
0.34% | Over $2 Billion | |||||||
Government Income | 0.54% | First $1 Billion | ||||||
0.49% | Next $1 Billion | |||||||
0.47% | Over $2 Billion | |||||||
The Management Agreement for the Equity Index Fund provides for a Management fee at an annual rate equal to 0.30% of the Fund’s average daily net assets. If the Fund’s average daily net assets exceed $400 million, 0.10% of the Management fee will be waived on a voluntary basis. If the Fund’s average daily net assets are between $300 million and $400 million, 0.05% of the Management fee will be waived on a voluntary basis. If the Fund’s average daily net assets are less than $300 million, 0% of the Management fee will be waived. These waivers may be modified or terminated at any time without shareholder approval.
Percentage of Average Daily Net Assets | ||||||||||||||||||||||||
First | Next | Next | Next | Next | Over | |||||||||||||||||||
Fund | $100,000,000 | $150,000,000 | $250,000,000 | $250,000,000 | $250,000,000 | $1,000,000,000 | ||||||||||||||||||
Growth Opportunities | 1.00% | 0.90% | 0.80% | 0.70% | 0.70% | 0.65% | ||||||||||||||||||
Government Income | 0.50% | 0.50% | 0.50% | 0.50% | 0.50% | 0.50% | ||||||||||||||||||
Money Market | 0.35% | 0.30% | 0.30% | 0.25% | 0.20% | 0.20% |
3. AGREEMENTS (continued) |
First | Next | Over | ||||||||||
Fund | $50,000,000 | $200,000,000 | $250,000,000 | |||||||||
Equity Index | 0.35% | 0.30% | 0.25% |
First | Next | Over | ||||||||||
Fund | $50,000,000 | $50,000,000 | $100,000,000 | |||||||||
Core Fixed Income | 0.50% | 0.45% | 0.40% |
In connection with the reorganization of the Funds of the Allmerica Investment Trust in January 2006, the Investment Adviser has contractually agreed to reimburse the following Funds as necessary to limit the total annual operating expenses of the Funds to the following levels until June 2007:
Fund | ||||||||
Growth Opportunities | 1.144% | |||||||
Equity Index | 0.404% | |||||||
Core Fixed Income | 0.544% | |||||||
Government Income | 0.684% | |||||||
Money Market | 0.494% | |||||||
GSAM has voluntarily agreed to limit certain “Other Expenses” of the Funds (excluding Management Fees, Transfer Agency fees and expenses, taxes, interest, brokerage fees and litigation, indemnification costs, shareholder meeting and other extraordinary expenses exclusive of any offset arrangements) to the extent that such expenses exceed, on an annual basis, a percentage rate of the average daily net assets of the Fund. GSAM has agreed to maintain this expense limitation reduction on a voluntary basis. Such expense reimbursements, if any, are computed daily and paid monthly. In addition, the Funds are not obligated to reimburse GSAM for prior fiscal year expense reimbursements, if any. For the six months ended June 30, 2006, the Other Expense limitations for Growth Opportunities Fund, Equity Index Fund, Core Fixed Income Fund, Government Income Fund, and Money Market Fund as an annual percentage rate of average daily net assets to 0.004% 0.064%, 0.004%, 0.004%, and 0.004%, respectively.
3. AGREEMENTS (continued) |
Fee Waivers | ||||||||||||||||||||
Custody | Total | |||||||||||||||||||
Management | Distribution and | Fee | Other Expense | Expense | ||||||||||||||||
Fund | Fees | Service Fees | Reduction | Reimbursement | Reductions | |||||||||||||||
Growth Opportunities | $ | — | $ | 184 | $ | — | $ | 87 | $ | 271 | ||||||||||
Equity Index | 213 | 335 | 2 | 22 | 572 | |||||||||||||||
Core Fixed Income | — | 227 | 3 | 153 | 383 | |||||||||||||||
Government Income | — | 70 | — | 117 | 187 | |||||||||||||||
Money Market | — | 158 | 1 | 80 | 239 | |||||||||||||||
At June 30, 2006, the amounts owed to affiliates were as follows (in thousands):
Management | Distribution and | Transfer | ||||||||||||||
Fund | Fees | Service Fees | Agent Fees | Total | ||||||||||||
Growth Opportunities | $ | 188 | $ | 19 | $ | 7 | $ | 214 | ||||||||
Equity Index | 71 | 36 | 14 | 121 | ||||||||||||
Core Fixed Income | 99 | 24 | 10 | 133 | ||||||||||||
Government Income | 41 | 8 | 3 | 52 | ||||||||||||
Money Market | 65 | 18 | 7 | 90 | ||||||||||||
4. PORTFOLIO SECURITIES TRANSACTIONS |
Sales and | Sales and | |||||||||||||||
Purchase | Maturities of | Maturities | ||||||||||||||
Purchases of | (Excluding | U.S. Government | (Excluding U.S. | |||||||||||||
U.S. Government and | U.S. Government and | and Agency | Government and | |||||||||||||
Fund | Agency Obligations | Agency Obligations) | Obligations | Agency Obligations) | ||||||||||||
Growth Opportunities | $ | — | $ | 296,775,923 | $ | — | $ | 335,587,423 | ||||||||
Equity Index | — | 11,239,551 | — | 75,897,117 | ||||||||||||
Core Fixed Income | 342,728,863 | 95,098,737 | 191,587,075 | 129,176,621 | ||||||||||||
Government Income | 162,575,426 | 8,361,803 | 135,184,138 | 11,294,994 | ||||||||||||
Money Market | — | — | — | — | ||||||||||||
For the six months ended June 30, 2006, Goldman Sachs earned approximately $372 and $3,586 of brokerage commissions from portfolio transactions executed on behalf of the Growth Opportunities and Equity Index Funds, respectively.
5. SECURITIES LENDING |
6. LINE OF CREDIT FACILITY |
7. TAX INFORMATION |
Growth | |||||||||||||||||
Opportunities | Equity Index | Core Fixed Income | Government Income | ||||||||||||||
Capital loss carryforward: | |||||||||||||||||
Expiring 2007 | $ | — | $ | 12,212,844 | $ | — | $ | — | |||||||||
Expiring 2008 | 427,851 | 62,715,062 | — | — | |||||||||||||
Expiring 2009 | — | 13,380,657 | — | — | |||||||||||||
Expiring 2010 | — | 17,675,562 | — | — | |||||||||||||
Expiring 2011 | — | 16,843,955 | — | — | |||||||||||||
Expiring 2012 | — | 7,271,316 | 1,472,715 | 1,242,253 | |||||||||||||
Expiring 2013 | — | — | 657,789 | 1,135,876 | |||||||||||||
Total capital loss carryforward | $ | 427,851 | $ | 130,099,396 | $ | 2,130,504 | $ | 2,378,129 |
7. TAX INFORMATION (continued) |
At June 30, 2006, the Funds’ aggregate security unrealized gains and losses based on cost for U.S. federal income tax purposes were as follows:
Growth | ||||||||||||||||
Opportunities | Equity Index | Core Fixed Income | Government Income | |||||||||||||
Tax Cost | $ | 250,227,839 | $ | 374,664,306 | $ | 313,031,273 | $ | 104,833,773 | ||||||||
Gross unrealized gain | 16,863,397 | 81,651,733 | 384,658 | 38,850 | ||||||||||||
Gross unrealized loss | (27,237,369 | ) | (26,148,163 | ) | (7,892,101 | ) | (14,484,207 | ) | ||||||||
Net unrealized security gain (loss) | $ | (10,373,972 | ) | $ | 55,503,570 | $ | (7,507,443 | ) | $ | (14,445,357 | ) | |||||
The amortized cost for the Money Market Fund stated in the accompanying statements of assets and liabilities also represents aggregate cost for U.S. federal income tax purposes.
The difference between book-basis and tax-basis unrealized gains (losses) is attributable primarily to wash sales, net mark-to market gains on futures and forward foreign currency contracts recognized for tax purposes and differing treatment of amortization of market premium.
8. OTHER MATTERS |
New Accounting Pronouncement — On July 13, 2006, the Financial Accounting Standards Board (“FASB”) released FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Fund’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Adoption of FIN 48 is required for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. At this time, management is evaluating the implications of FIN 48 and its impact in the financial statements has not yet been determined.
Statement Regarding Basis for Approval of Management Agreement (Unaudited)
The Growth Opportunities, Equity Index, Government Income, Core Fixed Income and Money Market Funds are newly-organized investment portfolios of Goldman Sachs Variable Insurance Trust (the “Trust”) that commenced investment operations on January 9, 2006. The respective Funds are the accounting successors to investment portfolios of Allmerica Investment Trust, which were reorganized into the Funds.
In connection with the Funds’ organization, the Trust’s investment management agreements (the “Management Agreements”) with Goldman Sachs Asset Management, L.P. (the “Investment Adviser”) for the Funds, and the Sub-Advisory Agreement (the “Sub-Advisory Agreement”) between the Investment Adviser and SSgA Funds Management, Inc. (the “Sub-Adviser”) for the Equity Index Fund, were approved by the Trustees, including all of the Trustees who are not parties to the Management Agreements or the Sub-Advisory Agreement or “interested persons” (as defined in the Investment Company Act of 1940, as amended) of any party thereto (the “Independent Trustees”), at a meeting held on August 4, 2005 (the “2005 Meeting”), The Management Agreements and the Sub-Advisory Agreement were subsequently re-approved by the Trustees, including all of the Independent Trustees, at a meeting held on June 15, 2006 (the “Annual Contract Meeting”) for an annual period ending June 30, 2007. (The 2005 Meeting and the Annual Contract Meeting are sometimes referred to as the “Meetings.”)
At the 2005 Meeting, the Trustees reviewed the Management Agreements and the Sub-Advisory Agreement as they applied to the respective Funds, including information regarding the terms of the Management Agreements and the Sub-Advisory Agreement; the fees and expenses to be paid by the Funds; the spread between the Investment Adviser’s management fee for the Equity Index Fund and the Sub-Adviser’s sub-advisory fee for that Fund; the Investment Adviser’s proposal to reimburse certain expenses of the Funds that exceed a specified level; the Investment Adviser’s proposal to waive voluntarily a portion of its management fee with respect to the Equity Index Fund; other benefits to be derived by the Investment Adviser and its affiliates from their relationships with the Funds; and a comparison of the Funds’ fees and expenses with those paid by other similar mutual funds.
In connection with the Meetings, the Trustees received written materials and oral presentations provided by the Investment Adviser and Sub-Adviser, and were advised by their independent legal counsel regarding their responsibilities under applicable law. The Trustees also reviewed, with the advice of legal counsel, their responsibilities under applicable law and met in executive session without representatives of the Investment Adviser and Sub-Adviser present. In evaluating the Management Agreements at the Meetings, the Trustees relied upon their knowledge of the Investment Adviser resulting from their meetings and other interactions throughout the year.
In connection with their approval of the Management. Agreements and Sub-Advisory Agreement for the Funds at the Meetings, the Trustees gave weight to various factors, but did not identify any particular factor as controlling their decision. As part of their review, the Trustees considered the nature, extent and quality of the services provided by the Investment Adviser and Sub-Adviser. In this regard, the Trustees considered both the investment advisory services and the other non-advisory services provided by the Investment Adviser and its affiliates for the Funds. These services included services as the Funds’ transfer agent, securities lending agent and distributor. In addition, affiliates of the Investment Adviser would receive compensation in connection with the execution of the Funds’ portfolio securities transactions. The Trustees concluded that the Investment. Adviser was able to provide quality services to the Funds. In this regard, the Trustees noted that, although the Funds were new and had not been managed previously by the Investment Adviser, the Investment Adviser did have past experience in managing other similar investment portfolios. The Trustees believed that the investment returns of these other portfolios had been within a competitive range.
With regard to the Equity Index Fund, the Trustees also considered the benefits that affiliates of the Sub-Adviser would receive for providing other services to the Funds, including services as the custodian and accounting agent. In addition, the Trustees considered, among other things, the Sub-Adviser’s experience in index investing and its compliance policies and procedures and code of ethics. The Trustees also considered the investment performance of other similar clients managed by the Sub-Adviser. The Trustees believed that the Sub-Adviser had been able to track the investment returns of the S&P 500 Index for its other clients. The Trustees believed that the Sub-Adviser was able to provide quality services to the Equity Index Fund.
The Board of Trustees also considered the contractual fee rates payable by the Funds under the Management Agreements and the contractual fee rates payable by the Investment Adviser under the Sub-Advisory Agreement. In this regard, information on the fees paid by the Funds and the Funds’ projected total operating expense ratios were compared to similar information for mutual funds advised by other, unaffiliated investment management firms. The comparisons of the Funds’ fee rates and total operating expense ratios were compiled by a third-party provider of mutual fund data (the “Outside Data Provider”). More particularly, the analyses compared the Funds’ management fees and projected expenses to relevant peer groups and category medians. The Trustees believed that this information was useful in evaluating the reasonableness of the management fees payable by the Funds.
In addition, in connection with the approval of the Management Agreements at the 2005 Meeting, the Board approved the breakpoints in the contractual management fee rate at the following annual percentages of the average daily net assets of the Government Income Fund, Core Fixed Income Fund and Growth Opportunities Fund:
Government | Core Fixed | |||||||
Income Fund | Income Fund | |||||||
Up to $1 billion | 0.54 | % | 0.40 | % | ||||
Next $1 billion | 0.49 | 0.36 | ||||||
Over $2 billion | 0.47 | 0.34 | ||||||
Growth | ||||
Opportunities | ||||
Fund | ||||
First $2 billion | 1.00 | % | ||
Over $2 billion | 0.90 | |||
The Trustees also considered and approved the following breakpoints in the contractual fee rate in the Sub-Advisory Agreement:
Equity Index Fund | ||||
(Sub-Advisory Fee) | ||||
First $50 million | 0.03% | |||
Next $200 million | 0.02 | |||
Next $750 million | 0.01 | |||
Over $1 billion | 0.008 | |||
In approving these fee breakpoints, the Trustees considered information regarding potential economies of scale, and whether the Funds and their shareholders would participate in the benefits of these economies. In this regard, the Trustees considered the Funds’ projected assets, the Investment Adviser’s and Sub-Adviser’s anticipated expenses and the fee comparisons that had been provided. The Trustees noted again that the Funds were new and that the costs of the Investment Adviser and Sub-Adviser in providing its services, and the related profitability information, would be reviewed periodically by the Trustees. The Trustees agreed that the fee breakpoints were a way to ensure that benefits of scalability would be passed along to shareholders at the specified asset levels. The Trustees also noted the Investment Adviser’s voluntary undertaking to limit the Funds’ total expense ratios (excluding certain expenses) to specified levels. This voluntary undertaking was in addition to the Investment Adviser’s contractual agreement to reimburse the Funds as necessary to limit the total annual operating expenses of their Service Shares to a specified level until June 2007.
In addition, with respect to the Equity Index Fund, the Trustees noted that the management fee rates of the Investment Advisor did not have breakpoints. Regarding the Equity Index Fund, however, the Trustees considered both the Investment Adviser’s voluntary management fee waiver and that Fund’s future growth prospects. With respect to the Money Market Fund, the Trustees considered the Fund’s relatively lower asset level as compared to many other money market funds. Furthermore, with respect to all of the Funds, the Trustees considered information relating to the Investment Adviser’s past revenues and costs with respect to the Trust and its investment portfolios.
At the Meetings, the Trustees also considered the other benefits that would be derived by the Investment Adviser and its affiliates from the Funds as stated above, including the fees received by them for transfer agency, securities lending, distribution and brokerage services, and the brokerage and research services that may be received by the Investment Adviser in connection with the placement of brokerage transactions for the Funds. In addition, as noted the Trustees considered the benefits received by affiliates of the Sub-Adviser for providing other services to the Funds, including services as the custodian and accounting agent.
After deliberation and consideration of the information provided, including the factors described above, the Trustees concluded at the 2005 Meeting, and again at the Annual Contract Meeting, that the management fees payable by the Funds, and the fee payable to the Sub-Adviser by the Investment Adviser with respect to the Equity Index Fund, were reasonable in light of the services to be provided by the Investment Adviser and Sub-Adviser and the Funds’ reasonably foreseeable asset levels, and that the Management Agreements and the Sub-Advisory Agreement should be approved and continued.
Fund Expenses (Unaudited) — Six Month Period Ended June 30, 2006
As a shareholder of Service Shares of the Funds you incur these types of costs: 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 Service 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 January 1, 2006 through June 30, 2006.
Actual Expenses — The first line of 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 for this period.
Hypothetical Example for Comparison Purposes — The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Funds’ actual expense ratios 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 a Fund you do not incur any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. 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.
Growth Opportunities Fund | Equity Index Fund | |||||||||||||||||||||||
Expenses Paid | Expenses Paid | |||||||||||||||||||||||
Beginning | Ending | for the 6 | Beginning | Ending | for the 6 | |||||||||||||||||||
Account Value | Account Value | months ended | Account Value | Account Value | months ended | |||||||||||||||||||
Share Class | 1/1/06 | 6/30/06 | 6/30/06* | 1/1/06 | 6/30/06 | 6/30/06* | ||||||||||||||||||
Service | ||||||||||||||||||||||||
Actual | 1,000.00 | 985.00 | 5.71 | 1,000.00 | 1,024.80 | 2.11 | ||||||||||||||||||
Hypothetical 5% return | 1,000.00 | 1,019.03 | + | 5.81 | 1,000.00 | 1,022.72 | + | 2.11 | ||||||||||||||||
[Additional columns below]
[Continued from above table, first column(s) repeated]
Core Fixed Income Fund | Government Income Fund | Money Market Fund | ||||||||||||||||||||||||||||||||||
Expenses Paid | Expenses Paid | Expenses Paid | ||||||||||||||||||||||||||||||||||
Beginning | Ending | for the 6 | Beginning | Ending | for the 6 | Beginning | Ending | for the 6 | ||||||||||||||||||||||||||||
Account Value | Account Value | months ended | Account Value | Account Value | months ended | Account Value | Account Value | months ended | ||||||||||||||||||||||||||||
Share Class | 1/1/06 | 6/3/06 | 6/30/06* | 1/1/06 | 6/30/06 | 6/30/06* | 1/1/06 | 6/30/06 | 6/30/06* | |||||||||||||||||||||||||||
Service | ||||||||||||||||||||||||||||||||||||
Actual | 1,000.00 | 991.60 | 2.72 | 1,000.00 | 994.90 | 3.41 | 1,000.00 | 1,021.20 | 2.51 | |||||||||||||||||||||||||||
Hypothetical 5% return | 1,000.00 | 1,022.04 | + | 2.76 | 1,000.00 | 1,021.75 | + | 3.46 | 1,000.00 | 1,022.31 | + | 2.51 | ||||||||||||||||||||||||
* | Expenses for each share class are calculated using the Funds’ annualized expense ratio for each class, which represents the ongoing expenses as a percentage of net assets for the six months ended 06/30/06. Expenses are calculated by multiplying the annualized 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 expense ratios for the period were as follows: |
Fund | Service | |||
Growth Opportunities | 1.16 | % | ||
Equity Index | 0.42 | |||
Core Fixed Income | 0.55 | |||
Government Income | 0.69 | |||
Money Market | 0.50 | |||
+ | Hypothetical expenses are based on the Funds’ actual expense ratios and an assumed rate of return of 5% per year before expenses. |
TRUSTEES | OFFICERS | |
Ashok N. Bakhru, Chairman | Kaysie P. Uniacke, President | |
John P. Coblentz, Jr. | James A. Fitzpatrick, Vice President | |
Patrick T. Harker | James A. McNamara, Vice President | |
Mary Patterson McPherson | John M. Perlowski, Treasurer | |
Alan A. Shuch | Peter V. Bonanno, Secretary | |
Wilma J. Smelcer | ||
Richard P. Strubel | ||
Kaysie P. Uniacke | ||
GOLDMAN, SACHS & CO. Distributor and Transfer Agent | ||
GOLDMAN SACHS ASSET MANAGEMENT, L.P. Investment Adviser | ||
Visit our Web site at www.goldmansachsfunds.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 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 1-800-526-7384 (for Retail Shareholders) or 1-800-621-2550 (for Institutional Shareholders); and (ii) on the Securities and Exchange Commission Web site at http://www.sec.gov. | ||
The Funds file their complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Form N-Q will become available on the SEC’s website at http://www.sec.gov within 60 days after the Funds’ first and third fiscal quarters. When available, the Funds’ 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. When available, Form N-Q may be obtained upon request and without charge by calling 1-800-621-2550. | ||
This material is not authorized for distribution to prospective investors unless preceded or accompanied by a current Prospectus. 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 Funds. | ||
Holdings and allocations shown may not be representative of current or future investments. Holdings and allocations may not include the Funds’ entire investment portfolio,which may change at any time. Fund holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities. | ||
Toll Free (in U.S.): 800-292-4726 | ||
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. | ||
Copyright 2006 Goldman, Sachs & Co. All rights reserved. Date of first use: August 29, 2006 | ||
VITSAR/06-1234/08-06 |
ITEM 2. | CODE OF ETHICS. — Not applicable to the Semi-Annual Report for the period ended June 30, 2006. |
ITEM 3. | AUDIT COMMITTEE FINANCIAL EXPERT. — Not applicable to the Semi-Annual Report for the period ended June 30, 2006. |
ITEM 4. | PRINCIPAL ACCOUNTANT FEES AND SERVICES. — Not applicable to the Semi-Annual Report for the period ended June 30, 2006. |
ITEM 5. | AUDIT COMMITTEE OF LISTED REGISTRANTS. | |
Not applicable. |
ITEM 6. | SCHEDULE OF INVESTMENTS. | |
Schedule of Investments is included as part of the Report 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 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 have materially affected, or are 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 11(a)(1) of the registrant’s Form N-CSR filed on March 8, 2004 (Accession Number 0000950123-04-0002976). | ||
(a)(2) | Exhibit 99.CERT | Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 filed herewith. | ||
(b) | 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/ Kaysie Uniacke | ||
By: Kaysie Uniacke | ||
Chief Executive Officer of | ||
Goldman Sachs Variable Insurance Trust | ||
Date: August 31, 2006 | ||
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/ Kaysie Uniacke | ||
By: Kaysie Uniacke | ||
Chief Executive Officer of | ||
Goldman Sachs Variable Insurance Trust | ||
Date: August 31, 2006 | ||
/s/ John M. Perlowski | ||
By: John M. Perlowski | ||
Chief Financial Officer of | ||
Goldman Sachs Variable Insurance Trust | ||
Date: August 31, 2006 |