UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-08361
Goldman Sachs Variable Insurance Trust
(Exact name of registrant as specified in charter)
71 South Wacker Drive, Chicago, Illinois 60606-6303
(Address of principal executive offices) (Zip code)
Caroline Kraus
Goldman Sachs & Co. LLC
200 West Street
New York, NY 10282
Copies to:
Geoffrey R.T. Kenyon, Esq.
Dechert LLP
One International Place, 40th Floor
100 Oliver Street
Boston, MA 02110-2605
(Name and address of agents for service)
Registrant’s telephone number, including area code: (312) 655-4400
Date of fiscal year end: December 31
Date of reporting period: June 30, 2017
ITEM 1. | REPORTS TO STOCKHOLDERS. |
The Semi-Annual Reports to Shareholders are filed herewith. |
Goldman
Sachs Variable Insurance Trust
Goldman Sachs
Global Trends
Allocation Fund
Semi-Annual Report
June 30, 2017
GOLDMAN SACHS VARIABLE INSURANCE TRUST GLOBAL TRENDS ALLOCATION FUND
INVESTMENT OBJECTIVE
The Fund seeks total return while seeking to provide volatility management.
Portfolio Management Discussion and Analysis
Below, the Goldman Sachs Quantitative Investment Strategies Team discusses the Goldman Sachs Variable Insurance Trust — Goldman Sachs Global Trends Allocation Fund’s (the “Fund”) performance and positioning for the six-month period ended June 30, 2017 (the “Reporting Period”).
How did the Fund perform during the Reporting Period?
During the Reporting Period, the Fund’s Institutional and Service Shares generated cumulative total returns of 5.65% and 5.48%, respectively. These returns compare to the 7.45% cumulative total return of the Fund’s benchmark, the Global Trends Allocation Composite Index (the “Index”), during the same time period. The components of the Fund’s benchmark, the MSCI World Index (60%) and the Bloomberg Barclays U.S. Aggregate Bond Index (40%), generated cumulative total returns of 11.02% and 2.27%, respectively, during the same time period.
Importantly, during the Reporting Period, the Fund’s overall annualized volatility was 5.49%, less than the S&P 500® Index’s annualized volatility of 6.96% during the same time period.
What economic and market factors most influenced the Fund during the Reporting Period?
As the Reporting Period began in January 2017, global equities rallied on the prospect of deregulation in the U.S. following Presidential executive orders on oil pipelines and further optimism around potential infrastructure spending. International equity markets subsequently retreated on political uncertainty and protectionism concerns, though U.S. stocks continued to advance. In February 2017, global equities were buoyed by “risk on” sentiment, or reduced risk aversion, owing to potential U.S. tax reform and deregulation as well as by stronger economic data. In March 2017, the U.S. Federal Reserve (“Fed”) raised interest rates for the third time since the 2008-2009 global financial crisis, while maintaining projections for three rate hikes this year. However, a seemingly cautious stance on the future path of monetary tightening from the Fed Chair and the presence of a dissenter on the policy committee led to a dovish market reaction and to Japanese yen appreciation, despite the Bank of Japan (“BoJ”) maintaining its policy rate. (Dovish tends to suggest lower interest rates; opposite of hawkish.) Political risks subsequently drove U.S. equities lower in the wake of House Republicans’ struggle to schedule a vote on health care. Outside the U.S., the European Central Bank (“ECB”) kept its policy unchanged at its March 2017 meeting but revised its growth and inflation forecasts upwards. Markets interpreted the positive economic assessment as hawkish, sparking concerns around the sequencing of the ECB’s policy steps — namely, whether rates will rise before quantitative easing ends. In the second quarter of 2017, global equities posted gains. Strong first quarter 2017 corporate earnings results, with double-digit growth across virtually all major developed market regions, and receding political risk after the centrist candidate’s win in the French election supported global equity markets. However, market expectations for pro-growth U.S. fiscal policy were dampened by domestic political developments. The U.S. labor market remained strong, but economic activity and inflation data appeared to be moderating. Core inflation softened to 1.7% year-over-year in May 2017, marking a third consecutive month of weakness, while core personal consumption expenditures remained below the Fed’s 2% target at just 1.4% year-over-year. Nonetheless, the Fed proceeded to raise the targeted federal funds rate by 25 basis points in June 2017, citing ongoing strength in the labor market and a pick-up in household spending and business fixed investment. (A basis point is 1/100th of a percentage point.) Also in June, European markets reacted hawkishly to the ECB president’s sanguine outlook for recovering inflation and cautious reference to tapering of asset purchases. Japanese equities saw a temporary pullback in June 2017, as market sentiment deteriorated and as the Japanese yen strengthened immediately after the Fed interest rate hike, but quickly rebounded.
In terms of fixed income, when the Reporting Period started, spread (or non-government bond) sectors generally posted gains. Investors focused on the prospect of pro-growth policies from the new U.S. Administration, which helped boost business and consumer sentiment to near record levels. Investors also evaluated the positive impact of earlier fiscal stimulus in China. Global purchasing managers’ indices pointed to solid and synchronized global expansion, led by developed markets, most notably the U.S. In Europe, economic data strengthened and political risk remained contained, as markets weathered the official start of Brexit negotiations. (Brexit refers to the U.K.’s efforts to exit the European Union.) The far right lost to centrists in the Netherlands’ election. In France, polls reflected a relatively low chance of victory for the far-right candidate in the country’s then-upcoming presidential vote. Monetary policy presented few surprises during the first calendar quarter, as the ECB, BoJ and Bank of England (“BoE”) kept their respective monetary policies unchanged. In March 2017, the ECB raised its economic growth and inflation
1
GOLDMAN SACHS VARIABLE INSURANCE TRUST GLOBAL TRENDS ALLOCATION FUND
forecasts, while the Fed raised its target range for the federal funds rate. Minutes from the meeting raised expectations that Fed balance sheet normalization would begin in 2017. Despite the Fed’s monetary policy tightening, the U.S. dollar weakened versus both developed and emerging markets currencies during the first calendar quarter. In the second quarter of 2017, spread sectors overall recorded positive returns. Political developments led to temporary bouts of volatility early in the quarter, driving weakness in Brazilian, U.S. and U.K. fixed income assets as well as a credit rating downgrade of South Africa’s sovereign debt. Political risks receded in May 2017 on the centrist candidate’s victory in the French presidential election, which was supportive of French bonds and the bonds of European peripheral countries broadly. On the economic front, weakness in U.S. core inflation cast uncertainty over the pace of Fed monetary tightening. Nonetheless, comments included in minutes from the Fed’s May and June 2017 policy meetings suggested an announcement about how and when the Fed would begin reducing the size of its balance sheet would be made sooner than the markets had previously anticipated. In Europe, economic data continued to surprise to the upside. At its June 2017 policy meeting, the ECB provided an optimistic assessment of the risks to growth but revised downward its medium-term inflation forecasts. The ECB, BoJ and BoE left their respective monetary policies unchanged during the second calendar quarter, while the Fed raised interest rates for the second time in 2017 and for the fourth time in a decade at its June 2017 policy meeting. As the quarter came to an end, a string of hawkish comments from central bankers drove global interest rates up, as the market anticipated a faster than expected pace of monetary policy tightening by the BoE, ECB and Bank of Canada. During the second quarter of 2017, the U.S. dollar continued to weaken versus many global currencies.
What key factors were responsible for the Fund’s performance during the Reporting Period?
The Fund primarily seeks to achieve its investment objective by investing in a global portfolio of equity and fixed income asset classes. Under normal market conditions, the Fund expects to invest at least 40% of its assets in equity investments and at least 20% of its assets in fixed income investments. The percentage of the Fund’s portfolio exposed to any asset class or geographic region will vary from time to time as the weightings of the Fund change, and the Fund may not be invested in each asset class at all times.
As part of the Fund’s investment strategy, the Investment Adviser seeks to manage volatility and limit losses by allocating the Fund’s assets away from risky investments in distressed or volatile market environments. Volatility is a statistical measurement of the magnitude of up and down fluctuations in the value of a financial instrument or index. In distressed or volatile market environments, the Fund may also hold significant amounts of U.S. Treasury, short-term or other fixed income investments, including money market funds and repurchase agreements or cash, and at times may invest up to 100% of its assets in such investments.
During the Reporting Period, the Fund continued dynamically allocating across global asset classes, using a momentum-based methodology, as it sought total return while also seeking to provide volatility management. Momentum investing seeks growth of capital by gaining exposure to asset classes that have exhibited trends in price performance over selected time periods. In managing the Fund, we use a methodology that evaluates historical three-, six- and nine-month returns, volatilities and correlations across a range of nine global asset classes. Represented by indices, these asset classes include, within the equities category, U.S. large-cap and small-cap, European, Asian, emerging markets and U.K. stocks. Within the fixed income category, the Fund may allocate assets to the U.S., Europe and Japan. The analysis of these asset classes drives the aggregate allocations of the Fund over time. We believe market price momentum — either positive or negative — has significant predictive power.
The Fund was hurt by its exposures to Japanese and U.S. government bonds late in the Reporting Period when interest rates rose. The Fund benefited during the Reporting Period from its allocations to global equities, including U.S. large-cap and small-cap stocks; European, Japanese and U.K. equities; and emerging markets stocks. An allocation to German government bonds also added value.
What was the Fund’s volatility during the Reporting Period?
As part of our investment approach, we seek to mitigate the Fund’s volatility. As mentioned earlier, for the Reporting Period overall, the Fund’s actual volatility (annualized, using daily returns) was 5.49%, less than the S&P 500® Index’s annualized volatility of 6.96%.
How was the Fund positioned during the Reporting Period?
During the Reporting Period, we tactically managed the Fund’s allocations across equity and fixed income markets based on the momentum and volatility of these asset classes. At the beginning of the Reporting Period, the Fund’s total assets were allocated 80% to equities, 20% to fixed income and 0% to cash (Many of these positions were implemented through the use of exchange-traded index future contracts.) Within the equity category, the Fund had allocations to five of six global equity asset classes. It did not have an allocation to emerging markets equities at the start of the Reporting Period. As for fixed income, the Fund had an emphasis on German government bonds with a smaller allocation to Japanese government bonds when the Reporting Period began.
2
GOLDMAN SACHS VARIABLE INSURANCE TRUST GLOBAL TRENDS ALLOCATION FUND
At the end of January 2017, we added a small allocation to emerging markets equities, increasing it slightly by the end of May 2017. We increased the Fund’s allocation to U.S. large-cap stocks at the start of the first calendar quarter and eliminated its allocation to U.S. small-cap stocks. We also reduced the Fund’s allocation to German government bonds and increased its exposure to Japanese government bonds.
Near the end of the Reporting Period, we reduced the size of the Fund’s equity allocation and increased the size of its fixed income allocation. The Fund continued to have no allocation to cash. Within its equity allocation, the Fund had exposure to U.S. large-cap equities; European, Japanese and U.K. equities; and emerging markets equities. It had no exposure to U.S. small-cap equities. Within fixed income, we added some exposure to U.S. Treasuries and eliminated the Fund’s allocation to German government bonds.
How did the Fund use derivatives and similar instruments during the Reporting Period?
During the Reporting Period, the Fund employed exchange-traded index futures contracts to gain exposure to U.S. large-cap and small-cap stocks, the European, Japanese and U.K. equity markets, and U.S., Japanese and German government bonds. On an absolute basis, the use of these instruments had a positive impact on the Fund’s performance, as these allocations added to returns.
What is the Fund’s tactical asset allocation view and strategy for the months ahead?
At the end of the Reporting Period, we slightly reduced the Fund’s allocation to equities. Within equities, we modestly increased its allocations to U.S. large-cap stocks and Japanese equities, while reducing its exposures to European and U.K. equities. Overall, at the end of the Reporting Period, the Fund had more exposure to emerging markets equities than it did at the beginning of the Reporting Period and the same exposure to Japanese equities. The Fund maintained an allocation to emerging markets equities and had no allocation to U.S. small-cap equities. Within fixed income, we increased the Fund’s allocation to U.S. Treasuries, while marginally reducing its allocation to Japanese government bonds. At the end of the Reporting Period, the Fund did not have an allocation to German government bonds due to their poor momentum amid rising yields. At the end of the Reporting Period, the Fund’s total assets were allocated 72% to equities, 28% to fixed income and 0% to cash.
Going forward, we intend to position the Fund to provide exposure to price momentum from among nine underlying asset classes, while dynamically managing the volatility, or risk, of the overall portfolio. In general, the Fund seeks to maintain a strategic allocation of 60% of its assets in equity investments and 40% of its assets in fixed income investments. The Fund may deviate from these strategic allocations in order to allocate a greater percentage to asset classes with strong momentum and to reduce its allocation to assets with weak momentum. When volatility increases, our goal is to preserve capital by proportionally increasing the Fund’s cash exposure and reducing its exposure to riskier asset classes. There is no guarantee the Fund’s dynamic management strategy will cause it to achieve its investment objective.
3
GOLDMAN SACHS VARIABLE INSURANCE TRUST GLOBAL TRENDS ALLOCATION FUND
Index Definitions
∎ | The Global Trends Allocation Composite Index is composed 60% of MSCI World Index and 40% of Bloomberg Barclays U.S. Aggregate Bond Index. It is a composite representation prepared by the Investment Adviser of the performance of the Fund’s asset classes, weighted according to their respective weightings in the Fund’s target range. |
∎ | The MSCI World Index (Net, USD, Unhedged) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of 23 developed markets. |
∎ | The Bloomberg Barclays U.S. Aggregate Bond Index represents an unmanaged diversified portfolio of fixed income securities, including U.S. Treasuries, investment grade corporate bonds, and mortgage-backed and asset-backed securities. |
4
FUND BASICS
Global Trends Allocation Fund
as of June 30, 2017
STANDARDIZED TOTAL RETURNS1
For the period ended 6/30/17 | One Year | Five Years | Since Inception | Inception Date | ||||||||||
Institutional | 9.91 | % | N/A | 3.14 | % | 10/16/13 | ||||||||
Service | 9.65 | 5.16 | % | 4.68 | 4/16/12 |
1 | Standardized Total Returns are average annual total returns as of the most recent calendar quarter-end. They assume reinvestment of all distributions at net asset value (“NAV”). Because Institutional Shares and Service Shares do not involve a sales charge, such a charge is not applied to their Standardized Total Returns. |
Total return figures in the above chart represent past performance and do not indicate future results, which will vary. The investment return and principal value of an investment will fluctuate and, therefore, an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the total return figures in the above chart. Please visit www.GSAMFUNDS.com to obtain the most recent month-end returns. Performance reflects fee waivers and/or expense limitations in effect during the periods shown. In their absence, performance would be reduced.
EXPENSE RATIOS2
Net Expense Ratio (Current) | Gross Expense Ratio (Before Waivers) | |||||||
Institutional | 0.73 | % | 1.00 | % | ||||
Service | 0.99 | 1.24 |
2 | The expense ratios of the Fund, both current (net of applicable fee waivers and/or expense limitations) and before waivers (gross of applicable fee waivers and/or expense limitations) are as set forth above according to the most recent publicly available Prospectuses for the Fund and may differ from the expense ratios disclosed in the Financial Highlights in this report. Pursuant to a contractual arrangement, the Fund’s fee waivers and/or expense limitations will remain in place through at least April 28, 2018, and prior to such date, the Investment Adviser may not terminate the arrangements without the approval of the Fund’s Board of Trustees. If these arrangements are discontinued in the future, the expense ratios may change without shareholder approval. |
5
FUND BASICS
FUND COMPOSITION3
3 | The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets (excluding investments in the securities lending reinvestment vehicle, if any). Figures in the above graph may not sum to 100% due to the exclusion of other assets and liabilities. The underlying composition of exchange traded funds and investment companies held by the Fund are not reflected in the graph above. Consequently, the Fund’s overall composition may differ from the percentages contained in the graph above. The graph depicts the Fund’s investments but may not represent the Fund’s market exposure due to the exclusion of certain derivatives, if any, as listed in the Additional Investment Information section of the Schedule of Investments. |
4 | Short-Term Investments include investments in U.S. Government Agency Securities. U.S. Government Agency Securities include agency securities offered by companies such as Federal Home Loan Bank, Federal Home Loan Mortgage Corporation and Federal National Mortgage Association, which operate under a government charter. While they are required to report to a government regulator, their assets are not explicitly guaranteed by the government and they otherwise operate like any other publicly traded company. |
6
GOLDMAN SACHS VARIABLE INSURANCE TRUST GLOBAL TRENDS ALLOCATION FUND
Schedule of Investments
June 30, 2017 (Unaudited)
Shares | Description | Value | ||||||
Exchange Traded Funds – 31.8% | ||||||||
201,944 | iShares Core S&P 500 Fund | $ | 49,155,189 | |||||
607,674 | iShares MSCI Emerging Markets Fund | 25,151,627 | ||||||
204,262 | Vanguard S&P 500 Fund | 45,358,420 | ||||||
|
| |||||||
TOTAL EXCHANGE TRADED FUNDS | ||||||||
(Cost $104,234,734) | $ | 119,665,236 | ||||||
|
|
Shares | Distribution Rate | Value | ||||||
Investment Companies(a)(b) – 54.5% | ||||||||
Goldman Sachs Financial Square Government Fund — |
| |||||||
113,194,937 | 0.845 | % | $ | 113,194,937 | ||||
Goldman Sachs Financial Square Treasury Obligations Fund — |
| |||||||
46,048,357 | 0.846 | 46,048,357 | ||||||
Goldman Sachs Financial Square Treasury Solutions Fund — |
| |||||||
45,546,579 | 0.825 | 45,546,579 | ||||||
| ||||||||
TOTAL INVESTMENT COMPANIES | ||||||||
(Cost $204,789,873) | $ | 204,789,873 | ||||||
| ||||||||
TOTAL INVESTMENTS – 86.3% | ||||||||
(Cost $309,024,607) | $ | 324,455,109 | ||||||
| ||||||||
OTHER ASSETS IN EXCESS OF LIABILITIES – 13.7% |
| 51,467,196 | ||||||
| ||||||||
NET ASSETS – 100.0% | $ | 375,922,305 | ||||||
|
The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. | ||
(a) | Represents an affiliated issuer. | |
(b) | Variable rate security. Interest rate or distribution rate disclosed is that which is in effect on June 30, 2017. |
ADDITIONAL INVESTMENT INFORMATION
FUTURES CONTRACTS — At June 30, 2017, the Fund had the following futures contracts:
Type | Number of Contracts Long (Short) | Expiration Date | Current Value | Unrealized Gain (Loss) | ||||||||||||
EURO STOXX 50 Index | 953 | September 2017 | $ | 37,345,369 | $ | (1,517,232 | ) | |||||||||
FTSE 100 Index | 199 | September 2017 | 18,771,658 | (515,043 | ) | |||||||||||
S&P 500 E-Mini Index | 519 | September 2017 | 62,822,355 | (133,603 | ) | |||||||||||
TSE TOPIX Index | 134 | September 2017 | 19,199,022 | 129,075 | ||||||||||||
10 Year Japanese Government Bonds | 45 | September 2017 | 60,057,346 | (183,214 | ) | |||||||||||
10 Year U.S. Treasury Notes | 449 | September 2017 | 56,363,531 | (337,576 | ) | |||||||||||
TOTAL | $ | (2,557,593 | ) |
The accompanying notes are an integral part of these financial statements. | 7 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST GLOBAL TRENDS ALLOCATION FUND
Statement of Assets and Liabilities
June 30, 2017 (Unaudited)
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $104,234,734) | $ | 119,665,236 | ||
Investments in affiliated issuers, at value (cost $204,789,873) | 204,789,873 | |||
Cash | 43,562,352 | |||
Receivables: | ||||
Collateral on certain derivative contracts | 7,216,059 | |||
Fund shares sold | 354,381 | |||
Dividends | 132,828 | |||
Reimbursement from investment adviser | 15,044 | |||
Securities lending income | 5,703 | |||
Variation margin on certain derivative contracts | 861,383 | |||
Other assets | 1,130 | |||
Total assets | 376,603,989 | |||
Liabilities: | ||||
Payables: | ||||
Fund shares redeemed | 211,283 | |||
Management fees | 193,990 | |||
Distribution and Service fees and Transfer Agency fees | 84,207 | |||
Investments purchased | 72,376 | |||
Accrued expenses | 119,828 | |||
Total liabilities | 681,684 | |||
Net Assets: | ||||
Paid-in capital | 358,859,104 | |||
Undistributed net investment income | 1,033,452 | |||
Accumulated net realized gain | 3,054,753 | |||
Net unrealized gain | 12,974,996 | |||
NET ASSETS | $ | 375,922,305 | ||
Net Assets: | ||||
Institutional | $ | 28,047 | ||
Service | 375,894,258 | |||
Total Net Assets | $ | 375,922,305 | ||
Shares outstanding $0.001 par value (unlimited shares authorized): | ||||
Institutional | 2,343 | |||
Service | 31,482,564 | |||
Net asset value, offering and redemption price per share: | ||||
Institutional | $11.97 | |||
Service | 11.94 |
8 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST GLOBAL TRENDS ALLOCATION FUND
Statement of Operations
For the Six Months Ended June 30, 2017 (Unaudited)
Investment income: | ||||
Dividends — unaffiliated issuers | $ | 1,367,941 | ||
Dividends — affiliated issuers | 452,606 | |||
Interest | 88,833 | |||
Securities lending income — affiliated issuer | 13,852 | |||
Total investment income | 1,923,232 | |||
Expenses: | ||||
Management fees | 1,439,417 | |||
Distribution and Service fees — Service Shares | 455,477 | |||
Professional fees | 53,259 | |||
Transfer Agency fees(a) | 36,438 | |||
Custody, accounting and administrative services | 29,356 | |||
Printing and mailing costs | 17,360 | |||
Trustee fees | 8,505 | |||
Other | 6,521 | |||
Total expenses | 2,046,333 | |||
Less — expense reductions | (268,992 | ) | ||
Net expenses | 1,777,341 | |||
NET INVESTMENT INCOME | 145,891 | |||
Realized and unrealized gain (loss): | ||||
Net realized gain from: | ||||
Investments | 9,043,020 | |||
Futures contracts | 11,130,911 | |||
Foreign currency transactions | 80,364 | |||
Net change in unrealized gain (loss) on: | ||||
Investments | 3,535,972 | |||
Futures contracts | (4,769,762 | ) | ||
Foreign currency translation | 122,024 | |||
Net realized and unrealized gain | 19,142,529 | |||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 19,288,420 |
(a) Institutional and Service Shares incurred Transfer Agency fees of $3 and $36,435, respectively.
The accompanying notes are an integral part of these financial statements. | 9 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST GLOBAL TRENDS ALLOCATION FUND
Statements of Changes in Net Assets
For the Six Months Ended June 30, 2017 (Unaudited) | For the Fiscal Year Ended December 31, 2016 | |||||||
From operations: | ||||||||
Net investment income | $ | 145,891 | $ | 701,709 | ||||
Net realized gain | 20,254,295 | 225,837 | ||||||
Net change in unrealized gain (loss) | (1,111,766 | ) | 14,319,840 | |||||
Net increase in net assets resulting from operations | 19,288,420 | 15,247,386 | ||||||
Distributions to shareholders: | ||||||||
From net investment income | ||||||||
Institutional Shares | — | (119 | ) | |||||
Service Shares | — | (992,542 | ) | |||||
Total distributions to shareholders | — | (992,661 | ) | |||||
From share transactions: | ||||||||
Proceeds from sales of shares | 20,569,816 | 57,559,506 | ||||||
Reinvestment of distributions | — | 992,661 | ||||||
Cost of shares redeemed | (17,577,503 | ) | (74,879,513 | ) | ||||
Net increase (decrease) in net assets resulting from share transactions | 2,992,313 | (16,327,346 | ) | |||||
TOTAL INCREASE (DECREASE) | 22,280,733 | (2,072,621 | ) | |||||
Net assets: | ||||||||
Beginning of period | 353,641,572 | 355,714,193 | ||||||
End of period | $ | 375,922,305 | $ | 353,641,572 | ||||
Undistributed net investment income | $ | 1,033,452 | $ | 887,561 |
10 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST GLOBAL TRENDS ALLOCATION FUND
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
Income (loss) from investment operations | Distributions to shareholders | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year - Share Class | Net asset value, beginning of period | Net investment income (loss)(a) | Net realized and unrealized gain (loss) | Total from investment operations | From net investment income | From net realized gains | Total distributions | Net asset value, end of period | Total return(b) | Net assets, end of period (in 000s) | Ratio of net expenses to average net assets | Ratio of total expenses to average net assets | Ratio of net investment income (loss) to average net assets | Portfolio turnover rate(c) | ||||||||||||||||||||||||||||||||||||||||||
FOR THE SIX MONTHS ENDED JUNE 30, (UNAUDITED) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2017 - Institutional | $ | 11.33 | $ | 0.02 | $ | 0.62 | $ | 0.64 | $ | — | $ | — | $ | — | $ | 11.97 | 5.65 | % | $ | 28 | 0.73 | %(d) | 0.87 | %(d) | 0.33 | %(d) | 44 | % | ||||||||||||||||||||||||||||
2017 - Service | 11.32 | — | (e) | 0.62 | 0.62 | — | — | — | 11.94 | 5.48 | 375,894 | 0.98 | (d) | 1.12 | (d) | 0.08 | (d) | 44 | ||||||||||||||||||||||||||||||||||||||
FOR THE FISCAL YEARS ENDED DECEMBER 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2016 - Institutional | 10.89 | (0.03 | ) | 0.52 | 0.49 | (0.05 | ) | — | (0.05 | ) | 11.33 | 4.49 | 27 | 0.74 | 0.89 | (0.25 | ) | 260 | ||||||||||||||||||||||||||||||||||||||
2016 - Service | 10.88 | 0.02 | 0.45 | 0.47 | (0.03 | ) | — | (0.03 | ) | 11.32 | 4.33 | 353,615 | 1.00 | 1.13 | 0.20 | 260 | ||||||||||||||||||||||||||||||||||||||||
2015 - Institutional | 11.82 | 0.01 | (0.67 | ) | (0.66 | ) | (0.03 | ) | (0.24 | ) | (0.27 | ) | 10.89 | (5.52 | ) | 1,008 | 0.75 | 0.92 | 0.12 | 504 | ||||||||||||||||||||||||||||||||||||
2015 - Service | 11.82 | (0.02 | ) | (0.67 | ) | (0.69 | ) | (0.01 | ) | (0.24 | ) | (0.25 | ) | 10.88 | (5.82 | ) | 354,706 | 1.00 | 1.17 | (0.16 | ) | 504 | ||||||||||||||||||||||||||||||||||
2014 - Institutional | 11.46 | 0.08 | 0.41 | 0.49 | (0.03 | ) | (0.10 | ) | (0.13 | ) | 11.82 | 4.23 | 739 | 0.77 | 1.01 | 0.68 | 304 | |||||||||||||||||||||||||||||||||||||||
2014 - Service | 11.47 | — | (e) | 0.45 | 0.45 | — | (e) | (0.10 | ) | (0.10 | ) | 11.82 | 3.95 | 267,720 | 1.03 | 1.24 | 0.04 | 304 | ||||||||||||||||||||||||||||||||||||||
2013 - Institutional (Commenced | 11.41 | 0.01 | 0.34 | 0.35 | (0.02 | ) | (0.28 | ) | (0.30 | ) | 11.46 | 3.17 | 26 | 0.81 | (d) | 1.09 | (d) | 0.33 | (d) | 195 | ||||||||||||||||||||||||||||||||||||
2013 - Service | 10.36 | (0.02 | ) | 1.42 | 1.40 | (0.01 | ) | (0.28 | ) | (0.29 | ) | 11.47 | 13.57 | 136,116 | 1.04 | 1.51 | (0.21 | ) | 195 | |||||||||||||||||||||||||||||||||||||
FOR THE PERIOD ENDED DECEMBER 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 - Service (Commenced | 10.00 | 0.02 | 0.35 | 0.37 | — | (0.01 | ) | (0.01 | ) | 10.36 | 3.74 | 25,990 | 1.04 | (d) | 4.21 | (d) | 0.27 | (d) | 300 |
(a) | Calculated based on the average shares outstanding methodology. |
(b) | Assumes investment at the net asset value at the beginning of the period, reinvestment of all distributions, and a complete redemption of the investment at the net asset value at the end of the period. Total returns for periods less than one full year are not annualized. |
(c) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short term investments and certain derivatives. If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
(d) | Annualized. |
(e) | Amount is less than $0.005 per share. |
The accompanying notes are an integral part of these financial statements. | 11 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST GLOBAL TRENDS ALLOCATION FUND
Notes to Financial Statements
June 30, 2017 (Unaudited)
1. ORGANIZATION
Goldman Sachs Variable Insurance Trust (the “Trust” or “VIT”) is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company. The Trust includes the Goldman Sachs Global Trends Allocation Fund (the “Fund”). The Fund is a non-diversified portfolio under the Act offering two classes of shares — Institutional and Service Shares. Shares of the Trust are offered to separate accounts of participating life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies.
Goldman Sachs Asset Management, L.P. (“GSAM”), an affiliate of Goldman Sachs & Co. LLC (formerly Goldman, Sachs & Co.) (“Goldman Sachs”), serves as investment adviser to the Fund pursuant to a management agreement (the “Agreement”) with the Trust.
2. SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and require management to make estimates and assumptions that may affect the reported amounts and disclosures. Actual results may differ from those estimates and assumptions.
A. Investment Valuation — The Fund’s valuation policy is to value investments at fair value.
B. Investment Income and Investments — Investment income includes interest income, dividend income and securities lending income. Interest income is accrued daily and adjusted for amortization of premiums and accretion of discounts. Dividend income is recognized on ex-dividend date or, for certain foreign securities, as soon as such information is obtained subsequent to the ex-dividend date. Investment transactions are reflected on trade date. Realized gains and losses are calculated using identified cost. Investment transactions are recorded on the following business day for daily net asset value (“NAV”) calculations.
For derivative contracts, realized gains and losses are recorded upon settlement of the contract.
C. Class Allocations and Expenses — Investment income, realized and unrealized gain (loss), and non-class specific expenses of the Fund are allocated daily based upon the proportion of net assets of each class. Non-class specific expenses directly incurred by the Fund are charged to the Fund, while such expenses incurred by the Trust are allocated across the Fund on a straight-line and/or pro-rata basis depending upon the nature of the expenses. Class specific expenses, where applicable, are borne by the respective share classes and include Distribution and Service and Transfer Agency fees.
D. Federal Taxes and Distributions to Shareholders — It is the Fund’s policy to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Code”), applicable to regulated investment companies (mutual funds) and to distribute each year substantially all of its investment company taxable income and capital gains to its shareholders. Accordingly, the Fund is not required to make any provisions for the payment of federal income tax. Distributions to shareholders are recorded on the ex-dividend date. Income and capital gains distributions, if any, are declared and paid annually.
Net capital losses, if any, are carried forward to future fiscal years and may be used to the extent allowed by the Code to offset any future capital gains. Losses that are carried forward will retain their character as either short-term or long-term capital losses. Utilization of capital loss carryforwards will reduce the requirement of future capital gains distributions.
The characterization of distributions to shareholders for financial reporting purposes is determined in accordance with federal income tax rules, which may differ from GAAP. The source of the Fund’s distributions may be shown in the accompanying financial statements as either from net investment income, net realized gain or capital. Certain components of the Fund’s net assets on the Statement of Assets and Liabilities reflect permanent GAAP/tax differences based on the appropriate tax character.
E. Foreign Currency Translation — The accounting records and reporting currency of the Fund are maintained in United States (“U.S.”) dollars. Assets and liabilities denominated in foreign currencies are translated into U.S. dollars using the current exchange rates at the close of each business day. The effect of changes in foreign currency exchange rates on investments is included within net realized and unrealized gain (loss) on investments. Changes in the value of other assets and liabilities as a result of fluctuations
12
GOLDMAN SACHS VARIABLE INSURANCE TRUST GLOBAL TRENDS ALLOCATION FUND
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
in foreign exchange rates are included in the Statement of Operations within net change in unrealized gain (loss) on foreign currency translations. Transactions denominated in foreign currencies are translated into U.S. dollars on the date the transaction occurred, the effects of which are included within net realized gain (loss) on foreign currency transactions.
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS
U.S. GAAP defines the fair value of a financial instrument as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price); the Fund’s policy is to use the market approach. GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The levels used for classifying investments are not necessarily an indication of the risk associated with investing in these investments. The three levels of the fair value hierarchy are described below:
Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 — Quoted prices in markets that are not active or financial instruments for which significant inputs are observable (including, but not limited to, quoted prices for similar investments, interest rates, foreign exchange rates, volatility and credit spreads), either directly or indirectly;
Level 3 — Prices or valuations that require significant unobservable inputs (including GSAM’s assumptions in determining fair value measurement).
Changes in valuation techniques may result in transfers into or out of an assigned level within the hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value hierarchy resulting from such changes are deemed to have occurred as of the beginning of the reporting period.
The Board of Trustees (“Trustees”) has approved Valuation Procedures that govern the valuation of the portfolio investments held by the Fund, including investments for which market quotations are not readily available. The Trustees have delegated to GSAM day-to-day responsibility for implementing and maintaining internal controls and procedures related to the valuation of the Fund’s portfolio investments. To assess the continuing appropriateness of pricing sources and methodologies, GSAM regularly performs price verification procedures and issues challenges as necessary to third party pricing vendors or brokers, and any differences are reviewed in accordance with the Valuation Procedures.
A. Level 1 and Level 2 Fair Value Investments — The valuation techniques and significant inputs used in determining the fair values for investments classified as Level 1 and Level 2 are as follows:
Equity Securities — Equity securities traded on a U.S. securities exchange or the NASDAQ system, or those located on certain foreign exchanges, including but not limited to the Americas, are valued daily at their last sale price or official closing price on the principal exchange or system on which they are traded. If there is no sale or official closing price or such price is believed by GSAM to not represent fair value, equity securities are valued at the last bid price for long positions and at the last ask price for short positions. To the extent these investments are actively traded, they are classified as Level 1 of the fair value hierarchy, otherwise they are generally classified as Level 2.
Unlisted equity securities for which market quotations are available are valued at the last sale price on the valuation date, or if no sale occurs, at the last bid price. Securities traded on certain foreign securities exchanges are valued daily at fair value determined by an independent fair value service (if available) under Valuation Procedures approved by the Trustees and consistent with applicable regulatory guidance. The independent fair value service takes into account multiple factors including, but not limited to, movements in the securities markets, certain depositary receipts, futures contracts and foreign currency exchange rates that have occurred subsequent to the close of the foreign securities exchange. These investments are generally classified as Level 2 of the fair value hierarchy.
13
GOLDMAN SACHS VARIABLE INSURANCE TRUST GLOBAL TRENDS ALLOCATION FUND
Notes to Financial Statements (continued)
June 30, 2017 (Unaudited)
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS (continued)
Underlying Funds (including Money Market Funds) — Underlying Funds (“Underlying Funds”) include other investment companies and exchange-traded funds (“ETFs”). Investments in the Underlying Funds (except ETFs) are valued at the NAV per share of the Institutional Share class on the day of valuation. ETFs are valued daily at the last sale price or official closing price on the principal exchange or system on which the investment is traded. Because the Fund invests in Underlying Funds that fluctuate in value, the Fund’s shares will correspondingly fluctuate in value. To the extent these investments are actively traded, they are classified as Level 1 of the fair value hierarchy, otherwise they are generally classified as Level 2. For information regarding an Underlying Fund’s accounting policies and investment holdings, please see the Underlying Fund’s shareholder report.
Debt Securities — Debt securities for which market quotations are readily available are valued daily on the basis of quotations supplied by dealers or an independent pricing service approved by the Trustees. The pricing services may use valuation models or matrix pricing, which consider: (i) yield or price with respect to bonds that are considered comparable in characteristics such as rating, interest rate and maturity date or (ii) quotations from securities dealers to determine current value. With the exception of treasury securities of G8 countries, which are generally classified as Level 1, these investments are generally classified as Level 2 of the fair value hierarchy.
Derivative Contracts — A derivative is an instrument whose value is derived from underlying assets, indices, reference rates or a combination of these factors. The Fund enters into derivative transactions to hedge against changes in interest rates, securities prices, and/or currency exchange rates, to increase total return, or to gain access to certain markets or attain exposure to other underliers.
Exchange-traded derivatives, including futures and options contracts, are valued at the last sale or settlement price and typically fall within Level 1 of the fair value hierarchy. Over-the-counter (“OTC”) and centrally cleared derivatives are valued using market transactions and other market evidence, including market-based inputs to models, calibration to market-clearing transactions, broker or dealer quotations, or other alternative pricing sources. Where models are used, the selection of a particular model to value OTC and centrally cleared derivatives depends upon the contractual terms of, and specific risks inherent in, the instrument, as well as the availability of pricing information in the market. Valuation models require a variety of inputs, including contractual terms, market prices, yield curves, credit curves, measures of volatility, voluntary and involuntary prepayment rates, loss severity rates and correlations of such inputs. For OTC and centrally cleared derivatives that trade in liquid markets, model inputs can generally be verified and model selection does not involve significant management judgment. OTC and centrally cleared derivatives are classified within Level 2 of the fair value hierarchy when significant inputs are corroborated by market evidence.
i. Futures Contracts — Futures contracts are contracts to buy or sell a standardized quantity of a specified commodity or security and are valued based on exchanged settlement prices or independent market quotes. Futures contracts are valued at the last settlement price, or in the absence of a sale, the last bid price for long positions and at the last ask price for short positions, at the end of each day on the board of trade or exchange upon which they are traded. Upon entering into a futures contract, the Fund deposits cash or securities in an account on behalf of the broker in an amount sufficient to meet the initial margin requirement. Subsequent payments are made or received by the Fund equal to the daily change in the contract value and are recorded as variation margin receivable or payable with a corresponding offset to unrealized gains or losses. For financial reporting purposes, cash collateral that has been pledged to cover obligations of the Fund and cash collateral received, if any, is reported separately on the Statement of Assets and Liabilities as receivables/payables for collateral on certain derivative contracts. Non-cash collateral pledged by the Fund, if any, is noted in the Schedule of Investments.
Short Term Investments — Short-term investments having a maturity of 60 days or less are valued using available market quotations as provided by a third party pricing vendor or broker. These investments are classified as Level 2 of the fair value hierarchy.
B. Level 3 Fair Value Investments — To the extent that significant inputs to valuation models and other alternative pricing sources are unobservable, or if quotations are not readily available, or if GSAM believes that such quotations do not accurately reflect fair value, the fair value of the Fund’s investments may be determined under Valuation Procedures approved by the Trustees. GSAM, consistent with its procedures and applicable regulatory guidance, may make an adjustment to the most recent
14
GOLDMAN SACHS VARIABLE INSURANCE TRUST GLOBAL TRENDS ALLOCATION FUND
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS (continued)
valuation prices of either domestic or foreign securities in light of significant events to reflect what it believes to be the fair value of the securities at the time of determining the Fund’s NAV. Significant events which could affect a large number of securities in a particular market may include, but are not limited to: significant fluctuations in U.S. or foreign markets; market dislocations; market disruptions; or unscheduled market closings. Significant events which could also affect a single issuer may include, but are not limited to: corporate actions such as reorganizations, mergers and buy-outs; ratings downgrades; and bankruptcies.
C. Fair Value Hierarchy — The following is a summary of the Fund’s investments and derivatives classified in the fair value hierarchy as of June 30, 2017:
Investment Type | Level 1 | Level 2 | Level 3 | |||||||||
Assets | ||||||||||||
Exchange Traded Funds | $ | 119,665,236 | $ | — | $ | — | ||||||
Investment Companies | 204,789,873 | — | — | |||||||||
Total | $ | 324,455,109 | $ | — | $ | — | ||||||
Derivative Type | ||||||||||||
Assets(a) | ||||||||||||
Futures Contracts | $ | 129,075 | $ | — | $ | — | ||||||
Liabilities(a) | ||||||||||||
Futures Contracts | $ | (2,686,668 | ) | $ | — | $ | — |
(a) | Amount shown represents unrealized gain (loss) at period end. |
For further information regarding security characteristics, see the Schedule of Investments.
4. INVESTMENTS IN DERIVATIVES
The following table sets forth, by certain risk types, the gross value of derivative contracts as of June 30, 2017. These instruments were used as part of the Fund’s investment strategies and to obtain and/or manage exposure related to the risks below. The values in the table below exclude the effects of cash collateral received or posted pursuant to these derivative contracts, and therefore are not representative of the Fund’s net exposure.
Risk | Statement of Assets and Liabilities | Assets(a) | Statement of Assets and Liabilities | Liabilities(a) | ||||||||||
Equity | Variation margin on certain derivative contracts | $ | 129,075 | Variation margin on certain derivative contracts | $ | (2,165,878 | ) | |||||||
Interest Rate | — | — | Variation margin on certain derivative contracts | (520,790 | ) | |||||||||
Total | $ | 129,075 | $ | (2,686,668 | ) |
(a) | Includes unrealized gain (loss) on futures contracts described in the Additional Investment Information section of the Schedule of Investments. Only the variation margin as of June 30, 2017 is reported within the Statement of Assets and Liabilities. |
The following table sets forth, by certain risk types, the Fund’s gains (losses) related to these derivatives and their indicative volumes for the six months ended June 30, 2017. These gains (losses) should be considered in the context that these derivative contracts may have been executed to create investment opportunities and/or economically hedge certain investments, and
15
GOLDMAN SACHS VARIABLE INSURANCE TRUST GLOBAL TRENDS ALLOCATION FUND
Notes to Financial Statements (continued)
June 30, 2017 (Unaudited)
4. INVESTMENTS IN DERIVATIVES (continued)
accordingly, certain gains (losses) on such derivative contracts may offset certain (losses) gains attributable to investments. These gains (losses) are included in “Net realized gain (loss)” or “Net change in unrealized gain (loss)” on the Statement of Operations:
Risk | Statement of Operations | Net Realized Gain (Loss) | Net Change in Unrealized Gain (Loss) | Average Number of Contracts(a) | ||||||||||
Equity | Net realized gain (loss) from futures contracts/Net change in unrealized gain (loss) on futures contracts | $ | 9,930,743 | $ | (3,624,953 | ) | 2,300 | |||||||
Interest Rate | Net realized gain (loss) from futures contracts/Net change in unrealized gain (loss) on futures contracts | 1,200,168 | (1,144,809 | ) | 284 | |||||||||
Total | $ | 11,130,911 | $ | (4,769,762 | ) | 2,584 |
(a) | Average number of contracts is based on the average of month end balances for the six months ended June 30, 2017. |
5. AGREEMENTS AND AFFILIATED TRANSACTIONS
A. Management Agreement — Under the Agreement, GSAM manages the Fund, subject to the general supervision of the Trustees.
As compensation for the services rendered pursuant to the Agreement, the assumption of the expenses related thereto and administration of the Fund’s business affairs, including providing facilities, GSAM is entitled to a management fee, accrued daily and paid monthly, equal to an annual percentage rate of the Fund’s average daily net assets.
For the six months ended June 30, 2017, contractual and effective net management fees with GSAM were at the following rates:
Contractual Management Rate | ||||||||||||||||||||||||||
First $1 billion | Next $1 billion | Next $3 billion | Next $3 billion | Over $8 billion | Effective Rate | Effective Net Management Rate^ | ||||||||||||||||||||
0.79% | 0.71 | % | 0.68 | % | 0.66 | % | 0.65 | % | 0.79 | % | 0.70 | * |
^ | Effective Net Management Rate includes the impact of management fee waivers of affiliated Underlying Funds, if any. |
* | GSAM agreed to waive a portion of its management fee in order to achieve a net management rate, as defined in the Fund’s most recent prospectus. This waiver will be effective through at least April 28, 2018, and prior to such date GSAM may not terminate the arrangement without approval of the Trustees. For the six months ended June 30, 2017, GSAM waived $79,271 of its management fee. |
The Fund invests in Institutional Shares of the Goldman Sachs Financial Square Government Fund, which is an affiliated Underlying Fund. GSAM has agreed to waive a portion of its management fee payable by the Fund in an amount equal to the management fee it earns as an investment adviser to any of the affiliated Underlying Funds in which the Fund invests. For the six months ended June 30, 2017, GSAM waived $79,510 of the Fund’s management fee.
B. Distribution and/or Service (12b-1) Plan — The Trust, on behalf of Service Shares of the Fund, has adopted a Distribution and Service Plan subject to Rule 12b-1 under the Act. Under the Distribution and Service Plan, Goldman Sachs, which serves as distributor (the “Distributor”), is entitled to a fee accrued daily and paid monthly, for distribution services and personal and account maintenance services, which may then be paid by Goldman Sachs to authorized dealers, equal to, on an annual basis, 0.25% of the Fund’s average daily net assets attributable to Service Shares.
C. Transfer Agency Agreement — Goldman Sachs also serves as the transfer agent of the Fund for a fee pursuant to the Transfer Agency Agreement. The fees charged for such transfer agency services are accrued daily and paid monthly at an annual rate of 0.02% of the average daily net assets of Institutional and Service Shares.
16
GOLDMAN SACHS VARIABLE INSURANCE TRUST GLOBAL TRENDS ALLOCATION FUND
5. AGREEMENTS AND AFFILIATED TRANSACTIONS (continued)
D. Other Expense Agreements and Affiliated Transactions — GSAM has agreed to limit certain “Other Expenses” of the Fund (excluding acquired fund fees and expenses, transfer agency fees and expenses, taxes, interest, brokerage fees, shareholder meeting, litigation, indemnification, and extraordinary expenses) to the extent such expenses exceed, on an annual basis, a percentage rate of the average daily net assets of the Fund. Such Other Expense reimbursements, if any, are accrued daily and paid monthly. In addition, the Fund is not obligated to reimburse GSAM for prior fiscal year expense reimbursements, if any. The Other Expense limitation as an annual percentage rate of average daily net assets for the Fund is 0.004%. The Other Expense limitation will remain in place through at least April 28, 2018, and prior to such date GSAM may not terminate the arrangement without the approval of the Trustees. For the six months ended June 30, 2017, GSAM reimbursed $107,709 to the Fund. In addition, the Fund has entered into certain offset arrangements with the custodian and the transfer agent, which may result in a reduction of the Fund’s expenses and are received irrespective of the application of the “Other Expense” limitation described above. For the six months ended June 30, 2017, custody fee credits were $2,502.
E. Line of Credit Facility — As of June 30, 2017, the Fund participated in a $1,100,000,000 committed, unsecured revolving line of credit facility (the “facility”) together with other funds of the Trust and certain registered investment companies having management agreements with GSAM or its affiliates. This facility is to be used for temporary emergency purposes, or to allow for an orderly liquidation of securities to meet redemption requests. The interest rate on borrowings is based on the federal funds rate. The facility also requires a fee to be paid by the Fund based on the amount of the commitment that has not been utilized. For the six months ended June 30, 2017, the Fund did not have any borrowings under the facility.
F. Other Transactions with Affiliates — The following table provides information about the Fund’s investment in the Underlying Funds as of and for the six months ended June 30, 2017:
Investment Companies | Market Value | Purchases at Cost | Proceeds from Sales | Market Value | Dividend Income | |||||||||||||||
Goldman Sachs Financial Square Government Fund | $ | 74,421,507 | $ | 233,653,069 | $ | (194,879,639 | ) | $ | 113,194,937 | $ | 297,218 | |||||||||
Goldman Sachs Financial Square Treasury Obligations Fund | — | 46,048,357 | — | 46,048,357 | 76,463 | |||||||||||||||
Goldman Sachs Financial Square Treasury Solutions Fund | — | 45,546,579 | — | 45,546,579 | 78,925 | |||||||||||||||
Total | $ | 74,421,507 | $ | 325,248,005 | $ | (194,879,639 | ) | $ | 204,789,873 | $ | 452,606 |
As of June 30, 2017, The Goldman Sachs Group, Inc. was the beneficial owner of approximately 100% of the Institutional Class Shares of the Fund.
6. PORTFOLIO SECURITIES TRANSACTIONS
The cost of purchases and proceeds from sales and maturities of long-term securities for the six months ended June 30, 2017, were $58,667,085 and $110,651,001, respectively.
7. SECURITIES LENDING
Pursuant to exemptive relief granted by the Securities and Exchange Commission (“SEC”) and the terms and conditions contained therein, the Fund may lend its securities through a securities lending agent, Goldman Sachs Agency Lending (“GSAL”), a wholly-owned subsidiary of Goldman Sachs, to certain qualified borrowers including Goldman Sachs and affiliates. In accordance with the Fund’s securities lending procedures, the Fund receives cash collateral at least equal to the market value of the securities
17
GOLDMAN SACHS VARIABLE INSURANCE TRUST GLOBAL TRENDS ALLOCATION FUND
Notes to Financial Statements (continued)
June 30, 2017 (Unaudited)
7. SECURITIES LENDING (continued)
on loan. The market value of the loaned securities is determined at the close of business of the Fund, at their last sale price or official closing price on the principal exchange or system on which they are traded, and any additional required collateral is delivered to the Fund on the next business day. As with other extensions of credit, the Fund may experience delay in the recovery of its securities or incur a loss should the borrower of the securities breach its agreement with the Fund or become insolvent at a time when the collateral is insufficient to cover the cost of repurchasing securities on loan. Dividend income received from securities on loan may not be subject to withholding taxes and therefore withholding taxes paid may differ from the amounts listed in the Statement of Operations. Loans of securities are terminable at any time and as such 1) the remaining contractual maturities of the outstanding securities lending transactions are considered to be overnight and continuous and 2) the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.
The Fund invests the cash collateral received in connection with securities lending transactions in the Goldman Sachs Financial Square Government Fund (“Government Money Market Fund”), an affiliated series of the Trust. The Government Money Market Fund is registered under the Act as an open end investment company, is subject to Rule 2a-7 under the Act, and is managed by GSAM, for which GSAM may receive a management fee of up to 0.205% on an annualized basis of the average daily net assets of the Government Money Market Fund.
In the event of a default by a borrower with respect to any loan, GSAL will exercise any and all remedies provided under the applicable borrower agreement to make the Fund whole. These remedies include purchasing replacement securities by applying the collateral held from the defaulting broker against the purchase cost of the replacement securities. If GSAL is unable to purchase replacement securities, GSAL will indemnify the Fund by paying the Fund an amount equal to the market value of the securities loaned minus the value of cash collateral received from the borrower for the loan, subject to an exclusion for any shortfalls resulting from a loss of value in such cash collateral due to reinvestment risk. The amounts of the Fund’s overnight and continuous agreements represent the gross amounts of recognized liabilities for securities lending transactions outstanding as of June 30, 2017 are disclosed as “Payable upon return of securities loaned” on the Statement of Assets and Liabilities.
Both the Fund and GSAL received compensation relating to the lending of the Fund’s securities. The amounts earned, if any, by the Fund for the six months ended June 30, 2017, are reported under Investment Income on the Statement of Operations.
The table below details securities lending activity with affiliates of Goldman Sachs:
For the Six Months ended June 30, 2017 | ||||||||||
Earnings of GSAL Relating to Securities Loaned | Amounts Received by the Funds from Lending to Goldman Sachs | Amounts Payable to Goldman Sachs Upon Return of Securities Loaned as of June 30, 2017 | ||||||||
$1,530 | $ | — | $ | — |
The following table provides information about the Fund’s investment in the Government Money Market Fund for the six months ended June 30, 2017:
Market Value 12/31/2016 | Purchases at Cost | Proceeds from Sales | Market Value 6/30/2017 | |||||||||||
$ | 8,901,225 | $ | 62,404,725 | $ | (71,305,950 | ) | $ | — |
18
GOLDMAN SACHS VARIABLE INSURANCE TRUST GLOBAL TRENDS ALLOCATION FUND
8. TAX INFORMATION
As of the Fund’s most recent fiscal year end, December 31, 2016, the Fund’s capital loss carryforwards and certain timing differences, on a tax-basis were as follows:
Capital loss carryforwards:
Perpetual short-term | $ | (12,097,918 | ) | |
Timing differences (Qualified Late Year Loss Deferral/Post October Loss Deferal) | (295,190 | ) |
As of June 30, 2017, the Fund’s aggregate security unrealized gains and losses based on cost for U.S. federal income tax purposes were as follows:
Tax cost | $ | 312,344,617 | ||
Gross unrealized gain | 15,430,502 | |||
Gross unrealized loss | (3,320,010 | ) | ||
Net unrealized gain | $ | 12,110,492 |
The difference between GAAP-basis and tax-basis unrealized gains (losses) is attributable primarily to wash sales and net mark to market gains (losses) on regulated futures contracts.
GSAM has reviewed the Fund’s tax positions for all open tax years (the current and prior three years, as applicable) and has concluded that no provision for income tax is required in the Fund’s financial statements. Such open tax years remain subject to examination and adjustment by tax authorities.
9. OTHER RISKS
The Fund’s risks include, but are not limited to, the following:
Derivatives Risk — The Fund’s use of derivatives may result in loss. Derivative instruments, which may pose risks in addition to and greater than those associated with investing directly in securities, currencies or other instruments, may be illiquid or less liquid, volatile, difficult to price and leveraged so that small changes in the value of the underlying instruments may produce disproportionate losses to the Fund. Derivatives are also subject to counterparty risk, which is the risk that the other party in the transaction will not fulfill its contractual obligation. The use of derivatives is a highly specialized activity that involves investment techniques and risks different from those associated with investments in more traditional securities and instruments. Losses from derivatives can also result from a lack of correlation between changes in the value of derivative instruments and the portfolio assets (if any) being hedged.
Foreign and Emerging Countries Risk — Investing in foreign markets may involve special risks and considerations not typically associated with investing in the U.S. Foreign securities may be subject to risk of loss because of more or less foreign government regulation, less public information and less economic, political and social stability in the countries in which the Fund invests. The imposition of exchange controls, confiscations, trade restrictions (including tariffs) and other government restrictions by the U.S. or other governments, or from problems in share registration, settlement or custody, may also result in losses. Foreign risk also involves the risk of negative foreign currency rate fluctuations, which may cause the value of securities denominated in such foreign currency (or other instruments through which the Fund has exposure to foreign currencies) to decline in value. Currency exchange rates may fluctuate significantly over short periods of time. To the extent that the Fund also invests in securities of issuers located in emerging markets, these risks may be more pronounced.
Foreign Custody Risk — If the Fund invests in foreign securities, the Fund may hold such securities and cash with foreign banks, agents, and securities depositories appointed by the Fund’s custodian (each a “Foreign Custodian”). Some foreign custodians may be recently organized or new to the foreign custody business. In some countries, Foreign Custodians may be subject to little or no
19
GOLDMAN SACHS VARIABLE INSURANCE TRUST GLOBAL TRENDS ALLOCATION FUND
Notes to Financial Statements (continued)
June 30, 2017 (Unaudited)
9. OTHER RISKS (continued)
regulatory oversight over, or independent evaluation of, their operations. Further, the laws of certain countries may place limitations on the Fund’s ability to recover its assets if a Foreign Custodian enters bankruptcy. Investments in emerging markets may be subject to even greater custody risks than investments in more developed markets. Custody services in emerging market countries are very often undeveloped and may be considerably less well regulated than in more developed countries, and thus may not afford the same level of investor protection as would apply in developed countries.
Interest Rate Risk — When interest rates increase, fixed income securities or instruments held by the Fund will generally decline in value. Long-term fixed income securities or instruments will normally have more price volatility because of this risk than short-term fixed income securities or instruments. The risks associated with increasing rates are heightened given that interest rates are near historic lows, but may be expected to increase in the future with unpredictable effects on the markets and the Fund’s investments. Fluctuations in interest rates may also affect the liquidity of fixed income securities and instruments held by the Fund.
Investments in Other Investment Companies — As a shareholder of another investment company, including an exchange-traded fund (“ETF”), the Fund will indirectly bear its proportionate share of any net management fees and other expenses paid by such other investment companies, in addition to the fees and expenses regularly borne by the Fund. ETFs are subject to risks that do not apply to conventional mutual funds, including but not limited to the following: (i) the market price of the ETF’s shares may trade at a premium or a discount to their NAV; and (ii) an active trading market for an ETF’s shares may not develop or be maintained.
Large Shareholder Transactions Risk — The Fund may experience adverse effects when certain large shareholders, such as other funds, participating insurance companies, accounts and Goldman Sachs affiliates, purchase or redeem large amounts of shares of the Fund. Such large shareholder redemptions may cause the Fund to sell portfolio securities at times when it would not otherwise do so, which may negatively impact the Fund’s NAV and liquidity. These transactions may also accelerate the realization of taxable income to shareholders if such sales of investments resulted in gains, and may also increase transaction costs. In addition, a large redemption could result in the Fund’s current expenses being allocated over a smaller asset base, leading to an increase in the Fund’s expense ratio. Similarly, large Fund share purchases may adversely affect the Fund’s performance to the extent that the Fund is delayed in investing new cash and is required to maintain a larger cash position than it ordinarily would.
Liquidity Risk — The Fund may make investments that are illiquid or that may become less liquid in response to market developments or adverse investor perceptions. Illiquid investments may be more difficult to value. Liquidity risk may also refer to the risk that the Fund will not be able to pay redemption proceeds within the allowable time period because of unusual market conditions, an unusually high volume of redemption requests, or other reasons. To meet redemption requests, the Fund may be forced to sell investments at an unfavorable time and/or under unfavorable conditions. Liquidity risk may be the result of, among other things, the reduced number and capacity of traditional market participants to make a market in fixed income securities or the lack of an active market. The potential for liquidity risk may be magnified by a rising interest rate environment or other circumstances where investor redemptions from fixed income mutual funds may be higher than normal, potentially causing increased supply in the market due to selling activity.
Market and Credit Risks — In the normal course of business, the Fund trades financial instruments and enters into financial transactions where risk of potential loss exists due to changes in the market (market risk). Additionally, the Fund may also be exposed to credit risk in the event that an issuer or guarantor fails to perform or that an institution or entity with which the Fund has unsettled or open transactions defaults.
Non-Diversification Risk — The Fund is non-diversified, meaning that it is permitted to invest a larger percentage of its assets in fewer issuers than diversified mutual funds. Thus, the Fund may be more susceptible to adverse developments affecting any single issuer held in its portfolio, and may be more susceptible to greater losses because of these developments.
20
GOLDMAN SACHS VARIABLE INSURANCE TRUST GLOBAL TRENDS ALLOCATION FUND
10. INDEMNIFICATIONS
Under the Trust’s organizational documents, its Trustees, officers, employees and agents are indemnified, to the extent permitted by the Act and state law, against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the course of business, the Fund enters into contracts that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, GSAM believes the risk of loss under these arrangements to be remote.
11. SUBSEQUENT EVENTS
Subsequent events after the Statement of Assets and Liabilities date have been evaluated and GSAM has concluded that there is no impact requiring adjustment or disclosure in the financial statements.
12. SUMMARY OF SHARE TRANSACTIONS
Share activity is as follows:
For the Six Months Ended June 30, 2017 (Unaudited) | For the Fiscal Year Ended December 31, 2016 | |||||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||||
Institutional Shares | ||||||||||||||||
Reinvestment of distributions | — | $ | — | 10 | $ | 119 | ||||||||||
Shares redeemed | — | — | (90,223 | ) | (961,682 | ) | ||||||||||
— | — | (90,213 | ) | (961,563 | ) | |||||||||||
Service Shares | ||||||||||||||||
Shares sold | 1,745,373 | 20,569,816 | 5,287,482 | 57,559,506 | ||||||||||||
Reinvestment of distributions | — | — | 87,603 | 992,542 | ||||||||||||
Shares redeemed | (1,498,137 | ) | (17,577,503 | ) | (6,728,313 | ) | (73,917,831 | ) | ||||||||
247,236 | 2,992,313 | (1,353,228 | ) | (15,365,783 | ) | |||||||||||
NET INCREASE (DECREASE) | 247,236 | $ | 2,992,313 | (1,443,441 | ) | $ | (16,327,346 | ) |
21
GOLDMAN SACHS VARIABLE INSURANCE TRUST GLOBAL TRENDS ALLOCATION FUND
Fund Expenses — Six Month Period Ended June 30, 2017 (Unaudited) |
As a shareholder of Institutional or Service Shares of the Fund, you incur ongoing costs, including management fees, distribution and/or service (12b-1) fees (with respect to Service Shares) and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Institutional Shares and Service Shares of the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from January 1, 2017 through June 30, 2017, which represents a period of 181 days of a 365 day year.
Actual Expenses — The first line under each share class in the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000=8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes — The second line under each share class in the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual net expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only. As a shareholder of the Fund, you do not incur any transaction costs, such as sales charges, redemption fees, or exchange fees, but shareholders of other funds may incur such costs. The second line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds whose shareholders may incur transaction costs.
Share Class | Beginning Account Value 01/01/17 | Ending Account Value 06/30/17 | Expenses Paid for the 6 Months Ended 06/30/17* | |||||||||
Institutional | ||||||||||||
Actual | $ | 1,000 | $ | 1,056.50 | $ | 3.72 | ||||||
Hypothetical 5% return | 1,000 | 1,021.17+ | 3.66 | |||||||||
Service | ||||||||||||
Actual | 1,000 | 1,054.80 | 4.99 | |||||||||
Hypothetical 5% return | 1,000 | 1,019.93+ | 4.91 |
* | Expenses are calculated using the Fund’s annualized net expense ratio for each class, which represents the ongoing expenses as a percentage of net assets for the six months ended June 30, 2017. Expenses are calculated by multiplying the annualized net expense ratio by the average account value for the period; then multiplying the result by the number of days in the most recent fiscal half year; and then dividing that result by the number of days in the fiscal year. The annualized net expense ratios for the period were 0.73% and 0.98% for Institutional and Service Shares, respectively. |
+ | Hypothetical expenses are based on the Fund’s annualized net expense ratios and an assumed rate of return of 5% per year before expenses. |
22
GOLDMAN SACHS VARIABLE INSURANCE TRUST GLOBAL TRENDS ALLOCATION FUND
Statement Regarding Basis for Approval of Management Agreement (Unaudited)
Background
The Goldman Sachs Global Trends Allocation Fund (the “Fund”) is an investment portfolio of Goldman Sachs Variable Insurance Trust (the “Trust”). The Board of Trustees oversees the management of the Trust and reviews the investment performance and expenses of the Fund at regularly scheduled meetings held throughout the year. In addition, the Board of Trustees determines annually whether to approve the continuance of the Trust’s investment management agreement (the “Management Agreement”) with Goldman Sachs Asset Management, L.P. (the “Investment Adviser”) on behalf of the Fund.
The Management Agreement was most recently approved for continuation until June 30, 2018 by the Board of Trustees, including those 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”), at a meeting held on June 14-15, 2017 (the “Annual Meeting”).
The review process undertaken by the Trustees spans the course of the year and culminates with the Annual Meeting. To assist the Trustees in their deliberations, the Trustees have established a Contract Review Committee (the “Committee”), comprised of the Independent Trustees. The Committee held four meetings over the course of the year since the Management Agreement was last approved. At those Committee meetings, regularly scheduled Board or other committee meetings, and/or the Annual Meeting, matters relevant to the renewal of the Management Agreement were considered by the Board, or the Independent Trustees, as applicable. With respect to the Fund, such matters included:
(a) | the nature and quality of the advisory, administrative, and other services provided to the Fund by the Investment Adviser and its affiliates, including information about: |
(i) | the structure, staff, and capabilities of the Investment Adviser and its portfolio management teams; |
(ii) | the groups within the Investment Adviser and its affiliates that support the portfolio management teams or provide other types of necessary services, including fund services groups (e.g., accounting and financial reporting, tax, shareholder services, and operations); controls and risk management groups (e.g., legal, compliance, valuation oversight, credit risk management, internal audit, compliance testing, market risk analysis, finance, and central funding); sales and distribution support groups, and others (e.g., information technology and training); |
(iii) | trends in employee headcount; |
(iv) | the Investment Adviser’s financial resources and ability to hire and retain talented personnel and strengthen its operations; and |
(v) | the parent company’s support of the Investment Adviser and its mutual fund business, as expressed by the firm’s senior management; |
(b) | information on the investment performance of the Fund, including comparisons to the performance of similar mutual funds, as provided by a third-party mutual fund data provider engaged as part of the contract review process (the “Outside Data Provider”) and a benchmark performance index; and information on general investment outlooks in the markets in which the Fund invests; |
(c) | information provided by the Investment Adviser indicating the Investment Adviser’s views on whether the Fund’s peer group and/or benchmark index had high, medium, or low relevance given the Fund’s particular investment strategy; |
(d) | the terms of the Management Agreement and other agreements with affiliated service providers entered into by the Trust on behalf of the Fund; |
23
GOLDMAN SACHS VARIABLE INSURANCE TRUST GLOBAL TRENDS ALLOCATION FUND
Statement Regarding Basis for Approval of Management Agreement (Unaudited) (continued)
(e) | fee and expense information for the Fund, including: |
(i) | the relative management fee and expense levels of the Fund as compared to those of comparable funds managed by other advisers, as provided by the Outside Data Provider; |
(ii) | the Fund’s expense trends over time; and |
(iii) | to the extent the Investment Adviser manages other types of accounts (such as bank collective trusts, private wealth management accounts, institutional separate accounts, sub-advised mutual funds, and non-U.S. funds) having investment objectives and policies similar to those of the Fund, comparative information on the advisory fees charged and services provided to those accounts by the Investment Adviser; |
(f) | with respect to the extensive investment performance and expense comparison data provided by the Outside Data Provider, its processes in producing that data for the Fund; |
(g) | the undertakings of the Investment Adviser and its affiliates to implement fee waivers and/or expense limitations; |
(h) | information relating to the profitability of the Management Agreement and the transfer agency and distribution and service arrangements of the Fund to the Investment Adviser and its affiliates; |
(i) | whether the Fund’s existing management fee schedule adequately addressed any economies of scale; |
(j) | a summary of the “fall-out” benefits derived by the Investment Adviser and its affiliates from their relationships with the Fund, including the fees received by the Investment Adviser’s affiliates from the Fund for transfer agency, securities lending, portfolio trading, distribution and other services; |
(k) | a summary of potential benefits derived by the Fund as a result of its relationship with the Investment Adviser; |
(l) | information regarding commissions paid by the Fund and broker oversight, other information regarding portfolio trading, and how the Investment Adviser carries out its duty to seek best execution; |
(m) | the manner in which portfolio manager compensation is determined; and the number and types of accounts managed by the portfolio managers; |
(n) | the nature and quality of the services provided to the Fund by its unaffiliated service providers, and the Investment Adviser’s general oversight and evaluation (including reports on due diligence) of those service providers as part of the administrative services provided under the Management Agreement; and |
(o) | the Investment Adviser’s processes and policies addressing various types of potential conflicts of interest; its approach to risk management; the annual review of the effectiveness of the Fund’s compliance program; and periodic compliance reports. |
The Trustees also received an overview of the Fund’s distribution arrangements. They received information regarding the Fund’s assets, share purchase and redemption activity, and payment of distribution and service fees. Information was also provided to the Trustees relating to revenue sharing payments made by and services provided by the Investment Adviser and its affiliates to intermediaries that promote the sale, distribution, and/or servicing of Fund shares. The Independent Trustees also discussed the broad range of other investment choices that are available to Fund investors, including the availability of comparable funds managed by other advisers.
The presentations made at the Board and Committee meetings and at the Annual Meeting encompassed the Fund and other mutual funds for which the Board of Trustees has responsibility. In evaluating the Management Agreement at the Annual Meeting, the Trustees relied upon their knowledge, resulting from their meetings and other interactions throughout the year, of the Investment Adviser and its affiliates, their services, and the Fund. In conjunction with these meetings, the Trustees received written materials and oral presentations on the topics covered, and the Investment Adviser addressed the questions and concerns of the Trustees, including concerns regarding the investment performance of certain of the funds they oversee. The Independent Trustees were advised by their independent legal counsel regarding their responsibilities and other regulatory requirements related to the
24
GOLDMAN SACHS VARIABLE INSURANCE TRUST GLOBAL TRENDS ALLOCATION FUND
Statement Regarding Basis for Approval of Management Agreement (Unaudited) (continued)
approval and continuation of mutual fund investment management agreements under applicable law. In addition, the Investment Adviser and its affiliates provided the Independent Trustees with a written response to a formal request for information sent on behalf of the Independent Trustees by their independent legal counsel. During the course of their deliberations, the Independent Trustees met in executive sessions with their independent legal counsel, without representatives of the Investment Adviser or its affiliates present.
Nature, Extent, and Quality of the Services Provided Under the Management Agreement
As part of their review, the Trustees considered the nature, extent, and quality of the services provided to the Fund by the Investment Adviser. In this regard, the Trustees considered both the investment advisory services and non-advisory services that are provided by the Investment Adviser and its affiliates. The Trustees noted the transition in the leadership and changes in personnel of various of the Investment Adviser’s portfolio management teams that had occurred in recent periods, and the ongoing recruitment efforts aimed at bringing high quality investment talent to the Investment Adviser. They also noted the Investment Adviser’s commitment to maintaining high quality systems and expending substantial resources to respond to ongoing changes to the regulatory and control environment in which the Fund and its service providers operate, as well as the efforts of the Investment Adviser and its affiliates to combat cyber security risks. The Trustees concluded that the Investment Adviser continued to commit substantial financial and operational resources to the Fund and expressed confidence that the Investment Adviser would continue to do so in the future. The Trustees also recognized that the Investment Adviser had made significant commitments to address regulatory compliance requirements applicable to the Fund and the Investment Adviser and its affiliates.
Investment Performance
The Trustees also considered the investment performance of the Fund. In this regard, they compared the investment performance of the Fund to its peers using rankings and ratings compiled by the Outside Data Provider as of December 31, 2016, and updated performance information prepared by the Investment Adviser using the peer group identified by the Outside Data Provider as of March 31, 2017. The information on the Fund’s investment performance was provided for the one- and three-year periods ending on the applicable dates. The Trustees also reviewed the Fund’s investment performance relative to its performance benchmark. As part of this review, they 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 and market conditions.
In addition, the Trustees considered materials prepared and presentations made by the Investment Adviser’s senior management and portfolio management personnel in which Fund performance was assessed. The Trustees also considered the Investment Adviser’s periodic reports with respect to the Fund’s risk profile, and how the Investment Adviser’s approach to risk monitoring and management influences portfolio management. They noted the efforts of the Fund’s portfolio management team to continue to enhance the investment model used in managing the Fund.
The Trustees noted that the Fund’s Institutional Shares had placed in the second quartile of the Fund’s peer group for the one- and three- year periods; had performed in-line with the Fund’s benchmark index for the one-year period and underperformed for the three- year period; and had outperformed the average performance of a group of competitor funds, as determined by the Investment Adviser, for the one- and three-year periods ended March 31, 2017. The Trustees also noted that in April 2015, the Fund had been repositioned from the Goldman Sachs Global Markets Navigator Fund, which involved changes to the Fund’s investment objective, investment strategy, and benchmark.
Costs of Services Provided and Competitive Information
The Trustees considered the contractual terms of the Management Agreement and the fee rates payable by the Fund thereunder. 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.
25
GOLDMAN SACHS VARIABLE INSURANCE TRUST GLOBAL TRENDS ALLOCATION FUND
Statement Regarding Basis for Approval of Management Agreement (Unaudited) (continued)
In particular, the Trustees reviewed analyses prepared by the Outside Data Provider regarding the expense rankings of the Fund. The analyses provided a comparison of the Fund’s management fee and breakpoints to those of a relevant peer group and category universe; an expense analysis which compared the Fund’s overall net and gross expenses to a peer group and a category universe; and data comparing the Fund’s net expenses to the peer and category medians. The analyses also compared the Fund’s transfer agency, custody and distribution fees, other expenses and fee waivers/reimbursements to those of the peer group and category medians. The Trustees concluded that the comparisons provided by the Outside Data Provider were useful in evaluating the reasonableness of the management fees and total expenses paid by the Fund.
In addition, the Trustees considered the Investment Adviser’s undertakings to implement fee waivers and/or expense limitations. They also considered, to the extent that the Investment Adviser manages other types of accounts having investment objectives and policies similar to those of the Fund, comparative fee information for services provided by the Investment Adviser to those accounts, and information that indicated that services provided to the Fund differed in various significant respects from the services provided to other types of accounts which, in many cases, operated under less stringent legal and regulatory structures, required fewer services from the Investment Adviser to a smaller number of client contact points, and were less time-intensive.
In addition, the Trustees noted that shareholders are able to redeem their Fund shares at any time if shareholders believe that the Fund fees and expenses are too high or if they are dissatisfied with the performance of the Fund.
Profitability
The Trustees reviewed the Fund’s contribution to the Investment Adviser’s revenues and pre-tax profit margins. In this regard the Trustees noted that they had received, among other things, profitability analyses and summaries, revenue and expense schedules by Fund and by function (i.e., investment management, transfer agency and distribution and service), and information on the Investment Adviser’s expense allocation methodology. They observed that the profitability and expense figures are substantially similar to those used by the Investment Adviser for many internal purposes, including compensation decisions among various business groups, and are thus subject to a vigorous internal debate about how certain revenue and expenses should be allocated. The Trustees also noted that the internal audit group within the Goldman Sachs organization had audited the expense allocation methodology and that the internal audit group was satisfied with the reasonableness, consistency, and accuracy of the Investment Adviser’s expense allocation methodology and profitability analysis calculations. Profitability data for the Fund were provided for 2016 and 2015, and the Trustees considered this information in relation to the Investment Adviser’s overall profitability.
Economies of Scale
The Trustees considered the information that had been provided regarding the Investment Adviser’s profitability. The Trustees also considered the breakpoints in the fee rate payable under the Management Agreement for the Fund at the following annual percentage rates of the average daily net assets of the Fund:
First $1 billion | 0.79 | % | ||
Next $1 billion | 0.71 | |||
Next $3 billion | 0.68 | |||
Next $3 billion | 0.66 | |||
Over $8 billion | 0.65 |
26
GOLDMAN SACHS VARIABLE INSURANCE TRUST GLOBAL TRENDS ALLOCATION FUND
Statement Regarding Basis for Approval of Management Agreement (Unaudited) (continued)
The Trustees noted that the breakpoints were designed to share potential economies of scale, if any, with the Fund and its shareholders as assets under management reach those asset levels. The Trustees considered the amounts of assets in the Fund; the Fund’s recent share purchase and redemption activity; the information provided by the Investment Adviser relating to the costs of the services provided by the Investment Adviser and its affiliates and their realized profits; information comparing fee rates charged by the Investment Adviser with fee rates charged to other funds in the peer group; and the Investment Adviser’s undertakings to waive a portion of its management fee and to limit certain expenses of the Fund that exceed specified levels. Upon reviewing these matters at the Annual Meeting, the Trustees concluded that the fee breakpoints represented a means of assuring that benefits of scalability, if any, would be passed along to shareholders at the specified asset levels.
Other Benefits to the Investment Adviser and Its Affiliates
The Trustees also considered the other benefits derived by the Investment Adviser and its affiliates from their relationships with the Fund as stated above, including: (a) transfer agency fees received by Goldman Sachs & Co. LLC (“Goldman Sachs”); (b) brokerage and futures commissions earned by Goldman Sachs for executing securities and futures transactions on behalf of the Fund; (c) trading efficiencies resulting from aggregation of orders of the Fund with those for other funds or accounts managed by the Investment Adviser; (d) fees earned by Goldman Sachs Agency Lending (“GSAL”), an affiliate of the Investment Adviser, as securities lending agent (and fees earned by the Investment Adviser for managing the fund in which the Fund’s cash collateral is invested); (e) the Investment Adviser’s ability to leverage the infrastructure designed to service the Fund on behalf of its other clients; (f) the Investment Adviser’s ability to cross-market other products and services to Fund shareholders; (g) Goldman Sachs’ retention of certain fees as Fund Distributor; (h) the Investment Adviser’s ability to negotiate better pricing with custodians on behalf of its other clients, as a result of the relationship with the Fund; and (i) the possibility that the working relationship between the Investment Adviser and the Fund’s third-party service providers may cause those service providers to be more likely to do business with other areas of Goldman Sachs. In the course of considering the foregoing, the Independent Trustees requested and received further information quantifying certain of these fall-out benefits.
Other Benefits to the Fund and Its Shareholders
The Trustees also noted that the Fund receives certain potential benefits as a result of its relationship with the Investment Adviser, including: (a) trading efficiencies resulting from aggregation of orders of the Fund with those of other funds or accounts managed by the Investment Adviser; (b) enhanced servicing from vendors because of the volume of business generated by the Investment Adviser and its affiliates; (c) enhanced servicing from broker-dealers because of the volume of business generated by the Investment Adviser and its affiliates; (d) the Investment Adviser’s ability to negotiate favorable terms with derivatives counterparties on behalf of the Fund as a result of the size and reputation of the Goldman Sachs organization; (e) the Investment Adviser’s knowledge and experience gained from managing other accounts and products; (f) the Investment Adviser’s ability to hire and retain qualified personnel to provide services to the Fund because of the reputation of the Goldman Sachs organization; (g) the Fund’s access, through the Investment Adviser, to certain firmwide resources (e.g., proprietary risk management systems and databases), subject to certain restrictions; (h) the Fund’s ability to participate in the securities lending program administered by GSAL, as measured by the revenue received by the Fund in connection with the program; and (i) the Fund’s access to certain affiliated distribution channels. In addition, the Trustees noted the competitive nature of the mutual fund marketplace, and considered that many of the Fund’s shareholders invested in the Fund in part because of the Fund’s relationship with the Investment Adviser and that those shareholders have a general expectation that the relationship will continue.
27
GOLDMAN SACHS VARIABLE INSURANCE TRUST GLOBAL TRENDS ALLOCATION FUND
Statement Regarding Basis for Approval of Management Agreement (Unaudited) (continued)
Conclusion
In connection with their consideration of the Management Agreement, the Trustees gave weight to each of the factors described above, but did not identify any particular factor as controlling their decision. After deliberation and consideration of all of the information provided, including the factors described above, the Trustees concluded, in the exercise of their business judgment, that the management fees paid by the Fund were reasonable in light of the services provided to it by the Investment Adviser, the Investment Adviser’s costs and the Fund’s current and reasonably foreseeable asset levels. The Trustees unanimously concluded that the Investment Adviser’s continued management likely would benefit the Fund and its shareholders and that the Management Agreement should be approved and continued with respect to the Fund until June 30, 2018.
28
TRUSTEES | OFFICERS | |
Ashok N. Bakhru, Chairman | James A. McNamara, President | |
Kathryn A. Cassidy | Scott M. McHugh, Treasurer, Senior Vice | |
Diana M. Daniels | President and Principal Financial Officer | |
Herbert J. Markley | Joseph F. DiMaria, Assistant Treasurer and | |
James A. McNamara | Principal Accounting Officer | |
Jessica Palmer | Caroline L. Kraus, Secretary | |
Roy W. Templin | ||
Gregory G. Weaver |
GOLDMAN SACHS & CO. LLC
Distributor and Transfer Agent
GOLDMAN SACHS ASSET MANAGEMENT, L.P.
Investment Adviser
200 West Street, New York
New York 10282
Visit our web site at www.GSAMFUNDS.com to obtain the most recent month-end returns.
The reports concerning the Fund included in this shareholder report may contain certain forward-looking statements about the factors that may affect the performance of the Fund in the future. These statements are based on Fund management’s predictions and expectations concerning certain future events and their expected impact on the Fund, such as performance of the economy as a whole and of specific industry sectors, changes in the levels of interest rates, the impact of developing world events, and other factors that may influence the future performance of the Fund. Management believes these forward-looking statements to be reasonable, although they are inherently uncertain and difficult to predict. Actual events may cause adjustments in portfolio management strategies from those currently expected to be employed.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the Fund voted proxies relating to portfolio securities for the 12-month period ended June 30 is available (i) without charge, upon request by calling 1-800-621-2550; and (ii) on the Securities and Exchange Commission (“SEC”) web site at http://www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the SEC’s web site at http://www.sec.gov within 60 days after the Fund’s first and third fiscal quarters. The Fund’s Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may also be obtained by calling 1-800-SEC-0330. Forms N-Q may be obtained upon request and without charge by calling 1-800-621-2550.
The website links provided are for your convenience only and are not an endorsement or recommendation by GSAM of any of these websites or the products or services offered. GSAM is not responsible for the accuracy and validity of the content of these websites.
Fund holdings and allocations shown are as of June 30, 2017 and may not be representative of future investments. Fund holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities. Current and future holdings are subject to risk.
References to indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only and do not imply that the portfolio will achieve similar results. The index composition may not reflect the manner in which a portfolio is constructed. While an adviser seeks to design a portfolio which reflects appropriate risk and return features, portfolio characteristics may deviate from those of the benchmark.
The portfolio risk management process includes an effort to monitor and manage risk, but does not imply low risk.
Shares of the Goldman Sachs VIT Funds are offered to separate accounts of participating life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Shares of the Fund are not offered directly to the general public. The variable annuity contracts and variable life insurance policies are described in the separate prospectuses issued by participating insurance companies. You should refer to those prospectuses for information about surrender charges, mortality and expense risk fees and other charges that may be assessed by participating insurance companies under the variable annuity contracts or variable life insurance policies. Such fees or charges, if any, may affect the return you may realize with respect to your investments. Ask your representative for more complete information. Please consider a fund’s objectives, risks and charges and expenses, and read the prospectus carefully before investing. The prospectus contains this and other information about the Fund.
This material is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus or summary prospectus, if applicable. Investors should consider the Fund’s objective, risks, and charges and expenses, and read the summary prospectus, if available, and/or the prospectus carefully before investing or sending money. The summary prospectus, if available, and the prospectus contain this and other information about the Fund and may be obtained from your authorized dealer or from Goldman Sachs & Co. LLC by calling 1-800-621-2550.
THIS MATERIAL IS FOR INFORMATIONAL PURPOSES ONLY AND IS PROVIDED SOLELY ON THE BASIS THAT IT WILL NOT CONSTITUTE INVESTMENT OR OTHER ADVICE OR A RECOMMENDATION RELATING TO ANY PERSON’S OR PLAN’S INVESTMENT OR OTHER DECISIONS, AND GOLDMAN SACHS IS NOT A FIDUCIARY OR ADVISOR WITH RESPECT TO ANY PERSON OR PLAN BY REASON OF PROVIDING THE MATERIAL OR CONTENT HEREIN INCLUDING UNDER THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974 OR DEPARTMENT OF LABOR REGULATIONS. PLAN SPONSORS AND OTHER FIDUCIARIES SHOULD CONSIDER THEIR OWN CIRCUMSTANCES IN ASSESSING ANY POTENTIAL COURSE OF ACTION.
This report is prepared for the general information of contract owners and is not an offer of shares of the Goldman Sachs Variable Insurance Trust — Goldman Sachs Global Trends Allocation Fund.
© 2017 Goldman Sachs. All rights reserved.
VITNAVSAR-17/100865-TMPL-08/2017-587131/12.4K
Goldman
Sachs Variable Insurance Trust
Goldman Sachs
Large Cap Value Fund
Semi-Annual Report
June 30, 2017
GOLDMAN SACHS VARIABLE INSURANCE TRUST LARGE CAP VALUE FUND
INVESTMENT OBJECTIVE
The Fund seeks long-term capital appreciation.
Portfolio Management Discussion and Analysis
Below, the Goldman Sachs Value Portfolio Management Team discusses the Goldman Sachs Variable Insurance Trust — Goldman Sachs Large Cap Value Fund’s (the “Fund”) performance and positioning for the six-month period ended June 30, 2017 (the “Reporting Period”).
How did the Fund perform during the Reporting Period?
During the Reporting Period, the Fund’s Institutional and Service Shares generated cumulative total returns of 5.41% and 5.22%, respectively. These returns compare to the 4.66% cumulative total return of the Fund’s benchmark, the Russell 1000® Value Index (the “Russell Index”) during the same time period.
What economic and market factors most influenced the equity markets as a whole during the Reporting Period?
Representing the U.S. equity market, the S&P 500® Index gained 9.34% during the Reporting Period.
As the Reporting Period began in January 2017, U.S. equities rallied to new highs on the prospect of deregulation following executive orders on oil pipelines and on further optimism around infrastructure spending after a $1 trillion proposal from Senate Democrats. Despite political uncertainty and protectionism concerns, U.S. equities continued to rally in February 2017, driven by “risk on” sentiment, or reduced risk aversion, owing to potential U.S. tax reform and deregulation as well as by stronger economic data. In March 2017, the U.S. Federal Reserve (the “Fed”) raised interest rates for the third time since the 2008 global financial crisis, while maintaining projections for three rate hikes this year. However, a seemingly cautious stance on the future path of monetary tightening from Fed Chair Janet Yellen and the presence of a dissenter on the policy committee led to a dovish market reaction. (Dovish tends to suggest lower interest rates; opposite of hawkish.) Political risks subsequently drove U.S. equities lower in the wake of House Republicans’ struggle to schedule a vote on health care. For the month of March 2017, U.S. equities were virtually flat.
U.S. equities fell in April 2017, as Fed minutes suggested stocks were overvalued. However, U.S. equities subsequently rebounded on strong first quarter 2017 earnings results and on receding European political risk following the centrist candidate’s win in the French election. Although the U.S. labor market remained strong, economic activity and inflation data appeared to be moderating during the second quarter of 2017. Core inflation softened to 1.7% year-over-year in May 2017, marking a third consecutive month of weakness, while core personal consumption expenditures remained below the Fed’s 2% target at just 1.4% year-over-year. In addition, market expectations for pro-growth U.S. fiscal policy were dampened by domestic political developments. Nonetheless, the Fed proceeded to raise the targeted federal funds rate by 25 basis points in June 2017, citing ongoing strength in the labor market and a pick-up in household spending and business fixed investment. (A basis point is 1/100th of a percentage point.) The results of the Fed’s 2017 Comprehensive Capital Analysis and Review (“CCAR”) stress test for banks were encouraging, with improving payout ratios. (Payout ratio is the proportion of earnings paid out as dividends to shareholders.)
For the Reporting Period overall, information technology, health care and consumer discretionary were the best performing sectors in the S&P 500® Index by a wide margin. The weakest performing sectors in the S&P 500® Index were energy and telecommunication services, the only two to post negative absolute returns, followed by real estate and financials, which were comparatively weak but generated positive returns during the Reporting Period.
Within the U.S. equity market, there was significant disparity in performance not only among sectors but also among the various capitalization and style segments. While all capitalization segments posted positive returns, large-cap stocks, as measured by the Russell 1000® Index, performed best, followed by mid-cap stocks, as measured by the Russell Midcap® Index, and then at some distance by small-cap stocks, as measured by the Russell 2000® Index. From a style perspective, growth-oriented stocks significantly outpaced value-oriented stocks across the capitalization spectrum. (All as measured by the Russell Investments indices.)
What key factors were responsible for the Fund’s performance during the Reporting Period?
The Fund outperformed the Russell Index during the Reporting Period. Stock selection and sector allocation overall both contributed positively to the Fund’s performance relative to the Russell Index during the Reporting Period.
1
GOLDMAN SACHS VARIABLE INSURANCE TRUST LARGE CAP VALUE FUND
Which equity market sectors most significantly affected Fund performance?
Stock selection in the health care, information technology and financials sectors contributed most positively to the Fund’s relative results. Having an overweighted allocation to the strongly performing health care sector also added value. Only partially offsetting these positive contributors was stock selection in the industrials and real estate sectors, which detracted. Having an underweighted allocation to the utilities sector, which outpaced the Russell Index during the Reporting Period, also hurt.
What were some of the Fund’s best-performing individual stocks?
Relative to the Russell Index, the Fund benefited most from positions in U.S.-based pharmaceutical company Vertex Pharmaceuticals, enterprise information management software provider Oracle and health care company Abbott Laboratories.
Vertex Pharmaceuticals is primarily focused on treatments for cystic fibrosis. The majority of its outperformance of the Russell Index came after the company reported positive test results from one of its next-generation cystic fibrosis pipeline drugs. Its shares also rose after the company reported fourth quarter 2016 earnings that exceeded consensus expectations and issued 2017 guidance. Additionally, Vertex Pharmaceuticals sold its cancer research pipeline for $230 million. Investors viewed this positively given the possibility of royalties on future sales. At the end of the Reporting Period, we believed Vertex Pharmaceuticals would likely continue to expand its reach into the cystic fibrosis market through its next-generation pipeline drugs. In our view, its stock was trading at a compelling valuation, and the company was well insulated relative to its peer group if regulatory changes are made to the broader health care sector.
Oracle’s stock rose sharply after the company reported both strong growth in its cloud business and earnings that exceeded consensus expectations. We were encouraged by its management’s 2018 revenue expectations. At the end of the Reporting Period, we believed Oracle would become a powerful player in the cloud business, as it transitions its existing customer base from on premise to cloud computing platforms. As investors come to better appreciate this transition, we believe there is likely to be multiple expansion (Multiple expansion is an increase in the price/earnings ratio, or multiple, of a stock or group of stocks). We further believe its margins also have upside, as more customers transition given the large fixed investment Oracle has made in its cloud business.
Abbott Laboratories’ shares appreciated after the company announced the closing of its acquisition of St. Jude. Its strong performance was also due to its management reporting earnings that exceeded consensus expectations. Revenue increases in its nutrition, diagnostics and medical devices business lines and improvement in its gross margins further boosted its shares. Despite a challenging 2016 due to political rhetoric, health care stocks in general performed well during the Reporting Period, as investors began to doubt any major changes to health care would be made by Congress. At the end of the Reporting Period, we believed the company was trading at an attractive valuation and that its acquisition of St. Jude would be accretive to earnings given the opportunity for synergies and the addition of key new products from St. Jude’s pipeline.
Which stocks detracted significantly from the Fund’s performance during the Reporting Period?
Detracting most from the Fund’s results relative to the Russell Index were positions in three energy-related exploration and production companies — Southwestern Energy, Range Resources and ConocoPhillips.
Southwestern Energy is a natural gas-focused exploration and production company. Its stock experienced weakness during the Reporting Period as the price of natural gas was pressured, and energy market volatility plagued the stock. Despite its underperformance of the Russell Index during the Reporting Period, we believe our thesis on long-term demand drivers within natural gas remains intact, even with potential macro headwinds. At the end of the Reporting Period, we remained positive on the steps the company is taking to lower its debt levels and reduce its cost structure. Going forward, we continue to see upside potential for Southwestern Energy given what we view as the company’s high quality assets, specifically in the Marcellus, Fayetteville and Utica Shales.
Range Resources’ stock was pressured by increased oil production, which has the potential to increase supply of associated gas and thus lower gas prices. In our view, however, the long-term demand drivers of natural gas, such as coal plant retirements, liquid natural gas exports and industrial/electricity generation, remain intact. We believe Range Resources has a strong asset base in the Appalachian and Midcontinent regions, which its management has indicated could experience 30% production growth next year. At the end of the Reporting Period, we were also positive on Range Resources’ acquisition of Memorial Resource Development, as it should help diversify the company’s assets.
ConocoPhillips successfully reshaped its portfolio by divesting non-core businesses and used the proceeds to reduce debt and repurchase stock. However, during the Reporting Period, investors remained cautious on potential asset dispositions and headwinds related to Cenovus Energy’s balance sheet. (Cenovus is the Canadian-based company to whom ConocoPhillips sold some of its oil and gas assets in March 2017.) After reporting strong first quarter 2017 results and after the company performed better than other
2
GOLDMAN SACHS VARIABLE INSURANCE TRUST LARGE CAP VALUE FUND
large cap energy stocks, we trimmed the Fund’s position in ConocoPhillips in favor of other stocks with what we perceived to be greater risk-adjusted upside potential.
How did the Fund use derivatives and similar instruments during the Reporting Period?
During the Reporting Period, we did not use derivatives as part of an active management strategy.
Did the Fund make any significant purchases or sales during the Reporting Period?
During the Reporting Period, we initiated a Fund position in American International Group, an insurance company based in New York. We believe its new Chief Executive Officer’s (“CEO”) initiatives and capabilities may well serve as a positive catalyst and lead to margin improvement. We established a position in the company because of what we consider to be its attractive valuation and our belief in the upcoming inflection in its fundamentals. Additionally, the company’s new financial strength rating should be accretive to its earnings over time, in our view.
We started a Fund position in Citigroup, a global financial services company, during the Reporting Period. In our view, Citigroup is attractively priced relative to its peers given the strength of its balance sheet. We are encouraged by its management’s emphasis on cost cutting initiatives through technology implementation and closures. This emphasis, coupled with growth in its card business, gives us confidence that the company is well positioned for the long term.
Conversely, we exited the Fund’s position in Verizon Communications, a leading provider of wireless telecommunications in the U.S., which had detracted from relative results during the first quarter of 2017. Its shares fell in January 2017 after the company reported weaker than consensus expected earnings as a result of increased industry competition. Despite recent headwinds, we believe Verizon Communications has some of the highest quality assets in the industry and can modestly grow as the company continues to invest and focus on its strong wireless business and areas poised for future growth, including digital advertising, Internet of Things and 5G. (The Internet of Things is the interconnection of uniquely identifiable embedded computing devices within the existing Internet infrastructure. 5G represents the fifth, or next, generation of devices and the technology supporting those devices.) In light of elevated competitive dynamics in the industry and Verizon Communications’ stock approaching our price target, we sold the position in favor of other investments with what we considered to be greater risk-adjusted upside potential.
We eliminated the Fund’s position in American Express, a global financial services corporation. We had originally initiated the position because we believed concerns regarding credit and longer-term secular headwinds were overblown, leading to an excessively depressed valuation. While, at the end of the Reporting Period, we continued to view American Express as a high quality company with good long-term growth potential, the stock approached our price target after reporting strong first quarter 2017 results, and so we exited the position in favor of other investments with what we believed to be greater risk-adjusted upside potential.
Were there any notable changes in the Fund’s weightings during the Reporting Period?
In constructing the Fund’s portfolio, we focus on picking stocks rather than on making industry or sector bets. We seek to outpace the benchmark index by overweighting stocks that we expect to outperform and underweighting those that we think may lag. Consequently, changes in its sector weights are generally the direct result of individual stock selection or of stock appreciation or depreciation. That said, during the Reporting Period, the Fund’s exposure to industrials increased compared to the Russell Index as did the Fund’s position in cash. The Fund’s allocations compared to the Russell Index in consumer discretionary, telecommunication services and utilities decreased.
How was the Fund positioned relative to its benchmark index at the end of the Reporting Period?
At the end of June 2017, the Fund had overweighted positions relative to the Russell Index in the industrials, health care, information technology and materials sectors. On the same date, the Fund had underweighted positions compared to the Russell Index in utilities, real estate and telecommunication services and was rather neutrally weighted to the Russell Index in consumer discretionary, consumer staples, energy and financials.
What is the Fund’s tactical view and strategy for the months ahead?
At the end of the Reporting Period, we were cautiously optimistic with respect to pro-growth policy actions and their ability to spur a more accommodative operating environment. In our view, most companies should benefit from aggressive fiscal policy, including lower taxes and increased spending, and less restrictive regulatory conditions. We were also encouraged by a strong first quarter 2017 earnings reporting season, as sales, margins and earnings all exceeded consensus expectations. Aggregate S&P 500® Index earnings growth of 13.5% on a year-over-year basis represented the strongest rate of growth since 2011. Earnings in most markets
3
GOLDMAN SACHS VARIABLE INSURANCE TRUST LARGE CAP VALUE FUND
across the world surpassed consensus estimates as well. All else being equal, broadening global economic growth should be supportive of a continuation in earnings growth and equity market appreciation. While our return expectations remain relatively muted given what we perceive to be rather full valuations, we still believe U.S. equities are more attractive than most other asset classes and can continue to be driven by earnings growth in the absence of multiple expansion. Additionally, after several years of thematic-driven markets, we were positive at the end of the Reporting Period about lower correlations at the stock level. We believe an active approach will likely continue to benefit in this type of environment.
Regardless of market direction, our fundamental, bottom-up stock selection continues to drive our process, rather than headlines or sentiment. We maintain high conviction in the companies the Fund owns and believe they have the potential to outperform relative to the broader market regardless of economic growth conditions. We continue to focus on undervalued companies that we believe have comparatively greater control of their own destiny, such as innovators with differentiated products, companies with low cost structures or companies that have been investing in their own businesses and may be poised to gain market share. We maintain our discipline in identifying companies with what we believe to be strong or improving balance sheets, led by quality management teams and trading at discounted valuations. We remain focused on the long-term performance of the Fund.
4
GOLDMAN SACHS VARIABLE INSURANCE TRUST LARGE CAP VALUE FUND
Index Definitions
The Russell 1000® Value Index is an unmanaged market capitalization weighted index of the 1000 largest U.S. companies with lower price-to-book ratios and lower forecasted growth values. The figures for the index do not include any deduction for fees, expenses or taxes. It is not possible to invest directly in an index.
The Russell 2000® Index is an unmanaged index of common stock prices that measures the performance of the 2000 smallest companies in the Russell 3000® Index. The figures for the index do not include any deduction for fees, expenses or taxes. It is not possible to invest directly in an index.
The S&P 500® Index is the Standard & Poor’s 500 Composite Index of 500 stocks, an unmanaged index of common stock prices. The figures for the index do not include any deduction for fees, expenses or taxes. It is not possible to invest directly in an index.
The Russell Midcap® Index measures the performance of the 800 smallest companies in the Russell 1000® Index, which represent approximately 25% of the total market capitalization of the Russell 1000 Index. It is not possible to invest directly in an index.
The Russell 1000® Index measures the performance of the 1,000 largest companies in the Russell 3000® Index, which represent approximately 92% of the total market capitalization of the Russell 3000 Index. It is not possible to invest directly in an index.
5
FUND BASICS
Large Cap Value Fund
as of June 30, 2017
STANDARDIZED TOTAL RETURNS1
For the period ended 6/30/17 | One Year | Five Years | Ten Years | Since Inception | Inception Date | |||||||||||||
Institutional | 16.26 | % | 13.13 | % | 4.36 | % | 5.08 | % | 1/12/98 | |||||||||
Service | 15.98 | 12.85 | N/A | 4.28 | 7/24/07 |
1 | The Standardized Total Returns are average annual total returns as of the most recent calendar quarter-end. They assume reinvestment of all distributions at net asset value (“NAV”). Because Institutional Shares and Service Shares do not involve a sales charge, such a charge is not applied to their Standardized Total Returns. |
Total return figures in the above chart represent past performance and do not indicate future results, which will vary. The investment return and principal value of an investment will fluctuate and, therefore, an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the total return figures in the above chart. Please visit www.GSAMFUNDS.com to obtain the most recent month-end returns. Performance reflects fee waivers and/or expense limitations in effect during the periods shown. In their absence, performance would be reduced.
EXPENSE RATIOS2
Net Expense Ratio (Current) | Gross Expense Ratio (Before Waivers) | |||||||
Institutional | 0.71 | % | 0.81 | % | ||||
Service | 0.96 | 1.06 |
2 | The expense ratios of the Fund, both current (net of any fee waivers and/or expense limitations) and before waivers (gross of any fee waivers and/or expense limitations) are as set forth above according to the most recent publicly available Prospectuses for the Fund and may differ from the expense ratios disclosed in the Financial Highlights in this report. Pursuant to a contractual arrangement, the Fund’s fee waivers and/or expense limitations will remain in place through at least April 28, 2018, and prior to such date, the Investment Adviser may not terminate the arrangements without the approval of the Fund’s Board of Trustees. If these arrangements are discontinued in the future, the expense ratios may change without shareholder approval. |
TOP TEN HOLDINGS AS OF 6/30/173
Holding | % of Net Assets | Line of Business | ||||
Wells Fargo & Co. | 5.2% | Banks | ||||
Exxon Mobil Corp. | 5.0 | Energy | ||||
Bank of America Corp. | 4.7 | Banks | ||||
Pfizer, Inc. | 3.4 | Pharmaceuticals, Biotechnology & Life Sciences | ||||
JPMorgan Chase & Co. | 3.3 | Banks | ||||
General Electric Co. | 3.1 | Capital Goods | ||||
Allergan plc | 3.1 | Pharmaceuticals, Biotechnology & Life Sciences | ||||
Oracle Corp. | 3.0 | Software & Services | ||||
MetLife, Inc. | 2.8 | Insurance | ||||
Cisco Systems, Inc. | 2.6 | Technology Hardware & Equipment |
3 | The top 10 holdings may not be representative of the Fund’s future investments. |
6
FUND BASICS
FUND vs. BENCHMARK SECTOR ALLOCATIONS4
As of June 30, 2017
4 | The Fund is actively managed and, as such, its composition may differ over time. Consequently, the Fund’s overall sector allocations may differ from percentages contained in the graph above. The graph categorizes investments using Global Industry Classification Standard (“GICS”), however, the sector classifications used by the portfolio management team may differ from GICS. The percentage shown for each investment category reflects the value of investments in that category as a percentage of market value (excluding investments in the securities lending reinvestment vehicle, if any). Underlying sector allocations of exchange traded funds and investment companies held by the Fund are not reflected in the graph above. Investments in the securities lending reinvestment vehicle represented 1.1% of the Fund’s net assets at June 30, 2017. |
7
GOLDMAN SACHS VARIABLE INSURANCE TRUST LARGE CAP VALUE FUND
Schedule of Investments
June 30, 2017 (Unaudited)
Shares | Description | Value | ||||||
Common Stocks – 96.4% | ||||||||
Automobiles & Components – 0.7% | ||||||||
116,186 | Volkswagen AG ADR | $ | 3,616,289 | |||||
|
| |||||||
Banks – 16.1% | ||||||||
1,072,181 | Bank of America Corp. | 26,011,111 | ||||||
151,666 | Citigroup, Inc. | 10,143,422 | ||||||
195,313 | JPMorgan Chase & Co. | 17,851,608 | ||||||
99,659 | SunTrust Banks, Inc. | 5,652,659 | ||||||
516,012 | Wells Fargo & Co. | 28,592,225 | ||||||
|
| |||||||
88,251,025 | ||||||||
|
| |||||||
Capital Goods – 8.8% | ||||||||
195,991 | Emerson Electric Co. | 11,684,983 | ||||||
113,710 | Fluor Corp. | 5,205,644 | ||||||
633,976 | General Electric Co. | 17,123,692 | ||||||
118,484 | Textron, Inc. | 5,580,596 | ||||||
34,502 | United Technologies Corp. | 4,213,039 | ||||||
35,915 | WABCO Holdings, Inc.* | 4,579,522 | ||||||
|
| |||||||
48,387,476 | ||||||||
|
| |||||||
Consumer Durables & Apparel – 1.2% | ||||||||
101,769 | Coach, Inc. | 4,817,744 | ||||||
30,264 | Newell Brands, Inc. | 1,622,756 | ||||||
|
| |||||||
6,440,500 | ||||||||
|
| |||||||
Diversified Financials – 3.1% | ||||||||
118,320 | Capital One Financial Corp. | 9,775,598 | ||||||
166,248 | Morgan Stanley | 7,408,011 | ||||||
|
| |||||||
17,183,609 | ||||||||
|
| |||||||
Energy – 9.9% | ||||||||
235,672 | BP plc ADR | 8,166,035 | ||||||
157,369 | ConocoPhillips | 6,917,941 | ||||||
339,155 | Exxon Mobil Corp. | 27,379,983 | ||||||
185,200 | Range Resources Corp. | 4,291,084 | ||||||
1,263,698 | Southwestern Energy Co.* | 7,683,284 | ||||||
|
| |||||||
54,438,327 | ||||||||
|
| |||||||
Food & Staples Retailing – 0.6% | ||||||||
44,741 | CVS Health Corp. | 3,599,861 | ||||||
|
| |||||||
Food, Beverage & Tobacco – 3.8% | ||||||||
139,765 | Altria Group, Inc. | 10,408,300 | ||||||
43,390 | Anheuser-Busch InBev SA/NV ADR | 4,788,520 | ||||||
127,726 | Mondelez International, Inc. Class A | 5,516,486 | ||||||
|
| |||||||
20,713,306 | ||||||||
|
| |||||||
Health Care Equipment & Services – 3.7% | ||||||||
271,426 | Abbott Laboratories | 13,194,018 | ||||||
46,170 | Aetna, Inc. | 7,009,991 | ||||||
|
| |||||||
20,204,009 | ||||||||
|
| |||||||
Household & Personal Products – 4.3% | ||||||||
313,620 | Coty, Inc. Class A | 5,883,511 | ||||||
153,075 | Procter & Gamble Co. (The) | 13,340,486 | ||||||
81,350 | Unilever NV | 4,496,215 | ||||||
|
| |||||||
23,720,212 | ||||||||
|
| |||||||
Common Stocks – (continued) | ||||||||
Insurance – 5.8% | ||||||||
215,480 | American International Group, Inc. | $ | 13,471,810 | |||||
57,317 | Hartford Financial Services Group, Inc. (The) | 3,013,155 | ||||||
282,327 | MetLife, Inc. | 15,511,045 | ||||||
|
| |||||||
31,996,010 | ||||||||
|
| |||||||
Materials – 3.7% | ||||||||
128,254 | Ball Corp. | 5,413,601 | ||||||
122,125 | EI du Pont de Nemours & Co. | 9,856,709 | ||||||
90,226 | Nucor Corp. | 5,221,379 | ||||||
|
| |||||||
20,491,689 | ||||||||
|
| |||||||
Media – 4.1% | ||||||||
53,649 | DISH Network Corp. Class A* | 3,367,011 | ||||||
425,308 | Liberty Global plc Class C* | 13,261,103 | ||||||
172,024 | Viacom, Inc. Class B | 5,774,846 | ||||||
|
| |||||||
22,402,960 | ||||||||
|
| |||||||
Pharmaceuticals, Biotechnology & Life Sciences – 11.9% | ||||||||
69,152 | Allergan plc | 16,810,160 | ||||||
42,785 | BioMarin Pharmaceutical, Inc.* | 3,885,734 | ||||||
135,382 | Bristol-Myers Squibb Co. | 7,543,485 | ||||||
62,139 | Celgene Corp.* | 8,069,992 | ||||||
42,788 | Johnson & Johnson | 5,660,424 | ||||||
42,956 | Merck & Co., Inc. | 2,753,050 | ||||||
555,109 | Pfizer, Inc. | 18,646,111 | ||||||
16,754 | Vertex Pharmaceuticals, Inc.* | 2,159,088 | ||||||
|
| |||||||
65,528,044 | ||||||||
|
| |||||||
Real Estate Investment Trust – 2.7% | ||||||||
487,176 | DDR Corp. | 4,418,686 | ||||||
32,375 | Simon Property Group, Inc. | 5,236,980 | ||||||
55,371 | Vornado Realty Trust | 5,199,337 | ||||||
|
| |||||||
14,855,003 | ||||||||
|
| |||||||
Retailing – 1.3% | ||||||||
19,741 | Home Depot, Inc. (The) | 3,028,269 | ||||||
54,587 | TJX Cos., Inc. (The) | 3,939,544 | ||||||
|
| |||||||
6,967,813 | ||||||||
|
| |||||||
Semiconductors & Semiconductor Equipment – 0.5% | ||||||||
34,481 | Texas Instruments, Inc. | 2,652,623 | ||||||
|
| |||||||
Software & Services – 6.2% | ||||||||
11,553 | Alphabet, Inc. Class A* | 10,740,593 | ||||||
332,390 | Oracle Corp. | 16,666,035 | ||||||
142,158 | Symantec Corp. | 4,015,964 | ||||||
29,012 | Visa, Inc. Class A | 2,720,745 | ||||||
|
| |||||||
34,143,337 | ||||||||
|
| |||||||
Technology Hardware & Equipment – 2.6% | ||||||||
454,704 | Cisco Systems, Inc. | 14,232,235 | ||||||
|
| |||||||
Telecommunication Services – 1.7% | ||||||||
212,817 | CenturyLink, Inc.(a) | 5,082,070 | ||||||
66,902 | T-Mobile US, Inc.* | 4,055,599 | ||||||
|
| |||||||
9,137,669 | ||||||||
|
|
8 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST LARGE CAP VALUE FUND
Shares | Description | Value | ||||||
Common Stocks – (continued) | ||||||||
Transportation – 2.5% | ||||||||
205,347 | JetBlue Airways Corp.* | $ | 4,688,072 | |||||
85,533 | Kansas City Southern | 8,951,029 | ||||||
|
| |||||||
13,639,101 | ||||||||
|
| |||||||
Utilities – 1.2% | ||||||||
107,812 | FirstEnergy Corp. | 3,143,798 | ||||||
52,210 | PG&E Corp. | 3,465,178 | ||||||
|
| |||||||
6,608,976 | ||||||||
|
| |||||||
TOTAL COMMON STOCKS | ||||||||
(Cost $451,063,719) | $ | 529,210,074 | ||||||
|
| |||||||
Shares | Distribution Rate | Value | ||||||
Investment Company(b)(c) – 0.9% | ||||||||
| Goldman Sachs Financial Square Government Fund — | | ||||||
4,730,357 | 0.845% | $ | 4,730,357 | |||||
(Cost $4,730,357) | ||||||||
|
| |||||||
| TOTAL INVESTMENTS BEFORE SECURITIES LENDING REINVESTMENT VEHICLE | | ||||||
(Cost $455,794,076) | $ | 533,940,431 | ||||||
|
| |||||||
Securities Lending Reinvestment Vehicle(b)(c) – 1.1% | ||||||||
| Goldman Sachs Financial Square Government Fund — | | ||||||
6,191,025 | 0.845% | $ | 6,191,025 | |||||
(Cost $6,191,025) | ||||||||
|
| |||||||
TOTAL INVESTMENTS – 98.4% | ||||||||
(Cost $461,985,101) | $ | 540,131,456 | ||||||
|
| |||||||
| OTHER ASSETS IN EXCESS OF | 8,881,636 | ||||||
|
| |||||||
NET ASSETS – 100.0% | $ | 549,013,092 | ||||||
|
|
The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. | ||
* | Non-income producing security. | |
(a) | All or a portion of security is on loan. | |
(b) | Represents an affiliated issuer. | |
(c) | Variable rate security. Interest rate or distribution rate disclosed is that which is in effect on June 30, 2017. |
Investment Abbreviation: | ||
ADR | —American Depositary Receipt. |
The accompanying notes are an integral part of these financial statements. | 9 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST LARGE CAP VALUE FUND
Statement of Assets and Liabilities
June 30, 2017 (Unaudited)
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $451,063,719)(a) | $ | 529,210,074 | ||
Investments in affiliated issuers, at value (cost $4,730,357) | 4,730,357 | |||
Investments in affiliated securities lending reinvestment vehicle, at value (cost $6,191,025) | 6,191,025 | |||
Cash | 8,218,807 | |||
Receivables: | ||||
Investments sold | 16,726,530 | |||
Fund shares sold | 974,424 | |||
Dividends | 558,985 | |||
Reimbursement from investment adviser | 15,918 | |||
Securities lending income | 2,456 | |||
Other assets | 2,311 | |||
Total assets | 566,630,887 | |||
Liabilities: | ||||
Payables: | ||||
Investments purchased | 10,699,812 | |||
Payable upon return of securities loaned | 6,191,025 | |||
Management fees | 307,687 | |||
Fund shares redeemed | 210,012 | |||
Distribution and Service fees and Transfer Agency fees | 81,748 | |||
Accrued expenses | 127,511 | |||
Total liabilities | 17,617,795 | |||
Net Assets: | ||||
Paid-in capital | 394,923,128 | |||
Undistributed net investment income | 5,268,477 | |||
Accumulated net realized gain | 70,675,132 | |||
Net unrealized gain | 78,146,355 | |||
NET ASSETS | $ | 549,013,092 | ||
Net Assets: | ||||
Institutional | $ | 190,691,125 | ||
Service | 358,321,967 | |||
Total Net Assets | $ | 549,013,092 | ||
Shares outstanding $0.001 par value (unlimited shares authorized): | ||||
Institutional | 17,806,767 | |||
Service | 33,513,095 | |||
Net asset value, offering and redemption price per share: | ||||
Institutional | $10.71 | |||
Service | 10.69 |
(a) Includes loaned securities having a market value of $6,043,296.
10 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST LARGE CAP VALUE FUND
Statement of Operations
For the Six Months Ended June 30, 2017 (Unaudited)
Investment income: | ||||
Dividends — unaffiliated issuers (net of foreign taxes withheld of $12,029) | $ | 7,457,792 | ||
Dividends — affiliated issuers | 13,727 | |||
Securities lending income — affiliated issuer | 10,363 | |||
Total investment income | 7,481,882 | |||
Expenses: | ||||
Management fees | 2,365,670 | |||
Distribution and Service fees — Service Shares | 526,572 | |||
Transfer Agency fees(a) | 63,080 | |||
Printing and mailing costs | 41,007 | |||
Professional fees | 39,659 | |||
Custody, accounting and administrative services | 30,022 | |||
Trustee fees | 8,898 | |||
Other | 13,027 | |||
Total expenses | 3,087,935 | |||
Less — expense reductions | (249,683 | ) | ||
Net expenses | 2,838,252 | |||
NET INVESTMENT INCOME | 4,643,630 | |||
Realized and unrealized gain (loss): | ||||
Net realized gain from investments (including commissions recaptured of $33,430) | 79,158,302 | |||
Net change in unrealized loss on investments | (45,828,173 | ) | ||
Net realized and unrealized gain | 33,330,129 | |||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 37,973,759 |
(a) Institutional and Service Shares incurred Transfer Agency fees of $20,957 and $42,123, respectively.
The accompanying notes are an integral part of these financial statements. | 11 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST LARGE CAP VALUE FUND
Statements of Changes in Net Assets
For the Six Months Ended June 30, 2017 (Unaudited) | For the Fiscal Year Ended December 31, 2016 | |||||||
From operations: | ||||||||
Net investment income | $ | 4,643,630 | $ | 14,542,105 | ||||
Net realized gain | 79,158,302 | 3,065,360 | ||||||
Net change in unrealized gain (loss) | (45,828,173 | ) | 69,964,908 | |||||
Net increase in net assets resulting from operations | 37,973,759 | 87,572,373 | ||||||
Distributions to shareholders: | ||||||||
From net investment income | ||||||||
Institutional Shares | — | (5,067,653 | ) | |||||
Service Shares | — | (9,637,716 | ) | |||||
From net realized gains | ||||||||
Institutional Shares | — | (2,433,036 | ) | |||||
Service Shares | — | (5,324,082 | ) | |||||
Total distributions to shareholders | — | (22,462,487 | ) | |||||
From share transactions: | ||||||||
Proceeds from sales of shares | 14,338,841 | 46,845,142 | ||||||
Reinvestment of distributions | — | 22,462,487 | ||||||
Cost of shares redeemed | (278,727,502 | ) | (249,588,098 | ) | ||||
Net decrease in net assets resulting from share transactions | (264,388,661 | ) | (180,280,469 | ) | ||||
TOTAL DECREASE | (226,414,902 | ) | (115,170,583 | ) | ||||
Net assets: | ||||||||
Beginning of period | 775,427,994 | 890,598,577 | ||||||
End of period | $ | 549,013,092 | $ | 775,427,994 | ||||
Undistributed net investment income | $ | 5,268,477 | $ | 624,847 |
12 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST LARGE CAP VALUE FUND
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
Income (loss) from investment operations | Distributions to shareholders | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year - Share Class | Net asset value, beginning of period | Net investment income(a) | Net realized and unrealized gain (loss) | Total from investment operations | From net investment income | From net realized gains | Total distributions | Net asset value, end of period | Total return(b) | Net assets, end of period (in 000s) | Ratio of net expenses to average net assets | Ratio of total expenses to average net assets | Ratio of net investment income to average net assets | Portfolio turnover rate(c) | ||||||||||||||||||||||||||||||||||||||||||
FOR THE SIX MONTHS ENDED JUNE 30, (UNAUDITED) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2017 - Institutional | $ | 10.16 | $ | 0.08 | $ | 0.47 | $ | 0.55 | $ | — | $ | — | $ | — | $ | 10.71 | 5.41 | % | $ | 190,691 | 0.73 | %(d) | 0.81 | %(d) | 1.63 | %(d) | 54 | % | ||||||||||||||||||||||||||||
2017 - Service | 10.16 | 0.07 | 0.46 | 0.53 | — | — | — | 10.69 | 5.22 | 358,322 | 0.98 | (d) | 1.06 | (d) | 1.39 | (d) | 54 | |||||||||||||||||||||||||||||||||||||||
FOR THE FISCAL YEARS ENDED DECEMBER 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2016 - Institutional | 9.39 | 0.18 | 0.91 | 1.09 | (0.22 | ) | (0.10 | ) | (0.32 | ) | 10.16 | 11.55 | 243,875 | 0.74 | 0.81 | 1.91 | 130 | |||||||||||||||||||||||||||||||||||||||
2016 - Service | 9.39 | 0.16 | 0.90 | 1.06 | (0.19 | ) | (0.10 | ) | (0.29 | ) | 10.16 | 11.25 | 531,553 | 0.99 | 1.06 | 1.66 | 130 | |||||||||||||||||||||||||||||||||||||||
2015 - Institutional | 11.39 | 0.15 | (0.67 | ) | (0.52 | ) | (0.16 | ) | (1.32 | ) | (1.48 | ) | 9.39 | (4.41 | ) | 279,910 | 0.74 | 0.81 | 1.38 | 83 | ||||||||||||||||||||||||||||||||||||
2015 - Service | 11.38 | 0.13 | (0.67 | ) | (0.54 | ) | (0.13 | ) | (1.32 | ) | (1.45 | ) | 9.39 | (4.58 | ) | 610,689 | 0.99 | 1.06 | 1.13 | 83 | ||||||||||||||||||||||||||||||||||||
2014 - Institutional | 12.59 | 0.16 | 1.38 | 1.54 | (0.19 | ) | (2.55 | ) | (2.74 | ) | 11.39 | 12.94 | 326,543 | 0.75 | 0.80 | 1.21 | 72 | |||||||||||||||||||||||||||||||||||||||
2014 - Service | 12.58 | 0.13 | 1.37 | 1.50 | (0.15 | ) | (2.55 | ) | (2.70 | ) | 11.38 | 12.61 | 692,741 | 1.00 | 1.05 | 0.96 | 72 | |||||||||||||||||||||||||||||||||||||||
2013 - Institutional | 10.76 | 0.14 | 3.39 | 3.53 | (0.16 | ) | (1.54 | ) | (1.70 | ) | 12.59 | 33.23 | 370,241 | 0.75 | 0.79 | 1.15 | 86 | |||||||||||||||||||||||||||||||||||||||
2013 - Service | 10.75 | 0.11 | 3.39 | 3.50 | (0.13 | ) | (1.54 | ) | (1.67 | ) | 12.58 | 32.93 | 792,553 | 1.00 | 1.04 | 0.91 | 86 | |||||||||||||||||||||||||||||||||||||||
2012 - Institutional | 9.39 | 0.15 | 1.64 | 1.79 | (0.15 | ) | (0.27 | ) | (0.42 | ) | 10.76 | 19.07 | 351,677 | 0.77 | 0.78 | 1.40 | 120 | |||||||||||||||||||||||||||||||||||||||
2012 - Service | 9.38 | 0.12 | 1.64 | 1.76 | (0.12 | ) | (0.27 | ) | (0.39 | ) | 10.75 | 18.77 | 734,577 | 1.02 | 1.03 | 1.15 | 120 |
(a) | Calculated based on the average shares outstanding methodology. |
(b) | Assumes investment at the net asset value at the beginning of the period, reinvestment of all distributions, and a complete redemption of the investment at the net asset value at the end of the period. Total returns for periods less than one full year are not annualized. |
(c) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short term investments. If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
(d) | Annualized. |
The accompanying notes are an integral part of these financial statements. | 13 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST LARGE CAP VALUE FUND
Notes to Financial Statements
June 30, 2017 (Unaudited)
1. ORGANIZATION
Goldman Sachs Variable Insurance Trust (the “Trust” or “VIT”) is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company. The Trust includes the Goldman Sachs Large Cap Value Fund (the “Fund”). The Fund is a diversified portfolio under the Act offering two classes of shares — Institutional and Service Shares. Shares of the Trust are offered to separate accounts of participating life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies.
Goldman Sachs Asset Management, L.P. (“GSAM”), an affiliate of Goldman Sachs & Co. LLC (formerly Goldman, Sachs & Co.) (“Goldman Sachs”), serves as investment adviser to the Fund pursuant to a management agreement (the “Agreement”) with the Trust.
2. SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and require management to make estimates and assumptions that may affect the reported amounts and disclosures. Actual results may differ from those estimates and assumptions.
A. Investment Valuation — The Fund’s valuation policy is to value investments at fair value.
B. Investment Income and Investments — Investment income includes interest income, dividend income and securities lending income. Interest income is accrued daily and adjusted for amortization of premiums and accretion of discounts. Dividend income is recognized on ex-dividend date or, for certain foreign securities, as soon as such information is obtained subsequent to the ex-dividend date. Investment transactions are reflected on trade date. Realized gains and losses are calculated using identified cost. Investment transactions are recorded on the following business day for daily net asset value (“NAV”) calculations. Investment income is recorded net of any foreign withholding taxes, less any amounts reclaimable. The Fund may file withholding tax reclaims in certain jurisdictions to recover a portion of amounts previously withheld. Any foreign capital gains tax is accrued daily based upon net unrealized gains, and is payable upon sale of such investments. Distributions received from the Fund’s investments in United States (“U.S.”) real estate investment trusts (“REITs”) may be characterized as ordinary income, net capital gain or a return of capital. A return of capital is recorded by the Fund as a reduction to the cost basis of the REIT.
C. Class Allocations and Expenses — Investment income, realized and unrealized gain (loss), and non-class specific expenses of the Fund are allocated daily based upon the proportion of net assets of each class. Non-class specific expenses directly incurred by the Fund are charged to the Fund, while such expenses incurred by the Trust are allocated across the Fund on a straight-line and/or pro-rata basis depending upon the nature of the expenses. Class specific expenses, where applicable, are borne by the respective share classes and include Distribution and Service and Transfer Agency fees.
D. Federal Taxes and Distributions to Shareholders — It is the Fund’s policy to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Code”), applicable to regulated investment companies (mutual funds) and to distribute each year substantially all of its investment company taxable income and capital gains to its shareholders. Accordingly, the Fund is not required to make any provisions for the payment of federal income tax. Distributions to shareholders are recorded on the ex-dividend date. Income and capital gains distributions, if any, are declared and paid annually.
Net capital losses, if any, are carried forward to future fiscal years and may be used to the extent allowed by the Code to offset any future capital gains. Losses that are carried forward will retain their character as either short-term or long-term capital losses. Utilization of capital loss carryforwards will reduce the requirement of future capital gains distributions.
The characterization of distributions to shareholders for financial reporting purposes is determined in accordance with federal income tax rules, which may differ from GAAP. The source of the Fund’s distributions may be shown in the accompanying financial statements as either from net investment income, net realized gain or capital. Certain components of the Fund’s net assets on the Statement of Assets and Liabilities reflect permanent GAAP/tax differences based on the appropriate tax character.
E. Commission Recapture — GSAM, on behalf of certain Funds, may direct portfolio trades, subject to seeking best execution, to various brokers who have agreed to rebate a portion of the commissions generated. Such rebates are made directly to the Fund as cash payments and are included in net realized gain (loss) from investments on the Statement of Operations.
14
GOLDMAN SACHS VARIABLE INSURANCE TRUST LARGE CAP VALUE FUND
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS
U.S. GAAP defines the fair value of a financial instrument as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price); the Fund’s policy is to use the market approach. GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The levels used for classifying investments are not necessarily an indication of the risk associated with investing in these investments. The three levels of the fair value hierarchy are described below:
Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 — Quoted prices in markets that are not active or financial instruments for which significant inputs are observable (including, but not limited to, quoted prices for similar investments, interest rates, foreign exchange rates, volatility and credit spreads), either directly or indirectly;
Level 3 — Prices or valuations that require significant unobservable inputs (including GSAM’s assumptions in determining fair value measurement).
Changes in valuation techniques may result in transfers into or out of an assigned level within the hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value hierarchy resulting from such changes are deemed to have occurred as of the beginning of the reporting period.
The Board of Trustees (“Trustees”) has approved Valuation Procedures that govern the valuation of the portfolio investments held by the Fund, including investments for which market quotations are not readily available. The Trustees have delegated to GSAM day-to-day responsibility for implementing and maintaining internal controls and procedures related to the valuation of the Fund’s portfolio investments. To assess the continuing appropriateness of pricing sources and methodologies, GSAM regularly performs price verification procedures and issues challenges as necessary to third party pricing vendors or brokers, and any differences are reviewed in accordance with the Valuation Procedures.
A. Level 1 and Level 2 Fair Value Investments — The valuation techniques and significant inputs used in determining the fair values for investments classified as Level 1 and Level 2 are as follows:
Equity Securities — Equity securities traded on a U.S. securities exchange or the NASDAQ system, or those located on certain foreign exchanges, including but not limited to the Americas, are valued daily at their last sale price or official closing price on the principal exchange or system on which they are traded. If there is no sale or official closing price or such price is believed by GSAM to not represent fair value, equity securities are valued at the last bid price for long positions and at the last ask price for short positions. To the extent these investments are actively traded, they are classified as Level 1 of the fair value hierarchy, otherwise they are generally classified as Level 2.
Unlisted equity securities for which market quotations are available are valued at the last sale price on the valuation date, or if no sale occurs, at the last bid price. Securities traded on certain foreign securities exchanges are valued daily at fair value determined by an independent fair value service (if available) under Valuation Procedures approved by the Trustees and consistent with applicable regulatory guidance. The independent fair value service takes into account multiple factors including, but not limited to, movements in the securities markets, certain depositary receipts, futures contracts and foreign currency exchange rates that have occurred subsequent to the close of the foreign securities exchange. These investments are generally classified as Level 2 of the fair value hierarchy.
Money Market Funds — Investments in the Goldman Sachs Financial Square Government Fund (“Underlying Fund”) are valued at the NAV of the Institutional Share class on the day of valuation. These investments are generally classified as Level 1 of the fair value hierarchy. For information regarding an Underlying Fund’s accounting policies and investment holdings, please see the Underlying Fund’s shareholder report.
15
GOLDMAN SACHS VARIABLE INSURANCE TRUST LARGE CAP VALUE FUND
Notes to Financial Statements (continued)
June 30, 2017 (Unaudited)
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS (continued)
B. Level 3 Fair Value Investments — To the extent that significant inputs to valuation models and other alternative pricing sources are unobservable, or if quotations are not readily available, or if GSAM believes that such quotations do not accurately reflect fair value, the fair value of the Fund’s investments may be determined under Valuation Procedures approved by the Trustees. GSAM, consistent with its procedures and applicable regulatory guidance, may make an adjustment to the most recent valuation prices of either domestic or foreign securities in light of significant events to reflect what it believes to be the fair value of the securities at the time of determining the Fund’s NAV. Significant events which could affect a large number of securities in a particular market may include, but are not limited to: significant fluctuations in U.S. or foreign markets; market dislocations; market disruptions; or unscheduled market closings. Significant events which could also affect a single issuer may include, but are not limited to: corporate actions such as reorganizations, mergers and buy-outs; ratings downgrades; and bankruptcies.
C. Fair Value Hierarchy — The following is a summary of the Fund’s investments classified in the fair value hierarchy as of June 30, 2017:
Investment Type | Level 1 | Level 2 | Level 3 | |||||||||
Assets | ||||||||||||
Common Stock and/or Other Equity Investments(a) | ||||||||||||
Europe | $ | 34,328,162 | $ | — | $ | — | ||||||
North America | 494,881,912 | — | — | |||||||||
Investment Company | 4,730,357 | — | — | |||||||||
Securities Lending Reinvestment Vehicle | 6,191,025 | — | — | |||||||||
Total | $ | 540,131,456 | $ | — | $ | — |
(a) | Amounts are disclosed by continent to highlight the impact of time zone differences between local market close and the calculation of NAV. Security valuations are based on the principal exchange or system on which they are traded, which may differ from country of domicile noted in the table. |
For further information regarding security characteristics, see the Schedule of Investments.
4. AGREEMENTS AND AFFILIATED TRANSACTIONS
A. Management Agreement — Under the Agreement, GSAM manages the Fund, subject to the general supervision of the Trustees.
As compensation for the services rendered pursuant to the Agreement, the assumption of the expenses related thereto and administration of the Fund’s business affairs, including providing facilities, GSAM is entitled to a management fee, accrued daily and paid monthly, equal to an annual percentage rate of the Fund’s average daily net assets.
For the six months ended June 30, 2017, contractual and effective net management fees with GSAM were at the following rates:
Contractual Management Rate | Effective Net Rate^ | |||||||||||||||||||||||||
First $1 billion | Next $1 billion | Next $3 billion | Next $3 billion | Over $8 billion | Effective Rate | |||||||||||||||||||||
0.75% | 0.68 | % | 0.65 | % | 0.64 | % | 0.63 | % | 0.75 | % | 0.71 | %* |
^ | Effective Net Management Rate includes the impact of management fee waivers of affiliated Underlying Funds, if any. |
* | GSAM agreed to waive a portion of its management fee in order to achieve a net management rate, as defined in the Fund’s most recent prospectus. This waiver will be effective through at least April 28, 2018, and prior to such date GSAM may not terminate the arrangement without approval of the Trustees. For the six months ended June 30, 2017, GSAM waived $123,140 of its management fee. |
The Fund invests in Institutional Shares of the Goldman Sachs Financial Square Government Fund, which is an affiliated Underlying Fund. GSAM has agreed to waive a portion of its management fee payable by the Fund in an amount equal to the
16
GOLDMAN SACHS VARIABLE INSURANCE TRUST LARGE CAP VALUE FUND
4. AGREEMENTS AND AFFILIATED TRANSACTIONS (continued)
management fee it earns as an investment adviser to any of the affiliated Underlying Funds in which the Fund invests. For the six months ended June 30, 2017, GSAM waived $3,568 of the Fund’s management fee.
B. Distribution and/or Service (12b-1) Plan — The Trust, on behalf of Service Shares of the Fund, has adopted a Distribution and Service Plan subject to Rule 12b-1 under the Act. Under the Distribution and Service Plan, Goldman Sachs, which serves as distributor (the “Distributor”), is entitled to a fee accrued daily and paid monthly, for distribution services and personal and account maintenance services, which may then be paid by Goldman Sachs to authorized dealers, equal to, on an annual basis, 0.25% of the Fund’s average daily net assets attributable to Service Shares.
C. Transfer Agency Agreement — Goldman Sachs also serves as the transfer agent of the Fund for a fee pursuant to the Transfer Agency Agreement. The fees charged for such transfer agency services are accrued daily and paid monthly at an annual rate of 0.02% of the average daily net assets of Institutional and Service Shares.
D. Other Expense Agreements and Affiliated Transactions — GSAM has agreed to limit certain “Other Expenses” of the Fund (excluding acquired fund fees and expenses, transfer agency fees and expenses, taxes, interest, brokerage fees, shareholder meeting, litigation, indemnification and extraordinary expenses) to the extent such expenses exceed, on an annual basis, a percentage rate of the average daily net assets of the Fund. Such Other Expense reimbursements, if any, are accrued daily and paid monthly. In addition, the Fund is not obligated to reimburse GSAM for prior fiscal year expense reimbursements, if any. The Other Expense limitation as an annual percentage rate of average daily net assets for the Fund is 0.004%. The Other Expense limitation will remain in place through at least April 28, 2018, and prior to such date GSAM may not terminate the arrangement without the approval of the Trustees. For the six months ended June 30, 2017, GSAM reimbursed $119,991 to the Fund. In addition, the Fund has entered into certain offset arrangements with the custodian and the transfer agent, which may result in a reduction of the Fund’s expenses and are received irrespective of the application of the “Other Expense” limitation described above. For the six months ended June 30, 2017, custody fee credits were $2,984.
E. Line of Credit Facility — As of June 30, 2017, the Fund participated in a $1,100,000,000 committed, unsecured revolving line of credit facility (the “facility”) together with other funds of the Trust and certain registered investment companies having management agreements with GSAM or its affiliates. This facility is to be used for temporary emergency purposes, or to allow for an orderly liquidation of securities to meet redemption requests. The interest rate on borrowings is based on the federal funds rate. The facility also requires a fee to be paid by the Fund based on the amount of the commitment that has not been utilized. For the six months ended June 30, 2017, the Fund did not have any borrowings under the facility.
F. Other Transactions with Affiliates — For the six months ended June 30, 2017, Goldman Sachs earned $225 in brokerage commissions from portfolio transactions.
The following table provides information about the Fund’s investment in the Goldman Sachs Financial Square Government Fund as of and for the six months ended June 30, 2017:
Market Value | Purchases at Cost | Proceeds from Sales | Market Value | Dividend Income | ||||||||||||||
$ | 944 | $ | 87,095,911 | $ | (82,366,498 | ) | $ | 4,730,357 | $ | 13,727 |
5. PORTFOLIO SECURITIES TRANSACTIONS
The cost of purchases and proceeds from sales and maturities of long-term securities for the six months ended June 30, 2017 were $336,577,715 and $613,792,929, respectively.
17
GOLDMAN SACHS VARIABLE INSURANCE TRUST LARGE CAP VALUE FUND
Notes to Financial Statements (continued)
June 30, 2017 (Unaudited)
6. SECURITIES LENDING
The Fund may lend its securities through a securities lending agent, the Bank of New York Mellon (“BNYM”), to certain qualified borrowers. In accordance with the Fund’s securities lending procedures, the Fund receives cash collateral at least equal to the market value of the securities on loan. The market value of the loaned securities is determined at the close of business of the Fund, at their last sale price or official closing price on the principal exchange or system on which they are traded, and any additional required collateral is delivered to the Fund on the next business day. As with other extensions of credit, the Fund may experience delay in the recovery of its securities or incur a loss should the borrower of the securities breach its agreement with the Fund or become insolvent at a time when the collateral is insufficient to cover the cost of repurchasing securities on loan. Dividend income received from securities on loan may not be subject to withholding taxes and therefore withholding taxes paid may differ from the amounts listed in the Statement of Operations. Loans of securities are terminable at any time and as such 1) the remaining contractual maturities of the outstanding securities lending transactions are considered to be overnight and continuous and 2) the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.
The Fund invests the cash collateral received in connection with securities lending transactions in the Goldman Sachs Financial Square Government Fund (“Government Money Market Fund”), an affiliated series of the Trust. The Government Money Market Fund is registered under the Act as an open end investment company, is subject to Rule 2a-7 under the Act, and is managed by GSAM, for which GSAM may receive a management fee of up to 0.205% on an annualized basis of the average daily net assets of the Government Money Market Fund.
In the event of a default by a borrower with respect to any loan, BNYM may exercise any and all remedies provided under the applicable borrower agreement to make the Fund whole. These remedies include purchasing replacement securities by applying the collateral held from the defaulting broker against the purchase cost of the replacement securities. If BNYM is unable to purchase replacement securities, BNYM will indemnify the Fund by paying the Fund an amount equal to the market value of the securities loaned minus the value of cash collateral received from the borrower for the loan, subject to an exclusion for any shortfalls resulting from a loss of value in such cash collateral due to reinvestment risk. The amounts of the Fund’s overnight and continuous agreements represent the gross amounts of recognized liabilities for securities lending transactions outstanding as of June 30, 2017 are disclosed as “Payable upon return of securities loaned” on the Statement of Assets and Liabilities.
Both the Fund and BNYM received compensation relating to the lending of the Fund’s securities. The amounts earned, if any, by the Fund for the six months ended June 30, 2017, are reported under Investment Income on the Statement of Operations.
The following table provides information about the Fund’s investment in the Government Money Market Fund for the six months ended June 30, 2017:
Market Value | Purchases at Cost | Proceeds from Sales | Market Value 6/30/2017 | |||||||||||
$ | — | $ | 52,945,676 | $ | (46,754,651 | ) | $ | 6,191,025 |
7. TAX INFORMATION
As of June 30, 2017, the Fund’s aggregate security unrealized gains and losses based on cost for U.S. federal income tax purposes were as follows:
Tax cost | $ | 473,653,400 | ||
Gross unrealized gain | 86,744,977 | |||
Gross unrealized loss | (20,266,921 | ) | ||
Net unrealized security gain | $ | 66,478,056 |
18
GOLDMAN SACHS VARIABLE INSURANCE TRUST LARGE CAP VALUE FUND
7. TAX INFORMATION (continued)
The difference between GAAP-basis and tax-basis unrealized gains (losses) is attributable primarily to wash sales.
GSAM has reviewed the Fund’s tax positions for all open tax years (the current and prior three years, as applicable) and has concluded that no provision for income tax is required in the Fund’s financial statements. Such open tax years remain subject to examination and adjustment by tax authorities.
8. OTHER RISKS
The Fund’s risks include, but are not limited to, the following:
Foreign Countries Risk — Investing in foreign markets may involve special risks and considerations not typically associated with investing in the U.S. Foreign securities may be subject to risk of loss because of more or less foreign government regulation, less public information and less economic, political and social stability in the countries in which the Fund invests. The imposition of exchange controls, confiscations, trade restrictions (including tariffs) and other government restrictions by the U.S. or other governments, or from problems in share registration, settlement or custody, may also result in losses. Foreign risk also involves the risk of negative foreign currency rate fluctuations, which may cause the value of securities denominated in such foreign currency (or other instruments through which the Fund has exposure to foreign currencies) to decline in value. Currency exchange rates may fluctuate significantly over short periods of time.
Foreign Custody Risk — If the Fund invests in foreign securities, the Fund may hold such securities and cash with foreign banks, agents, and securities depositories appointed by the Fund’s custodian (each a “Foreign Custodian”). Some foreign custodians may be recently organized or new to the foreign custody business. In some countries, Foreign Custodians may be subject to little or no regulatory oversight over, or independent evaluation of, their operations. Further, the laws of certain countries may place limitations on the Fund’s ability to recover its assets if a Foreign Custodian enters bankruptcy.
Investments in Other Investment Companies — As a shareholder of another investment company, including an exchange-traded fund (“ETF”), the Fund will indirectly bear its proportionate share of any net management fees and other expenses paid by such other investment companies, in addition to the fees and expenses regularly borne by the Fund. ETFs are subject to risks that do not apply to conventional mutual funds, including but not limited to the following: (i) the market price of the ETF’s shares may trade at a premium or a discount to their NAV; and (ii) an active trading market for an ETF’s shares may not develop or be maintained.
Large Shareholder Transactions Risk — The Fund may experience adverse effects when certain large shareholders, such as other funds, participating insurance companies, accounts and Goldman Sachs affiliates, purchase or redeem large amounts of shares of the Fund. Such large shareholder redemptions may cause the Fund to sell portfolio securities at times when it would not otherwise do so, which may negatively impact the Fund’s NAV and liquidity. These transactions may also accelerate the realization of taxable income to shareholders if such sales of investments resulted in gains, and may also increase transaction costs. In addition, a large redemption could result in the Fund’s current expenses being allocated over a smaller asset base, leading to an increase in the Fund’s expense ratio. Similarly, large Fund share purchases may adversely affect the Fund’s performance to the extent that the Fund is delayed in investing new cash and is required to maintain a larger cash position than it ordinarily would.
Market and Credit Risks — In the normal course of business, the Fund trades financial instruments and enters into financial transactions where risk of potential loss exists due to changes in the market (market risk). Additionally, the Fund may also be exposed to credit risk in the event that an issuer or guarantor fails to perform or that an institution or entity with which the Fund has unsettled or open transactions defaults.
19
GOLDMAN SACHS VARIABLE INSURANCE TRUST LARGE CAP VALUE FUND
Notes to Financial Statements (continued)
June 30, 2017 (Unaudited)
9. INDEMNIFICATIONS
Under the Trust’s organizational documents, its Trustees, officers, employees and agents are indemnified, to the extent permitted by the Act and state law, against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the course of business, the Fund enters into contracts that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, GSAM believes the risk of loss under these arrangements to be remote.
10. SUBSEQUENT EVENTS
Subsequent events after the Statement of Assets and Liabilities date have been evaluated and GSAM has concluded that there is no impact requiring adjustment or disclosure in the financial statements.
11. SUMMARY OF SHARE TRANSACTIONS
Share activity is as follows:
For the Six Months Ended June 30, 2017 (Unaudited) | For the Fiscal Year Ended December 31, 2016 | |||||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||||
Institutional Shares | ||||||||||||||||
Shares sold | 518,783 | $ | 5,448,891 | 1,208,095 | $ | 11,301,985 | ||||||||||
Reinvestment of distributions | — | — | 732,489 | 7,500,689 | ||||||||||||
Shares redeemed | (6,704,324 | ) | (70,830,556 | ) | (7,742,346 | ) | (74,469,762 | ) | ||||||||
(6,185,541 | ) | (65,381,665 | ) | (5,801,762 | ) | (55,667,088 | ) | |||||||||
Service Shares | ||||||||||||||||
Shares sold | 847,857 | 8,889,950 | 3,825,318 | 35,543,157 | ||||||||||||
Reinvestment of distributions | — | — | 1,461,113 | 14,961,798 | ||||||||||||
Shares redeemed | (19,640,249 | ) | (207,896,946 | ) | (18,016,464 | ) | (175,118,336 | ) | ||||||||
(18,792,392 | ) | (199,006,996 | ) | (12,730,033 | ) | (124,613,381 | ) | |||||||||
NET DECREASE | (24,977,933 | ) | $ | (264,388,661 | ) | (18,531,795 | ) | $ | (180,280,469 | ) |
20
GOLDMAN SACHS VARIABLE INSURANCE TRUST LARGE CAP VALUE FUND
Fund Expenses — Six Month Period Ended June 30, 2017 (Unaudited) |
As a shareholder of Institutional or Service Shares of the Fund, you incur ongoing costs, including management fees, distribution and/or service (12b-1) fees (with respect to Service Shares) and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Institutional Shares and Service Shares of the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from January 1, 2017 through June 30, 2017, which represents a period of 181 days of a 365 day year.
Actual Expenses — The first line under each share class in the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000=8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes — The second line under each share class in the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual net expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only. As a shareholder of the Fund, you do not incur any transaction costs, such as sales charges, redemption fees, or exchange fees, but shareholders of other funds may incur such costs. The second line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds whose shareholders may incur transaction costs.
Share Class | Beginning Account Value 01/01/17 | Ending Account Value 06/30/17 | Expenses Paid for the 6 Months Ended 06/30/17* | |||||||||
Institutional | ||||||||||||
Actual | $ | 1,000 | $ | 1,054.10 | $ | 3.72 | ||||||
Hypothetical 5% return | 1,000 | 1,021.17 | + | 3.66 | ||||||||
Service | ||||||||||||
Actual | 1,000 | 1,052.20 | 4.99 | |||||||||
Hypothetical 5% return | 1,000 | 1,019.93 | + | 4.91 |
* | Expenses are calculated using the Fund’s annualized net expense ratio for each class, which represents the ongoing expenses as a percentage of net assets for the six months ended June 30, 2017. Expenses are calculated by multiplying the annualized net expense ratio by the average account value for the period; then multiplying the result by the number of days in the most recent fiscal half year; and then dividing that result by the number of days in the fiscal year. The annualized net expense ratios for the period were 0.73% and 0.98% for the Institutional and Service Shares, respectively. |
+ | Hypothetical expenses are based on the Fund’s actual annualized net expense ratios and an assumed rate of return of 5% per year before expenses. |
21
GOLDMAN SACHS VARIABLE INSURANCE TRUST LARGE CAP VALUE FUND
Statement Regarding Basis for Approval of Management Agreement (Unaudited)
Background
The Goldman Sachs Large Cap Value Fund (the “Fund”) is an investment portfolio of Goldman Sachs Variable Insurance Trust (the “Trust”). The Board of Trustees oversees the management of the Trust and reviews the investment performance and expenses of the Fund at regularly scheduled meetings held throughout the year. In addition, the Board of Trustees determines annually whether to approve the continuance of the Trust’s investment management agreement (the “Management Agreement”) with Goldman Sachs Asset Management, L.P. (the “Investment Adviser”) on behalf of the Fund.
The Management Agreement was most recently approved for continuation until June 30, 2018 by the Board of Trustees, including those 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”), at a meeting held on June 14-15, 2017 (the “Annual Meeting”).
The review process undertaken by the Trustees spans the course of the year and culminates with the Annual Meeting. To assist the Trustees in their deliberations, the Trustees have established a Contract Review Committee (the “Committee”), comprised of the Independent Trustees. The Committee held four meetings over the course of the year since the Management Agreement was last approved. At those Committee meetings, regularly scheduled Board or other committee meetings, and/or the Annual Meeting, matters relevant to the renewal of the Management Agreement were considered by the Board, or the Independent Trustees, as applicable. With respect to the Fund, such matters included:
(a) | the nature and quality of the advisory, administrative, and other services provided to the Fund by the Investment Adviser and its affiliates, including information about: |
(i) | the structure, staff, and capabilities of the Investment Adviser and its portfolio management teams; |
(ii) | the groups within the Investment Adviser and its affiliates that support the portfolio management teams or provide other types of necessary services, including fund services groups (e.g., accounting and financial reporting, tax, shareholder services, and operations); controls and risk management groups (e.g., legal, compliance, valuation oversight, credit risk management, internal audit, compliance testing, market risk analysis, finance, and central funding); sales and distribution support groups, and others (e.g., information technology and training); |
(iii) | trends in employee headcount; |
(iv) | the Investment Adviser’s financial resources and ability to hire and retain talented personnel and strengthen its operations; and |
(v) | the parent company’s support of the Investment Adviser and its mutual fund business, as expressed by the firm’s senior management; |
(b) | information on the investment performance of the Fund, including comparisons to the performance of similar mutual funds, as provided by a third-party mutual fund data provider engaged as part of the contract review process (the “Outside Data Provider”), a benchmark performance index, and a composite of accounts with comparable investment strategies managed by the Investment Adviser; and information on general investment outlooks in the markets in which the Fund invests; |
(c) | information provided by the Investment Adviser indicating the Investment Adviser’s views on whether the Fund’s peer group and/or benchmark index had high, medium, or low relevance given the Fund’s particular investment strategy; |
(d) | the terms of the Management Agreement and other agreements with affiliated service providers entered into by the Trust on behalf of the Fund; |
(e) | fee and expense information for the Fund, including: |
(i) | the relative management fee and expense levels of the Fund as compared to those of comparable funds managed by other advisers, as provided by the Outside Data Provider; |
(ii) | the Fund’s expense trends over time; and |
(iii) | to the extent the Investment Adviser manages other types of accounts (such as bank collective trusts, private wealth management accounts, institutional separate accounts, sub-advised mutual funds, and non-U.S. funds) having investment objectives and policies similar to those of the Fund, comparative information on the advisory fees charged and services provided to those accounts by the Investment Adviser; |
(f) | with respect to the extensive investment performance and expense comparison data provided by the Outside Data Provider, its processes in producing that data for the Fund; |
(g) | the undertakings of the Investment Adviser and its affiliates to implement fee waivers and/or expense limitations; |
(h) | information relating to the profitability of the Management Agreement and the transfer agency and distribution and service arrangements of the Fund to the Investment Adviser and its affiliates; |
(i) | whether the Fund’s existing management fee schedule adequately addressed any economies of scale; |
22
GOLDMAN SACHS VARIABLE INSURANCE TRUST LARGE CAP VALUE FUND
Statement Regarding Basis for Approval of Management Agreement (Unaudited) (continued)
(j) | a summary of the “fall-out” benefits derived by the Investment Adviser and its affiliates from their relationships with the Fund, including the fees received by the Investment Adviser’s affiliates from the Fund for transfer agency, portfolio trading, distribution and other services; |
(k) | a summary of potential benefits derived by the Fund as a result of its relationship with the Investment Adviser; |
(l) | information regarding commissions paid by the Fund and broker oversight, an update on the Investment Adviser’s soft dollars practices, other information regarding portfolio trading, and how the Investment Adviser carries out its duty to seek best execution; |
(m) | the manner in which portfolio manager compensation is determined; and the number and types of accounts managed by the portfolio managers; |
(n) | the nature and quality of the services provided to the Fund by its unaffiliated service providers, and the Investment Adviser’s general oversight and evaluation (including reports on due diligence) of those service providers as part of the administrative services provided under the Management Agreement; and |
(o) | the Investment Adviser’s processes and policies addressing various types of potential conflicts of interest; its approach to risk management; the annual review of the effectiveness of the Fund’s compliance program; and periodic compliance reports. |
The Trustees also received an overview of the Fund’s distribution arrangements. They received information regarding the Fund’s assets, share purchase and redemption activity, and payment of distribution and service fees. Information was also provided to the Trustees relating to revenue sharing payments made by and services provided by the Investment Adviser and its affiliates to intermediaries that promote the sale, distribution, and/or servicing of Fund shares. The Independent Trustees also discussed the broad range of other investment choices that are available to Fund investors, including the availability of comparable funds managed by other advisers.
The presentations made at the Board and Committee meetings and at the Annual Meeting encompassed the Fund and other mutual funds for which the Board of Trustees has responsibility. In evaluating the Management Agreement at the Annual Meeting, the Trustees relied upon their knowledge, resulting from their meetings and other interactions throughout the year, of the Investment Adviser and its affiliates, their services, and the Fund. In conjunction with these meetings, the Trustees received written materials and oral presentations on the topics covered, and the Investment Adviser addressed the questions and concerns of the Trustees, including concerns regarding the investment performance of certain of the funds they oversee. The Independent Trustees were advised by their independent legal counsel regarding their responsibilities and other regulatory requirements related to the approval and continuation of mutual fund investment management agreements under applicable law. In addition, the Investment Adviser and its affiliates provided the Independent Trustees with a written response to a formal request for information sent on behalf of the Independent Trustees by their independent legal counsel. During the course of their deliberations, the Independent Trustees met in executive sessions with their independent legal counsel, without representatives of the Investment Adviser or its affiliates present.
Nature, Extent, and Quality of the Services Provided Under the Management Agreement
As part of their review, the Trustees considered the nature, extent, and quality of the services provided to the Fund by the Investment Adviser. In this regard, the Trustees considered both the investment advisory services and non-advisory services that are provided by the Investment Adviser and its affiliates. The Trustees noted the transition in the leadership and changes in personnel of various of the Investment Adviser’s portfolio management teams that had occurred in recent periods, and the ongoing recruitment efforts aimed at bringing high quality investment talent to the Investment Adviser. They also noted the Investment Adviser’s commitment to maintaining high quality systems and expending substantial resources to respond to ongoing changes to the regulatory and control environment in which the Fund and its service providers operate, as well as the efforts of the Investment Adviser and its affiliates to combat cyber security risks. The Trustees concluded that the Investment Adviser continued to commit substantial financial and operational resources to the Fund and expressed confidence that the Investment Adviser would continue to do so in the future. The Trustees also recognized that the Investment Adviser had made significant commitments to address regulatory compliance requirements applicable to the Fund and the Investment Adviser and its affiliates.
Investment Performance
The Trustees also considered the investment performance of the Fund. In this regard, they compared the investment performance of the Fund to its peers using rankings and ratings compiled by the Outside Data Provider as of December 31, 2016, and updated performance information prepared by the Investment Adviser using the peer group identified by the Outside Data Provider as of March 31, 2017. The information on the Fund’s investment performance was provided for the one-, three-, five-, and ten-year periods ending on the applicable dates. The Trustees also reviewed the Fund’s investment performance relative to its performance benchmark. As part of this review, they considered the investment performance trends of the Fund over time, and
23
GOLDMAN SACHS VARIABLE INSURANCE TRUST LARGE CAP VALUE FUND
Statement Regarding Basis for Approval of Management Agreement (Unaudited) (continued)
reviewed the investment performance of the Fund in light of its investment objective and policies and market conditions. The Trustees also received information comparing the Fund’s performance to that of a composite of accounts with comparable investment strategies managed by the Investment Adviser.
In addition, the Trustees considered materials prepared and presentations made by the Investment Adviser’s senior management and portfolio management personnel in which Fund performance was assessed. The Trustees also considered the Investment Adviser’s periodic reports with respect to the Fund’s risk profile, and how the Investment Adviser’s approach to risk monitoring and management influences portfolio management.
The Trustees noted that the Fund’s Institutional Shares had placed in the second quartile of the Fund’s peer group for the one- and five-year periods and in the third quartile for the three- and ten-year periods, and had underperformed the Fund’s benchmark index for the one-, three-, five-, and ten-year periods ended March 31, 2017.
Costs of Services Provided and Competitive Information
The Trustees considered the contractual terms of the Management Agreement and the fee rates payable by the Fund thereunder. 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.
In particular, the Trustees reviewed analyses prepared by the Outside Data Provider regarding the expense rankings of the Fund. The analyses provided a comparison of the Fund’s management fee and breakpoints to those of a relevant peer group and category universe; an expense analysis which compared the Fund’s overall net and gross expenses to a peer group and a category universe; and data comparing the Fund’s net expenses to the peer and category medians. The analyses also compared the Fund’s transfer agency, custody, and distribution fees, other expenses and fee waivers/reimbursements to those of the peer group and category medians. The Trustees concluded that the comparisons provided by the Outside Data Provider were useful in evaluating the reasonableness of the management fee and total expenses paid by the Fund.
The Trustees noted that the management fee breakpoint schedule was being reduced at all asset levels. In addition, the Trustees considered the Investment Adviser’s undertakings to implement fee waivers and/or expense limitations. They also considered, to the extent that the Investment Adviser manages other types of accounts having investment objectives and policies similar to those of the Fund, comparative fee information for services provided by the Investment Adviser to those accounts, and information that indicated that services provided to the Fund differed in various significant respects from the services provided to other types of accounts which, in many cases, operated under less stringent legal and regulatory structures, required fewer services from the Investment Adviser to a smaller number of client contact points, and were less time-intensive.
In addition, the Trustees noted that shareholders are able to redeem their Fund shares at any time if shareholders believe that the Fund fees and expenses are too high or if they are dissatisfied with the performance of the Fund.
Profitability
The Trustees reviewed the Fund’s contribution to the Investment Adviser’s revenues and pre-tax profit margins. In this regard the Trustees noted that they had received, among other things, profitability analyses and summaries, revenue and expense schedules by Fund and by function (i.e., investment management, transfer agency and distribution and service), and information on the Investment Adviser’s expense allocation methodology. They observed that the profitability and expense figures are substantially similar to those used by the Investment Adviser for many internal purposes, including compensation decisions among various business groups, and are thus subject to a vigorous internal debate about how certain revenue and expenses should be allocated. The Trustees also noted that the internal audit group within the Goldman Sachs organization had audited the expense allocation methodology and that the internal audit group was satisfied with the reasonableness, consistency, and accuracy of the Investment Adviser’s expense allocation methodology and profitability analysis calculations. Profitability data for the Fund were provided for 2016 and 2015, and the Trustees considered this information in relation to the Investment Adviser’s overall profitability.
Economies of Scale
The Trustees considered the information that had been provided regarding the Investment Adviser’s profitability. The Trustees also considered the breakpoints in the fee rate payable under the Management Agreement for the Fund at the following annual percentage rates of the average daily net assets of the Fund:
First $1 billion | 0.75 | % | ||
Next $1 billion | 0.68 | |||
Next $3 billion | 0.65 | |||
Next $3 billion | 0.64 | |||
Over $8 billion | 0.63 |
24
GOLDMAN SACHS VARIABLE INSURANCE TRUST LARGE CAP VALUE FUND
Statement Regarding Basis for Approval of Management Agreement (Unaudited) (continued)
The Trustees noted that the breakpoints were designed to share potential economies of scale, if any, with the Fund and its shareholders as assets under management reach those asset levels. The Trustees considered the amounts of assets in the Fund; the Fund’s recent share purchase and redemption activity; the information provided by the Investment Adviser relating to the costs of the services provided by the Investment Adviser and its affiliates and their realized profits; information comparing fee rates charged by the Investment Adviser with fee rates charged to other funds in the peer group; and the Investment Adviser’s undertakings to waive a portion of its management fee and to limit certain expenses of the Fund that exceed a specified level. Upon reviewing these matters at the Annual Meeting, the Trustees concluded that the fee breakpoints represented a means of assuring that benefits of scalability, if any, would be passed along to shareholders at the specified asset levels.
Other Benefits to the Investment Adviser and Its Affiliates
The Trustees also considered the other benefits derived by the Investment Adviser and its affiliates from their relationships with the Fund as stated above, including: (a) transfer agency fees received by Goldman Sachs & Co. LLC (“Goldman Sachs”); (b) brokerage and futures commissions earned by Goldman Sachs for executing securities and futures transactions on behalf of the Fund; (c) research received by the Investment Adviser from broker-dealers in exchange for executing certain transactions on behalf of the Fund; (d) trading efficiencies resulting from aggregation of orders of the Fund with those for other funds or accounts managed by the Investment Adviser; (e) the Investment Adviser’s ability to leverage the infrastructure designed to service the Fund on behalf of its other clients; (f) the Investment Adviser’s ability to cross-market other products and services to Fund shareholders; (g) Goldman Sachs’ retention of certain fees as Fund Distributor; (h) the Investment Adviser’s ability to negotiate better pricing with custodians on behalf of its other clients, as a result of the relationship with the Fund; and (i) the possibility that the working relationship between the Investment Adviser and the Fund’s third-party service providers may cause those service providers to be more likely to do business with other areas of Goldman Sachs. In the course of considering the foregoing, the Independent Trustees requested and received further information quantifying certain of these fall-out benefits.
Other Benefits to the Fund and Its Shareholders
The Trustees also noted that the Fund receives certain potential benefits as a result of its relationship with the Investment Adviser, including: (a) trading efficiencies resulting from aggregation of orders of the Fund with those of other funds or accounts managed by the Investment Adviser; (b) enhanced servicing from vendors because of the volume of business generated by the Investment Adviser and its affiliates; (c) enhanced servicing from broker-dealers because of the volume of business generated by the Investment Adviser and its affiliates; (d) the Investment Adviser’s ability to negotiate favorable terms with derivatives counterparties on behalf of the Fund as a result of the size and reputation of the Goldman Sachs organization; (e) the Investment Adviser’s knowledge and experience gained from managing other accounts and products; (f) the Investment Adviser’s ability to hire and retain qualified personnel to provide services to the Fund because of the reputation of the Goldman Sachs organization; (g) the Fund’s access, through the Investment Adviser, to certain firmwide resources (e.g., proprietary risk management systems and databases), subject to certain restrictions; and (h) the Fund’s access to certain affiliated distribution channels. In addition, the Trustees noted the competitive nature of the mutual fund marketplace, and considered that many of the Fund’s shareholders invested in the Fund in part because of the Fund’s relationship with the Investment Adviser and that those shareholders have a general expectation that the relationship will continue.
Conclusion
In connection with their consideration of the Management Agreement, the Trustees gave weight to each of the factors described above, but did not identify any particular factor as controlling their decision. After deliberation and consideration of all of the information provided, including the factors described above, the Trustees concluded, in the exercise of their business judgment, that the management fees paid by the Fund were reasonable in light of the services provided to it by the Investment Adviser, the Investment Adviser’s costs and the Fund’s current and reasonably foreseeable asset levels. The Trustees unanimously concluded that the Investment Adviser’s continued management likely would benefit the Fund and its shareholders and that the Management Agreement should be approved and continued with respect to the Fund until June 30, 2018.
25
TRUSTEES | OFFICERS | |
Ashok N. Bakhru, Chairman | James A. McNamara, President | |
Kathryn A. Cassidy | Scott M. McHugh, Treasurer, Senior Vice | |
Diana M. Daniels | President and Principal Financial Officer | |
Herbert J. Markley | Joseph F. DiMaria, Assistant Treasurer and | |
James A. McNamara | Principal Accounting Officer | |
Jessica Palmer | Caroline L. Kraus, Secretary | |
Roy W. Templin | ||
Gregory G. Weaver |
GOLDMAN SACHS & CO. LLC
Distributor and Transfer Agent
GOLDMAN SACHS ASSET MANAGEMENT, L.P.
Investment Adviser
200 West Street, New York
New York 10282
Visit our web site at www.GSAMFUNDS.com to obtain the most recent month-end returns.
The reports concerning the Fund included in this shareholder report may contain certain forward-looking statements about the factors that may affect the performance of the Fund in the future. These statements are based on Fund management’s predictions and expectations concerning certain future events and their expected impact on the Fund, such as performance of the economy as a whole and of specific industry sectors, changes in the levels of interest rates, the impact of developing world events, and other factors that may influence the future performance of the Fund. Management believes these forward-looking statements to be reasonable, although they are inherently uncertain and difficult to predict. Actual events may cause adjustments in portfolio management strategies from those currently expected to be employed.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the Fund voted proxies relating to portfolio securities for the 12-month period ended June 30 is available (i) without charge, upon request by calling 1-800-621-2550; and (ii) on the Securities and Exchange Commission (“SEC”) web site at http://www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Form N-Qs are available on the SEC’s web site at http://www.sec.gov within 60 days after the Fund’s first and third fiscal quarters. The Fund’s Form N-Qs may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may also be obtained by calling 1-800-SEC-0330. Form N-Qs may be obtained upon request and without charge by calling 1-800-621-2550.
The website links provided are for your convenience only and are not an endorsement or recommendation by GSAM of any of these websites or the products or services offered. GSAM is not responsible for the accuracy and validity of the content of these websites.
Fund holdings and allocations shown are as of June 30, 2017 and may not be representative of future investments. Fund holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities. Current and future holdings are subject to risk.
References to indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only and do not imply that the portfolio will achieve similar results. The index composition may not reflect the manner in which a portfolio is constructed. While an adviser seeks to design a portfolio which reflects appropriate risk and return features, portfolio characteristics may deviate from those of the benchmark.
The Global Industry Classification Standard (“GICS”) was developed by and is the exclusive property and a service mark of Morgan Stanley Capital International Inc. (“MSCI”) and Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. (“S&P”) and is licensed for use by Goldman Sachs. Neither MSCI, S&P nor any other party involved in making or compiling the GICS or any GICS classifications makes any express or implied warranties or representations with respect to such standard or classification (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of such standard or classification. Without limiting any of the foregoing, in no event shall MSCI, S&P, any of their affiliates or any third party involved in making or compiling the GICS or any GICS classifications have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.
The portfolio risk management process includes an effort to monitor and manage risk, but does not imply low risk.
Shares of the Goldman Sachs VIT Funds are offered to separate accounts of participating life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Shares of the Fund are not offered directly to the general public. The variable annuity contracts and variable life insurance policies are described in the separate prospectuses issued by participating insurance companies. You should refer to those prospectuses for information about surrender charges, mortality and expense risk fees and other charges that may be assessed by participating insurance companies under the variable annuity contracts or variable life insurance policies. Such fees or charges, if any, may affect the return you may realize with respect to your investments. Ask your representative for more complete information. Please consider a fund’s objectives, risks and charges and expenses, and read the prospectus carefully before investing. The prospectus contains this and other information about the Fund.
This material is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus or summary prospectus, if applicable. Investors should consider the Fund’s objective, risks, and charges and expenses, and read the summary prospectus, if available, and/or the prospectus carefully before investing or sending money. The summary prospectus, if available, and the prospectus contain this and other information about the Fund and may be obtained from your authorized dealer or from Goldman Sachs & Co. LLC by calling 1-800-621-2550.
THIS MATERIAL IS FOR INFORMATIONAL PURPOSES ONLY AND IS PROVIDED SOLELY ON THE BASIS THAT IT WILL NOT CONSTITUTE INVESTMENT OR OTHER ADVICE OR A RECOMMENDATION RELATING TO ANY PERSON’S OR PLAN’S INVESTMENT OR OTHER DECISIONS, AND GOLDMAN SACHS IS NOT A FIDUCIARY OR ADVISOR WITH RESPECT TO ANY PERSON OR PLAN BY REASON OF PROVIDING THE MATERIAL OR CONTENT HEREIN INCLUDING UNDER THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974 OR DEPARTMENT OF LABOR REGULATIONS. PLAN SPONSORS AND OTHER FIDUCIARIES SHOULD CONSIDER THEIR OWN CIRCUMSTANCES IN ASSESSING ANY POTENTIAL COURSE OF ACTION.
This report is prepared for the general information of contract owners and is not an offer of shares of the Goldman Sachs Variable Insurance Trust — Goldman Sachs Large Cap Value Fund.
© 2017 Goldman Sachs. All rights reserved.
VITLCVSAR-17/102639-TMPL-08/2017-587099/44K
Goldman
Sachs Variable Insurance Trust
Goldman Sachs
Mid Cap Value Fund
Semi-Annual Report
June 30, 2017
GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND
INVESTMENT OBJECTIVE
The Fund seeks long-term capital appreciation.
Portfolio Management Discussion and Analysis
Below, the Goldman Sachs Value Portfolio Management Team discusses the Goldman Sachs Variable Insurance Trust — Goldman Sachs Mid Cap Value Fund’s (the “Fund”) performance and positioning for the six-month period ended June 30, 2017 (the “Reporting Period”).
How did the Fund perform during the Reporting Period?
During the Reporting Period, the Fund’s Institutional and Service Shares generated cumulative total returns of 4.07% and 3.94%, respectively. These returns compare to the 5.18% cumulative total return of the Fund’s benchmark, the Russell Midcap Value® Index (the “Russell Index”), during the same time period.
What economic and market factors most influenced the equity markets as a whole during the Reporting Period?
Representing the U.S. equity market, the S&P 500® Index gained 9.34% during the Reporting Period.
As the Reporting Period began in January 2017, U.S. equities rallied to new highs on the prospect of deregulation following executive orders on oil pipelines and on further optimism around infrastructure spending after a $1 trillion proposal from Senate Democrats. Despite political uncertainty and protectionism concerns, U.S. equities continued to rally in February 2017, driven by “risk on” sentiment, or reduced risk aversion, owing to potential U.S. tax reform and deregulation as well as by stronger economic data. In March 2017, the U.S. Federal Reserve (the “Fed”) raised interest rates for the third time since the 2008 global financial crisis, while maintaining projections for three rate hikes this year. However, a seemingly cautious stance on the future path of monetary tightening from Fed Chair Janet Yellen and the presence of a dissenter on the policy committee led to a dovish market reaction. (Dovish tends to suggest lower interest rates; opposite of hawkish.) Political risks subsequently drove U.S. equities lower in the wake of House Republicans’ struggle to schedule a vote on health care. For the month of March 2017, U.S. equities were virtually flat.
U.S. equities fell in April 2017, as Fed minutes suggested stocks were overvalued. However, U.S. equities subsequently rebounded on strong first quarter 2017 earnings results and on receding European political risk following the centrist candidate’s win in the French election. Although the U.S. labor market remained strong, economic activity and inflation data appeared to be moderating during the second quarter of 2017. Core inflation softened to 1.7% year-over-year in May 2017, marking a third consecutive month of weakness, while core personal consumption expenditures remained below the Fed’s 2% target at just 1.4% year-over-year. In addition, market expectations for pro-growth U.S. fiscal policy were dampened by domestic political developments. Nonetheless, the Fed proceeded to raise the targeted federal funds rate by 25 basis points in June 2017, citing ongoing strength in the labor market and a pick-up in household spending and business fixed investment. (A basis point is 1/100th of a percentage point.) The results of the Fed’s 2017 Comprehensive Capital Analysis and Review (“CCAR”) stress test for banks were encouraging, with improving payout ratios. (Payout ratio is the proportion of earnings paid out as dividends to shareholders.)
For the Reporting Period overall, information technology, health care and consumer discretionary were the best performing sectors in the S&P 500 Index by a wide margin. The weakest performing sectors in the S&P 500 Index were energy and telecommunication services, the only two to post negative absolute returns, followed by real estate and financials, which were comparatively weak but generated positive returns during the Reporting Period.
Within the U.S. equity market, there was significant disparity in performance not only among sectors but also among the various capitalization and style segments. While all capitalization segments posted positive returns, large-cap stocks, as measured by the Russell 1000® Index, performed best, followed by mid-cap stocks, as measured by the Russell Midcap® Index, and then at some distance by small-cap stocks, as measured by the Russell 2000® Index. From a style perspective, growth-oriented stocks significantly outpaced value-oriented stocks across the capitalization spectrum. (All as measured by the Russell Investments indices.)
What key factors were responsible for the Fund’s performance during the Reporting Period?
While the Fund posted solid positive absolute returns, it underperformed the Russell Index on a relative basis. Stock selection had the greatest effect on the Fund’s performance relative to the Russell Index during the Reporting Period.
1
GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND
Which equity market sectors most significantly affected Fund performance?
Detracting from the Fund’s relative results most was stock selection in the real estate, consumer discretionary and financials sectors. Such detractors were only partially offset by effective stock selection in the health care, information technology and materials sectors, which contributed positively to the Fund’s performance relative to the Russell Index during the Reporting Period.
Which stocks detracted significantly from the Fund’s performance during the Reporting Period?
Detracting from the Fund’s results relative to the Russell Index were positions in global retailer L Brands, grocery-anchored community shopping centers owner Brixmor Property Group and retail shopping centers owner and manager DDR.
L Brands operates primarily through Victoria’s Secret and Bath & Body Works. The majority of its underperformance of the Russell Index during the Reporting Period came after the company lowered its first quarter 2017 and fiscal year earnings guidance. L Brands is the category leader within the lingerie and personal care and beauty markets. The market, however, became increasingly concerned about the company’s outlook, particularly its resilience to declining mall traffic. While we believe restructuring efforts aimed at Victoria’s Secret should eventually result in a stronger core business model, we decided to exit the position and transition the capital to higher conviction investments.
We believe Brixmor Property Group’s underperformance of the Russell Index during the Reporting Period was largely due to market concerns around store closures within the industry, resulting from disappointing retail sales. In our view, these fears are overblown, especially given Brixmor Property Group’s base in high quality grocery-anchored shopping centers. Overall, at the end of the Reporting Period, we remained positive on Brixmor Property Group’s long-term growth potential as well as on the company’s portfolio of assets. In our view, fundamentals in the industry remain healthy, as supply, relative to historical levels, is low and demand continues to be strong. Finally, we were encouraged by its management’s focus on high return redevelopment projects and on improving the company’s balance sheet.
Similarly, we believe the majority of DDR’s weak performance during the Reporting Period can be attributed to market concerns around store closures and retailer bankruptcies within the industry, resulting from disappointing retail sales. Despite DDR’s underperformance of the Russell Index during the Reporting Period, we believe the company’s fundamentals remain healthy and its high quality tenant base provides DDR with an advantage relative to its peers. At the end of the Reporting Period, we maintained a high level of conviction in DDR’s new management team and its extensive experience and deep relationships in the strip mall/power center space.
What were some of the Fund’s best-performing individual stocks?
The Fund benefited most relative to the Russell Index from positions in U.S.-based pharmaceutical company Vertex Pharmaceuticals, media company Viacom and technology hardware and equipment firm Viavi Solutions.
Vertex Pharmaceuticals is primarily focused on treatments for cystic fibrosis. The majority of its outperformance of the Russell Index came after the company reported positive test results from one of its next-generation cystic fibrosis pipeline drugs. Its shares also rose after the company reported fourth quarter 2016 earnings that exceeded consensus expectations and issued 2017 guidance. Additionally, Vertex Pharmaceuticals sold its cancer research pipeline for $230 million. Investors viewed this positively given the possibility of royalties on future sales. At the end of the Reporting Period, we believed Vertex Pharmaceuticals would likely continue to expand its reach into the cystic fibrosis market through its next-generation pipeline drugs. In our view, its stock was trading at a compelling valuation, and the company was well insulated relative to its peer group if regulatory changes are made to the broader health care sector. Following the stock’s strong performance, however, we trimmed the Fund’s position to better reflect what we view as its current risk/reward profile.
Viacom is a media company focused on cable television and films. Although its performance was challenged throughout 2016, its stock price significantly strengthened during the Reporting Period, primarily driven by a newly announced strategic realignment led by the company’s new Chief Executive Officer (“CEO”). The realignment of the company includes initiatives designed to promote greater cross-brand collaboration, focus on new growth areas and improve operational efficiency and financial performance. At the end of the Reporting Period, we remained positive on the company due to what we considered to be its attractive valuation, broad network and strong viewership base, which we believe should support stable profitability.
Viavi Solutions is a global leader in both network service enablement and optical security and performance products and solutions. The company provides communication equipment and software that help service providers manage their networks and products that improve the anti-counterfeiting of currencies and bank notes. We had initiated the Fund position in September 2015 after the company announced the spin-off of its optical component business and its intention to improve margins and appoint a new CEO.
2
GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND
The company appointed Oleg Khaykin as its CEO in February 2016. During the Reporting Period, the company benefited most from its announcement that it had signed a new supply agreement with Apple to provide optical filters for its upcoming iPhone8. At the end of the Reporting Period, we believed Viavi Solutions’ shares remained undervalued and that its CEO would continue to improve the company’s revenue and margin profile and allocate the company’s balance sheet favorably for shareholders.
How did the Fund use derivatives and similar instruments during the Reporting Period?
During the Reporting Period, we did not use derivatives as part of an active management strategy.
Did the Fund make any significant purchases or sales during the Reporting Period?
During the Reporting Period, we initiated a position in Newell Brands, a leading global consumer goods company. We are constructive on the company’s business model and what we view as its management team’s exceptional track record of execution and value creation. We believe Newell Brands was attractively valued at the time of purchase given the strength of its franchise and potential for further realization of cost and growth synergies from its acquisition of Jarden Corporation in 2015.
We established a Fund position in Boston Properties, a fully integrated real estate investment trust and one of the largest owners and developers of Class A office properties in the gateway coastal markets, including Manhattan, Boston, Washington D.C., San Francisco and West Los Angeles. Structurally, we are attracted to these markets, as they tend to have better fundamentals given higher employment growth, greater supply constraints, and consumers with high propensities to consume. Furthermore, we believe these markets are of greater interest to private real estate funds and foreign investors, resulting in potentially above-average asset values. Finally, we are constructive on what we view as the company’s strong balance sheet, long track record of accretive development and industry-leading management team.
Conversely, in addition to those sales already mentioned, we exited the Fund’s position in Textron, a global aerospace, defense, security and advanced technologies industrial conglomerate. We originally initiated a position in the company as we were positive on its management’s restructuring plan, focus on new products and continued integration of acquired businesses. We exited the position as a result of our view that the business jet cycle is at mid-cycle levels with high levels of inventory and that Textron’s stock was priced near its intrinsic value. We do not see a catalyst for the business jet market to improve to prior peak levels, which, in our view, would be the primary driver of further upside in the stock.
We sold the Fund’s position in Symantec, a California-based company that provides security products and solutions to protect small and medium enterprise businesses from advanced threats, malware and other cyber attacks. We had initiated the Fund’s position in Symantec in October 2015 after the company announced the sale of its information management business, Veritas, as well as plans to cut significant costs as it sought to improve operating margins and return excess capital to shareholders. The company merged with Blue Coat Systems in June 2016, strengthening its enterprise business, and appointed a new CEO, Greg Clark, who we believed would unlock value, improve operating margins and allocate capital in a shareholder-friendly manner. We exited the position in June 2017 because we believed the stock had become fairly valued.
Were there any notable changes in the Fund’s weightings during the Reporting Period?
In constructing the Fund’s portfolio, we focus on picking stocks rather than on making industry or sector bets. We seek to outpace the benchmark index by overweighting stocks that we expect to outperform and underweighting those that we think may lag. Consequently, changes in its sector weights are generally the direct result of individual stock selection or of stock appreciation or depreciation. That said, during the Reporting Period, the Fund’s exposure to information technology increased compared to the Russell Index. There were no other notable changes in the Fund’s weightings during the Reporting Period.
How was the Fund positioned relative to its benchmark index at the end of the Reporting Period?
At the end of June 2017, the Fund had an overweighted position relative to the Russell Index in the information technology sector. On the same date, the Fund had underweighted positions compared to the Russell Index in real estate and utilities and was rather neutrally weighted to the Russell Index in consumer discretionary, industrials, energy, health care, consumer staples, materials, financials and telecommunication services.
What is the Fund’s tactical view and strategy for the months ahead?
At the end of the Reporting Period, we were cautiously optimistic with respect to pro-growth policy actions and their ability to spur a more accommodative operating environment. In our view, most companies should benefit from aggressive fiscal policy, including lower taxes and increased spending, and less restrictive regulatory conditions. We were also encouraged by a strong first quarter 2017 earnings reporting season, as sales, margins and earnings all exceeded consensus expectations. Aggregate S&P 500 Index
3
GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND
earnings growth of 13.5% on a year-over-year basis represented the strongest rate of growth since 2011. Earnings in most markets across the world surpassed consensus estimates as well. All else being equal, broadening global economic growth should be supportive of a continuation in earnings growth and equity market appreciation. While our return expectations remain relatively muted given what we perceive to be rather full valuations, we still believe U.S. equities are more attractive than most other asset classes and can continue to be driven by earnings growth in the absence of multiple expansion (Multiple expansion is an increase in the price/earnings ratio, or multiple, of a stock or group of stocks.). Additionally, after several years of thematic-driven markets, we were positive at the end of the Reporting Period about lower correlations at the stock level. We believe an active approach will likely continue to benefit in this type of environment.
Regardless of market direction, our fundamental, bottom-up stock selection continues to drive our process, rather than headlines or sentiment. We maintain high conviction in the companies the Fund owns and believe they have the potential to outperform relative to the broader market regardless of economic growth conditions. We continue to focus on undervalued companies that we believe have comparatively greater control of their own destiny, such as innovators with differentiated products, companies with low cost structures or companies that have been investing in their own businesses and may be poised to gain market share. We maintain our discipline in identifying companies with what we believe to be strong or improving balance sheets, led by quality management teams and trading at discounted valuations. We remain focused on the long-term performance of the Fund.
4
GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND
Index Definitions
The Russell Midcap Value® Index is an unmanaged index of common stock prices that measures the performance of those Russell Midcap companies with lower price-to-book ratios and lower forecasted growth values. The index figures do not reflect any deduction for fees, expenses or taxes. It is not possible to invest directly in an index.
The Russell 2000® Index is an unmanaged index of common stock prices that measures the performance of the 2000 smallest companies in the Russell 3000® Index. The figures for the index do not include any deduction for fees, expenses or taxes. It is not possible to invest directly in an index.
The S&P 500® Index is the Standard & Poor’s composite index of 500 stocks, an unmanaged index of common stock prices. The figures for the index do not include any deduction for fees, expenses or taxes. It is not possible to invest directly in an index.
The Russell Midcap® Index measures the performance of the 800 smallest companies in the Russell 1000® Index, which represent approximately 25% of the total market capitalization of the Russell 1000® Index. It is not possible to invest directly in an index.
The Russell 1000® Index measures the performance of the 1,000 largest companies in the Russell 3000® Index, which represent approximately 92% of the total market capitalization of the Russell 3000® Index. It is not possible to invest directly in an index.
5
FUND BASICS
Mid Cap Value Fund
as of June 30, 2017
STANDARDIZED TOTAL RETURNS1
For the period ended 6/30/17 | One Year | Five Years | Ten Years | Since Inception | Inception Date | |||||||||||||
Institutional | 13.83 | % | 12.20 | % | 5.84 | % | 8.67 | % | 5/01/98 | |||||||||
Service | 13.51 | 11.92 | 5.59 | 6.84 | 1/09/06 |
1 | The Standardized Total Returns are average annual total returns as of the most recent calendar quarter-end. They assume reinvestment of all distributions at net asset value (“NAV”). Because Institutional Shares and Service Shares do not involve a sales charge, such a charge is not applied to their Standardized Total Returns. |
Total return figures in the above chart represent past performance and do not indicate future results, which will vary. The investment return and principal value of an investment will fluctuate and, therefore, an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the total return figures in the above chart. Please visit www.GSAMFUNDS.com to obtain the most recent month-end returns. Performance reflects fee waivers and/or expense limitations in effect during the periods shown. In their absence, performance would be reduced.
EXPENSE RATIOS2
Net Expense Ratio (Current) | Gross Expense Ratio (Before Waivers) | |||||||
Institutional | 0.84 | % | 0.87 | % | ||||
Service | 1.09 | 1.12 |
2 | The expense ratios of the Fund, both current (net of any fee waivers and/or expense limitations) and before waivers (gross of any fee waivers and/or expense limitations) are as set forth above according to the most recent publicly available Prospectuses for the Fund and may differ from the expense ratios disclosed in the Financial Highlights in this report. Pursuant to a contractual arrangement, the Fund’s fee waivers and/or expense limitations will remain in place through at least April 28, 2018, and prior to such date, the Investment Adviser may not terminate the arrangements without the approval of the Fund’s Board of Trustees. If these arrangements are discontinued in the future, the expense ratios may change without shareholder approval. |
TOP TEN HOLDINGS AS OF 6/30/173,4
Holding | % of Net Assets | Line of Business | ||||||||
Huntington Bancshares, Inc. | 2.4% | Banks | ||||||||
SunTrust Banks, Inc. | 2.1 | Banks | ||||||||
Molson Coors Brewing Co. Class B | 1.9 | Food, Beverage & Tobacco | ||||||||
Ameriprise Financial, Inc. | 1.9 | Diversified Financials | ||||||||
Stanley Black & Decker, Inc. | 1.9 | Capital Goods | ||||||||
PG&E Corp. | 1.8 | Utilities | ||||||||
Vornado Realty Trust | 1.8 | Real Estate Investment Trust | ||||||||
Newell Brands, Inc. | 1.6 | Consumer Durables & Apparel | ||||||||
Ball Corp. | 1.6 | Materials | ||||||||
Laboratory Corp. of America Holdings | 1.5 | Health Care Equipment & Services |
3 | The top 10 holdings may not be representative of the Fund’s future investments. |
4 | The Fund’s overall top ten holdings differ from the table above due to the exclusion of the Goldman Sachs Financial Square Government Fund (a securities lending reinvestment vehicle) which represents 2.2% of the Fund’s net assets as of 06/30/2017. |
6
FUND BASICS
FUND vs. BENCHMARK SECTOR ALLOCATIONS5
As of June 30, 2017
5 | The Fund is actively managed and, as such, its composition may differ over time. Consequently, the Fund’s overall sector allocations may differ from percentages contained in the graph above. The graph categorizes investments using Global Industry Classification Standard (“GICS”), however, the sector classifications used by the portfolio management team may differ from GICS. The percentage shown for each investment category reflects the value of investments in that category as a percentage of market value (excluding investments in the securities lending reinvestment vehicle, if any). Underlying sector allocations of exchange traded funds and investment companies held by the Fund are not reflected in the graph above. Investments in the securities lending reinvestment vehicle represented 2.2% of the Fund’s net assets at June 30, 2017. |
7
GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND
Schedule of Investments
June 30, 2017 (Unaudited)
Shares | Description | Value | ||||||
Common Stocks – 97.8% | ||||||||
Banks – 9.2% | ||||||||
91,132 | CIT Group, Inc. | $ | 4,438,128 | |||||
311,498 | Citizens Financial Group, Inc. | 11,114,249 | ||||||
570,640 | First Horizon National Corp. | 9,940,549 | ||||||
1,376,522 | Huntington Bancshares, Inc. | 18,610,577 | ||||||
73,774 | Signature Bank* | 10,588,782 | ||||||
294,130 | SunTrust Banks, Inc. | 16,683,054 | ||||||
|
| |||||||
71,375,339 | ||||||||
|
| |||||||
Capital Goods – 8.9% | ||||||||
113,385 | AMETEK, Inc. | 6,867,730 | ||||||
179,926 | Jacobs Engineering Group, Inc. | 9,786,175 | ||||||
46,990 | L3 Technologies, Inc. | 7,851,089 | ||||||
86,234 | MSC Industrial Direct Co., Inc. Class A | 7,412,675 | ||||||
103,196 | Stanley Black & Decker, Inc. | 14,522,773 | ||||||
174,777 | Terex Corp. | 6,554,138 | ||||||
237,381 | Trinity Industries, Inc. | 6,653,789 | ||||||
105,340 | Wabtec Corp. | 9,638,610 | ||||||
|
| |||||||
69,286,979 | ||||||||
|
| |||||||
Consumer Durables & Apparel – 4.7% | ||||||||
195,941 | Coach, Inc. | 9,275,847 | ||||||
12,762 | Mohawk Industries, Inc.* | 3,084,448 | ||||||
233,975 | Newell Brands, Inc. | 12,545,739 | ||||||
47,919 | PVH Corp. | 5,486,725 | ||||||
157,162 | Toll Brothers, Inc. | 6,209,471 | ||||||
|
| |||||||
36,602,230 | ||||||||
|
| |||||||
Consumer Services – 1.1% | ||||||||
270,442 | MGM Resorts International | 8,462,130 | ||||||
|
| |||||||
Diversified Financials – 5.9% | ||||||||
115,553 | Ameriprise Financial, Inc. | 14,708,741 | ||||||
227,012 | E*TRADE Financial Corp.* | 8,633,266 | ||||||
559,833 | SLM Corp.* | 6,438,080 | ||||||
214,463 | Starwood Property Trust, Inc. (REIT) | 4,801,827 | ||||||
384,504 | Synchrony Financial | 11,465,909 | ||||||
|
| |||||||
46,047,823 | ||||||||
|
| |||||||
Energy – 8.1% | ||||||||
549,984 | Encana Corp. | 4,839,859 | ||||||
199,004 | EQT Corp. | 11,659,644 | ||||||
105,761 | Golar LNG Ltd. | 2,353,182 | ||||||
333,050 | Parsley Energy, Inc. Class A* | 9,242,138 | ||||||
275,153 | Range Resources Corp. | 6,375,295 | ||||||
189,109 | RSP Permian, Inc.* | 6,102,547 | ||||||
93,785 | Tesoro Corp. | 8,778,276 | ||||||
310,085 | Williams Cos., Inc. (The) | 9,389,374 | ||||||
417,277 | WPX Energy, Inc.* | 4,030,896 | ||||||
|
| |||||||
62,771,211 | ||||||||
|
| |||||||
Food & Staples Retailing – 1.4% | ||||||||
396,283 | US Foods Holding Corp.* | 10,786,823 | ||||||
|
| |||||||
Food, Beverage & Tobacco – 1.9% | ||||||||
171,106 | Molson Coors Brewing Co. Class B | 14,773,292 | ||||||
|
| |||||||
Common Stocks – (continued) | ||||||||
Health Care Equipment & Services – 4.9% | ||||||||
135,810 | Acadia Healthcare Co., Inc.*(a) | $ | 6,706,298 | |||||
110,214 | Cardinal Health, Inc. | 8,587,875 | ||||||
78,002 | Laboratory Corp. of America Holdings* | 12,023,228 | ||||||
87,186 | Zimmer Biomet Holdings, Inc. | 11,194,682 | ||||||
|
| |||||||
38,512,083 | ||||||||
|
| |||||||
Household & Personal Products – 1.0% | ||||||||
103,658 | Edgewell Personal Care Co.* | 7,880,081 | ||||||
|
| |||||||
Insurance – 5.6% | ||||||||
116,264 | Arch Capital Group Ltd.* | 10,846,268 | ||||||
191,588 | Hartford Financial Services Group, Inc. (The) | 10,071,781 | ||||||
106,546 | Lincoln National Corp. | 7,200,379 | ||||||
87,089 | Progressive Corp. (The) | 3,839,754 | ||||||
129,966 | Unum Group | 6,060,315 | ||||||
80,253 | WR Berkley Corp. | 5,551,100 | ||||||
|
| |||||||
43,569,597 | ||||||||
|
| |||||||
Materials – 5.9% | ||||||||
288,203 | Ball Corp. | 12,165,049 | ||||||
100,167 | Celanese Corp. Series A | 9,509,855 | ||||||
483,783 | Freeport-McMoRan, Inc.* | 5,810,234 | ||||||
32,160 | Martin Marietta Materials, Inc. | 7,158,173 | ||||||
309,181 | Steel Dynamics, Inc. | 11,071,771 | ||||||
|
| |||||||
45,715,082 | ||||||||
|
| |||||||
Media – 4.4% | ||||||||
212,992 | Discovery Communications, Inc. Class A*(a) | 5,501,583 | ||||||
129,891 | DISH Network Corp. Class A* | 8,151,959 | ||||||
66,188 | Liberty Broadband Corp. Class C* | 5,741,809 | ||||||
187,350 | Liberty Media Corp-Liberty Formula One Class C*(a) | 6,860,757 | ||||||
236,952 | Viacom, Inc. Class B | 7,954,479 | ||||||
|
| |||||||
34,210,587 | ||||||||
|
| |||||||
Pharmaceuticals, Biotechnology & Life Sciences – 2.4% | ||||||||
45,508 | Alexion Pharmaceuticals, Inc.* | 5,536,958 | ||||||
95,870 | BioMarin Pharmaceutical, Inc.* | 8,706,914 | ||||||
33,770 | Vertex Pharmaceuticals, Inc.* | 4,351,940 | ||||||
|
| |||||||
18,595,812 | ||||||||
|
| |||||||
Real Estate Investment Trust – 12.0% | ||||||||
48,796 | Alexandria Real Estate Equities, Inc. | 5,878,454 | ||||||
95,870 | Boston Properties, Inc. | 11,793,927 | ||||||
393,902 | Brixmor Property Group, Inc. | 7,042,968 | ||||||
72,961 | CyrusOne, Inc. | 4,067,576 | ||||||
870,470 | DDR Corp. | 7,895,163 | ||||||
174,423 | Equity Residential | 11,482,266 | ||||||
38,174 | Federal Realty Investment Trust | 4,824,812 | ||||||
98,798 | Mid-America Apartment Communities, Inc. | 10,411,333 | ||||||
460,565 | RLJ Lodging Trust | 9,151,427 | ||||||
121,775 | Taubman Centers, Inc. | 7,251,701 | ||||||
|
|
8 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND
Shares | Description | Value | ||||||
Common Stocks – (continued) | ||||||||
Real Estate Investment Trust – (continued) | ||||||||
148,680 | Vornado Realty Trust | $ | 13,961,052 | |||||
|
| |||||||
93,760,679 | ||||||||
|
| |||||||
Retailing – 1.5% | ||||||||
40,306 | Expedia, Inc. | 6,003,579 | ||||||
182,553 | LKQ Corp.* | 6,015,121 | ||||||
|
| |||||||
12,018,700 | ||||||||
|
| |||||||
Semiconductors & Semiconductor Equipment – 2.9% | ||||||||
659,820 | Marvell Technology Group Ltd. | 10,900,226 | ||||||
94,097 | Mellanox Technologies Ltd.*(a) | 4,074,400 | ||||||
120,805 | Qorvo, Inc.* | 7,649,373 | ||||||
|
| |||||||
22,623,999 | ||||||||
|
| |||||||
Software & Services – 3.3% | ||||||||
89,883 | DXC Technology Co. | 6,895,824 | ||||||
75,043 | Fidelity National Information Services, Inc. | 6,408,672 | ||||||
128,320 | GoDaddy, Inc. Class A* | 5,443,335 | ||||||
65,646 | IAC/InterActiveCorp* | 6,777,293 | ||||||
|
| |||||||
25,525,124 | ||||||||
|
| |||||||
Technology Hardware & Equipment – 2.3% | ||||||||
191,389 | Juniper Networks, Inc. | 5,335,925 | ||||||
225,569 | VeriFone Systems, Inc.* | 4,082,799 | ||||||
422,812 | Viavi Solutions, Inc.* | 4,452,210 | ||||||
44,076 | Western Digital Corp. | 3,905,134 | ||||||
|
| |||||||
17,776,068 | ||||||||
|
| |||||||
Telecommunication Services – 1.1% | ||||||||
364,668 | CenturyLink, Inc.(a) | 8,708,272 | ||||||
|
| |||||||
Transportation – 2.3% | ||||||||
484,641 | JetBlue Airways Corp.* | 11,064,354 | ||||||
76,194 | Old Dominion Freight Line, Inc. | 7,256,717 | ||||||
|
| |||||||
18,321,071 | ||||||||
|
| |||||||
Utilities – 7.0% | ||||||||
106,208 | Atmos Energy Corp. | 8,809,954 | ||||||
97,497 | Edison International | 7,623,290 | ||||||
213,884 | FirstEnergy Corp. | 6,236,858 | ||||||
215,866 | PG&E Corp. | 14,327,026 | ||||||
134,755 | Pinnacle West Capital Corp. | 11,475,736 | ||||||
52,480 | Sempra Energy | 5,917,120 | ||||||
|
| |||||||
54,389,984 | ||||||||
|
| |||||||
TOTAL COMMON STOCKS | ||||||||
(Cost $689,602,828) | $ | 761,712,966 | ||||||
|
| |||||||
Shares | Distribution Rate | Value | ||||||
Investment Company(b)(c) – 1.2% | ||||||||
| Goldman Sachs Financial Square Government Fund — | |||||||
8,971,526 | 0.845% | $ | 8,971,526 | |||||
(Cost $8,971,526) | ||||||||
|
| |||||||
| TOTAL INVESTMENTS BEFORE SECURITIES LENDING REINVESTMENT VEHICLE | | ||||||
(Cost $698,574,354) | $ | 770,684,492 | ||||||
|
| |||||||
Securities Lending Reinvestment Vehicle(b)(c) – 2.2% | ||||||||
| Goldman Sachs Financial Square Government Fund — | |||||||
17,394,641 | 0.845% | $ | 17,394,641 | |||||
(Cost $17,394,641) | ||||||||
|
| |||||||
TOTAL INVESTMENTS – 101.2% | ||||||||
(Cost $715,968,995) | $ | 788,079,133 | ||||||
|
| |||||||
| LIABILITIES IN EXCESS OF | (9,145,499 | ) | |||||
|
| |||||||
NET ASSETS – 100.0% | $ | 778,933,634 | ||||||
|
|
The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. | ||
* | Non-income producing security. | |
(a) | All or a portion of security is on loan. | |
(b) | Represents an affiliated issuer. | |
(c) | Variable rate security. Interest rate or distribution rate disclosed is that which is in effect on June 30, 2017. |
Investment Abbreviation: | ||
REIT | —Real Estate Investment Trust |
The accompanying notes are an integral part of these financial statements. | 9 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND
Statement of Assets and Liabilities
June 30, 2017 (Unaudited)
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $689,602,828)(a) | $ | 761,712,966 | ||
Investments in affiliated issuers, at value (cost $8,971,526) | 8,971,526 | |||
Investments in affiliated securities lending reinvestment vehicle, at value (cost $17,394,641) | 17,394,641 | |||
Cash | 11,389,486 | |||
Receivables: | ||||
Investments sold | 3,108,177 | |||
Dividends | 1,425,102 | |||
Fund shares sold | 71,537 | |||
Securities lending income | 7,734 | |||
Other assets | 2,402 | |||
Total assets | 804,083,571 | |||
Liabilities: | ||||
Payables: | ||||
Payable upon return of securities loaned | 17,394,641 | |||
Investments purchased | 6,695,617 | |||
Management fees | 491,097 | |||
Fund shares redeemed | 392,101 | |||
Distribution and Service fees and Transfer Agency fees | 88,888 | |||
Accrued expenses | 87,593 | |||
Total liabilities | 25,149,937 | |||
Net Assets: | ||||
Paid-in capital | 683,359,654 | |||
Undistributed net investment income | 4,042,049 | |||
Accumulated net realized gain | 19,421,793 | |||
Net unrealized gain | 72,110,138 | |||
NET ASSETS | $ | 778,933,634 | ||
Net Assets: | ||||
Institutional | $ | 408,636,302 | ||
Service | 370,297,332 | |||
Total Net Assets | $ | 778,933,634 | ||
Shares outstanding $0.001 par value (unlimited shares authorized): | ||||
Institutional | 24,195,345 | |||
Service | 21,922,377 | |||
Net asset value, offering and redemption price per share: | ||||
Institutional | $16.89 | |||
Service | 16.89 |
(a) | Includes loaned securities having a market value of 16,923,525. |
10 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND
Statement of Operations
For the Six Months Ended June 30, 2017 (Unaudited)
Investment income: | ||||
Dividends — unaffiliated issuers (net of foreign taxes withheld of $7,136) | $ | 6,167,220 | ||
Dividends — affiliated issuers | 41,354 | |||
Securities lending income — affiliated issuer | 19,890 | |||
Total investment income | 6,228,464 | |||
Expenses: | ||||
Management fees | 3,158,787 | |||
Distribution and Service fees — Service Shares | 463,258 | |||
Printing and mailing costs | 83,483 | |||
Transfer Agency fees(a) | 78,963 | |||
Custody, accounting and administrative services | 45,855 | |||
Professional fees | 39,614 | |||
Trustee fees | 8,978 | |||
Other | 12,315 | |||
Total expenses | 3,891,253 | |||
Less — expense reductions | (132,728 | ) | ||
Net expenses | 3,758,525 | |||
NET INVESTMENT INCOME | 2,469,939 | |||
Realized and unrealized gain (loss): | ||||
Net realized gain from investments (including commissions recaptured of $31,066) | 54,848,506 | |||
Net change in unrealized loss on investments | (25,755,033 | ) | ||
Net realized and unrealized gain | 29,093,473 | |||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 31,563,412 |
(a) Institutional and Service Shares incurred Transfer Agency fees of $41,905 and $37,058, respectively.
The accompanying notes are an integral part of these financial statements. | 11 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND
Statements of Changes in Net Assets
For the Six Months Ended June 30, 2017 (Unaudited) | For the Fiscal Year Ended December 31, 2016 | |||||||
From operations: | ||||||||
Net investment income | $ | 2,469,939 | $ | 7,514,036 | ||||
Net realized gain (loss) | 54,848,506 | (12,111,930 | ) | |||||
Net change in unrealized gain (loss) | (25,755,033 | ) | 101,468,808 | |||||
Net increase in net assets resulting from operations | 31,563,412 | 96,870,914 | ||||||
Distributions to shareholders: | ||||||||
From net investment income | — | — | ||||||
Institutional Shares | — | (5,637,619 | ) | |||||
Service Shares | — | (4,045,785 | ) | |||||
From net realized gains | ||||||||
Institutional Shares | — | (227,729 | ) | |||||
Service Shares | — | (194,596 | ) | |||||
Total distributions to shareholders | — | (10,105,729 | ) | |||||
From share transactions: | ||||||||
Proceeds from sales of shares | 13,616,209 | 139,251,803 | ||||||
Reinvestment of distributions | — | 10,105,729 | ||||||
Cost of shares redeemed | (74,696,574 | ) | (228,675,673 | ) | ||||
Net decrease in net assets resulting from share transactions | (61,080,365 | ) | (79,318,141 | ) | ||||
TOTAL INCREASE (DECREASE) | (29,516,953 | ) | 7,447,044 | |||||
Net assets: | ||||||||
Beginning of period | 808,450,587 | 801,003,543 | ||||||
End of period | $ | 778,933,634 | $ | 808,450,587 | ||||
Undistributed net investment income | $ | 4,042,049 | $ | 1,572,110 |
12 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
Income (loss) from investment operations | Distributions to shareholders | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year - Share Class | Net asset value, beginning of period | Net investment income(a) | Net realized and unrealized gain (loss) | Total from investment operations | From net investment income | From net realized gains | Total distributions | Net asset value, end of period | Total return(b) | Net assets, end of period (in 000s) | Ratio of net expenses to average net assets | Ratio of total expenses to average net assets | Ratio of net investment income to average net assets | Portfolio turnover rate(c) | ||||||||||||||||||||||||||||||||||||||||||
FOR THE SIX MONTHS ENDED JUNE 30, (UNAUDITED) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2017 - Institutional | $ | 16.23 | $ | 0.06 | $ | 0.60 | $ | 0.66 | $ | — | $ | — | $ | — | $ | 16.89 | 4.07 | % | $ | 408,636 | 0.83 | %(d) | 0.87 | %(d) | 0.74 | %(d) | 63 | % | ||||||||||||||||||||||||||||
2017 - Service | 16.25 | 0.04 | 0.60 | 0.64 | — | — | — | 16.89 | 3.94 | 370,297 | 1.08 | (d) | 1.12 | (d) | 0.50 | (d) | 63 | |||||||||||||||||||||||||||||||||||||||
FOR THE FISCAL YEARS ENDED DECEMBER 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2016 - Institutional | 14.49 | 0.16 | 1.80 | 1.96 | (0.21 | ) | (0.01 | ) | (0.22 | ) | 16.23 | 13.49 | 437,085 | 0.84 | 0.87 | 1.08 | 149 | |||||||||||||||||||||||||||||||||||||||
2016 - Service | 14.51 | 0.12 | 1.81 | 1.93 | (0.18 | ) | (0.01 | ) | (0.19 | ) | 16.25 | 13.24 | 371,366 | 1.09 | 1.12 | 0.78 | 149 | |||||||||||||||||||||||||||||||||||||||
2015 - Institutional | 17.43 | 0.13 | (1.75 | ) | (1.62 | ) | (0.07 | ) | (1.25 | ) | (1.32 | ) | 14.49 | (9.24 | ) | 535,459 | 0.84 | 0.87 | 0.74 | 94 | ||||||||||||||||||||||||||||||||||||
2015 - Service | 17.45 | 0.08 | (1.75 | ) | (1.67 | ) | (0.02 | ) | (1.25 | ) | (1.27 | ) | 14.51 | (9.52 | ) | 265,545 | 1.09 | 1.12 | 0.48 | 94 | ||||||||||||||||||||||||||||||||||||
2014 - Institutional | 18.64 | 0.12 | 2.31 | 2.43 | (0.21 | ) | (3.43 | ) | (3.64 | ) | 17.43 | 13.57 | 692,068 | 0.83 | 0.87 | 0.62 | 88 | |||||||||||||||||||||||||||||||||||||||
2014 - Service | 18.66 | 0.07 | 2.31 | 2.38 | (0.16 | ) | (3.43 | ) | (3.59 | ) | 17.45 | 13.29 | 362,501 | 1.08 | 1.12 | 0.38 | 88 | |||||||||||||||||||||||||||||||||||||||
2013 - Institutional | 15.33 | 0.13 | 4.88 | 5.01 | (0.16 | ) | (1.54 | ) | (1.70 | ) | 18.64 | 32.89 | 695,832 | 0.83 | 0.86 | 0.74 | 108 | |||||||||||||||||||||||||||||||||||||||
2013 - Service | 15.35 | 0.09 | 4.88 | 4.97 | (0.12 | ) | (1.54 | ) | (1.66 | ) | 18.66 | 32.56 | 319,524 | 1.08 | 1.11 | 0.51 | 108 | |||||||||||||||||||||||||||||||||||||||
2012 - Institutional | 13.09 | 0.18 | (e) | 2.24 | 2.42 | (0.18 | ) | — | (0.18 | ) | 15.33 | 18.41 | 601,620 | 0.84 | 0.87 | 1.24 | (e) | 79 | ||||||||||||||||||||||||||||||||||||||
2012 - Service | 13.11 | 0.15 | (e) | 2.23 | 2.38 | (0.14 | ) | — | (0.14 | ) | 15.35 | 18.13 | 221,917 | 1.09 | 1.12 | 1.05 | (e) | 79 |
(a) | Calculated based on the average shares outstanding methodology. |
(b) | Assumes investment at the net asset value at the beginning of the period, reinvestment of all distributions, and a complete redemption of the investment at the net asset value at the end of the period. Total returns for periods less than one full year are not annualized. |
(c) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short term investments. If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
(d) | Annualized. |
(e) | Reflects income recognized from special dividends which amounted to $0.04 per share and 0.31% of average net assets. |
The accompanying notes are an integral part of these financial statements. | 13 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND
Notes to Financial Statements
June 30, 2017 (Unaudited)
1. ORGANIZATION
Goldman Sachs Variable Insurance Trust (the “Trust” or “VIT”) is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company. The Trust includes the Goldman Sachs Mid Cap Value Fund (the “Fund”). The Fund is a diversified portfolio under the Act offering two classes of shares — Institutional and Service Shares. Shares of the Trust are offered to separate accounts of participating life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies.
Goldman Sachs Asset Management, L.P. (“GSAM”), an affiliate of Goldman Sachs & Co. LLC (formerly Goldman, Sachs & Co.) (“Goldman Sachs”), serves as investment adviser to the Fund pursuant to a management agreement (the “Agreement”) with the Trust.
2. SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and require management to make estimates and assumptions that may affect the reported amounts and disclosures. Actual results may differ from those estimates and assumptions.
A. Investment Valuation — The Fund’s valuation policy is to value investments at fair value.
B. Investment Income and Investments — Investment income includes interest income, dividend income and securities lending income. Interest income is accrued daily and adjusted for amortization of premiums and accretion of discounts. Dividend income is recognized on ex-dividend date or, for certain foreign securities, as soon as such information is obtained subsequent to the ex-dividend date. Investment transactions are reflected on trade date. Realized gains and losses are calculated using identified cost. Investment transactions are recorded on the following business day for daily net asset value (“NAV”) calculations. Investment income is recorded net of any foreign withholding taxes, less any amounts reclaimable. The Fund may file withholding tax reclaims in certain jurisdictions to recover a portion of amounts previously withheld. Any foreign capital gains tax is accrued daily based upon net unrealized gains, and is payable upon sale of such investments. Distributions received from the Fund’s investments in United States (“U.S.”) real estate investment trusts (“REITs”) may be characterized as ordinary income, net capital gain or a return of capital. A return of capital is recorded by the Fund as a reduction to the cost basis of the REIT.
C. Class Allocations and Expenses — Investment income, realized and unrealized gain (loss), and non-class specific expenses of the Fund are allocated daily based upon the proportion of net assets of each class. Non-class specific expenses directly incurred by the Fund are charged to the Fund, while such expenses incurred by the Trust are allocated across the Fund on a straight-line and/or pro-rata basis depending upon the nature of the expenses. Class specific expenses, where applicable, are borne by the respective share classes and include Distribution and Service and Transfer Agency fees.
D. Federal Taxes and Distributions to Shareholders — It is the Fund’s policy to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Code”), applicable to regulated investment companies (mutual funds) and to distribute each year substantially all of its investment company taxable income and capital gains to its shareholders. Accordingly, the Fund is not required to make any provisions for the payment of federal income tax. Distributions to shareholders are recorded on the ex-dividend date. Income and capital gains distributions, if any, are declared and paid annually.
Net capital losses, if any, are carried forward to future fiscal years and may be used to the extent allowed by the Code to offset any future capital gains. Losses that are carried forward will retain their character as either short-term or long-term capital losses. Utilization of capital loss carryforwards will reduce the requirement of future capital gains distributions.
The characterization of distributions to shareholders for financial reporting purposes is determined in accordance with federal income tax rules, which may differ from GAAP. The source of the Fund’s distributions may be shown in the accompanying financial statements as either from net investment income, net realized gain or capital. Certain components of the Fund’s net assets on the Statement of Assets and Liabilities reflect permanent GAAP/tax differences based on the appropriate tax character.
14
GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
E. Commission Recapture — GSAM, on behalf of certain Funds, may direct portfolio trades, subject to seeking best execution, to various brokers who have agreed to rebate a portion of the commissions generated. Such rebates are made directly to the Fund as cash payments and are included in net realized gain (loss) from investments on the Statement of Operations.
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS
U.S. GAAP defines the fair value of a financial instrument as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price); the Fund’s policy is to use the market approach. GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The levels used for classifying investments are not necessarily an indication of the risk associated with investing in these investments. The three levels of the fair value hierarchy are described below:
Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 — Quoted prices in markets that are not active or financial instruments for which significant inputs are observable (including, but not limited to, quoted prices for similar investments, interest rates, foreign exchange rates, volatility and credit spreads), either directly or indirectly;
Level 3 — Prices or valuations that require significant unobservable inputs (including GSAM’s assumptions in determining fair value measurement).
Changes in valuation techniques may result in transfers into or out of an assigned level within the hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value hierarchy resulting from such changes are deemed to have occurred as of the beginning of the reporting period.
The Board of Trustees (“Trustees”) has approved Valuation Procedures that govern the valuation of the portfolio investments held by the Fund, including investments for which market quotations are not readily available. The Trustees have delegated to GSAM day-to-day responsibility for implementing and maintaining internal controls and procedures related to the valuation of the Fund’s portfolio investments. To assess the continuing appropriateness of pricing sources and methodologies, GSAM regularly performs price verification procedures and issues challenges as necessary to third party pricing vendors or brokers, and any differences are reviewed in accordance with the Valuation Procedures.
A. Level 1 and Level 2 Fair Value Investments — The valuation techniques and significant inputs used in determining the fair values for investments classified as Level 1 and Level 2 are as follows:
Equity Securities — Equity securities traded on a U.S. securities exchange or the NASDAQ system, or those located on certain foreign exchanges, including but not limited to the Americas, are valued daily at their last sale price or official closing price on the principal exchange or system on which they are traded. If there is no sale or official closing price or such price is believed by GSAM to not represent fair value, equity securities are valued at the last bid price for long positions and at the last ask price for short positions. To the extent these investments are actively traded, they are classified as Level 1 of the fair value hierarchy, otherwise they are generally classified as Level 2.
Unlisted equity securities for which market quotations are available are valued at the last sale price on the valuation date, or if no sale occurs, at the last bid price. Securities traded on certain foreign securities exchanges are valued daily at fair value determined by an independent fair value service (if available) under Valuation Procedures approved by the Trustees and consistent with applicable regulatory guidance. The independent fair value service takes into account multiple factors including, but not limited to, movements in the securities markets, certain depositary receipts, futures contracts and foreign currency exchange rates that have occurred subsequent to the close of the foreign securities exchange. These investments are generally classified as Level 2 of the fair value hierarchy.
15
GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND
Notes to Financial Statements (continued)
June 30, 2017 (Unaudited)
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS (continued)
Money Market Funds — Investments in the Goldman Sachs Financial Square Government Fund (“Underlying Fund”) are valued at the NAV of the Institutional Share class on the day of valuation. These investments are generally classified as Level 1 of the fair value hierarchy. For information regarding an Underlying Fund’s accounting policies and investment holdings, please see the Underlying Fund’s shareholder report.
B. Level 3 Fair Value Investments — To the extent that significant inputs to valuation models and other alternative pricing sources are unobservable, or if quotations are not readily available, or if GSAM believes that such quotations do not accurately reflect fair value, the fair value of the Fund’s investments may be determined under Valuation Procedures approved by the Trustees. GSAM, consistent with its procedures and applicable regulatory guidance, may make an adjustment to the most recent valuation prices of either domestic or foreign securities in light of significant events to reflect what it believes to be the fair value of the securities at the time of determining the Fund’s NAV. Significant events which could affect a large number of securities in a particular market may include, but are not limited to: significant fluctuations in U.S. or foreign markets; market dislocations; market disruptions; or unscheduled market closings. Significant events which could also affect a single issuer may include, but are not limited to: corporate actions such as reorganizations, mergers and buy-outs; ratings downgrades; and bankruptcies.
C. Fair Value Hierarchy — The following is a summary of the Fund’s investments classified in the fair value hierarchy as of June 30, 2017:
Investment Type | Level 1 | Level 2 | Level 3 | |||||||||
Assets | ||||||||||||
Common Stock and/or Other Equity Investments(a) | ||||||||||||
Asia | $ | 4,074,400 | $ | — | $ | — | ||||||
North America | 757,638,566 | — | — | |||||||||
Investment Company | 8,971,526 | — | — | |||||||||
Securities Lending Reinvestment Vehicle | 17,394,641 | — | — | |||||||||
Total | $ | 788,079,133 | $ | — | $ | — |
(a) | Amounts are disclosed by continent to highlight the impact of time zone differences between local market close and the calculation of NAV. Security valuations are based on the principal exchange or system on which they are traded, which may differ from country of domicile noted in the table |
For further information regarding security characteristics, see the Schedule of Investments.
4. AGREEMENTS AND AFFILIATED TRANSACTIONS
A. Management Agreement — Under the Agreement, GSAM manages the Fund, subject to the general supervision of the Trustees.
As compensation for the services rendered pursuant to the Agreement, the assumption of the expenses related thereto and administration of the Fund’s business affairs, including providing facilities, GSAM is entitled to a management fee, accrued daily and paid monthly, equal to an annual percentage rate of the Fund’s average daily net assets.
For the six months ended June 30, 2017, contractual and effective net management fees with GSAM were at the following rates:
Contractual Management Rate | ||||||||||||||||||||||
First $2 billion | Next $3 billion | Next $3 billion | Over $8 billion | Effective Rate | Effective Net Management Rate^ | |||||||||||||||||
0.80% | 0.72 | % | 0.68 | % | 0.67 | % | 0.80 | % | 0.77 | %* |
^ | Effective Net Management Rate includes the impact of management fee waivers of affiliated Underlying Funds, if any. |
* | GSAM agreed to waive a portion of its management fee in order to achieve a net management rate, as defined in the Fund’s most recent prospectus. This waiver will be effective through at least April 28, 2018, and prior to such date GSAM may not terminate the arrangement without approval of the Trustees. For the six months ended June 30, 2017, GSAM waived $118,452 of its management fee. |
16
GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND
4. AGREEMENTS AND AFFILIATED TRANSACTIONS (continued)
The Fund invests in Institutional Shares of the Goldman Sachs Financial Square Government Fund, which is an affiliated Underlying Fund. GSAM has agreed to waive a portion of its management fee payable by the Fund in an amount equal to the management fee it earns as an investment adviser to any of the affiliated Underlying Funds in which the Fund invests. For the six months ended June 30, 2017, GSAM waived $10,408 of the Fund’s management fee.
B. Distribution and/or Service (12b-1) Plan — The Trust, on behalf of Service Shares of the Fund, has adopted a Distribution and Service Plan subject to Rule 12b-1 under the Act. Under the Distribution and Service Plan, Goldman Sachs, which serves as distributor (the “Distributor”), is entitled to a fee accrued daily and paid monthly, for distribution services and personal and account maintenance services, which may then be paid by Goldman Sachs to authorized dealers, equal to, on an annual basis, 0.25% of the Fund’s average daily net assets attributable to Service Shares.
C. Transfer Agency Agreement — Goldman Sachs also serves as the transfer agent of the Fund for a fee pursuant to the Transfer Agency Agreement. The fees charged for such transfer agency services are accrued daily and paid monthly at an annual rate of 0.02% of the average daily net assets of Institutional and Service Shares.
D. Other Expense Agreements and Affiliated Transactions — GSAM has agreed to limit certain “Other Expenses” of the Fund (excluding acquired fund fees and expenses, transfer agency fees and expenses, taxes, interest, brokerage fees, shareholder meeting, litigation, indemnification and extraordinary expenses) to the extent such expenses exceed, on an annual basis, a percentage rate of the average daily net assets of the Fund. Such Other Expense reimbursements, if any, are accrued daily and paid monthly. In addition, the Fund is not obligated to reimburse GSAM for prior fiscal year expense reimbursements, if any. The Other Expense limitation as an annual percentage rate of average daily net assets for the Fund is 0.054%. The Other Expense limitation will remain in place through at least April 28, 2018, and prior to such date GSAM may not terminate the arrangement without the approval of the Trustees. For the six months ended June 30, 2017, GSAM did not reimburse the Fund. In addition, the Fund has entered into certain offset arrangements with the custodian and the transfer agent, which may result in a reduction of the Fund’s expenses and are received irrespective of the application of the “Other Expense” limitation described above. For the six months ended June 30, 2017, custody fee credits were $3,868.
E. Line of Credit Facility — As of June 30, 2017, the Fund participated in a $1,100,000,000 committed, unsecured revolving line of credit facility (the “facility”) together with other funds of the Trust and certain registered investment companies having management agreements with GSAM or its affiliates. This facility is to be used for temporary emergency purposes, or to allow for an orderly liquidation of securities to meet redemption requests. The interest rate on borrowings is based on the federal funds rate. The facility also requires a fee to be paid by the Fund based on the amount of the commitment that has not been utilized. For the six months ended June 30, 2017, the Fund did not have any borrowings under the facility.
F. Other Transactions with Affiliates — For the six months ended June 30, 2017, Goldman Sachs earned $42,918 in brokerage commissions from portfolio transactions.
The following table provides information about the Fund’s investment in the Goldman Sachs Financial Square Government Fund as of and for the six months ended June 30, 2017:
Market Value 12/31/16 | Purchases at Cost | Proceeds from Sales | Market Value 6/30/17 | Dividend Income | ||||||||||||||
$ | 8,285,364 | $ | 143,607,639 | $ | (142,921,477 | ) | $ | 8,971,526 | $ | 41,354 |
17
GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND
Notes to Financial Statements (continued)
June 30, 2017 (Unaudited)
5. PORTFOLIO SECURITIES TRANSACTIONS
The cost of purchases and proceeds from sales and maturities of long-term securities for the six months ended June 30, 2017 were $481,620,459 and $538,814,317, respectively.
6. SECURITIES LENDING
The Fund may lend its securities through a securities lending agent, the Bank of New York Mellon (“BNYM”), to certain qualified borrowers. In accordance with the Fund’s securities lending procedures, the Fund receives cash collateral at least equal to the market value of the securities on loan. The market value of the loaned securities is determined at the close of business of the Fund, at their last sale price or official closing price on the principal exchange or system on which they are traded, and any additional required collateral is delivered to the Fund on the next business day. As with other extensions of credit, the Fund may experience delay in the recovery of its securities or incur a loss should the borrower of the securities breach its agreement with the Fund or become insolvent at a time when the collateral is insufficient to cover the cost of repurchasing securities on loan. Dividend income received from securities on loan may not be subject to withholding taxes and therefore withholding taxes paid may differ from the amounts listed in the Statement of Operations. Loans of securities are terminable at any time and as such 1) the remaining contractual maturities of the outstanding securities lending transactions are considered to be overnight and continuous and 2) the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.
The Fund invests the cash collateral received in connection with securities lending transactions in the Goldman Sachs Financial Square Government Fund (“Government Money Market Fund”), an affiliated series of the Trust. The Government Money Market Fund is registered under the Act as an open end investment company, is subject to Rule 2a-7 under the Act, and is managed by GSAM, for which GSAM may receive a management fee of up to 0.205% on an annualized basis of the average daily net assets of the Government Money Market Fund.
In the event of a default by a borrower with respect to any loan, BNYM may exercise any and all remedies provided under the applicable borrower agreement to make the Fund whole. These remedies include purchasing replacement securities by applying the collateral held from the defaulting broker against the purchase cost of the replacement securities. If BNYM is unable to purchase replacement securities, BNYM will indemnify the Fund by paying the Fund an amount equal to the market value of the securities loaned minus the value of cash collateral received from the borrower for the loan, subject to an exclusion for any shortfalls resulting from a loss of value in such cash collateral due to reinvestment risk. The amounts of the Fund’s overnight and continuous agreements represent the gross amounts of recognized liabilities for securities lending transactions outstanding as of June 30, 2017 are disclosed as “Payable upon return of securities loaned” on the Statement of Assets and Liabilities.
Both the Fund and BNYM received compensation relating to the lending of the Fund’s securities. The amounts earned, if any, by the Fund for the six months ended June 30, 2017, are reported under Investment Income on the Statement of Operations.
The following table provides information about the Fund’s investment in the Government Money Market Fund for the six months ended June 30, 2017:
Market Value 12/31/2016 | Purchases at Cost | Proceeds from Sales | Market Value 6/30/2017 | |||||||||||
$3,827,250 | $ | 100,155,166 | $ | (86,587,775 | ) | $ | 17,394,641 |
18
GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND
7. TAX INFORMATION
As of the Fund’s most recent fiscal year end, December 31, 2016, the Fund’s capital loss carryforwards and certain timing differences, on a tax-basis were as follows:
Capital loss carryforwards: | ||||
Perpetual short-term | $ | (17,207,278 | ) | |
Perpetual long-term | (12,844,650 | ) | ||
Total capital loss carryforwards | $ | (30,051,928 | ) | |
Timing differences (Certain REIT Adjustments) | 233,580 |
As of June 30, 2017, the Fund’s aggregate security unrealized gains and losses based on cost for U.S. federal income tax purposes were as follows:
Tax cost | $ | 721,256,537 | ||
Gross unrealized gain | 92,919,134 | |||
Gross unrealized loss | (26,096,538 | ) | ||
Net unrealized security gain | $ | 66,822,596 |
The difference between GAAP-basis and tax-basis unrealized gains (losses) is attributable primarily to wash sales and differences in the tax treatment of underlying fund investments.
GSAM has reviewed the Fund’s tax positions for all open tax years (the current and prior three years, as applicable) and has concluded that no provision for income tax is required in the Fund’s financial statements. Such open tax years remain subject to examination and adjustment by tax authorities.
8. OTHER RISKS
The Fund’s risks include, but are not limited to, the following:
Foreign Countries Risk — Investing in foreign markets may involve special risks and considerations not typically associated with investing in the U.S. Foreign securities may be subject to risk of loss because of more or less foreign government regulation, less public information and less economic, political and social stability in the countries in which the Fund invests. The imposition of exchange controls, confiscations, trade restrictions (including tariffs) and other government restrictions by the U.S. or other governments, or from problems in share registration, settlement or custody, may also result in losses. Foreign risk also involves the risk of negative foreign currency rate fluctuations, which may cause the value of securities denominated in such foreign currency (or other instruments through which the Fund has exposure to foreign currencies) to decline in value. Currency exchange rates may fluctuate significantly over short periods of time.
Foreign Custody Risk — If the Fund invests in foreign securities, the Fund may hold such securities and cash with foreign banks, agents, and securities depositories appointed by the Fund’s custodian (each a “Foreign Custodian”). Some foreign custodians may be recently organized or new to the foreign custody business. In some countries, Foreign Custodians may be subject to little or no regulatory oversight over, or independent evaluation of, their operations. Further, the laws of certain countries may place limitations on the Fund’s ability to recover its assets if a Foreign Custodian enters bankruptcy.
Geographic Risk — If the Fund focuses its investments in securities of issuers located in a particular country or geographic region, it will subject the Fund, to a greater extent than if its investments were less focused, to the risks of volatile economic cycles and/or conditions and developments that may be particular to that country or region, such as: adverse securities markets; adverse exchange rates; adverse social, political, regulatory, economic, business, environmental or other developments; or natural disasters.
19
GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND
Notes to Financial Statements (continued)
June 30, 2017 (Unaudited)
8. OTHER RISKS (continued)
Investments in Other Investment Companies — As a shareholder of another investment company, including an exchange-traded fund (“ETF”), the Fund will indirectly bear its proportionate share of any net management fees and other expenses paid by such other investment companies, in addition to the fees and expenses regularly borne by the Fund. ETFs are subject to risks that do not apply to conventional mutual funds, including but not limited to the following: (i) the market price of the ETF’s shares may trade at a premium or a discount to their NAV; and (ii) an active trading market for an ETF’s shares may not develop or be maintained.
Large Shareholder Transactions Risk — The Fund may experience adverse effects when certain large shareholders, such as other funds, participating insurance companies, accounts and Goldman Sachs affiliates, purchase or redeem large amounts of shares of the Fund. Such large shareholder redemptions may cause the Fund to sell portfolio securities at times when it would not otherwise do so, which may negatively impact the Fund’s NAV and liquidity. These transactions may also accelerate the realization of taxable income to shareholders if such sales of investments resulted in gains, and may also increase transaction costs. In addition, a large redemption could result in the Fund’s current expenses being allocated over a smaller asset base, leading to an increase in the Fund’s expense ratio. Similarly, large Fund share purchases may adversely affect the Fund’s performance to the extent that the Fund is delayed in investing new cash and is required to maintain a larger cash position than it ordinarily would.
Liquidity Risk — The Fund may make investments that are illiquid or that may become less liquid in response to market developments or adverse investor perceptions. Illiquid investments may be more difficult to value. Liquidity risk may also refer to the risk that the Fund will not be able to pay redemption proceeds within the allowable time period because of unusual market conditions, an unusually high volume of redemption requests, or other reasons. To meet redemption requests, the Fund may be forced to sell investments at an unfavorable time and/or under unfavorable conditions.
Market and Credit Risks — In the normal course of business, the Fund trades financial instruments and enters into financial transactions where risk of potential loss exists due to changes in the market (market risk). Additionally, the Fund may also be exposed to credit risk in the event that an issuer or guarantor fails to perform or that an institution or entity with which the Fund has unsettled or open transactions defaults.
9. INDEMNIFICATIONS
Under the Trust’s organizational documents, its Trustees, officers, employees and agents are indemnified, to the extent permitted by the Act and state law, against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the course of business, the Fund enters into contracts that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, GSAM believes the risk of loss under these arrangements to be remote.
10. SUBSEQUENT EVENTS
Subsequent events after the Statement of Assets and Liabilities date have been evaluated and GSAM has concluded that there is no impact requiring adjustment or disclosure in the financial statements.
20
11. SUMMARY OF SHARE TRANSACTIONS
Share activity is as follows:
For the Six Months Ended June 30, 2017 (Unaudited) | For the Fiscal Year Ended December 31, 2016 | |||||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||||
Institutional Shares | ||||||||||||||||
Shares sold | 452,600 | $ | 7,569,575 | 1,446,124 | $ | 22,058,515 | ||||||||||
Reinvestment of distributions | — | — | 359,837 | 5,865,348 | ||||||||||||
Shares redeemed | (3,187,980 | ) | (53,140,954 | ) | (11,837,314 | ) | (176,540,514 | ) | ||||||||
(2,735,380 | ) | (45,571,379 | ) | (10,031,353 | ) | (148,616,651 | ) | |||||||||
Service Shares | ||||||||||||||||
Shares sold | 361,713 | 6,046,634 | 7,792,442 | 117,193,288 | ||||||||||||
Reinvestment of distributions | — | — | 259,668 | 4,240,381 | ||||||||||||
Shares redeemed | (1,289,453 | ) | (21,555,620 | ) | (3,499,961 | ) | (52,135,159 | ) | ||||||||
(927,740 | ) | (15,508,986 | ) | 4,552,149 | 69,298,510 | |||||||||||
NET DECREASE | (3,663,120 | ) | $ | (61,080,365 | ) | (5,479,204 | ) | $ | (79,318,141 | ) |
21
GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND
Fund Expenses — Six Month Period Ended June 30, 2017 (Unaudited) |
As a shareholder of Institutional or Service Shares of the Fund, you incur ongoing costs, including management fees, distribution and/or service (12b-1) fees (with respect to Service Shares) and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Institutional Shares and Service Shares of the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from January 1, 2017 through June 30, 2017, which represents a period of 181 days of a 365 day year.
Actual Expenses — The first line under each share class in the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000=8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes — The second line under each share class in the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual net expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only. As a shareholder of the Fund you do not incur any transaction costs, such as sales charges, redemption fees, or exchange fees, but shareholders of other funds may incur such costs. The second line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds whose shareholders may incur transaction costs.
Share Class | Beginning Account Value 1/01/17 | Ending Account Value 06/30/17 | Expenses Paid for the | |||||||||
Institutional | ||||||||||||
Actual | $ | 1,000 | $ | 1,040.70 | $ | 4.20 | ||||||
Hypothetical 5% return | 1,000 | 1020.68 | + | $ | 4.16 | |||||||
Service | ||||||||||||
Actual | 1,000 | $ | 1,039.40 | $ | 5.46 | |||||||
Hypothetical 5% return | 1,000 | 1019.44 | + | $ | 5.41 |
* | Expenses are calculated using the Fund’s annualized net expense ratio for each class, which represents the ongoing expenses as a percentage of net assets for the six months ended June 30, 2017. Expenses are calculated by multiplying the annualized net expense ratio by the average account value for the period; then multiplying the result by the number of days in the most recent fiscal half year; and then dividing that result by the number of days in the fiscal year. The annualized net expense ratios for the period were 0.83% and 1.08% for Institutional and Service Shares, respectively. |
+ | Hypothetical expenses are based on the Fund’s actual annualized net expense ratios and an assumed rate of return of 5% per year before expenses. |
22
GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND
Statement Regarding Basis for Approval of Management Agreement (Unaudited)
Background
The Goldman Sachs Mid Cap Value Fund (the “Fund”) is an investment portfolio of Goldman Sachs Variable Insurance Trust (the “Trust”). The Board of Trustees oversees the management of the Trust and reviews the investment performance and expenses of the Fund at regularly scheduled meetings held throughout the year. In addition, the Board of Trustees determines annually whether to approve the continuance of the Trust’s investment management agreement (the “Management Agreement”) with Goldman Sachs Asset Management, L.P. (the “Investment Adviser”) on behalf of the Fund.
The Management Agreement was most recently approved for continuation until June 30, 2018 by the Board of Trustees, including those 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”), at a meeting held on June 14-15, 2017 (the “Annual Meeting”).
The review process undertaken by the Trustees spans the course of the year and culminates with the Annual Meeting. To assist the Trustees in their deliberations, the Trustees have established a Contract Review Committee (the “Committee”), comprised of the Independent Trustees. The Committee held four meetings over the course of the year since the Management Agreement was last approved. At those Committee meetings, regularly scheduled Board or other committee meetings, and/or the Annual Meeting, matters relevant to the renewal of the Management Agreement were considered by the Board, or the Independent Trustees, as applicable. With respect to the Fund, such matters included:
(a) | the nature and quality of the advisory, administrative, and other services provided to the Fund by the Investment Adviser and its affiliates, including information about: |
(i) | the structure, staff, and capabilities of the Investment Adviser and its portfolio management teams; |
(ii) | the groups within the Investment Adviser and its affiliates that support the portfolio management teams or provide other types of necessary services, including fund services groups (e.g., accounting and financial reporting, tax, shareholder services, and operations); controls and risk management groups (e.g., legal, compliance, valuation oversight, credit risk management, internal audit, compliance testing, market risk analysis, finance, and central funding); sales and distribution support groups, and others (e.g., information technology and training); |
(iii) | trends in employee headcount; |
(iv) | the Investment Adviser’s financial resources and ability to hire and retain talented personnel and strengthen its operations; and |
(v) | the parent company’s support of the Investment Adviser and its mutual fund business, as expressed by the firm’s senior management; |
(b) | information on the investment performance of the Fund, including comparisons to the performance of similar mutual funds, as provided by a third-party mutual fund data provider engaged as part of the contract review process (the “Outside Data Provider”), a benchmark performance index, and a composite of accounts with comparable investment strategies managed by the Investment Adviser; and information on general investment outlooks in the markets in which the Fund invests; |
(c) | information provided by the Investment Adviser indicating the Investment Adviser’s views on whether the Fund’s peer group and/or benchmark index had high, medium, or low relevance given the Fund’s particular investment strategy; |
(d) | the terms of the Management Agreement and other agreements with affiliated service providers entered into by the Trust on behalf of the Fund; |
23
GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND
Statement Regarding Basis for Approval of Management Agreement (Unaudited) (continued)
(e) | fee and expense information for the Fund, including: |
(i) | the relative management fee and expense levels of the Fund as compared to those of comparable funds managed by other advisers, as provided by the Outside Data Provider; |
(ii) | the Fund’s expense trends over time; and |
(iii) | to the extent the Investment Adviser manages other types of accounts (such as bank collective trusts, private wealth management accounts, institutional separate accounts, sub-advised mutual funds, and non-U.S. funds) having investment objectives and policies similar to those of the Fund, comparative information on the advisory fees charged and services provided to those accounts by the Investment Adviser; |
(f) | with respect to the extensive investment performance and expense comparison data provided by the Outside Data Provider, its processes in producing that data for the Fund; |
(g) | the undertakings of the Investment Adviser and its affiliates to implement fee waivers and/or expense limitations; |
(h) | information relating to the profitability of the Management Agreement and the transfer agency and distribution and service arrangements of the Fund to the Investment Adviser and its affiliates; |
(i) | whether the Fund’s existing management fee schedule adequately addressed any economies of scale; |
(j) | a summary of the “fall-out” benefits derived by the Investment Adviser and its affiliates from their relationships with the Fund, including the fees received by the Investment Adviser’s affiliates from the Fund for transfer agency, portfolio trading, distribution and other services; |
(k) | a summary of potential benefits derived by the Fund as a result of its relationship with the Investment Adviser; |
(l) | information regarding commissions paid by the Fund and broker oversight, an update on the Investment Adviser’s soft dollars practices, other information regarding portfolio trading, and how the Investment Adviser carries out its duty to seek best execution; |
(m) | the manner in which portfolio manager compensation is determined; and the number and types of accounts managed by the portfolio managers; |
(n) | the nature and quality of the services provided to the Fund by its unaffiliated service providers, and the Investment Adviser’s general oversight and evaluation (including reports on due diligence) of those service providers as part of the administrative services provided under the Management Agreement; and |
(o) | the Investment Adviser’s processes and policies addressing various types of potential conflicts of interest; its approach to risk management; the annual review of the effectiveness of the Fund’s compliance program; and periodic compliance reports. |
The Trustees also received an overview of the Fund’s distribution arrangements. They received information regarding the Fund’s assets, share purchase and redemption activity, and payment of distribution and service fees. Information was also provided to the Trustees relating to revenue sharing payments made by and services provided by the Investment Adviser and its affiliates to intermediaries that promote the sale, distribution, and/or servicing of Fund shares. The Independent Trustees also discussed the broad range of other investment choices that are available to Fund investors, including the availability of comparable funds managed by other advisers.
The presentations made at the Board and Committee meetings and at the Annual Meeting encompassed the Fund and other mutual funds for which the Board of Trustees has responsibility. In evaluating the Management Agreement at the Annual Meeting, the Trustees relied upon their knowledge, resulting from their meetings and other interactions throughout the year, of the Investment Adviser and its affiliates, their services, and the Fund. In conjunction with these meetings, the Trustees received written materials and oral presentations on the topics covered, and the Investment Adviser addressed the questions and concerns of the Trustees, including concerns regarding the investment performance of certain of the funds they oversee. The Independent Trustees were advised by their independent legal counsel regarding their responsibilities and other regulatory requirements related to the approval and continuation of mutual fund investment management agreements under applicable law. In addition, the Investment Adviser and its affiliates provided the Independent Trustees with a written response to a formal request for information sent on behalf of the Independent Trustees by their independent legal counsel. During the course of their deliberations, the Independent Trustees met in executive sessions with their independent legal counsel, without representatives of the Investment Adviser or its affiliates present.
24
GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND
Statement Regarding Basis for Approval of Management Agreement (Unaudited) (continued)
Nature, Extent, and Quality of the Services Provided Under the Management Agreement
As part of their review, the Trustees considered the nature, extent, and quality of the services provided to the Fund by the Investment Adviser. In this regard, the Trustees considered both the investment advisory services and non-advisory services that are provided by the Investment Adviser and its affiliates. The Trustees noted the transition in the leadership and changes in personnel of various of the Investment Adviser’s portfolio management teams that had occurred in recent periods, and the ongoing recruitment efforts aimed at bringing high quality investment talent to the Investment Adviser. They also noted the Investment Adviser’s commitment to maintaining high quality systems and expending substantial resources to respond to ongoing changes to the regulatory and control environment in which the Fund and its service providers operate, as well as the efforts of the Investment Adviser and its affiliates to combat cyber security risks. The Trustees concluded that the Investment Adviser continued to commit substantial financial and operational resources to the Fund and expressed confidence that the Investment Adviser would continue to do so in the future. The Trustees also recognized that the Investment Adviser had made significant commitments to address regulatory compliance requirements applicable to the Fund and the Investment Adviser and its affiliates.
Investment Performance
The Trustees also considered the investment performance of the Fund. In this regard, they compared the investment performance of the Fund to its peers using rankings and ratings compiled by the Outside Data Provider as of December 31, 2016, and updated performance information prepared by the Investment Adviser using the peer group identified by the Outside Data Provider as of March 31, 2017. The information on the Fund’s investment performance was provided for the one-, three-, five-, and ten-year periods ending on the applicable dates. The Trustees also reviewed the Fund’s investment performance relative to its performance benchmark. As part of this review, they 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 and market conditions. The Trustees also received information comparing the Fund’s performance to that of a composite of accounts with comparable investment strategies managed by the Investment Adviser.
In addition, the Trustees considered materials prepared and presentations made by the Investment Adviser’s senior management and portfolio management personnel in which Fund performance was assessed. The Trustees also considered the Investment Adviser’s periodic reports with respect to the Fund’s risk profile, and how the Investment Adviser’s approach to risk monitoring and management influences portfolio management.
The Trustees observed that the Fund’s Institutional Shares had placed in the third quartile of the Fund’s peer group for the one- and ten-year periods and in the fourth quartile for the three- and five-year periods, and had underperformed the Fund’s benchmark index for the one-, three-, five-, and ten-year periods ended March 31, 2017.
Costs of Services Provided and Competitive Information
The Trustees considered the contractual terms of the Management Agreement and the fee rates payable by the Fund thereunder. 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.
In particular, the Trustees reviewed analyses prepared by the Outside Data Provider regarding the expense rankings of the Fund. The analyses provided a comparison of the Fund’s management fee and breakpoints to those of a relevant peer group and category universe; an expense analysis which compared the Fund’s overall net and gross expenses to a peer group and a category universe; and data comparing the Fund’s net expenses to the peer and category medians. The analyses also compared the Fund’s transfer agency, custody, and distribution fees, other expenses and fee waivers/reimbursements to those of the peer group and category medians. The Trustees concluded that the comparisons provided by the Outside Data Provider were useful in evaluating the reasonableness of the management fees and total expenses paid by the Fund.
25
GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND
Statement Regarding Basis for Approval of Management Agreement (Unaudited) (continued)
The Trustees noted that the management fee breakpoint schedule was being reduced at all asset levels. In addition, the Trustees considered the Investment Adviser’s undertakings to implement fee waivers and/or expense limitations. They also considered, to the extent that the Investment Adviser manages other types of accounts having investment objectives and policies similar to those of the Fund, comparative fee information for services provided by the Investment Adviser to those accounts, and information that indicated that services provided to the Fund differed in various significant respects from the services provided to other types of accounts which, in many cases, operated under less stringent legal and regulatory structures, required fewer services from the Investment Adviser to a smaller number of client contact points, and were less time-intensive.
In addition, the Trustees noted that shareholders are able to redeem their Fund shares at any time if shareholders believe that the Fund fees and expenses are too high or if they are dissatisfied with the performance of the Fund.
Profitability
The Trustees reviewed the Fund’s contribution to the Investment Adviser’s revenues and pre-tax profit margins. In this regard the Trustees noted that they had received, among other things, profitability analyses and summaries, revenue and expense schedules by Fund and by function (i.e., investment management, transfer agency and distribution and service), and information on the Investment Adviser’s expense allocation methodology. They observed that the profitability and expense figures are substantially similar to those used by the Investment Adviser for many internal purposes, including compensation decisions among various business groups, and are thus subject to a vigorous internal debate about how certain revenue and expenses should be allocated. The Trustees also noted that the internal audit group within the Goldman Sachs organization had audited the expense allocation methodology and that the internal audit group was satisfied with the reasonableness, consistency, and accuracy of the Investment Adviser’s expense allocation methodology and profitability analysis calculations. Profitability data for the Fund were provided for 2016 and 2015, and the Trustees considered this information in relation to the Investment Adviser’s overall profitability.
Economies of Scale
The Trustees considered the information that had been provided regarding the Investment Adviser’s profitability. The Trustees also considered the breakpoints in the fee rate payable under the Management Agreement for the Fund at the following annual percentage rates of the average daily net assets of the Fund:
First $2 billion | 0.80 | % | ||
Next $3 billion | 0.72 | |||
Next $3 billion | 0.68 | |||
Over $8 billion | 0.67 |
The Trustees noted that the breakpoints were designed to share potential economies of scale, if any, with the Fund and its shareholders as assets under management reach those asset levels. The Trustees considered the amounts of assets in the Fund; the Fund’s recent share purchase and redemption activity; the information provided by the Investment Adviser relating to the costs of the services provided by the Investment Adviser and its affiliates and their realized profits; information comparing fee rates charged by the Investment Adviser with fee rates charged to other funds in the peer group; and the Investment Adviser’s undertakings to waive a portion of its management fee and to limit certain expenses of the Fund that exceed a specified level. Upon reviewing these matters at the Annual Meeting, the Trustees concluded that the fee breakpoints represented a means of assuring that benefits of scalability, if any, would be passed along to shareholders at the specified asset levels.
26
GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND
Statement Regarding Basis for Approval of Management Agreement (Unaudited) (continued)
Other Benefits to the Investment Adviser and Its Affiliates
The Trustees also considered the other benefits derived by the Investment Adviser and its affiliates from their relationships with the Fund as stated above, including: (a) transfer agency fees received by Goldman Sachs & Co. LLC (“Goldman Sachs”); (b) brokerage and futures commissions earned by Goldman Sachs for executing securities and futures transactions on behalf of the Fund; (c) research received by the Investment Adviser from broker-dealers in exchange for executing certain transactions on behalf of the Fund; (d) trading efficiencies resulting from aggregation of orders of the Fund with those for other funds or accounts managed by the Investment Adviser; (e) the Investment Adviser’s ability to leverage the infrastructure designed to service the Fund on behalf of its other clients; (f) the Investment Adviser’s ability to cross-market other products and services to Fund shareholders; (g) Goldman Sachs’ retention of certain fees as Fund Distributor; (h) the Investment Adviser’s ability to negotiate better pricing with custodians on behalf of its other clients, as a result of the relationship with the Fund; and (i) the possibility that the working relationship between the Investment Adviser and the Fund’s third-party service providers may cause those service providers to be more likely to do business with other areas of Goldman Sachs. In the course of considering the foregoing, the Independent Trustees requested and received further information quantifying certain of these fall-out benefits.
Other Benefits to the Fund and Its Shareholders
The Trustees also noted that the Fund receives certain potential benefits as a result of its relationship with the Investment Adviser, including: (a) trading efficiencies resulting from aggregation of orders of the Fund with those of other funds or accounts managed by the Investment Adviser; (b) enhanced servicing from vendors because of the volume of business generated by the Investment Adviser and its affiliates; (c) enhanced servicing from broker-dealers because of the volume of business generated by the Investment Adviser and its affiliates; (d) the Investment Adviser’s ability to negotiate favorable terms with derivatives counterparties on behalf of the Fund as a result of the size and reputation of the Goldman Sachs organization; (e) the Investment Adviser’s knowledge and experience gained from managing other accounts and products; (f) the Investment Adviser’s ability to hire and retain qualified personnel to provide services to the Fund because of the reputation of the Goldman Sachs organization; (g) the Fund’s access, through the Investment Adviser, to certain firmwide resources (e.g., proprietary risk management systems and databases), subject to certain restrictions; and (h) the Fund’s access to certain affiliated distribution channels. In addition, the Trustees noted the competitive nature of the mutual fund marketplace, and considered that many of the Fund’s shareholders invested in the Fund in part because of the Fund’s relationship with the Investment Adviser and that those shareholders have a general expectation that the relationship will continue.
27
GOLDMAN SACHS VARIABLE INSURANCE TRUST MID CAP VALUE FUND
Statement Regarding Basis for Approval of Management Agreement (Unaudited) (continued)
Conclusion
In connection with their consideration of the Management Agreement, the Trustees gave weight to each of the factors described above, but did not identify any particular factor as controlling their decision. After deliberation and consideration of all of the information provided, including the factors described above, the Trustees concluded, in the exercise of their business judgment, that the management fees paid by the Fund were reasonable in light of the services provided to it by the Investment Adviser, the Investment Adviser’s costs and the Fund’s current and reasonably foreseeable asset levels. The Trustees unanimously concluded that the Investment Adviser’s continued management likely would benefit the Fund and its shareholders and that the Management Agreement should be approved and continued with respect to the Fund until June 30, 2018.
28
TRUSTEES | OFFICERS | |
Ashok N. Bakhru, Chairman Kathryn A. Cassidy Diana M. Daniels Herbert J. Markley James A. McNamara Jessica Palmer Roy W. Templin Gregory G. Weaver | James A. McNamara, President Scott M. McHugh, Treasurer, Senior Vice President and Principal Financial Officer Joseph F. DiMaria, Assistant Treasurer and Principal Accounting Officer Caroline L. Kraus, Secretary |
GOLDMAN SACHS & CO. LLC
Distributor and Transfer Agent
GOLDMAN SACHS ASSET MANAGEMENT, L.P.
Investment Adviser
200 West Street, New York
New York 10282
Visit our web site at www.GSAMFUNDS.com to obtain the most recent month-end returns.
The reports concerning the Fund included in this shareholder report may contain certain forward-looking statements about the factors that may affect the performance of the Fund in the future. These statements are based on Fund management’s predictions and expectations concerning certain future events and their expected impact on the Fund, such as performance of the economy as a whole and of specific industry sectors, changes in the levels of interest rates, the impact of developing world events, and other factors that may influence the future performance of the Fund. Management believes these forward-looking statements to be reasonable, although they are inherently uncertain and difficult to predict. Actual events may cause adjustments in portfolio management strategies from those currently expected to be employed.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the Fund voted proxies relating to portfolio securities for the 12-month period ended June 30 is available (i) without charge, upon request by calling 1-800-621-2550; and (ii) on the Securities and Exchange Commission (“SEC”) web site at http://www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Form N-Qs are available on the SEC’s web site at http://www.sec.gov within 60 days after the Fund’s first and third fiscal quarters. The Fund’s Form N-Qs may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may also be obtained by calling 1-800-SEC-0330. Form N-Qs may be obtained upon request and without charge by calling 1-800-621-2550.
The website links provided are for your convenience only and are not an endorsement or recommendation by GSAM of any of these websites or the products or services offered. GSAM is not responsible for the accuracy and validity of the content of these websites.
Fund holdings and allocations shown are as of June 30, 2017 and may not be representative of future investments. Fund holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities. Current and future holdings are subject to risk.
References to indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only and do not imply that the portfolio will achieve similar results. The index composition may not reflect the manner in which a portfolio is constructed. While an adviser seeks to design a portfolio which reflects appropriate risk and return features, portfolio characteristics may deviate from those of the benchmark.
The Global Industry Classification Standard (“GICS”) was developed by and is the exclusive property and a service mark of Morgan Stanley Capital International Inc. (“MSCI”) and Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. (“S&P”) and is licensed for use by Goldman Sachs. Neither MSCI, S&P nor any other party involved in making or compiling the GICS or any GICS classifications makes any express or implied warranties or representations with respect to such standard or classification (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of such standard or classification. Without limiting any of the foregoing, in no event shall MSCI, S&P, any of their affiliates or any third party involved in making or compiling the GICS or any GICS classifications have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.
The portfolio risk management process includes an effort to monitor and manage risk, but does not imply low risk.
Shares of the Goldman Sachs VIT Funds are offered to separate accounts of participating life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Shares of the Fund are not offered directly to the general public. The variable annuity contracts and variable life insurance policies are described in the separate prospectuses issued by participating insurance companies. You should refer to those prospectuses for information about surrender charges, mortality and expense risk fees and other charges that may be assessed by participating insurance companies under the variable annuity contracts or variable life insurance policies. Such fees or charges, if any, may affect the return you may realize with respect to your investments. Ask your representative for more complete information. Please consider a fund’s objectives, risks and charges and expenses, and read the prospectus carefully before investing. The prospectus contains this and other information about the Fund.
This material is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus or summary prospectus, if applicable. Investors should consider the Fund’s objective, risks, and charges and expenses, and read the summary prospectus, if available, and/or the prospectus carefully before investing or sending money. The summary prospectus, if available, and the prospectus contain this and other information about the Fund and may be obtained from your authorized dealer or from Goldman Sachs & Co. LLC by calling 1-800-621-2550.
THIS MATERIAL IS FOR INFORMATIONAL PURPOSES ONLY AND IS PROVIDED SOLELY ON THE BASIS THAT IT WILL NOT CONSTITUTE INVESTMENT OR OTHER ADVICE OR A RECOMMENDATION RELATING TO ANY PERSON’S OR PLAN’S INVESTMENT OR OTHER DECISIONS, AND GOLDMAN SACHS IS NOT A FIDUCIARY OR ADVISOR WITH RESPECT TO ANY PERSON OR PLAN BY REASON OF PROVIDING THE MATERIAL OR CONTENT HEREIN INCLUDING UNDER THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974 OR DEPARTMENT OF LABOR REGULATIONS. PLAN SPONSORS AND OTHER FIDUCIARIES SHOULD CONSIDER THEIR OWN CIRCUMSTANCES IN ASSESSING ANY POTENTIAL COURSE OF ACTION.
This report is prepared for the general information of contract owners and is not an offer of shares of the Goldman Sachs Variable Insurance Trust — Goldman Sachs Mid Cap Value Fund.
© 2017 Goldman Sachs. All rights reserved.
VITMCVSAR-17/102646-TMPL-08/2017-587236/30K
Goldman
Sachs Variable Insurance Trust
Goldman Sachs Government
Money Market Fund
Semi-Annual Report
June 30, 2017
You could lose money by investing in the Fund. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. An investment in the Fund is not a deposit of the bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund’s sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.
GOLDMAN SACHS VARIABLE INSURANCE TRUST GOVERNMENT MONEY MARKET FUND
INVESTMENT OBJECTIVE
The Fund seeks to maximize current income to the extent consistent with the preservation of capital and the maintenance of liquidity by investing exclusively in high quality money market instruments.
Portfolio Management Discussion and Analysis
Below, the Goldman Sachs Money Market Portfolio Management Team discusses the Goldman Sachs Variable Insurance Trust — Goldman Sachs Government Money Market Fund’s (the “Fund”) performance and positioning for the six-month period ended June 30, 2017 (the “Reporting Period”).
How did the Fund perform during the Reporting Period?
The Fund’s Institutional Shares’ standardized 7-day current yield was 0.86% and their standardized 7-day effective yield was 0.87% as of June 30, 2017. The Institutional Shares’ one-month simple average yield was 0.77% as of June 30, 2017. The Institutional Shares’ 7-day distribution yield as of June 30, 2017 was 0.85%.
The Fund’s Service Shares’ standardized 7-day current yield was 0.61% and their standardized 7-day effective yield was 0.62% as of June 30, 2017. The Service Shares’ one-month simple average yield was 0.52% as of June 30, 2017. The Service Shares’ 7-day distribution yield as of June 30, 2017 was 0.60%.
The yields represent past performance. Past performance does not guarantee future results. Current performance may be lower or higher than the performance quoted above.
Yields will fluctuate as market conditions change. The yield quotations more closely reflect the current earnings of the Fund than total return quotations.
What economic and market factors most influenced the money markets as a whole during the Reporting Period?
The Reporting Period was one wherein money market yields remained low throughout, but did move higher as the U.S. Federal Reserve (the “Fed”) proceeded to raise the target range of the federal funds rate twice, bringing it to a range of 1.00% to 1.25% by the end of June 2017. In making its two interest rate hikes — one in March 2017 and one in June 2017, the Fed cited ongoing strength in the U.S. labor market and a pick-up in household spending and business fixed investment. The money market yield curve, or spectrum of maturities, flattened, meaning differentials between yields on shorter-term maturities rose more than on longer-term maturities during the Reporting Period. Other significant events that influenced the money markets during the Reporting Period included the Fed’s discussion of balance sheet normalization, the possibility of the European Central Bank (“ECB”) tapering its asset purchases following the French election, and U.K. parliamentary elections.
During the Reporting Period, U.S. economic data surprised to the downside but remained at relatively robust levels. Unemployment declined to 4.3%, which is below the Fed’s estimate of the structural rate, and second quarter 2017 economic growth expectations exceeded 2% on an annualized basis. That said, core personal consumption expenditures remained below the Fed’s 2% target at just 1.4% year-over-year in May 2017, marking the fourth consecutive month of weak data on that front.
Fed Chair Janet Yellen stated that asset valuations look “somewhat rich if you use some traditional metrics like price/earnings ratios.” Fed Vice Chair Stanley Fischer and San Francisco Fed President John Williams also commented on rising valuations in equity and other asset markets. Further, in addition to hiking interest rates twice during the Reporting Period, the Fed released a detailed addendum to its policy statement with specifics around its plan to taper reinvestment of its balance sheet. The plan is set to begin sometime in 2017 with a rundown of no greater than $10 billion a month, divided between mortgage-backed securities and U.S. Treasuries, with the total anticipated to rise steadily over the course of one year.
Additionally, expectations for a tapering announcement from the ECB in September 2017 shifted during the Reporting Period from possible to more than probable. ECB President Mario Draghi provided a rather sanguine outlook for inflation, stating “deflationary forces have been replaced by reflationary ones.” Mr. Draghi also made a cautious reference to a tapering of quantitative easing, saying an adjustment in the central bank’s “policy instruments” alongside the ongoing economic recovery would imply a constant rather than a tighter policy stance. The markets reacted to these comments in a hawkish manner, with the euro appreciating and German government bond yields rising. (A hawkish manner tends to suggest higher interest rates; opposite of dovish.)
1
GOLDMAN SACHS VARIABLE INSURANCE TRUST GOVERNMENT MONEY MARKET FUND
What key factors were responsible for the Fund’s performance during the Reporting Period?
The Fund’s yields remained low during the Reporting Period due primarily to the market factors discussed above. The targeted federal funds rate was gradually increased during the Reporting Period to a range of 1.00% to 1.25%, and, as such, money market yields similarly rose modestly though with little difference between maturities during that time. As mentioned, the money market yield curve, or spectrum of maturities, flattened during the Reporting Period overall, as shorter-term rates rose more than longer-term rates did. The Fund remained highly liquid throughout.
During the first quarter of 2017, better clarity from the Fed around a June 2017 interest rate hike led us to position the Fund accordingly, i.e. by maintaining a short weighted average maturity in the 30 to 45 day range. Our focus was on floating rate and U.S. government agency securities. The LIBOR/OIS spread, or yield differential, tightened, as market participants became increasingly familiar with changes resulting from U.S. money market reform taking effect in 2016. (LIBOR, or the London Inter-Bank Offered Rate, is the interest rate that banks charge each other for short-term unsecured loans. OIS, or the Overnight Indexed Swap, represents the assumed federal funds rate over the course of a certain period. If a commercial bank or a corporation wants to convert from variable to fixed interest payments, or vice versa, it could “swap” interest obligations with a counterparty. The LIBOR/OIS spread is considered a key measure of credit risk within the banking sector.)
In the second quarter of 2017, we mostly maintained the Fund’s weighted average maturity in a range of 29 to 35 days, as yield levels did not offer enough compensation, in our view, to extend maturities on the fixed curve. We continued to focus on U.S. government agency debt when and where we saw what we considered to be attractive opportunities.
As LIBOR’s move slowed, the U.S. Treasury money market continued to offer compelling value, in our view. The U.S. Treasury yield curve steepened ahead of the June 2017 Fed interest rate hike, and so we focused more at that time on the longer end of the money market U.S. Treasury coupon curve. The Fund also retained a sizable allocation to government repurchase agreements, or repo, equivalent to approximately 65% of total net assets at the end of the Reporting Period.
We felt comfortable that the Fund was appropriately positioned given the interest rate environment during the Reporting Period, as we sought to take advantage of anticipated interest rate movements throughout. While conditions throughout the Reporting Period did not provide bountiful opportunities to pick up yield, as the interest rate yield curve flattened through most of the Reporting Period, it should be noted that regardless of interest rate conditions, we manage the Fund consistently. Our investment approach has always been tri-fold — to seek preservation of capital, daily liquidity and maximization of yield potential. We manage interest and credit risk daily. Whether interest rates are historically low, high or in-between, we intend to continue to use our actively managed approach to provide the best possible return within the framework of the Fund’s guidelines and objectives.
How did you manage the Fund’s weighted average maturity during the Reporting Period?
On December 31, 2016, the Fund’s weighted average maturity was 55 days. During the first quarter of 2017, we targeted a weighted average maturity for the Fund in a 30 to 45 day range. We had a bias in the Fund to move shorter during the first calendar quarter and targeted a 30 to 35 day weighted average maturity range by the end of March 2017. We looked to floating rate and agency securities during the first quarter, which allowed us to manage duration against a more aggressive Fed interest rate hike scenario than we had seen for some time.
During the second quarter of 2017, we targeted a weighted average maturity for the Fund in a 29 to 35 day range, moving down to a weighted average maturity of 26 days by the end of June 2017. The Fund’s weighted average maturity on June 30, 2017 was 27 days. We continued to focus on floating rate securities, agency securities and U.S. Treasuries when and where we saw what we considered to be attractive opportunities. We also looked to extend duration opportunistically later in the Reporting Period. The weighted average maturity of a money market fund is a measure of its price sensitivity to changes in interest rates. Also known as effective maturity, weighted average maturity measures the weighted average of the maturity date of bonds held by the Fund taking into consideration any available maturity shortening features.
How did you manage the Fund’s weighted average life during the Reporting Period?
During the Reporting Period, we managed the weighted average life of the Fund below 120 days. The weighted average life of the Fund was 56 days as of June 30, 2017. The weighted average life of a money market fund is a measure of a money market fund’s price sensitivity to changes in liquidity and/or credit risk.
Under amendments to SEC Rule 2a-7 that became effective in May 2010, the maximum allowable weighted average life of a money market fund is 120 days. While one of the goals of the SEC’s money market fund rule is to reinforce conservative investment practices across the money market fund industry, our security selection process has long emphasized conservative
investment choices.
2
GOLDMAN SACHS VARIABLE INSURANCE TRUST GOVERNMENT MONEY MARKET FUND
How was the Fund invested during the Reporting Period?
The Fund had investments in government agency debt, floating rate securities, U.S. Treasury securities and government agency repurchase agreements during the Reporting Period.
During the first quarter of 2017, our focus remained on floating rate securities and government agency debt. As LIBOR moved tighter, the U.S. Treasury money market curve offered value, in our view, and we expanded our selection of U.S. Treasury securities for the Fund. With yields bounds in a still-low range, there was not a lot of dispersion in performance among securities available for purchase. Throughout, though, we stayed true to our investment discipline, favoring liquidity and high quality credits over added yield. The primary focal points for our team are consistently managing interest rate risk and credit risk. We were able to navigate interest rate risk by adjusting the Fund’s weighted average maturity longer or shorter as market conditions shifted and to mitigate potential credit risk by buying high quality, creditworthy investments, strategies which added to the Fund’s performance during the Reporting Period.
Did you make any changes in the Fund’s portfolio during the Reporting Period?
As indicated earlier, we made adjustments to the Fund’s weighted average maturity and to specific security type composition allocations based on then-current market conditions, our near-term view, and anticipated and actual Fed monetary policy statements. Our duration positioning in the Fund ahead of the June 2017 Fed meeting was particularly positive for the Fund.
What is the Fund’s tactical view and strategy for the months ahead?
At the end of the Reporting Period, we expected the Fed to take the lead among global central banks in terms of interest rate hikes and balance sheet normalization. We expect ongoing improvements in the U.S. economy, particularly in the labor market, to warrant one further interest rate hike in 2017, providing financial conditions do not tighten or core inflation improve materially.
Elsewhere, we expect central banks in Europe and Japan to scale back quantitative easing due to scarcity of assets but at the same time to maintain low rates amid subdued inflation outlooks. More specifically, we maintain our expectations for the ECB to reduce its asset purchases beginning in January 2018 and for the central bank to keep its interest rates unchanged for the remainder of this year and next. We see an increased likelihood of the ECB to make a tapering announcement in September 2017, with the implication being potential increases in LIBOR and European rates at the short-term end of its yield curve. We expect monetary policy to remain on hold in the U.K., providing inflation expectations do not rise materially there, and we see little scope for a near-term interest rate hike in Canada given recent weakness in its inflation data.
While we appreciate that policymakers may use speeches and press conferences to shape expectations of future decisions, we believe policymaker comments during the Reporting Period were more balanced than headlines suggested.
Looking ahead, our strategy continues to be flexibly guided by shifting market conditions, positioning the Fund to seek to take advantage of anticipated interest rate movements. At the end of the Reporting Period, we viewed floating rate securities as offering value, and we intend to adjust duration guided by the context of market pricing in relation to our expectations. As always, we intend to continue to use our actively managed approach to seek the best possible return within the framework of the Fund’s investment guidelines and objectives. In addition, we will continue to manage interest, liquidity and credit risk daily.
We will, of course, continue to closely monitor economic data, Fed policy, and any shifts in the money market yield curve, as we strive to strategically navigate the interest rate environment.
3
FUND BASICS
FUND COMPOSITION†
Security Type
(Percentage of Net Assets)
† | The Fund is actively managed and, as such, its portfolio composition may differ over time. The percentage shown for each investment category reflects the value (based on amortized cost) of investments in that category as a percentage of net assets. Figures in the above chart may not sum to 100% due to the exclusion of other assets and liabilities. |
4
GOLDMAN SACHS VARIABLE INSURANCE TRUST GOVERNMENT MONEY MARKET FUND
Schedule of Investments
June 30, 2017 (Unaudited)
Principal Amount | Interest Rate | Maturity Date | Amortized Cost | |||||||||||
U.S. Government Agency Obligations – 21.7% | ||||||||||||||
Federal Farm Credit Bank(a) | ||||||||||||||
$ | 1,000,000 | 1.170 | % | 08/01/17 | $ | 999,958 | ||||||||
300,000 | 1.199 | 09/15/17 | 299,997 | |||||||||||
Federal Home Loan Bank(a) | ||||||||||||||
2,500,000 | 0.750 | 07/10/17 | 2,500,000 | |||||||||||
2,900,000 | 0.922 | 07/11/17 | 2,900,000 | |||||||||||
1,000,000 | 0.927 | 07/12/17 | 1,000,000 | |||||||||||
1,100,000 | 1.004 | 07/14/17 | 1,100,000 | |||||||||||
5,500,000 | 1.021 | 07/25/17 | 5,500,000 | |||||||||||
2,750,000 | 1.026 | 07/25/17 | 2,750,000 | |||||||||||
500,000 | 1.164 | 08/21/17 | 500,000 | |||||||||||
1,000,000 | 1.156 | 08/22/17 | 1,000,000 | |||||||||||
2,500,000 | 1.170 | 08/28/17 | 2,499,960 | |||||||||||
3,500,000 | 0.962 | 09/01/17 | 3,500,000 | |||||||||||
2,000,000 | 0.983 | 09/06/17 | 2,000,000 | |||||||||||
1,350,000 | 1.007 | 09/12/17 | 1,350,000 | |||||||||||
2,500,000 | 0.878 | 10/02/17 | 2,500,000 | |||||||||||
3,000,000 | 0.888 | 10/02/17 | 3,000,000 | |||||||||||
1,500,000 | 1.004 | 11/08/17 | 1,500,000 | |||||||||||
4,700,000 | 0.989 | 11/15/17 | 4,699,989 | |||||||||||
1,600,000 | 1.002 | 11/16/17 | 1,600,000 | |||||||||||
3,400,000 | 1.039 | 11/16/17 | 3,400,000 | |||||||||||
8,000,000 | 1.039 | 11/17/17 | 8,000,000 | |||||||||||
1,500,000 | 1.057 | 12/19/17 | 1,500,000 | |||||||||||
3,000,000 | 1.201 | 12/26/17 | 3,000,000 | |||||||||||
1,400,000 | 1.078 | 12/27/17 | 1,400,000 | |||||||||||
6,300,000 | 1.012 | 01/16/18 | 6,300,000 | |||||||||||
5,500,000 | 1.044 | 01/19/18 | 5,500,000 | |||||||||||
6,800,000 | 1.051 | 01/22/18 | 6,800,000 | |||||||||||
3,400,000 | 1.051 | 01/23/18 | 3,400,000 | |||||||||||
2,000,000 | 1.051 | 01/25/18 | 2,000,000 | |||||||||||
6,000,000 | 1.051 | 01/26/18 | 6,000,000 | |||||||||||
2,000,000 | 1.066 | 02/05/18 | 2,000,000 | |||||||||||
2,000,000 | 1.032 | 02/15/18 | 2,000,000 | |||||||||||
3,000,000 | 1.022 | 02/22/18 | 3,000,000 | |||||||||||
1,800,000 | 1.039 | 03/01/18 | 1,800,618 | |||||||||||
1,430,000 | 1.076 | 03/15/18 | 1,430,000 | |||||||||||
1,430,000 | 1.080 | 03/16/18 | 1,429,949 | |||||||||||
4,000,000 | 1.069 | 03/23/18 | 4,000,000 | |||||||||||
1,700,000 | 1.064 | 05/18/18 | 1,700,000 | |||||||||||
1,300,000 | 1.069 | 05/18/18 | 1,300,000 | |||||||||||
4,000,000 | 1.219 | 06/19/18 | 4,000,000 | |||||||||||
2,710,000 | 1.232 | 06/28/18 | 2,710,000 | |||||||||||
600,000 | 0.935 | 07/09/18 | 599,968 | |||||||||||
800,000 | 0.936 | 07/12/18 | 799,959 | |||||||||||
2,800,000 | 1.077 | 07/13/18 | 2,800,000 | |||||||||||
Federal Home Loan Bank Discount Note | ||||||||||||||
2,100,000 | 0.959 | 09/18/17 | 2,095,668 | |||||||||||
Federal Home Loan Mortgage Corporation | ||||||||||||||
3,500,000 | 1.194 | (a) | 12/20/17 | 3,500,000 | ||||||||||
3,000,000 | 1.125 | (a) | 01/08/18 | 3,000,000 | ||||||||||
2,470,000 | 0.750 | 01/12/18 | 2,466,639 | |||||||||||
1,000,000 | 1.126 | (a) | 01/12/18 | 1,000,000 | ||||||||||
|
| |||||||||||||
U.S. Government Agency Obligations – (continued) | ||||||||||||||
Federal National Mortgage Association | ||||||||||||||
$ | 1,225,000 | 1.232 | %(a) | 07/20/17 | $ | 1,224,961 | ||||||||
Tennessee Valley Authority | ||||||||||||||
3,000,000 | 5.500 | 07/18/17 | 3,006,404 | |||||||||||
|
| |||||||||||||
| TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS | | $ | 134,364,070 | ||||||||||
|
| |||||||||||||
U.S. Treasury Obligations – 12.8% | ||||||||||||||
United States Treasury Bills | ||||||||||||||
$ | 800,000 | 0.836 | % | 07/27/17 | $ | 799,526 | ||||||||
300,000 | 0.893 | 09/21/17 | 299,402 | |||||||||||
375,000 | 0.914 | 09/21/17 | 374,236 | |||||||||||
600,000 | 1.010 | 09/28/17 | 598,532 | |||||||||||
400,000 | 1.015 | 09/28/17 | 399,016 | |||||||||||
400,000 | 1.031 | 09/28/17 | 399,001 | |||||||||||
200,000 | 1.022 | 11/09/17 | 199,272 | |||||||||||
3,700,000 | 1.037 | 11/09/17 | 3,686,334 | |||||||||||
700,000 | 1.057 | 11/16/17 | 697,223 | |||||||||||
100,000 | 1.063 | 11/16/17 | 99,601 | |||||||||||
200,000 | 1.072 | 11/16/17 | 199,195 | |||||||||||
200,000 | 1.078 | 11/16/17 | 199,191 | |||||||||||
100,000 | 1.083 | 11/16/17 | 99,594 | |||||||||||
2,000,000 | 1.068 | 11/24/17 | 1,991,524 | |||||||||||
1,000,000 | 1.071 | 11/24/17 | 995,752 | |||||||||||
1,500,000 | 1.073 | 11/24/17 | 1,493,612 | |||||||||||
17,000,000 | 1.083 | 11/30/17 | 16,923,916 | |||||||||||
8,200,000 | 1.094 | 12/07/17 | 8,161,248 | |||||||||||
200,000 | 1.114 | 12/07/17 | 199,037 | |||||||||||
10,500,000 | 1.125 | 12/14/17 | 10,446,742 | |||||||||||
200,000 | 1.130 | 12/14/17 | 198,981 | |||||||||||
1,500,000 | 1.135 | 12/28/17 | 1,491,675 | |||||||||||
United States Treasury Floating Rate Note | ||||||||||||||
2,000,000 | 1.275 | (a) | 01/31/18 | 2,003,470 | ||||||||||
United States Treasury Notes | ||||||||||||||
900,000 | 0.875 | 07/15/17 | 900,003 | |||||||||||
450,000 | 0.875 | 08/15/17 | 450,014 | |||||||||||
11,810,000 | 4.750 | 08/15/17 | 11,868,203 | |||||||||||
1,700,000 | 0.625 | 08/31/17 | 1,699,259 | |||||||||||
1,700,000 | 0.625 | 09/30/17 | 1,698,929 | |||||||||||
100,000 | 0.750 | 10/31/17 | 99,893 | |||||||||||
1,860,000 | 1.875 | 10/31/17 | 1,866,084 | |||||||||||
400,000 | 0.875 | 11/15/17 | 399,674 | |||||||||||
2,300,000 | 4.250 | 11/15/17 | 2,328,539 | |||||||||||
800,000 | 0.625 | 11/30/17 | 798,581 | |||||||||||
200,000 | 0.875 | 11/30/17 | 199,794 | |||||||||||
700,000 | 2.250 | 11/30/17 | 703,635 | |||||||||||
3,300,000 | 2.625 | 01/31/18 | 3,327,917 | |||||||||||
800,000 | 3.500 | 02/15/18 | 812,275 | |||||||||||
|
| |||||||||||||
| TOTAL U.S. TREASURY OBLIGATIONS | | $ | 79,108,880 | ||||||||||
|
| |||||||||||||
| TOTAL INVESTMENTS BEFORE REPURCHASE AGREEMENTS | | $ | 213,472,950 | ||||||||||
|
|
The accompanying notes are an integral part of these financial statements. | 5 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST GOVERNMENT MONEY MARKET FUND
Schedule of Investments (continued)
June 30, 2017 (Unaudited)
Principal Amount | Interest Rate | Maturity Date | Amortized Cost | |||||||||||
Repurchase Agreements(b) – 64.1% | ||||||||||||||
Joint Repurchase Agreement Account III | ||||||||||||||
$ | 396,300,000 | 1.106 | % | 07/03/17 | $ | 396,300,000 | ||||||||
Maturity Value: $396,336,530 | ||||||||||||||
|
| |||||||||||||
TOTAL INVESTMENTS – 98.6% | $ | 609,772,950 | ||||||||||||
|
| |||||||||||||
| OTHER ASSETS IN EXCESS OF | | 8,640,722 | |||||||||||
|
| |||||||||||||
NET ASSETS – 100.0% | $ | 618,413,672 | ||||||||||||
|
|
The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. | ||
(a) | Variable or floating rate security. Interest rate disclosed is that which is in effect at June 30, 2017. | |
(b) | Repurchase agreement was entered into on June 30, 2017. Additional information on Joint Repurchase Agreement Account III appears on page 7. | |
Interest rates represent either the stated coupon rate, annualized yield on date of purchase for discounted securities, or, for floating rate securities, the current reset rate, which is based upon current interest rate indices.
Maturity dates represent either the final legal maturity date on the security, the demand date for puttable securities, or the prerefunded date for those types of securities. |
6 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST GOVERNMENT MONEY MARKET FUND
ADDITIONAL INVESTMENT INFORMATION
JOINT REPURCHASE AGREEMENT ACCOUNT III — At June 30, 2017, the Fund had undivided interests in the Joint Repurchase Agreement Account III, with a maturity date of July 3, 2017, as follows:
Principal Amount | Maturity Value | Collateral Value | |||||||||||
$396,300,000 | $ | 396,336,530 | $ | 407,204,898 |
REPURCHASE AGREEMENTS — At June 30, 2017, the Principal Amounts of the Fund’s interest in the Joint Repurchase Agreement Account III were as follows:
Counterparty | Interest Rate | Principal Amount | ||||||
ABN Amro Bank N.V. | 1.080 | % | $ | 31,695,736 | ||||
Bank of America, N.A. | 1.100 | 23,478,323 | ||||||
Bank of Nova Scotia (The) | 1.120 | 103,304,620 | ||||||
BNP Paribas | 1.120 | 35,687,050 | ||||||
Citigroup Global Markets, Inc. | 1.100 | 30,474,863 | ||||||
Merrill Lynch, Pierce, Fenner & Smith, Inc. | 1.100 | 16,702,479 | ||||||
TD Securities USA, LLC | 1.120 | 14,086,993 | ||||||
Wells Fargo Securities, LLC | 1.100 | 140,869,936 | ||||||
TOTAL | $ | 396,300,000 |
At June 30, 2017, the Joint Repurchase Agreement Account III was fully collateralized by:
Issuer | Interest Rates | Maturity Dates | ||||||
Federal Farm Credit Bank | 1.124 to 5.500 | % | 12/08/17 to 10/22/35 | |||||
Federal Home Loan Bank | 0.000 to 2.840 | 08/11/17 to 03/27/24 | ||||||
Federal Home Loan Mortgage Corp. | 0.000 to 7.500 | 01/17/20 to 06/01/47 | ||||||
Federal National Mortgage Association | 0.875 to 8.000 | 05/21/18 to 06/01/53 | ||||||
Government National Mortgage Association | 2.500 to 8.500 | 06/15/18 to 06/20/47 | ||||||
U.S. Treasury Bills | 0.000 | 07/13/17 to 04/26/18 | ||||||
U.S. Treasury Bonds | 2.250 to 8.875 | 02/15/19 to 02/15/47 | ||||||
U.S. Treasury Inflation-Indexed Bonds | 0.625 to 2.125 | 02/15/41 to 02/15/45 | ||||||
U.S. Treasury Inflation-Indexed Notes | 0.125 to 1.875 | 07/15/19 to 07/15/25 | ||||||
U.S. Treasury Interest-Only Stripped Securities | 0.000 | 08/15/17 to 11/15/30 | ||||||
U.S. Treasury Notes | 0.625 to 4.750 | 08/15/17 to 05/15/27 | ||||||
U.S. Treasury Principal-Only Stripped Security | 0.000 | 05/15/41 |
The accompanying notes are an integral part of these financial statements. | 7 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST GOVERNMENT MONEY MARKET FUND
Statement of Assets and Liabilities
June 30, 2017 (Unaudited)
Assets: | ||||
Investments based on amortized cost | $ | 213,472,950 | ||
Repurchase agreements based on amortized cost | 396,300,000 | |||
Cash | 91,479 | |||
Receivables: | ||||
Fund shares sold | 8,525,467 | |||
Interest | 472,085 | |||
Reimbursement from investment adviser | 14,012 | |||
Other assets | 1,709 | |||
Total assets | 618,877,702 | |||
Liabilities: | ||||
Payables: | ||||
Fund shares redeemed | 226,015 | |||
Distribution and Service fees and Transfer Agency fees | 84,613 | |||
Management fees | 79,165 | |||
Accrued expenses | 74,237 | |||
Total liabilities | 464,030 | |||
Net Assets: | ||||
Paid-in capital | 618,431,156 | |||
Undistributed net investment income | 6,947 | |||
Accumulated net realized loss | (24,431 | ) | ||
NET ASSETS | $ | 618,413,672 | ||
Net asset value, offering and redemption price per share | $ | 1.00 | ||
Net Assets: | ||||
Institutional Shares | $ | 246,859,314 | ||
Service Shares | 371,554,358 | |||
Total Net Assets | $ | 618,413,672 | ||
Shares of beneficial interest outstanding $0.001 par value (unlimited shares authorized): | ||||
Institutional Shares | 246,866,138 | |||
Service Shares | 371,564,999 |
8 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST GOVERNMENT MONEY MARKET FUND
Statement of Operations
For the Six Months Ended June 30, 2017 (Unaudited)
Investment income: | ||||
Interest | $ | 2,309,565 | ||
Expenses: | ||||
Management fees | 612,900 | |||
Distribution and Service fees — Service Shares | 451,779 | |||
Transfer Agency fees(a) | 59,795 | |||
Professional fees | 49,474 | |||
Printing and mailing costs | 35,783 | |||
Custody, accounting and administrative services | 25,680 | |||
Trustee fees | 6,106 | |||
Other | 4,291 | |||
Total expenses | 1,245,808 | |||
Less — expense reductions | (243,945 | ) | ||
Net expenses | 1,001,863 | |||
NET INVESTMENT INCOME | 1,307,702 | |||
NET REALIZED LOSS FROM INVESTMENT TRANSACTIONS | (23,142 | ) | ||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 1,284,560 |
(a) Institutional and Service Shares incurred Transfer Agency fees of $23,653 and $36,142, respectively.
The accompanying notes are an integral part of these financial statements. | 9 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST GOVERNMENT MONEY MARKET FUND
Statements of Changes in Net Assets
For the Six Months Ended June 30, 2017 (Unaudited) | For the Fiscal Year Ended December 31, 2016 | |||||||
From operations: | ||||||||
Net investment income | $ | 1,307,702 | $ | 297,342 | ||||
Net realized gain (loss) from investment transactions | (23,142 | ) | 45,052 | |||||
Net increase in net assets resulting from operations | 1,284,560 | 342,394 | ||||||
Distributions to shareholders: | ||||||||
From net investment income: | ||||||||
Institutional Shares | (695,708 | ) | (193,798 | ) | ||||
Service Shares | (605,047 | ) | (103,544 | ) | ||||
From net realized gains: | ||||||||
Institutional Shares | – | (5,258 | ) | |||||
Service Shares | – | (42,567 | ) | |||||
Total distributions to shareholders | (1,300,755 | ) | (345,167 | ) | ||||
From share transactions (at $1.00 per share): | ||||||||
Proceeds from sales of shares | 206,878,113 | 542,052,079 | ||||||
Reinvestment of distributions | 1,300,755 | 345,167 | ||||||
Cost of shares redeemed | (172,315,587 | ) | (289,172,490 | ) | ||||
Net increase in net assets resulting from share transactions | 35,863,281 | 253,224,756 | ||||||
TOTAL INCREASE | 35,847,086 | 253,221,983 | ||||||
Net assets: | ||||||||
Beginning of period | 582,566,586 | 329,344,603 | ||||||
End of period | $ | 618,413,672 | $ | 582,566,586 | ||||
Undistributed net investment income | $ | 6,947 | $ | – |
10 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST GOVERNMENT MONEY MARKET FUND
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
From investment operations | Distributions to shareholders | |||||||||||||||||||||||||||||||||||||||||||||||||||
Year - Share Class | Net asset value, beginning of period | Net investment income(a) | Net realized and unrealized gain (loss) | Total from investment operations | From net investment income | From net realized gains | Total distributions(b) | Net asset value, end of period | Total return(c) | Net assets, end of period (in 000’s) | Ratio of net expenses to average net assets | Ratio of total expenses to average net assets | Ratio of net investment income to average net assets | |||||||||||||||||||||||||||||||||||||||
FOR THE SIX MONTHS ENDED JUNE 30, (UNAUDITED) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
2017 - Institutional | $ | 1.00 | $ | 0.003 | $ | (— | )(d) | $ | 0.003 | $ | (0.003 | ) | $ | — | $ | (0.003 | ) | $ | 1.00 | 0.29 | % | $ | 246,859 | 0.18 | %(e) | 0.27 | %(e) | 0.59 | %(e) | |||||||||||||||||||||||
2017 - Service | 1.00 | 0.002 | (— | )(d) | 0.002 | (0.002 | ) | — | (0.002 | ) | 1.00 | 0.17 | 371,555 | 0.43 | (e) | 0.52 | (e) | 0.34 | (e) | |||||||||||||||||||||||||||||||||
FOR THE FISCAL YEARS ENDED DECEMBER 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||
2016 - Institutional | 1.00 | 0.003 | — | (d) | 0.003 | (0.003 | ) | — | (d) | (0.003 | ) | 1.00 | 0.29 | 206,987 | 0.19 | 0.30 | 0.31 | |||||||||||||||||||||||||||||||||||
2016 - Service | 1.00 | — | (d) | — | (d) | — | (d) | — | (d) | — | (d) | — | (d) | 1.00 | 0.04 | 375,580 | 0.44 | 0.55 | 0.03 | |||||||||||||||||||||||||||||||||
2015 - Institutional | 1.00 | — | (d) | — | (d) | — | (d) | — | (d) | — | (d) | — | (d) | 1.00 | 0.02 | 1,143 | 0.23 | 0.31 | 0.03 | |||||||||||||||||||||||||||||||||
2015 - Service | 1.00 | — | (d) | — | (d) | — | (d) | — | (d) | — | (d) | — | (d) | 1.00 | 0.01 | 328,202 | 0.26 | 0.56 | 0.01 | |||||||||||||||||||||||||||||||||
2014 - Institutional | 1.00 | — | (d) | — | (d) | — | (d) | — | (d) | — | (d) | — | (d) | 1.00 | 0.01 | 773 | 0.23 | 0.31 | 0.03 | |||||||||||||||||||||||||||||||||
2014 - Service | 1.00 | — | (d) | — | (d) | — | (d) | — | (d) | — | (d) | — | (d) | 1.00 | 0.01 | 305,994 | 0.24 | 0.56 | — | (f) | ||||||||||||||||||||||||||||||||
2013 - Institutional (g) | 1.00 | — | (d) | — | (d) | — | (d) | — | (d) | — | (d) | — | (d) | 1.00 | 0.01 | 25 | 0.24 | (e) | 0.36 | (e) | 0.04 | (e) | ||||||||||||||||||||||||||||||
2013 - Service | 1.00 | — | (d) | — | (d) | — | (d) | — | (d) | — | (d) | — | (d) | 1.00 | 0.01 | 316,404 | 0.28 | 0.55 | — | (f) | ||||||||||||||||||||||||||||||||
2012 - Service | 1.00 | — | (d) | — | (d) | — | (d) | — | (d) | — | (d) | — | (d) | 1.00 | 0.01 | 357,545 | 0.35 | 0.53 | — | (f) |
(a) | Calculated based on the average shares outstanding methodology. |
(b) | Distributions may not coincide with the current year net investment income or net realized gains as distributions may be paid from current or prior year earnings. |
(c) | Assumes reinvestment of all distributions. Total returns for periods less than one full year are not annualized. |
(d) | Amount is less than $0.0005 per share. |
(e) | Annualized. |
(f) | Amount is less than 0.005% of average net assets. |
(g) | Commenced operations on October 16, 2013. |
The accompanying notes are an integral part of these financial statements. | 11 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST GOVERNMENT MONEY MARKET FUND
Notes to Financial Statements
June 30, 2017 (Unaudited)
1. ORGANIZATION
Goldman Sachs Variable Insurance Trust (the “Trust” or “VIT”) is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company. The Trust includes the Goldman Sachs Government Money Market Fund (the “Fund”). The Fund is a diversified portfolio under the Act offering two classes of shares — Institutional and Service Shares. Shares of the Trust are offered to separate accounts of participating life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies.
Goldman Sachs Asset Management, L.P. (“GSAM”), an affiliate of Goldman Sachs & Co. LLC (formerly, Goldman, Sachs & Co.) (“Goldman Sachs”), serves as investment adviser to the Fund pursuant to a management agreement (the “Agreement”) with the Trust.
2. SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and require management to make estimates and assumptions that may affect the reported amounts and disclosures. Actual results may differ from those estimates and assumptions.
A. Investment Valuation — The investment valuation policy of the Fund is to use the amortized-cost method permitted by Rule 2a-7 under the Act for valuing portfolio securities. The amortized-cost method of valuation involves valuing a security at its cost and thereafter applying a constant amortization to maturity of any discount or premium. Normally, a security’s amortized cost will approximate its market value. Under procedures and tolerances approved by the Board of Trustees (“Trustees”), GSAM evaluates daily the difference between the Fund’s net asset value (“NAV”) per share using the amortized costs of its portfolio securities and the Fund’s NAV per share using market-based values of its portfolio securities. The market-based value of a portfolio security is determined, where readily available, on the basis of market quotations provided by pricing services or securities dealers, or, where accurate market quotations are not readily available, on the basis of the security’s fair value as determined in accordance with Valuation Procedures approved by the Trustees. The pricing services may use valuation models or matrix pricing, which may consider (among other things): (i) yield or price with respect to debt securities that are considered comparable in characteristics such as rating, interest rate and maturity date or (ii) quotations from securities dealers to determine current value.
B. Investment Income and Investments — Interest income is accrued daily and adjusted for amortization of premiums and accretion of discounts. Investment transactions are reflected on trade date. Realized gains and losses are calculated using identified cost.
C. Class Allocations and Expenses — Investment income, realized and unrealized gain (loss), and non-class specific expenses of the Fund are allocated daily based upon the proportion of net assets of each class. Class specific expenses, where applicable, are borne by the respective share classes and include Distribution and Service and Transfer Agency fees. Non-class specific expenses directly incurred by the Fund are charged to the Fund, while such expenses incurred by the Trust are allocated across the applicable Funds on a straight-line and/or pro-rata basis depending upon the nature of the expenses.
D. Federal Taxes and Distributions to Shareholders — It is the Fund’s policy to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Code”), applicable to regulated investment companies (mutual funds) and to distribute each year substantially all of its investment company taxable and tax-exempt income and capital gains to its shareholders. Accordingly, the Fund is not required to make any provisions for the payment of federal income tax. Distributions to shareholders are declared and recorded daily and paid monthly by the Fund and may include short-term capital gains. Long-term capital gain distributions, if any, are declared and paid annually.
The characterization of distributions to shareholders for financial reporting purposes is determined in accordance with federal income tax rules, which may differ from GAAP. The source of the Fund’s distributions may be shown in the accompanying financial statements as either from net investment income, net realized gain or capital. Certain components of the Fund’s net assets on the Statement of Assets and Liabilities reflect permanent GAAP/tax differences based on the appropriate tax character.
12
GOLDMAN SACHS VARIABLE INSURANCE TRUST GOVERNMENT MONEY MARKET FUND
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
The amortized cost for the Fund stated in the accompanying Statement of Assets and Liabilities also represents aggregate cost for U.S. federal income tax purposes.
GSAM has reviewed the Fund’s tax positions for all open tax years (the current and prior three years, as applicable) and has concluded that no provision for income tax is required in the Fund’s financial statements. Such open tax years remain subject to examination and adjustment by tax authorities.
E. Forward Commitments — A forward commitment involves entering into a contract to purchase or sell securities, typically on an extended settlement basis, for a fixed price at a future date. The purchase of securities on a forward commitment basis involves a risk of loss if the value of the security to be purchased declines before the settlement date. Conversely, the sale of securities on a forward commitment basis involves the risk that the value of the securities sold may increase before the settlement date. Although the Fund will generally purchase securities on a forward commitment basis with the intention of acquiring the securities for its portfolio, the Fund may dispose of forward commitments prior to settlement which may result in a realized gain or loss.
F. Repurchase Agreements — Repurchase agreements involve the purchase of securities subject to the seller’s agreement to repurchase the securities at a mutually agreed upon date and price, under the terms of a Master Repurchase Agreement (“MRA”). During the term of a repurchase agreement, the value of the underlying securities held as collateral on behalf of the Fund, including accrued interest, is required to exceed the value of the repurchase agreement, including accrued interest. The gross value of repurchase agreements is included in the Statement of Assets and Liabilities for financial reporting purposes. The underlying securities for all repurchase agreements are held at the Fund’s custodian or designated sub-custodians under tri-party repurchase agreements.
An MRA governs transactions between the Fund and select counterparties. An MRA contains provisions for, among other things, initiation of the transaction, income payments, events of default and maintenance of securities for repurchase agreements. An MRA also permits offsetting with collateral to create one single net payment in the event of default or similar events, including the bankruptcy or insolvency of a counterparty.
If the seller defaults, the Fund could suffer a loss to the extent that the proceeds from the sale of the underlying securities and other collateral held by the Fund are less than the repurchase price and the Fund’s costs associated with delay and enforcement of the repurchase agreement. In addition, in the event of default or insolvency of the seller, a court could determine that the Fund’s interest in the collateral is not enforceable, resulting in additional losses to the Fund.
Pursuant to exemptive relief granted by the Securities and Exchange Commission (“SEC”) and terms and conditions contained therein, the Fund, together with other funds of the Trust and registered investment companies having management agreements with GSAM or its affiliates, may transfer uninvested cash into joint accounts, the daily aggregate balance of which is invested in one or more repurchase agreements. Under these joint accounts, the Fund maintains pro-rata credit exposure to the underlying repurchase agreements’ counterparties. With the exception of certain transaction fees, the Fund is not subject to any expenses in relation to these investments.
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS
U.S. GAAP defines the fair value of a financial instrument as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price); the Fund’s policy is to use the market approach. GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The levels used for classifying investments are not necessarily an indication of the risk associated with investing in these investments. The three levels of the fair value hierarchy are described below:
Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
13
GOLDMAN SACHS VARIABLE INSURANCE TRUST GOVERNMENT MONEY MARKET FUND
Notes to Financial Statements (continued)
June 30, 2017 (Unaudited)
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS (continued)
Level 2 — Quoted prices in markets that are not active or financial instruments for which significant inputs are observable (including, but not limited to, quoted prices for similar investments, interest rates, foreign exchange rates, volatility and credit spreads), either directly or indirectly;
Level 3 — Prices or valuations that require significant unobservable inputs (including GSAM’s assumptions in determining fair value measurement).
The Trustees have approved Valuation Procedures that govern the valuation of the portfolio investments held by the Fund, including investments for which market quotations are not readily available. The Trustees have delegated to GSAM day-to-day responsibility for implementing and maintaining internal controls and procedures related to the valuation (including both the amortized cost and market-based methods of valuation) of the Fund’s portfolio investments. To assess the continuing appropriateness of pricing sources and methodologies related to the market-based method of valuation, GSAM regularly performs price verification procedures and issues challenges as necessary to third party pricing vendors or brokers, and any differences are reviewed in accordance with the Valuation Procedures.
As of June 30, 2017, all investments are classified as Level 2 of the fair value hierarchy. Please refer to the Schedule of Investments for further detail.
4. AGREEMENTS AND AFFILIATED TRANSACTIONS
A. Management Agreement — Under the Agreement, GSAM manages the Fund, subject to the general supervision of the Trustees.
As compensation for the services rendered pursuant to the Agreement, the assumption of the expenses related thereto and administration of the Fund’s business affairs, including providing facilities, GSAM is entitled to a management fee, accrued daily and paid monthly, equal to an annual percentage rate of the Fund’s average daily net assets. GSAM has agreed to waive a portion of the management fee equal to 0.045% of the annual contractual rate applicable to the Fund’s average daily net assets. The management fee waiver will remain in effect through at least April 28, 2018, and prior to such date GSAM may not terminate the arrangement without the approval of the Board of Trustees. For the six months ended June 30, 2017, GSAM waived $134,548 of its management fee pursuant to the contractual management fee waiver.
B. Distribution and/or Service (12b-1) Plan — The Trust, on behalf of Service Shares of the Fund, has adopted a Distribution and Service Plan subject to Rule 12b-1 under the Act. Under the Distribution and Service Plan, Goldman Sachs, which serves as distributor (the “Distributor”), is entitled to a fee accrued daily and paid monthly, for distribution services and personal and account maintenance services, which may then be paid by Goldman Sachs to authorized dealers, equal to, on an annual basis, 0.25% of the Fund’s average daily net assets attributable to Service Shares.
C. Transfer Agency Agreement — Goldman Sachs also serves as the transfer agent of the Fund for a fee pursuant to a Transfer Agency Agreement. The fee charged for such transfer agency services is accrued daily and paid monthly at an annual rate of 0.02% of the average daily net assets of Institutional and Service Shares.
D. Other Expense Agreements — GSAM has agreed to limit certain “Other Expenses” of the Fund (excluding transfer agency fees and expenses, taxes, interest, brokerage fees, shareholder meetings, litigation, indemnification and extraordinary expenses) to the extent that such expenses exceed, on an annual basis, 0.004% of the average daily net assets of the Fund. Such Other Expense reimbursements, if any, are accrued daily and paid monthly. In addition, the Fund is not obligated to reimburse GSAM for prior fiscal year expense reimbursements, if any. This Other Expense limitation will remain in place through April 28, 2018, and prior to such date GSAM may not terminate the arrangement without the approval of the Trustees. For the six months ended June 30, 2017, GSAM reimbursed $109,375 to the Fund. In addition, the Fund has entered into certain offset arrangements with the custodian and the transfer agent, which may result in a reduction of the Fund’s expenses and are received irrespective of the application of the “Other Expense” limitation described above.
E. Contractual and Net Fund Expenses — During the six months ended June 30, 2017, GSAM as the investment adviser, and Goldman Sachs, as distributor and transfer agent, voluntarily agreed to waive a portion of management fees, distribution and
14
GOLDMAN SACHS VARIABLE INSURANCE TRUST GOVERNMENT MONEY MARKET FUND
4. AGREEMENTS AND AFFILIATED TRANSACTIONS (continued)
service plan fees and transfer agency fees attributable to the Fund. These waivers may be modified or terminated at any time at the option of GSAM or Goldman Sachs (as applicable). The following table outlines such fees (net of waivers) and Other Expenses (net of reimbursements and custodian and transfer agency fee credit reductions) in order to determine the Fund’s net annualized expenses for the fiscal period. The Fund is not obligated to reimburse Goldman Sachs for prior fiscal year fee waivers, if any.
Institutional Shares | Service Shares | |||||||||||||||
Fee/Expense Type | Contractual rate, if any | Ratio of net expenses to average net assets for the six months ended June 30, 2017* | Contractual rate, if any | Ratio of net expenses to average net assets for the six months ended June 30, 2017* | ||||||||||||
Management Fee | 0.205 | % | 0.160 | % | 0.205 | % | 0.160 | % | ||||||||
Distribution and Service Fees | N/A | N/A | 0.25 | 0.25 | ||||||||||||
Transfer Agency Fees | 0.02 | 0.02 | 0.02 | 0.02 | ||||||||||||
Other Expenses | — | 0.00 | (a) | — | 0.00 | (a) | ||||||||||
Net Expenses | 0.18 | % | 0.43 | % |
* | Annualized |
(a) Amount is less than 0.005% of average net assets.
N/A - Fees not applicable to respective share class.
For the six months ended June 30, 2017, Goldman Sachs waived $134,548, $7 and $15 in management, distribution and service fees, and transfer agency fees, respectively.
F. Other Transactions with Affiliates — The Fund may purchase securities from, or sell securities to, an affiliated fund provided the affiliation is solely due to having a common investment adviser, common officers, or common Trustees. For the six months ended June 30, 2017, there were no purchase and sale transactions for the Fund with affiliated funds in compliance with Rule 17a-7 under the Act.
G. Line of Credit Facility — As of June 30, 2017, the Fund participated in a $1,100,000,000 committed, unsecured revolving line of credit facility (the “facility”) together with other funds of the Trust and registered investment companies having management agreements with GSAM or its affiliates. This facility is to be used for temporary emergency purposes, or to allow for an orderly liquidation of securities to meet redemption requests. The interest rate on borrowings is based on the federal funds rate. The facility also requires a fee to be paid by the Fund based on the amount of the commitment that has not been utilized. For the six months ended June 30, 2017, the Fund did not have any borrowings under the facility.
5. OTHER RISKS
The Fund’s risks include, but are not limited to, the following:
Large Shareholder Transactions Risk — The Fund may experience adverse effects when certain large shareholders, such as other funds, participating insurance companies, accounts and Goldman Sachs affiliates, purchase or redeem large amounts of shares of the Fund. Such large shareholder redemptions may cause the Fund to sell portfolio securities at times when it would not otherwise do so, which may negatively impact the Fund’s NAV and liquidity. Similarly, large Fund share purchases may adversely affect the Fund’s performance to the extent that the Fund is delayed in investing new cash and is required to maintain a larger cash position than it ordinarily would. These transactions may also increase transaction costs. In addition, a large redemption could result in the Fund’s current expenses being allocated over a smaller asset base, leading to an increase in the Fund’s expense ratio.
Interest Rate Risk — When interest rates increase, the Fund’s yield will tend to be lower than prevailing market rates, and the market value of its securities or instruments may also be adversely affected. A low interest rate environment poses additional risks
15
GOLDMAN SACHS VARIABLE INSURANCE TRUST GOVERNMENT MONEY MARKET FUND
Notes to Financial Statements (continued)
June 30, 2017 (Unaudited)
5. OTHER RISKS (continued)
to the Fund, because low yields on the Fund’s portfolio holdings may have an adverse impact on the Fund’s ability to provide a positive yield to its shareholders, pay expenses out of Fund assets, or, at times, maintain a stable $1.00 share price. The risks associated with increasing interest rates are heightened given that interest rates are near historic lows, but may be expected to increase in the future with unpredictable effects on the markets and the Fund’s investments. Fluctuations in interest rates may also affect the liquidity of fixed income securities and instruments held by the Fund.
Market and Credit Risks — In the normal course of business, the Fund trades financial instruments and enters into financial transactions where risk of potential loss exists due to changes in the market (market risk). Additionally, the Fund may also be exposed to credit risk in the event that an issuer or guarantor fails to perform or that an institution or entity with which the Fund has unsettled or open transactions defaults.
6. INDEMNIFICATIONS
Under the Trust’s organizational documents, its Trustees, officers, employees and agents are indemnified, to the extent permitted by the Act and state law, against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the course of business, the Fund enters into contracts that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, GSAM believes the risk of loss under these arrangements to be remote.
7. SUBSEQUENT EVENTS
Subsequent events after the Statement of Assets and Liabilities date have been evaluated and GSAM has concluded that there is no impact requiring adjustment or disclosure in the financial statements.
8. SUMMARY OF SHARE TRANSACTIONS
Share activity is as follows:
For the Six Months Ended June 30, 2017 (Unaudited) | For the Fiscal Year Ended December 31, 2016 | |||||||
Institutional Shares | ||||||||
Shares sold | 107,245,365 | 273,054,154 | ||||||
Reinvestment of distributions | 695,708 | 199,056 | ||||||
Shares redeemed | (68,062,016 | ) | (67,408,741 | ) | ||||
39,879,057 | 205,844,469 | |||||||
Service Shares | ||||||||
Shares sold | 99,632,748 | 268,997,925 | ||||||
Reinvestment of distributions | 605,047 | 146,111 | ||||||
Shares redeemed | (104,253,571 | ) | (221,763,749 | ) | ||||
(4,015,776 | ) | 47,380,287 | ||||||
NET INCREASE IN SHARES | 35,863,281 | 253,224,756 |
16
GOLDMAN SACHS VARIABLE INSURANCE TRUST GOVERNMENT MONEY MARKET FUND
Fund Expenses — Six Month Period Ended June 30, 2017 (Unaudited) |
As a shareholder of the Institutional Shares and Service Shares of the Fund, you incur ongoing costs, including management fees; distribution and service (12b-1) fees (with respect to Service Shares); and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from January 1, 2017 through June 30, 2017, which represents a period of 181 days of a 365 day year.
Actual Expenses — The first line in the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000=8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes — The second line in the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual net expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges, redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Share Class | Beginning Account Value 1/1/17 | Ending Account Value 6/30/17 | Expenses Paid for the 6 Months Ended 6/30/17* | |||||||||
Institutional Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,002.91 | $ | 0.91 | ||||||
Hypothetical 5% return | $ | 1,000.00 | 1,023.88 | + | $ | 0.92 | ||||||
Service Shares | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,001.67 | $ | 2.15 | ||||||
Hypothetical 5% return | $ | 1,000.00 | 1,022.64 | + | $ | 2.18 |
* | Expenses are calculated using the Fund’s annualized net expense ratio for each class, which represents the ongoing expenses as a percentage of net assets for the six months ended June 30, 2017. Expenses are calculated by multiplying the annualized net expense ratio by the average account value for the period; then multiplying the result by the number of days in the most recent fiscal half year (or, since inception, if shorter); and then dividing that result by the number of days in the period. The annualized net expense ratios for the period were 0.18% and 0.43% for the Institutional Shares and Service Shares, respectively. |
+ | Hypothetical expenses are based on the Fund’s actual annualized net expense ratio and an assumed rate of return of 5% per year before expenses. |
17
GOLDMAN SACHS VARIABLE INSURANCE TRUST GOVERNMENT MONEY MARKET FUND
Statement Regarding Basis for Approval of Management Agreement (Unaudited)
Background
The Goldman Sachs Government Money Market Fund (the “Fund”) is an investment portfolio of Goldman Sachs Variable Insurance Trust (the “Trust”). The Board of Trustees oversees the management of the Trust and reviews the investment performance and expenses of the Fund at regularly scheduled meetings held throughout the year. In addition, the Board of Trustees determines annually whether to approve the continuance of the Trust’s investment management agreement (the “Management Agreement”) with Goldman Sachs Asset Management, L.P. (the “Investment Adviser”) on behalf of the Fund.
The Management Agreement was most recently approved for continuation until June 30, 2018 by the Board of Trustees, including those 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”), at a meeting held on June 14-15, 2017 (the “Annual Meeting”).
The review process undertaken by the Trustees spans the course of the year and culminates with the Annual Meeting. To assist the Trustees in their deliberations, the Trustees have established a Contract Review Committee (the “Committee”), comprised of the Independent Trustees. The Committee held four meetings over the course of the year since the Management Agreement was last approved. At those Committee meetings, regularly scheduled Board or other committee meetings, and/or the Annual Meeting, matters relevant to the renewal of the Management Agreement were considered by the Board, or the Independent Trustees, as applicable. With respect to the Fund, such matters included:
(a) | the nature and quality of the advisory, administrative, and other services provided to the Fund by the Investment Adviser and its affiliates, including information about: |
(i) | the structure, staff, and capabilities of the Investment Adviser and its portfolio management teams; |
(ii) | the groups within the Investment Adviser and its affiliates that support the portfolio management teams or provide other types of necessary services, including fund services groups (e.g., accounting and financial reporting, tax, shareholder services, and operations); controls and risk management groups (e.g., legal, compliance, valuation oversight, credit risk management, internal audit, compliance testing, market risk analysis, finance, and central funding); sales and distribution support groups, and others (e.g., information technology and training); |
(iii) | trends in employee headcount; |
(iv) | the Investment Adviser’s financial resources and ability to hire and retain talented personnel and strengthen its operations; and |
(v) | the parent company’s support of the Investment Adviser and its mutual fund business, as expressed by the firm’s senior management; |
(b) | information on the investment performance of the Fund, including comparisons to the performance of similar mutual funds, as provided by a third-party mutual fund data provider engaged as part of the contract review process (the “Outside Data Provider”); and information on general investment outlooks in the markets in which the Fund invests; |
(c) | information provided by the Investment Adviser indicating the Investment Adviser’s views on whether the Fund’s peer group and/or benchmark index had high, medium, or low relevance given the Fund’s particular investment strategy; |
(d) | the terms of the Management Agreement and other agreements with affiliated service providers entered into by the Trust on behalf of the Fund; |
(e) | fee and expense information for the Fund, including: |
(i) | the relative management fee and expense levels of the Fund as compared to those of comparable funds managed by other advisers, as provided by the Outside Data Provider; |
(ii) | the Fund’s expense trends over time; and |
(iii) | to the extent the Investment Adviser manages other types of accounts (such as bank collective trusts, private wealth management accounts, institutional separate accounts, sub-advised mutual funds, and non-U.S. funds) having investment objectives and policies similar to those of the Fund, comparative information on the advisory fees charged and services provided to those accounts by the Investment Adviser; |
(f) | with respect to the extensive investment performance and expense comparison data provided by the Outside Data Provider, its processes in producing that data for the Fund; |
(g) | the undertakings of the Investment Adviser and its affiliates to implement fee waivers and/or expense limitations; |
(h) | information relating to the profitability of the Management Agreement and the transfer agency and distribution and service arrangements of the Fund to the Investment Adviser and its affiliates; |
(i) | whether the Fund’s existing management fee schedule adequately addressed any economies of scale; |
18
GOLDMAN SACHS VARIABLE INSURANCE TRUST GOVERNMENT MONEY MARKET FUND
Statement Regarding Basis for Approval of Management Agreement (Unaudited) (continued)
(j) | a summary of the “fall-out” benefits derived by the Investment Adviser and its affiliates from their relationships with the Fund, including the fees received by the Investment Adviser’s affiliates from the Fund for transfer agency, distribution and other services; |
(k) | a summary of potential benefits derived by the Fund as a result of its relationship with the Investment Adviser; |
(l) | the nature and quality of the services provided to the Fund by its unaffiliated service providers, and the Investment Adviser’s general oversight and evaluation (including reports on due diligence) of those service providers as part of the administrative services provided under the Management Agreement; and |
(m) | the Investment Adviser’s processes and policies addressing various types of potential conflicts of interest; its approach to risk management; the annual review of the effectiveness of the Fund’s compliance program; and periodic compliance reports. |
The Trustees also received an overview of the Fund’s distribution arrangements. They received information regarding the Fund’s assets, share purchase and redemption activity, and payment of distribution and service fees. Information was also provided to the Trustees relating to revenue sharing payments made by and services provided by the Investment Adviser and its affiliates to intermediaries that promote the sale, distribution, and/or servicing of Fund shares. The Independent Trustees also discussed the broad range of other investment choices that are available to Fund investors, including the availability of comparable funds managed by other advisers.
The presentations made at the Board and Committee meetings and at the Annual Meeting encompassed the Fund and other mutual funds for which the Board of Trustees has responsibility. In evaluating the Management Agreement at the Annual Meeting, the Trustees relied upon their knowledge, resulting from their meetings and other interactions throughout the year, of the Investment Adviser and its affiliates, their services, and the Fund. In conjunction with these meetings, the Trustees received written materials and oral presentations on the topics covered, and the Investment Adviser addressed the questions and concerns of the Trustees, including concerns regarding the investment performance of certain of the funds they oversee. The Independent Trustees were advised by their independent legal counsel regarding their responsibilities and other regulatory requirements related to the approval and continuation of mutual fund investment management agreements under applicable law. In addition, the Investment Adviser and its affiliates provided the Independent Trustees with a written response to a formal request for information sent on behalf of the Independent Trustees by their independent legal counsel. During the course of their deliberations, the Independent Trustees met in executive sessions with their independent legal counsel, without representatives of the Investment Adviser or its affiliates present.
Nature, Extent, and Quality of the Services Provided Under the Management Agreement
As part of their review, the Trustees considered the nature, extent, and quality of the services provided to the Fund by the Investment Adviser. In this regard, the Trustees considered both the investment advisory services and non-advisory services that are provided by the Investment Adviser and its affiliates. The Trustees noted the transition in the leadership and changes in personnel of various of the Investment Adviser’s portfolio management teams that had occurred in recent periods, and the ongoing recruitment efforts aimed at bringing high quality investment talent to the Investment Adviser. They also noted the Investment Adviser’s commitment to maintaining high quality systems and expending substantial resources to respond to ongoing changes to the regulatory and control environment in which the Fund and its service providers operate, as well as the efforts of the Investment Adviser and its affiliates to combat cyber security risks. The Trustees concluded that the Investment Adviser continued to commit substantial financial and operational resources to the Fund and expressed confidence that the Investment Adviser would continue to do so in the future. The Trustees also recognized that the Investment Adviser had made significant commitments to address regulatory compliance requirements applicable to the Fund and the Investment Adviser and its affiliates.
Investment Performance
The Trustees also considered the investment performance of the Fund. In this regard, they compared the investment performance of the Fund to its peers using rankings compiled by the Outside Data Provider as of December 31, 2016. The information on the Fund’s investment performance was provided for the one-, three-, five-, and ten-year periods ending on the applicable dates.
In addition, the Trustees considered materials prepared and presentations made by the Investment Adviser’s senior management and portfolio management personnel in which Fund performance was assessed. The Trustees also considered the Investment Adviser’s periodic reports with respect to the Fund’s risk profile, and how the Investment Adviser’s approach to risk monitoring and management influences portfolio management.
19
GOLDMAN SACHS VARIABLE INSURANCE TRUST GOVERNMENT MONEY MARKET FUND
Statement Regarding Basis for Approval of Management Agreement (Unaudited) (continued)
The Trustees considered the performance of the Fund in light of its investment policies and strategies. They considered that the Investment Adviser had expended substantial resources to respond to amendments to the regulatory framework for money market funds. They noted that the Fund had implemented the final set of reforms as of October 11, 2016. They considered that the Fund had operated in a challenging yield environment since 2009 (although yields had begun to improve as a result of recent actions by the Federal Reserve), and that the Investment Adviser had been able to maintain a positive yield to meet the demand of the Fund’s investors, in many instances as the result of voluntary fee waivers and expense reimbursements. The Trustees also considered that the Fund had maintained a stable net asset value. In light of these considerations, the Trustees believed that the Fund was providing investment performance within a competitive range for investors.
Costs of Services Provided and Competitive Information
The Trustees considered the contractual terms of the Management Agreement and the fee rates payable by the Fund thereunder. 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.
In particular, the Trustees reviewed analyses prepared by the Outside Data Provider regarding the expense rankings of the Fund. The analyses provided a comparison of the Fund’s management fee to those of a relevant peer group and category universe; an expense analysis which compared the Fund’s overall net and gross expenses to a peer group and a category universe; and data comparing the Fund’s net expenses to the peer and category medians. The analyses also compared the Fund’s transfer agency and custody fees, other expenses and fee waivers/reimbursements to those of the peer group and category medians. The Trustees concluded that the comparisons provided by the Outside Data Provider were useful in evaluating the reasonableness of the management fees and total expenses paid by the Fund.
In addition, the Trustees considered the Investment Adviser’s undertakings to implement fee waivers and/or expense limitations. They noted that the Investment Adviser and Goldman Sachs had waived fees and reimbursed expenses for the Fund in order to maintain a positive yield. They also observed that the Investment Adviser had expended substantial resources to respond to amendments to the regulatory framework for money market funds. They noted that the Fund had implemented the final set of reforms as of October 11, 2016. They also considered, to the extent that the Investment Adviser manages other types of accounts having investment objectives and policies similar to those of the Fund, comparative fee information for services provided by the Investment Adviser to those accounts, and information that indicated that services provided to the Fund differed in various significant respects from the services provided to other types of accounts which, in many cases, operated under less stringent legal and regulatory structures, required fewer services from the Investment Adviser to a smaller number of client contact points, and were less time-intensive.
In addition, the Trustees noted that shareholders are able to redeem their Fund shares at any time if shareholders believe that the Fund fees and expenses are too high or if they are dissatisfied with the performance of the Fund.
Profitability
The Trustees reviewed the Fund’s contribution to the Investment Adviser’s revenues and pre-tax profit margins. In this regard the Trustees noted that they had received, among other things, profitability analyses and summaries, revenue and expense schedules by Fund and by function (i.e., investment management, transfer agency and distribution and service), and information on the Investment Adviser’s expense allocation methodology. They observed that the profitability and expense figures are substantially similar to those used by the Investment Adviser for many internal purposes, including compensation decisions among various business groups, and are thus subject to a vigorous internal debate about how certain revenue and expenses should be allocated. The Trustees also noted that the internal audit group within the Goldman Sachs organization had audited the expense allocation methodology and that the internal audit group was satisfied with the reasonableness, consistency, and accuracy of the Investment Adviser’s expense allocation methodology and profitability analysis calculations. Profitability data for the Fund were provided for 2016 and 2015, and the Trustees considered this information in relation to the Investment Adviser’s overall profitability.
Economies of Scale
The Trustees considered the information that had been provided regarding the Investment Adviser’s profitability. The Trustees noted that the Fund does not have management fee breakpoints. They considered the asset levels in the Fund; the Fund’s recent purchase and redemption activity; the information provided by the Investment Adviser relating to the costs of the services provided by the Investment Adviser and its affiliates and their realized profits; information comparing the contractual fee rates charged by the Investment Adviser with fee rates charged to other money market funds in the peer group; the Investment Adviser’s undertaking
20
GOLDMAN SACHS VARIABLE INSURANCE TRUST GOVERNMENT MONEY MARKET FUND
Statement Regarding Basis for Approval of Management Agreement (Unaudited) (continued)
to limit certain expenses of the Fund that exceed a specified level; and the willingness of the Investment Adviser and Goldman Sachs to waive certain fees on a temporary basis in order to maintain a positive Fund yield. They considered a report prepared by the Outside Data Provider, which surveyed money market funds’ management fee arrangements and use of breakpoints. The Trustees also considered the competitive nature of the money market fund business and the competitiveness of the fees charged to the Fund by the Investment Adviser.
Other Benefits to the Investment Adviser and Its Affiliates
The Trustees also considered the other benefits derived by the Investment Adviser and its affiliates from their relationships with the Fund as stated above, including: (a) transfer agency fees received by Goldman Sachs & Co. LLC (“Goldman Sachs”); (b) trading efficiencies resulting from aggregation of orders of the Fund with those for other funds or accounts managed by the Investment Adviser; (c) the Investment Adviser’s ability to leverage the infrastructure designed to service the Fund on behalf of its other clients; (d) the Investment Adviser’s ability to cross-market other products and services to Fund shareholders; (e) Goldman Sachs’ retention of certain fees as Fund Distributor; (f) Goldman Sachs’ ability to engage in principal transactions with the Fund under exemptive orders from the U.S. Securities and Exchange Commission permitting such trades; (g) the Investment Adviser’s ability to negotiate better pricing with custodians on behalf of its other clients, as a result of the relationship with the Fund; and (h) the possibility that the working relationship between the Investment Adviser and the Fund’s third-party service providers may cause those service providers to be more likely to do business with other areas of Goldman Sachs. In the course of considering the foregoing, the Independent Trustees requested and received further information quantifying certain of these fall-out benefits.
Other Benefits to the Fund and Its Shareholders
The Trustees also noted that the Fund receives certain potential benefits as a result of its relationship with the Investment Adviser, including: (a) trading efficiencies resulting from aggregation of orders of the Fund with those of other funds or accounts managed by the Investment Adviser; (b) enhanced servicing from vendors because of the volume of business generated by the Investment Adviser and its affiliates; (c) enhanced servicing from broker-dealers because of the volume of business generated by the Investment Adviser and its affiliates; (d) the Investment Adviser’s knowledge and experience gained from managing other accounts and products; (e) the Investment Adviser’s ability to hire and retain qualified personnel to provide services to the Fund because of the reputation of the Goldman Sachs organization; (f) the Fund’s access, through the Investment Adviser, to certain firmwide resources (e.g., proprietary risk management systems and databases), subject to certain restrictions; and (g) the Fund’s access to certain affiliated distribution channels. In addition, the Trustees noted the competitive nature of the mutual fund marketplace, and considered that many of the Fund’s shareholders invested in the Fund in part because of the Fund’s relationship with the Investment Adviser and that those shareholders have a general expectation that the relationship will continue.
Conclusion
In connection with their consideration of the Management Agreement, the Trustees gave weight to each of the factors described above, but did not identify any particular factor as controlling their decision. After deliberation and consideration of all of the information provided, including the factors described above, the Trustees concluded, in the exercise of their business judgment, that the management fees paid by the Fund were reasonable in light of the services provided to it by the Investment Adviser, the Investment Adviser’s costs and the Fund’s current and reasonably foreseeable asset levels. The Trustees unanimously concluded that the Investment Adviser’s continued management likely would benefit the Fund and its shareholders and that the Management Agreement should be approved and continued with respect to the Fund until June 30, 2018.
21
TRUSTEES Ashok N. Bakhru, Chairman Kathryn A. Cassidy Diana M. Daniels Herbert J. Markley James A. McNamara Jessica Palmer Roy W. Templin Gregory G. Weaver | OFFICERS James A. McNamara, President Scott M. McHugh, Treasurer, Senior Vice President and Principal Financial Officer Joseph F. DiMaria, Assistant Treasuer and Principal Accounting Officer Caroline L. Kraus, Secretary |
GOLDMAN SACHS & CO. LLC
Distributor and Transfer Agent
GOLDMAN SACHS ASSET MANAGEMENT, L.P.
Investment Adviser
200 West Street, New York
New York 10282
Visit our Web site at www.GSAMFUNDS.com to obtain the most recent month-end returns.
The reports concerning the Fund included in this shareholder report may contain certain forward-looking statements about the factors that may affect the performance of the Fund in the future. These statements are based on Fund management’s predictions and expectations concerning certain future events and their expected impact on the Fund, such as performance of the economy as a whole and of specific industry sectors, changes in the levels of interest rates, the impact of developing world events, and other factors that may influence the future performance of the Fund. Management believes these forward-looking statements to be reasonable, although they are inherently uncertain and difficult to predict. Actual events may cause adjustments in portfolio management strategies from those currently expected to be employed.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available (i) without charge, upon request by calling 1-800-621-2550; and (ii) on the Securities and Exchange Commission (“SEC”) Web site at http://www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the SEC’s web site at http://www.sec.gov within 60 days after the Fund’s first and third fiscal quarters. The Fund’s Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may also be obtained by calling 1-800-SEC-0330. Forms N-Q may be obtained upon request and without charge by calling 1-800-621-2550.
The web site links provided are for your convenience only and are not an endorsement or recommendation by GSAM of any of these web sites or the products or services offered. GSAM is not responsible for the accuracy and validity of the content of these web sites.
Fund holdings and allocations shown are as of June 30, 2017 and may not be representative of future investments. Fund holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities. Current and future holdings are subject to risk.
The portfolio risk management process includes an effort to monitor and manage risk, but does not imply low risk.
Shares of the Goldman Sachs VIT Funds are offered to separate accounts of participating life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Shares of the Fund are not offered directly to the general public. The variable annuity contracts and variable life insurance policies are described in the separate prospectuses issued by participating insurance companies. You should refer to those prospectuses for information about surrender charges, mortality and expense risk fees and other charges that may be assessed by participating insurance companies under the variable annuity contracts or variable life insurance policies. Such fees or charges, if any, may affect the return you may realize with respect to your investments. Ask your representative for more complete information. Please consider a fund’s objectives, risks and charges and expenses, and read the prospectus carefully before investing. The prospectus contains this and other information about the Fund.
This material is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus or summary prospectus, if applicable. Investors should consider the Fund’s objective, risks, and charges and expenses, and read the summary prospectus, if available, and/or the prospectus carefully before investing or sending money. The summary prospectus, if available, and the prospectus contain this and other information about the Fund and may be obtained from your authorized dealer or from Goldman Sachs & Co. LLC by calling 1-800-621-2550.
This report is prepared for the general information of contract owners and is not an offer of shares of the Goldman Sachs Variable Insurance Trust — Goldman Sachs Government Money Market Fund.
© 2017 Goldman Sachs. All rights reserved.
VITMMSAR-17/100736-TMPL-08/2017-585397/9074
Goldman
Sachs Variable Insurance Trust
Goldman Sachs
Multi-Strategy
Alternatives Portfolio
Semi-Annual Report
June 30, 2017
GOLDMAN SACHS VARIABLE INSURANCE TRUST MULTI-STRATEGY ALTERNATIVES PORTFOLIO
INVESTMENT OBJECTIVE
The Portfolio seeks long-term growth of capital.
Portfolio Management Discussion and Analysis
Below, the Goldman Sachs Global Portfolio Solutions Team discusses the Goldman Sachs Variable Insurance Trust — Goldman Sachs Multi-Strategy Alternatives Portfolio’s (the “Portfolio”) performance and positioning for the six-month period ended June 30, 2017 (the “Reporting Period”).
How did the Portfolio perform during the Reporting Period?
During the Reporting Period, the Portfolio’s Institutional, Service and Advisor Shares generated cumulative total returns of 3.30%, 3.18% and 3.08%, respectively. These returns compare to the 0.49% cumulative total return of the Portfolio’s benchmark, the BofA Merrill Lynch U.S. Dollar Three-Month LIBOR Constant Maturity Index (the “LIBOR Index”), during the same period.
Please note that the Portfolio’s benchmark being the LIBOR Index is a means of emphasizing that the Portfolio has an unconstrained strategy. That said, this Portfolio employs a benchmark agnostic strategy and thus comparisons to a benchmark index are not particularly relevant.
What economic and market factors most influenced the Portfolio during the Reporting Period?
The first half of the Reporting Period witnessed the continuation of a broad risk-on rally, which had started following the U.S. elections in November 2016. The rally was further supported by a stream of better than consensus expected U.S. economic data, reflected in non-farm payroll numbers, purchasing managers’ indices, and consumer- and producer-sentiment gauges — all of which reinforced opinions about a more positive macroeconomic picture. In addition, the U.S. inflation rate rose higher than the Federal Reserve’s (“Fed”) stated 2.0% target. These factors, along with positive survey data, led Fed policymakers, who had previously raised short-term interest rates in December 2016, to guide market expectations toward another rate hike in March 2017. As a result, the March interest rate increase caused minimal market disruption. Fed officials also said that several interest rate hikes could occur during 2017, and the minutes from the Fed’s March policy meeting indicated that balance sheet normalization might begin by the end of the calendar year. However, economic data at the end of the first quarter of 2017 failed to keep up with lofty survey data. Additionally, the U.S. Administration was unsuccessful in its first attempt to pass a health care bill, raising concern about its ability to enact legislation related to taxes and infrastructure. In this environment, global stocks gave up some of their gains, with cyclical stocks generally underperforming defensive stocks. Yields fell, driving a rally in the U.S. Treasury market, and the U.S. dollar weakened. Sharp rallies followed in emerging markets assets, particularly emerging markets currencies. In Europe, optimism about the European Central Bank’s (“ECB”) tapering of its asset purchases, as well as positive purchasing managers’ data, was well received by investors, who nevertheless remained cautious given political uncertainties surrounding the presidential election in France.
Heading into the second half of the Reporting Period, investor sentiment remained pro-risk, driven by the outcome of the French election, broadly improving global economic growth and robust corporate earnings reports. In France, the victory of the centrist candidate was viewed as positive by many market participants, leading to strong rallies in European equities and the euro. In the U.S., Fed policymakers noted that the fundamentals underpinning consumption growth remained solid despite data showing lackluster first quarter 2017 economic growth. Political risks centering on the U.S. Administration and the speed of its pro-growth agenda led to increased U.S. equity market volatility. Commodities, specifically crude oil, struggled due to oversupply concerns even though the Organization of the Petroleum Exporting Countries (“OPEC”) announced extended output cuts. Near the end of the Reporting Period, a flurry of central bank comments, as well as a Fed interest rate hike in June 2017, signaled a hawkish shift, causing longer-term interest rates to rise. (Hawkish tends to imply higher interest rates; opposite of dovish.) The weaker U.S. dollar, easier financial conditions and a more stable macro environment pushed emerging markets assets higher, led by Chinese equities.
What key factors were responsible for the Portfolio’s performance during the Reporting Period?
The Portfolio’s performance is driven by three sources of return: long-term strategic asset allocation to market exposures, short-term tactical allocation and excess returns from investments in underlying funds. Strategic asset allocation is the process by which the Portfolio’s assets are allocated across underlying asset classes and strategies in a way that considers the risks of each underlying asset class and strategy. The short-term tactical allocation is the implementation of tactical market views with the goal of improving the Portfolio’s risk-adjusted return. (The risk-adjusted return on an investment takes into account the risk associated with that investment relative to other potential investments.)
1
GOLDMAN SACHS VARIABLE INSURANCE TRUST MULTI-STRATEGY ALTERNATIVES PORTFOLIO
During the Reporting Period, the Portfolio outperformed relative to its benchmark because of strategic asset allocation. Short-term tactical asset allocation and security selection within the Portfolio’s underlying funds detracted from its results.
Strategic asset allocation contributed positively to the Portfolio’s performance during the Reporting Period. Allocations to specific liquid alternatives strategies added to returns, with the Portfolio’s short volatility selling strategy and hedge fund replication strategy proving particularly beneficial to performance. Allocations to emerging markets debt and international real estate securities further bolstered returns.
Short-term tactical positioning detracted from the Portfolio’s performance during the Reporting Period. These results were largely driven by the Portfolio’s tactical steepening position on the U.S. Treasury yield curve, which hurt returns as short-term rates rose and longer-term rates fell, causing the yield curve to flatten instead of steepen. (A steepening yield curve is one wherein the differential in yields between longer-term and shorter-term maturities widens; opposite of flattening. Yield curve is a spectrum of maturities.) A tactical long position in emerging markets equities versus developed markets equities helped mitigate the Portfolio’s losses, given that emerging markets equities (as measured by the MSCI Emerging Markets Index) were up more than 18% and developed markets equities (as measured by the MSCI World Index) were up approximately 11%.
After accounting for their market exposures, overall security selection within underlying funds detracted from the Portfolio’s performance during the Reporting Period. The Goldman Sachs Long Short Credit Strategies Fund and the Goldman Sachs Long Short Fund, which are each benchmarked to the LIBOR Index, underperformed their market exposures most. The Goldman Sachs Strategic Income Fund, which is also benchmarked to the LIBOR Index, marginally outpaced its market exposure. The Goldman Sachs Dynamic Emerging Markets Debt Fund outperformed its benchmark index the most.
How was the Portfolio positioned at the beginning of the Reporting Period?
At the beginning of the Reporting Period, the Portfolio was positioned, in terms of its total net assets, with 76.1% in liquid alternative strategies, 11.4% in real assets and 1.4% in cash. (Liquid alternatives strategies generally include, but are not limited to, momentum or trend trading strategies (investment decisions based on trends in asset prices over time), hedge fund beta (long term total returns consistent with investment results that approximate the return and risk patterns of a diversified universe of hedge funds), managed risk investment strategies (which seek to manage extreme risk scenarios by implementing daily and monthly risk targets across a diversified mix of asset classes), emerging markets debt and unconstrained fixed income strategies (which have the ability to move across various fixed income sectors). Real assets generally include, but are not limited to, commodities, global real estate securities, infrastructure and master limited partnerships (“MLPs”).) The strategic asset allocation of the Portfolio reflects a risk-based allocation approach to increase diversification across the Portfolio. The Portfolio had 11.1% of its total net assets invested in tactical exposures at the beginning of the Reporting Period.
How did you tactically manage the Portfolio’s allocations during the Reporting Period?
At the beginning of the Reporting Period, we increased the Portfolio’s already short duration position through a steepening position at the front, or short-term, end of the U.S. yield curve. (Duration is a measure of the Portfolio’s sensitivity to changes in interest rates.) In our view, U.S. economic fundamentals were positive, with inflation data firming and the labor market at what is considered by the government to be full employment, and we thought the market was underpricing the pace at which the Fed would raise interest rates. We further increased this steepening position in the middle of the Reporting Period. In our view, continued strong economic data suggested a higher risk of an abrupt rise in yields.
In addition, over the course of the Reporting Period, we modulated the Portfolio’s strategic exposures. At the beginning of the Reporting Period, we underweighted the short volatility selling strategy, which would profit if the CBOE Volatility Index® (“VIX®”) fell or would take a loss if it rose. The VIX® was at a historical low when the Reporting Period started, a situation we did not expect to continue, as we believed volatility could suddenly spike on political uncertainty and in response to news about a possible Fed rate hike. Once we thought these risks had passed, we eliminated the Portfolio’s underweight to the short volatility selling strategy. Shortly thereafter, we took profits on a long position in emerging markets debt, which the Portfolio had held since July 2016, as it reached our price target and we believed near-term risks were skewed to the downside.
During the Reporting Period, we continued to manage the Portfolio’s tactical country and sector-level relative value positions. We increased the size of the Portfolio’s long tactical position in Singapore equities versus its short tactical position in global equities broadly. Short-term technical (or supply and demand) conditions looked favorable, momentum remained positive, and we believed Singapore equities would continue to outperform in the near term. In the middle of the Reporting Period, after the significant appreciation of Singapore equities, we reduced the Portfolio’s long tactical position by approximately half. Additionally, during the Reporting Period, the Portfolio maintained a long tactical position in large-cap U.S. banks versus a short tactical position in
2
GOLDMAN SACHS VARIABLE INSURANCE TRUST MULTI-STRATEGY ALTERNATIVES PORTFOLIO
large-cap U.S. stocks broadly. We believed the environment was one of higher economic growth and inflation, which could, in our view, lead to higher equity prices and higher yields. Overall, we thought the environment would be particularly advantageous for U.S. banks. Also, in our view, banks are potentially one of the largest beneficiaries of potential U.S. fiscal policy initiatives, such as tax reform, reduced regulation and infrastructure spending. In addition, during the Reporting Period, we took profits on the Portfolio’s tactical long position in Spanish equities versus European equities (initiated in August 2016) because our investment thesis had played out as expected. Although we decided to exit the position, we remained positive on European and Spanish economic growth, believing that relative value opportunities could be better captured through positioning in developed markets beyond Spain. At the same time, we initiated a long tactical position in Spanish equities versus Australian equities, as we expect the Spanish economy to continue firming and believe the Australia economy is decelerating due to its trade connections with China as well as other idiosyncratic factors.
Within currencies, the Portfolio continued to hold a strategic allocation to a basket of international currencies, which we tactically managed during the Reporting Period. We used this basket as we sought to take advantage of the monetary and inflationary environment across developed and emerging market countries. It was also used to express our views on issues such as slowing economic growth in China, economic developments in other emerging market countries and commodity prices.
How was the Portfolio positioned at the end of the Reporting Period?
At the end of the Reporting Period, the Portfolio was positioned, in terms of its total net assets, with 61.9% in liquid alternative strategies, 27.9% in real assets and 7.6% in cash. The Portfolio had 2.7% of its total net assets invested in tactical exposures.
How did the Portfolio use derivatives and similar instruments during the Reporting Period?
During the Reporting Period, the Portfolio used derivatives primarily to express views across developed and emerging markets equities. The Portfolio employed equity index futures to replicate exposures to U.S. large-cap equities (negative impact), U.K. large-cap equities versus U.K. domestically focused equities (negative impact), and European equities (negative impact, though Spanish equity exposure contributed positively). Additionally, the Portfolio used equity index futures to gain tactical exposure to Indian equities (positive impact), Australian equities (positive impact), Spanish equities (positive impact), and Chinese offshore-listed equities versus Chinese onshore-listed equities (negative impact). The Portfolio also used emerging markets equity index futures to partially hedge the beta associated with investing in emerging markets stocks, thus isolating active security selection. In addition, toward the end of the Reporting Period, emerging markets equity index futures were used to gain exposure to emerging markets equities after we took profits on a long position in emerging markets stocks, thereby eliminating them from the Portfolio. These futures contributed positively to the Portfolio’s performance. (Beta is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole.) Within fixed income, the Portfolio used interest rate futures to take views on the U.S. Treasury yield curve (negative impact). In addition, during the Reporting Period, the Portfolio employed foreign exchange forwards to go long and short select developed and emerging markets currencies within a tactical basket of currencies. The use of foreign exchange forwards had a negative impact on performance.
Additionally, some of the underlying funds used derivatives during the Reporting Period to apply their active investment views with greater versatility and potentially to afford greater risk management precision. As market conditions warranted during the Reporting Period, some of these underlying funds engaged in forward foreign currency exchange contracts, financial futures contracts, options, swap contracts and structured securities to attempt to enhance portfolio return and for hedging purposes.
What is the Portfolio’s tactical view and strategy for the months ahead?
At the end of the Reporting Period, we expected the global economy to continue expanding during the second half of 2017, improving on the progress it made in 2016. We believed the markets were underestimating the pace of Fed interest rate hikes, given that the U.S. labor market was near full employment when the Reporting Period ended. Although we did not see a pickup in inflation during the Reporting Period, we expected the lower than consensus expected inflation numbers to be temporary as they were not consistent with U.S. economic data, in our view.
With regard to equities, we believe returns may be limited but positive in the near term, given the supportive investment environment and the appreciation in stock prices during the Reporting Period. As for fixed income, we are bearish on government bonds and believe we could see temporary selloffs in riskier asset classes, driven by inflation scares. At the end of the Reporting Period, we generally preferred corporate credit over government bonds, though the compression in spreads during the Reporting Period had made corporate credit less attractive than earlier in 2017. (Spreads are yield differentials between bonds of comparable maturity.) As for emerging markets assets versus developed markets assets, we remain more constructive on emerging markets assets given what we consider to be their attractive relative valuations and because we believe emerging markets growth has room to rebound.
3
GOLDMAN SACHS VARIABLE INSURANCE TRUST MULTI-STRATEGY ALTERNATIVES PORTFOLIO
Index Definitions
∎ | The BofA Merrill Lynch U.S. Dollar Three-Month LIBOR Constant Maturity Index is based on the assumed purchase of a synthetic instrument having three months to maturity and with a coupon equal to the closing quote for three-month LIBOR. That issue is sold the following day (priced at a yield equal to the current day closing three-month LIBOR rate) and is rolled into a new three-month instrument. The index, therefore, will always have a constant maturity equal to exactly three months. It is not possible to invest in an unmanaged index. |
∎ | The MSCI World Index represents large- and mid-cap equity performance across 23 developed markets countries, covering approximately 85% of the free float-adjusted market capitalization in each. This index offers a broad global equity benchmark, without emerging markets exposure. It is not possible to invest in an unmanaged index. |
∎ | The MSCI Emerging Markets Index captures large- and mid-cap representation across 24 emerging markets countries. The index covers approximately 85% of the free float-adjusted market capitalization in each country. It is not possible to invest in an unmanaged index. |
∎ | The CBOE Volatility Index® (VIX®) is a key measure of market expectations of near-term volatility conveyed by S&P 500® Index option prices. Since its introduction in 1993, VIX® has been considered by many to be the world’s premier barometer of investor sentiment and market volatility. It is not possible to invest in an unmanaged index. |
∎ | The S&P 500® Index is a U.S. stock market index based on the market capitalizations of 500 large companies having common stock listed on the New York Stock Exchange or NASDAQ. The S&P 500® Index components and their weightings are determined by S&P Dow Jones Indices. It is not possible to invest in an unmanaged index. |
4
FUND BASICS
Multi-Strategy Alternatives Portfolio
as of June 30, 2017
STANDARDIZED TOTAL RETURNS1
For the period ended 6/30/17 | One Year | Since Inception | Inception Date | |||||||
Institutional | 5.45 | % | -0.48 | % | 4/25/14 | |||||
Service | 5.19 | -0.73 | 4/25/14 | |||||||
Advisor | 5.10 | -0.84 | 4/25/14 |
1 | The Standardized Total Returns are average annual total returns as of the most recent calendar quarter-end. They assume reinvestment of all distributions at net asset value (“NAV”). Because Institutional, Service and Advisor Shares do not involve a sales charge, such a charge is not applied to their Standardized Total Returns. |
Total return figures in the above chart represent past performance and do not indicate future results, which will vary. The investment return and principal value of an investment will fluctuate and, therefore, an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the total return figures in the above chart. Please visit www.GSAMFUNDS.com to obtain the most recent month-end returns. Performance reflects fee waivers and/or expense limitations in effect during the periods shown. In their absence, performance would be reduced.
EXPENSE RATIOS2
Net Expense Ratio (Current) | Gross Expense Ratio (Before Waivers) | |||||||
Institutional | 1.27 | % | 3.42 | % | ||||
Service | 1.52 | 3.02 | ||||||
Advisor | 1.67 | 3.63 |
2 | The expense ratios of the Portfolio, both current (net of any fee waivers and/or expense limitations) and before waivers (gross of any fee waivers and/or expense limitations) are as set forth above according to the most recent publicly available Prospectuses for the Portfolio and may differ from the expense ratios disclosed in the Financial Highlights in this report. Pursuant to a contractual arrangement, the Portfolio’s fee waivers and/or expense limitations will remain in place through at least April 28, 2018, and prior to such date, the Investment Adviser may not terminate the arrangements without the approval of the Portfolio’s Board of Trustees. If these arrangements are discontinued in the future, the expense ratios may change without shareholder approval. |
5
FUND BASICS
OVERALL UNDERLYING FUND AND ETF WEIGHTINGS3
Percentage of Net Assets
3 | The Portfolio is actively managed and, as such, its composition may differ over time. The percentage shown for each Underlying Fund and exchange traded fund (“ETF”) reflects the value of that Underlying Fund or ETF as a percentage of net assets of the Portfolio. Figures in the graph above may not sum to 100% due to rounding and/or exclusion of other assets and liabilities. Underlying sector allocations of exchange traded funds and investment companies held by the Portfolio are not reflected in the graph above. The graph depicts the Portfolio’s investments but may not represent the Portfolio’s market exposure due to the exclusion of certain derivatives, if any, as listed in the Additional Investment Information section of the Schedule of Investments. |
6
GOLDMAN SACHS VARIABLE INSURANCE TRUST MULTI-STRATEGY ALTERNATIVES PORTFOLIO
Schedule of Investments
June 30, 2017 (Unaudited)
Shares | Description | Value | ||||||
Underlying Funds(a) – 89.5% | ||||||||
Equity – 28.2% | ||||||||
192,057 | Goldman Sachs Absolute Return Tracker Fund | $ | 1,832,227 | |||||
93,264 | Goldman Sachs Emerging Markets Equity Insights Fund | 900,000 | ||||||
91,182 | Goldman Sachs Long Short Fund | 783,256 | ||||||
24,692 | Goldman Sachs Real Estate Securities Fund | 460,005 | ||||||
|
| |||||||
3,975,488 | ||||||||
|
| |||||||
Fixed Income – 61.3% | ||||||||
332,632 | Goldman Sachs Long Short Credit Strategies Fund | 3,166,657 | ||||||
120,837 | Goldman Sachs Emerging Markets Debt Fund | 1,560,000 | ||||||
125,295 | Goldman Sachs Strategic Income Fund | 1,211,601 | ||||||
139,818 | Goldman Sachs High Yield Fund | 920,000 | ||||||
99,300 | Goldman Sachs Strategic Macro Fund | 875,823 | ||||||
76,900 | Goldman Sachs Managed Futures Strategy Fund | 790,531 | ||||||
10,917 | Goldman Sachs High Yield Floating Rate Fund | 106,000 | ||||||
|
| |||||||
8,630,612 | ||||||||
|
| |||||||
| TOTAL UNDERLYING FUNDS (INSTITUTIONAL SHARES) | |||||||
(Cost $12,596,459) | $ | 12,606,100 | ||||||
|
| |||||||
Exchange Traded Funds – 1.1% | ||||||||
646 | ProShares Short VIX Short-Term Futures Fund(b) | $ | 104,181 | |||||
1,171 | SPDR S&P Bank Fund | 50,962 | ||||||
|
| |||||||
TOTAL EXCHANGE TRADED FUNDS | ||||||||
(Cost $75,279) | $ | 155,143 | ||||||
|
|
Shares | Distribution Rate | Value | ||||||
Investment Company(a)(c) – 10.0% | ||||||||
Goldman Sachs Financial Square Government Fund — Institutional Shares |
| |||||||
1,409,488 | 0.845 | % | $ | 1,409,488 | ||||
(Cost $1,409,488) | ||||||||
|
Contracts | Strike Price | Expiration Date | Value | |||||||||
Options Purchased – 1.6% | ||||||||||||
Eurodollar Call Option | ||||||||||||
64 | $ | 98.125 | 09/18/17 | $ | 83,200 | |||||||
43 | 97.875 | 12/18/17 | 69,875 | |||||||||
20 | 97.500 | 03/19/18 | 47,000 | |||||||||
205 | 99.000 | 12/17/18 | 8,969 | |||||||||
154 | 99.000 | 03/18/19 | 10,587 | |||||||||
86 | 99.000 | 06/17/19 | 7,525 | |||||||||
| ||||||||||||
TOTAL OPTIONS PURCHASED | ||||||||||||
(Cost $240,496) | $ | 227,156 | ||||||||||
| ||||||||||||
TOTAL INVESTMENTS BEFORE SECURITIES LENDING REINVESTMENT VEHICLE | ||||||||||||
(Cost $14,321,722) | $ | 14,397,887 | ||||||||||
|
Shares | Distribution Rate | Value | ||||||
Securities Lending Reinvestment Vehicle(a)(c) – 0.8% | ||||||||
Goldman Sachs Financial Square Government Fund — Institutional Shares |
| |||||||
113,225 | 0.845 | % | $ | 113,225 | ||||
(Cost $113,225) | ||||||||
| ||||||||
TOTAL INVESTMENTS – 103.0% | ||||||||
(Cost $14,434,947) | $ | 14,511,112 | ||||||
| ||||||||
LIABILITIES IN EXCESS OF OTHER ASSETS – (3.0)% |
| (420,837 | ) | |||||
| ||||||||
NET ASSETS – 100.0% | $ | 14,090,275 | ||||||
|
The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. | ||
(a) | Represents affiliated funds. | |
(b) | All or a portion of security is on loan. | |
(c) | Variable rate security. Interest rate or distribution rate disclosed is that which is in effect on June 30, 2017. |
The accompanying notes are an integral part of these financial statements. | 7 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST MULTI-STRATEGY ALTERNATIVES PORTFOLIO
Schedule of Investments (continued)
June 30, 2017 (Unaudited)
Investment Abbreviation: | ||
SPDR | —Standard and Poor’s Depositary Receipts | |
Currency Abbreviations: | ||
BRL | —Brazilian Real | |
CHF | —Swiss Franc | |
COP | —Colombian Peso | |
CZK | —Czech Koruna | |
EUR | —Euro | |
GBP | —British Pound | |
HUF | —Hungarian Forint | |
IDR | —Indonesian Rupiah | |
INR | —Indian Rupee | |
JPY | —Japanese Yen | |
KRW | —South Korean Won | |
NOK | —Norwegian Krone | |
PHP | —Philippines peso | |
RUB | —Russian Ruble | |
SEK | —Swedish Krona | |
THB | —Thailand Baht | |
TRY | —Turkish Lira | |
TWD | —Taiwan Dollar | |
USD | —United States Dollar |
ADDITIONAL INVESTMENT INFORMATION
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS — At June 30, 2017, the Portfolio had the following forward foreign currency exchange contracts:
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS WITH UNREALIZED GAIN
Counterparty | Currency Purchased | Currency Sold | Settlement Date | Current Value | Unrealized Gain | |||||||||||||||
Morgan Stanley Co., Inc. | BRL | 200,000 | USD | 59,563 | 08/02/17 | $ | 60,370 | $ | 807 | |||||||||||
CZK | 2,400,000 | USD | 103,189 | 09/20/17 | 105,483 | 2,294 | ||||||||||||||
EUR | 60,000 | USD | 67,234 | 09/20/17 | 68,813 | 1,579 | ||||||||||||||
NOK | 550,000 | USD | 64,845 | 09/20/17 | 65,979 | 1,134 | ||||||||||||||
SEK | 1,275,000 | USD | 147,370 | 09/20/17 | 152,016 | 4,646 | ||||||||||||||
TRY | 220,000 | USD | 60,252 | 09/20/17 | 61,147 | 895 | ||||||||||||||
USD | 58,220 | COP | 176,000,000 | 09/20/17 | 57,159 | 1,061 | ||||||||||||||
USD | 191,403 | JPY | 21,000,000 | 09/20/17 | 187,348 | 4,055 | ||||||||||||||
USD | 62,642 | KRW | 70,000,000 | 09/20/17 | 61,194 | 1,448 | ||||||||||||||
USD | 80,120 | TWD | 2,400,000 | 09/20/17 | 78,949 | 1,171 | ||||||||||||||
TOTAL | $ | 19,090 |
8 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST MULTI-STRATEGY ALTERNATIVES PORTFOLIO
ADDITIONAL INVESTMENT INFORMATION (continued)
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS WITH UNREALIZED LOSS
Counterparty | Currency Purchased | Currency Sold | Settlement Date | Current Value | Unrealized Loss | |||||||||||||||
Morgan Stanley Co., Inc. | BRL | 200,000 | USD | 60,514 | 07/05/17 | $ | 60,370 | $ | (144 | ) | ||||||||||
COP | 176,000,000 | USD | 59,859 | 09/20/17 | 57,160 | (2,699 | ) | |||||||||||||
IDR | 2,520,000,000 | USD | 187,962 | 09/20/17 | 187,455 | (507 | ) | |||||||||||||
INR | 8,000,000 | USD | 122,992 | 09/20/17 | 122,711 | (281 | ) | |||||||||||||
PHP | 4,000,000 | USD | 80,322 | 09/20/17 | 78,728 | (1,594 | ) | |||||||||||||
RUB | 3,750,000 | USD | 64,647 | 09/20/17 | 62,551 | (2,096 | ) | |||||||||||||
USD | 59,916 | BRL | 200,000 | 07/05/17 | 60,370 | (454 | ) | |||||||||||||
USD | 125,081 | CHF | 120,000 | 09/20/17 | 125,773 | (692 | ) | |||||||||||||
USD | 192,004 | EUR | 170,000 | 09/20/17 | 194,969 | (2,965 | ) | |||||||||||||
USD | 63,860 | GBP | 50,000 | 09/20/17 | 65,280 | (1,420 | ) | |||||||||||||
USD | 87,797 | HUF | 24,000,000 | 09/20/17 | 89,047 | (1,250 | ) | |||||||||||||
USD | 88,116 | THB | 3,000,000 | 09/20/17 | 88,317 | (201 | ) | |||||||||||||
TOTAL | $ | (14,303 | ) |
FUTURES CONTRACTS — At June 30, 2017, the Portfolio had the following futures contracts:
Type | Number of Contracts Long (Short) | Expiration Date | Current Value | Unrealized Gain (Loss) | ||||||||||||
90 Day Eurodollar | 52 | December 2017 | $ | 12,808,250 | $ | 6,755 | ||||||||||
90 Day Eurodollar | (52 | ) | March 2020 | (12,728,300 | ) | (34,583 | ) | |||||||||
EURO STOXX 50 Index | 1 | September 2017 | 39,187 | (1,339 | ) | |||||||||||
Euro-Buxl | (5 | ) | September 2017 | (933,822 | ) | (349 | ) | |||||||||
FTSE 250 Index | (2 | ) | September 2017 | (100,085 | ) | 2,073 | ||||||||||
FTSE China A50 Index | (8 | ) | July 2017 | (90,900 | ) | (641 | ) | |||||||||
H-Shares Index | 1 | July 2017 | 65,290 | (170 | ) | |||||||||||
IBEX 35 Index | 1 | July 2017 | 118,851 | (4,021 | ) | |||||||||||
MSCI EAFE Mini Index | (1 | ) | September 2017 | (94,480 | ) | 163 | ||||||||||
MSCI Emerging Markets Mini Index | 13 | September 2017 | 655,395 | (6,031 | ) | |||||||||||
MSCI Singapore Index | 3 | July 2017 | 78,108 | 165 | ||||||||||||
S&P 500 E-Mini Index | (4 | ) | September 2017 | (484,180 | ) | 1,660 | ||||||||||
SGX NIFTY 50 Index | 4 | July 2017 | 76,148 | (742 | ) | |||||||||||
SPI 200 Index | (1 | ) | September 2017 | (108,546 | ) | (968 | ) | |||||||||
TOTAL | $ | (38,028 | ) |
The accompanying notes are an integral part of these financial statements. | 9 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST MULTI-STRATEGY ALTERNATIVES PORTFOLIO
Statement of Assets and Liabilities
June 30, 2017 (Unaudited)
Assets: | ||||
Investments in affiliated Underlying Funds, at value (cost $14,014,621)(a) | $ | 14,015,588 | ||
Investments in unaffiliated Funds, at value (cost $307,101) | 382,299 | |||
Investments in affiliated securities lending reinvestment vehicle, at value (cost $113,225) | 113,225 | |||
Cash | 466,868 | |||
Receivables: | ||||
Investments sold | 4,377,612 | |||
Collateral on certain derivative contracts | 91,104 | |||
Portfolio shares sold | 13,723 | |||
Reimbursement from investment adviser | 12,433 | |||
Dividends | 845 | |||
Securities lending income | 88 | |||
Unrealized gain on forward foreign currency exchange contracts | 19,090 | |||
Other assets | 175 | |||
Total assets | 19,493,050 | |||
Liabilities: | ||||
Variation margin on certain derivative contracts | 222,185 | |||
Unrealized loss on forward foreign currency exchange contracts | 14,303 | |||
Payables: | ||||
Investments purchased | 4,956,923 | |||
Payable upon return of securities loaned | 113,225 | |||
Portfolio shares redeemed | 11,410 | |||
Distribution and Service fees and Transfer Agency fees | 4,676 | |||
Accrued expenses | 80,053 | |||
Total liabilities | 5,402,775 | |||
Net Assets: | ||||
Paid-in capital | 14,671,261 | |||
Undistributed net investment income | 74,277 | |||
Accumulated net realized loss | (697,799 | ) | ||
Net unrealized gain | 42,536 | |||
NET ASSETS | $ | 14,090,275 | ||
Net Assets: | ||||
Institutional | $ | 386,844 | ||
Service | 42,946 | |||
Advisor | 13,660,485 | |||
Total Net Assets | $ | 14,090,275 | ||
Shares outstanding $0.001 par value (unlimited shares authorized): | ||||
Institutional | 41,176 | |||
Service | 4,561 | |||
Advisor | 1,460,883 | |||
Net asset value, offering and redemption price per share: | ||||
Institutional | $9.39 | |||
Service | 9.42 | |||
Advisor | 9.35 |
(a) Includes loaned securities having a market value of $110,852.
10 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST MULTI-STRATEGY ALTERNATIVES PORTFOLIO
Statement of Operations
For the Six Months Ended June 30, 2017 (Unaudited)
Investment income: | ||||
Dividends from affiliated Underlying Funds | $ | 71,714 | ||
Securities lending income — affiliated issuer | 840 | |||
Dividends from unaffiliated Funds | 509 | |||
Total investment income | 73,063 | |||
Expenses: | ||||
Professional fees | 29,932 | |||
Custody, accounting and administrative services | 27,077 | |||
Distribution and Service fees(a) | 23,208 | |||
Printing and mailing costs | 21,818 | |||
Management fees | 8,958 | |||
Trustee fees | 8,099 | |||
Transfer Agency fees(a) | 1,194 | |||
Other | 1,520 | |||
Total expenses | 121,806 | |||
Less — expense reductions | (86,179 | ) | ||
Net expenses | 35,627 | |||
NET INVESTMENT INCOME | 37,436 | |||
Realized and unrealized gain (loss): | ||||
Net realized gain (loss) from: | ||||
Investments affiliated Underlying Funds | 17,866 | |||
Investments in unaffiliated Underlying Funds | 47,662 | |||
Futures contracts | 15,846 | |||
Forward foreign currency exchange contracts | (7,394 | ) | ||
Foreign currency transactions | 177 | |||
Net change in unrealized gain (loss) on: | ||||
Investments affiliated Underlying Funds | 260,803 | |||
Investments in unaffiliated Underlying Funds | 15,861 | |||
Futures contracts | (33,601 | ) | ||
Forward foreign currency exchange contracts | (7,235 | ) | ||
Foreign currency translation | (1,613 | ) | ||
Net realized and unrealized gain | 308,372 | |||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 345,808 |
(a) Class specific Distribution and Service, and Transfer Agency fees were as follows:
Distribution and Service Fees | Transfer Agency Fees | |||||||||||||||||
Advisor | Service | Advisor | Institutional | Service | ||||||||||||||
$ | 23,163 | $ | 45 | $ | 1,158 | $ | 32 | $ | 4 |
The accompanying notes are an integral part of these financial statements. | 11 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST MULTI-STRATEGY ALTERNATIVES PORTFOLIO
Statements of Changes in Net Assets
For the Six Months Ended June 30, 2017 (Unaudited) | For the Fiscal Year Ended December 31, 2016 | |||||||
From operations: | ||||||||
Net investment income | $ | 37,436 | $ | 111,842 | ||||
Net realized gain (loss) | 74,157 | (571,447 | ) | |||||
Net change in unrealized gain | 234,215 | 484,829 | ||||||
Net increase in net assets resulting from operations | 345,808 | 25,224 | ||||||
Distributions to shareholders: | ||||||||
From net investment income | ||||||||
Institutional Shares | — | (3,280 | ) | |||||
Service Shares | — | (131 | ) | |||||
Advisor Shares | — | (76,669 | ) | |||||
Total distributions to shareholders | — | (80,080 | ) | |||||
From share transactions: | ||||||||
Proceeds from sales of shares | 3,703,104 | 4,005,564 | ||||||
Reinvestment of distributions | — | 80,080 | ||||||
Cost of shares redeemed | (1,079,158 | ) | (3,556,068 | ) | ||||
Net increase in net assets resulting from share transactions | 2,623,946 | 529,576 | ||||||
TOTAL INCREASE | 2,969,754 | 474,720 | ||||||
Net assets: | ||||||||
Beginning of period | 11,120,521 | 10,645,801 | ||||||
End of period | $ | 14,090,275 | $ | 11,120,521 | ||||
Undistributed net investment income | $ | 74,277 | $ | 36,841 |
12 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST MULTI-STRATEGY ALTERNATIVES PORTFOLIO
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
Income (loss) from investment operations | Distributions to shareholders | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year - Share Class | Net asset value, beginning of period | Net investment income(a)(b) | Net realized and unrealized gain (loss) | Total from investment operations | From net investment income | From net realized gains | Total distributions | Net asset value, end of period | Total return(c) | Net assets, end of period (in 000s) | Ratio of net expenses to average net assets(d) | Ratio of total expenses to average net assets(d) | Ratio of net investment income to average net assets(b) | Portfolio turnover rate(e) | ||||||||||||||||||||||||||||||||||||||||||
FOR THE SIX MONTHS ENDED JUNE 30, (UNAUDITED) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2017 - Institutional | $ | 9.10 | $ | 0.05 | $ | 0.24 | $ | 0.29 | $ | — | $ | — | $ | — | $ | 9.39 | 3.30 | % | $ | 387 | 0.21 | %(f) | 1.66 | %(f) | 1.02 | %(f) | 57 | % | ||||||||||||||||||||||||||||
2017 - Service | 9.13 | 0.04 | 0.25 | 0.29 | — | — | — | 9.42 | 3.18 | 43 | 0.46 | (f) | 1.90 | (f) | 0.77 | (f) | 57 | |||||||||||||||||||||||||||||||||||||||
2017 - Advisor | 9.08 | 0.03 | 0.24 | 0.27 | — | — | — | 9.35 | 3.08 | 13,660 | 0.61 | (f) | 2.05 | (f) | 0.62 | (f) | 57 | |||||||||||||||||||||||||||||||||||||||
FOR THE FISCAL YEARS ENDED DECEMBER 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2016 - Institutional | 9.15 | 0.11 | (0.06 | ) | 0.05 | (0.10 | ) | — | (0.10 | ) | 9.10 | 0.52 | 309 | 0.24 | 2.37 | 1.17 | 44 | |||||||||||||||||||||||||||||||||||||||
2016 - Service | 9.14 | 0.08 | (0.05 | ) | 0.03 | (0.04 | ) | — | (0.04 | ) | 9.13 | 0.28 | 34 | 0.46 | 1.97 | 0.92 | 44 | |||||||||||||||||||||||||||||||||||||||
2016 - Advisor | 9.12 | 0.10 | (0.07 | ) | 0.03 | (0.07 | ) | — | (0.07 | ) | 9.08 | 0.27 | 10,778 | 0.61 | 2.58 | 1.06 | 44 | |||||||||||||||||||||||||||||||||||||||
2015 - Institutional | 9.81 | 0.20 | (0.65 | ) | (0.45 | ) | (0.20 | ) | (0.01 | ) | (0.21 | ) | 9.15 | (4.51 | ) | 958 | 0.22 | 4.40 | 2.02 | 53 | ||||||||||||||||||||||||||||||||||||
2015 - Service | 9.81 | 0.24 | (0.71 | ) | (0.47 | ) | (0.19 | ) | (0.01 | ) | (0.20 | ) | 9.14 | (4.76 | ) | 22 | 0.48 | 3.33 | 2.54 | 53 | ||||||||||||||||||||||||||||||||||||
2015 - Advisor | 9.79 | 0.21 | (0.69 | ) | (0.48 | ) | (0.18 | ) | (0.01 | ) | (0.19 | ) | 9.12 | (4.89 | ) | 9,666 | 0.62 | 3.51 | 2.16 | 53 | ||||||||||||||||||||||||||||||||||||
FOR THE PERIOD ENDED DECEMBER 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2014 - Institutional (Commenced | 10.00 | 0.09 | (0.16 | ) | (0.07 | ) | (0.12 | ) | — | (g) | (0.12 | ) | 9.81 | (0.67 | ) | 1,003 | 0.22 | (f) | 24.63 | (f) | 1.30 | (f) | 25 | |||||||||||||||||||||||||||||||||
2014 - Service (Commenced | 10.00 | 0.07 | (0.16 | ) | (0.09 | ) | (0.10 | ) | — | (g) | (0.10 | ) | 9.81 | (0.85 | ) | 10 | 0.49 | (f) | 25.05 | (f) | 1.02 | (f) | 25 | |||||||||||||||||||||||||||||||||
2014 - Advisor (Commenced | 10.00 | 0.11 | (0.21 | ) | (0.10 | ) | (0.11 | ) | — | (g) | (0.11 | ) | 9.79 | (0.97 | ) | 3,246 | 0.62 | (f) | 16.16 | (f) | 1.66 | (f) | 25 |
(a) | Calculated based on the average shares outstanding methodology. |
(b) | Recognition of net investment income by the Portfolio is affected by the timing of declaration of dividends by the Underlying Funds in which the Portfolio invests. |
(c) | Assumes investment at the net asset value at the beginning of the period, reinvestment of all distributions, and a complete redemption of the investment at the net asset value at the end of the period. Total returns for periods less than one full year are not annualized. |
(d) | Expense ratios exclude the expenses of the Underlying Funds in which the Portfolio invests. |
(e) | The portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short term investments and certain derivatives. If such transactions were included, the portfolio turnover rate may be higher. |
(f) | Annualized. |
(g) | Amount is less than $0.005 per share. |
The accompanying notes are an integral part of these financial statements. | 13 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST MULTI-STRATEGY ALTERNATIVES PORTFOLIO
Notes to Financial Statements
June 30, 2017 (Unaudited)
1. ORGANIZATION
Goldman Sachs Variable Insurance Trust (the “Trust” or “VIT”) is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company. The Trust includes the Goldman Sachs Multi-Strategy Alternatives Portfolio (the “Portfolio”). The Portfolio is a diversified portfolio under the Act offering three classes of shares — Institutional, Service and Advisor Shares. Shares of the Trust are offered to separate accounts of participating life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies.
Goldman Sachs Asset Management, L.P. (“GSAM”), an affiliate of Goldman Sachs & Co. LLC (formerly Goldman, Sachs & Co.) (“Goldman Sachs”), serves as investment adviser to the Portfolio pursuant to a management agreement (the “Agreement”) with the Trust.
The Portfolio invests primarily in a combination of domestic and international equity and fixed income underlying funds (“Underlying Funds”) which are registered under the Act, for which GSAM or Goldman Sachs Asset Management International (“GSAMI”), also an affiliate of Goldman Sachs, act as investment advisers. Additionally, this Portfolio may invest a portion of its assets directly in other securities and instruments, including unaffiliated exchange traded funds (“Unaffiliated Funds”).
2. SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and require management to make estimates and assumptions that may affect the reported amounts and disclosures. Actual results may differ from those estimates and assumptions.
A. Investment Valuation — The Portfolio’s valuation policy, as well as the Underlying Funds’ is to value investments at fair value.
B. Investment Income and Investments — Investment income includes interest income, dividend income and securities lending income. Interest income is accrued daily and adjusted for amortization of premiums and accretion of discounts. Dividend income is recognized on ex-dividend date or, for certain foreign securities, as soon as such information is obtained subsequent to the ex-dividend date. Capital gain distributions received from Underlying Funds are recognized on ex-dividend date. Investment transactions are reflected on trade date. Realized gains and losses are calculated using identified cost. Investment transactions are recorded on the following business day for daily net asset value (“NAV”) calculations. Income distributions are recognized as capital gains or income in the financial statements in accordance with the character that is distributed.
For derivative contracts, realized gains and losses are recorded upon settlement of the contract.
C. Class Allocations and Expenses — Investment income, realized and unrealized gain (loss), and non-class specific expenses of the Portfolio are allocated daily based upon the proportion of net assets of each class. Non-class specific expenses directly incurred by the Portfolio are charged to that Portfolio, while such expenses incurred by the Trust are allocated across the applicable Portfolios on a straight-line and/or pro-rata basis depending upon the nature of the expenses. Class specific expenses, where applicable, are borne by the respective share classes and include Distribution and Service and Transfer Agency fees. Expenses included in the accompanying financial statements reflect the expenses of the Portfolio and do not include any expenses associated with the Underlying Funds (”Underlying Funds”). Because the Underlying Funds have varied expense and fee levels and the Portfolio may own different proportions of the Underlying Funds at different times, the amount of fees and expenses incurred indirectly by the Portfolio will vary.
D. Federal Taxes and Distributions to Shareholders — It is the Portfolio’s policy to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Code”), applicable to regulated investment companies (mutual funds) and to distribute each year substantially all of its investment company taxable income and capital gains to its shareholders. Accordingly, the Portfolio is not required to make any provisions for the payment of federal income tax. Distributions to shareholders are recorded on the ex-dividend date. Income and capital gains distributions, if any, are declared and paid annually.
14
GOLDMAN SACHS VARIABLE INSURANCE TRUST MULTI-STRATEGY ALTERNATIVES PORTFOLIO
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Net capital losses, if any, are carried forward to future fiscal years and may be used to the extent allowed by the Code to offset any future capital gains. Losses that are carried forward will retain their character as either short-term or long-term capital losses. Utilization of capital loss carryforwards will reduce the requirement of future capital gains distributions.
The characterization of distributions to shareholders for financial reporting purposes is determined in accordance with federal income tax rules, which may differ from GAAP. The source of the Portfolio’s distributions may be shown in the accompanying financial statements as either from net investment income, net realized gain or capital. Certain components of the Portfolio’s net assets on the Statement of Assets and Liabilities reflect permanent GAAP/tax differences based on the appropriate tax character.
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS
U.S. GAAP defines the fair value of a financial instrument as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price); the Portfolio’s policy is to use the market approach. GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The levels used for classifying investments are not necessarily an indication of the risk associated with investing in these investments. The three levels of the fair value hierarchy are described below:
Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 — Quoted prices in markets that are not active or financial instruments for which significant inputs are observable (including, but not limited to, quoted prices for similar investments, interest rates, foreign exchange rates, volatility and credit spreads), either directly or indirectly;
Level 3 — Prices or valuations that require significant unobservable inputs (including GSAM’s assumptions in determining fair value measurement).
Changes in valuation techniques may result in transfers into or out of an assigned level within the hierarchy. In accordance with the Portfolio’s policy, transfers between different levels of the fair value hierarchy resulting from such changes are deemed to have occurred as of the beginning of the reporting period.
The Board of Trustees (“Trustees”) has approved Valuation Procedures that govern the valuation of the portfolio investments held by the Portfolio, including investments for which market quotations are not readily available. The Trustees have delegated to GSAM day-to-day responsibility for implementing and maintaining internal controls and procedures related to the valuation of the Portfolio’s investments. To assess the continuing appropriateness of pricing sources and methodologies, GSAM regularly performs price verification procedures and issues challenges as necessary to third party pricing vendors or brokers, and any differences are reviewed in accordance with the Valuation Procedures.
A. Level 1 and Level 2 Fair Value Investments — The valuation techniques and significant inputs used in determining the fair values for investments classified as Level 1 and Level 2 are as follows:
Exchange Traded Funds — Investments in exchange traded funds (“ETFs”) are valued daily at the last sale price or official closing price on the principal exchange or system on which the investment is traded. To the extent these investments are actively traded, they are classified as Level 1 of the fair value hierarchy, otherwise they are generally classified as Level 2. For information regarding an ETF’s accounting policies and investment holdings, please see the ETF’s shareholder report.
Underlying Funds (Including Money Market Funds) — Investments in the Underlying Funds are valued at the NAV per share of the Institutional Share class of each Underlying Fund on the day of valuation. Because the Portfolio invests primarily in other mutual funds that fluctuate in value, the Portfolio’s shares will correspondingly fluctuate in value. These investments are generally classified as Level 1 of the fair value hierarchy. For information regarding an Underlying Fund’s accounting policies and investment holdings, please see the Underlying Fund’s shareholder report.
15
GOLDMAN SACHS VARIABLE INSURANCE TRUST MULTI-STRATEGY ALTERNATIVES PORTFOLIO
Notes to Financial Statements (continued)
June 30, 2017 (Unaudited)
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS (continued)
Derivative Contracts — A derivative is an instrument whose value is derived from underlying assets, indices, reference rates or a combination of these factors. The Portfolio enters into derivative transactions to hedge against changes in interest rates, securities prices, and/or currency exchange rates, to increase total return, or to gain access to certain markets or attain exposure to other underliers.
Exchange-traded derivatives, including futures and options contracts, are valued at the last sale or settlement price and typically fall within Level 1 of the fair value hierarchy. Over-the-counter (“OTC”) and centrally cleared derivatives are valued using market transactions and other market evidence, including market-based inputs to models, calibration to market-clearing transactions, broker or dealer quotations, or other alternative pricing sources. Where models are used, the selection of a particular model to value OTC and centrally cleared derivatives depends upon the contractual terms of, and specific risks inherent in, the instrument, as well as the availability of pricing information in the market. Valuation models require a variety of inputs, including contractual terms, market prices, yield curves, credit curves, measures of volatility, voluntary and involuntary prepayment rates, loss severity rates and correlations of such inputs. For OTC and centrally cleared derivatives that trade in liquid markets, model inputs can generally be verified and model selection does not involve significant management judgment. OTC and centrally cleared derivatives are classified within Level 2 of the fair value hierarchy when significant inputs are corroborated by market evidence.
i. Forward Contracts — A forward contract is a contract between two parties to buy or sell an asset at a specified price on a future date. A forward contract settlement can occur on a cash or delivery basis. Forward contracts are marked-to-market daily using independent vendor prices, and the change in value, if any, is recorded as an unrealized gain or loss. Cash and certain investments may be used to collateralize forward contracts.
A forward foreign currency contract is a forward contract in which the Portfolio agrees to receive or deliver a fixed quantity of one currency for another, at a pre-determined price at a future date. All forward foreign currency exchange contracts are marked-to-market daily at the applicable forward rate. Non-deliverable forward foreign currency exchange contracts are settled with the counterparty in cash without the delivery of foreign currency.
ii. Futures Contracts — Futures contracts are contracts to buy or sell a standardized quantity of a specified commodity or security and are valued based on exchanged settlement prices or independent market quotes. Futures contracts are valued at the last settlement price, or in the absence of a sale, the last bid price for long positions and at the last ask price for short positions, at the end of each day on the board of trade or exchange upon which they are traded. Upon entering into a futures contract, the Portfolio deposits cash or securities in an account on behalf of the broker in an amount sufficient to meet the initial margin requirement. Subsequent payments are made or received by the Portfolio equal to the daily change in the contract value and are recorded as variation margin receivable or payable with a corresponding offset to unrealized gains or losses. For financial reporting purposes, cash collateral that has been pledged to cover obligations of the Portfolio and cash collateral received, if any, is reported separately on the Statement of Assets and Liabilities as receivables/payables for collateral on certain derivative contracts. Non-cash collateral pledged by the Portfolio, if any, is noted in the Schedule of Investments.
iii. Options — When the Portfolio writes call or put options, an amount equal to the premium received is recorded as a liability and is subsequently marked-to-market to reflect the current value of the option written. Swaptions are options on interest rate swap contracts.
Upon the purchase of a call option or a put option by the Portfolio, the premium paid is recorded as an investment and subsequently marked-to-market to reflect the current value of the option. Certain options may be purchased with premiums to be determined on a future date. The premiums for these options are based upon implied volatility parameters at specified terms.
B. Level 3 Fair Value Investments — To the extent that significant inputs to valuation models and other alternative pricing sources are unobservable, or if quotations are not readily available, or if GSAM believes that such quotations do not accurately reflect fair value, the fair value of the Portfolio’s investments may be determined under Valuation Procedures approved by the Trustees. GSAM, consistent with its procedures and applicable regulatory guidance, may make an adjustment to the most recent valuation prices of either domestic or foreign securities in light of significant events to reflect what it believes to be the fair value of the securities at the time of determining the Portfolio’s NAV. Significant events which could affect a large number of securities in a particular market may include, but are not limited to: significant fluctuations in U.S. or foreign markets; market dislocations;
16
GOLDMAN SACHS VARIABLE INSURANCE TRUST MULTI-STRATEGY ALTERNATIVES PORTFOLIO
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS (continued)
market disruptions; or unscheduled market closings. Significant events which could also affect a single issuer may include, but are not limited to: corporate actions such as reorganizations, mergers and buy-outs; ratings downgrades; and bankruptcies.
C. Fair Value Hierarchy — The following is a summary of the Portfolio’s investments and derivatives classified in the fair value hierarchy as of June 30, 2017:
Investment Type | Level 1 | Level 2 | Level 3 | |||||||||
Assets | ||||||||||||
Equity Underlying Funds | $ | 3,975,488 | $ | — | $ | — | ||||||
Fixed Income Underlying Funds | 8,630,612 | — | — | |||||||||
Exchange Traded Funds | 155,143 | — | — | |||||||||
Investment Company | 1,409,488 | — | — | |||||||||
Options Purchased | 227,156 | — | — | |||||||||
Securities Lending Reinvestment Vehicle | 113,225 | — | — | |||||||||
Total | $ | 14,511,112 | $ | — | $ | — | ||||||
Derivative Type | ||||||||||||
Assets(a) | ||||||||||||
Forward Foreign Currency Exchange Contracts | $ | — | $ | 19,090 | $ | — | ||||||
Futures Contracts | 10,816 | — | — | |||||||||
Total | $ | 10,816 | $ | 19,090 | $ | — | ||||||
Liabilities(a) | ||||||||||||
Forward Foreign Currency Exchange Contracts | $ | — | $ | (14,303 | ) | $ | — | |||||
Futures Contracts | (48,844 | ) | — | — | ||||||||
Total | $ | (48,844 | ) | $ | (14,303 | ) | $ | — |
(a) | Amount shown represents unrealized gain (loss) at period end. |
For further information regarding security characteristics, see the Schedule of Investments.
4. INVESTMENTS IN DERIVATIVES
The following table sets forth, by certain risk types, the gross value of derivative contracts as of June 30, 2017. These instruments were used as part of the Portfolio’s investment strategies and to obtain and/or manage exposure related to the risks below. The values in the table below exclude the effects of cash collateral received or posted pursuant to these derivative contracts, and therefore are not representative of the Portfolio’s net exposure.
Risk | Statement of Assets and Liabilities | Assets | Statement of Assets and Liabilities | Liabilities | ||||||||||
Equity | Variation margin on certain derivative contracts | $ | 4,061 | (a) | Variation margin on certain derivative contracts | $ | (13,912 | )(a) | ||||||
Currency | Receivables for unrealized gain on forward foreign currency exchange contracts | 19,090 | Payable for unrealized gain on forward foreign currency exchange contracts | (14,303 | ) | |||||||||
Interest Rate | Variation margin on certain derivative contracts; Investments at value | 233,911 | (a) | Variation margin on certain derivative contracts | (34,932 | )(a) | ||||||||
Total | $ | 257,062 | $ | (63,147 | ) |
(a) | Includes unrealized gain (loss) on futures contracts described in the Additional Investment Information section of the Schedule of Investments. Only the variation margin as of June 30, 2017 is reported within the Statement of Assets and Liabilities. |
17
GOLDMAN SACHS VARIABLE INSURANCE TRUST MULTI-STRATEGY ALTERNATIVES PORTFOLIO
Notes to Financial Statements (continued)
June 30, 2017 (Unaudited)
4. INVESTMENTS IN DERIVATIVES (continued)
The following table sets forth, by certain risk types, the Portfolio’s gains (losses) related to these derivatives and their indicative volumes for the six months ended June 30, 2017. These gains (losses) should be considered in the context that these derivative contracts may have been executed to create investment opportunities and/or economically hedge certain investments, and accordingly, certain gains (losses) on such derivative contracts may offset certain (losses) gains attributable to investments. These gains (losses) are included in “Net realized gain (loss)” or “Net change in unrealized gain (loss)” on the Statement of Operations.
Risk | Statement of Operations | Net Realized Gain (Loss) | Net Change in Unrealized Gain (Loss) | Average Number of Contracts(a) | ||||||||||
Equity | Net realized gain (loss) from futures contracts/Net change in unrealized gain (loss) on futures contracts | $ | 15,287 | $ | (10,018 | ) | 31 | |||||||
Currency | Net realized gain (loss) from forward foreign currency exchange contracts/Net change in unrealized gain (loss) on forward foreign currency exchange contracts | (7,394 | ) | $ | (7,235 | ) | 46 | |||||||
Interest Rate | Net realized gain (loss) from futures contracts/Net change in unrealized gain (loss) on investments and futures contracts | 559 | (36,923 | ) | 178 | |||||||||
Total | $ | 8,452 | $ | (54,176 | ) | $ | 255 |
(a) | Average number of contracts is based on the average of month end balances for the six months ended June 30, 2017. |
5. AGREEMENTS AND AFFILIATED TRANSACTIONS
A. Management Agreement — Under the Agreement, GSAM manages the Portfolio, subject to the general supervision of the Trustees.
As compensation for the services rendered pursuant to the Agreement, the assumption of the expenses related thereto and administration of the Portfolio’s business affairs, including providing facilities, GSAM is entitled to a management fee, accrued daily and paid monthly, equal to an annual percentage rate of 0.15% of the Portfolio’s average daily net assets. GSAM has agreed to waive all of its management fee. The management fee waiver will remain in effect through at least April 28, 2018, and prior to such date, GSAM may not terminate the arrangement without the approval of the Board of Trustees. For the six months ended June 30, 2017, GSAM waived $8,958 of its management fee.
The Portfolio invests in Institutional Shares of the Goldman Sachs Financial Square Government Fund, which is an affiliated Underlying Fund. GSAM has agreed to waive a portion of its management fee payable by the Portfolio in an amount equal to the management fee it earns as an investment adviser to any of the affiliated Underlying Funds in which the Portfolio invests. For the six months ended June 30, 2017, GSAM waived $902 of the Portfolio’s management fee.
B. Distribution and/or Service (12b-1) Plans — The Trust, on behalf of Service Shares of the Portfolio, has adopted a Distribution and Service Plan subject to Rule 12b-1 under the Act. Under the Distribution and Service Plan, Goldman Sachs, which serves as distributor (the “Distributor”), is entitled to a fee accrued daily and paid monthly, for distribution services and personal and account maintenance services, which may then be paid by Goldman Sachs to authorized dealers, equal to, on an annual basis, 0.25% of the Portfolio’s average daily net assets attributable to Service Shares.
The Trust, on behalf of Advisor Shares of the Portfolio, has adopted a Distribution Plan subject to Rule 12b-1 under the Act. Under the Distribution Plan, Goldman Sachs as Distributor is entitled to a fee accrued daily and paid monthly for distribution services, which may then be paid by Goldman Sachs to authorized dealers, equal to, on an annual basis, 0.15% of the Portfolio’s average daily net assets attributable to Advisor Shares.
C. Service Plans — The Trust, on behalf of Advisor Shares of the Portfolio, has adopted a Service Plan to allow Advisor Shares to compensate service organizations (including Goldman Sachs) for providing varying levels of personal and account maintenance and administration services to their customers who are beneficial owners of such shares. The Service Plan provides for compensation to the service organizations equal to 0.25% of the average daily net assets attributable to Advisor Shares of the Portfolio.
18
GOLDMAN SACHS VARIABLE INSURANCE TRUST MULTI-STRATEGY ALTERNATIVES PORTFOLIO
5. AGREEMENTS AND AFFILIATED TRANSACTIONS (continued)
D. Transfer Agency Agreement — Goldman Sachs also serves as the transfer agent of the Portfolio for a fee pursuant to the Transfer Agency Agreement. The fees charged for such transfer agency services are accrued daily and paid monthly at an annual rate of 0.02% of the average daily net assets of Institutional, Service and Advisor Shares.
E. Other Expense Agreements and Affiliated Transactions — GSAM has agreed to limit certain “Other Expenses” of the Portfolio (excluding acquired fund fees and expenses, transfer agency fees and expenses, taxes, interest, brokerage fees, shareholder meeting, litigation, indemnification and extraordinary expenses) to the extent such expenses exceed, on an annual basis, a percentage rate of the average daily net assets of the Portfolio. Such Other Expense reimbursements, if any, are accrued daily and paid monthly. In addition, the Portfolio is not obligated to reimburse GSAM for prior fiscal year expense reimbursements, if any. The Other Expense limitation as an annual percentage rate of average daily net assets for the Portfolio is 0.204%. The Other Expense limitation will remain in place through at least April 28, 2018, and prior to such date GSAM may not terminate the arrangement without the approval of the Trustees. For the six months ended June 30, 2017, GSAM reimbursed $76,261 to the Portfolio. In addition, the Portfolio has entered into certain offset arrangements with the custodian and the transfer agent, which may result in a reduction of the Portfolio’s expenses and are received irrespective of the application of the “Other Expense” limitation described above. For the six months ended June 30, 2017, custody fee credits were $58.
F. Line of Credit Facility — As of June 30, 2017, the Portfolio participated in a $1,100,000,000 committed, unsecured revolving line of credit facility (the “facility”) together with other funds of the Trust and certain registered investment companies having management agreements with GSAM or its affiliates. This facility is to be used for temporary emergency purposes, or to allow for an orderly liquidation of securities to meet redemption requests. The interest rate on borrowings is based on the federal funds rate. The facility also requires a fee to be paid by the Portfolio based on the amount of the commitment that has not been utilized. For the six months ended June 30, 2017, the Portfolio did not have any borrowings under the facility.
G. Other Transactions with Affiliates — The Portfolio invests primarily in the Institutional Shares of the Underlying Funds. These Underlying Funds are considered to be affiliated with the Portfolio. The table below shows the transactions in and earnings from investments in these Underlying Funds for the six months ended June 30, 2017:
Underlying Funds | Market Value | Purchases at Cost | Proceeds Sales | Net (Loss) | Change in Unrealized Appreciation (Depreciation) | Market Value | Dividend Income | |||||||||||||||||||||
Goldman Sachs Absolute Return Tracker Fund | $ | 1,482,676 | $ | 702,000 | $ | (405,000 | ) | $ | (680 | ) | $ | 53,231 | $ | 1,832,227 | $ | — | ||||||||||||
Goldman Sachs Dynamic Emerging Markets Debt Fund | 1,059,082 | 407,990 | (1,534,052 | ) | 30,904 | 36,076 | — | 26,194 | ||||||||||||||||||||
Goldman Sachs Emerging Markets Debt Fund | — | 1,560,000 | — | — | — | 1,560,000 | — | |||||||||||||||||||||
Goldman Sachs Emerging Markets Equity Fund | 547,542 | 47,000 | (712,953 | ) | 136,756 | (18,345 | ) | — | — | |||||||||||||||||||
Goldman Sachs Emerging Markets Equity Insights Fund | — | 900,000 | — | — | — | 900,000 | — | |||||||||||||||||||||
Goldman Sachs Financial Square Government Fund | 1,079,735 | 3,180,742 | (2,850,989 | ) | — | — | 1,409,488 | 3,411 | ||||||||||||||||||||
Goldman Sachs High Yield Floating Rate Fund | — | 106,000 | — | — | — | 106,000 | — | |||||||||||||||||||||
Goldman Sachs High Yield Fund | — | 920,000 | — | — | — | 920,000 | — | |||||||||||||||||||||
Goldman Sachs International Real Estate Securities Fund | 114,391 | 2,527 | (124,958 | ) | (4,845 | ) | 12,885 | — | 2,527 |
19
GOLDMAN SACHS VARIABLE INSURANCE TRUST MULTI-STRATEGY ALTERNATIVES PORTFOLIO
Notes to Financial Statements (continued)
June 30, 2017 (Unaudited)
5. AGREEMENTS AND AFFILIATED TRANSACTIONS (continued)
Underlying Funds | Market Value | Purchases at Cost | Proceeds Sales | Net (Loss) | Change in Unrealized Appreciation (Depreciation) | Market Value | Dividend Income | |||||||||||||||||||||
Goldman Sachs Long Short Credit Strategies Fund | $ | 1,768,151 | $ | 1,439,843 | $ | (65,000 | ) | $ | (2,778 | ) | $ | 26,441 | $ | 3,166,657 | $ | 23,856 | ||||||||||||
Goldman Sachs Long Short Fund | 685,145 | 216,001 | (110,000 | ) | (21,354 | ) | 13,464 | 783,256 | — | |||||||||||||||||||
Goldman Sachs Managed Futures Strategy Fund | 1,090,475 | 474,000 | (770,001 | ) | (38,826 | ) | 34,883 | 790,531 | — | |||||||||||||||||||
Goldman Sachs Real Estate Securities Fund | 114,560 | 346,373 | — | — | (928 | ) | 460,005 | 1,374 | ||||||||||||||||||||
Goldman Sachs Strategic Income Fund | 1,569,457 | 554,353 | (920,000 | ) | (44,993 | ) | 52,784 | 1,211,601 | 14,352 | |||||||||||||||||||
Goldman Sachs Strategic Macro Fund | 1,265,829 | 366,000 | (770,000 | ) | (36,318 | ) | 50,312 | 875,823 | — | |||||||||||||||||||
Total | $ | 10,777,043 | $ | 11,222,829 | $ | (8,262,953 | ) | $ | 17,866 | $ | 260,803 | $ | 14,015,588 | $ | 71,714 |
As of June 30, 2017, The Goldman Sachs Group, Inc. was the beneficial owner of approximately 23% of the Service Shares of the Portfolio.
6. PORTFOLIO SECURITIES TRANSACTIONS
The cost of purchases and proceeds from sales and maturities of long-term securities for the six months ended June 30, 2017 were $7,451,865 and $5,220,193, respectively.
7. SECURITIES LENDING
The Portfolio may lend its securities through a securities lending agent, the Bank of New York Mellon (“BNYM”), to certain qualified borrowers. In accordance with the Portfolio’s securities lending procedures, the Portfolio receives cash collateral at least equal to the market value of the securities on loan. The market value of the loaned securities is determined at the close of business of the Portfolio, at their last sale price or official closing price on the principal exchange or system on which they are traded, and any additional required collateral is delivered to the Portfolio on the next business day. As with other extensions of credit, the Portfolio may experience delay in the recovery of its securities or incur a loss should the borrower of the securities breach its agreement with the Portfolio or become insolvent at a time when the collateral is insufficient to cover the cost of repurchasing securities on loan. Dividend income received from securities on loan may not be subject to withholding taxes and therefore withholding taxes paid may differ from the amounts listed in the Statement of Operations. Loans of securities are terminable at any time and as such 1) the remaining contractual maturities of the outstanding securities lending transactions are considered to be overnight and continuous and 2) the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.
The Portfolio invests the cash collateral received in connection with securities lending transactions in the Goldman Sachs Financial Square Government Fund (“Government Money Market Fund”), an affiliated series of the Trust. The Government Money Market Fund is registered under the Act as an open end investment company, is subject to Rule 2a-7 under the Act, and is managed by GSAM, for which GSAM may receive a management fee of up to 0.205% on an annualized basis of the average daily net assets of the Government Money Market Fund.
In the event of a default by a borrower with respect to any loan, BNYM may exercise any and all remedies provided under the applicable borrower agreement to make the Portfolio whole. These remedies include purchasing replacement securities by applying the collateral held from the defaulting broker against the purchase cost of the replacement securities. If BNYM is unable to purchase replacement securities, BNYM will indemnify the Portfolio by paying the Portfolio an amount equal to the market value of the securities loaned minus the value of cash collateral received from the borrower for the loan, subject to an exclusion for any
20
GOLDMAN SACHS VARIABLE INSURANCE TRUST MULTI-STRATEGY ALTERNATIVES PORTFOLIO
7. SECURITIES LENDING (continued)
shortfalls resulting from a loss of value in such cash collateral due to reinvestment risk. The amounts of the Portfolio’s overnight and continuous agreements represent the gross amounts of recognized liabilities for securities lending transactions outstanding as of June 30, 2017 are disclosed as “Payable upon return of securities loaned” on the Statement of Assets and Liabilities.
Both the Portfolio and BNYM received compensation relating to the lending of the Portfolio’s securities. The amounts earned, if any, by the Portfolio for the six months ended June 30, 2017, are reported under Investment Income on the Statement of Operations.
The following table provides information about the Portfolio’s investment in the Government Money Market Fund for the six months ended June 30, 2017:
Market Value 12/31/2016 | Purchases at Cost | Proceeds from Sales | Market Value 6/30/2017 | |||||||||||
$162,650 | $ | 1,139,880 | $ | (1,189,305 | ) | $ | 113,225 |
8. TAX INFORMATION
As of the Portfolio’s most recent fiscal year end, December 31, 2016, the Portfolio’s capital loss carryforwards and certain timing differences, on a tax-basis were as follows:
Capital loss carryforwards: | ||||
Perpetual Short-term | $ | (398,586 | ) | |
Perpetual Long-term | (183,884 | ) | ||
Total capital loss carryforwards | $ | (582,470 | ) | |
Timing differences (Qualified Late Year Loss Deferral/Post October Loss Deferral) | $ | (3,378 | ) |
As of June 30, 2017, the Portfolio’s aggregate security unrealized gains and losses based on cost for U.S. federal income tax purposes were as follows:
Tax cost | $ | 14,629,584 | ||
Gross unrealized gain | 150,960 | |||
Gross unrealized loss | (269,432 | ) | ||
Net unrealized security loss | $ | (118,472 | ) |
The difference between GAAP-basis and tax-basis unrealized gains (losses) is attributable primarily to wash sales, net mark to market gains (losses) on regulated futures and foreign exchange contracts and differences in the tax treatment of underlying fund investments.
GSAM has reviewed the Portfolio’s tax position for all open tax years (the current and prior three years, as applicable) and has concluded that no provision for income tax is required in the Portfolio’s financial statements. Such open tax years remain subject to examination and adjustment by tax authorities.
21
GOLDMAN SACHS VARIABLE INSURANCE TRUST MULTI-STRATEGY ALTERNATIVES PORTFOLIO
Notes to Financial Statements (continued)
June 30, 2017 (Unaudited)
9. OTHER RISKS
The Portfolio’s risks include, but are not limited to, the following:
Derivatives Risk — The Portfolio’s use of derivatives may result in loss. Derivative instruments, which may pose risks in addition to and greater than those associated with investing directly in securities, currencies or other instruments, may be illiquid or less liquid, volatile, difficult to price and leveraged so that small changes in the value of the underlying instruments may produce disproportionate losses to the Portfolio. Derivatives are also subject to counterparty risk, which is the risk that the other party in the transaction will not fulfill its contractual obligation. The use of derivatives is a highly specialized activity that involves investment techniques and risks different from those associated with investments in more traditional securities and instruments. Losses from derivatives can also result from a lack of correlation between changes in the value of derivative instruments and the portfolio assets (if any) being hedged.
Investments in the Underlying Funds — The investments of the Portfolio are concentrated in the Underlying Funds, and the Portfolio’s investment performance is directly related to the investment performance of the Underlying Funds it holds. The Portfolio is subject to the risk factors associated with the investments of the Underlying Funds in direct proportion to the amount of assets allocated to each. To the extent that the Portfolio has a relative concentration of its portfolio in a single Underlying Fund, the Portfolio may be more susceptible to adverse developments affecting that Underlying Fund, and may be more susceptible to losses because of these developments.
Investments in Other Investment Companies — As a shareholder of another investment company, including an exchange-traded fund (“ETF”), the Portfolio will indirectly bear its proportionate share of any net management fees and other expenses paid by such other investment companies, in addition to the fees and expenses regularly borne by the Portfolio. ETFs are subject to risks that do not apply to conventional mutual funds, including but not limited to the following: (i) the market price of the ETF’s shares may trade at a premium or a discount to their NAV; and (ii) an active trading market for an ETF’s shares may not develop or be maintained.
Large Shareholder Transactions Risk — The Portfolio or an Underlying Fund may experience adverse effects when certain large shareholders, such as other funds, participating insurance companies, accounts and Goldman Sachs affiliates, purchase or redeem large amounts of shares of the Portfolio or an Underlying Fund. Such large shareholder redemptions may cause the Portfolio or an Underlying Fund to sell portfolio securities at times when it would not otherwise do so, which may negatively impact the Portfolio’s or an Underlying Fund’s NAV and liquidity. These transactions may also accelerate the realization of taxable income to shareholders if such sales of investments resulted in gains, and may also increase transaction costs. In addition, a large redemption could result in the Portfolio’s or an Underlying Fund’s current expenses being allocated over a smaller asset base, leading to an increase in the Portfolio’s or an Underlying Fund’s expense ratio. Similarly, large Portfolio or Underlying Fund share purchases may adversely affect the Portfolio’s or an Underlying Fund’s performance to the extent that the Portfolio or an Underlying Fund is delayed in investing new cash and is required to maintain a larger cash position than it ordinarily would.
Liquidity Risk — The Underlying Funds may make investments that are illiquid or that may become less liquid in response to market developments or adverse investor perceptions. Illiquid investments may be more difficult to value. Liquidity risk may also refer to the risk that the Portfolio will not be able to pay redemption proceeds within the allowable time period because of unusual market conditions, an unusually high volume of redemption requests, or other reasons. To meet redemption requests, the Portfolio may be forced to sell investments at an unfavorable time and/or under unfavorable conditions. Liquidity risk may be the result of, among other things, the reduced number and capacity of traditional market participants to make a market in fixed income securities or the lack of an active market. The potential for liquidity risk may be magnified by a rising interest rate environment or other circumstances where investor redemptions from fixed income mutual funds may be higher than normal, potentially causing increased supply in the market due to selling activity.
Market and Credit Risks — In the normal course of business, the Portfolio and the Underlying Funds trade financial instruments and enter into financial transactions where risk of potential loss exists due to changes in the market (market risk). Additionally, the Portfolio and the Underlying Funds may also be exposed to credit risk in the event that an issuer or guarantor fails to perform or that an institution or entity with which the Portfolio and the Underlying Funds have unsettled or open transactions defaults.
22
GOLDMAN SACHS VARIABLE INSURANCE TRUST MULTI-STRATEGY ALTERNATIVES PORTFOLIO
9. OTHER RISKS (continued)
Short Position Risk — The Portfolio or an Underlying Fund may enter into a short position through a futures contract, an option or swap agreement or through short sales of any instrument that the Portfolio or an Underlying Fund may purchase for investment. Taking short positions involves leverage of the Portfolio’s assets and presents various risks, including counterparty risk. If the value of the underlying instrument or market in which the Portfolio or an Underlying Fund has taken a short position increases, then the Portfolio or an Underlying Fund will incur a loss equal to the increase in value from the time that the short position was entered into plus any related interest payments or other fees. Taking short positions involves the risk that losses may be disproportionate, may exceed the amount invested, and may be unlimited.
10. INDEMNIFICATIONS
Under the Trust’s organizational documents, its Trustees, officers, employees and agents are indemnified, to the extent permitted by the Act and state law, against certain liabilities that may arise out of performance of their duties to the Portfolio. Additionally, in the course of business, the Portfolio enters into contracts that contain a variety of indemnification clauses. The Portfolio’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Portfolio that have not yet occurred. However, GSAM believes the risk of loss under these arrangements to be remote.
11. SUBSEQUENT EVENTS
Subsequent events after the Statement of Assets and Liabilities date have been evaluated and GSAM has concluded that there is no impact requiring adjustment or disclosure in the financial statements.
12. SUMMARY OF SHARE TRANSACTIONS
Share activity is as follows:
For the Six Months Ended June 30, 2017 (Unaudited) | For the Fiscal Year Ended December 31, 2016 | |||||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||||
Institutional Shares | ||||||||||||||||
Shares sold | 7,716 | $ | 72,714 | 30,367 | $ | 278,375 | ||||||||||
Reinvestment of distributions | — | — | 360 | 3,280 | ||||||||||||
Shares redeemed | (460 | ) | (4,230 | ) | (101,512 | ) | (911,862 | ) | ||||||||
7,256 | 68,484 | (70,785 | ) | (630,207 | ) | |||||||||||
Service Shares | ||||||||||||||||
Shares sold | 902 | 8,500 | 2,700 | 24,286 | ||||||||||||
Reinvestment of distributions | — | — | 14 | 131 | ||||||||||||
Shares redeemed | (10 | ) | (94 | ) | (1,411 | ) | (17,774 | ) | ||||||||
892 | 8,406 | 1,303 | 6,643 | |||||||||||||
Advisor Shares | ||||||||||||||||
Shares sold | 390,020 | 3,621,890 | 410,465 | 3,702,903 | ||||||||||||
Reinvestment of distributions | — | — | 8,435 | 76,669 | ||||||||||||
Shares redeemed | (116,324 | ) | (1,074,834 | ) | (291,572 | ) | (2,626,432 | ) | ||||||||
273,696 | 2,547,056 | 127,328 | 1,153,140 | |||||||||||||
NET INCREASE | 281,844 | $ | 2,623,946 | 57,846 | $ | 529,576 |
23
GOLDMAN SACHS VARIABLE INSURANCE TRUST MULTI-STRATEGY ALTERNATIVES PORTFOLIO
Portfolio Expenses — Six Month Period Ended June 30, 2017 (Unaudited) |
As a shareholder of Institutional, Service or Advisor Shares of the Portfolio, you incur ongoing costs, including management fees, distribution and/or service (12b-1) fees (with respect to Service and Advisor Shares) and other Portfolio expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Institutional Shares, Service Shares and Advisor Shares of the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from January 1, 2017 through June 30, 2017, which represents a period of 181 days of a 365 day year.
Actual Expenses — The first line under each share class in the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000=8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes — The second line under each share class in the table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio’s actual net expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only. As a shareholder of the Portfolio you do not incur any transaction costs, such as sales charges, redemption fees, or exchange fees, but shareholders of other funds may incur such costs. The second line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds whose shareholders may incur transaction costs.
Share Class | Beginning Account Value 01/01/17 | Ending Account Value | Expenses Paid for the 6 Months Ended 06/30/17* | |||||||||
Institutional | ||||||||||||
Actual | $ | 1,000 | $ | 1,033.00 | $ | 1.06 | ||||||
Hypothetical 5% return | 1,000 | 1,023.75 | + | 1.05 | ||||||||
Service | ||||||||||||
Actual | 1,000 | 1,031.80 | 2.32 | |||||||||
Hypothetical 5% return | 1,000 | 1,022.51 | + | 2.31 | ||||||||
Advisor | ||||||||||||
Actual | 1,000 | 1,030.80 | 3.07 | |||||||||
Hypothetical 5% return | 1,000 | 1,021.77 | + | 3.06 |
* | Expenses are calculated using the Portfolio’s annualized net expense ratio for each class, which represents the ongoing expenses as a percentage of net assets for the six months ended June 30, 2017. Expenses are calculated by multiplying the annualized net expense ratio by the average account value for the period; then multiplying the result by the number of days in the most recent fiscal half year; and then dividing that result by the number of days in the fiscal year. The annualized net expense ratios for the period were 0.21%, 0.46% and 0.61% for Institutional, Service and Advisor Shares, respectively. |
+ | Hypothetical expenses are based on the Portfolio’s actual annualized net expense ratios and an assumed rate of return of 5% per year before expenses. |
24
GOLDMAN SACHS VARIABLE INSURANCE TRUST MULTI-STRATEGY ALTERNATIVES PORTFOLIO
Statement Regarding Basis for Approval of Management Agreement (Unaudited)
Background
The Goldman Sachs Multi-Strategy Alternatives Portfolio (the “Portfolio”) is an investment portfolio of Goldman Sachs Variable Insurance Trust (the “Trust”). The Board of Trustees oversees the management of the Trust and reviews the investment performance and expenses of the Portfolio at regularly scheduled meetings held throughout the year. In addition, the Board of Trustees determines annually whether to approve the continuance of the Trust’s investment management agreement (the “Management Agreement”) with Goldman Sachs Asset Management, L.P. (the “Investment Adviser”) on behalf of the Portfolio.
The Management Agreement was most recently approved for continuation until June 30, 2018 by the Board of Trustees, including those 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”), at a meeting held on June 14-15, 2017 (the “Annual Meeting”).
The review process undertaken by the Trustees spans the course of the year and culminates with the Annual Meeting. To assist the Trustees in their deliberations, the Trustees have established a Contract Review Committee (the “Committee”), comprised of the Independent Trustees. The Committee held four meetings over the course of the year since the Management Agreement was last approved. At those Committee meetings, regularly scheduled Board or other committee meetings, and/or the Annual Meeting, matters relevant to the renewal of the Management Agreement were considered by the Board, or the Independent Trustees, as applicable. With respect to the Portfolio, such matters included:
(a) | the nature and quality of the advisory, administrative, and other services provided to the Portfolio and the underlying funds in which it invests (the “Underlying Funds”) by the Investment Adviser and its affiliates, including information about: |
(i) | the structure, staff, and capabilities of the Investment Adviser and its portfolio management teams; |
(ii) | the groups within the Investment Adviser and its affiliates that support the portfolio management teams or provide other types of necessary services, including fund services groups (e.g., accounting and financial reporting, tax, shareholder services, and operations); controls and risk management groups (e.g., legal, compliance, valuation oversight, credit risk management, internal audit, compliance testing, market risk analysis, finance, and central funding); sales and distribution support groups, and others (e.g., information technology and training); |
(iii) | trends in employee headcount; |
(iv) | the Investment Adviser’s financial resources and ability to hire and retain talented personnel and strengthen its operations; and |
(v) | the parent company’s support of the Investment Adviser and its mutual fund business, as expressed by the firm’s senior management; |
(b) | information on the investment performance of the Portfolio and Underlying Funds, including comparisons to the performance of similar mutual funds, as provided by a third-party mutual fund data provider engaged as part of the contract review process (the “Outside Data Provider”), and a benchmark performance index; and information on general investment outlooks in the markets in which the Underlying Funds invest; |
(c) | information provided by the Investment Adviser indicating the Investment Adviser’s views on whether the Portfolio’s peer group and/or benchmark index had high, medium, or low relevance given the Portfolio’s particular investment strategy; |
(d) | the terms of the Management Agreement and other agreements with affiliated service providers entered into by the Trust on behalf of the Portfolio; |
(e) | fee and expense information for the Portfolio, including: |
(i) | the relative management fee and expense levels of the Portfolio as compared to those of comparable funds managed by other advisers, as provided by the Outside Data Provider; |
(ii) | the Portfolio’s expense trends over time; and |
(iii) | to the extent the Investment Adviser manages other types of accounts (such as bank collective trusts, private wealth management accounts, institutional separate accounts, sub-advised mutual funds, and non-U.S. funds) having investment objectives and policies similar to those of the Portfolio, comparative information on the advisory fees charged and services provided to those accounts by the Investment Adviser; |
(f) | with respect to the extensive investment performance and expense comparison data provided by the Outside Data Provider, its processes in producing that data for the Portfolio; |
(g) | the undertakings of the Investment Adviser and its affiliates to implement fee waivers and/or expense limitations of the Portfolio and the Underlying Funds; |
25
GOLDMAN SACHS VARIABLE INSURANCE TRUST MULTI-STRATEGY ALTERNATIVES PORTFOLIO
Statement Regarding Basis for Approval of Management Agreement (Unaudited) (continued)
(h) | information relating to the profitability of the Management Agreement and the transfer agency and distribution and service arrangements of the Portfolio to the Investment Adviser and its affiliates; |
(i) | whether the Portfolio’s existing management fee schedule, together with the management fee schedules of the Underlying Funds, adequately addressed any economies of scale; |
(j) | a summary of the “fall-out” benefits derived by the Investment Adviser and its affiliates from their relationships with the Portfolio and/or the Underlying Funds, including the fees received by the Investment Adviser’s affiliates from the Portfolio and/or the Underlying Funds for transfer agency, securities lending, portfolio trading, distribution and other services; |
(k) | a summary of potential benefits derived by the Portfolio and/or the Underlying Funds as a result of their relationship with the Investment Adviser; |
(l) | with respect to the applicable Underlying Funds, information regarding commissions paid by the Underlying Equity Funds and broker oversight, an update on the Investment Adviser’s soft dollars practices, other information regarding portfolio trading, and how the Investment Adviser carries out its duty to seek best execution; |
(m) | the manner in which portfolio manager compensation is determined; and the number and types of accounts managed by the portfolio managers; |
(n) | the nature and quality of the services provided to the Portfolio and the Underlying Funds by their unaffiliated service providers, and the Investment Adviser’s general oversight and evaluation (including reports on due diligence) of those service providers as part of the administrative services provided under the Management Agreement; and |
(o) | the Investment Adviser’s processes and policies addressing various types of potential conflicts of interest; its approach to risk management; the annual review of the effectiveness of the Portfolio’s compliance program; and periodic compliance reports. |
The Trustees also received an overview of the Portfolio’s distribution arrangements. They received information regarding the Portfolio’s assets, share purchase and redemption activity, and payment of distribution and service fees. Information was also provided to the Trustees relating to revenue sharing payments made by and services provided by the Investment Adviser and its affiliates to intermediaries that promote the sale, distribution, and/or servicing of Portfolio shares. The Independent Trustees also discussed the broad range of other investment choices that are available to Portfolio investors, including the availability of comparable funds managed by other advisers.
The presentations made at the Board and Committee meetings and at the Annual Meeting encompassed the Portfolio and other mutual funds for which the Board of Trustees has responsibility. In evaluating the Management Agreement at the Annual Meeting, the Trustees relied upon their knowledge, resulting from their meetings and other interactions throughout the year, of the Investment Adviser and its affiliates, their services, and the Portfolio. In conjunction with these meetings, the Trustees received written materials and oral presentations on the topics covered, and the Investment Adviser addressed the questions and concerns of the Trustees, including concerns regarding the investment performance of certain of the funds they oversee. The Independent Trustees were advised by their independent legal counsel regarding their responsibilities and other regulatory requirements related to the approval and continuation of mutual fund investment management agreements under applicable law. In addition, the Investment Adviser and its affiliates provided the Independent Trustees with a written response to a formal request for information sent on behalf of the Independent Trustees by their independent legal counsel. During the course of their deliberations, the Independent Trustees met in executive sessions with their independent legal counsel, without representatives of the Investment Adviser or its affiliates present.
Nature, Extent, and Quality of the Services Provided Under the Management Agreement
As part of their review, the Trustees considered the nature, extent, and quality of the services provided to the Portfolio and the Underlying Funds by the Investment Adviser. In this regard, the Trustees considered both the investment advisory services and non-advisory services that are provided by the Investment Adviser and its affiliates. The Trustees noted the transition in the leadership and changes in personnel of various of the Investment Adviser’s portfolio management teams that had occurred in recent periods, and the ongoing recruitment efforts aimed at bringing high quality investment talent to the Investment Adviser. They also noted the Investment Adviser’s commitment to maintaining high quality systems and expending substantial resources to respond to ongoing changes to the regulatory and control environment in which the Portfolio and the Underlying Funds and their service providers operate, as well as the efforts of the Investment Adviser and its affiliates to combat cyber security risks. The Trustees concluded that the Investment Adviser continued to commit substantial financial and operational resources to the Portfolio and expressed confidence that the Investment Adviser would continue to do so in the future. The Trustees also recognized that the
26
GOLDMAN SACHS VARIABLE INSURANCE TRUST MULTI-STRATEGY ALTERNATIVES PORTFOLIO
Statement Regarding Basis for Approval of Management Agreement (Unaudited) (continued)
Investment Adviser had made significant commitments to address regulatory compliance requirements applicable to the Portfolio, the Underlying Funds, and the Investment Adviser and its affiliates.
Investment Performance
The Trustees also considered the investment performance of the Portfolio and the Underlying Funds. In this regard, they compared the investment performance of the Portfolio to its peers using rankings compiled by the Outside Data Provider as of December 31, 2016, and updated performance information prepared by the Investment Adviser using the peer group identified by the Outside Data Provider as of March 31, 2017. The information on the Portfolio’s investment performance was provided for the one-year period ending on the applicable date. The Trustees also reviewed the Portfolio’s investment performance relative to its performance benchmark. As part of this review, they considered the investment performance trends of the Portfolio over time, and reviewed the investment performance of the Portfolio in light of its investment objective and policies and market conditions.
In addition, the Trustees considered materials prepared and presentations made by the Investment Adviser’s senior management and portfolio management personnel in which Portfolio performance was assessed. The Trustees also considered the Investment Adviser’s periodic reports with respect to the Underlying Funds’ risk profiles, and how the Investment Adviser’s approach to risk monitoring and management influences portfolio management.
The Trustees noted that the Portfolio’s Institutional Shares placed in the second quartile of the Portfolio’s peer group, had outperformed the Portfolio’s LIBOR-based benchmark index by 4.15%, and had outperformed the average performance of a group of competitor funds, as determined by the Investment Adviser, for the one-year period ending March 31, 2017.
Costs of Services Provided and Competitive Information
The Trustees considered the contractual terms of the Management Agreement and the fee rates payable by the Portfolio thereunder. In this regard, the Trustees considered information on the services rendered by the Investment Adviser to the Portfolio, which included both advisory and administrative services that were directed to the needs and operations of the Portfolio as a registered mutual fund.
In particular, the Trustees reviewed analyses prepared by the Outside Data Provider regarding the expense rankings of the Portfolio. The analyses provided a comparison of the Portfolio’s management fee to those of a relevant peer group and category universe; an expense analysis which compared the Portfolio’s overall net and gross expenses to a peer group and a category universe; and data comparing the Portfolio’s net expenses to the peer and category medians. The analyses also compared the Portfolio’s transfer agency, custody, and distribution fees, other expenses and fee waivers/reimbursements to those of the peer group and category medians. The Trustees concluded that the comparisons provided by the Outside Data Provider were useful in evaluating the reasonableness of the management fees and total expenses paid by the Portfolio.
In addition, the Trustees considered the Investment Adviser’s undertakings to implement fee waivers and/or expense limitations of the Portfolio and the Underlying Funds. They also considered, to the extent that the Investment Adviser manages other types of accounts having investment objectives and policies similar to those of the Portfolio, comparative fee information for services provided by the Investment Adviser to those accounts, and information that indicated that services provided to the Portfolio differed in various significant respects from the services provided to other types of accounts which, in many cases, operated under less stringent legal and regulatory structures, required fewer services from the Investment Adviser to a smaller number of client contact points, and were less time-intensive.
In addition, the Trustees noted that shareholders are able to redeem their Portfolio shares at any time if shareholders believe that the Portfolio fees and expenses are too high or if they are dissatisfied with the performance of the Portfolio.
Profitability
The Trustees reviewed the Portfolio’s contribution to the Investment Adviser’s revenues and pre-tax profit margins. In this regard the Trustees noted that they had received, among other things, profitability analyses and summaries, revenue and expense schedules by Portfolio and by function (i.e., investment management, transfer agency and distribution and service), and information on the Investment Adviser’s expense allocation methodology. They observed that the profitability and expense figures are substantially similar to those used by the Investment Adviser for many internal purposes, including compensation decisions among various business groups, and are thus subject to a vigorous internal debate about how certain revenue and expenses should be allocated. The Trustees also noted that the internal audit group within the Goldman Sachs organization had audited the expense allocation methodology and that the internal audit group was satisfied with the reasonableness, consistency, and accuracy of the Investment Adviser’s expense allocation methodology and profitability analysis calculations. Profitability data for the Portfolio were provided for 2016 and 2015, and the Trustees considered this information in relation to the Investment Adviser’s overall profitability.
27
GOLDMAN SACHS VARIABLE INSURANCE TRUST MULTI-STRATEGY ALTERNATIVES PORTFOLIO
Statement Regarding Basis for Approval of Management Agreement (Unaudited) (continued)
Economies of Scale
The Trustees considered the information that had been provided regarding the Investment Adviser’s profitability.
The Trustees noted that, although the Portfolio itself does not have breakpoints in its management fee schedule, any benefits of the breakpoints in the management fee schedules of certain Underlying Funds, when reached, would pass through to the shareholders in the Portfolio at the specified asset levels. The Trustees considered the amounts of assets in the Portfolio; the Portfolio’s recent purchase and redemption activity; 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; information comparing the fee rates charged by the Investment Adviser with fee rates charged to other funds in the peer group; and the Investment Adviser’s undertakings to waive the management fee paid by the Portfolio and a portion of the management fees paid by certain Underlying Funds and to limit certain expenses of the Portfolio and Underlying Funds that exceed specified levels. They also considered the services provided to the Portfolio under the Management Agreement and the fees and expenses borne by the Underlying Funds.
Other Benefits to the Investment Adviser and Its Affiliates
The Trustees also considered the other benefits derived by the Investment Adviser and its affiliates from their relationships with the Portfolio and/or the Underlying Funds as stated above, including: (a) transfer agency fees received by Goldman Sachs & Co. LLC (“Goldman Sachs”); (b) brokerage and futures commissions earned by Goldman Sachs for executing securities and futures transactions on behalf of certain Underlying Funds; (c) research received by the Investment Adviser from broker-dealers in exchange for executing certain transactions on behalf of certain Underlying Funds; (d) trading efficiencies resulting from aggregation of orders of the Underlying Funds with those for other funds or accounts managed by the Investment Adviser; e) fees earned by Goldman Sachs Agency Lending (“GSAL”), an affiliate of the Investment Adviser, as securities lending agent for certain Underlying Funds (and fees earned by the Investment Adviser for managing the fund in which those Underlying Funds’ cash collateral is invested); (f) the Investment Adviser’s ability to leverage the infrastructure designed to service the Portfolio on behalf of its other clients; (g) the Investment Adviser’s ability to cross-market other products and services to Portfolio shareholders; (h) Goldman Sachs’ retention of certain fees as Portfolio Distributor; (i) the Investment Adviser’s ability to negotiate better pricing with custodians on behalf of its other clients, as a result of the relationship with the Portfolio and Underlying Funds; and (j) the possibility that the working relationship between the Investment Adviser and the Portfolio’s and Underlying Funds’ third-party service providers may cause those service providers to be more likely to do business with other areas of Goldman Sachs. In the course of considering the foregoing, the Independent Trustees requested and received further information quantifying certain of these fall-out benefits.
Other Benefits to the Portfolio and Its Shareholders
The Trustees also noted that the Portfolio and/or the Underlying Funds receive certain potential benefits as a result of their relationship with the Investment Adviser, including: (a) trading efficiencies resulting from aggregation of orders of the Underlying Funds with those of other funds or accounts managed by the Investment Adviser; (b) enhanced servicing from vendors because of the volume of business generated by the Investment Adviser and its affiliates; (c) with respect to the Underlying Funds, enhanced servicing from broker-dealers because of the volume of business generated by the Investment Adviser and its affiliates; (d) with respect to certain Underlying Funds, the Investment Adviser’s ability to negotiate favorable terms with derivatives counterparties as a result of the size and reputation of the Goldman Sachs organization; (e) the Investment Adviser’s knowledge and experience gained from managing other accounts and products; (f) the Investment Adviser’s ability to hire and retain qualified personnel to provide services to the Portfolio and the Underlying Funds because of the reputation of the Goldman Sachs organization; (g) the Portfolio’s and Underlying Funds’ access, through the Investment Adviser, to certain firmwide resources (e.g., proprietary risk management systems and databases), subject to certain restrictions; (h) with respect to certain Underlying Funds, the ability to participate in the securities lending program administered by GSAL, as measured by the revenue received by the Underlying Funds in connection with the program; and (i) the Portfolio’s access to certain affiliated distribution channels. In addition, the Trustees noted the competitive nature of the mutual fund marketplace, and considered that many of the Portfolio’s shareholders invested in the Portfolio in part because of the Portfolio’s relationship with the Investment Adviser and that those shareholders have a general expectation that the relationship will continue.
28
GOLDMAN SACHS VARIABLE INSURANCE TRUST MULTI-STRATEGY ALTERNATIVES PORTFOLIO
Statement Regarding Basis for Approval of Management Agreement (Unaudited) (continued)
Conclusion
In connection with their consideration of the Management Agreement, the Trustees gave weight to each of the factors described above, but did not identify any particular factor as controlling their decision. After deliberation and consideration of all of the information provided, including the factors described above, the Trustees concluded, in the exercise of their business judgment, that the management fees paid by the Portfolio were reasonable in light of the services provided to it by the Investment Adviser, the Investment Adviser’s costs and the Portfolio’s current and reasonably foreseeable asset levels. The Trustees unanimously concluded that the Investment Adviser’s continued management likely would benefit the Portfolio and its shareholders and that the Management Agreement should be approved and continued with respect to the Portfolio until June 30, 2018.
29
TRUSTEES | OFFICERS | |
Ashok N. Bakhru, Chairman | James A. McNamara, President | |
Kathryn A. Cassidy | Scott M. McHugh, Treasurer, Senior Vice | |
Diana M. Daniels | President and Principal Financial Officer | |
Herbert J. Markley | Joseph F. DiMaria, Assistant Treasurer and | |
James A. McNamara | Principal Accounting Officer | |
Jessica Palmer | Caroline L. Kraus, Secretary | |
Roy W. Templin | ||
Gregory G. Weaver |
GOLDMAN SACHS & CO. LLC
Distributor and Transfer Agent
GOLDMAN SACHS ASSET MANAGEMENT, L.P.
Investment Adviser
200 West Street, New York
New York 10282
Visit our web site at www.GSAMFUNDS.com to obtain the most recent month-end returns.
The reports concerning the Portfolio included in this shareholder report may contain certain forward-looking statements about the factors that may affect the performance of the Portfolio in the future. These statements are based on Portfolio management’s predictions and expectations concerning certain future events and their expected impact on the Portfolio, such as performance of the economy as a whole and of specific industry sectors, changes in the levels of interest rates, the impact of developing world events, and other factors that may influence the future performance of the Portfolio. Management believes these forward-looking statements to be reasonable, although they are inherently uncertain and difficult to predict. Actual events may cause adjustments in portfolio management strategies from those currently expected to be employed.
A description of the policies and procedures that the Portfolio uses to determine how to vote proxies relating to portfolio securities and information regarding how the Portfolio voted proxies relating to portfolio securities for the 12-month period ended June 30 is available (i) without charge, upon request by calling 1-800-621-2550; and (ii) on the Securities and Exchange Commission (“SEC”) web site at http://www.sec.gov.
The Portfolio files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Portfolio’s Form N-Qs are available on the SEC’s web site at http://www.sec.gov within 60 days after the Portfolio’s first and third fiscal quarters. The Portfolio’s Form N-Qs may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may also be obtained by calling 1-800-SEC-0330. Form N-Qs may be obtained upon request and without charge by calling 1-800-621-2550.
The website links provided are for your convenience only and are not an endorsement or recommendation by GSAM of any of these websites or the products or services offered. GSAM is not responsible for the accuracy and validity of the content of these websites.
Portfolio holdings and allocations shown are as of June 30, 2017 and may not be representative of future investments. Portfolio holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities. Current and future holdings are subject to risk.
References to indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only and do not imply that the portfolio will achieve similar results. The index composition may not reflect the manner in which a portfolio is constructed. While an adviser seeks to design a portfolio which reflects appropriate risk and return features, portfolio characteristics may deviate from those of the benchmark.
The Global Industry Classification Standard (“GICS”) was developed by and is the exclusive property and a service mark of Morgan Stanley Capital International Inc. (“MSCI”) and Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. (“S&P”) and is licensed for use by Goldman Sachs. Neither MSCI, S&P nor any other party involved in making or compiling the GICS or any GICS classifications makes any express or implied warranties or representations with respect to such standard or classification (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of such standard or classification. Without limiting any of the foregoing, in no event shall MSCI, S&P, any of their affiliates or any third party involved in making or compiling the GICS or any GICS classifications have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.
The portfolio risk management process includes an effort to monitor and manage risk, but does not imply low risk.
Diversification does not protect an investor from market risk and does not ensure a profit.
Shares of the Goldman Sachs VIT Funds are offered to separate accounts of participating life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Shares of the Portfolio are not offered directly to the general public. The variable annuity contracts and variable life insurance policies are described in the separate prospectuses issued by participating insurance companies. You should refer to those prospectuses for information about surrender charges, mortality and expense risk fees and other charges that may be assessed by participating insurance companies under the variable annuity contracts or variable life insurance policies. Such fees or charges, if any, may affect the return you may realize with respect to your investments. Ask your representative for more complete information. Please consider a fund’s objectives, risks and charges and expenses, and read the prospectus carefully before investing. The prospectus contains this and other information about the Portfolio.
This material is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus or summary prospectus, if applicable. Investors should consider the Portfolio’s objective, risks, and charges and expenses, and read the summary prospectus, if available, and/or the prospectus carefully before investing or sending money. The summary prospectus, if available, and the prospectus contain this and other information about the Portfolio and may be obtained from your authorized dealer or from Goldman Sachs & Co. LLC by calling 1-800-621-2550.
THIS MATERIAL IS FOR INFORMATIONAL PURPOSES ONLY AND IS PROVIDED SOLELY ON THE BASIS THAT IT WILL NOT CONSTITUTE INVESTMENT OR OTHER ADVICE OR A RECOMMENDATION RELATING TO ANY PERSON’S OR PLAN’S INVESTMENT OR OTHER DECISIONS, AND GOLDMAN SACHS IS NOT A FIDUCIARY OR ADVISOR WITH RESPECT TO ANY PERSON OR PLAN BY REASON OF PROVIDING THE MATERIAL OR CONTENT HEREIN INCLUDING UNDER THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974 OR DEPARTMENT OF LABOR REGULATIONS. PLAN SPONSORS AND OTHER FIDUCIARIES SHOULD CONSIDER THEIR OWN CIRCUMSTANCES IN ASSESSING ANY POTENTIAL COURSE OF ACTION.
This report is prepared for the general information of contract owners and is not an offer of shares of the Goldman Sachs Variable Insurance Trust — Goldman Sachs Multi-Strategy Alternatives Portfolio.
© 2017 Goldman Sachs. All rights reserved.
VITMSASAR-17/102643-TMPL-08/2017-587118/183
Goldman
Sachs Variable Insurance Trust
Goldman Sachs Core Fixed Income Fund
Goldman Sachs Equity Index Fund
Goldman Sachs Growth Opportunities Fund
Goldman Sachs High Quality Floating Rate Fund
Semi-Annual Report
June 30, 2017
MARKET REVIEW
Goldman Sachs Variable Insurance Trust Funds
Market Review
During the six months ended June 30, 2017 (the “Reporting Period”), the U.S. equity market recorded a strong gain, while the broad fixed income market generated modestly positive returns.
Equity Markets
As the Reporting Period began in January 2017, U.S. equities rallied to new highs on the prospect of deregulation following executive orders on oil pipelines and on further optimism around infrastructure spending after a $1 trillion proposal from Senate Democrats. Despite political uncertainty and protectionism concerns, U.S. equities continued to rally in February 2017, driven by “risk on” sentiment, or reduced risk aversion, owing to potential U.S. tax reform and deregulation as well as by stronger economic data. In March 2017, the U.S. Federal Reserve (the “Fed”) raised interest rates for the third time since the 2008-2009 global financial crisis, while maintaining projections for three rate hikes this year. However, a seemingly cautious stance on the future path of monetary tightening from the Fed Chair and the presence of a dissenter on the policy committee led to a dovish market reaction. (Dovish tends to suggest lower interest rates; opposite of hawkish.) Political risks subsequently drove U.S. equities lower in the wake of House Republicans’ struggle to schedule a vote on health care. For the month of March 2017, U.S. equities were virtually flat.
U.S. equities fell in April 2017, as Fed minutes suggested stocks were overvalued. However, U.S. equities subsequently rebounded on strong first quarter 2017 earnings results and on receding European political risk following the centrist candidate’s win in the French election. Although the U.S. labor market remained strong, economic activity and inflation data appeared to be moderating during the second quarter of 2017. Core inflation softened to 1.7% year-over-year in May 2017, marking a third consecutive month of weakness, while core personal consumption expenditures remained below the Fed’s 2% target at just 1.4% year-over-year. In addition, market expectations for pro-growth U.S. fiscal policy were dampened by domestic political developments. Nonetheless, the Fed proceeded to raise the targeted federal funds rate by 25 basis points in June 2017, citing ongoing strength in the labor market and a pick-up in household spending and business fixed investment. (A basis point is 1/100th of a percentage point.) The results of the Fed’s 2017 Comprehensive Capital Analysis and Review (“CCAR”) stress test for banks were encouraging, with improving payout ratios. (Payout ratio is the proportion of earnings paid out as dividends to shareholders.)
U.S. equities, as represented by the Standard & Poor’s 500® Index (the “S&P 500® Index”) gained 9.34% during the Reporting Period. Information technology, health care and consumer discretionary were the best performing sectors in the S&P 500® Index by a wide margin. The weakest performing sectors in the S&P 500® Index were energy and telecommunication services, the only two to post negative absolute returns, followed by real estate and financials, which were comparatively weak but generated positive returns during the Reporting Period.
Within the U.S. equity market, there was significant disparity in performance not only among sectors but also among the various capitalization and style segments. While all capitalization segments posted positive returns, large-cap stocks, as measured by the Russell 1000® Index, performed best, followed by mid-cap stocks, as measured by the Russell Midcap® Index, and then at some distance by small-cap stocks, as measured by the Russell 2000® Index. From a style perspective, growth-oriented stocks significantly outpaced value-oriented stocks across the capitalization spectrum. (All as measured by the Russell Investments indices.)
Fixed Income Markets
At the beginning of the Reporting Period, spread (or non-government bond) sectors generally posted gains. Investors focused on the prospect of pro-growth policies from the new U.S. Administration, which helped boost business and consumer sentiment to near record levels. Investors also evaluated the positive impact of earlier fiscal stimulus in China. Global purchasing managers’ indices pointed to solid and synchronized global expansion, led by developed markets, most notably the U.S. In Europe, economic data strengthened and political risk remained contained, as markets weathered the official start of Brexit negotiations. (Brexit refers to the U.K.’s efforts to exit the European Union.) The far right lost to centrists in the Netherlands’ election. In France, polls reflected a relatively low chance of victory for the far-right candidate in the country’s then-upcoming presidential vote. Monetary policy presented few surprises during the first calendar quarter, as the European Central Bank (“ECB”), Bank of Japan (BoJ”) and Bank of England (“BoE”) kept their respective monetary policies unchanged. In March 2017, the ECB raised its economic growth and
1
MARKET REVIEW
inflation forecasts, while the Fed raised its target range for the federal funds rate by 25 basis points. Minutes from the meeting raised market expectations that Fed balance sheet normalization would begin in 2017. Despite the Fed’s monetary policy tightening, the U.S. dollar weakened versus both developed and emerging markets currencies during the first calendar quarter.
In the second quarter of 2017, spread sectors overall recorded positive returns. Political developments led to temporary bouts of volatility early in the quarter, driving weakness in Brazilian, U.S. and U.K. fixed income assets as well as a credit rating downgrade of South Africa’s sovereign debt. Political risks receded in May 2017 on the centrist candidate’s victory in the French presidential election, which was supportive of French and European peripheral bonds broadly. On the economic front, U.S. core inflation weakened for the third consecutive month in May 2017, casting uncertainty over the pace of Fed monetary tightening. Nonetheless, comments included in minutes from the Fed’s May and June 2017 policy meetings suggested an announcement about how and when the Fed would begin reducing the size of its balance sheet would be made sooner than the markets had previously anticipated. In Europe, economic data continued to surprise to the upside. At its June 2017 policy meeting, the ECB provided a sanguine assessment of the risks to growth, but revised downward its medium-term inflation forecasts. The ECB, BoJ and BoE left their respective monetary policies unchanged during the second calendar quarter, while the Fed raised interest rates for the second time in 2017 and for the fourth time in a decade at its June 2017 policy meeting. As the quarter came to an end, a string of comments from global central bankers triggered a hawkish market reaction. (A hawkish market reaction suggests investors expect higher interest rates; opposite of dovish.) Global interest rates rose as the market anticipated a faster than expected pace of monetary policy tightening by the BoE, ECB and Bank of Canada. During the second quarter of 2017, the U.S. dollar continued to weaken versus many global currencies.
For the Reporting Period overall, sovereign emerging markets debt and high yield corporate bonds produced solid gains, outperforming U.S. Treasury securities. Investment grade corporate bonds also outpaced U.S. Treasuries, followed at a distance by agency securities, asset-backed securities and commercial mortgage-backed securities. Mortgage-backed securities slightly underperformed U.S. Treasuries. The U.S. Treasury yield curve flattened slightly during the Reporting Period, as yields on longer- and intermediate-term maturities fell and yields on shorter-term maturities rose. The yield on the bellwether 10-year U.S. Treasury fell approximately 32 basis points to end the Reporting Period at 2.11%. (A flattening yield curve is one wherein the differential in yields between longer-term and shorter-term maturities narrows.)
Looking Ahead
Equity Markets
At the end of the Reporting Period, our outlook for equities remained positive, supported by strong global earnings momentum, receding political risk and what we perceive as overly negative sentiment on the Administration’s proposals. Global economic growth has been strong, and the expansion appears to be broadening across regions, creating, in our view, a positive backdrop for corporate earnings growth. For the first year since 2010, consensus earnings per share growth forecasts were positive in all major global regions at the end of the Reporting Period.
While we were slightly more bullish on equities outside the U.S. at the end of the Reporting Period, we believe plummeting optimism on the Administration’s proposals have gone too far, resulting in an almost full unwinding of the rally seen earlier in the U.S. The outperformance of value versus growth stocks has reversed, as has small cap outperformance to large cap. With investor expectations so low, we think U.S. equities have upside potential from any reforms implemented, and thus any incremental progress on reform may come as a positive surprise. At the end of the Reporting Period, we saw particularly attractive opportunities in specific sectors, such as financials, which we believe can reap significant benefits from a more clear and more effective implementation of existing regulatory legislation.
That said, what we view as expensive valuations make U.S. equities more vulnerable, in our opinion, to a moderation in growth on the one hand or to a sharper than consensus expected rise in bond yields on the other. These risks support our case for dynamic active management. Moreover, these aforementioned tailwinds of solid earnings growth and positive potential from any reforms implemented are not priced into valuations and can, we believe, offer potential upside.
2
MARKET REVIEW
Fixed Income Markets
As the Reporting Period came to an end, we expected global economic growth to remain strong in the near term, largely driven by developed markets. In the U.S., we believe tightness in the labor market and easy financial conditions, which continued to loosen despite the Fed’s two interest rate hikes during the Reporting Period, may warrant further monetary policy tightening. We also see scope for U.S. inflation to rebound from its recent weakness, largely due to a healthy labor market supporting wage growth. Based on recent Fed communications, we expect policymakers to unveil in September 2017 a strategy for reducing balance sheet holdings of U.S. Treasury and agency mortgage backed securities, and we see increased likelihood of implementation from October 2017. As for Europe, economic growth surprised to the upside during the Reporting Period, but the inflation backdrop remained subdued and we expect it to remain so, thereby warranting prolonged monetary policy accommodation by the ECB. At the end of the Reporting Period, we anticipated a slower pace of monetary policy tightening in Canada, the U.K. and Europe than the market appeared to believe. At the same time, we think the markets are underpricing the pace of Fed rate hikes.
Overall, we believe political risks shifted from Europe to the U.S. and U.K. during the Reporting Period. In our view, centrist victories in the French presidential and parliamentary elections have the potential to improve cohesion within the European Union, which appeared at risk at the start of 2017 due to rising support for populist parties. In the U.K., we expect uncertain Brexit negotiations to weigh on business sentiment, and we see consumption weakening as inflation rises and low wage growth puts pressure on household disposable incomes. In the U.S., fiscal policy uncertainty persists, although we think low market expectations regarding the Administration’s ability to implement its pro-growth agenda creates the potential for positive surprises.
3
GOLDMAN SACHS VARIABLE INSURANCE TRUST CORE FIXED INCOME FUND
INVESTMENT OBJECTIVE
The Fund seeks a total return consisting of capital appreciation and income that exceeds the total return of the Bloomberg Barclays U.S. Aggregate Bond Index.
Portfolio Management Discussion and Analysis
Below, the Goldman Sachs Fixed Income Portfolio Management Team discusses the Goldman Sachs Variable Insurance Trust — Goldman Sachs Core Fixed Income Fund’s (the “Fund”) performance and positioning for the six-month period ended June 30, 2017 (the “Reporting Period”).
How did the Fund perform during the Reporting Period?
During the Reporting Period, the Fund’s Institutional and Service Shares generated cumulative total returns of 2.40% and 2.28%, respectively. These returns compare to the 2.27% cumulative total return of the Fund’s benchmark, the Bloomberg Barclays U.S. Aggregate Bond Index (the “Bloomberg Barclays Index”), during the same time period.
What key factors were responsible for the Fund’s performance during the Reporting Period?
During the Reporting Period, the Fund’s top-down cross-sector strategy contributed positively to relative performance. In our cross-sector strategy, we invest Fund assets across a variety of fixed income sectors, including some that may not be included in the Bloomberg Barclays Index. Our bottom-up individual issue selection also added to relative returns.
Conversely, the Fund’s combined tactical duration and yield curve positioning hurt its relative results. (Duration is a measure of the Fund’s sensitivity to changes in interest rates. Yield curve is a spectrum of maturities.) Additionally, the Fund’s top-down country strategy detracted from relative performance, driven by long positions in Europe and Canada versus a short position in the U.S. These results were partially offset by a long position in New Zealand. Within our top-down currency strategy, the Fund was hampered by short positions in the euro and the New Taiwan dollar. It benefited from long positions in the Swedish krona, Norwegian krone and Canadian dollar.
Which fixed income market sectors most affected Fund performance during the Reporting Period?
During the Reporting Period, the Fund benefited from its overweight compared to the Bloomberg Barclays Index in asset-backed securities (“ABS”). Its allocations to collateralized loan obligations and non-agency mortgage-backed securities as well as its exposure to the government/swaps sector further aided relative performance. However, an underweight position in agency mortgage-backed securities dampened its returns. The Fund was underweight agency mortgage-backed securities because we expected their spreads (yield differentials versus U.S. Treasuries of comparable maturity) to become more volatile once the Federal Reserve (“Fed”) begins to taper the reinvestment of its maturing holdings of agency mortgage-backed securities and U.S. Treasuries. Overall, we had generally expected spreads to widen. In addition, the Fund’s underweight positions relative to the Bloomberg Barclays Index in U.S. corporate bonds and emerging markets corporate bonds detracted from results.
As for individual issue selection, holdings within the government/swaps sector bolstered the Fund’s performance. More specifically, the Fund benefited from issue selection of U.S. government securities as well as investments that facilitated steepening positions on global government bond yield curves. (A steepening yield curve is one wherein the differential in yields between longer-term and shorter-term maturities widens; opposite of flattening.) Within corporate credit, the Fund was helped by our selection of various maturities along the yield curve and its holdings of investment grade corporate bonds in the financial sector. In emerging markets debt, our selection of U.S. dollar-denominated Mexican external debt was advantageous. Conversely, issue selection of mortgage backed-securities within the securitized sector detracted from the Fund’s performance during the Reporting Period.
Did the Fund’s duration and yield curve positioning strategy help or hurt its results during the Reporting Period?
The Fund’s combined tactical duration and yield curve positioning detracted from performance. Throughout the Reporting Period, the Fund held a short duration position relative to that of the Bloomberg Barclays Index. This hurt results as shorter-term U.S. interest rates rose in response to Fed interest rate hikes and intermediate-term and longer-term interest rates fell on political uncertainty and fewer positive economic surprises. Although U.S. economic data softened toward the end of the Reporting Period, the Fund maintained its short duration position, as we believed the market was underestimating the pace of Fed interest rate hikes in 2017 and 2018. In addition, financial conditions had not tightened due to previous Fed rate increases.
4
GOLDMAN SACHS VARIABLE INSURANCE TRUST CORE FIXED INCOME FUND
How did the Fund use derivatives and similar instruments during the Reporting Period?
As market conditions warranted during the Reporting Period, currency transactions were carried out using primarily over-the-counter (“OTC”) forward foreign exchange contracts. Currency transactions were used as we sought both to enhance returns and to hedge the Fund’s portfolio against currency exchange rate fluctuations. OTC forward foreign exchange contracts detracted from Fund performance during the Reporting Period. In addition, Treasury futures were employed as warranted to facilitate specific duration, yield curve and country strategies. During the Reporting Period, Treasury futures contributed positively to Fund results. Interest rate swaps were used to manage exposure to fluctuations in interest rates. They added to Fund performance during the Reporting Period. Additionally, the Fund employed credit default swaps to implement specific credit-related investment strategies, including management of the Fund’s exposure to credit spreads. Credit default swaps did not have a material impact on the Fund’s results during the Reporting Period. The Fund also used inflation-linked swaps to express our views on U.K. inflation. Inflation-linked swaps did not have a meaningful impact on the Fund’s performance during the Reporting Period. Overall, we employ derivatives and similar instruments for the efficient management of the Fund’s portfolio. Derivatives and similar instruments allow us to manage interest rate, credit, currency and inflation risks more effectively by allowing us both to hedge and to apply active investment views with greater versatility and to afford greater risk management precision than we would otherwise be able to implement.
Were there any notable changes in the Fund’s weightings during the Reporting Period?
During the Reporting Period, we reduced the Fund’s underweight relative to the Bloomberg Barclays Index in U.S. government securities. We increased its overweight position in ABS. Also, the Fund shifted from a small overweight in sovereign emerging markets debt to a small underweight position because of what we considered to be tight valuations and commodity price uncertainty. The Fund remained underweight agency mortgage-backed securities during the Reporting Period.
Were there any changes to the Fund’s portfolio management team during the Reporting Period?
There were no changes to the Fund’s portfolio management team during the Reporting Period.
How was the Fund positioned relative to the Bloomberg Barclays Index at the end of the Reporting Period?
At the end of the Reporting Period, the Fund was underweight U.S. government securities compared to the Bloomberg Barclays Index on a market-value weighted basis. The Fund was overweight ABS and investment grade corporate bonds. (As measured by contribution to duration, the Fund was underweight corporate credit.) It was underweight agency mortgage-backed securities, especially mortgage-backed pass-through securities. (Pass-through mortgages consist of a pool of residential mortgage loans, where homeowners’ monthly payments of principal, interest and prepayments pass from the original bank through a government agency or investment bank to investors.) On a market-value weighted basis, the Fund was marginally overweight non-agency mortgage-backed securities and marginally underweight commercial mortgage-backed securities and emerging markets debt. The Fund was neutral relative to the Bloomberg Barclays Index in quasi-government bonds and did not have any exposure to covered bonds at the end of the Reporting Period. (Covered bonds are securities created from either mortgage loans or public sector loans.)
5
FUND BASICS
Core Fixed Income Fund
as of June 30, 2017
STANDARDIZED TOTAL RETURNS1
For the period ended 6/30/17 | One Year | Five Years | Ten Years | Since Inception | Inception Date | |||||||||||||
Institutional | 0.49 | % | N/A | N/A | 2.25 | % | 4/30/13 | |||||||||||
Service | 0.21 | 2.55 | % | 4.06 | % | 3.97 | 1/09/06 |
1 | The Standardized Total Returns are average annual total returns as of the most recent calendar quarter-end. They assume reinvestment of all distributions at net asset value (“NAV”). Because Institutional and Service Shares do not involve a sales charge, such a charge is not applied to their Standardized Total Returns. |
Total return figures in the above chart represent past performance and do not indicate future results, which will vary. The investment return and principal value of an investment will fluctuate and, therefore, an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the total return figures in the above chart. Please visit www.GSAMFUNDS.com to obtain the most recent month-end returns. Performance reflects fee waivers and/or expense limitations in effect during the periods shown. In their absence, performance would be reduced.
EXPENSE RATIOS2
Net Expense Ratio (Current) | Gross Expense Ratio (Before Waivers) | |||||||
Institutional | 0.42 | % | 0.65 | % | ||||
Service | 0.67 | 0.91 |
2 | The expense ratios of the Fund, both current (net of any fee waivers and/or expense limitations) and before waivers (gross of any fee waivers and/or expense limitations) are as set forth above according to the most recent publicly available Prospectus for the Fund and may differ from the expense ratios disclosed in the Financial Highlights in this report. Pursuant to a contractual arrangement, the Fund’s fee waivers and/or expense limitations will remain in place through at least April 28, 2018, and prior to such date, the Investment Adviser may not terminate the arrangements without the approval of the Fund’s Board of Trustees. If these arrangements are discontinued in the future, the expense ratios may change without shareholder approval. |
6
FUND BASICS
FUND COMPOSITION3
3 | The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. Figures in the graph may not sum to 100% due to the exclusion of other assets and liabilities. The graph depicts the Fund’s investments but may not represent the Fund’s market exposure due to the exclusion of certain derivatives, if any, as listed in the Additional Investment Information section of the Schedule of Investments. |
4 | “Mortgage-Backed Securities” are guaranteed by the Government National Mortgage Association (“GNMA”), the Federal National Mortgage Association (“FNMA”) or the Federal Home Loan Mortgage Corp. (“FHLMC”). GNMA instruments are backed by the full faith and credit of the United States Government. |
5 | “U.S. Government Agency Securities” include agency securities offered by companies such as FNMA and the Federal Home Loan Bank (“FHLB”), which operate under a government charter. While they are required to report to a government regulator, their assets are not explicitly guaranteed by the government and they otherwise operate like any other publicly traded company. |
7
GOLDMAN SACHS VARIABLE INSURANCE TRUST EQUITY INDEX FUND
INVESTMENT OBJECTIVE
The Fund seeks to achieve investment results that correspond to the aggregate price and yield performance of a benchmark index that measures the investment returns of large capitalization stocks.
Portfolio Management Discussion and Analysis
Below, SSgA Funds Management, Inc. (“SSgA”), the Fund’s Subadvisor, discusses the Goldman Sachs Variable Insurance Trust — Goldman Sachs Equity Index Fund’s (the “Fund”) performance and positioning for the six-month period ended June 30, 2017 (the “Reporting Period”).
How did the Fund perform during the Reporting Period?
During the Reporting Period, the Fund’s Service Shares generated a cumulative total return of 9.11%. This return compares to the 9.34% cumulative total return of the Fund’s benchmark, the Standard & Poor’s 500® Index (with dividends reinvested) (the “S&P 500® Index”), during the same time period.
During the Reporting Period, which sectors and which industries in the S&P 500® Index were the strongest contributors to the Fund’s performance?
Nine of the 11 sectors in the S&P 500® Index recorded gains during the Reporting Period. In terms of total return, the sectors that made the strongest positive contributions to the S&P 500® Index and to the Fund were information technology, health care and consumer discretionary. The largest sector by weighting in the S&P 500® Index at the end of the Reporting Period was information technology at a weighting of 22.3%. The industries with the strongest performance in terms of total return were casinos/gambling; investment trusts/mutual funds; recreational products; electronics/appliance stores; and Internet retail.
On the basis of impact (which takes both total returns and weightings into account), the sectors that made the strongest positive contributions to the S&P 500® Index and to the Fund were information technology, health care and consumer discretionary. The industries with the strongest performance on the basis of impact were Internet software/services; telecommunications equipment; packaged software; medical specialties; and major pharmaceuticals.
Which sectors and industries in the S&P 500® Index were the weakest contributors to the Fund’s performance?
In terms of total return, during the Reporting Period, the weakest performing sectors were energy, telecommunication services and real estate. The weakest performing industries in terms of total return were contract drilling; department stores; oilfield services/equipment; oil and gas production; and food retail.
On the basis of impact, the weakest performing sectors were energy, telecommunication services and real estate. The weakest performing industries on the basis of impact were oil and gas production; integrated oil; major telecommunications; oilfield services/equipment; and specialty stores.
Which individual stocks were the top performers, and which were the greatest detractors?
On the basis of impact, the stocks that made the strongest positive contribution during the Reporting Period were Apple, Amazon.com, Facebook, Microsoft and Johnson & Johnson. The weakest performers were General Electric, Exxon Mobil, Verizon, AT&T and Schlumberger.
How did the Fund use derivatives and similar instruments during the Reporting Period?
During the Reporting Period, the Fund did not use derivatives as part of an active management strategy to add value to the Fund’s results. However, equity index futures were used to equitize the Fund’s cash holdings. In other words, we put the Fund’s cash holdings to work by using them as collateral for the purchase of equity index futures. We also used these equity index futures to provide liquidity for daily cash flow requirements. Equity index futures had a neutral impact on the Fund’s performance during the Reporting Period.
Were there any changes to the Fund’s portfolio management team during the Reporting Period?
Effective January 3, 2017, co-portfolio manager John Tucker no longer served as a Portfolio Manager for the Fund. By design, all investment decisions for the Fund are performed within a co-lead or team structure. Effective January 3, 2017, Daniel TenPas, Principal and Portfolio Manager, replaced Mr. Tucker as Portfolio Manager for the Fund. Mr. TenPas joined Michael Feehily,
8
GOLDMAN SACHS VARIABLE INSURANCE TRUST EQUITY INDEX FUND
Senior Managing Director and the Head of Global Equity Beta Solutions in the Americas of SSgA, and Melissa Kapitulik, Vice President and Senior Portfolio Manager of SSgA, both of whom have managed the Fund since 2014.
What changes were made to the makeup of the S&P 500® Index during the Reporting Period?
Twenty-two stocks were removed from the S&P 500® Index during the Reporting Period. They were Bioverativ, Cars.com, Conduent, Dun & Bradstreet, Endo International, Everett SpinCo, First Solar, Frontier Communications, GetGo, Harman International Industries, Linear Technology, Mead Johnson Nutrition, Pitney Bowes, Ryder System, Southwestern Energy, Spectra Energy, St. Jude Medical, TEGNA, Teradata, Urban Outfitters, Varex Imaging and Yahoo. There were 22 stocks added to the S&P 500® Index during the Reporting Period. They were Advanced Micro Devices, Alexandria Real Estate Equities, Align Technology, ANSYS, Bioverativ, Cars.com, CBOE Holdings, Conduent, DISH Network A, DXC Technology Company, Everest Re Group, Everett SpinCo, Gartner, GetGo, Hilton Worldwide Holdings, IDEXX Laboratories, IHS Markit, Incyte, Raymond James Financial, Regency Centers, Synopsys and Varex Imaging.
The source of the data included in the above Portfolio Management Discussion and Analysis with respect to the Goldman Sachs Equity Index Fund is FactSet as of 6/30/17.
Characteristics presented are calculated using the month end market value of holdings, except for beta and standard deviation, if shown, which use month end return values. Averages reflect the market weight of securities in the portfolio. Market data, prices, and dividend estimates for characteristics calculations provided by FactSet Research Systems, Inc. All other portfolio data provided by SSGA. Characteristics are as of the date indicated, are subject to change, and should not be relied upon as current thereafter.
Past performance is not a guarantee of future results.
Index returns are unmanaged and do not reflect the deduction of any fees or expenses. Index returns reflect all items of income, gain and loss and the reinvestment of dividends and other income.
SSgA may have or may seek investment management or other business relationships with companies discussed in this material or affiliates of those companies, such as their officers, directors and pension plans.
The views expressed in this material are the views of SSGA’s Global Equity Beta Solutions Team through the period ended June 30, 2017 and are subject to change based on market and other conditions. All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.
9
FUND BASICS
Equity Index Fund
as of June 30, 2017
STANDARDIZED TOTAL RETURNS1
For the period ended 6/30/17 | One Year | Five Years | Ten Years | Since Inception | Inception Date | |||||||||||||
Service | 17.38 | % | 14.13 | % | 6.80 | % | 7.59 | % | 1/09/06 |
1 | The Standardized Total Returns are average annual total returns as of the most recent calendar quarter-end. They assume reinvestment of all distributions at net asset value (“NAV”). Because Service Shares do not involve a sales charge, such a charge is not applied to their Standardized Total Returns. |
Total return figures in the above chart represent past performance and do not indicate future results, which will vary. The investment return and principal value of an investment will fluctuate and, therefore, an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the total return figures in the above chart. Please visit www.GSAMFUNDS.com to obtain the most recent month-end returns. Performance reflects fee waivers and/or expense limitations in effect during the periods shown. In their absence, performance would be reduced.
EXPENSE RATIOS2
Net Expense Ratio (Current) | Gross Expense Ratio (Before Waivers) | |||||||
Service | 0.48 | % | 0.73 | % |
2 | The expense ratios of the Fund, both current (net of any fee waivers and/or expense limitations) and before waivers (gross of any fee waivers and/or expense limitations) are as set forth above according to the most recent publicly available Prospectus for the Fund and may differ from the expense ratios disclosed in the Financial Highlights in this report. Pursuant to a contractual arrangement, the Fund’s fee waivers and/or expense limitations will remain in place through at least April 28, 2018, and prior to such date, the Investment Adviser may not terminate the arrangements without the approval of the Fund’s Board of Trustees. If these arrangements are discontinued in the future, the expense ratios may change without shareholder approval. |
TOP TEN HOLDINGS AS OF 6/30/173
Holding | % of Net Assets | Line of Business | ||||
Apple, Inc. | 3.6% | Technology Hardware & Equipment | ||||
Microsoft Corp. | 2.5 | Software & Services | ||||
Amazon.com, Inc. | 1.8 | Retailing | ||||
Facebook, Inc. Class A | 1.7 | Software & Services | ||||
Johnson & Johnson | 1.7 | Pharmaceuticals, Biotechnology & Life Sciences | ||||
Exxon Mobil Corp. | 1.6 | Energy | ||||
JPMorgan Chase & Co. | 1.6 | Banks | ||||
Berkshire Hathaway, Inc. Class B | 1.5 | Diversified Financials | ||||
Alphabet, Inc. Class A | 1.3 | Software & Services | ||||
Alphabet, Inc. Class C | 1.3 | Software & Services |
3 The top 10 holdings may not be representative of the Fund’s future investments.
10
FUND BASICS
FUND VS. BENCHMARK SECTOR ALLOCATIONS4
As of June 30, 2017
4 | The graph categorizes investments using Global Industry Classification Standard (“GICS”), however, the sector classifications used by the portfolio management team may differ from GICS. The percentage shown for each investment category reflects the value of investments in that category as a percentage of market value (excluding investments in the securities lending reinvestment vehicle, if any). Investments in the securities lending reinvestment vehicle represented 0.2% of the Fund’s net assets at June 30, 2017. The graph depicts the Fund’s investments but may not represent the Fund’s market exposure due to the exclusion of certain derivatives, if any, as listed in the Additional Investment Information section of the Schedule of Investments. |
11
GOLDMAN SACHS VARIABLE INSURANCE TRUST GROWTH OPPORTUNITIES FUND
INVESTMENT OBJECTIVE
The Fund seeks long-term growth of capital.
Portfolio Management Discussion and Analysis
Below, the Goldman Sachs Growth Investment Team discusses the Goldman Sachs Variable Insurance Trust — Goldman Sachs Growth Opportunities Fund’s (the “Fund”) performance and positioning for the six-month period ended June 30, 2017 (the “Reporting Period”).
How did the Fund perform during the Reporting Period?
During the Reporting Period, the Fund’s Institutional and Service Shares generated cumulative total returns of 14.90% and 14.71%, respectively. These returns compare to the 11.40% cumulative total return of the Fund’s benchmark, the Russell Midcap® Growth Index (with dividends reinvested) (the “Russell Index”), during the same time period.
What key factors were responsible for the Fund’s performance during the Reporting Period?
The Fund outperformed the Russell Index during the Reporting Period primarily due to stock selection.
Which equity market sectors helped and hurt Fund performance?
Our bottom-up approach focuses on security selection, and as a result, we do not make active sector-level investment decisions. That said, on a sector level, stock selection in the consumer discretionary, industrials and consumer staples sectors contributed positively to the Fund’s relative returns. Stock selection in two sectors — information technology and financials — detracted from relative performance.
Which individual stocks added to the Fund’s relative performance during the Reporting Period?
The Fund benefited most relative to the Russell Index from its investments in Panera Bread, Roper Technologies and C.R. Bard.
Panera Bread was the top positive contributor to the Fund’s relative returns during the Reporting Period. Shares of the fast-casual restaurant chain advanced on news of strong fourth quarter 2016 results, with its earnings ahead of market estimates as driven by better than expected operating margins. The company also announced record new store sales volume and provided better than expected 2017 guidance. Later in the Reporting Period, its shares surged higher after the restaurant chain agreed to a buyout by JAB Holding Company. The premium paid was, in our view, positive recognition of Panera Bread’s earlier investments to improve efficiencies and grow margins. After the stock’s strong performance and a potential shift in leadership, we decided to exit the Fund’s position and look for opportunities elsewhere.
Roper Technologies, a provider of engineered products to global niche markets, was another of the Fund’s top contributors. Its stock price was pushed higher by strong quarterly results that beat market estimates on earnings per share. We think Roper Technologies’ margins and its cash return on invested capital (“CROI”) could continue to expand as it transitions from an industrial company to one that is more software aligned. (CROI is a method of valuation that compares a company’s cash return to its equity.) At the end of the Reporting Period, the Fund continued to hold the stock, as we are optimistic about what we consider to be the company’s innovative measures, disciplined capital deployment and solid management execution ability.
Notable contributor C.R. Bard, a multinational developer, manufacturer and marketer of medical devices, announced it had accepted a buyout offer from Becton Dickinson, causing its stock price to rise. We have long viewed C.R. Bard as a strong business franchise with favorable long-term prospects and a high quality management team. Near the end of the Reporting Period, we eliminated the Fund’s position in the stock as we sought to capture profits.
Which individual stocks detracted from the Fund’s performance during the Reporting Period?
During the Reporting Period, Advance Auto Parts, Ross Stores and Middleby were top detractors from the Fund’s relative performance.
The Fund’s leading detractor was Advance Auto Parts, which was weak during the Reporting Period on a combination of concerns around increased competition in the auto parts industry and weaker than market expected earnings. The auto parts retailer also announced first fiscal quarter 2017 earnings that were lower than market estimates, leading the stock to fall further. Despite the weakness, we think its comparable same store sales growth trends are moving in the right direction, and we believe the company could benefit from planned internal improvements to increase its margin structure. At the end of the Reporting Period, the Fund
12
GOLDMAN SACHS VARIABLE INSURANCE TRUST GROWTH OPPORTUNITIES FUND
continued to own Advance Auto Parts, as we consider it an attractively valued business with a compelling earnings growth opportunity over the long term.
Another key detractor during the Reporting Period was Ross Stores. In May 2017, the off-price retailer announced strong earnings, beating market expectations for comparable store sales and earnings per share. Despite the strong earnings, fears that Amazon.com and other e-commerce companies might displace physical stores and increase competition was a headwind for its stock price, causing it to drop in June 2017. In our view, Ross Stores is well positioned within its industry, and we believe it is relatively insulated from Amazon.com pressures because it is an off-price retailer. We also think it is attractively valued for a high quality company. We are encouraged by Ross Stores’ consistent sales and earnings growth over time, strong free cash flows and demonstrated track record of returning capital to investors. The Fund maintained a position in the stock at the end of the Reporting Period.
Middleby, which designs, manufactures and distributes kitchen equipment around the world, also detracted from the Fund’s relative returns during the Reporting Period. The company reported mixed first quarter 2017 results, delivering impressive margin expansion but failing to grow revenues at the pace investors had expected. Its management explained the weakness as delayed capital expenditure spending by U.S.-based restaurants. In our view, the weakness is a short-term challenge, and we believe what we view as Middleby’s best-in-class product line positions it well going forward. In our opinion, the stock’s decline provided a strong risk/reward opportunity for us to increase the Fund’s investment in the name at attractive valuations. At the end of the Reporting Period, we believed Middleby’s market share gains, partnerships with strong franchises and innovative products continued to position it as an industry leader.
Did the Fund make any significant purchases or sales during the Reporting Period?
Among the positions initiated during the Reporting Period was an investment in Analog Devices. The company engages in the design and manufacturing of analog, mixed-signal and digital-signal processing integrated circuits used in all types of electronic equipment. We have a favorable view of the company and its recent acquisition of Linear Technology, which we believe can help boost margins and create cost synergies. Analog Devices has a strong balance sheet and robust free cash flow, in our opinion, and we are positive on its potential for continued growth.
The Fund established a position in Xilinx, which develops and markets programmable devices and associated technologies. The stock was a laggard during the Reporting Period on concerns about the impact of wireless equipment spending. As we considered this a transitory challenge, we believe the stock’s weakness offered us an attractive buying opportunity. In our view, Xilinx is an innovative leader in an industry with strong margins and high barriers to entry.
In addition to the sales already mentioned, we sold the Fund’s position in Chipotle Mexican Grill during the Reporting Period. Near the end of June 2017, the fast-casual food chain reiterated its fiscal year 2017 guidance, which the market viewed as disappointing given its expectations for growth. After the release, we were less confident in the company’s ability to increase comparable store sales growth rates. We therefore decided to exit the Fund’s position and allocate the capital to names in which we had stronger conviction and that offered more compelling risk/reward opportunity, in our view.
Were there any notable changes in the Fund’s weightings during the Reporting Period?
During the Reporting Period, we increased the Fund’s already underweight position relative to the Russell Index in information technology. We reduced the size of its underweight in the consumer discretionary sector. Compared to the Russell Index, we shifted the Fund from an underweight position in the health care sector to a neutral position and moved from an overweight position in telecommunication services to a neutral position.
How did the Fund use derivatives and similar instruments during the Reporting Period?
The Fund did not use derivatives or similar instruments within its investment process during the Reporting Period.
Were there any changes to the Fund’s portfolio management team during the Reporting Period?
There were no changes to the Fund’s portfolio management team during the Reporting Period.
How was the Fund positioned relative to the Russell Index at the end of the Reporting Period?
As mentioned, the Fund’s sector positioning relative to the Russell Index is the result of our stock selection, as we take a pure bottom-up, research-intensive approach to investing. From that perspective, then, at the end of the Reporting Period, the Fund’s portfolio was broadly diversified with an overweight position compared to the Russell Index in the financials sector. The Fund had smaller weightings than the Russell Index in the consumer discretionary and information technology sectors at the end of the Reporting Period. It was relatively neutral compared to the Russell Index at the end of the Reporting Period in the industrials, materials, energy, utilities, consumer staples, telecommunication services, health care and real estate sectors.
13
FUND BASICS
Growth Opportunities Fund
as of June 30, 2017
STANDARDIZED TOTAL RETURNS1
For the period ended 6/30/17 | One Year | Five Years | Ten Years | Since Inception | Inception Date | |||||||||||||
Institutional | 14.14 | % | N/A | N/A | 9.79 | % | 4/30/13 | |||||||||||
Service | 13.78 | 11.64 | % | 7.97 | % | 8.47 | 1/09/06 |
1 | The Standardized Total Returns are average annual total returns as of the most recent calendar quarter-end. They assume reinvestment of all distributions at net asset value (“NAV”). Because Institutional and Service Shares do not involve a sales charge, such a charge is not applied to their Standardized Total Returns. |
Total return figures in the above chart represent past performance and do not indicate future results, which will vary. The investment return and principal value of an investment will fluctuate and, therefore, an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the total return figures in the above chart. Please visit www.GSAMFUNDS.com to obtain the most recent month-end returns. Performance reflects fee waivers and/or expense limitations in effect during the periods shown. In their absence, performance would be reduced.
EXPENSE RATIOS2
Net Expense Ratio (Current) | Gross Expense Ratio (Before Waivers) | |||||||
Institutional | 0.85 | % | 1.16 | % | ||||
Service | 1.01 | 1.40 |
2 | The expense ratios of the Fund, both current (net of any fee waivers and/or expense limitations) and before waivers (gross of any fee waivers and/or expense limitations) are as set forth above according to the most recent publicly available Prospectus for the Fund and may differ from the expense ratios disclosed in the Financial Highlights in this report. Pursuant to a contractual arrangement, the Fund’s fee waivers and/or expense limitations will remain in place through at least April 28, 2018, and prior to such date, the Investment Adviser may not terminate the arrangements without the approval of the Fund’s Board of Trustees. If these arrangements are discontinued in the future, the expense ratios may change without shareholder approval. |
TOP TEN HOLDINGS AS OF 6/30/173,4
Holding | % of Net Assets | Line of Business | ||||
Amphenol Corp. Class A | 3.0% | Technology Hardware & Equipment | ||||
Xylem, Inc. | 2.9 | Capital Goods | ||||
Roper Technologies, Inc. | 2.8 | Capital Goods | ||||
Edwards Lifesciences Corp. | 2.5 | Health Care Equipment & Services | ||||
Northern Trust Corp. | 2.4 | Diversified Financials | ||||
Middleby Corp. (The) | 2.4 | Capital Goods | ||||
Mettler-Toledo International, Inc. | 2.2 | Pharmaceuticals, Biotechnology & Life Sciences | ||||
Zoetis, Inc. | 2.2 | Pharmaceuticals, Biotechnology & Life Sciences | ||||
Ross Stores, Inc. | 2.2 | Retailing | ||||
Intercontinental Exchange, Inc. | 2.1 | Diversified Financials |
3 | The top 10 holdings may not be representative of the Fund’s future investments. |
4 | The Fund’s overall top ten holdings differ from the table above due to the exclusion of the Goldman Sachs Financial Square Government Fund (a securities lending reinvestment vehicle) which represents 2.7% of the Fund’s net assets as of 06/30/2017. |
14
FUND BASICS
FUND vs. BENCHMARK SECTOR ALLOCATIONS5
As of June 30, 2017
5 | The Fund is actively managed and, as such, its composition may differ over time. Consequently, the Fund’s overall sector allocations may differ from percentages contained in the graph above. The graph categorizes investments using Global Industry Classification Standard (“GICS”), however, the sector classifications used by the portfolio management team may differ from GICS. The percentage shown for each investment category reflects the value of investments in that category as a percentage of market value (excluding investments in the securities lending reinvestment vehicle, if any). Underlying sector allocations of exchange traded funds and investment companies held by the Fund are not reflected in the graph above. Investments in the securities lending reinvestment vehicle represented 2.7% of the Fund’s net assets at June 30, 2017. |
15
GOLDMAN SACHS VARIABLE INSURANCE TRUST HIGH QUALITY FLOATING RATE FUND
INVESTMENT OBJECTIVE
The Fund seeks to provide a high level of current income, consistent with low volatility of principal.
Portfolio Management Discussion and Analysis
Below, the Goldman Sachs Fixed Income Portfolio Management Team discusses the Goldman Sachs High Quality Floating Rate Fund’s (the “Fund”) performance and positioning for the six-month period ended June 30, 2017 (the “Reporting Period”).
How did the Fund perform during the Reporting Period?
During the Reporting Period, the Fund’s Institutional, Service and Advisor Shares generated cumulative total returns of 0.80%, 0.78% and 0.65%, respectively. These returns compare to the 0.31% cumulative total return of the Fund’s benchmark, the Bank of America Merrill Lynch Three-Month U.S. Treasury Bill Index (the “BofA Index”), during the Reporting Period.
We note that the Fund’s benchmark being the BofA Index is a means of emphasizing that the Fund has an unconstrained strategy. That said, this Fund employs a benchmark agnostic strategy and thus comparisons to a benchmark index are not particularly relevant.
What key factors had the greatest impact on the Fund’s performance during the Reporting Period?
During the Reporting Period, our individual issue selection contributed most positively to the Fund’s performance. Our top-down cross-sector strategy also added to relative returns. In our cross-sector strategy, we invest Fund assets based on a discipline of valuing each fixed income sector in the context of all investment opportunities within the Fund’s universe.
Conversely, the Fund’s combined tactical duration and yield curve positioning detracted from results. Duration is a measure of the Fund’s sensitivity to changes in interest rates. Yield curve indicates a spectrum of maturities.
Which fixed income market sectors helped or hurt Fund performance during the Reporting Period?
Individual issue selection overall added most to the Fund’s relative returns during the Reporting Period. Within the government/swaps sector, our selection of U.S. Treasuries bolstered performance. Our selection of asset backed securities (“ABS”) and collateralized mortgage obligations (“CMOs”) contributed positively as well. On the other hand, selection within the securitized sector, specifically of agency adjustable-rate mortgage-backed securities, detracted modestly from results.
Within our cross-sector strategy, the Fund benefited from its overweight versus the BofA Index in ABS and agency mortgage-backed securities. In addition, its allocation to collateralized loan obligations (“CLO”) was advantageous. The CLO credit curve flattened significantly during the Reporting Period, with the spread, or yield differential, between BB-rated and AAA-rated tranches tightening almost 120 basis points, which was near its narrowest level since the 2008-2009 financial crisis. (A credit curve is the spread over U.S. Treasuries of various maturities for a single bond issuer. A basis point is 1/100th of a percentage point.)
Did the Fund’s duration and yield curve positioning strategy help or hurt its results during the Reporting Period?
The Fund’s combined tactical duration and yield curve positioning detracted from performance. Throughout the Reporting Period, the Fund held a short duration position relative to the BofA Index. This hurt results as shorter-term U.S. interest rates rose in response to Fed interest rate hikes and intermediate-term and longer-term interest rates fell on political uncertainty and fewer positive economic surprises. Although U.S. economic data softened toward the end of the Reporting Period, the Fund maintained its short duration position, as we believed the market was underestimating the pace of Fed rate hikes in 2017 and 2018. In addition, financial conditions had not tightened due to previous Fed rate increases.
Were there any notable changes in the Fund’s weightings during the Reporting Period?
During the Reporting Period, we increased the Fund’s exposure to ABS as well as its cash position. We reduced its exposure to U.S. Treasuries. In addition, we decreased the Fund’s exposure to the 10-year segment of the U.S. Treasury yield curve and increased its exposure to the seven-year segment.
How did the Fund use derivatives and similar instruments during the Reporting Period?
As market conditions warranted, the Fund used Treasury futures to manage the duration and term structure of the Fund. (Term structure, most often depicted as a yield curve, refers to the term structure of interest rates, which is the relationship between the
16
GOLDMAN SACHS VARIABLE INSURANCE TRUST HIGH QUALITY FLOATING RATE FUND
yield to maturity and the time to maturity for pure discount bonds.) In addition, the Fund employed interest rate swaps to manage interest rate risk and to express our views on the direction of interest rates. The use of Treasury futures and interest rate swaps contributed positively to Fund performance during the Reporting Period.
Were there any changes to the Fund’s portfolio management team during the Reporting Period?
There were no changes to the Fund’s portfolio management team during the Reporting Period.
How was the Fund positioned relative to the BofA Index at the end of the Reporting Period?
At the end of the Reporting Period, the Fund had little exposure to U.S. government securities, which represent 100% of the BofA Index. The Fund had positions in ABS, agency CMOs, residential mortgage-backed securities, agency adjustable-rate mortgage-backed securities, mortgage pass-through securities and quasi-government bonds, none of which are represented in the BofA Index. Pass-through mortgages consist of a pool of residential mortgage loans, where homeowners’ monthly payments of principal, interest and prepayments pass from the original bank through a government agency or investment bank to investors.
17
FUND BASICS
High Quality Floating Rate Fund
as of June 30, 2017
STANDARDIZED TOTAL RETURNS1
For the period ended 6/30/17 | One Year | Five Years | Ten Years | Since Inception | Inception Date | |||||||||||||
Institutional | 1.86 | % | N/A | N/A | 0.64 | % | 4/30/13 | |||||||||||
Service | 1.61 | 0.52 | % | 3.14 | % | 3.17 | 1/09/06 | |||||||||||
Advisor | 1.49 | N/A | N/A | 0.35 | 10/15/14 |
1 | The Standardized Total Returns are average annual total returns as of the most recent calendar quarter-end. They assume reinvestment of all distributions at net asset value (“NAV”). Because Institutional, Service and Advisor Shares do not involve a sales charge, such a charge is not applied to their Standardized Total Returns. |
Total return figures in the above chart represent past performance and do not indicate future results, which will vary. The investment return and principal value of an investment will fluctuate and, therefore, an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the total return figures in the above chart. Please visit www.GSAMFUNDS.com to obtain the most recent month-end returns. Performance reflects fee waivers and/or expense limitations in effect during the periods shown. In their absence, performance would be reduced.
EXPENSE RATIOS2
Net Expense Ratio (Current) | Gross Expense Ratio (Before Waivers) | |||||||
Institutional | 0.36 | % | 0.79 | % | ||||
Service | 0.61 | 1.05 | ||||||
Advisor | 0.76 | 1.19 |
2 | The expense ratios of the Fund, both current (net of any fee waivers and/or expense limitations) and before waivers (gross of any fee waivers and/or expense limitations) are as set forth above according to the most recent publicly available Prospectus for the Fund and may differ from the expense ratios disclosed in the Financial Highlights in this report. Pursuant to a contractual arrangement, the Fund’s fee waivers and/or expense limitations will remain in place through at least April 28, 2018, and prior to such date, the Investment Adviser may not terminate the arrangements without the approval of the Fund’s Board of Trustees. If these arrangements are discontinued in the future, the expense ratios may change without shareholder approval. |
18
FUND BASICS
FUND COMPOSITION3
3 | The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. Figures in the above graph may not sum to 100% due to the exclusion of other assets and liabilities. The graph depicts the Fund’s investments but may not represent the Fund’s market exposure due to the exclusion of certain derivatives, if any, as listed in the Additional Investment Information section of the Schedule of Investments. |
4 | Mortgage-backed securities guaranteed by the Government National Mortgage Association (“GNMA”), the Federal National Mortgage Association (“FNMA”) or the Federal Home Loan Mortgage Corp. (“FHLMC”). GNMA instruments are backed by the full faith and credit of the United States Government. |
5 | “U.S. Government Agency Security” includes agency securities offered by companies such as FNMA and the Federal Home Loan Bank (“FHLB”), which operate under a government charter. While they are required to report to a government regulator, their assets are not explicitly guaranteed by the government and they otherwise operate like any other publicly traded company. |
19
GOLDMAN SACHS VARIABLE INSURANCE TRUST FUNDS
Index Definitions
∎ | Bloomberg Barclays U.S. Aggregate Bond Index is a broad based index that follows the U.S. dollar denominated investment grade fixed rate taxable bond market. It includes U.S. Treasuries, agency and corporate securities, mortgage-backed securities, asset-backed securities and commercial mortgage-backed securities. |
∎ | The S&P 500® Index is a U.S. stock market index based on the market capitalizations of 500 large companies having common stock listed on the New York Stock Exchange or NASDAQ. The S&P 500® Index components and their weightings are determined by S&P Dow Jones Indices. |
∎ | Russell Midcap® Index measures the performance of the mid-cap segment of the U.S. equity universe. The Russell Midcap® Index is a subset of the Russell 1000® Index. The Russell Midcap® Index includes approximately 800 of the smallest securities based on a combination of their market cap and current index membership. The Russell Midcap® Index represents approximately 31% of the total market capitalization of the Russell 1000® Index companies. The Russell Midcap® Index is constructed to provide a comprehensive and unbiased barometer for the mid-cap segment. The Russell Midcap® Index is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true mid-cap opportunity set. |
∎ | Russell Midcap® Growth Index is an unmanaged index that measures the performance of those companies in the Russell Midcap® Index with higher price-to-book ratios and higher forecasted growth values. Its figures do not reflect any deduction for fees, expenses or taxes. |
∎ | Russell 1000® Index measures the performance of the large-cap segment of the U.S. equity universe. The Russell 1000® Index is a subset of the Russell 3000® Index and includes approximately 1000 of the largest securities based on a combination of their market cap and current index membership. The Russell 1000® Index represents approximately 92% of the U.S. market. The Russell 1000® Index is constructed to provide a comprehensive and unbiased barometer for the large-cap segment and is completely reconstituted annually to ensure new and growing equities are reflected. |
∎ | Russell 2000® Index measures the performance of the small-cap segment of the U.S. equity universe. The Russell 2000® Index is a subset of the Russell 3000® Index representing approximately 10% of the total market capitalization of that index. The Russell 2000® Index includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership. The Russell 2000® Index is constructed to provide a comprehensive and unbiased small-cap barometer and is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true small-cap opportunity set. |
∎ | BofA Merrill Lynch Three-Month U.S. Treasury Bill Index is an unmanaged market index of U.S. Treasury securities maturing in 90 days that assumes reinvestment of all income. It is composed of a single issue purchased at the beginning of the month and held for a full month. At the end of the month that issue is sold and rolled into a newly selected issue. The issue selected at each month-end rebalancing is the outstanding U.S. Treasury Bill that matures closest to, but not beyond, three months from the rebalancing date. To qualify for selection, an issue must have settled on or before the month-end rebalancing date. While the index will often hold the U.S. Treasury Bill issued at the most recent three-month auction, it is also possible for a seasoned six-month U.S. Treasury Bill to be selected. |
20
GOLDMAN SACHS VARIABLE INSURANCE TRUST CORE FIXED INCOME FUND
Schedule of Investments
June 30, 2017 (Unaudited)
Principal Amount | Interest Rate | Maturity Date | Value | |||||||||||
Corporate Bonds – 36.6% | ||||||||||||||
Automobiles & Components – 0.5% | ||||||||||||||
Ford Motor Credit Co. LLC | ||||||||||||||
$ | 475,000 | 5.875 | % | 08/02/21 | $ | 529,689 | ||||||||
|
| |||||||||||||
Banks – 10.0% | ||||||||||||||
American Express Co.(a) | ||||||||||||||
75,000 | 3.625 | 12/05/24 | 76,745 | |||||||||||
Bank of America Corp. | ||||||||||||||
100,000 | 5.700 | 01/24/22 | 112,996 | |||||||||||
225,000 | 4.125 | 01/22/24 | 237,433 | |||||||||||
275,000 | 4.000 | 04/01/24 | 288,164 | |||||||||||
275,000 | 3.248 | (a) | 10/21/27 | 265,741 | ||||||||||
225,000 | 3.824 | (a)(b) | 01/20/28 | 228,907 | ||||||||||
Bank of Tokyo-Mitsubishi UFJ Ltd. (The)(c) | ||||||||||||||
300,000 | 2.150 | 09/14/18 | 300,625 | |||||||||||
Citigroup, Inc. | ||||||||||||||
200,000 | 3.400 | 05/01/26 | 197,846 | |||||||||||
75,000 | 4.125 | 07/25/28 | 76,135 | |||||||||||
Compass Bank(a) | ||||||||||||||
375,000 | 2.750 | 09/29/19 | 377,904 | |||||||||||
Credit Agricole SA(c) | ||||||||||||||
250,000 | 4.125 | 01/10/27 | 261,369 | |||||||||||
Credit Suisse AG | ||||||||||||||
325,000 | 2.300 | 05/28/19 | 327,138 | |||||||||||
Credit Suisse Group Funding Guernsey Ltd. | ||||||||||||||
400,000 | 3.125 | 12/10/20 | 407,523 | |||||||||||
Deutsche Bank AG | ||||||||||||||
50,000 | 2.500 | 02/13/19 | 50,186 | |||||||||||
Discover Financial Services(a) | ||||||||||||||
225,000 | 3.750 | 03/04/25 | 222,316 | |||||||||||
HSBC Holdings plc | ||||||||||||||
225,000 | 3.400 | 03/08/21 | 231,254 | |||||||||||
225,000 | 3.262 | (a)(b) | 03/13/23 | 229,264 | ||||||||||
ING Bank NV(a)(b) | ||||||||||||||
325,000 | 4.125 | 11/21/23 | 332,073 | |||||||||||
Intesa Sanpaolo SpA | ||||||||||||||
350,000 | 3.875 | 01/16/18 | 353,237 | |||||||||||
JPMorgan Chase & Co. | ||||||||||||||
450,000 | 4.400 | 07/22/20 | 479,219 | |||||||||||
275,000 | 2.700 | (a) | 05/18/23 | 271,985 | ||||||||||
JPMorgan Chase & Co. Series Z(a)(b) | ||||||||||||||
250,000 | 5.300 | 12/31/49 | 260,312 | |||||||||||
KBC Bank NV(a)(b) | ||||||||||||||
200,000 | 8.000 | 01/25/23 | 206,000 | |||||||||||
KeyCorp | ||||||||||||||
400,000 | 2.900 | 09/15/20 | 406,919 | |||||||||||
Kreditanstalt fuer Wiederaufbau(d) | ||||||||||||||
1,000,000 | 1.125 | 08/06/18 | 996,960 | |||||||||||
Lloyds Bank plc | ||||||||||||||
175,000 | 2.300 | 11/27/18 | 176,041 | |||||||||||
Macquarie Bank Ltd.(c) | ||||||||||||||
25,000 | 6.625 | 04/07/21 | 28,173 | |||||||||||
Morgan Stanley | ||||||||||||||
150,000 | 2.553 | (a)(b) | 10/24/23 | 152,604 | ||||||||||
650,000 | 3.700 | 10/23/24 | 667,068 | |||||||||||
75,000 | 3.625 | 01/20/27 | 75,539 | |||||||||||
|
| |||||||||||||
Corporate Bonds – (continued) | ||||||||||||||
Banks – (continued) | ||||||||||||||
Morgan Stanley Series F | ||||||||||||||
$ | 100,000 | 3.875 | % | 04/29/24 | $ | 103,929 | ||||||||
Regions Bank | ||||||||||||||
250,000 | 7.500 | 05/15/18 | 261,718 | |||||||||||
Synchrony Financial(a) | ||||||||||||||
350,000 | 2.600 | 01/15/19 | 351,869 | |||||||||||
Toronto-Dominion Bank (The)(a)(b) | ||||||||||||||
125,000 | 3.625 | 09/15/31 | 124,023 | |||||||||||
UBS Group Funding Switzerland AG(c) | ||||||||||||||
350,000 | 3.000 | 04/15/21 | 355,368 | |||||||||||
UniCredit SpA(c) | ||||||||||||||
400,000 | 3.750 | 04/12/22 | 409,657 | |||||||||||
225,000 | 4.625 | 04/12/27 | 236,703 | |||||||||||
Wells Fargo & Co. | ||||||||||||||
825,000 | 3.000 | 10/23/26 | 803,350 | |||||||||||
Westpac Banking Corp.(a)(b) | ||||||||||||||
150,000 | 4.322 | 11/23/31 | 153,739 | |||||||||||
|
| |||||||||||||
11,098,032 | ||||||||||||||
|
| |||||||||||||
Commercial Services – 0.5% | ||||||||||||||
Rensselaer Polytechnic Institute | ||||||||||||||
475,000 | 5.600 | 09/01/20 | 514,667 | |||||||||||
|
| |||||||||||||
Consumer Services(a) – 0.3% | ||||||||||||||
Marriott International, Inc. | ||||||||||||||
125,000 | 2.875 | 03/01/21 | 126,844 | |||||||||||
250,000 | 2.300 | 01/15/22 | 246,710 | |||||||||||
|
| |||||||||||||
373,554 | ||||||||||||||
|
| |||||||||||||
Diversified Financials – 0.3% | ||||||||||||||
General Motors Financial Co., Inc. | ||||||||||||||
125,000 | 3.250 | 05/15/18 | 126,465 | |||||||||||
175,000 | 3.500 | 07/10/19 | 179,068 | |||||||||||
|
| |||||||||||||
305,533 | ||||||||||||||
|
| |||||||||||||
Diversified Manufacturing(a) – 0.2% | ||||||||||||||
Roper Technologies, Inc. | ||||||||||||||
125,000 | 3.000 | 12/15/20 | 127,937 | |||||||||||
100,000 | 2.800 | 12/15/21 | 100,851 | |||||||||||
|
| |||||||||||||
228,788 | ||||||||||||||
|
| |||||||||||||
Electric – 2.5% | ||||||||||||||
Berkshire Hathaway Energy Co. | ||||||||||||||
200,000 | 6.125 | 04/01/36 | 256,942 | |||||||||||
Dominion Energy, Inc. | ||||||||||||||
250,000 | 2.579 | 07/01/20 | 251,291 | |||||||||||
Emera US Finance LP(a) | ||||||||||||||
125,000 | 2.700 | 06/15/21 | 125,191 | |||||||||||
Enel Finance International NV(c) | ||||||||||||||
275,000 | 2.875 | 05/25/22 | 275,381 | |||||||||||
Entergy Corp.(a) | ||||||||||||||
125,000 | 2.950 | 09/01/26 | 119,695 | |||||||||||
Exelon Corp.(a) | ||||||||||||||
125,000 | 3.497 | 06/01/22 | 127,705 | |||||||||||
Florida Power & Light Co.(a) | ||||||||||||||
193,000 | 4.125 | 02/01/42 | 204,423 | |||||||||||
|
|
The accompanying notes are an integral part of these financial statements. | 21 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST CORE FIXED INCOME FUND
Schedule of Investments (continued)
June 30, 2017 (Unaudited)
Principal Amount | Interest Rate | Maturity Date | Value | |||||||||||
Corporate Bonds – (continued) | ||||||||||||||
Electric – (continued) | ||||||||||||||
NiSource Finance Corp.(a) | ||||||||||||||
$ | 275,000 | 3.490 | % | 05/15/27 | $ | 276,892 | ||||||||
Pacific Gas & Electric Co.(a) | ||||||||||||||
100,000 | 3.500 | 06/15/25 | 103,391 | |||||||||||
Progress Energy, Inc. | ||||||||||||||
350,000 | 7.000 | 10/30/31 | 463,394 | |||||||||||
Puget Sound Energy, Inc. Series A(a)(b) | ||||||||||||||
150,000 | 6.974 | 06/01/67 | 144,188 | |||||||||||
Southern California Edison Co.(a) | ||||||||||||||
175,000 | 4.050 | 03/15/42 | 183,081 | |||||||||||
Southern Co. (The)(a) | ||||||||||||||
225,000 | 2.350 | 07/01/21 | 223,361 | |||||||||||
|
| |||||||||||||
2,754,935 | ||||||||||||||
|
| |||||||||||||
Energy – 2.4% | ||||||||||||||
Anadarko Petroleum Corp. | ||||||||||||||
35,000 | 3.450 | (a) | 07/15/24 | 34,189 | ||||||||||
50,000 | 5.550 | (a) | 03/15/26 | 55,875 | ||||||||||
100,000 | 6.450 | 09/15/36 | 117,709 | |||||||||||
Apache Corp.(a) | ||||||||||||||
50,000 | 2.625 | 01/15/23 | 48,800 | |||||||||||
150,000 | 4.250 | 01/15/44 | 140,500 | |||||||||||
Cenovus Energy, Inc.(a)(c) | ||||||||||||||
75,000 | 4.250 | 04/15/27 | 71,447 | |||||||||||
ConocoPhillips Co.(a) | ||||||||||||||
25,000 | 3.350 | 11/15/24 | 25,489 | |||||||||||
100,000 | 4.950 | 03/15/26 | 111,372 | |||||||||||
100,000 | 4.150 | 11/15/34 | 100,490 | |||||||||||
Devon Energy Corp.(a) | ||||||||||||||
25,000 | 4.000 | 07/15/21 | 25,764 | |||||||||||
75,000 | 5.600 | 07/15/41 | 77,894 | |||||||||||
80,000 | 4.750 | 05/15/42 | 77,562 | |||||||||||
Dolphin Energy Ltd.(c) | ||||||||||||||
36,012 | 5.888 | 06/15/19 | 36,912 | |||||||||||
Energy Transfer LP(a) | ||||||||||||||
75,000 | 4.650 | 06/01/21 | 79,116 | |||||||||||
75,000 | 4.750 | 01/15/26 | 78,024 | |||||||||||
Kinder Morgan Energy Partners LP(a) | ||||||||||||||
150,000 | 5.400 | 09/01/44 | 151,287 | |||||||||||
Kinder Morgan, Inc.(a) | ||||||||||||||
425,000 | 3.050 | 12/01/19 | 432,384 | |||||||||||
Petroleos Mexicanos | ||||||||||||||
30,000 | 5.500 | 02/04/19 | 31,357 | |||||||||||
60,000 | 6.375 | 02/04/21 | 64,968 | |||||||||||
13,000 | 5.500 | 06/27/44 | 11,427 | |||||||||||
70,000 | 5.625 | 01/23/46 | 62,055 | |||||||||||
Pioneer Natural Resources Co.(a) | ||||||||||||||
125,000 | 3.450 | 01/15/21 | 128,427 | |||||||||||
70,000 | 3.950 | 07/15/22 | 73,350 | |||||||||||
Plains All American Pipeline LP(a) | ||||||||||||||
50,000 | 3.650 | 06/01/22 | 51,008 | |||||||||||
125,000 | 4.500 | 12/15/26 | 126,419 | |||||||||||
Sabine Pass Liquefaction LLC(a) | ||||||||||||||
175,000 | 6.250 | 03/15/22 | 198,166 | |||||||||||
175,000 | 5.625 | 03/01/25 | 193,035 | |||||||||||
|
| |||||||||||||
Corporate Bonds – (continued) | ||||||||||||||
Energy – (continued) | ||||||||||||||
Valero Energy Corp. | ||||||||||||||
$ | 100,000 | 3.650 | % | 03/15/25 | $ | 101,965 | ||||||||
|
| |||||||||||||
2,706,991 | ||||||||||||||
|
| |||||||||||||
Food & Beverage – 1.6% | ||||||||||||||
Anheuser-Busch InBev Finance, Inc.(a) | ||||||||||||||
675,000 | 2.650 | 02/01/21 | 684,050 | |||||||||||
200,000 | 3.650 | 02/01/26 | 206,054 | |||||||||||
75,000 | 4.900 | 02/01/46 | 84,648 | |||||||||||
Kraft Heinz Foods Co.(a) | ||||||||||||||
100,000 | 2.800 | 07/02/20 | 101,496 | |||||||||||
75,000 | 3.950 | 07/15/25 | 77,120 | |||||||||||
125,000 | 4.375 | 06/01/46 | 122,417 | |||||||||||
Molson Coors Brewing Co.(a) | ||||||||||||||
50,000 | 2.100 | 07/15/21 | 49,169 | |||||||||||
75,000 | 3.000 | 07/15/26 | 72,138 | |||||||||||
Smithfield Foods, Inc.(c) | ||||||||||||||
125,000 | 2.700 | 01/31/20 | 125,659 | |||||||||||
Suntory Holdings Ltd.(c) | ||||||||||||||
275,000 | 2.550 | 09/29/19 | 277,219 | |||||||||||
|
| |||||||||||||
1,799,970 | ||||||||||||||
|
| |||||||||||||
Food & Staples Retailing(a) – 0.9% | ||||||||||||||
CVS Health Corp. | ||||||||||||||
125,000 | 2.800 | 07/20/20 | 127,262 | |||||||||||
125,000 | 4.125 | 05/15/21 | 132,155 | |||||||||||
225,000 | 3.500 | 07/20/22 | 233,339 | |||||||||||
89,000 | 3.875 | 07/20/25 | 92,537 | |||||||||||
275,000 | 2.875 | 06/01/26 | 266,499 | |||||||||||
Walgreens Boots Alliance, Inc. | ||||||||||||||
125,000 | 3.450 | 06/01/26 | 124,736 | |||||||||||
|
| |||||||||||||
976,528 | ||||||||||||||
|
| |||||||||||||
Health Care Equipment & Services – 1.7% | ||||||||||||||
Aetna, Inc.(a) | ||||||||||||||
75,000 | 2.800 | 06/15/23 | 74,870 | |||||||||||
Becton Dickinson and Co. | ||||||||||||||
175,000 | 2.675 | 12/15/19 | 177,143 | |||||||||||
275,000 | 2.894 | (a) | 06/06/22 | 275,860 | ||||||||||
275,000 | 3.363 | (a) | 06/06/24 | 275,629 | ||||||||||
100,000 | 4.685 | (a) | 12/15/44 | 102,986 | ||||||||||
Cigna Corp.(a) | ||||||||||||||
150,000 | 3.250 | 04/15/25 | 150,585 | |||||||||||
CR Bard, Inc.(a) | ||||||||||||||
260,000 | 3.000 | 05/15/26 | 260,841 | |||||||||||
Medtronic, Inc. | ||||||||||||||
75,000 | 2.500 | 03/15/20 | 76,087 | |||||||||||
150,000 | 3.150 | 03/15/22 | 155,225 | |||||||||||
Stryker Corp.(a) | ||||||||||||||
50,000 | 2.625 | 03/15/21 | 50,520 | |||||||||||
125,000 | 3.375 | 11/01/25 | 127,211 | |||||||||||
UnitedHealth Group, Inc. | ||||||||||||||
100,000 | 4.625 | 07/15/35 | 112,392 | |||||||||||
|
| |||||||||||||
1,839,349 | ||||||||||||||
|
|
22 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST CORE FIXED INCOME FUND
Principal Amount | Interest Rate | Maturity Date | Value | |||||||||||
Corporate Bonds – (continued) | ||||||||||||||
Life Insurance – 0.8% | ||||||||||||||
American International Group, Inc.(a) | ||||||||||||||
$ | 50,000 | 3.750 | % | 07/10/25 | $ | 50,929 | ||||||||
25,000 | 4.500 | 07/16/44 | 25,422 | |||||||||||
100,000 | 4.800 | 07/10/45 | 106,728 | |||||||||||
Brighthouse Financial, Inc.(a)(c) | ||||||||||||||
75,000 | 3.700 | 06/22/27 | 74,089 | |||||||||||
Northwestern Mutual Life Insurance Co. (The)(c) | ||||||||||||||
200,000 | 6.063 | 03/30/40 | 260,160 | |||||||||||
Principal Financial Group, Inc.(a) | ||||||||||||||
150,000 | 3.100 | 11/15/26 | 147,802 | |||||||||||
Reliance Standard Life Global Funding II(c) | ||||||||||||||
225,000 | 2.500 | 01/15/20 | 225,370 | |||||||||||
|
| |||||||||||||
890,500 | ||||||||||||||
|
| |||||||||||||
Materials – 0.7% | ||||||||||||||
Ecolab, Inc. | ||||||||||||||
100,000 | 5.500 | 12/08/41 | 122,493 | |||||||||||
LYB International Finance II BV(a) | ||||||||||||||
200,000 | 3.500 | 03/02/27 | 197,148 | |||||||||||
Sherwin-Williams Co. (The) | ||||||||||||||
125,000 | 2.250 | 05/15/20 | 125,280 | |||||||||||
25,000 | 2.750 | (a) | 06/01/22 | 24,985 | ||||||||||
50,000 | 3.125 | (a) | 06/01/24 | 50,253 | ||||||||||
200,000 | 3.450 | (a) | 06/01/27 | 201,321 | ||||||||||
Westlake Chemical Corp.(a) | ||||||||||||||
75,000 | 3.600 | 08/15/26 | 74,437 | |||||||||||
|
| |||||||||||||
795,917 | ||||||||||||||
|
| |||||||||||||
Media – 0.5% | ||||||||||||||
21st Century Fox America, Inc.(a) | ||||||||||||||
75,000 | 3.700 | 09/15/24 | 78,405 | |||||||||||
CCO Safari II LLC(a) | ||||||||||||||
50,000 | 4.464 | 07/23/22 | 53,273 | |||||||||||
200,000 | 4.908 | 07/23/25 | 216,064 | |||||||||||
25,000 | 6.484 | 10/23/45 | 30,006 | |||||||||||
Comcast Corp.(a) | ||||||||||||||
125,000 | 3.375 | 08/15/25 | 128,239 | |||||||||||
Time Warner Cable LLC | ||||||||||||||
50,000 | 5.000 | 02/01/20 | 53,340 | |||||||||||
25,000 | 5.875 | (a) | 11/15/40 | 27,865 | ||||||||||
|
| |||||||||||||
587,192 | ||||||||||||||
|
| |||||||||||||
Metals and Mining(c) – 0.6% | ||||||||||||||
Glencore Finance Canada Ltd. | ||||||||||||||
350,000 | 2.700 | 10/25/17 | 350,525 | |||||||||||
Glencore Funding LLC | ||||||||||||||
75,000 | 4.125 | 05/30/23 | 76,957 | |||||||||||
200,000 | 4.000 | (a) | 03/27/27 | 196,779 | ||||||||||
|
| |||||||||||||
624,261 | ||||||||||||||
|
| |||||||||||||
Noncaptive-Financial – 0.4% | ||||||||||||||
AerCap Ireland Capital DAC | ||||||||||||||
250,000 | 4.625 | 07/01/22 | 267,933 | |||||||||||
International Lease Finance Corp.(c) | ||||||||||||||
150,000 | 7.125 | 09/01/18 | 158,752 | |||||||||||
|
| |||||||||||||
426,685 | ||||||||||||||
|
| |||||||||||||
Corporate Bonds – (continued) | ||||||||||||||
Pharmaceuticals, Biotechnology & Life Sciences – 2.4% | ||||||||||||||
AbbVie, Inc.(a) | ||||||||||||||
$ | 125,000 | 2.500 | % | 05/14/20 | $ | 126,449 | ||||||||
75,000 | 2.300 | 05/14/21 | 74,814 | |||||||||||
Allergan Funding SCS | ||||||||||||||
225,000 | 2.350 | 03/12/18 | 225,939 | |||||||||||
25,000 | 4.850 | (a) | 06/15/44 | 27,037 | ||||||||||
Amgen, Inc.(a) | ||||||||||||||
200,000 | 3.125 | 05/01/25 | 200,442 | |||||||||||
Bayer US Finance LLC(c) | ||||||||||||||
400,000 | 3.000 | 10/08/21 | 408,074 | |||||||||||
EMD Finance LLC(a)(c) | ||||||||||||||
375,000 | 2.950 | 03/19/22 | 381,658 | |||||||||||
Forest Laboratories LLC(a)(c) | ||||||||||||||
87,000 | 4.375 | 02/01/19 | 89,721 | |||||||||||
100,000 | 5.000 | 12/15/21 | 109,180 | |||||||||||
Mylan NV(a) | ||||||||||||||
300,000 | 3.950 | 06/15/26 | 303,972 | |||||||||||
Shire Acquisitions Investments Ireland DAC | ||||||||||||||
225,000 | 1.900 | 09/23/19 | 223,955 | |||||||||||
200,000 | 3.200 | (a) | 09/23/26 | 195,571 | ||||||||||
Teva Pharmaceutical Finance Netherlands III BV | ||||||||||||||
50,000 | 3.150 | 10/01/26 | 47,484 | |||||||||||
Thermo Fisher Scientific, Inc.(a) | ||||||||||||||
175,000 | 3.000 | 04/15/23 | 176,421 | |||||||||||
100,000 | 3.650 | 12/15/25 | 102,878 | |||||||||||
|
| |||||||||||||
2,693,595 | ||||||||||||||
|
| |||||||||||||
Pipelines(a) – 1.1% | ||||||||||||||
Columbia Pipeline Group, Inc. | ||||||||||||||
100,000 | 3.300 | 06/01/20 | 102,462 | |||||||||||
Enbridge, Inc. | ||||||||||||||
100,000 | 2.900 | 07/15/22 | 99,800 | |||||||||||
50,000 | 3.500 | 06/10/24 | 49,978 | |||||||||||
EnLink Midstream Partners LP | ||||||||||||||
175,000 | 4.150 | 06/01/25 | 172,815 | |||||||||||
75,000 | 4.850 | 07/15/26 | 78,031 | |||||||||||
Enterprise Products Operating LLC | ||||||||||||||
25,000 | 3.350 | 03/15/23 | 25,671 | |||||||||||
Enterprise Products Operating LLC Series A(b) | ||||||||||||||
250,000 | 4.877 | 08/01/66 | 250,937 | |||||||||||
Sunoco Logistics Partners Operations LP | ||||||||||||||
50,000 | 4.250 | 04/01/24 | 50,572 | |||||||||||
Williams Partners LP | ||||||||||||||
80,000 | 3.600 | 03/15/22 | 81,733 | |||||||||||
175,000 | 3.900 | 01/15/25 | 176,922 | |||||||||||
125,000 | 4.000 | 09/15/25 | 127,301 | |||||||||||
|
| |||||||||||||
1,216,222 | ||||||||||||||
|
| |||||||||||||
Property/Casualty Insurance – 0.2% | ||||||||||||||
Chubb Corp. (The)(a)(b) | ||||||||||||||
125,000 | 3.408 | 04/15/37 | 124,062 | |||||||||||
Hartford Financial Services Group, Inc. (The) | ||||||||||||||
25,000 | 5.125 | 04/15/22 | 27,751 | |||||||||||
Willis North America, Inc.(a) | ||||||||||||||
100,000 | 3.600 | 05/15/24 | 101,008 | |||||||||||
|
| |||||||||||||
252,821 | ||||||||||||||
|
|
The accompanying notes are an integral part of these financial statements. | 23 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST CORE FIXED INCOME FUND
Schedule of Investments (continued)
June 30, 2017 (Unaudited)
Principal Amount | Interest Rate | Maturity Date | Value | |||||||||||
Corporate Bonds – (continued) | ||||||||||||||
Real Estate Investment Trusts – 1.8% | ||||||||||||||
American Campus Communities Operating Partnership LP(a) | ||||||||||||||
$ | 275,000 | 4.125 | % | 07/01/24 | $ | 287,405 | ||||||||
Crown Castle International Corp.(a) | ||||||||||||||
75,000 | 2.250 | 09/01/21 | 73,785 | |||||||||||
CubeSmart LP(a) | ||||||||||||||
125,000 | 4.000 | 11/15/25 | 127,669 | |||||||||||
HCP, Inc.(a) | ||||||||||||||
25,000 | 2.625 | 02/01/20 | 25,183 | |||||||||||
Healthcare Realty Trust, Inc. | ||||||||||||||
350,000 | 5.750 | 01/15/21 | 383,333 | |||||||||||
Healthcare Trust of America Holdings LP(a) | ||||||||||||||
100,000 | 3.375 | 07/15/21 | 102,001 | |||||||||||
National Retail Properties, Inc.(a) | ||||||||||||||
125,000 | 4.000 | 11/15/25 | 127,824 | |||||||||||
Select Income REIT(a) | ||||||||||||||
50,000 | 2.850 | 02/01/18 | 50,208 | |||||||||||
75,000 | 3.600 | 02/01/20 | 76,005 | |||||||||||
Ventas Realty LP(a) | ||||||||||||||
150,000 | 3.100 | 01/15/23 | 150,501 | |||||||||||
125,000 | 3.500 | 02/01/25 | 124,190 | |||||||||||
VEREIT Operating Partnership LP(a) | ||||||||||||||
75,000 | 4.875 | 06/01/26 | 79,288 | |||||||||||
Welltower, Inc. | ||||||||||||||
375,000 | 2.250 | 03/15/18 | 375,986 | |||||||||||
|
| |||||||||||||
1,983,378 | ||||||||||||||
|
| |||||||||||||
Retailing(a) – 0.1% | ||||||||||||||
Home Depot, Inc. (The) | ||||||||||||||
75,000 | 4.250 | 04/01/46 | 80,466 | |||||||||||
|
| |||||||||||||
Software & Services(a) – 0.5% | ||||||||||||||
Fidelity National Information Services, Inc. | ||||||||||||||
250,000 | 3.625 | 10/15/20 | 261,886 | |||||||||||
125,000 | 3.000 | 08/15/26 | 121,039 | |||||||||||
Fiserv, Inc. | ||||||||||||||
150,000 | 2.700 | 06/01/20 | 151,768 | |||||||||||
|
| |||||||||||||
534,693 | ||||||||||||||
|
| |||||||||||||
Technology – 1.6% | ||||||||||||||
Amphenol Corp.(a) | ||||||||||||||
125,000 | 3.125 | 09/15/21 | 127,906 | |||||||||||
Broadcom Corp.(a)(c) | ||||||||||||||
275,000 | 3.625 | 01/15/24 | 281,324 | |||||||||||
25,000 | 3.875 | 01/15/27 | 25,673 | |||||||||||
Cisco Systems, Inc. | ||||||||||||||
100,000 | 2.200 | 02/28/21 | 100,540 | |||||||||||
DXC Technology Co.(a)(c) | ||||||||||||||
150,000 | 4.250 | 04/15/24 | 155,194 | |||||||||||
Hewlett Packard Enterprise Co.(a) | ||||||||||||||
125,000 | 4.900 | 10/15/25 | 131,050 | |||||||||||
NXP BV(c) | ||||||||||||||
375,000 | 4.125 | 06/01/21 | 394,875 | |||||||||||
Oracle Corp.(a) | ||||||||||||||
200,000 | 2.500 | 05/15/22 | 201,898 | |||||||||||
|
| |||||||||||||
Corporate Bonds – (continued) | ||||||||||||||
Technology – (continued) | ||||||||||||||
QUALCOMM, Inc.(a) | ||||||||||||||
$ | 150,000 | 2.600 | % | 01/30/23 | $ | 149,453 | ||||||||
175,000 | 2.900 | 05/20/24 | 174,643 | |||||||||||
|
| |||||||||||||
1,742,556 | ||||||||||||||
|
| |||||||||||||
Tobacco – 0.7% | ||||||||||||||
Imperial Brands Finance plc(c) | ||||||||||||||
400,000 | 2.050 | 02/11/18 | 400,396 | |||||||||||
Reynolds American, Inc.(a) | ||||||||||||||
375,000 | 4.450 | 06/12/25 | 401,756 | |||||||||||
|
| |||||||||||||
802,152 | ||||||||||||||
|
| |||||||||||||
Transportation(c) – 0.5% | ||||||||||||||
ERAC USA Finance LLC | ||||||||||||||
350,000 | 2.350 | 10/15/19 | 350,544 | |||||||||||
Penske Truck Leasing Co. LP(a) | ||||||||||||||
200,000 | 3.375 | 02/01/22 | 204,877 | |||||||||||
|
| |||||||||||||
555,421 | ||||||||||||||
|
| |||||||||||||
Wireless Telecommunications – 3.4% | ||||||||||||||
American Tower Corp. | ||||||||||||||
75,000 | 3.300 | (a) | 02/15/21 | 76,959 | ||||||||||
125,000 | 4.700 | 03/15/22 | 135,343 | |||||||||||
AT&T, Inc. | ||||||||||||||
225,000 | 2.300 | 03/11/19 | 226,335 | |||||||||||
25,000 | 2.800 | (a) | 02/17/21 | 25,265 | ||||||||||
175,000 | 3.200 | (a) | 03/01/22 | 177,135 | ||||||||||
250,000 | 3.800 | 03/15/22 | 258,758 | |||||||||||
150,000 | 3.000 | (a) | 06/30/22 | 150,078 | ||||||||||
135,000 | 3.600 | (a) | 02/17/23 | 138,167 | ||||||||||
200,000 | 3.400 | (a) | 05/15/25 | 196,618 | ||||||||||
100,000 | 4.125 | (a) | 02/17/26 | 102,527 | ||||||||||
100,000 | 4.250 | (a) | 03/01/27 | 103,395 | ||||||||||
Verizon Communications, Inc. | ||||||||||||||
850,000 | 4.500 | 09/15/20 | 908,005 | |||||||||||
621,000 | 2.946 | (c) | 03/15/22 | 625,315 | ||||||||||
400,000 | 5.150 | 09/15/23 | 444,315 | |||||||||||
150,000 | 2.625 | 08/15/26 | 137,969 | |||||||||||
|
| |||||||||||||
3,706,184 | ||||||||||||||
|
| |||||||||||||
Wirelines Telecommunications – 0.4% | ||||||||||||||
Telefonica Emisiones SAU | ||||||||||||||
175,000 | 3.192 | 04/27/18 | 176,850 | |||||||||||
225,000 | 5.462 | 02/16/21 | 247,484 | |||||||||||
|
| |||||||||||||
424,334 | ||||||||||||||
|
| |||||||||||||
TOTAL CORPORATE BONDS | ||||||||||||||
(Cost $39,726,426) | $ | 40,444,413 | ||||||||||||
|
| |||||||||||||
Mortgage-Backed Securities – 25.0% | ||||||||||||||
Adjustable Rate FHLMC(b) – 0.4% | ||||||||||||||
$ | 463,060 | 2.821 | % | 09/01/35 | $ | 488,534 | ||||||||
|
|
24 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST CORE FIXED INCOME FUND
Principal Amount | Interest Rate | Maturity Date | Value | |||||||||||
Mortgage-Backed Securities – (continued) | ||||||||||||||
Adjustable Rate FNMA(b) – 0.8% | ||||||||||||||
$ | 212,058 | 3.125 | % | 05/01/33 | $ | 220,413 | ||||||||
382,591 | 3.208 | 05/01/35 | 404,897 | |||||||||||
234,278 | 3.194 | 09/01/35 | 248,420 | |||||||||||
|
| |||||||||||||
873,730 | ||||||||||||||
|
| |||||||||||||
FHLMC – 1.8% | ||||||||||||||
13,627 | 5.500 | 02/01/18 | 13,751 | |||||||||||
1,306 | 5.500 | 04/01/18 | 1,317 | |||||||||||
785 | 4.500 | 09/01/18 | 797 | |||||||||||
2,088 | 5.500 | 09/01/18 | 2,125 | |||||||||||
12 | 9.500 | 08/01/20 | 12 | |||||||||||
22,608 | 6.500 | 10/01/20 | 25,043 | |||||||||||
5,928 | 4.500 | 07/01/24 | 6,281 | |||||||||||
34,060 | 4.500 | 11/01/24 | 36,193 | |||||||||||
8,082 | 4.500 | 12/01/24 | 8,567 | |||||||||||
8,615 | 6.000 | 03/01/29 | 9,681 | |||||||||||
151 | 6.000 | 04/01/29 | 169 | |||||||||||
10,493 | 7.500 | 12/01/29 | 12,232 | |||||||||||
110,559 | 7.000 | 05/01/32 | 129,716 | |||||||||||
176 | 6.000 | 08/01/32 | 196 | |||||||||||
56,031 | 7.000 | 12/01/32 | 65,829 | |||||||||||
3,366 | 5.000 | 10/01/33 | 3,662 | |||||||||||
5,015 | 5.000 | 07/01/35 | 5,480 | |||||||||||
6,893 | 5.000 | 12/01/35 | 7,586 | |||||||||||
56,327 | 5.500 | 01/01/37 | 62,244 | |||||||||||
1,486 | 5.000 | 03/01/38 | 1,622 | |||||||||||
97,149 | 7.000 | 02/01/39 | 112,486 | |||||||||||
3,371 | 5.000 | 06/01/41 | 3,685 | |||||||||||
1,438,329 | 3.500 | 04/01/43 | 1,486,198 | |||||||||||
|
| |||||||||||||
1,994,872 | ||||||||||||||
|
| |||||||||||||
FNMA – 10.3% | ||||||||||||||
14,560 | 5.500 | 02/01/18 | 14,686 | |||||||||||
15,786 | 5.000 | 05/01/18 | 15,970 | |||||||||||
1,925 | 6.500 | 08/01/18 | 1,962 | |||||||||||
11,025 | 7.000 | 08/01/18 | 11,175 | |||||||||||
715 | 5.000 | 06/01/23 | 755 | |||||||||||
66,667 | 5.500 | 09/01/23 | 70,802 | |||||||||||
18,504 | 5.500 | 10/01/23 | 19,726 | |||||||||||
3,764 | 4.500 | 07/01/24 | 3,985 | |||||||||||
89,697 | 4.500 | 11/01/24 | 95,294 | |||||||||||
39,548 | 4.500 | 12/01/24 | 42,044 | |||||||||||
60 | 7.000 | 07/01/25 | 68 | |||||||||||
10,638 | 9.000 | 11/01/25 | 12,270 | |||||||||||
36,488 | 7.000 | 08/01/26 | 41,260 | |||||||||||
629 | 7.000 | 08/01/27 | 726 | |||||||||||
4,839 | 7.000 | 09/01/27 | 5,243 | |||||||||||
112 | 7.000 | 01/01/28 | 128 | |||||||||||
61,139 | 6.000 | 02/01/29 | 69,344 | |||||||||||
55,474 | 6.000 | 06/01/29 | 62,934 | |||||||||||
18,293 | 8.000 | 10/01/29 | 20,882 | |||||||||||
5,090 | 7.000 | 12/01/29 | 5,861 | |||||||||||
1,274 | 8.500 | 04/01/30 | 1,549 | |||||||||||
2,371 | 8.000 | 05/01/30 | 2,703 | |||||||||||
221 | 8.500 | 06/01/30 | 243 | |||||||||||
|
| |||||||||||||
Mortgage-Backed Securities – (continued) | ||||||||||||||
FNMA – (continued) | ||||||||||||||
$ | 6,142 | 7.000 | % | 05/01/32 | $ | 7,149 | ||||||||
47,955 | 7.000 | 06/01/32 | 56,286 | |||||||||||
56,528 | 7.000 | 08/01/32 | 66,484 | |||||||||||
8,992 | 8.000 | 08/01/32 | 10,100 | |||||||||||
2,652 | 5.000 | 08/01/33 | 2,903 | |||||||||||
642 | 5.500 | 09/01/33 | 720 | |||||||||||
804 | 5.500 | 02/01/34 | 901 | |||||||||||
164 | 5.500 | 04/01/34 | 185 | |||||||||||
5,412 | 5.500 | 12/01/34 | 6,073 | |||||||||||
26,491 | 5.000 | 04/01/35 | 29,138 | |||||||||||
47,063 | 6.000 | 04/01/35 | 53,248 | |||||||||||
1,079 | 5.500 | 09/01/35 | 1,215 | |||||||||||
103,630 | 6.000 | 10/01/35 | 118,221 | |||||||||||
231,900 | 6.000 | 09/01/36 | 263,833 | |||||||||||
68 | 5.500 | 02/01/37 | 77 | |||||||||||
139 | 5.500 | 04/01/37 | 157 | |||||||||||
148,525 | 5.500 | 08/01/37 | 165,094 | |||||||||||
206 | 5.500 | 03/01/38 | 231 | |||||||||||
217 | 5.500 | 06/01/38 | 244 | |||||||||||
158 | 5.500 | 07/01/38 | 177 | |||||||||||
151 | 5.500 | 08/01/38 | 170 | |||||||||||
119 | 5.500 | 09/01/38 | 133 | |||||||||||
2,278 | 5.500 | 10/01/38 | 2,561 | |||||||||||
50 | 5.500 | 12/01/38 | 57 | |||||||||||
123,215 | 5.000 | 01/01/39 | 136,132 | |||||||||||
60,516 | 7.000 | 03/01/39 | 70,085 | |||||||||||
193,840 | 6.000 | 05/01/39 | 218,700 | |||||||||||
13,971 | 4.500 | 08/01/39 | 15,205 | |||||||||||
54,962 | 3.000 | 01/01/43 | 55,363 | |||||||||||
217,733 | 3.000 | 03/01/43 | 219,324 | |||||||||||
303,487 | 3.000 | 04/01/43 | 305,721 | |||||||||||
227,804 | 3.000 | 05/01/43 | 229,539 | |||||||||||
765,229 | 3.500 | 07/01/43 | 789,212 | |||||||||||
800,826 | 4.500 | 04/01/45 | 873,526 | |||||||||||
94,634 | 4.500 | 05/01/45 | 101,781 | |||||||||||
841,098 | 3.500 | 05/01/46 | 866,364 | |||||||||||
1,000,000 | 4.000 | TBA-30yr | (e) | 1,049,473 | ||||||||||
3,000,000 | 3.500 | TBA-30yr | (e) | 3,080,625 | ||||||||||
2,000,000 | 4.000 | TBA-30yr | (e) | 2,102,031 | ||||||||||
|
| |||||||||||||
11,398,048 | ||||||||||||||
|
| |||||||||||||
GNMA – 11.7% | ||||||||||||||
2,018 | 7.000 | 10/15/25 | 2,052 | |||||||||||
7,235 | 7.000 | 11/15/25 | 7,795 | |||||||||||
1,181 | 7.000 | 02/15/26 | 1,212 | |||||||||||
5,513 | 7.000 | 04/15/26 | 6,096 | |||||||||||
3,176 | 7.000 | 03/15/27 | 3,667 | |||||||||||
24,125 | 7.000 | 11/15/27 | 27,073 | |||||||||||
397 | 7.000 | 01/15/28 | 434 | |||||||||||
17,630 | 7.000 | 02/15/28 | 19,137 | |||||||||||
2,278 | 7.000 | 03/15/28 | 2,604 | |||||||||||
1,012 | 7.000 | 04/15/28 | 1,177 | |||||||||||
215 | 7.000 | 05/15/28 | 245 | |||||||||||
3,756 | 7.000 | 06/15/28 | 4,348 | |||||||||||
7,879 | 7.000 | 07/15/28 | 9,159 | |||||||||||
|
|
The accompanying notes are an integral part of these financial statements. | 25 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST CORE FIXED INCOME FUND
Schedule of Investments (continued)
June 30, 2017 (Unaudited)
Principal Amount | Interest Rate | Maturity Date | Value | |||||||||||
Mortgage-Backed Securities – (continued) | ||||||||||||||
GNMA – (continued) | ||||||||||||||
$ | 13,418 | 7.000 | % | 09/15/28 | $ | 15,636 | ||||||||
2,256 | 7.000 | 11/15/28 | 2,624 | |||||||||||
2,554 | 7.500 | 11/15/30 | 2,562 | |||||||||||
149,672 | 6.000 | 08/20/34 | 169,701 | |||||||||||
159,046 | 5.000 | 06/15/40 | 173,962 | |||||||||||
749,669 | 4.000 | 08/20/43 | 792,394 | |||||||||||
387,647 | 4.000 | 08/20/45 | 408,650 | |||||||||||
1,573,838 | 4.000 | 10/20/45 | 1,658,124 | |||||||||||
60,618 | 4.000 | 11/20/45 | 63,845 | |||||||||||
828,086 | 4.000 | 01/20/46 | 871,657 | |||||||||||
289,615 | 4.000 | 02/20/46 | 304,854 | |||||||||||
793,308 | 4.000 | 03/20/46 | 835,050 | |||||||||||
3,317,894 | 4.000 | 04/20/46 | 3,492,990 | |||||||||||
840,694 | 4.000 | 05/20/46 | 885,060 | |||||||||||
997,991 | 4.000 | 05/20/47 | 1,052,686 | |||||||||||
1,000,000 | 4.000 | 06/20/47 | 1,055,723 | |||||||||||
1,000,000 | 4.000 | 07/20/47 | 1,056,289 | |||||||||||
|
| |||||||||||||
12,926,806 | ||||||||||||||
|
| |||||||||||||
TOTAL MORTGAGE-BACKED SECURITIES | ||||||||||||||
(Cost $27,549,246) | $ | 27,681,990 | ||||||||||||
|
| |||||||||||||
Collateralized Mortgage Obligations – 2.2% | ||||||||||||||
Adjustable Rate Non-Agency(a)(b) – 0.5% | ||||||||||||||
Alternative Loan Trust Series 2005-38, Class A1 | ||||||||||||||
$ | 111,891 | 2.232 | % | 09/25/35 | $ | 109,505 | ||||||||
Lehman XS Trust Series 2005-7N, Class 1A1A | ||||||||||||||
200,848 | 1.486 | 12/25/35 | 192,899 | |||||||||||
| MASTR Adjustable Rate Mortgages Trust Series 2006-OA2, | | ||||||||||||
251,890 | 1.582 | 12/25/46 | 247,202 | |||||||||||
|
| |||||||||||||
549,606 | ||||||||||||||
|
| |||||||||||||
Regular Floater(b) – 1.3% | ||||||||||||||
Connecticut Avenue Securities Series 2014-C03, Class 1M1(a) | ||||||||||||||
7,506 | 2.416 | 07/25/24 | 7,517 | |||||||||||
| Mortgage Repurchase Agreement Financing Trust Series 2016-1, | | ||||||||||||
300,000 | 2.017 | 04/10/19 | 300,034 | |||||||||||
| Mortgage Repurchase Agreement Financing Trust Series 2016-1, | | ||||||||||||
200,000 | 2.067 | 04/10/19 | 200,047 | |||||||||||
| Mortgage Repurchase Agreement Financing Trust Series 2016-2, | | ||||||||||||
500,000 | 2.417 | 03/10/19 | 500,074 | |||||||||||
| Mortgage Repurchase Agreement Financing Trust Series 2017-1, | | ||||||||||||
150,000 | 1.967 | 07/10/19 | 150,063 | |||||||||||
Station Place Securitization Trust Series 2015-2, Class A(c) | ||||||||||||||
300,000 | 2.189 | 05/15/18 | 300,000 | |||||||||||
|
| |||||||||||||
1,457,735 | ||||||||||||||
|
| |||||||||||||
Collateralized Mortgage Obligations – (continued) | ||||||||||||||
Sequential Fixed Rate – 0.4% | ||||||||||||||
FNMA REMIC Series 2012-111, Class B | ||||||||||||||
$ | 19,678 | 7.000 | % | 10/25/42 | $ | 22,688 | ||||||||
FNMA REMIC Series 2012-153, Class B | ||||||||||||||
52,106 | 7.000 | 07/25/42 | 60,312 | |||||||||||
NCUA Guaranteed Notes Series A4 | ||||||||||||||
300,000 | 3.000 | 06/12/19 | 307,757 | |||||||||||
|
| |||||||||||||
390,757 | ||||||||||||||
|
| |||||||||||||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS | ||||||||||||||
(Cost $2,334,533) | $ | 2,398,098 | ||||||||||||
|
| |||||||||||||
Commercial Mortgage-Backed Security(b) – 0.3% | ||||||||||||||
Sequential Fixed Rate – 0.3% | ||||||||||||||
| Wachovia Bank Commercial Mortgage Trust Series 2007-C34, | | ||||||||||||
$ | 297,269 | 5.608 | % | 05/15/46 | $ | 297,294 | ||||||||
(Cost $327,437) | ||||||||||||||
|
| |||||||||||||
U.S. Government Agency Securities – 2.0% | ||||||||||||||
FHLB | ||||||||||||||
$ | 600,000 | 2.125 | % | 06/09/23 | $ | 599,636 | ||||||||
100,000 | 3.375 | 12/08/23 | 106,713 | |||||||||||
|
| |||||||||||||
FNMA | ||||||||||||||
400,000 | 1.875 | 09/24/26 | 379,258 | |||||||||||
400,000 | 6.250 | 05/15/29 | 542,584 | |||||||||||
|
| |||||||||||||
Tennessee Valley Authority | ||||||||||||||
500,000 | 3.875 | % | 02/15/21 | 536,975 | ||||||||||
|
| |||||||||||||
TOTAL U.S. GOVERNMENT AGENCY SECURITIES | ||||||||||||||
(Cost $2,154,005) | $ | 2,165,166 | ||||||||||||
|
| |||||||||||||
Asset-Backed Securities(b) – 12.1% | ||||||||||||||
Collateralized Loan Obligations(c) – 4.5% | ||||||||||||||
Acis CLO Ltd. Series 2013-1A, Class ACOM(a) | ||||||||||||||
$ | 1,500,000 | 2.386 | % | 04/18/24 | $ | 1,491,450 | ||||||||
Acis CLO Ltd. Series 2013-2A, Class BR(a) | ||||||||||||||
121,437 | 2.208 | 10/14/22 | 121,454 | |||||||||||
Acis CLO Ltd. Series 2013-2A, Class C2R(a) | ||||||||||||||
200,000 | 2.458 | 10/14/22 | 199,999 | |||||||||||
BlueMountain CLO Ltd. Series 2014-2A, Class AR(a) | ||||||||||||||
550,000 | 0.000 | 07/20/26 | 550,000 | |||||||||||
Cutwater Ltd. Series 2014-1A, Class A1AR(a) | ||||||||||||||
550,000 | 2.469 | 07/15/26 | 549,724 | |||||||||||
Neuberger Berman CLO XIX Ltd. Series 2015-19A, Class A1R(a) | ||||||||||||||
550,000 | 0.000 | 07/15/27 | 550,000 | |||||||||||
OFSI Fund V Ltd. Series 2013-5A, Class A1LA | ||||||||||||||
734,299 | 2.088 | 04/17/25 | 732,487 | |||||||||||
Voya CLO Ltd. Series 2014-4A, Class A1R(a) | ||||||||||||||
800,000 | 0.000 | 10/14/26 | 800,000 | |||||||||||
|
| |||||||||||||
4,995,114 | ||||||||||||||
|
|
26 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST CORE FIXED INCOME FUND
Principal Amount | Interest Rate | Maturity Date | Value | |||||||||||
Asset-Backed Securities(b) – (continued) | ||||||||||||||
Home Equity(a) – 0.1% | ||||||||||||||
GMACM Home Equity Loan Trust Series 2007-HE3, Class 1A1 | ||||||||||||||
$ | 29,649 | 7.000 | % | 09/25/37 | $ | 30,107 | ||||||||
GMACM Home Equity Loan Trust Series 2007-HE3, Class 2A1 | ||||||||||||||
77,412 | 6.809 | 09/25/37 | 79,766 | |||||||||||
|
| |||||||||||||
109,873 | ||||||||||||||
|
| |||||||||||||
Student Loans – 7.5% | ||||||||||||||
Academic Loan Funding Trust Series 2012-1A, Class A2(a)(c) | ||||||||||||||
550,000 | 2.316 | 12/27/44 | 547,966 | |||||||||||
AccessLex Institute Series 2005-2, Class A3(a) | ||||||||||||||
133,247 | 1.352 | 11/22/24 | 133,239 | |||||||||||
Brazos Higher Education Authority, Inc. Series 2005-2, Class A11 | ||||||||||||||
99,024 | 1.436 | 09/27/21 | 98,847 | |||||||||||
Chase Education Loan Trust Series 2007-A, Class A3(a) | ||||||||||||||
45,210 | 1.365 | 12/28/23 | 45,081 | |||||||||||
ECMC Group Student Loan Trust Series 2016-1A, Class A(a)(c) | ||||||||||||||
520,816 | 2.566 | 07/26/66 | 523,580 | |||||||||||
Edsouth Indenture No. 10 LLC Series 2015-2, Class A(a)(c) | ||||||||||||||
333,744 | 2.216 | 12/25/56 | 333,744 | |||||||||||
EFS Volunteer No. 2 LLC Series 2012-1, Class A2(a)(c) | ||||||||||||||
550,000 | 2.566 | 03/25/36 | 558,702 | |||||||||||
EFS Volunteer No. 3 LLC Series 2012-1, Class A3(a)(c) | ||||||||||||||
350,000 | 2.216 | 04/25/33 | 351,101 | |||||||||||
| Montana Higher Education Student Assistance Corp. | | ||||||||||||
300,000 | 2.262 | 07/20/43 | 294,389 | |||||||||||
Navient Student Loan Trust Series 2016-5A, Class A(a)(c) | ||||||||||||||
1,052,228 | 2.466 | 06/25/65 | 1,068,826 | |||||||||||
Navient Student Loan Trust Series 2016-7A, Class A(a)(c) | ||||||||||||||
513,870 | 2.366 | 03/25/66 | 519,740 | |||||||||||
Nelnet Student Loan Trust Series 2006-1, Class A6(a)(c) | ||||||||||||||
500,000 | 1.636 | 08/23/36 | 477,955 | |||||||||||
Nelnet Student Loan Trust Series 2006-2, Class A5(a) | ||||||||||||||
293,782 | 1.256 | 01/25/30 | 293,355 | |||||||||||
Northstar Education Finance, Inc. Series 2004-2, Class A3 | ||||||||||||||
1,253 | 1.342 | 07/30/18 | 1,252 | |||||||||||
Northstar Education Finance, Inc. Series 2007-1, Class A1(a) | ||||||||||||||
100,000 | 1.272 | 04/28/30 | 98,509 | |||||||||||
Scholar Funding Trust Series 2010-A, Class A(a)(c) | ||||||||||||||
146,419 | 1.922 | 10/28/41 | 144,301 | |||||||||||
SLC Student Loan Trust Series 2006-1, Class A5(a) | ||||||||||||||
457,237 | 1.356 | 03/15/27 | 455,172 | |||||||||||
SLM Student Loan Trust Series 2003-7A, Class A5A(a)(c) | ||||||||||||||
415,138 | 2.446 | 12/15/33 | 419,385 | |||||||||||
SLM Student Loan Trust Series 2004-8A, Class A6(a)(c) | ||||||||||||||
400,000 | 1.786 | 01/25/40 | 394,830 | |||||||||||
SLM Student Loan Trust Series 2005-3, Class A5(a) | ||||||||||||||
164,684 | 1.246 | 10/25/24 | 164,430 | |||||||||||
SLM Student Loan Trust Series 2005-5, Class A5(a) | ||||||||||||||
100,000 | 1.906 | 10/25/40 | 97,756 | |||||||||||
SLM Student Loan Trust Series 2006-2, Class A5(a) | ||||||||||||||
184,485 | 1.266 | 07/25/25 | 184,474 | |||||||||||
SLM Student Loan Trust Series 2007-7, Class A4(a) | ||||||||||||||
212,862 | 1.486 | 01/25/22 | 209,592 | |||||||||||
|
| |||||||||||||
Asset-Backed Securities(b) – (continued) | ||||||||||||||
Student Loans – (continued) | ||||||||||||||
SLM Student Loan Trust Series 2008-5, Class A4(a) | ||||||||||||||
$ | 438,554 | 2.856 | % | 07/25/23 | $ | 449,307 | ||||||||
SLM Student Loan Trust Series 2008-6, Class A4(a) | ||||||||||||||
300,000 | 2.256 | 07/25/23 | 301,639 | |||||||||||
SLM Student Loan Trust Series 2008-8, Class A4(a) | ||||||||||||||
150,000 | 2.656 | 04/25/23 | 153,412 | |||||||||||
|
| |||||||||||||
8,320,584 | ||||||||||||||
|
| |||||||||||||
TOTAL ASSET-BACKED SECURITIES | ||||||||||||||
(Cost $13,266,144) | $ | 13,425,571 | ||||||||||||
|
| |||||||||||||
Foreign Government Securities – 2.3% | ||||||||||||||
Colombia Government International Bond(a) | ||||||||||||||
$ | 240,000 | 4.000 | % | 02/26/24 | $ | 249,000 | ||||||||
Hashemite Kingdom of Jordan Government AID Bond(f) | ||||||||||||||
700,000 | 2.503 | 10/30/20 | 713,538 | |||||||||||
Indonesia Government International Note(c) | ||||||||||||||
230,000 | 4.750 | 01/08/26 | 246,962 | |||||||||||
Israel Government AID Bond(f) | ||||||||||||||
400,000 | 5.500 | 09/18/23 | 476,304 | |||||||||||
200,000 | 5.500 | 12/04/23 | 237,678 | |||||||||||
100,000 | 5.500 | 04/26/24 | 119,154 | |||||||||||
Mexico Government International Bond | ||||||||||||||
470,000 | 3.600 | 01/30/25 | 476,580 | |||||||||||
|
| |||||||||||||
TOTAL FOREIGN GOVERNMENT SECURITIES | ||||||||||||||
(Cost $2,485,058) | $ | 2,519,216 | ||||||||||||
|
| |||||||||||||
Supranational – 0.2% | ||||||||||||||
Inter-American Development Bank | ||||||||||||||
$ | 200,000 | 1.000 | % | 02/27/18 | $ | 198,930 | ||||||||
(Cost $199,734) | ||||||||||||||
|
| |||||||||||||
Municipal Bonds – 0.8% | ||||||||||||||
California – 0.3% | ||||||||||||||
California State Various Purpose GO Bonds Series 2010 | ||||||||||||||
$ | 140,000 | 7.950 | % | 03/01/36 | $ | 159,720 | ||||||||
105,000 | 7.625 | 03/01/40 | 160,414 | |||||||||||
|
| |||||||||||||
320,134 | ||||||||||||||
|
| |||||||||||||
Illinois – 0.2% | ||||||||||||||
Illinois State GO Bonds for Build America Bonds Series 2010-5 | ||||||||||||||
250,000 | 7.350 | 07/01/35 | 267,498 | |||||||||||
|
| |||||||||||||
Ohio – 0.3% | ||||||||||||||
| American Municipal Power, Inc. RB Build America Bond | | ||||||||||||
250,000 | 6.270 | 02/15/50 | 310,532 | |||||||||||
|
| |||||||||||||
TOTAL MUNICIPAL BONDS | ||||||||||||||
(Cost $750,161) | $ | 898,164 | ||||||||||||
|
|
The accompanying notes are an integral part of these financial statements. | 27 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST CORE FIXED INCOME FUND
Schedule of Investments (continued)
June 30, 2017 (Unaudited)
Principal Amount | Interest Rate | Maturity Date | Value | |||||||||||
U.S. Treasury Obligations – 23.6% | ||||||||||||||
U.S. Treasury Bonds | ||||||||||||||
$ | 470,000 | 2.750 | % | 11/15/42 | $ | 464,642 | ||||||||
410,000 | 3.125 | 02/15/43 | 433,349 | |||||||||||
490,000 | 3.625 | 02/15/44 | 564,730 | |||||||||||
490,000 | 3.125 | 08/15/44 | 517,856 | |||||||||||
100,000 | 3.000 | 11/15/44 | 103,224 | |||||||||||
200,000 | 2.875 | 08/15/45 | 201,162 | |||||||||||
1,350,000 | 3.000 | (g) | 11/15/45 | 1,391,040 | ||||||||||
5,200,000 | 2.875 | 11/15/46 | 5,230,420 | |||||||||||
130,000 | 3.000 | 05/15/47 | 134,219 | |||||||||||
U.S. Treasury Inflation Indexed Bond (TIPS) | ||||||||||||||
101,297 | 0.875 | 02/15/47 | 98,466 | |||||||||||
U.S. Treasury Inflation Indexed Notes (TIPS) | ||||||||||||||
261,043 | 0.125 | 04/15/20 | 261,541 | |||||||||||
257,930 | 0.125 | 04/15/21 | 257,688 | |||||||||||
429,668 | 0.625 | 01/15/24 | 436,095 | |||||||||||
412,952 | 0.250 | 01/15/25 | 405,924 | |||||||||||
205,818 | 0.625 | 01/15/26 | 207,287 | |||||||||||
U.S. Treasury Notes | ||||||||||||||
1,400,000 | 1.375 | 04/30/21 | 1,382,276 | |||||||||||
2,630,000 | 2.250 | 01/31/24 | 2,654,906 | |||||||||||
610,000 | 2.125 | 03/31/24 | 610,415 | |||||||||||
4,400,000 | 2.000 | 04/30/24 | 4,366,824 | |||||||||||
3,100,000 | 2.000 | 05/31/24 | 3,074,828 | |||||||||||
620,000 | 2.000 | 06/30/24 | 614,526 | |||||||||||
1,640,000 | 2.250 | 11/15/25 | 1,640,508 | |||||||||||
U.S. Treasury STRIPS Bond(h) | ||||||||||||||
1,800,000 | 0.000 | 02/15/36 | 1,080,216 | |||||||||||
|
| |||||||||||||
TOTAL U.S. TREASURY OBLIGATIONS | ||||||||||||||
(Cost $25,896,025) | $ | 26,132,142 | ||||||||||||
|
|
Shares | Distribution Rate | Value | ||||||||
Investment Company(b)(i) – 1.0% | ||||||||||
| Goldman Sachs Financial Square Government Fund — | |||||||||
1,111,197 | 0.845 | % | $ | 1,111,197 | ||||||
(Cost $1,111,197) | ||||||||||
|
| |||||||||
TOTAL INVESTMENTS – 106.1% | ||||||||||
(Cost $115,799,966) | $ | 117,272,181 | ||||||||
|
| |||||||||
| LIABILITIES IN EXCESS OF | (6,767,062 | ) | |||||||
|
| |||||||||
NET ASSETS – 100.0% | $ | 110,505,119 | ||||||||
|
|
The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. | ||
(a) | Securities with “Call” features. Maturity dates disclosed are the final maturity dates. | |
(b) | Variable rate security. Interest rate or distribution rate disclosed is that which is in effect on June 30, 2017. | |
(c) | Exempt from registration under Rule 144A of the Securities Act of 1933. Under procedures approved by the Board of Trustees, such securities may be deemed liquid by the Investment Adviser and may be resold, normally to qualified institutional buyers in transactions exempt from registration. Total market value of Rule 144A securities amounts to $19,180,400, which represents approximately 17.4% of net assets as of June 30, 2017. | |
(d) | Guaranteed by a foreign government until maturity. Total market value of these securities amounts to $996,960, which represents 0.9% of net assets as of June 30, 2017. | |
(e) | 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 (excluding forward sales contracts, if any) amounts to $6,232,129 which represents approximately 5.6% of net assets as of June 30, 2017. | |
(f) | Guaranteed by the United States Government. Total market value of these securities amounts to $1,546,674, which represents 1.4% of net assets as of June 30, 2017. | |
(g) | All or a portion of security is segregated as collateral for initial margin requirements on futures transactions. | |
(h) | Issued with a zero coupon. Income is recognized through the accretion of discount. | |
(i) | Represents an affiliated issuer. |
Investment Abbreviations: | ||
BA | —Banker Acceptance Rate | |
BBR | —Bank Bill Reference Rate | |
EURIBOR | —Euro Interbank Offered Rate | |
FHLB | —Federal Home Loan Bank | |
FHLMC | —Federal Home Loan Mortgage Corp. | |
FNMA | —Federal National Mortgage Association | |
GNMA | —Government National Mortgage Association | |
GO | —General Obligation | |
LIBOR | —London Interbank Offered Rate | |
NIBOR | —Norwegian Interbank Offered Rate | |
RB | —Revenue Bond | |
REMIC | —Real Estate Mortgage Investment Conduit | |
RMKT | —Remarketed | |
STIBOR | —Stockholm Interbank Offered Rate | |
STRIPS | —Separate Trading of Registered Interest and Principal of Securities | |
TIPS | —Treasury Inflation-Protected Securities | |
UK-RPI | —United Kingdom Retail Price Index | |
Currency Abbreviations: | ||
AUD | —Australian Dollar | |
CAD | —Canadian Dollar | |
CHF | —Swiss Franc | |
EUR | —Euro | |
GBP | —British Pound | |
JPY | —Japanese Yen | |
NOK | —Norwegian Krone | |
NZD | —New Zealand Dollar | |
SEK | —Swedish Krona | |
TWD | —Taiwan Dollar | |
USD | —United States Dollar |
28 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST CORE FIXED INCOME FUND
ADDITIONAL INVESTMENT INFORMATION
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS — At June 30, 2017, the Fund had the following forward foreign currency exchange contracts:
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS WITH UNREALIZED GAIN
Counterparty | Currency Purchased | Currency Sold | Settlement Date | Current Value | Unrealized Gain | |||||||||||||||
Morgan Stanley Co., Inc. | AUD | 222,000 | NZD | 232,835 | 09/20/17 | $ | 170,460 | $ | 85 | |||||||||||
AUD | 155,487 | USD | 116,312 | 07/27/17 | 119,470 | 3,158 | ||||||||||||||
AUD | 2,313,532 | USD | 1,753,677 | 09/20/17 | 1,776,424 | 22,747 | ||||||||||||||
CAD | 3,857,056 | USD | 2,887,365 | 09/20/17 | 2,977,998 | 90,633 | ||||||||||||||
EUR | 30,663 | AUD | 45,532 | 09/20/17 | 35,167 | 206 | ||||||||||||||
EUR | 376,000 | CHF | 410,430 | 09/20/17 | 431,225 | 1,049 | ||||||||||||||
EUR | 77,000 | GBP | 67,509 | 09/20/17 | 88,309 | 170 | ||||||||||||||
EUR | 262,792 | JPY | 32,445,614 | 09/20/17 | 301,389 | 11,931 | ||||||||||||||
EUR | 46,000 | NOK | 438,141 | 09/20/17 | 52,756 | 196 | ||||||||||||||
EUR | 895,867 | USD | 1,014,775 | 08/24/17 | 1,025,963 | 11,188 | ||||||||||||||
EUR | 987,653 | USD | 1,119,608 | 09/20/17 | 1,132,715 | 13,107 | ||||||||||||||
GBP | 53,857 | CAD | 90,860 | 09/20/17 | 70,316 | 163 | ||||||||||||||
GBP | 54,270 | EUR | 61,140 | 09/20/17 | 70,855 | 735 | ||||||||||||||
GBP | 299,534 | USD | 382,174 | 08/10/17 | 390,599 | 8,425 | ||||||||||||||
GBP | 522,887 | USD | 664,318 | 09/20/17 | 682,680 | 18,362 | ||||||||||||||
JPY | 35,797,320 | USD | 318,614 | 09/20/17 | 319,360 | 746 | ||||||||||||||
NOK | 581,007 | CAD | 90,080 | 09/20/17 | 69,699 | 149 | ||||||||||||||
NOK | 1,429,977 | CHF | 163,000 | 09/20/17 | 171,544 | 702 | ||||||||||||||
NOK | 4,941,332 | EUR | 514,363 | 09/20/17 | 592,775 | 2,866 | ||||||||||||||
NOK | 1,453,064 | USD | 172,000 | 09/20/17 | 174,313 | 2,313 | ||||||||||||||
NZD | 1,633,799 | USD | 1,177,878 | 09/20/17 | 1,195,524 | 17,646 | ||||||||||||||
SEK | 30,540,838 | EUR | 3,134,894 | 09/20/17 | 3,640,937 | 45,967 | ||||||||||||||
SEK | 996,930 | NOK | 969,446 | 09/20/17 | 118,862 | 2,565 | ||||||||||||||
SEK | 875,996 | USD | 98,920 | 07/12/17 | 104,020 | 5,100 | ||||||||||||||
SEK | 809,796 | USD | 93,221 | 09/20/17 | 96,550 | 3,329 | ||||||||||||||
USD | 31,393 | EUR | 27,366 | 09/20/17 | 31,385 | 8 | ||||||||||||||
USD | 94,955 | JPY | 10,525,255 | 07/20/17 | 93,642 | 1,313 | ||||||||||||||
USD | 4,316,298 | JPY | 475,009,536 | 09/20/17 | 4,237,717 | 78,581 | ||||||||||||||
USD | 285 | TWD | 8,564 | 09/11/17 | 282 | 3 | ||||||||||||||
TOTAL | $ | 343,443 |
The accompanying notes are an integral part of these financial statements. | 29 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST CORE FIXED INCOME FUND
Schedule of Investments (continued)
June 30, 2017 (Unaudited)
ADDITIONAL INVESTMENT INFORMATION (continued)
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS WITH UNREALIZED LOSS
Counterparty | Currency Purchased | Currency Sold | Settlement Date | Current Value | Unrealized Loss | |||||||||||||||
Morgan Stanley Co., Inc. | CHF | 766,597 | EUR | 706,762 | 09/20/17 | $ | 803,479 | $ | (7,089 | ) | ||||||||||
EUR | 36,577 | CAD | 54,354 | 09/20/17 | 41,950 | (17 | ) | |||||||||||||
EUR | 1,013,855 | SEK | 9,795,681 | 09/20/17 | 1,162,766 | (5,159 | ) | |||||||||||||
EUR | 75,000 | USD | 86,032 | 09/20/17 | 86,016 | (16 | ) | |||||||||||||
JPY | 29,370,806 | EUR | 234,032 | 09/20/17 | 262,027 | (6,379 | ) | |||||||||||||
JPY | 11,613,101 | USD | 104,768 | 07/20/17 | 103,320 | (1,448 | ) | |||||||||||||
JPY | 317,857,123 | USD | 2,860,061 | 09/20/17 | 2,835,710 | (24,351 | ) | |||||||||||||
NOK | 1,346,973 | CAD | 210,274 | 09/20/17 | 161,586 | (764 | ) | |||||||||||||
NOK | 19,667,573 | EUR | 2,072,218 | 09/20/17 | 2,359,376 | (17,199 | ) | |||||||||||||
NZD | 236,000 | CAD | 225,159 | 09/20/17 | 172,692 | (1,151 | ) | |||||||||||||
USD | 122,287 | AUD | 163,475 | 07/27/17 | 125,607 | (3,320 | ) | |||||||||||||
USD | 1,818,745 | AUD | 2,406,563 | 09/20/17 | 1,847,857 | (29,112 | ) | |||||||||||||
USD | 2,920,772 | CAD | 3,862,396 | 09/20/17 | 2,982,121 | (61,349 | ) | |||||||||||||
USD | 342,000 | CHF | 326,678 | 09/20/17 | 342,395 | (395 | ) | |||||||||||||
USD | 910,749 | EUR | 805,000 | 08/24/17 | 921,901 | (11,152 | ) | |||||||||||||
USD | 1,856,019 | EUR | 1,639,032 | 09/20/17 | 1,879,766 | (23,747 | ) | |||||||||||||
USD | 410,925 | GBP | 322,068 | 08/10/17 | 419,984 | (9,059 | ) | |||||||||||||
USD | 3,421,600 | GBP | 2,672,570 | 09/20/17 | 3,489,313 | (67,713 | ) | |||||||||||||
USD | 51,000 | JPY | 5,720,517 | 09/20/17 | 51,035 | (35 | ) | |||||||||||||
USD | 34,365 | NOK | 290,809 | 09/20/17 | 34,886 | (521 | ) | |||||||||||||
USD | 1,638,400 | NZD | 2,266,097 | 09/20/17 | 1,658,204 | (19,804 | ) | |||||||||||||
USD | 107,092 | SEK | 948,368 | 07/12/17 | 112,613 | (5,521 | ) | |||||||||||||
USD | 72,118 | SEK | 614,197 | 09/20/17 | 73,230 | (1,112 | ) | |||||||||||||
TOTAL | $ | (296,413 | ) |
FORWARD SALES CONTRACT — At June 30, 2017, the Fund had the following forward sales contract:
Description | Interest Rate | Maturity Date(a) | Settlement Date | Principal Amount | Value | |||||||||||||||
FHLMC (Proceeds Received: $1,031,992) | 3.500 | % | TBA-30yr | 07/15/47 | $ | (1,000,000 | ) | $ | (1,027,148 | ) |
(a) | TBA (To Be Announced) Securities are sold on a forward commitment basis with an approximate principal amount and no defined maturity date. The actual principal and maturity date will be determined upon settlement when the specific mortgage pools are assigned. |
30 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST CORE FIXED INCOME FUND
ADDITIONAL INVESTMENT INFORMATION (continued)
FUTURES CONTRACTS — At June 30, 2017, the Fund had the following futures contracts:
Type | Number of Contracts Long (Short) | Expiration Date | Current Value | Unrealized Gain (Loss) | ||||||||||||
3 Year Australian Government Bonds | 21 | September 2017 | $ | 1,802,145 | $ | (11,032 | ) | |||||||||
90 Day Eurodollar | (14 | ) | December 2018 | (3,437,000 | ) | (3,488 | ) | |||||||||
U.S. Long Bonds | 11 | September 2017 | 1,690,563 | 2,234 | ||||||||||||
U.S. Ultra Long Treasury Bonds | (8 | ) | September 2017 | (1,327,000 | ) | (12,833 | ) | |||||||||
2 Year U.S. Treasury Notes | 43 | September 2017 | 9,292,703 | (10,854 | ) | |||||||||||
5 Year U.S. Treasury Notes | 33 | September 2017 | 3,888,586 | (14,482 | ) | |||||||||||
10 Year U.S. Treasury Notes | (33 | ) | September 2017 | (4,142,531 | ) | 32,137 | ||||||||||
TOTAL | $ | (18,318 | ) |
SWAP CONTRACTS — At June 30, 2017, the Fund had the following swap contracts:
CENTRALLY CLEARED INTEREST RATE SWAP CONTRACTS
Rates Exchanged | Market Value | |||||||||||||||||
Notional Amount (000’s) | Termination Date | Payments Received | Payments Made | Upfront Made (Received) | Unrealized Gain (Loss) | |||||||||||||
SEK | 9,470 | 06/15/18 | 0.050% | 3 Month STIBOR | $ | 4,534 | $ | 1,271 | ||||||||||
GBP | 14,860 | (a) | 06/21/18 | 0.590 | 3 Month LIBOR | 733 | — | |||||||||||
SEK | 9,950 | (a) | 09/15/18 | (0.330) | 3 Month STIBOR | 52 | 664 | |||||||||||
EUR | 3,860 | (a) | 03/14/19 | 0.010 | 6 Month EURIBOR | (453 | ) | 5,088 | ||||||||||
CHF | 4,360 | (a) | 03/29/19 | (0.554) | 6 Month LIBOR | 173 | (2,371 | ) | ||||||||||
$ | 3,040 | (a) | 05/11/19 | 3 Month LIBOR | 1.826% | (336 | ) | (2,516 | ) | |||||||||
SEK | 12,530 | (a) | 06/29/19 | (0.100) | 3 Month STIBOR | 8 | (953 | ) | ||||||||||
AUD | 3,080 | (a) | 09/20/19 | 3 Month BBR | 1.800 | 2,633 | 7,306 | |||||||||||
CAD | 18,740 | (a) | 09/20/19 | 1.250 | 3 Month BA | (19,927 | ) | (50,148 | ) | |||||||||
NOK | 2,400 | (a) | 09/20/19 | 1.000 | 6 Month NIBOR | (669 | ) | (218 | ) | |||||||||
$ | 2,390 | (a) | 09/20/19 | 3 Month LIBOR | 1.750 | (6,314 | ) | 2,679 | ||||||||||
10,680 | (a) | 12/20/19 | 2.250 | 3 Month LIBOR | 15,389 | 22,761 | ||||||||||||
EUR | 4,670 | (a) | 02/11/21 | 0.250 | 6 Month EURIBOR | 1,005 | (4,936 | ) | ||||||||||
$ | 3,010 | (a) | 02/11/21 | 3 Month LIBOR | 2.250 | 5,692 | (19,104 | ) | ||||||||||
GBP | 890 | (a) | 03/11/21 | 6 Month LIBOR | 1.000 | (317 | ) | 1,532 | ||||||||||
AUD | 170 | (a) | 09/20/22 | 6 Month BBR | 2.250 | 259 | 1,660 | |||||||||||
CAD | 1,000 | (a) | 09/20/22 | 1.500 | 3 Month BA | (3,194 | ) | (8,078 | ) | |||||||||
EUR | 3,730 | (a) | 09/20/22 | 0.250 | 6 Month EURIBOR | 15,114 | (31,972 | ) | ||||||||||
SEK | 16,860 | (a) | 09/20/22 | 0.250 | 3 Month STIBOR | (3,818 | ) | (22,329 | ) | |||||||||
$ | 5,990 | (a) | 09/20/22 | 3 Month LIBOR | 2.000 | (31,685 | ) | 29,821 | ||||||||||
EUR | 1,580 | (a) | 01/12/27 | 1.330 | 6 Month EURIBOR | (12,082 | ) | 2,218 | ||||||||||
GBP | 1,650 | (a) | 03/16/27 | 1.600 | 6 Month LIBOR | 10,376 | (20,124 | ) | ||||||||||
EUR | 2,330 | (a) | 09/20/27 | 1.000 | 6 Month EURIBOR | 52,790 | (38,728 | ) | ||||||||||
GBP | 1,610 | (a) | 09/20/27 | 6 Month LIBOR | 1.500 | (70,498 | ) | 47,824 | ||||||||||
$ | 560 | (a) | 09/20/27 | 2.500 | 3 Month LIBOR | 17,971 | (7,694 | ) | ||||||||||
1,510 | (a) | 12/20/28 | 3 Month LIBOR | 2.790 | (25,125 | ) | (19,340 | ) | ||||||||||
GBP | 1,260 | (a) | 01/11/32 | 6 Month LIBOR | 1.940 | 5,521 | (863 | ) | ||||||||||
330 | (a) | 09/20/32 | 6 Month LIBOR | 1.500 | (7,420 | ) | 12,082 | |||||||||||
1,160 | (a) | 03/17/37 | 6 Month LIBOR | 1.750 | (2,708 | ) | 27,547 | |||||||||||
JPY | 14,480 | (a) | 09/20/37 | 6 Month LIBOR | 0.750 | (2,823 | ) | 853 | ||||||||||
GBP | 100 | (a) | 09/20/47 | 6 Month LIBOR | 1.500 | (2,952 | ) | 6,821 | ||||||||||
$ | 100 | (a) | 09/20/47 | 3 Month LIBOR | 2.500 | (1,952 | ) | 2,837 | ||||||||||
TOTAL | $ | (60,023 | ) | $ | (56,410 | ) |
(a) | Represents forward starting interest rate swaps whose effective dates of commencement of accruals and cash flows occur subsequent to June 30, 2017. |
The accompanying notes are an integral part of these financial statements. | 31 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST CORE FIXED INCOME FUND
Schedule of Investments (continued)
June 30, 2017 (Unaudited)
ADDITIONAL INVESTMENT INFORMATION (continued)
CENTRALLY CLEARED INFLATION-LINKED SWAP CONTRACT
Rates Exchanged | ||||||||||||
Notional Amount (000’s) | Termination Date | Payments Received | Payments Made | Unrealized Gain (Loss)(a) | ||||||||
GBP | 100 | 06/15/27 | 3.364% | 1 Month UK-RPI | $ | (1,024 | ) |
(a) | There are no upfront payments on the swap contracts listed above, therefore the unrealized gains (losses) on the swap contracts are equal to their market value. |
32 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST EQUITY INDEX FUND
Schedule of Investments
June 30, 2017 (Unaudited)
Shares | Description | Value | ||||||
Common Stocks – 99.3% | ||||||||
Automobiles & Components – 0.7% | ||||||||
1,684 | BorgWarner, Inc. | $ | 71,334 | |||||
2,151 | Delphi Automotive plc | 188,535 | ||||||
31,981 | Ford Motor Co. | 357,867 | ||||||
11,090 | General Motors Co. | 387,374 | ||||||
1,969 | Goodyear Tire & Rubber Co. (The) | 68,836 | ||||||
1,380 | Harley-Davidson, Inc. | 74,548 | ||||||
|
| |||||||
1,148,494 | ||||||||
|
| |||||||
Banks – 6.5% | ||||||||
80,705 | Bank of America Corp. | 1,957,903 | ||||||
6,525 | BB&T Corp. | 296,300 | ||||||
22,318 | Citigroup, Inc. | 1,492,628 | ||||||
4,082 | Citizens Financial Group, Inc. | 145,646 | ||||||
1,406 | Comerica, Inc. | 102,976 | ||||||
6,115 | Fifth Third Bancorp | 158,746 | ||||||
9,041 | Huntington Bancshares, Inc. | 122,234 | ||||||
28,821 | JPMorgan Chase & Co. | 2,634,240 | ||||||
8,868 | KeyCorp | 166,186 | ||||||
1,254 | M&T Bank Corp. | 203,085 | ||||||
2,617 | People’s United Financial, Inc. | 46,216 | ||||||
3,909 | PNC Financial Services Group, Inc. (The) | 488,117 | ||||||
9,850 | Regions Financial Corp. | 144,204 | ||||||
3,892 | SunTrust Banks, Inc. | 220,754 | ||||||
12,884 | US Bancorp | 668,937 | ||||||
36,475 | Wells Fargo & Co. | 2,021,080 | ||||||
1,723 | Zions Bancorp | 75,657 | ||||||
|
| |||||||
10,944,909 | ||||||||
|
| |||||||
Capital Goods – 7.3% | ||||||||
4,857 | 3M Co. | 1,011,179 | ||||||
372 | Acuity Brands, Inc. | 75,620 | ||||||
813 | Allegion plc | 65,951 | ||||||
1,824 | AMETEK, Inc. | 110,480 | ||||||
3,558 | Arconic, Inc. | 80,589 | ||||||
4,569 | Boeing Co. (The) | 903,520 | ||||||
4,765 | Caterpillar, Inc. | 512,047 | ||||||
1,251 | Cummins, Inc. | 202,937 | ||||||
2,373 | Deere & Co. | 293,279 | ||||||
1,236 | Dover Corp. | 99,152 | ||||||
3,610 | Eaton Corp. plc | 280,966 | ||||||
5,183 | Emerson Electric Co. | 309,010 | ||||||
2,368 | Fastenal Co. | 103,079 | ||||||
1,025 | Flowserve Corp. | 47,591 | ||||||
1,113 | Fluor Corp. | 50,953 | ||||||
2,454 | Fortive Corp. | 155,461 | ||||||
1,257 | Fortune Brands Home & Security, Inc. | 82,007 | ||||||
2,290 | General Dynamics Corp. | 453,649 | ||||||
70,533 | General Electric Co. | 1,905,096 | ||||||
6,171 | Honeywell International, Inc. | 822,533 | ||||||
2,529 | Illinois Tool Works, Inc. | 362,279 | ||||||
2,051 | Ingersoll-Rand plc | 187,441 | ||||||
1,006 | Jacobs Engineering Group, Inc. | 54,716 | ||||||
7,671 | Johnson Controls International plc | 332,615 | ||||||
|
| |||||||
Common Stocks – (continued) | ||||||||
Capital Goods – (continued) | ||||||||
648 | L3 Technologies, Inc. | $ | 108,268 | |||||
2,018 | Lockheed Martin Corp. | 560,217 | ||||||
2,528 | Masco Corp. | 96,595 | ||||||
1,416 | Northrop Grumman Corp. | 363,501 | ||||||
2,857 | PACCAR, Inc. | 188,676 | ||||||
1,100 | Parker-Hannifin Corp. | 175,802 | ||||||
1,321 | Pentair plc | 87,899 | ||||||
1,227 | Quanta Services, Inc.* | 40,393 | ||||||
2,361 | Raytheon Co. | 381,254 | ||||||
1,037 | Rockwell Automation, Inc. | 167,952 | ||||||
1,344 | Rockwell Collins, Inc. | 141,227 | ||||||
838 | Roper Technologies, Inc. | 194,022 | ||||||
478 | Snap-on, Inc. | 75,524 | ||||||
1,256 | Stanley Black & Decker, Inc. | 176,757 | ||||||
2,126 | Textron, Inc. | 100,135 | ||||||
401 | TransDigm Group, Inc. | 107,817 | ||||||
692 | United Rentals, Inc.* | 77,995 | ||||||
6,062 | United Technologies Corp. | 740,231 | ||||||
451 | WW Grainger, Inc. | 81,419 | ||||||
1,425 | Xylem, Inc. | 78,988 | ||||||
|
| |||||||
12,446,822 | ||||||||
|
| |||||||
Commercial & Professional Services – 0.6% | ||||||||
697 | Cintas Corp. | 87,850 | ||||||
957 | Equifax, Inc. | 131,511 | ||||||
2,597 | IHS Markit Ltd.* | 114,372 | ||||||
2,741 | Nielsen Holdings plc | 105,967 | ||||||
1,870 | Republic Services, Inc. | 119,175 | ||||||
1,037 | Robert Half International, Inc. | 49,703 | ||||||
728 | Stericycle, Inc.* | 55,561 | ||||||
1,243 | Verisk Analytics, Inc.* | 104,872 | ||||||
3,317 | Waste Management, Inc. | 243,302 | ||||||
|
| |||||||
1,012,313 | ||||||||
|
| |||||||
Consumer Durables & Apparel – 1.3% | ||||||||
2,290 | Coach, Inc. | 108,409 | ||||||
2,840 | DR Horton, Inc. | 98,179 | ||||||
923 | Garmin Ltd. | 47,101 | ||||||
3,009 | Hanesbrands, Inc. | 69,688 | ||||||
939 | Hasbro, Inc. | 104,708 | ||||||
1,075 | Leggett & Platt, Inc. | 56,470 | ||||||
1,593 | Lennar Corp. Class A | 84,939 | ||||||
2,776 | Mattel, Inc. | 59,767 | ||||||
1,268 | Michael Kors Holdings Ltd.* | 45,965 | ||||||
522 | Mohawk Industries, Inc.* | 126,162 | ||||||
3,891 | Newell Brands, Inc. | 208,635 | ||||||
10,743 | NIKE, Inc. Class B | 633,837 | ||||||
2,401 | PulteGroup, Inc. | 58,896 | ||||||
625 | PVH Corp. | 71,562 | ||||||
481 | Ralph Lauren Corp. | 35,498 | ||||||
1,605 | Under Armour, Inc. Class A*(a) | 34,925 | ||||||
1,616 | Under Armour, Inc. Class C* | 32,579 | ||||||
2,570 | VF Corp. | 148,032 | ||||||
589 | Whirlpool Corp. | 112,864 | ||||||
|
| |||||||
2,138,216 | ||||||||
|
|
The accompanying notes are an integral part of these financial statements. | 33 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST EQUITY INDEX FUND
Schedule of Investments (continued)
June 30, 2017 (Unaudited)
Shares | Description | Value | ||||||
Common Stocks – (continued) | ||||||||
Consumer Services – 1.8% | ||||||||
3,426 | Carnival Corp. | $ | 224,643 | |||||
239 | Chipotle Mexican Grill, Inc.* | 99,448 | ||||||
1,000 | Darden Restaurants, Inc. | 90,440 | ||||||
1,623 | H&R Block, Inc. | 50,167 | ||||||
1,673 | Hilton Worldwide Holdings, Inc. | 103,475 | ||||||
2,512 | Marriott International, Inc. Class A | 251,979 | ||||||
6,621 | McDonald’s Corp. | 1,014,072 | ||||||
1,371 | Royal Caribbean Cruises Ltd. | 149,754 | ||||||
11,780 | Starbucks Corp. | 686,892 | ||||||
825 | Wyndham Worldwide Corp. | 82,838 | ||||||
656 | Wynn Resorts Ltd. | 87,983 | ||||||
2,660 | Yum Brands, Inc. | 196,201 | ||||||
|
| |||||||
3,037,892 | ||||||||
|
| |||||||
Diversified Financials – 5.2% | ||||||||
458 | Affiliated Managers Group, Inc. | 75,964 | ||||||
6,098 | American Express Co. | 513,696 | ||||||
1,217 | Ameriprise Financial, Inc. | 154,912 | ||||||
8,461 | Bank of New York Mellon Corp. (The) | 431,680 | ||||||
15,409 | Berkshire Hathaway, Inc. Class B* | 2,609,822 | ||||||
988 | BlackRock, Inc. | 417,341 | ||||||
3,886 | Capital One Financial Corp. | 321,061 | ||||||
767 | CBOE Holdings, Inc. | 70,104 | ||||||
9,922 | Charles Schwab Corp. (The) | 426,249 | ||||||
2,766 | CME Group, Inc. | 346,414 | ||||||
3,054 | Discover Financial Services | 189,928 | ||||||
2,263 | E*TRADE Financial Corp.* | 86,062 | ||||||
2,720 | Franklin Resources, Inc. | 121,829 | ||||||
2,977 | Goldman Sachs Group, Inc. (The)(b) | 660,596 | ||||||
4,763 | Intercontinental Exchange, Inc. | 313,977 | ||||||
3,275 | Invesco Ltd. | 115,247 | ||||||
2,680 | Leucadia National Corp. | 70,109 | ||||||
1,334 | Moody’s Corp. | 162,321 | ||||||
11,508 | Morgan Stanley | 512,797 | ||||||
905 | Nasdaq, Inc. | 64,699 | ||||||
2,165 | Navient Corp. | 36,047 | ||||||
1,740 | Northern Trust Corp. | 169,145 | ||||||
1,068 | Raymond James Financial, Inc. | 85,675 | ||||||
2,103 | S&P Global, Inc. | 307,017 | ||||||
2,858 | State Street Corp. | 256,448 | ||||||
6,344 | Synchrony Financial | 189,178 | ||||||
1,952 | T Rowe Price Group, Inc. | 144,858 | ||||||
|
| |||||||
8,853,176 | ||||||||
|
| |||||||
Energy – 6.0% | ||||||||
4,540 | Anadarko Petroleum Corp. | 205,844 | ||||||
3,059 | Apache Corp. | 146,618 | ||||||
3,460 | Baker Hughes, Inc. | 188,605 | ||||||
3,676 | Cabot Oil & Gas Corp. | 92,194 | ||||||
5,166 | Chesapeake Energy Corp.*(a) | 25,675 | ||||||
15,360 | Chevron Corp. | 1,602,509 | ||||||
760 | Cimarex Energy Co. | 71,448 | ||||||
1,139 | Concho Resources, Inc.* | 138,423 | ||||||
10,089 | ConocoPhillips | 443,512 | ||||||
|
| |||||||
Common Stocks – (continued) | ||||||||
Energy – (continued) | ||||||||
4,184 | Devon Energy Corp. | $ | 133,762 | |||||
4,682 | EOG Resources, Inc. | 423,815 | ||||||
1,437 | EQT Corp. | 84,194 | ||||||
34,376 | Exxon Mobil Corp. | 2,775,174 | ||||||
7,009 | Halliburton Co. | 299,354 | ||||||
897 | Helmerich & Payne, Inc.(a) | 48,743 | ||||||
2,186 | Hess Corp. | 95,900 | ||||||
15,597 | Kinder Morgan, Inc. | 298,839 | ||||||
6,824 | Marathon Oil Corp. | 80,864 | ||||||
4,176 | Marathon Petroleum Corp. | 218,530 | ||||||
1,234 | Murphy Oil Corp. | 31,627 | ||||||
3,080 | National Oilwell Varco, Inc. | 101,455 | ||||||
1,619 | Newfield Exploration Co.* | 46,077 | ||||||
3,593 | Noble Energy, Inc. | 101,682 | ||||||
6,158 | Occidental Petroleum Corp. | 368,679 | ||||||
3,093 | ONEOK, Inc. | 161,331 | ||||||
3,527 | Phillips 66 | 291,648 | ||||||
1,396 | Pioneer Natural Resources Co. | 222,774 | ||||||
1,521 | Range Resources Corp. | 35,242 | ||||||
11,244 | Schlumberger Ltd. | 740,305 | ||||||
3,795 | TechnipFMC plc* | 103,224 | ||||||
1,234 | Tesoro Corp. | 115,502 | ||||||
3,110 | Transocean Ltd.* | 25,595 | ||||||
3,655 | Valero Energy Corp. | 246,566 | ||||||
6,739 | Williams Cos., Inc. (The) | 204,057 | ||||||
|
| |||||||
10,169,767 | ||||||||
|
| |||||||
Food & Staples Retailing – 1.9% | ||||||||
3,546 | Costco Wholesale Corp. | 567,112 | ||||||
8,286 | CVS Health Corp. | 666,692 | ||||||
7,366 | Kroger Co. (The) | 171,775 | ||||||
4,033 | Sysco Corp. | 202,981 | ||||||
6,954 | Walgreens Boots Alliance, Inc. | 544,568 | ||||||
11,961 | Wal-Mart Stores, Inc. | 905,208 | ||||||
2,532 | Whole Foods Market, Inc. | 106,622 | ||||||
|
| |||||||
3,164,958 | ||||||||
|
| |||||||
Food, Beverage & Tobacco – 5.2% | ||||||||
15,652 | Altria Group, Inc. | 1,165,604 | ||||||
4,695 | Archer-Daniels-Midland Co. | 194,279 | ||||||
1,436 | Brown-Forman Corp. Class B | 69,790 | ||||||
1,507 | Campbell Soup Co. | 78,590 | ||||||
31,169 | Coca-Cola Co. (The) | 1,397,930 | ||||||
3,225 | Conagra Brands, Inc. | 115,326 | ||||||
1,405 | Constellation Brands, Inc. Class A | 272,191 | ||||||
1,477 | Dr Pepper Snapple Group, Inc. | 134,569 | ||||||
4,633 | General Mills, Inc. | 256,668 | ||||||
1,166 | Hershey Co. (The) | 125,193 | ||||||
2,176 | Hormel Foods Corp. | 74,223 | ||||||
952 | JM Smucker Co. (The) | 112,650 | ||||||
2,011 | Kellogg Co. | 139,684 | ||||||
4,858 | Kraft Heinz Co. (The) | 416,039 | ||||||
926 | McCormick & Co., Inc. (Non-Voting) | 90,294 | ||||||
1,484 | Molson Coors Brewing Co. Class B | 128,129 | ||||||
|
|
34 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST EQUITY INDEX FUND
Shares | Description | Value | ||||||
Common Stocks – (continued) | ||||||||
Food, Beverage & Tobacco – (continued) | ||||||||
12,331 | Mondelez International, Inc. Class A | $ | 532,576 | |||||
3,219 | Monster Beverage Corp.* | 159,920 | ||||||
11,612 | PepsiCo, Inc. | 1,341,070 | ||||||
12,590 | Philip Morris International, Inc. | 1,478,696 | ||||||
6,716 | Reynolds American, Inc. | 436,809 | ||||||
2,307 | Tyson Foods, Inc. Class A | 144,487 | ||||||
|
| |||||||
8,864,717 | ||||||||
|
| |||||||
Health Care Equipment & Services – 5.7% | ||||||||
14,057 | Abbott Laboratories | 683,311 | ||||||
2,677 | Aetna, Inc. | 406,449 | ||||||
616 | Align Technology, Inc.* | 92,474 | ||||||
1,339 | AmerisourceBergen Corp. | 126,576 | ||||||
2,145 | Anthem, Inc. | 403,539 | ||||||
3,995 | Baxter International, Inc. | 241,857 | ||||||
1,849 | Becton Dickinson and Co. | 360,758 | ||||||
11,148 | Boston Scientific Corp.* | 309,023 | ||||||
2,583 | Cardinal Health, Inc. | 201,267 | ||||||
1,386 | Centene Corp.* | 110,714 | ||||||
2,394 | Cerner Corp.* | 159,129 | ||||||
2,064 | Cigna Corp. | 345,493 | ||||||
395 | Cooper Cos., Inc. (The) | 94,571 | ||||||
588 | CR Bard, Inc. | 185,873 | ||||||
4,953 | Danaher Corp. | 417,984 | ||||||
1,313 | DaVita, Inc.* | 85,030 | ||||||
1,907 | DENTSPLY SIRONA, Inc. | 123,650 | ||||||
1,687 | Edwards Lifesciences Corp.* | 199,471 | ||||||
912 | Envision Healthcare Corp.* | 57,155 | ||||||
4,794 | Express Scripts Holding Co.* | 306,049 | ||||||
2,295 | HCA Healthcare, Inc.* | 200,124 | ||||||
656 | Henry Schein, Inc.* | 120,061 | ||||||
2,080 | Hologic, Inc.* | 94,390 | ||||||
1,167 | Humana, Inc. | 280,803 | ||||||
716 | IDEXX Laboratories, Inc.* | 115,577 | ||||||
299 | Intuitive Surgical, Inc.* | 279,676 | ||||||
842 | Laboratory Corp. of America Holdings* | 129,786 | ||||||
1,725 | McKesson Corp. | 283,831 | ||||||
11,073 | Medtronic plc | 982,729 | ||||||
642 | Patterson Cos., Inc. | 30,142 | ||||||
1,088 | Quest Diagnostics, Inc. | 120,942 | ||||||
2,525 | Stryker Corp. | 350,419 | ||||||
7,802 | UnitedHealth Group, Inc. | 1,446,647 | ||||||
730 | Universal Health Services, Inc. Class B | 89,118 | ||||||
769 | Varian Medical Systems, Inc.* | 79,353 | ||||||
1,632 | Zimmer Biomet Holdings, Inc. | 209,549 | ||||||
|
| |||||||
9,723,520 | ||||||||
|
| |||||||
Household & Personal Products – 1.9% | ||||||||
2,035 | Church & Dwight Co., Inc. | 105,576 | ||||||
1,035 | Clorox Co. (The) | 137,903 | ||||||
7,139 | Colgate-Palmolive Co. | 529,214 | ||||||
3,784 | Coty, Inc. Class A | 70,988 | ||||||
1,825 | Estee Lauder Cos., Inc. (The) Class A | 175,164 | ||||||
2,886 | Kimberly-Clark Corp. | 372,611 | ||||||
20,713 | Procter & Gamble Co. (The) | 1,805,138 | ||||||
|
| |||||||
3,196,594 | ||||||||
|
| |||||||
Common Stocks – (continued) | ||||||||
Insurance – 2.8% | ||||||||
3,207 | Aflac, Inc. | $ | 249,120 | |||||
2,928 | Allstate Corp. (The) | 258,952 | ||||||
7,178 | American International Group, Inc. | 448,769 | ||||||
2,109 | Aon plc | 280,392 | ||||||
1,466 | Arthur J Gallagher & Co. | 83,928 | ||||||
463 | Assurant, Inc. | 48,008 | ||||||
3,805 | Chubb Ltd. | 553,171 | ||||||
1,225 | Cincinnati Financial Corp. | 88,751 | ||||||
335 | Everest Re Group Ltd. | 85,288 | ||||||
3,026 | Hartford Financial Services Group, Inc. (The) | 159,077 | ||||||
1,806 | Lincoln National Corp. | 122,049 | ||||||
2,262 | Loews Corp. | 105,884 | ||||||
4,173 | Marsh & McLennan Cos., Inc. | 325,327 | ||||||
8,752 | MetLife, Inc. | 480,835 | ||||||
2,198 | Principal Financial Group, Inc. | 140,826 | ||||||
4,728 | Progressive Corp. (The) | 208,458 | ||||||
3,470 | Prudential Financial, Inc. | 375,246 | ||||||
905 | Torchmark Corp. | 69,233 | ||||||
2,249 | Travelers Cos., Inc. (The) | 284,566 | ||||||
1,797 | Unum Group | 83,794 | ||||||
1,018 | Willis Towers Watson plc | 148,078 | ||||||
2,189 | XL Group Ltd. | 95,878 | ||||||
|
| |||||||
4,695,630 | ||||||||
|
| |||||||
Materials – 2.8% | ||||||||
1,759 | Air Products & Chemicals, Inc. | 251,643 | ||||||
874 | Albemarle Corp. | 92,242 | ||||||
753 | Avery Dennison Corp. | 66,543 | ||||||
2,890 | Ball Corp. | 121,987 | ||||||
1,827 | CF Industries Holdings, Inc. | 51,083 | ||||||
9,135 | Dow Chemical Co. (The) | 576,144 | ||||||
1,211 | Eastman Chemical Co. | 101,712 | ||||||
2,107 | Ecolab, Inc. | 279,704 | ||||||
7,063 | EI du Pont de Nemours & Co. | 570,055 | ||||||
1,065 | FMC Corp. | 77,798 | ||||||
10,104 | Freeport-McMoRan, Inc.* | 121,349 | ||||||
653 | International Flavors & Fragrances, Inc. | 88,155 | ||||||
3,394 | International Paper Co. | 192,134 | ||||||
2,689 | LyondellBasell Industries NV Class A | 226,925 | ||||||
509 | Martin Marietta Materials, Inc. | 113,293 | ||||||
3,537 | Monsanto Co. | 418,639 | ||||||
2,830 | Mosaic Co. (The) | 64,609 | ||||||
4,246 | Newmont Mining Corp. | 137,528 | ||||||
2,544 | Nucor Corp. | 147,221 | ||||||
2,063 | PPG Industries, Inc. | 226,847 | ||||||
2,309 | Praxair, Inc. | 306,058 | ||||||
1,601 | Sealed Air Corp. | 71,661 | ||||||
651 | Sherwin-Williams Co. (The) | 228,475 | ||||||
1,082 | Vulcan Materials Co. | 137,068 | ||||||
2,063 | WestRock Co. | 116,890 | ||||||
|
| |||||||
4,785,763 | ||||||||
|
|
The accompanying notes are an integral part of these financial statements. | 35 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST EQUITY INDEX FUND
Schedule of Investments (continued)
June 30, 2017 (Unaudited)
Shares | Description | Value | ||||||
Common Stocks – (continued) | ||||||||
Media – 3.0% | ||||||||
2,958 | CBS Corp. (Non-Voting) Class B | $ | 188,661 | |||||
1,744 | Charter Communications, Inc. Class A* | 587,466 | ||||||
38,367 | Comcast Corp. Class A | 1,493,244 | ||||||
1,181 | Discovery Communications, Inc. Class A* | 30,505 | ||||||
1,693 | Discovery Communications, Inc. Class C* | 42,681 | ||||||
1,896 | DISH Network Corp. Class A* | 118,993 | ||||||
3,281 | Interpublic Group of Cos., Inc. (The) | 80,713 | ||||||
3,213 | News Corp. Class A | 44,018 | ||||||
1,017 | News Corp. Class B | 14,391 | ||||||
1,865 | Omnicom Group, Inc. | 154,608 | ||||||
820 | Scripps Networks Interactive, Inc. Class A | 56,014 | ||||||
6,317 | Time Warner, Inc. | 634,290 | ||||||
8,502 | Twenty-First Century Fox, Inc. Class A | 240,947 | ||||||
3,835 | Twenty-First Century Fox, Inc. Class B | 106,881 | ||||||
2,857 | Viacom, Inc. Class B | 95,909 | ||||||
11,823 | Walt Disney Co. (The) | 1,256,194 | ||||||
|
| |||||||
5,145,515 | ||||||||
|
| |||||||
Pharmaceuticals, Biotechnology & Life Sciences – 8.7% | ||||||||
12,889 | AbbVie, Inc. | 934,582 | ||||||
2,620 | Agilent Technologies, Inc. | 155,392 | ||||||
1,845 | Alexion Pharmaceuticals, Inc.* | 224,481 | ||||||
2,717 | Allergan plc | 660,476 | ||||||
5,961 | Amgen, Inc. | 1,026,663 | ||||||
1,734 | Biogen, Inc.* | 470,538 | ||||||
13,402 | Bristol-Myers Squibb Co. | 746,760 | ||||||
6,321 | Celgene Corp.* | 820,908 | ||||||
7,897 | Eli Lilly & Co. | 649,923 | ||||||
10,635 | Gilead Sciences, Inc. | 752,745 | ||||||
1,198 | Illumina, Inc.* | 207,877 | ||||||
1,383 | Incyte Corp.* | 174,134 | ||||||
21,855 | Johnson & Johnson | 2,891,198 | ||||||
852 | Mallinckrodt plc* | 38,178 | ||||||
22,143 | Merck & Co., Inc. | 1,419,145 | ||||||
208 | Mettler-Toledo International, Inc.* | 122,416 | ||||||
3,693 | Mylan NV* | 143,362 | ||||||
857 | PerkinElmer, Inc. | 58,396 | ||||||
1,177 | Perrigo Co. plc | 88,887 | ||||||
48,385 | Pfizer, Inc. | 1,625,252 | ||||||
619 | Regeneron Pharmaceuticals, Inc.* | 304,016 | ||||||
3,190 | Thermo Fisher Scientific, Inc. | 556,559 | ||||||
2,028 | Vertex Pharmaceuticals, Inc.* | 261,348 | ||||||
645 | Waters Corp.* | 118,577 | ||||||
3,977 | Zoetis, Inc. | 248,085 | ||||||
|
| |||||||
14,699,898 | ||||||||
|
| |||||||
Real Estate – 2.9% | ||||||||
743 | Alexandria Real Estate Equities, Inc. (REIT) | 89,509 | ||||||
3,442 | American Tower Corp. (REIT) | 455,445 | ||||||
1,262 | Apartment Investment & Management Co. Class A (REIT) | 54,228 | ||||||
|
| |||||||
Common Stocks – (continued) | ||||||||
Real Estate – (continued) | ||||||||
1,128 | AvalonBay Communities, Inc. (REIT) | $ | 216,768 | |||||
1,235 | Boston Properties, Inc. (REIT) | 151,930 | ||||||
2,492 | CBRE Group, Inc. Class A* | 90,709 | ||||||
2,933 | Crown Castle International Corp. (REIT) | 293,828 | ||||||
1,246 | Digital Realty Trust, Inc. (REIT) | 140,736 | ||||||
598 | Equinix, Inc. (REIT) | 256,638 | ||||||
3,006 | Equity Residential (REIT) | 197,885 | ||||||
537 | Essex Property Trust, Inc. (REIT) | 138,154 | ||||||
1,008 | Extra Space Storage, Inc. (REIT) | 78,624 | ||||||
607 | Federal Realty Investment Trust (REIT) | 76,719 | ||||||
4,808 | GGP, Inc. (REIT) | 113,276 | ||||||
3,901 | HCP, Inc. (REIT) | 124,676 | ||||||
6,177 | Host Hotels & Resorts, Inc. (REIT) | 112,854 | ||||||
1,967 | Iron Mountain, Inc. (REIT) | 67,586 | ||||||
3,427 | Kimco Realty Corp. (REIT) | 62,885 | ||||||
1,019 | Macerich Co. (The) (REIT) | 59,163 | ||||||
925 | Mid-America Apartment Communities, Inc. (REIT) | 97,476 | ||||||
4,350 | Prologis, Inc. (REIT) | 255,084 | ||||||
1,200 | Public Storage (REIT) | 250,236 | ||||||
2,160 | Realty Income Corp. (REIT) | 119,189 | ||||||
1,226 | Regency Centers Corp. (REIT) | 76,797 | ||||||
2,533 | Simon Property Group, Inc. (REIT) | 409,738 | ||||||
832 | SL Green Realty Corp. (REIT) | 88,026 | ||||||
2,104 | UDR, Inc. (REIT) | 81,993 | ||||||
2,888 | Ventas, Inc. (REIT) | 200,658 | ||||||
1,416 | Vornado Realty Trust (REIT) | 132,962 | ||||||
2,982 | Welltower, Inc. (REIT) | 223,203 | ||||||
6,040 | Weyerhaeuser Co. (REIT) | 202,340 | ||||||
|
| |||||||
4,919,315 | ||||||||
|
| |||||||
Retailing – 5.4% | ||||||||
607 | Advance Auto Parts, Inc. | 70,770 | ||||||
3,219 | Amazon.com, Inc.* | 3,115,992 | ||||||
589 | AutoNation, Inc.*(a) | 24,832 | ||||||
233 | AutoZone, Inc.* | 132,917 | ||||||
1,107 | Bed Bath & Beyond, Inc. | 33,653 | ||||||
2,110 | Best Buy Co., Inc. | 120,966 | ||||||
1,465 | CarMax, Inc.* | 92,383 | ||||||
2,061 | Dollar General Corp. | 148,578 | ||||||
1,923 | Dollar Tree, Inc.* | 134,456 | ||||||
972 | Expedia, Inc. | 144,779 | ||||||
1,065 | Foot Locker, Inc. | 52,483 | ||||||
1,834 | Gap, Inc. (The) | 40,330 | ||||||
1,212 | Genuine Parts Co. | 112,425 | ||||||
9,692 | Home Depot, Inc. (The) | 1,486,753 | ||||||
1,416 | Kohl’s Corp. | 54,757 | ||||||
1,960 | L Brands, Inc. | 105,624 | ||||||
2,564 | LKQ Corp.* | 84,484 | ||||||
6,973 | Lowe’s Cos., Inc. | 540,617 | ||||||
2,445 | Macy’s, Inc. | 56,822 | ||||||
3,479 | Netflix, Inc.* | 519,797 | ||||||
|
|
36 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST EQUITY INDEX FUND
Shares | Description | Value | ||||||
Common Stocks – (continued) | ||||||||
Retailing – (continued) | ||||||||
849 | Nordstrom, Inc.(a) | $ | 40,608 | |||||
726 | O’Reilly Automotive, Inc.* | 158,805 | ||||||
400 | Priceline Group, Inc. (The)* | 748,208 | ||||||
3,214 | Ross Stores, Inc. | 185,544 | ||||||
569 | Signet Jewelers Ltd.(a) | 35,984 | ||||||
5,583 | Staples, Inc. | 56,221 | ||||||
4,443 | Target Corp. | 232,325 | ||||||
828 | Tiffany & Co. | 77,724 | ||||||
5,217 | TJX Cos., Inc. (The) | 376,511 | ||||||
1,091 | Tractor Supply Co. | 59,143 | ||||||
829 | TripAdvisor, Inc.* | 31,668 | ||||||
480 | Ulta Beauty, Inc.* | 137,923 | ||||||
|
| |||||||
9,214,082 | ||||||||
|
| |||||||
Semiconductors & Semiconductor Equipment – 3.4% | ||||||||
6,445 | Advanced Micro Devices, Inc.* | 80,433 | ||||||
3,002 | Analog Devices, Inc. | 233,556 | ||||||
8,693 | Applied Materials, Inc. | 359,108 | ||||||
3,258 | Broadcom Ltd. | 759,277 | ||||||
38,164 | Intel Corp. | 1,287,653 | ||||||
1,275 | KLA-Tencor Corp. | 116,675 | ||||||
1,320 | Lam Research Corp. | 186,688 | ||||||
1,737 | Microchip Technology, Inc. | 134,062 | ||||||
8,460 | Micron Technology, Inc.* | 252,616 | ||||||
4,806 | NVIDIA Corp. | 694,755 | ||||||
1,028 | Qorvo, Inc.* | 65,093 | ||||||
11,952 | QUALCOMM, Inc. | 659,989 | ||||||
1,478 | Skyworks Solutions, Inc. | 141,814 | ||||||
8,047 | Texas Instruments, Inc. | 619,056 | ||||||
2,000 | Xilinx, Inc. | 128,640 | ||||||
|
| |||||||
5,719,415 | ||||||||
|
| |||||||
Software & Services – 13.2% | ||||||||
5,030 | Accenture plc Class A | 622,110 | ||||||
5,657 | Activision Blizzard, Inc. | 325,673 | ||||||
3,999 | Adobe Systems, Inc.* | 565,619 | ||||||
1,353 | Akamai Technologies, Inc.* | 67,393 | ||||||
452 | Alliance Data Systems Corp. | 116,024 | ||||||
2,414 | Alphabet, Inc. Class A* | 2,244,247 | ||||||
2,420 | Alphabet, Inc. Class C* | 2,199,127 | ||||||
698 | ANSYS, Inc.* | 84,933 | ||||||
1,593 | Autodesk, Inc.* | 160,606 | ||||||
3,641 | Automatic Data Processing, Inc. | 373,057 | ||||||
2,472 | CA, Inc. | 85,210 | ||||||
1,194 | Citrix Systems, Inc.* | 95,018 | ||||||
4,770 | Cognizant Technology Solutions Corp. Class A | 316,728 | ||||||
1,121 | CSRA, Inc. | 35,592 | ||||||
2,273 | DXC Technology Co. | 174,385 | ||||||
8,090 | eBay, Inc.* | 282,503 | ||||||
2,516 | Electronic Arts, Inc.* | 265,992 | ||||||
19,153 | Facebook, Inc. Class A* | 2,891,720 | ||||||
2,710 | Fidelity National Information Services, Inc. | 231,434 | ||||||
|
| |||||||
Common Stocks – (continued) | ||||||||
Software & Services – (continued) | ||||||||
1,709 | Fiserv, Inc.* | $ | 209,079 | |||||
748 | Gartner, Inc.* | 92,385 | ||||||
1,271 | Global Payments, Inc. | 114,797 | ||||||
6,946 | International Business Machines Corp. | 1,068,503 | ||||||
1,995 | Intuit, Inc. | 264,956 | ||||||
7,618 | Mastercard, Inc. Class A | 925,206 | ||||||
62,656 | Microsoft Corp. | 4,318,878 | ||||||
24,341 | Oracle Corp. | 1,220,458 | ||||||
2,565 | Paychex, Inc. | 146,051 | ||||||
9,050 | PayPal Holdings, Inc.* | 485,713 | ||||||
1,466 | Red Hat, Inc.* | 140,369 | ||||||
5,335 | salesforce.com, Inc.* | 462,011 | ||||||
4,969 | Symantec Corp. | 140,374 | ||||||
1,263 | Synopsys, Inc.* | 92,111 | ||||||
1,361 | Total System Services, Inc. | 79,278 | ||||||
706 | VeriSign, Inc.* | 65,630 | ||||||
14,965 | Visa, Inc. Class A | 1,403,418 | ||||||
3,920 | Western Union Co. (The) | 74,676 | ||||||
|
| |||||||
22,441,264 | ||||||||
|
| |||||||
Technology Hardware & Equipment – 5.5% | ||||||||
2,503 | Amphenol Corp. Class A | 184,771 | ||||||
42,266 | Apple, Inc. | 6,087,148 | ||||||
40,641 | Cisco Systems, Inc. | 1,272,063 | ||||||
7,389 | Corning, Inc. | 222,039 | ||||||
530 | F5 Networks, Inc.* | 67,342 | ||||||
1,120 | FLIR Systems, Inc. | 38,819 | ||||||
1,013 | Harris Corp. | 110,498 | ||||||
13,596 | Hewlett Packard Enterprise Co. | 225,558 | ||||||
13,566 | HP, Inc. | 237,134 | ||||||
3,102 | Juniper Networks, Inc. | 86,484 | ||||||
1,362 | Motorola Solutions, Inc. | 118,140 | ||||||
2,164 | NetApp, Inc. | 86,668 | ||||||
2,413 | Seagate Technology plc | 93,504 | ||||||
2,887 | TE Connectivity Ltd. | 227,149 | ||||||
2,331 | Western Digital Corp. | 206,527 | ||||||
1,790 | Xerox Corp. | 51,427 | ||||||
|
| |||||||
9,315,271 | ||||||||
|
| |||||||
Telecommunication Services – 2.1% | ||||||||
49,792 | AT&T, Inc. | 1,878,652 | ||||||
4,447 | CenturyLink, Inc.(a) | 106,195 | ||||||
2,344 | Level 3 Communications, Inc.* | 138,999 | ||||||
33,026 | Verizon Communications, Inc. | 1,474,941 | ||||||
|
| |||||||
3,598,787 | ||||||||
|
| |||||||
Transportation – 2.3% | ||||||||
1,032 | Alaska Air Group, Inc. | 92,632 | ||||||
3,970 | American Airlines Group, Inc. | 199,770 | ||||||
1,168 | CH Robinson Worldwide, Inc. | 80,218 | ||||||
7,519 | CSX Corp. | 410,237 | ||||||
5,999 | Delta Air Lines, Inc. | 322,386 | ||||||
1,416 | Expeditors International of Washington, Inc. | 79,976 | ||||||
|
|
The accompanying notes are an integral part of these financial statements. | 37 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST EQUITY INDEX FUND
Schedule of Investments (continued)
June 30, 2017 (Unaudited)
Shares | Description | Value | ||||||
Common Stocks – (continued) | ||||||||
Transportation – (continued) | ||||||||
1,990 | FedEx Corp. | $ | 432,487 | |||||
731 | JB Hunt Transport Services, Inc. | 66,799 | ||||||
885 | Kansas City Southern | 92,615 | ||||||
2,367 | Norfolk Southern Corp. | 288,064 | ||||||
4,869 | Southwest Airlines Co. | 302,560 | ||||||
6,569 | Union Pacific Corp. | 715,430 | ||||||
2,317 | United Continental Holdings, Inc.* | 174,354 | ||||||
5,563 | United Parcel Service, Inc. Class B | 615,212 | ||||||
|
| |||||||
3,872,740 | ||||||||
|
| |||||||
Utilities – 3.1% | ||||||||
5,392 | AES Corp. | 59,905 | ||||||
1,855 | Alliant Energy Corp. | 74,515 | ||||||
2,003 | Ameren Corp. | 109,504 | ||||||
3,956 | American Electric Power Co., Inc. | 274,823 | ||||||
1,479 | American Water Works Co., Inc. | 115,288 | ||||||
3,551 | CenterPoint Energy, Inc. | 97,226 | ||||||
2,283 | CMS Energy Corp. | 105,589 | ||||||
2,480 | Consolidated Edison, Inc. | 200,434 | ||||||
5,139 | Dominion Energy, Inc. | 393,802 | ||||||
1,431 | DTE Energy Co. | 151,386 | ||||||
5,684 | Duke Energy Corp. | 475,126 | ||||||
2,683 | Edison International | 209,784 | ||||||
1,465 | Entergy Corp. | 112,468 | ||||||
2,578 | Eversource Energy | 156,510 | ||||||
7,473 | Exelon Corp. | 269,551 | ||||||
3,625 | FirstEnergy Corp. | 105,705 | ||||||
3,819 | NextEra Energy, Inc. | 535,156 | ||||||
2,594 | NiSource, Inc. | 65,784 | ||||||
2,677 | NRG Energy, Inc. | 46,098 | ||||||
4,136 | PG&E Corp. | 274,506 | ||||||
939 | Pinnacle West Capital Corp. | 79,965 | ||||||
5,487 | PPL Corp. | 212,127 | ||||||
4,120 | Public Service Enterprise Group, Inc. | 177,201 | ||||||
1,159 | SCANA Corp. | 77,665 | ||||||
2,060 | Sempra Energy | 232,265 | ||||||
8,025 | Southern Co. (The) | 384,237 | ||||||
2,544 | WEC Energy Group, Inc. | 156,151 | ||||||
4,120 | Xcel Energy, Inc. | 189,026 | ||||||
|
| |||||||
5,341,797 | ||||||||
|
| |||||||
TOTAL COMMON STOCKS | ||||||||
(Cost $69,262,260) | $ | 168,450,855 | ||||||
|
|
Principal Amount | Interest Rate | Maturity Date | Value | |||||||||
Short-Term Investment – 0.0%(c)(d) | ||||||||||||
U.S Government Obligation – 0.0% | ||||||||||||
U.S. Treasury Bill |
| |||||||||||
$100,000 | 0.000 | % | 08/03/17 | $ | 99,922 | |||||||
(Cost $99,937) | ||||||||||||
| ||||||||||||
TOTAL INVESTMENTS BEFORE SECURITIES LENDING REINVESTMENT VEHICLE | ||||||||||||
(Cost $69,362,197) | $ | 168,550,777 | ||||||||||
| ||||||||||||
Shares | Distribution Rate | Value | ||||||||||
Securities Lending Reinvestment Vehicle(b)(e) – 0.2% | ||||||||||||
Goldman Sachs Financial Square Government Fund — Institutional Shares |
| |||||||||||
304,575 | 0.845% | $ | 304,575 | |||||||||
(Cost $304,575) | ||||||||||||
| ||||||||||||
TOTAL INVESTMENTS – 99.5% | ||||||||||||
(Cost $69,666,772) | $ | 168,855,352 | ||||||||||
| ||||||||||||
OTHER ASSETS IN EXCESS OF LIABILITIES – 0.5% |
| 825,919 | ||||||||||
| ||||||||||||
NET ASSETS – 100.0% | $ | 169,681,271 | ||||||||||
|
The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. | ||
* | Non-income producing security. | |
(a) | All or a portion of security is on loan. | |
(b) | Represents an affiliated issuer. | |
(c) | Issued with a zero coupon. Income is recognized through the accretion of discount. | |
(d) | All or a portion of security is segregated as collateral for initial margin requirements on futures transactions. | |
(e) | Variable rate security. Interest rate or distribution rate disclosed is that which is in effect on June 30, 2017. |
Investment Abbreviation: | ||
REIT | —Real Estate Investment Trust |
38 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST EQUITY INDEX FUND
ADDITIONAL INVESTMENT INFORMATION
FUTURES CONTRACTS — At June 30, 2017, the Fund had the following futures contracts:
Type | Number of Contracts Long (Short) | Expiration Date | Current Value | Unrealized Gain (Loss) | ||||||||||
S&P 500 E-Mini Index | 10 | September 2017 | $ | 1,210,450 | $ | (4,715 | ) |
The accompanying notes are an integral part of these financial statements. | 39 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST GROWTH OPPORTUNITIES FUND
Schedule of Investments
June 30, 2017 (Unaudited)
Shares | Description | Value | ||||||
Common Stocks – 97.6% | ||||||||
Automobiles & Components – 0.5% | ||||||||
10,276 | Delphi Automotive plc | $ | 900,691 | |||||
|
| |||||||
Banks – 3.8% | ||||||||
38,108 | Eagle Bancorp, Inc.* | 2,412,236 | ||||||
23,368 | First Republic Bank | 2,339,137 | ||||||
32,156 | SunTrust Banks, Inc. | 1,823,888 | ||||||
|
| |||||||
6,575,261 | ||||||||
|
| |||||||
Capital Goods – 17.1% | ||||||||
43,033 | Fortive Corp. | 2,726,140 | ||||||
28,772 | Fortune Brands Home & Security, Inc. | 1,877,085 | ||||||
11,357 | Hubbell, Inc. | 1,285,272 | ||||||
14,404 | IDEX Corp. | 1,627,796 | ||||||
13,394 | John Bean Technologies Corp. | 1,312,612 | ||||||
12,579 | L3 Technologies, Inc. | 2,101,699 | ||||||
33,539 | Middleby Corp. (The)* | 4,075,324 | ||||||
20,688 | Roper Technologies, Inc. | 4,789,893 | ||||||
61,547 | Sensata Technologies Holding NV*(a) | 2,629,288 | ||||||
14,404 | WABCO Holdings, Inc.* | 1,836,654 | ||||||
88,281 | Xylem, Inc. | 4,893,416 | ||||||
|
| |||||||
29,155,179 | ||||||||
|
| |||||||
Consumer Durables & Apparel – 3.3% | ||||||||
64,549 | Newell Brands, Inc. | 3,461,117 | ||||||
19,046 | PVH Corp. | 2,180,767 | ||||||
|
| |||||||
5,641,884 | ||||||||
|
| |||||||
Consumer Services – 2.0% | ||||||||
29,401 | Dunkin’ Brands Group, Inc. | 1,620,583 | ||||||
23,463 | Yum Brands, Inc. | 1,730,631 | ||||||
|
| |||||||
3,351,214 | ||||||||
|
| |||||||
Diversified Financials – 6.6% | ||||||||
10,595 | Affiliated Managers Group, Inc. | 1,757,287 | ||||||
54,124 | Intercontinental Exchange, Inc. | 3,567,854 | ||||||
42,130 | Lazard Ltd. Class A | 1,951,883 | ||||||
41,935 | Northern Trust Corp. | 4,076,501 | ||||||
|
| |||||||
11,353,525 | ||||||||
|
| |||||||
Energy – 2.0% | ||||||||
12,420 | Concho Resources, Inc.* | 1,509,403 | ||||||
15,371 | Diamondback Energy, Inc.* | 1,365,098 | ||||||
9,886 | Dril-Quip, Inc.* | 482,437 | ||||||
|
| |||||||
3,356,938 | ||||||||
|
| |||||||
Food, Beverage & Tobacco – 4.6% | ||||||||
69,590 | Blue Buffalo Pet Products, Inc.* | 1,587,348 | ||||||
20,002 | Hershey Co. (The) | 2,147,615 | ||||||
12,420 | Molson Coors Brewing Co. Class B | 1,072,343 | ||||||
42,426 | Monster Beverage Corp.* | 2,107,724 | ||||||
28,859 | Snyder’s-Lance, Inc. | 999,098 | ||||||
|
| |||||||
7,914,128 | ||||||||
|
| |||||||
Health Care Equipment & Services – 3.2% | ||||||||
35,876 | Edwards Lifesciences Corp.* | 4,241,978 | ||||||
17,327 | Nevro Corp.* | 1,289,649 | ||||||
|
| |||||||
5,531,627 | ||||||||
|
| |||||||
Common Stocks – (continued) | ||||||||
Materials – 6.0% | ||||||||
14,829 | Ashland Global Holdings, Inc. | $ | 977,379 | |||||
32,032 | Avery Dennison Corp. | 2,830,668 | ||||||
54,443 | RPM International, Inc. | 2,969,866 | ||||||
4,093 | Sherwin-Williams Co. (The) | 1,436,479 | ||||||
87,537 | Valvoline, Inc. | 2,076,378 | ||||||
|
| |||||||
10,290,770 | ||||||||
|
| |||||||
Media – 1.2% | ||||||||
9,729 | Altice USA, Inc. Class A*(a) | 314,247 | ||||||
27,339 | CBS Corp. (Non-Voting) Class B | 1,743,681 | ||||||
|
| |||||||
2,057,928 | ||||||||
|
| |||||||
Pharmaceuticals, Biotechnology & Life Sciences – 12.3% | ||||||||
24,856 | ACADIA Pharmaceuticals, Inc.*(a) | 693,234 | ||||||
48,472 | Agilent Technologies, Inc. | 2,874,874 | ||||||
35,274 | Alkermes plc* | 2,044,834 | ||||||
38,782 | Exelixis, Inc.*(a) | 955,201 | ||||||
15,712 | Illumina, Inc.* | 2,726,346 | ||||||
17,805 | Incyte Corp.* | 2,241,827 | ||||||
6,485 | Mettler-Toledo International, Inc.* | 3,816,682 | ||||||
17,309 | Neurocrine Biosciences, Inc.* | 796,214 | ||||||
8,433 | Vertex Pharmaceuticals, Inc.* | 1,086,761 | ||||||
60,750 | Zoetis, Inc. | 3,789,585 | ||||||
|
| |||||||
21,025,558 | ||||||||
|
| |||||||
Real Estate Investment Trusts – 2.7% | ||||||||
4,689 | Equinix, Inc. | 2,012,331 | ||||||
18,727 | SBA Communications Corp.* | 2,526,273 | ||||||
|
| |||||||
4,538,604 | ||||||||
|
| |||||||
Retailing – 8.2% | ||||||||
13,986 | Advance Auto Parts, Inc. | 1,630,628 | ||||||
23,386 | Expedia, Inc. | 3,483,345 | ||||||
30,384 | Five Below, Inc.* | 1,500,058 | ||||||
4,733 | O’Reilly Automotive, Inc.* | 1,035,296 | ||||||
65,533 | Ross Stores, Inc. | 3,783,220 | ||||||
8,881 | Ulta Beauty, Inc.* | 2,551,867 | ||||||
|
| |||||||
13,984,414 | ||||||||
|
| |||||||
Semiconductors & Semiconductor Equipment – 4.9% | ||||||||
37,587 | Analog Devices, Inc. | 2,924,269 | ||||||
16,758 | Lam Research Corp. | 2,370,084 | ||||||
12,260 | Qorvo, Inc.* | 776,303 | ||||||
34,514 | Xilinx, Inc. | 2,219,940 | ||||||
|
| |||||||
8,290,596 | ||||||||
|
| |||||||
Software & Services – 16.2% | ||||||||
19,506 | Autodesk, Inc.* | 1,966,595 | ||||||
77,754 | Black Knight Financial Services, Inc. Class A* | 3,184,026 | ||||||
18,422 | Electronic Arts, Inc.* | 1,947,574 | ||||||
26,947 | Fiserv, Inc.* | 3,296,696 | ||||||
32,843 | Global Payments, Inc. | 2,966,380 | ||||||
43,530 | GoDaddy, Inc. Class A* | �� | 1,846,543 | |||||
24,608 | Intuit, Inc. | 3,268,188 | ||||||
23,457 | Red Hat, Inc.* | 2,246,008 | ||||||
|
|
40 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST GROWTH OPPORTUNITIES FUND
Shares | Description | Value | ||||||
Common Stocks – (continued) | ||||||||
Software & Services – (continued) | ||||||||
15,839 | ServiceNow, Inc.* | $ | 1,678,934 | |||||
19,288 | Splunk, Inc.* | 1,097,294 | ||||||
50,209 | Total System Services, Inc. | 2,924,674 | ||||||
7,282 | Tyler Technologies, Inc.* | 1,279,229 | ||||||
|
| |||||||
27,702,141 | ||||||||
|
| |||||||
Technology Hardware & Equipment – 3.0% | ||||||||
68,350 | Amphenol Corp. Class A | 5,045,597 | ||||||
|
| |||||||
TOTAL COMMON STOCKS | ||||||||
(Cost $128,132,004) | $ | 166,716,055 | ||||||
|
|
Shares | Distribution Rate | Value | ||||||||
Investment Company(b)(c) – 0.9% | ||||||||||
| Goldman Sachs Financial Square Government Fund — | | ||||||||
1,498,070 | 0.845 | % | $ | 1,498,070 | ||||||
(Cost $1,498,070) | ||||||||||
|
| |||||||||
| TOTAL INVESTMENTS BEFORE SECURITIES LENDING REINVESTMENT VEHICLE | | ||||||||
(Cost $129,630,074) | $ | 168,214,125 | ||||||||
|
|
Securities Lending Reinvestment Vehicle(b)(c) – 2.7% | ||||||||||
| Goldman Sachs Financial Square Government Fund — | | ||||||||
4,540,100 | 0.845 | % | $ | 4,540,100 | ||||||
(Cost $4,540,100) | ||||||||||
|
| |||||||||
TOTAL INVESTMENTS – 101.2% | ||||||||||
(Cost $134,170,174) | $ | 172,754,225 | ||||||||
|
| |||||||||
| LIABILITIES IN EXCESS OF | | (2,064,061 | ) | ||||||
|
| |||||||||
NET ASSETS – 100.0% | $ | 170,690,164 | ||||||||
|
|
The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. | ||
* | Non-income producing security. | |
(a) | All or a portion of security is on loan. | |
(b) | Represents an affiliated issuer. | |
(c) | Variable rate security. Interest rate or distribution rate disclosed is that which is in effect on June 30, 2017. |
The accompanying notes are an integral part of these financial statements. | 41 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST HIGH QUALITY FLOATING RATE FUND
Schedule of Investments
June 30, 2017 (Unaudited)
Principal Amount | Interest Rate | Maturity Date | Value | |||||||||||
Mortgage-Backed Securities – 8.5% | ||||||||||||||
Adjustable Rate FHLMC(a) – 3.2% | ||||||||||||||
$ | 213,782 | 3.533 | % | 05/01/35 | $ | 225,095 | ||||||||
115,765 | 2.821 | 09/01/35 | 122,133 | |||||||||||
225,042 | 3.458 | 12/01/36 | 233,401 | |||||||||||
589,818 | 3.930 | 04/01/37 | 617,424 | |||||||||||
576,411 | 2.888 | 01/01/38 | 608,733 | |||||||||||
454,196 | 3.391 | 01/01/38 | 472,437 | |||||||||||
|
| |||||||||||||
2,279,223 | ||||||||||||||
|
| |||||||||||||
Adjustable Rate FNMA(a) – 2.8% | ||||||||||||||
70,686 | 3.125 | 05/01/33 | 73,471 | |||||||||||
191,296 | 3.208 | 05/01/35 | 202,448 | |||||||||||
477,109 | 2.834 | 06/01/35 | 503,295 | |||||||||||
669,508 | 2.947 | 11/01/35 | 702,813 | |||||||||||
94,875 | 3.283 | 12/01/35 | 100,149 | |||||||||||
337,919 | 3.483 | 03/01/37 | 357,826 | |||||||||||
|
| |||||||||||||
1,940,002 | ||||||||||||||
|
| |||||||||||||
Adjustable Rate GNMA(a) – 0.5% | ||||||||||||||
323,752 | 2.125 | 04/20/33 | 333,357 | |||||||||||
|
| |||||||||||||
Agency Multi-Family – 2.0% | ||||||||||||||
FNMA | ||||||||||||||
173,880 | 2.800 | 03/01/18 | 174,064 | |||||||||||
453,536 | 3.740 | 05/01/18 | 456,793 | |||||||||||
110,000 | 3.840 | 05/01/18 | 110,742 | |||||||||||
79,139 | 3.416 | 10/01/20 | 82,507 | |||||||||||
82,526 | 3.619 | 12/01/20 | 86,594 | |||||||||||
310,448 | 3.762 | 12/01/20 | 326,263 | |||||||||||
176,298 | 4.381 | 06/01/21 | 189,801 | |||||||||||
|
| |||||||||||||
1,426,764 | ||||||||||||||
|
| |||||||||||||
TOTAL MORTGAGE-BACKED SECURITIES | ||||||||||||||
(Cost $5,993,347) | $ | 5,979,346 | ||||||||||||
|
| |||||||||||||
Collateralized Mortgage Obligations(a) – 37.4% | ||||||||||||||
Agency Multi-Family – 1.9% | ||||||||||||||
| FHLMC Multifamily Structured Pass-Through Certificates | | ||||||||||||
126,533 | 1.596 | 07/25/20 | 126,514 | |||||||||||
| FHLMC Multifamily Structured Pass-Through Certificates | | ||||||||||||
144,058 | 1.556 | 01/25/21 | 144,058 | |||||||||||
| FHLMC Multifamily Structured Pass-Through Certificates | | ||||||||||||
1,068,285 | 1.596 | 08/25/23 | 1,068,274 | |||||||||||
|
| |||||||||||||
1,338,846 | ||||||||||||||
|
| |||||||||||||
Regular Floater – 35.5% | ||||||||||||||
FHLMC REMIC Series 3049, Class FP | ||||||||||||||
236,742 | 1.509 | 10/15/35 | 235,719 | |||||||||||
FHLMC REMIC Series 3208, Class FB(b) | ||||||||||||||
146,309 | 1.559 | 08/15/36 | 146,553 | |||||||||||
FHLMC REMIC Series 3208, Class FD(b) | ||||||||||||||
218,000 | 1.559 | 08/15/36 | 219,094 | |||||||||||
|
| |||||||||||||
Collateralized Mortgage Obligations(a) – (continued) | ||||||||||||||
Regular Floater – (continued) | ||||||||||||||
FHLMC REMIC Series 3208, Class FG(b) | ||||||||||||||
$ | 877,852 | 1.559 | 08/15/36 | $ | 882,257 | |||||||||
FHLMC REMIC Series 3307, Class FT | ||||||||||||||
1,351,902 | 1.399 | 07/15/34 | 1,351,442 | |||||||||||
FHLMC REMIC Series 3311, Class KF(b) | ||||||||||||||
2,389,529 | 1.499 | % | 05/15/37 | 2,388,317 | ||||||||||
FHLMC REMIC Series 3371, Class FA(b) | ||||||||||||||
538,534 | 1.759 | 09/15/37 | 543,716 | |||||||||||
FHLMC REMIC Series 4174, Class FB(b) | ||||||||||||||
1,110,450 | 1.459 | 05/15/39 | 1,109,734 | |||||||||||
FHLMC REMIC Series 4320, Class FD | ||||||||||||||
507,997 | 1.559 | 07/15/39 | 509,605 | |||||||||||
FHLMC REMIC Series 4477, Class FG | ||||||||||||||
1,002,997 | 1.351 | 10/15/40 | 999,928 | |||||||||||
FHLMC REMIC Series 4508, Class CF | ||||||||||||||
498,375 | 1.559 | 09/15/45 | 499,192 | |||||||||||
FHLMC REMIC Series 4631, Class GF | ||||||||||||||
2,814,767 | 1.659 | 11/15/46 | 2,834,780 | |||||||||||
FHLMC REMIC Series 4637, Class QF(b) | ||||||||||||||
2,531,645 | 2.050 | 04/15/44 | 2,537,926 | |||||||||||
FNMA REMIC Series 2006-82, Class F | ||||||||||||||
312,151 | 1.786 | 09/25/36 | 314,426 | |||||||||||
FNMA REMIC Series 2006-96, Class FA | ||||||||||||||
751,135 | 1.516 | 10/25/36 | 749,934 | |||||||||||
FNMA REMIC Series 2007-114, Class A7 | ||||||||||||||
360,408 | 1.416 | 10/27/37 | 356,386 | |||||||||||
FNMA REMIC Series 2007-33, Class HF | ||||||||||||||
128,990 | 1.566 | 04/25/37 | 129,291 | |||||||||||
FNMA REMIC Series 2007-36, Class F | ||||||||||||||
208,118 | 1.446 | 04/25/37 | 207,057 | |||||||||||
FNMA REMIC Series 2007-85, Class FC | ||||||||||||||
589,476 | 1.756 | 09/25/37 | 594,169 | |||||||||||
FNMA REMIC Series 2008-8, Class FB | ||||||||||||||
717,587 | 2.036 | 02/25/38 | 724,470 | |||||||||||
FNMA REMIC Series 2011-63, Class FG | ||||||||||||||
546,318 | 1.666 | 07/25/41 | 549,157 | |||||||||||
FNMA REMIC Series 2012-35, Class QF | ||||||||||||||
1,497,187 | 1.616 | 04/25/42 | 1,500,633 | |||||||||||
FNMA REMIC Series 2016-1, Class FT | ||||||||||||||
1,458,365 | 1.566 | 02/25/46 | 1,459,964 | |||||||||||
FNMA REMIC Series 2017-45, Class FA | ||||||||||||||
1,073,589 | 1.310 | 06/25/47 | 1,072,867 | |||||||||||
GNMA REMIC Series 2005-48, Class AF | ||||||||||||||
718,530 | 1.412 | 06/20/35 | 713,051 | |||||||||||
GNMA REMIC Series 2012-98, Class FA | ||||||||||||||
682,815 | 1.612 | 08/20/42 | 684,905 | |||||||||||
NCUA Guaranteed Notes Trust Series 2011-R1, Class 1A(b) | ||||||||||||||
1,715,827 | 1.534 | 01/08/20 | 1,718,575 | |||||||||||
|
| |||||||||||||
25,033,148 | ||||||||||||||
|
| |||||||||||||
| TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS | |||||||||||||
(Cost $26,326,300) | $ | 26,371,994 | ||||||||||||
|
|
42 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST HIGH QUALITY FLOATING RATE FUND
Principal Amount | Interest Rate | Maturity Date | Value | |||||||||||
Commercial Mortgage-Backed Security(a) – 0.1% | ||||||||||||||
Agency Multi-Family – 0.1% | ||||||||||||||
FNMA ACES Series 2013-M11, Class FA | ||||||||||||||
$ | 65,208 | 1.546 | % | 01/25/18 | $ | 65,149 | ||||||||
(Cost $65,208) | ||||||||||||||
|
| |||||||||||||
U.S. Government Agency Security(a) – 1.1% | ||||||||||||||
FHLB | ||||||||||||||
$ | 750,000 | 1.275 | % | 09/29/17 | $ | 750,368 | ||||||||
(Cost $750,220) | ||||||||||||||
|
| |||||||||||||
Asset-Backed Securities(a) – 42.6% | ||||||||||||||
Automobile(b) – 2.7% | ||||||||||||||
Ally Master Owner Trust Series 2017-3, Class A1 | ||||||||||||||
$ | 1,350,000 | 1.574 | % | 06/15/22 | $ | 1,350,005 | ||||||||
Chesapeake Funding II LLC Series 2016-2A, Class A2(c) | ||||||||||||||
529,341 | 2.159 | 06/15/28 | 531,832 | |||||||||||
|
| |||||||||||||
1,881,837 | ||||||||||||||
|
| |||||||||||||
Collateralized Loan Obligations(c) – 9.4% | ||||||||||||||
Acis CLO Ltd. Series 2013-2A, Class BR(b) | ||||||||||||||
48,575 | 2.208 | 10/14/22 | 48,582 | |||||||||||
Apidos CLO X Series 2012-10A, Class A(b) | ||||||||||||||
346,352 | 2.592 | 10/30/22 | 346,399 | |||||||||||
BlueMountain CLO Ltd. Series 2014-2A, Class AR(b) | ||||||||||||||
350,000 | 0.000 | 07/20/26 | 350,000 | |||||||||||
Bowman Park CLO Ltd. Series 2014-1A, Class AR | ||||||||||||||
250,000 | 2.366 | 11/23/25 | 249,998 | |||||||||||
Cutwater Ltd. Series 2014-1A, Class A1AR(b) | ||||||||||||||
350,000 | 2.469 | 07/15/26 | 349,824 | |||||||||||
Halcyon Loan Advisors Funding Ltd. Series 2014-1A, Class A1(b) | ||||||||||||||
350,000 | 2.688 | 04/18/26 | 350,019 | |||||||||||
| Halcyon Loan Advisors Funding Ltd. Series 2014-1A, | | ||||||||||||
350,000 | 0.000 | 04/18/26 | 350,000 | |||||||||||
Jamestown CLO VII Ltd. Series 2015-7A, Class A1(b) | ||||||||||||||
1,300,000 | 2.706 | 07/25/27 | 1,300,092 | |||||||||||
Neuberger Berman CLO XIX Ltd. Series 2015-19A, Class A1R(b) | ||||||||||||||
350,000 | 0.000 | 07/15/27 | 350,000 | |||||||||||
OFSI Fund V Ltd. Series 2013-5A, Class A1LA(b) | ||||||||||||||
300,000 | 2.088 | 04/17/25 | 299,260 | |||||||||||
OFSI Fund VI Ltd. Series 2014-6A, Class A1(b) | ||||||||||||||
350,000 | 2.188 | 03/20/25 | 347,215 | |||||||||||
Parallel Ltd. Series 2015-1A, Class A(b) | ||||||||||||||
300,000 | 2.606 | 07/20/27 | 300,111 | |||||||||||
Sound Point CLO XI Ltd. Series 2016-1A, Class A(b) | ||||||||||||||
700,000 | 2.806 | 07/20/28 | 705,527 | |||||||||||
Voya CLO Ltd. Series 2014-4A, Class A1R(b) | ||||||||||||||
500,000 | 0.000 | 10/14/26 | 500,000 | |||||||||||
WhiteHorse IX Ltd. Series 2014-9A, Class AR(b) | ||||||||||||||
400,000 | 0.000 | 07/17/26 | 400,000 | |||||||||||
Z Capital Credit Partners CLO Ltd. Series 2015-1A, Class A1(b) | ||||||||||||||
400,000 | 2.488 | 07/16/27 | 398,774 | |||||||||||
|
| |||||||||||||
6,645,801 | ||||||||||||||
|
| |||||||||||||
Asset-Backed Securities(a) – (continued) | ||||||||||||||
Credit Card – 8.3% | ||||||||||||||
BA Credit Card Trust Series 2014-A1, Class A | ||||||||||||||
$ | 1,000,000 | 1.539 | % | 06/15/21 | $ | 1,004,293 | ||||||||
| Capital One Multi-Asset Execution Trust Series 2016-A1, | | ||||||||||||
300,000 | 1.609 | 02/15/22 | 301,749 | |||||||||||
CARDS II Trust Series 2016-1A, Class A(b)(c) | ||||||||||||||
300,000 | 1.859 | 07/15/21 | 301,308 | |||||||||||
CARDS II Trust Series 2017-1A, Class A(c) | ||||||||||||||
300,000 | 1.529 | 04/18/22 | 300,255 | |||||||||||
Citibank Credit Card Issuance Trust Series 2017-A5, Class A5(b) | ||||||||||||||
1,400,000 | 1.836 | 04/22/26 | 1,407,264 | |||||||||||
Discover Card Execution Note Trust Series 2013-A1, Class A1(b) | ||||||||||||||
1,500,000 | 1.459 | 08/17/20 | 1,501,709 | |||||||||||
Evergreen Credit Card Trust Series 2016-1, Class A(b)(c) | ||||||||||||||
500,000 | 1.879 | 04/15/20 | 502,152 | |||||||||||
Trillium Credit Card Trust II Series 2016-1A, Class A(b)(c) | ||||||||||||||
500,000 | 1.936 | 05/26/21 | 502,341 | |||||||||||
|
| |||||||||||||
5,821,071 | ||||||||||||||
|
| |||||||||||||
Student Loans – 22.3% | ||||||||||||||
Academic Loan Funding Trust Series 2013-1A, Class A(b)(c) | ||||||||||||||
529,139 | 2.016 | 12/26/44 | 526,580 | |||||||||||
Access Group, Inc. Series 2015-1, Class A(b)(c) | ||||||||||||||
237,139 | 1.916 | 07/25/56 | 235,605 | |||||||||||
| Access to Loans for Learning Student Loan Corp. Series 2013-I, | | ||||||||||||
500,418 | 2.016 | 02/25/41 | 493,649 | |||||||||||
AccessLex Institute Series 2006-1, Class A2(b) | ||||||||||||||
10,026 | 1.299 | 08/25/23 | 10,021 | |||||||||||
College Loan Corp. Trust I Series 2005-1, Class A4 | ||||||||||||||
100,000 | 1.306 | 04/25/27 | 99,443 | |||||||||||
ECMC Group Student Loan Trust Series 2016-1A, Class A(b)(c) | ||||||||||||||
303,810 | 2.566 | 07/26/66 | 305,422 | |||||||||||
Education Loan Asset-Backed Trust I Series 2013-1, Class A1(c) | ||||||||||||||
300,544 | 2.016 | 06/25/26 | 300,878 | |||||||||||
Education Loan Asset-Backed Trust I Series 2013-1, Class A2(c) | ||||||||||||||
500,000 | 2.016 | 04/26/32 | 487,545 | |||||||||||
Educational Funding of the South, Inc. Series 2011-1, Class A2(b) | ||||||||||||||
582,824 | 1.806 | 04/25/35 | 580,704 | |||||||||||
Educational Funding of the South, Inc. Series 2012-1, Class A(b) | ||||||||||||||
392,914 | 2.266 | 03/25/36 | 394,931 | |||||||||||
Educational Services of America, Inc. Series 2010-1, Class A1(b)(c) | ||||||||||||||
640,444 | 2.006 | 07/25/23 | 640,897 | |||||||||||
Educational Services of America, Inc. Series 2013-1, Class A(b)(c) | ||||||||||||||
91,517 | 1.786 | 02/26/29 | 91,229 | |||||||||||
Educational Services of America, Inc. Series 2014-1, Class A(b)(c) | ||||||||||||||
290,239 | 1.916 | 02/25/39 | 286,478 | |||||||||||
EFS Volunteer No 3 LLC Series 2012-1, Class A2(b)(c) | ||||||||||||||
782,835 | 2.216 | 02/25/25 | 784,672 | |||||||||||
| GCO Education Loan Funding Master Trust-II Series 2006-2A, | | ||||||||||||
40,706 | 1.309 | 08/25/28 | 40,686 | |||||||||||
GCO Education Loan Funding Trust Series 2006-1, Class A8L | ||||||||||||||
412,824 | 1.319 | 05/25/25 | 409,197 | |||||||||||
|
|
The accompanying notes are an integral part of these financial statements. | 43 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST HIGH QUALITY FLOATING RATE FUND
Schedule of Investments (continued)
June 30, 2017 (Unaudited)
Principal Amount | Interest Rate | Maturity Date | Value | |||||||||||
Asset-Backed Securities(a) – (continued) | ||||||||||||||
Student Loans – (continued) | ||||||||||||||
Goal Capital Funding Trust Series 2007-1, Class A3 | ||||||||||||||
$ | 28,895 | 1.243 | % | 09/25/28 | $ | 28,869 | ||||||||
Higher Education Funding I Series 2005-1, Class A4 | ||||||||||||||
31,276 | 1.329 | 02/25/30 | 31,228 | |||||||||||
Higher Education Funding I Series 2014-1, Class A(b)(c) | ||||||||||||||
272,737 | 2.239 | 05/25/34 | 271,578 | |||||||||||
Illinois Student Assistance Commission Series 2010-1, Class A3(b) | ||||||||||||||
200,000 | 2.056 | 07/25/45 | 200,680 | |||||||||||
| Kentucky Higher Education Student Loan Corp. Series 2015-1, | | ||||||||||||
697,976 | 1.801 | 12/01/31 | 694,325 | |||||||||||
| Montana Higher Education Student Assistance Corp. | | ||||||||||||
848,521 | 2.212 | 05/20/30 | 857,523 | |||||||||||
Navient Student Loan Trust Series 2016-2, Class A1(b)(c) | ||||||||||||||
257,424 | 1.966 | 06/25/65 | 258,107 | |||||||||||
Navient Student Loan Trust Series 2016-5A, Class A(b)(c) | ||||||||||||||
1,280,973 | 2.466 | 06/25/65 | 1,301,180 | |||||||||||
Navient Student Loan Trust Series 2016-7A, Class A(b)(c) | ||||||||||||||
280,293 | 2.366 | 03/25/66 | 283,495 | |||||||||||
Nelnet Student Loan Trust Series 2005-4, Class A3(b) | ||||||||||||||
48,136 | 1.417 | 06/22/26 | 48,115 | |||||||||||
Nelnet Student Loan Trust Series 2006-1, Class A5(b) | ||||||||||||||
1,259,175 | 1.296 | 08/23/27 | 1,255,425 | |||||||||||
Nelnet Student Loan Trust Series 2006-2, Class A5(b) | ||||||||||||||
381,917 | 1.256 | 01/25/30 | 381,362 | |||||||||||
Nelnet Student Loan Trust Series 2013-5A, Class A(b)(c) | ||||||||||||||
98,915 | 1.846 | 01/25/37 | 98,587 | |||||||||||
| New Hampshire Higher Education Loan Corp. Series 2011-1, | | ||||||||||||
200,000 | 2.006 | 10/25/37 | 195,453 | |||||||||||
| North Carolina State Education Assistance Authority | | ||||||||||||
123,340 | 2.056 | 07/25/41 | 122,902 | |||||||||||
| Panhandle-Plains Higher Education Authority, Inc. Series 2011-1, | | ||||||||||||
354,077 | 2.098 | 07/01/24 | 355,880 | |||||||||||
| Pennsylvania Higher Education Assistance Agency Series 2006-1, | | ||||||||||||
625,990 | 1.296 | 10/25/35 | 603,880 | |||||||||||
Scholar Funding Trust Series 2010-A, Class A(b)(c) | ||||||||||||||
260,301 | 1.922 | 10/28/41 | 256,535 | |||||||||||
Scholar Funding Trust Series 2011-A, Class A(b)(c) | ||||||||||||||
253,401 | 2.072 | 10/28/43 | 251,317 | |||||||||||
SLM Student Loan Trust Series 2003-12, Class A5(b)(c) | ||||||||||||||
53,639 | 1.526 | 09/15/22 | 53,668 | |||||||||||
SLM Student Loan Trust Series 2003-14, Class A5(b) | ||||||||||||||
29,507 | 1.386 | 01/25/23 | 29,508 | |||||||||||
SLM Student Loan Trust Series 2005-9, Class A6(b) | ||||||||||||||
472,573 | 1.706 | 10/26/26 | 473,261 | |||||||||||
SLM Student Loan Trust Series 2006-2, Class A5(b) | ||||||||||||||
258,279 | 1.266 | 07/25/25 | 258,263 | |||||||||||
SLM Student Loan Trust Series 2006-4, Class A5(b) | ||||||||||||||
10,094 | 1.256 | 10/27/25 | 10,092 | |||||||||||
|
| |||||||||||||
Asset-Backed Securities(a) – (continued) | ||||||||||||||
Student Loans – (continued) | ||||||||||||||
SLM Student Loan Trust Series 2007-1, Class A5(b) | ||||||||||||||
$ | 891,261 | 1.246 | % | 01/26/26 | $ | 887,967 | ||||||||
SLM Student Loan Trust Series 2008-5, Class A4(b) | ||||||||||||||
159,474 | 2.856 | 07/25/23 | 163,384 | |||||||||||
SLM Student Loan Trust Series 2013-3, Class A2(b) | ||||||||||||||
17,158 | 1.516 | 05/26/20 | 17,154 | |||||||||||
SLM Student Loan Trust Series 2014-1, Class A2(b) | ||||||||||||||
25,190 | 1.596 | 07/26/21 | 25,203 | |||||||||||
| South Texas Higher Education Authority, Inc. Series 2012-1, | | ||||||||||||
127,292 | 1.998 | 10/01/24 | 127,818 | |||||||||||
Utah State Board of Regents Series 2015-1, Class A(b) | ||||||||||||||
461,097 | 1.816 | 02/25/43 | 462,208 | |||||||||||
Wachovia Student Loan Trust Series 2005-1, Class A5(b) | ||||||||||||||
39,963 | 1.286 | 01/26/26 | 39,896 | |||||||||||
|
| |||||||||||||
15,732,800 | ||||||||||||||
|
| |||||||||||||
TOTAL ASSET-BACKED SECURITIES | ||||||||||||||
(Cost $29,954,941) | $ | 30,081,509 | ||||||||||||
|
| |||||||||||||
Municipal Bond(b)(c) – 0.1% | ||||||||||||||
New York – 0.1% | ||||||||||||||
| Freddie Mac Multifamily Ml Certificates RB Pass Through | | ||||||||||||
$ | 100,000 | 1.650 | % | 01/25/33 | $ | 100,105 | ||||||||
(Cost $100,000) | ||||||||||||||
|
| |||||||||||||
U.S. Treasury Obligations – 2.0% | ||||||||||||||
U.S. Treasury Bond | ||||||||||||||
$ | 70,000 | 3.000 | % | 05/15/47 | $ | 72,271 | ||||||||
U.S. Treasury Inflation Indexed Note (TIPS) | ||||||||||||||
1,357,421 | 0.125 | 04/15/20 | 1,360,014 | |||||||||||
|
| |||||||||||||
TOTAL U.S. TREASURY OBLIGATIONS | ||||||||||||||
(Cost $1,435,190) | $ | 1,432,285 | ||||||||||||
|
| |||||||||||||
Shares | Distribution Rate | Value | ||||||||||||
Investment Company(a)(d) – 8.6% | ||||||||||||||
| Goldman Sachs Financial Square Government Fund — | | ||||||||||||
6,064,898 | 0.845 | % | $ | 6,064,898 | ||||||||||
(Cost $6,064,898) | ||||||||||||||
|
| |||||||||||||
TOTAL INVESTMENTS – 100.4% | ||||||||||||||
(Cost $70,690,104) | $ | 70,845,654 | ||||||||||||
|
| |||||||||||||
| LIABILITIES IN EXCESS OF | | (294,637 | ) | ||||||||||
|
| |||||||||||||
NET ASSETS – 100.0% | $ | 70,551,017 | ||||||||||||
|
|
44 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST HIGH QUALITY FLOATING RATE FUND
The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. | ||
(a) | Variable rate security. Interest rate or distribution rate disclosed is that which is in effect on June 30, 2017. | |
(b) | Securities with “Call” features. Maturity dates disclosed are the final maturity dates. | |
(c) | Exempt from registration under Rule 144A of the Securities Act of 1933. Under procedures approved by the Board of Trustees, such securities may be deemed liquid by the Investment Adviser and may be resold, normally to qualified institutional buyers in transactions exempt from registration. Total market value of Rule 144A securities amounts to $15,358,253, which represents approximately 21.8% of net assets as of June 30, 2017. | |
(d) | Represents an affiliated issuer. |
Investment Abbreviations: | ||
ACES | —Alternative Credit Enhancement Securities | |
FHLB | —Federal Home Loan Bank | |
FHLMC | —Federal Home Loan Mortgage Corp. | |
FNMA | —Federal National Mortgage Association | |
GNMA | —Government National Mortgage Association | |
LIBOR | —London Interbank Offered Rate | |
RB | —Revenue Bond | |
REMIC | —Real Estate Mortgage Investment Conduit | |
TIPS | —Treasury Inflation-Protected Securities |
ADDITIONAL INVESTMENT INFORMATION |
FUTURES CONTRACTS — At June 30, 2017, the Fund had the following futures contracts:
Type | Number of Contracts Long (Short) | Expiration Date | Current Value | Unrealized Gain (Loss) | ||||||||||||
90 Day Eurodollar | 1 | September 2017 | $ | 246,613 | $ | (830 | ) | |||||||||
90 Day Eurodollar | 1 | December 2017 | 246,313 | (1,011 | ) | |||||||||||
90 Day Eurodollar | 1 | March 2018 | 246,100 | (1,161 | ) | |||||||||||
90 Day Eurodollar | 1 | June 2018 | 245,913 | (1,268 | ) | |||||||||||
U.S. Long Bonds | (11) | September 2017 | (1,690,563 | ) | (13,821 | ) | ||||||||||
U.S. Ultra Long Treasury Bonds | 2 | September 2017 | 331,750 | 515 | ||||||||||||
2 Year U.S. Treasury Notes | (13) | September 2017 | (2,809,422 | ) | 3,602 | |||||||||||
5 Year U.S. Treasury Notes | (19) | September 2017 | (2,238,883 | ) | 11,372 | |||||||||||
10 Year U.S. Treasury Notes | 37 | September 2017 | 4,644,656 | (9,737 | ) | |||||||||||
10 Year U.S. Ultra Long Treasury Notes | (8) | September 2017 | (1,078,500 | ) | 1,886 | |||||||||||
TOTAL | $ | (10,453 | ) |
SWAP CONTRACTS — At June 30, 2017, the Fund had the following swap contracts:
CENTRALLY CLEARED INTEREST RATE SWAP CONTRACT
Rates Exchanged | Market Value | |||||||||||||||||||
Notional Amount (000’s) | Termination Date | Payments Received | Payments Made | Upfront Payments Made (Received) | Unrealized Gain (Loss) | |||||||||||||||
$100(a) | 09/20/47 | 3 Month LIBOR | 2.500 | % | $ | (1,956) | $2,840 |
(a) | Represents forward starting interest rate swap whose effective date of commencement of accruals and cash flows occur subsequent to June 30, 2017. |
The accompanying notes are an integral part of these financial statements. | 45 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST FUNDS
Statements of Assets and Liabilities
June 30, 2017 (Unaudited)
Core Fixed Income Fund | Equity Index Fund | Growth Opportunities Fund | High Quality Floating Rate Fund | |||||||||||||
Assets: | ||||||||||||||||
Investments in unaffiliated issuers, at value (cost $114,688,769, $69,036,442, $128,132,004 and $64,625,206)(a) | $ | 116,160,984 | $ | 167,890,181 | $ | 166,716,055 | $ | 64,780,756 | ||||||||
Investments in affiliated issuers, at value (cost $1,111,197, $325,755, $1,498,070 and $6,064,898) | 1,111,197 | 660,596 | 1,498,070 | 6,064,898 | ||||||||||||
Investments in affiliated securities lending reinvestment vehicle, at value (cost $0, $304,575, $4,540,100 and $0) | — | 304,575 | 4,540,100 | — | ||||||||||||
Cash | 1,654,803 | 469,352 | 2,603,892 | 1,059,522 | ||||||||||||
Foreign currencies, at value (cost $64,828, $0, $0 and $0) | 66,163 | — | — | — | ||||||||||||
Receivables: | ||||||||||||||||
Investments sold on an extended-settlement basis | 6,277,640 | — | — | 267,151 | ||||||||||||
Investments sold | 735,882 | 710,233 | 2,244,788 | — | ||||||||||||
Interest and dividends | 645,761 | 169,247 | 49,996 | 99,254 | ||||||||||||
Collateral on certain derivative contracts(b) | 585,928 | — | — | 360,506 | ||||||||||||
Fund shares sold | 21,843 | — | 941 | — | ||||||||||||
Reimbursement from investment adviser | 20,318 | 18,375 | 15,286 | 14,256 | ||||||||||||
Securities lending income | — | 200 | 159 | — | ||||||||||||
Unrealized gain on forward foreign currency exchange contracts | 343,443 | — | — | — | ||||||||||||
Variation margin on certain derivative contracts | — | 453 | — | 3,302 | ||||||||||||
Other assets | 470 | 630 | 615 | 355 | ||||||||||||
Total assets | 127,624,432 | 170,223,842 | 177,669,902 | 72,650,000 | ||||||||||||
Liabilities: | ||||||||||||||||
Forward sale contracts, at value (proceeds received $1,031,992, $0, $0 and $0) | 1,027,148 | — | — | — | ||||||||||||
Unrealized loss on forward foreign currency exchange contracts | 296,413 | — | — | — | ||||||||||||
Variation margin on certain derivative contracts | 19,966 | — | — | — | ||||||||||||
Payables: | ||||||||||||||||
Investments purchased on an extended-settlement basis | 15,608,314 | — | — | 1,950,000 | ||||||||||||
Management fees | 36,423 | 29,601 | 117,501 | 15,787 | ||||||||||||
Distribution and Service fees and Transfer Agency fees | 24,693 | 38,058 | 24,925 | 16,086 | ||||||||||||
Fund shares redeemed | 884 | 23,697 | 74,520 | 16,300 | ||||||||||||
Payable upon return of securities loaned | — | 304,575 | 4,540,100 | — | ||||||||||||
Investments purchased | — | 71,859 | 2,143,637 | — | ||||||||||||
Accrued expenses | 105,472 | 74,781 | 79,055 | 100,810 | ||||||||||||
Total liabilities | 17,119,313 | 542,571 | 6,979,738 | 2,098,983 | ||||||||||||
Net Assets: | ||||||||||||||||
Paid-in capital | 114,130,250 | 71,271,245 | 119,998,566 | 71,402,540 | ||||||||||||
Undistributed (distributions in excess of) net investment income (loss) | (342,078 | ) | 1,572,495 | (156,490 | ) | (9,379 | ) | |||||||||
Accumulated net realized gain (loss) | (4,733,315 | ) | (2,346,334 | ) | 12,264,037 | (990,081 | ) | |||||||||
Net unrealized gain | 1,450,262 | 99,183,865 | 38,584,051 | 147,937 | ||||||||||||
NET ASSETS | $ | 110,505,119 | $ | 169,681,271 | $ | 170,690,164 | $ | 70,551,017 | ||||||||
Net Assets: | ||||||||||||||||
Institutional | $ | 206,210 | $ | — | $ | 4,279,957 | $ | 55,699 | ||||||||
Service | 110,298,909 | 169,681,271 | 166,410,207 | 66,979,964 | ||||||||||||
Advisor | — | — | — | 3,515,354 | ||||||||||||
Total Net Assets | $ | 110,505,119 | $ | 169,681,271 | $ | 170,690,164 | $ | 70,551,017 | ||||||||
Shares outstanding $0.001 par value (unlimited shares authorized): | ||||||||||||||||
Institutional | 19,352 | — | 549,467 | 5,346 | ||||||||||||
Service | 10,358,192 | 10,734,198 | 21,550,583 | 6,441,476 | ||||||||||||
Advisor | — | — | — | 337,741 | ||||||||||||
Net asset value, offering and redemption price per share: | ||||||||||||||||
Institutional | $10.66 | $ — | $7.79 | $10.42 | ||||||||||||
Service | 10.65 | 15.81 | 7.72 | 10.40 | ||||||||||||
Advisor | — | — | — | 10.41 |
(a) Includes loaned securities having a market value of $296,508 and $4,438,662 for the Equity Index and Growth Opportunities Funds, respectively.
(b) Segregated for initial margin and/or collateral on transactions as follows:
Fund | Forwards | Futures | Swaps | |||||||||
Core Fixed Income | $ | 380,000 | $ | — | $ | 205,928 | ||||||
High Quality Floating Rate | — | 346,000 | 14,506 |
46 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST FUNDS
Statements of Operations
For the Six Months Ended June 30, 2017 (Unaudited)
Core Fixed Income Fund | Equity Index Fund | Growth Opportunities Fund | High Quality Floating Rate Fund | |||||||||||||
Investment income: | ||||||||||||||||
Interest | $ | 1,346,364 | $ | 300 | $ | — | $ | 533,923 | ||||||||
Dividends — affiliated issuers | 10,829 | 4,288 | 2,407 | 15,927 | ||||||||||||
Dividends — unaffiliated issuers | — | 1,718,538 | 652,943 | — | ||||||||||||
Securities lending income — affiliated issuer | — | 1,158 | 41,327 | — | ||||||||||||
Total investment income | 1,357,193 | 1,724,284 | 696,677 | 549,850 | ||||||||||||
Expenses: | ||||||||||||||||
Management fees | 219,712 | 252,586 | 834,539 | 138,945 | ||||||||||||
Distribution and Service fees(a) | 137,126 | 210,487 | 203,792 | 88,971 | ||||||||||||
Professional fees | 65,281 | 40,560 | 39,683 | 53,055 | ||||||||||||
Custody, accounting and administrative services | 30,931 | 27,749 | 28,951 | 27,957 | ||||||||||||
Printing and mailing costs | 19,137 | 22,117 | 18,003 | 13,581 | ||||||||||||
Transfer Agency fees(a) | 10,985 | 16,838 | 16,689 | 6,947 | ||||||||||||
Trustee fees | 8,274 | 8,229 | 8,236 | 8,142 | ||||||||||||
Other | 2,933 | 11,110 | 3,665 | 2,358 | ||||||||||||
Total expenses | 494,379 | 589,676 | 1,153,558 | 339,956 | ||||||||||||
Less — expense reductions | (128,038 | ) | (182,388 | ) | (290,583 | ) | (121,335 | ) | ||||||||
Net expenses | 366,341 | 407,288 | 862,975 | 218,621 | ||||||||||||
NET INVESTMENT INCOME (LOSS) | 990,852 | 1,316,996 | (166,298 | ) | 331,229 | |||||||||||
Realized and unrealized gain (loss): | ||||||||||||||||
Net realized gain (loss) from: | ||||||||||||||||
Investments — unaffiliated issuers (including commissions recaptured of $0, $0, $2,428 and $0) | 757,873 | 4,924,755 | 14,090,563 | 32,659 | ||||||||||||
Investments — affiliated issuer | — | 21,177 | — | — | ||||||||||||
Futures contracts | 260,509 | 92,519 | — | (27,665 | ) | |||||||||||
Swap contracts | 39,058 | — | — | (1,400 | ) | |||||||||||
Forward foreign currency exchange contracts | 19,773 | — | — | — | ||||||||||||
Foreign currency transactions | (11,452 | ) | — | — | — | |||||||||||
Net change in unrealized gain (loss) on: | ||||||||||||||||
Investments — unaffiliated issuers | 577,879 | 8,445,938 | 9,039,566 | 175,123 | ||||||||||||
Investments — affiliated issuers | — | (74,735 | ) | — | — | |||||||||||
Futures contracts | (88,386 | ) | 2,408 | — | (15,406 | ) | ||||||||||
Swap contracts | 5,962 | — | — | 2,840 | ||||||||||||
Forward foreign currency exchange contracts | (71,663 | ) | — | — | — | |||||||||||
Foreign currency translation | 985 | — | — | — | ||||||||||||
Net realized and unrealized gain | 1,490,538 | 13,412,062 | 23,130,129 | 166,151 | ||||||||||||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 2,481,390 | $ | 14,729,058 | $ | 22,963,831 | $ | 497,380 |
(a) Class specific Distribution and Service, and Transfer Agency fees were as follows:
Distribution and Service Fees | Transfer Agency Fees | |||||||||||||||||||
Fund | Service | Advisor | Institutional | Service | Advisor | |||||||||||||||
Core Fixed Income | $ | 137,126 | N/A | $ | 16 | $ | 10,969 | N/A | ||||||||||||
Equity Index | 210,487 | N/A | N/A | 16,838 | N/A | |||||||||||||||
Growth Opportunities | 203,792 | N/A | 387 | 16,302 | N/A | |||||||||||||||
High Quality Floating Rate | 83,076 | $ | 5,895 | 6 | 6,646 | $ | 295 |
47 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST FUNDS
Statements of Changes in Net Assets
Core Fixed Income Fund | Equity Index Fund | |||||||||||||||
For the Six Months Ended June 30, 2017 (Unaudited) | For the Fiscal Year Ended December 31, 2016 | For the Six Months Ended June 30, 2017 (Unaudited) | For the Fiscal Year Ended December 31, 2016 | |||||||||||||
From operations: | ||||||||||||||||
Net investment income (loss) | $ | 990,852 | $ | 2,275,333 | $ | 1,316,996 | $ | 2,824,658 | ||||||||
Net realized gain (loss) | 1,065,761 | 341,177 | 5,038,451 | 9,625,482 | ||||||||||||
Net change in unrealized gain | 424,777 | 197,933 | 8,373,611 | 5,122,443 | ||||||||||||
Net increase in net assets resulting from operations | 2,481,390 | 2,814,443 | 14,729,058 | 17,572,583 | ||||||||||||
Distributions to shareholders: | ||||||||||||||||
From net investment income | ||||||||||||||||
Institutional Shares | (3,250 | ) | (712 | ) | — | — | ||||||||||
Service Shares | (1,957,630 | ) | (2,237,128 | ) | — | (3,549,296 | ) | |||||||||
Advisor Shares | — | — | — | — | ||||||||||||
From net realized gains | ||||||||||||||||
Institutional Shares | — | — | — | — | ||||||||||||
Service Shares | — | — | — | (7,414,419 | ) | |||||||||||
Total distributions to shareholders | (1,960,880 | ) | (2,237,840 | ) | — | (10,963,715 | ) | |||||||||
From share transactions: | ||||||||||||||||
Proceeds from sales of shares | 4,350,284 | 18,825,312 | 677,243 | 3,310,921 | ||||||||||||
Reinvestment of distributions | 1,960,880 | 2,237,840 | — | 10,963,715 | ||||||||||||
Cost of shares redeemed | (6,892,830 | ) | (16,023,575 | ) | (11,275,886 | ) | (24,627,725 | ) | ||||||||
Net increase (decrease) in net assets resulting from share transactions | (581,666 | ) | 5,039,577 | (10,598,643 | ) | (10,353,089 | ) | |||||||||
TOTAL INCREASE (DECREASE) | (61,156 | ) | 5,616,180 | 4,130,415 | (3,744,221 | ) | ||||||||||
Net assets: | ||||||||||||||||
Beginning of period | 110,566,275 | 104,950,095 | 165,550,856 | 169,295,077 | ||||||||||||
End of period | $ | 110,505,119 | $ | 110,566,275 | $ | 169,681,271 | $ | 165,550,856 | ||||||||
Undistributed (distributions in excess of) net investment income (loss) | $ | (342,078 | ) | $ | 627,950 | $ | 1,572,495 | $ | 255,499 |
48 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST FUNDS
Growth Opportunities Fund | High Quality Floating Rate Fund | |||||||||||||
For the Six Months Ended June 30, 2017 (Unaudited) | For the Fiscal Year Ended December 31, 2016 | For the Six Months Ended June 30, 2017 (Unaudited) | For the Fiscal Year Ended December 31, 2016 | |||||||||||
$ | (166,298 | ) | $ | (604,577 | ) | $ | 331,229 | $ | 532,255 | |||||
14,090,563 | (776,503 | ) | 3,594 | 58,118 | ||||||||||
9,039,566 | 3,723,297 | 162,557 | 123,607 | |||||||||||
22,963,831 | 2,342,217 | 497,380 | 713,980 | |||||||||||
— | — | (500 | ) | (314 | ) | |||||||||
— | — | (390,049 | ) | (665,766 | ) | |||||||||
— | — | (18,213 | ) | (15,910 | ) | |||||||||
— | (23,519 | ) | — | — | ||||||||||
— | (1,048,654 | ) | — | — | ||||||||||
— | (1,072,173 | ) | (408,762 | ) | (681,990 | ) | ||||||||
2,590,920 | 18,099,066 | 5,966,819 | 9,233,882 | |||||||||||
— | 1,072,173 | 408,762 | 681,989 | |||||||||||
(14,306,202 | ) | (29,684,783 | ) | (4,306,674 | ) | (12,519,662 | ) | |||||||
| (11,715,282 | ) | (10,513,544 | ) | 2,068,907 | (2,603,791 | ) | |||||||
11,248,549 | (9,243,500 | ) | 2,157,525 | (2,571,801 | ) | |||||||||
159,441,615 | 168,685,115 | 68,393,492 | 70,965,293 | |||||||||||
$ | 170,690,164 | $ | 159,441,615 | $ | 70,551,017 | $ | 68,393,492 | |||||||
$ | (156,490 | ) | $ | 9,808 | $ | (9,379 | ) | $ | 68,154 |
The accompanying notes are an integral part of these financial statements. | 49 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST CORE FIXED INCOME FUND
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
Income (loss) from investment operations | ||||||||||||||||||||||||||||||||||||||||||||||||
Year - Share Class | Net asset value, beginning of period | Net investment income(a) | Net realized and unrealized gain (loss) | Total from investment operations | Distributions to shareholders from net investment income | Net asset value, end of period | Total return(b) | Net assets, end of period (in 000s) | Ratio of net expenses to average net assets | Ratio of total expenses to average net assets | Ratio of net investment income to average net assets | Portfolio turnover rate(c) | ||||||||||||||||||||||||||||||||||||
FOR THE SIX MONTHS ENDED JUNE 30, (UNAUDITED) | ||||||||||||||||||||||||||||||||||||||||||||||||
2017 - Institutional | $ | 10.61 | $ | 0.11 | $ | 0.14 | $ | 0.25 | $ | (0.20 | ) | $ | 10.66 | 2.40 | % | $ | 206 | 0.42 | %(d) | 0.65 | %(d) | 2.03 | %(d) | 125 | % | |||||||||||||||||||||||
2017 - Service | 10.60 | 0.10 | 0.14 | 0.24 | (0.19 | ) | 10.65 | 2.28 | 110,299 | 0.67 | (d) | 0.90 | (d) | 1.80 | (d) | 125 | ||||||||||||||||||||||||||||||||
FOR THE FISCAL YEARS ENDED DECEMBER 31, | ||||||||||||||||||||||||||||||||||||||||||||||||
2016 - Institutional | 10.53 | 0.24 | 0.08 | 0.32 | (0.24 | ) | 10.61 | 2.98 | 90 | 0.43 | 0.65 | 2.28 | 329 | |||||||||||||||||||||||||||||||||||
2016 - Service | 10.53 | 0.22 | 0.07 | 0.29 | (0.22 | ) | 10.60 | 2.70 | 110,476 | 0.67 | 0.91 | 2.05 | 329 | |||||||||||||||||||||||||||||||||||
2015 - Institutional | 10.75 | 0.27 | (0.20 | ) | 0.07 | (0.29 | ) | 10.53 | 0.60 | 26 | 0.42 | 0.74 | 2.53 | 376 | ||||||||||||||||||||||||||||||||||
2015 - Service | 10.76 | 0.24 | (0.21 | ) | 0.03 | (0.26 | ) | 10.53 | 0.27 | 104,924 | 0.67 | 0.99 | 2.27 | 376 | ||||||||||||||||||||||||||||||||||
2014 - Institutional | 10.48 | 0.25 | 0.34 | 0.59 | (0.32 | ) | 10.75 | 5.68 | 26 | 0.44 | 0.65 | 2.31 | 353 | |||||||||||||||||||||||||||||||||||
2014 - Service | 10.47 | 0.22 | 0.36 | 0.58 | (0.29 | ) | 10.76 | 5.61 | 107,063 | 0.68 | 0.91 | 2.06 | 353 | |||||||||||||||||||||||||||||||||||
2013 - Institutional (Commenced April 30, 2013) | 10.91 | 0.15 | (0.38 | ) | (0.23 | ) | (0.20 | ) | 10.48 | (2.13 | ) | 24 | 0.43 | (d) | 0.69 | (d) | 2.10 | (d) | 557 | |||||||||||||||||||||||||||||
2013 - Service | 10.88 | 0.20 | (0.35 | ) | (0.15 | ) | (0.26 | ) | 10.47 | (1.35 | ) | 116,530 | 0.67 | 0.89 | 1.88 | 557 | ||||||||||||||||||||||||||||||||
2012 - Service | 10.43 | 0.17 | 0.52 | 0.69 | (0.24 | ) | 10.88 | 6.70 | 135,436 | 0.67 | 0.83 | 1.57 | 727 |
(a) | Calculated based on the average shares outstanding methodology. |
(b) | Assumes investment at the net asset value at the beginning of the period, reinvestment of all distributions, and a complete redemption of the investment at the net asset value at the end of the period. Total returns for periods less than one full year are not annualized. |
(c) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short term investments and certain derivatives. If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
(d) | Annualized. |
The accompanying notes are an integral part of these financial statements. | 50 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST EQUITY INDEX FUND
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
Income (loss) from investment operations | Distributions to shareholders | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year - Share Class | Net asset value, beginning of period | Net investment income(a) | Net realized and unrealized gain (loss) | Total from investment operations | From net investment income | From net realized gains | Total distributions | Net asset value, end of period | Total return(b) | Net assets, end of period (in 000s) | Ratio of net expenses to average net assets | Ratio of total expenses to average net assets | Ratio of net investment income to average net assets | Portfolio turnover rate(c) | ||||||||||||||||||||||||||||||||||||||||||
FOR THE SIX MONTHS ENDED JUNE 30, (UNAUDITED) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2017 - Service | $ | 14.49 | $ | 0.12 | $ | 1.20 | $ | 1.32 | $ | — | $ | — | $ | — | $ | 15.81 | 9.11 | % | $ | 169,681 | 0.48 | %(d) | 0.70 | %(d) | 1.56 | %(d) | 1 | % | ||||||||||||||||||||||||||||
FOR THE FISCAL YEARS ENDED DECEMBER 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2016 - Service | 13.91 | 0.25 | 1.35 | 1.60 | (0.33 | ) | (0.69 | ) | (1.02 | ) | 14.49 | 11.41 | 165,551 | 0.48 | 0.73 | 1.73 | 3 | |||||||||||||||||||||||||||||||||||||||
2015 - Service | 14.91 | 0.32 | (0.18 | ) | 0.14 | (0.28 | ) | (0.86 | ) | (1.14 | ) | 13.91 | 0.94 | 169,295 | 0.48 | 0.70 | 2.15 | 4 | ||||||||||||||||||||||||||||||||||||||
2014 - Service | 13.68 | 0.22 | 1.58 | 1.80 | (0.25 | ) | (0.32 | ) | (0.57 | ) | 14.91 | 13.22 | 190,009 | 0.49 | 0.71 | 1.55 | 2 | |||||||||||||||||||||||||||||||||||||||
2013 - Service | 10.54 | 0.20 | 3.15 | 3.35 | (0.21 | ) | — | (0.21 | ) | 13.68 | 31.83 | 193,899 | 0.49 | 0.73 | 1.61 | 3 | ||||||||||||||||||||||||||||||||||||||||
2012 - Service | 9.29 | 0.19 | 1.26 | 1.45 | (0.20 | ) | — | (0.20 | ) | 10.54 | 15.50 | 167,811 | 0.48 | 0.72 | 1.82 | 3 |
(a) | Calculated based on the average shares outstanding methodology. |
(b) | Assumes investment at the net asset value at the beginning of the period, reinvestment of all distributions, and a complete redemption of the investment at the net asset value at the end of the period. Total returns for periods less than one full year are not annualized. |
(c) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short term investments and certain derivatives. If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
(d) | Annualized. |
The accompanying notes are an integral part of these financial statements. | 51 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST GROWTH OPPORTUNITIES FUND
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
Income (loss) from investment operations | ||||||||||||||||||||||||||||||||||||||||||||||||
Year - Share Class | Net asset value, beginning of period | Net investment loss(a) | Net realized and unrealized gain (loss) | Total from investment operations | Distributions to shareholders from net investment income | Net asset value, end of period | Total return(b) | Net assets, end of period (in 000s) | Ratio of net expenses to average net assets | Ratio of total expenses to average net assets | Ratio of net investment loss to average net assets | Portfolio turnover rate(c) | ||||||||||||||||||||||||||||||||||||
FOR THE SIX MONTHS ENDED JUNE 30, (UNAUDITED) | ||||||||||||||||||||||||||||||||||||||||||||||||
2017 - Institutional | $ | 6.78 | $ | — | (d) | $ | 1.01 | $ | 1.01 | $ | — | $ | 7.79 | 14.90 | % | $ | 4,280 | 0.88 | %(e) | 1.14 | %(e) | (0.04 | )%(e) | 33 | % | |||||||||||||||||||||||
2017 - Service | 6.73 | (0.01 | ) | 1.00 | 0.99 | — | 7.72 | 14.71 | 166,410 | 1.04 | (e) | 1.39 | (e) | (0.20 | )(e) | 33 | ||||||||||||||||||||||||||||||||
FOR THE FISCAL YEARS ENDED DECEMBER 31, | ||||||||||||||||||||||||||||||||||||||||||||||||
2016 - Institutional | 6.71 | (0.02 | ) | 0.14 | 0.12 | (0.05 | ) | 6.78 | 1.71 | 3,518 | 0.89 | 1.16 | (0.26 | ) | 63 | |||||||||||||||||||||||||||||||||
2016 - Service | 6.68 | (0.02 | ) | 0.12 | 0.10 | (0.05 | ) | 6.73 | 1.42 | 155,924 | 1.05 | 1.40 | (0.37 | ) | 63 | |||||||||||||||||||||||||||||||||
2015 - Institutional | 7.72 | (0.01 | ) | (0.39 | ) | (0.40 | ) | (0.61 | ) | 6.71 | (5.20 | ) | 32 | 0.93 | 1.14 | (0.19 | ) | 57 | ||||||||||||||||||||||||||||||
2015 - Service | 7.69 | (0.03 | ) | (0.37 | ) | (0.40 | ) | (0.61 | ) | 6.68 | (5.20 | ) | 168,653 | 1.09 | 1.40 | (0.36 | ) | 57 | ||||||||||||||||||||||||||||||
2014 - Institutional | 8.59 | (0.02 | ) | 0.94 | 0.92 | (1.79 | ) | 7.72 | 11.32 | 33 | 1.01 | 1.15 | (0.24 | ) | 62 | |||||||||||||||||||||||||||||||||
2014 - Service | 8.58 | (0.03 | ) | 0.93 | 0.90 | (1.79 | ) | 7.69 | 11.10 | 201,519 | 1.17 | 1.39 | (0.39 | ) | 62 | |||||||||||||||||||||||||||||||||
2013 - Institutional (Commenced April 30, 2013) | 7.66 | (0.02 | ) | 1.52 | 1.50 | (0.57 | ) | 8.59 | 19.73 | 30 | 1.00 | (e) | 1.16 | (e) | (0.27 | )(e) | 42 | |||||||||||||||||||||||||||||||
2013 - Service | 6.93 | (0.04 | ) | 2.26 | 2.22 | (0.57 | ) | 8.58 | 32.20 | 201,872 | 1.16 | 1.39 | (0.47 | ) | 42 | |||||||||||||||||||||||||||||||||
2012 - Service | 6.34 | (0.02 | )(f) | 1.25 | 1.23 | (0.64 | ) | 6.93 | 19.37 | 171,870 | 1.15 | 1.39 | (0.26 | )(f) | 46 |
(a) | Calculated based on the average shares outstanding methodology. |
(b) | Assumes investment at the net asset value at the beginning of the period, reinvestment of all distributions, and a complete redemption of the investment at the net asset value at the end of the period. Total returns for periods less than one full year are not annualized. |
(c) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short term investments. If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
(d) | Amount is less than $0.005 per share. |
(e) | Annualized. |
(f) | Reflects income recognized from special dividends which amounted to $0.01 per share and 0.18% of average net assets. |
The accompanying notes are an integral part of these financial statements. | 52 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST HIGH QUALITY FLOATING RATE FUND
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
Income (loss) from investment operations | Distributions to shareholders | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net asset value, beginning of period | Net investment income(a) | Net realized and unrealized gain (loss) | Total from investment operations | From net investment income | From net realized gains | Total distributions | Net asset value, end of period | Total return(b) | Net assets, end of period (in 000s) | Ratio of net expenses to average net assets | Ratio of total expenses to average net assets | Ratio of net investment income to average net assets | Portfolio turnover rate(c) | |||||||||||||||||||||||||||||||||||||||||||
FOR THE SIX MONTHS ENDED JUNE 30, (UNAUDITED) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2017 - Institutional | $ | 10.41 | $ | 0.06 | $ | 0.02 | $ | 0.08 | $ | (0.07 | ) | $ | — | $ | (0.07 | ) | $ | 10.42 | 0.80 | % | $ | 56 | 0.38 | %(d) | 0.72 | %(d) | 1.24 | %(d) | 21 | % | ||||||||||||||||||||||||||
2017 - Service | 10.38 | 0.05 | 0.03 | 0.08 | (0.06 | ) | — | (0.06 | ) | 10.40 | 0.78 | 66,980 | 0.62 | (d) | 0.97 | (d) | 0.96 | (d) | 21 | |||||||||||||||||||||||||||||||||||||
2017 - Advisor | 10.40 | 0.04 | 0.03 | 0.07 | (0.06 | ) | — | (0.06 | ) | 10.41 | 0.65 | 3,515 | 0.77 | (d) | 1.12 | (d) | 0.83 | (d) | 21 | |||||||||||||||||||||||||||||||||||||
FOR THE FISCAL YEARS ENDED DECEMBER 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2016 - Institutional | 10.40 | 0.11 | 0.03 | 0.14 | (0.13 | ) | — | (0.13 | ) | 10.41 | 1.35 | 25 | 0.39 | 0.78 | 1.03 | 47 | ||||||||||||||||||||||||||||||||||||||||
2016 - Service | 10.38 | 0.08 | 0.02 | 0.10 | (0.10 | ) | — | (0.10 | ) | 10.38 | 1.00 | 66,710 | 0.65 | 1.04 | 0.77 | 47 | ||||||||||||||||||||||||||||||||||||||||
2016 - Advisor | 10.40 | 0.06 | 0.03 | 0.09 | (0.09 | ) | — | (0.09 | ) | 10.40 | 0.96 | 1,658 | 0.80 | 1.18 | 0.62 | 47 | ||||||||||||||||||||||||||||||||||||||||
2015 - Institutional | 10.49 | 0.06 | (0.08 | ) | (0.02 | ) | (0.07 | ) | — | (0.07 | ) | 10.40 | (0.16 | ) | 25 | 0.38 | 0.81 | 0.54 | 14 | |||||||||||||||||||||||||||||||||||||
2015 - Service | 10.47 | 0.03 | (0.07 | ) | (0.04 | ) | (0.05 | ) | — | (0.05 | ) | 10.38 | (0.42 | ) | 69,625 | 0.64 | 1.05 | 0.28 | 14 | |||||||||||||||||||||||||||||||||||||
2015 - Advisor | 10.49 | 0.01 | (0.06 | ) | (0.05 | ) | (0.04 | ) | — | (0.04 | ) | 10.40 | (0.57 | ) | 1,315 | 0.78 | 1.25 | 0.12 | 14 | |||||||||||||||||||||||||||||||||||||
2014 - Institutional | 10.51 | 0.05 | (0.03 | ) | 0.02 | (0.04 | ) | — | (0.04 | ) | 10.49 | 0.17 | 25 | 0.40 | 0.70 | 0.51 | 17 | |||||||||||||||||||||||||||||||||||||||
2014 - Service | 10.51 | 0.03 | (0.04 | ) | (0.01 | ) | (0.03 | ) | — | (0.03 | ) | 10.47 | (0.09 | ) | 74,892 | 0.66 | 0.96 | 0.25 | 17 | |||||||||||||||||||||||||||||||||||||
2014 - Advisor (Commenced October 15, 2014) | 10.51 | — | (e) | (0.02 | ) | (0.02 | ) | — | — | — | 10.49 | (0.10 | )* | 10 | 0.77 | (d) | 1.13 | (d) | 0.15 | (d) | 17 | |||||||||||||||||||||||||||||||||||
2013 - Institutional (Commenced April 30, 2013) | 10.56 | 0.02 | 0.03 | 0.05 | (0.04 | ) | (0.06 | ) | (0.10 | )(f) | 10.51 | 0.50 | 25 | 0.40 | (d) | 0.86 | (d) | 0.25 | (d) | 467 | ||||||||||||||||||||||||||||||||||||
2013 - Service | 10.58 | 0.01 | 0.03 | 0.04 | (0.05 | ) | (0.06 | ) | (0.11 | )(f) | 10.51 | 0.40 | 78,142 | 0.70 | 1.10 | 0.08 | 467 | |||||||||||||||||||||||||||||||||||||||
2012 - Service | 10.70 | 0.04 | 0.25 | 0.29 | (0.08 | ) | (0.33 | ) | (0.41 | ) | 10.58 | 2.78 | 68,893 | 0.79 | 1.06 | 0.36 | 1045 |
(a) | Calculated based on the average shares outstanding methodology. |
(b) | Assumes investment at the net asset value at the beginning of the period, reinvestment of all distributions, and a complete redemption of the investment at the net asset value at the end of the period. Total returns for periods less than one full year are not annualized. |
(c) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short term investments and certain derivatives. If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
(d) | Annualized. |
(e) | Amount is less than $0.005 per share. |
(f) | Included a distribution from capital of less than $0.01 per share. |
* | Represents cumulative total returns |
The accompanying notes are an integral part of these financial statements. | 53 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST FUNDS
Notes to Financial Statements
June 30, 2017 (Unaudited)
1. ORGANIZATION
Goldman Sachs Variable Insurance Trust (the “Trust” or “VIT”) is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company. The following table lists those series of the Trust that are included in this report (collectively, the “Funds” or individually a “Fund”), along with their corresponding share classes and respective diversification status under the Act:
Fund | Share Classes Offered | Diversified/ Non-diversified | ||
High Quality Floating Rate | Institutional, Service and Advisor | Diversified | ||
Core Fixed Income and Growth Opportunities | Institutional and Service | Diversified | ||
Equity Index | Service | Diversified |
Shares of the Trust are offered to a separate account of participating life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies.
Goldman Sachs Asset Management, L.P. (“GSAM”), an affiliate of Goldman Sachs & Co. LLC (formerly Goldman, Sachs & Co.) (“Goldman Sachs”), serves as investment adviser to the Funds pursuant to a management agreements (the “Agreement”) with the Trust.
2. SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and require management to make estimates and assumptions that may affect the reported amounts and disclosures. Actual results may differ from those estimates and assumptions.
A. Investment Valuation — The Funds’ valuation policy is to value investments at fair value.
B. Investment Income and Investments — Investment income includes interest income, dividend income and securities lending income. Interest income is accrued daily and adjusted for amortization of premiums and accretion of discounts. Dividend income is recognized on ex-dividend date or, for certain foreign securities, as soon as such information is obtained subsequent to the ex-dividend date. Investment transactions are reflected on trade date. Realized gains and losses are calculated using identified cost. Investment transactions are recorded on the following business day for daily net asset value (“NAV”) calculations. Distributions received from the Funds’ investments United States (“U.S.”) real estate investment trusts (“REITs”) may be characterized as ordinary income, net capital gain or a return of capital. A return of capital is recorded by the Funds as a reduction to the cost basis of the REIT.
For derivative contracts, realized gains and losses are recorded upon settlement of the contract. Upfront payments, if any, are made or received upon entering into a swap agreement and are reflected in the Statements of Assets and Liabilities. Upfront payments are recognized over the contract’s term/event as realized gains or losses, with the exception of forward starting interest rate swaps whose realized gains or losses are recognized from the effective start date. For securities with paydown provisions, principal payments received are treated as a proportionate reduction to the cost basis of the securities, and excess or shortfall amounts are recorded as income. For treasury inflation protected securities (“TIPS”), adjustments to principal due to inflation/deflation are reflected as increases/decreases to interest income with a corresponding adjustment to cost.
C. Class Allocations and Expenses — Investment income, realized and unrealized gain (loss), and non-class specific expenses of each Fund are allocated daily based upon the proportion of net assets of each class. Non-class specific expenses directly incurred by a Fund are charged to that Fund, while such expenses incurred by the Trust are allocated across the applicable Funds on a straight-line and/or pro-rata basis depending upon the nature of the expenses. Class specific expenses, where applicable, are borne by the respective share classes and include Distribution and Service and Transfer Agency fees.
54
GOLDMAN SACHS VARIABLE INSURANCE TRUST FUNDS
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
D. Federal Taxes and Distributions to Shareholders — It is each Fund’s policy to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Code”), applicable to regulated investment companies (mutual funds) and to distribute each year substantially all of its investment company taxable income and capital gains to its shareholders. Accordingly, each Fund is not required to make any provisions for the payment of federal income tax. Distributions to shareholders are recorded on the ex-dividend date. Income and capital gains distributions, if any, are declared and paid according to the following schedule:
Fund | Income Distributions Declared/Paid | Capital Gains Distributions Declared/Paid | ||
Core Fixed Income and High Quality Floating Rate | Quarterly | Annually | ||
Equity Index and Growth Opportunities | Annually | Annually |
Net capital losses, if any, are carried forward to future fiscal years and may be used to the extent allowed by the Code to offset any future capital gains. Losses that are carried forward will retain their character as either short-term or long-term capital losses. Utilization of capital loss carryforwards will reduce the requirement of future capital gains distributions.
The characterization of distributions to shareholders for financial reporting purposes is determined in accordance with federal income tax rules, which may differ from GAAP. The source of each Fund’s distributions may be shown in the accompanying financial statements as either from net investment income, net realized gain or capital. Certain components of the Funds’ net assets on the Statements of Assets and Liabilities reflect permanent GAAP/tax differences based on the appropriate tax character.
E. Foreign Currency Translation — The accounting records and reporting currency of a Fund are maintained in U.S. dollars. Assets and liabilities denominated in foreign currencies are translated into U.S. dollars using the current exchange rates at the close of each business day. The effect of changes in foreign currency exchange rates on investments is included within net realized and unrealized gain (loss) on investments. Changes in the value of other assets and liabilities as a result of fluctuations in foreign exchange rates are included in the Statements of Operations within net change in unrealized gain (loss) on foreign currency translations. Transactions denominated in foreign currencies are translated into U.S. dollars on the date the transaction occurred, the effects of which are included within net realized gain (loss) on foreign currency transactions.
F. Commission Recapture — GSAM, on behalf of certain Funds, may direct portfolio trades, subject to seeking best execution, to various brokers who have agreed to rebate a portion of the commissions generated. Such rebates are made directly to a Fund as cash payments and are included in net realized gain (loss) from investments on the Statements of Operations.
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS
U.S. GAAP defines the fair value of a financial instrument as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price); the Funds’ policy is to use the market approach. GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The levels used for classifying investments are not necessarily an indication of the risk associated with investing in these investments. The three levels of the fair value hierarchy are described below:
Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 — Quoted prices in markets that are not active or financial instruments for which significant inputs are observable (including, but not limited to, quoted prices for similar investments, interest rates, foreign exchange rates, volatility and credit spreads), either directly or indirectly;
Level 3 — Prices or valuations that require significant unobservable inputs (including GSAM’s assumptions in determining fair value measurement).
55
GOLDMAN SACHS VARIABLE INSURANCE TRUST FUNDS
Notes to Financial Statements (continued)
June 30, 2017 (Unaudited)
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS (continued)
Changes in valuation techniques may result in transfers into or out of an assigned level within the hierarchy. In accordance with the Funds’ policy, transfers between different levels of the fair value hierarchy resulting from such changes are deemed to have occurred as of the beginning of the reporting period.
The Board of Trustees (“Trustees”) has approved Valuation Procedures that govern the valuation of the portfolio investments held by the Funds, including investments for which market quotations are not readily available. The Trustees have delegated to GSAM day-to-day responsibility for implementing and maintaining internal controls and procedures related to the valuation of the Funds’ portfolio investments. To assess the continuing appropriateness of pricing sources and methodologies, GSAM regularly performs price verification procedures and issues challenges as necessary to third party pricing vendors or brokers, and any differences are reviewed in accordance with the Valuation Procedures.
A. Level 1 and Level 2 Fair Value Investments — The valuation techniques and significant inputs used in determining the fair values for investments classified as Level 1 and Level 2 are as follows:
Equity Securities — Equity securities traded on a U.S. securities exchange or the NASDAQ system, or those located on certain foreign exchanges, including but not limited to the Americas, are valued daily at their last sale price or official closing price on the principal exchange or system on which they are traded. If there is no sale or official closing price or such price is believed by GSAM to not represent fair value, equity securities are valued at the last bid price for long positions and at the last ask price for short positions. To the extent these investments are actively traded, they are classified as Level 1 of the fair value hierarchy, otherwise they are generally classified as Level 2.
Unlisted equity securities for which market quotations are available are valued at the last sale price on the valuation date, or if no sale occurs, at the last bid price. These investments are generally classified as Level 2 of the fair value hierarchy.
Money Market Funds — Investments in the Goldman Sachs Financial Square Government Fund (“Underlying Fund”) are valued at the NAV of the Institutional Share class on the day of valuation. These investments are generally classified as Level 1 of the fair value hierarchy. For information regarding an Underlying Fund’s accounting policies and investment holdings, please see the Underlying Fund’s shareholder report.
Debt Securities — Debt securities for which market quotations are readily available are valued daily on the basis of quotations supplied by dealers or an independent pricing service approved by the Trustees. The pricing services may use valuation models or matrix pricing, which consider: (i) yield or price with respect to bonds that are considered comparable in characteristics such as rating, interest rate and maturity date or (ii) quotations from securities dealers to determine current value. With the exception of treasury securities of G8 countries, which are generally classified as Level 1, these investments are generally classified as Level 2 of the fair value hierarchy.
i. Mortgage-Backed and Asset-Backed Securities — Mortgage-backed securities represent direct or indirect participations in, or are collateralized by and payable from, mortgage loans secured by residential and/or commercial real estate property. Asset-backed securities include securities whose principal and interest payments are collateralized by pools of other assets or receivables. The value of certain mortgage-backed and asset-backed securities (including adjustable rate mortgage loans) may be particularly sensitive to changes in prevailing interest rates. The value of these securities may also fluctuate in response to the market’s perception of the creditworthiness of the issuers.
Asset-backed securities may present credit risks that are not presented by mortgage-backed securities because they generally do not have the benefit of a security interest in collateral that is comparable to mortgage assets. Some asset-backed securities may only have a subordinated claim on collateral.
Stripped mortgage-backed securities are usually structured with two different classes: one that receives substantially all interest payments (interest-only, or “IO” and/or high coupon rate with relatively low principal amount, or “IOette”), and the other that receives substantially all principal payments (principal-only, or “PO”) from a pool of mortgage loans. Little to no principal will be received at the maturity of an IO; as a result, periodic adjustments are recorded to reduce the cost of the security until maturity. These adjustments are included in interest income.
56
GOLDMAN SACHS VARIABLE INSURANCE TRUST FUNDS
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS (continued)
ii. Mortgage Dollar Rolls — Mortgage dollar rolls are transactions whereby a Fund sells mortgage-backed-securities and simultaneously contracts with the same counterparty to repurchase similar securities on a specified future date. During the settlement period, a Fund will not be entitled to accrue interest and receive principal payments on the securities sold. The Funds account for mortgage dollar roll transactions as purchases and sales and realize gains and losses on these transactions.
iii. Treasury Inflation Protected Securities — TIPS are treasury securities in which the principal amount is adjusted daily to keep pace with inflation, as measured by the U.S. Consumer Pricing Index for Urban Consumers. The repayment of the original bond principal upon maturity is guaranteed by the full faith and credit of the U.S. Government.
iv. When-Issued Securities and Forward Commitments — When-issued securities, including TBA (“To Be Announced”) securities, are securities that are authorized but not yet issued in the market and purchased in order to secure what is considered to be an advantageous price or yield to a Fund. A forward commitment involves entering into a contract to purchase or sell securities, typically on an extended settlement basis, for a fixed price at a future date. The purchase of securities on a when-issued or forward commitment basis involves a risk of loss if the value of the security to be purchased declines before the settlement date. Conversely, the sale of securities on a forward commitment basis involves the risk that the value of the securities sold may increase before the settlement date. Although a Fund will generally purchase securities on a when-issued or forward commitment basis with the intention of acquiring the securities for its portfolio, the Fund may dispose of when-issued securities or forward commitments prior to settlement, which may result in a realized gain or loss.
Derivative Contracts — A derivative is an instrument whose value is derived from underlying assets, indices, reference rates or a combination of these factors. A Fund enters into derivative transactions to hedge against changes in interest rates, securities prices, and/or currency exchange rates, to increase total return, or to gain access to certain markets or attain exposure to other underliers.
Exchange-traded derivatives, including futures and options contracts, are valued at the last sale or settlement price and typically fall within Level 1 of the fair value hierarchy. Over-the-counter (“OTC”) and centrally cleared derivatives are valued using market transactions and other market evidence, including market-based inputs to models, calibration to market-clearing transactions, broker or dealer quotations, or other alternative pricing sources. Where models are used, the selection of a particular model to value OTC and centrally cleared derivatives depends upon the contractual terms of, and specific risks inherent in, the instrument, as well as the availability of pricing information in the market. Valuation models require a variety of inputs, including contractual terms, market prices, yield curves, credit curves, measures of volatility, voluntary and involuntary prepayment rates, loss severity rates and correlations of such inputs. For OTC and centrally cleared derivatives that trade in liquid markets, model inputs can generally be verified and model selection does not involve significant management judgment. OTC and centrally cleared derivatives are classified within Level 2 of the fair value hierarchy when significant inputs are corroborated by market evidence.
i. Forward Contracts — A forward contract is a contract between two parties to buy or sell an asset at a specified price on a future date. A forward contract settlement can occur on a cash or delivery basis. Forward contracts are marked-to-market daily using independent vendor prices, and the change in value, if any, is recorded as an unrealized gain or loss. Cash and certain investments may be used to collateralize forward contracts.
A forward foreign currency contract is a forward contract in which a Fund agrees to receive or deliver a fixed quantity of one currency for another, at a pre-determined price at a future date. All forward foreign currency exchange contracts are marked-to-market daily at the applicable forward rate. Non-deliverable forward foreign currency exchange contracts are settled with the counterparty in cash without the delivery of foreign currency.
ii. Futures Contracts — Futures contracts are contracts to buy or sell a standardized quantity of a specified commodity or security and are valued based on exchanged settlement prices or independent market quotes. Futures contracts are valued at the last settlement price, or in the absence of a sale, the last bid price for long positions and at the last ask price for short positions, at the end of each day on the board of trade or exchange upon which they are traded. Upon entering into a futures contract, a Fund deposits cash or securities in an account on behalf of the broker in an amount sufficient to meet the initial margin requirement. Subsequent payments are made or received by a Fund equal to the daily change in the contract value and are recorded as variation margin receivable or payable with a corresponding offset to unrealized gains or losses. For financial
57
GOLDMAN SACHS VARIABLE INSURANCE TRUST FUNDS
Notes to Financial Statements (continued)
June 30, 2017 (Unaudited)
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS (continued)
reporting purposes, cash collateral that has been pledged to cover obligations of the Funds and cash collateral received, if any, is reported separately on the Statements of Assets and Liabilities as receivables/payables for collateral on certain derivative contracts. Non-cash collateral pledged by the Funds, if any, is noted in the Schedules of Investments.
iii. Swap Contracts — Bilateral swap contracts are agreements in which a Fund and a counterparty agree to exchange periodic payments on a specified notional amount or make a net payment upon termination. Bilateral swap transactions are privately negotiated in the OTC market and payments are settled through direct payments between a Fund and the counterparty. By contrast, certain swap transactions are subject to mandatory central clearing. These swaps are executed through a derivatives clearing member (“DCM”), acting in an agency capacity, and submitted to a central counterparty (“CCP”) (“centrally cleared swaps”), in which case all payments are settled with the CCP through the DCM. Swaps are marked-to-market daily using pricing vendor quotations, counterparty or clearinghouse prices or model prices, and the change in value, if any, is recorded as an unrealized gain or loss. Upon entering into a swap contract, a Fund is required to satisfy an initial margin requirement by delivering cash or securities to the counterparty (or in some cases, segregated in a triparty account on behalf of the counterparty), which can be adjusted by any mark-to-market gains or losses pursuant to bilateral or centrally cleared arrangements. For centrally cleared swaps the daily change in valuation, if any, is recorded as a receivable or payable for variation margin.
An interest rate swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals, based upon or calculated by reference to changes in interest rates on a specified notional principal amount. The payment flows are usually netted against each other, with the difference being paid by one party to the other.
A credit default swap is an agreement that involves one party (the buyer of protection) making a stream of payments to another party (the seller of protection) in exchange for the right to receive protection on a reference security or obligation, including a group of assets or exposure to the performance of an index. A Fund’s investment in credit default swaps may involve greater risks than if the Fund had invested in the referenced obligation directly. Credit events are contract specific but may include bankruptcy, failure to pay, restructuring and obligation acceleration. If a Fund buys protection through a credit default swap and no credit event occurs, its payments are limited to the periodic payments previously made to the counterparty. Upon the occurrence of a specified credit event, a Fund, as a buyer of credit protection, is entitled to receive an amount equal to the notional amount of the swap and deliver to the seller the defaulted reference obligation in a physically settled trade. A Fund may also receive a net settlement amount in the form of cash or securities equal to the notional amount of the swap reduced by the recovery value of the reference obligation in a cash settled trade.
As a seller of protection, a Fund generally receives a payment stream throughout the term of the swap, provided that there is no credit event. In addition, if a Fund sells protection through a credit default swap, a Fund could suffer a loss because the value of the referenced obligation and the premium payments received may be less than the notional amount of the swap paid to the buyer of protection. Upon the occurrence of a specified credit event, a Fund, as a seller of credit protection, may be required to take possession of the defaulted reference obligation and pay the buyer an amount equal to the notional amount of the swap in a physically settled trade. A Fund may also pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap reduced by the recovery value of the reference obligation in a cash settled trade. Recovery values are at times established through the credit event auction process in which market participants are ensured that a transparent price has been set for the defaulted security or obligation. In addition, a Fund is entitled to a return of any assets, which have been pledged as collateral to the counterparty upon settlement.
The maximum potential amount of future payments (undiscounted) that a Fund as seller of protection could be required to make under a credit default swap would be an amount equal to the notional amount of the agreement. These potential amounts would be partially offset by any recovery values of the respective referenced obligations or net amounts received from a settlement of a credit default swap for the same reference security or obligation where a Fund bought credit protection.
Short Term Investments — Short-term investments having a maturity of 60 days or less are valued using available market quotations as provided by a third party pricing vendor or broker. These investments are classified as Level 2 of the fair value hierarchy.
58
GOLDMAN SACHS VARIABLE INSURANCE TRUST FUNDS
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS (continued)
B. Level 3 Fair Value Investments — To the extent that significant inputs to valuation models and other alternative pricing sources are unobservable, or if quotations are not readily available, or if GSAM believes that such quotations do not accurately reflect fair value, the fair value of a Fund’s investments may be determined under Valuation Procedures approved by the Trustees. GSAM, consistent with its procedures and applicable regulatory guidance, may make an adjustment to the most recent valuation prices of either domestic or foreign securities in light of significant events to reflect what it believes to be the fair value of the securities at the time of determining a Fund’s NAV. Significant events which could affect a large number of securities in a particular market may include, but are not limited to: significant fluctuations in U.S. or foreign markets; market dislocations; market disruptions; or unscheduled market closings. Significant events which could also affect a single issuer may include, but are not limited to: corporate actions such as reorganizations, mergers and buy-outs; ratings downgrades; and bankruptcies.
C. Fair Value Hierarchy — The following is a summary of the Funds’ investments and derivatives classified in the fair value hierarchy as of June 30, 2017:
CORE FIXED INCOME | ||||||||||||
Investment Type | Level 1 | Level 2 | Level 3 | |||||||||
Assets | ||||||||||||
Fixed Income | ||||||||||||
Corporate Bonds | $ | — | $ | 40,444,413 | $ | — | ||||||
Mortgage-Backed Securities | — | 27,681,990 | — | |||||||||
Collateralized Mortgage Obligations | — | 2,398,098 | — | |||||||||
Commercial Mortgage-Backed Security | — | 297,294 | — | |||||||||
U.S. Treasury Obligations and/or Other U.S. Government Agencies | 26,132,142 | 2,165,166 | — | |||||||||
Asset-Backed Securities | — | 13,425,571 | — | |||||||||
Foreign Government Securities | — | 2,519,216 | — | |||||||||
Supranational | — | 198,930 | — | |||||||||
Municipal Bonds | — | 898,164 | — | |||||||||
Investment Company | 1,111,197 | — | — | |||||||||
Total | $ | 27,243,339 | $ | 90,028,842 | $ | — | ||||||
Liabilities | ||||||||||||
Fixed Income | ||||||||||||
Mortgage-Backed Securities — Forward Sales Contracts | $ | — | $ | (1,027,148 | ) | $ | — | |||||
Derivative Type | ||||||||||||
Assets(a) | ||||||||||||
Forward Foreign Currency Exchange Contracts | $ | — | $ | 343,443 | $ | — | ||||||
Futures Contracts | 34,371 | — | — | |||||||||
Interest Rate Swap Contracts | — | 172,964 | — | |||||||||
Total | $ | 34,371 | $ | 516,407 | $ | — | ||||||
Liabilities(a) | ||||||||||||
Forward Foreign Currency Exchange Contracts | $ | — | $ | (296,413 | ) | $ | — | |||||
Futures Contracts | (52,689 | ) | — | — | ||||||||
Inflation-Linked Swap Contract | — | (1,024 | ) | — | ||||||||
Interest Rate Swap Contracts | — | (229,374 | ) | — | ||||||||
Total | $ | (52,689 | ) | $ | (526,811 | ) | $ | — |
59
GOLDMAN SACHS VARIABLE INSURANCE TRUST FUNDS
Notes to Financial Statements (continued)
June 30, 2017 (Unaudited)
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS (continued)
EQUITY INDEX | ||||||||||||
Investment Type | Level 1 | Level 2 | Level 3 | |||||||||
Assets | ||||||||||||
Common Stock and/or Other Equity Investments(b) | ||||||||||||
Europe | $ | 191,123 | $ | — | $ | — | ||||||
North America | 168,259,732 | — | — | |||||||||
U.S. Treasury Obligations and/or Other U.S. Government Agencies | 99,922 | — | — | |||||||||
Securities Lending Reinvestment Vehicle | 304,575 | — | — | |||||||||
Total | $ | 168,855,352 | $ | — | $ | — | ||||||
Derivative Type | ||||||||||||
Liabilities(a) | ||||||||||||
Futures Contracts | $ | (4,715 | ) | $ | — | $ | — | |||||
GROWTH OPPORTUNITIES | ||||||||||||
Investment Type | Level 1 | Level 2 | Level 3 | |||||||||
Assets | ||||||||||||
Common Stock and/or Other Equity Investments(b) | ||||||||||||
North America | $ | 166,716,055 | $ | — | $ | — | ||||||
Investment Company | 1498070 | — | — | |||||||||
Securities Lending Reinvestment Vehicle | 4,540,100 | — | — | |||||||||
Total | $ | 172,754,225 | $ | — | $ | — | ||||||
HIGH QUALITY FLOATING RATE | ||||||||||||
Investment Type | Level 1 | Level 2 | Level 3 | |||||||||
Assets | ||||||||||||
Fixed Income | ||||||||||||
U.S. Treasury Obligations and/or Other U.S. Government Agencies | $ | 1,432,285 | $ | 750,368 | $ | — | ||||||
Mortgage-Backed Securities | — | 5,979,346 | — | |||||||||
Collateralized Mortgage Obligations | — | 26,371,994 | — | |||||||||
Commercial Mortgage-Backed Security | — | 65,149 | — | |||||||||
Asset-Backed Securities | — | 30,081,509 | — | |||||||||
Municipal Bond | — | 100,105 | — | |||||||||
Investment Company | 6,064,898 | — | — | |||||||||
Total | $ | 7,497,183 | $ | 63,348,471 | $ | — | ||||||
Derivative Type | ||||||||||||
Assets(a) | ||||||||||||
Futures Contracts | $ | 17,375 | $ | — | $ | — | ||||||
Interest Rate Swap Contracts | — | 2,840 | — | |||||||||
Total | $ | 17,375 | $ | 2,840 | $ | — | ||||||
Liabilities(a) | ||||||||||||
Futures Contracts | $ | (27,828 | ) | $ | — | $ | — |
(a) | Amount shown represents unrealized gain (loss) at period end. |
(b) | Amounts are disclosed by continent to highlight the impact of time zone differences between local market close and the calculation of NAV. Security valuations are based on the principal exchange or system on which they are traded, which may differ from country of domicile noted in the table. |
For further information regarding security characteristics, see the Schedules of Investments.
60
GOLDMAN SACHS VARIABLE INSURANCE TRUST FUNDS
4. INVESTMENTS IN DERIVATIVES
The following tables set forth, by certain risk types, the gross value of derivative contracts as of June 30, 2017. These instruments were used as part of the Funds’ investment strategies and to obtain and/or manage exposure related to the risks below. The values in the tables below exclude the effects of cash collateral received or posted pursuant to these derivative contracts, and therefore are not representative of the Funds’ net exposure.
Core Fixed Income
Risk | Statements of Assets and Liabilities | Assets | Statements of Assets and Liabilities | Liabilities | ||||||||||
Interest Rate | Variation margin on certain derivative contracts | $ | 207,335 | (a) | Variation margin on certain derivative contracts | $ | (283,087 | )(a) | ||||||
Currency | Receivables for unrealized gain on forward foreign currency exchange contracts | 343,443 | Payable for unrealized loss on forward foreign currency exchange contracts | (296,413 | ) | |||||||||
Total | $ | 550,778 | $ | (579,500 | ) | |||||||||
Fund | Risk | Statements of Assets and Liabilities | Assets(a) | Statements of Assets and Liabilities | Liabilities(a) | |||||||||
Equity Index | Equity | — | $ | — | Variation margin on certain derivative contracts | $ | (4,715 | ) | ||||||
High Quality Floating Rate | Interest Rate | Variation margin on certain derivative contracts | 20,215 | Variation margin on certain derivative contracts | (27,828 | ) |
(a) | Includes unrealized gain (loss) on futures contracts and centrally cleared swap contracts described in the Additional Investment Information sections of the Schedules of Investments. Only the variation margin as of June 30, 2017 is reported within the Statements of Assets and Liabilities. |
The following table sets forth, by certain risk types, the Funds’ gains (losses) related to these derivatives and their indicative volumes for the six months ended June 30, 2017. These gains (losses) should be considered in the context that these derivative contracts may have been executed to create investment opportunities and/or economically hedge certain investments, and accordingly, certain gains (losses) on such derivative contracts may offset certain (losses) gains attributable to investments. These gains (losses) are included in “Net realized gain (loss)” or “Net change in unrealized gain (loss)” on the Statements of Operations:
Core Fixed Income
Risk | Statements of Operations | Net Realized Gain (Loss) | Net Change in Unrealized Gain (Loss) | Average Number of Contracts(a) | ||||||||||
Interest Rate | Net realized gain (loss) from futures contracts and swap contracts/Net change in unrealized gain (loss) on futures contracts and swap contracts | $ | 301,943 | $ | (84,351 | ) | 211 | |||||||
Credit | Net realized gain (loss) from swap contracts/Net change in unrealized gain (loss) on swap contracts | (2,376 | ) | 1,927 | 1 | |||||||||
Currency | Net realized gain (loss) from forward foreign currency exchange contracts/Net change in unrealized gain (loss) on forward foreign currency exchange contracts | 19,773 | (71,663 | ) | 389 | |||||||||
Total | $ | 319,340 | $ | (154,087 | ) | 601 |
(a) | Average number of contracts is based on the average of month end balances for the six months ended June 30, 2017. |
61
GOLDMAN SACHS VARIABLE INSURANCE TRUST FUNDS
Notes to Financial Statements (continued)
June 30, 2017 (Unaudited)
4. INVESTMENTS IN DERIVATIVES (continued)
The following table represents gains (losses) which are included in “Net realized gain (loss) from future transactions” and “Net change in unrealized gain (loss) on futures” in the Statements of Operations:
Fund | Risk | Net Realized Gain (Loss) | Net Change in Unrealized Gain (Loss) | Average Number of Contracts(a) | ||||||||||||
Equity Index | Equity | $ | 92,519 | $ | 2,408 | 10 | ||||||||||
High Quality Floating Rate | Interest Rate | (29,065 | ) | (12,566 | ) | 88 |
(a) | Average number of contracts is based on the average of month end balances for the six months ended June 30, 2017. |
5. AGREEMENTS AND AFFILIATED TRANSACTIONS
A. Management Agreement — Under the Agreement, GSAM manages the Funds, subject to the general supervision of the Trustees.
As compensation for the services rendered pursuant to the Agreement, the assumption of the expenses related thereto and administration of the Funds’ business affairs, including providing facilities, GSAM is entitled to a management fee, accrued daily and paid monthly, equal to an annual percentage rate of each Fund’s average daily net assets.
For the six months ended June 30, 2017, contractual and effective net management fees with GSAM were at the following rates:
Contractual Management Rate | Effective Net Management | |||||||||||||||||||||||||||
Fund | First $1 billion | Next $1 billion | Next $3 billion | Next $3 billion | Over $8 billion | Effective Rate | ||||||||||||||||||||||
Core Fixed Income | 0.40 | % | 0.36 | % | 0.34 | % | 0.33 | % | 0.32 | % | 0.40 | % | 0.39 | % | ||||||||||||||
Growth Opportunities | 1.00 | 1.00 | 0.90 | 0.86 | 0.84 | 1.00 | 0.85 | * | ||||||||||||||||||||
High Quality Floating Rate | 0.40 | 0.36 | 0.34 | 0.33 | 0.32 | 0.40 | 0.29 | * |
^ | Effective Net Management Rate includes the impact of management fee waivers of affiliated Underlying Funds, if any. |
* | GSAM agreed to waive a portion of its management fee in order to achieve net management rates, as defined in the Funds’ most recent prospectuses. These waivers will be effective through at least April 28, 2018, and prior to such date GSAM may not terminate the arrangements without approval of the Trustees. |
The Core Fixed Income, Growth Opportunities and High Quality Floating Rate Funds invest in Institutional Shares of Goldman Sachs Financial Square Government Fund, which is an affiliated Underlying Fund. GSAM has agreed to waive a portion of its management fee payable by the Funds in an amount equal to the management fee it earns as an investment adviser to any of the affiliated Underlying Funds in which the Funds invest. For the six months ended June 30, 2017, GSAM waived $2,929, $753 and $4,044 of the Core Fixed Income, Growth Opportunities and High Quality Floating Rate Funds’ management fees, respectively.
The Agreement for the Equity Index Fund provides for a contractual management fee at an annual rate equal to 0.30% of the Fund’s average daily net assets. For the six months ended June 30, 2017, GSAM agreed to waive a portion of its management fee in order to achieve the following effective annual rates which will remain in effect through April 28, 2018 and prior to such date GSAM may not terminate the arrangement without the approval of the Trustees:
Net Management Rate | ||||||
Fund | $0-$400 million | Over $400 million | Effective Rate | |||
Equity Index | 0.21% | 0.20% | 0.21 % |
62
GOLDMAN SACHS VARIABLE INSURANCE TRUST FUNDS
5. AGREEMENTS AND AFFILIATED TRANSACTIONS (continued)
As authorized by the Agreement, GSAM has entered into a Sub-advisory Agreement with SSgA Funds Management, Inc. (“SSgA”) which serves as the sub-adviser to the Equity Index Fund and provides the day-to-day advice regarding the Fund’s portfolio transactions. As compensation for its services, SSgA is entitled to a fee, accrued daily and paid monthly by GSAM, at the following annual rates of the Fund’s average daily net assets: 0.03% on the first $50 million, 0.02% on the next $200 million, 0.01% on the next $750 million and 0.008% over $1 billion. The effective Sub-advisory fee was 0.02% for the six months ended June 30, 2017.
B. Distribution and/or Service (12b-1) Plans — The Trust, on behalf of Service Shares of each applicable Fund, has adopted a Distribution and Service Plan subject to Rule 12b-1 under the Act. Under the Distribution and Service Plan, Goldman Sachs, which serves as distributor (the “Distributor”), is entitled to a fee accrued daily and paid monthly, for distribution services and personal and account maintenance services, which may then be paid by Goldman Sachs to authorized dealers, equal to, on an annual basis, 0.25% of the Fund’s average daily net assets attributable to Service Shares. For the six months ended June 30, 2017 for the Growth Opportunities Fund, Goldman Sachs agreed to waive distribution and services fees so as not to exceed an annual rate of 0.16% of average daily net assets of the Fund. This distribution and service fee waiver will remain in place through at least April 28, 2018, and prior to such date Goldman Sachs may not terminate the arrangement without the approval of the Trustees.
The Trust, on behalf of Advisor Shares of each applicable Fund, has adopted a Distribution Plan subject to Rule 12b-1 under the Act. Under the Distribution Plan, Goldman Sachs as Distributor is entitled to a fee accrued daily and paid monthly for distribution services, which may then be paid by Goldman Sachs to authorized dealers, equal to, on an annual basis, 0.15% of the Fund’s average daily net assets attributable to Advisor Shares.
C. Service Plans — The Trust, on behalf of Advisor Shares of each applicable Fund, has adopted a Service Plan to allow Advisor Shares to compensate service organizations (including Goldman Sachs) for providing varying levels of personal and account maintenance and administration services to their customers who are beneficial owners of such shares. The Service Plan provides for compensation to the service organizations equal to 0.25% of the average daily net assets attributable to Advisor Shares of the Fund.
D. Transfer Agency Agreement — Goldman Sachs also serves as the transfer agent of the Funds for a fee pursuant to the Transfer Agency Agreement. The fees charged for such transfer agency services are accrued daily and paid monthly at an annual rate of 0.02% of the average daily net assets of Institutional, Service and Advisor Shares.
E. Other Expense Agreements and Affiliated Transactions — GSAM has agreed to limit certain “Other Expenses” of the Funds (excluding acquired fund fees and expenses, transfer agency fees and expenses, taxes, interest, brokerage fees, shareholder meeting, litigation, indemnification and extraordinary expenses) to the extent such expenses exceed, on an annual basis, a percentage rate of the average daily net assets of each Fund. Such Other Expense reimbursements, if any, are accrued daily and paid monthly. In addition, the Funds are not obligated to reimburse GSAM for prior fiscal year expense reimbursements, if any. The Other Expense limitations as an annual percentage rate of average daily net assets for Core Fixed Income, Equity Index, Growth Opportunities and High Quality Floating Rate Funds are 0.004%, 0.004%, 0.004% and 0.034%, respectively. Prior to April 28, 2017, the Other Expense limitation was 0.074% for the High Quality Floating Rate Fund. These Other Expense limitations will remain in place through at least April 28, 2018, and prior to such date GSAM may not terminate the arrangements without the approval of the Trustees. In addition, the Funds have entered into certain offset arrangements with the custodian and the transfer agent, which may result in a reduction of the Funds’ expenses and are received irrespective of the application of the “Other Expense” limitations described above.
For the six months ended June 30, 2017, these expense reductions, including any fee waivers and Other Expense reimbursements, were as follows:
Fund | Management Fee Waiver | Distribution and Service Fee Waiver | Custody Fee Credits | Other Expense Reimbursement | Total Expense Reductions | |||||||||||||||
Core Fixed Income | $ | 2,929 | $ | — | $ | 751 | $ | 124,358 | $ | 128,038 | ||||||||||
Equity Index | 75,777 | — | 214 | 106,397 | 182,388 | |||||||||||||||
Growth Opportunities | 121,273 | 73,366 | 745 | 95,199 | 290,583 | |||||||||||||||
High Quality Floating Rate | 36,543 | — | 457 | 84,335 | 121,335 |
63
GOLDMAN SACHS VARIABLE INSURANCE TRUST FUNDS
Notes to Financial Statements (continued)
June 30, 2017 (Unaudited)
5. AGREEMENTS AND AFFILIATED TRANSACTIONS (continued)
F. Line of Credit Facility — As of June 30, 2017, the Funds participated in a $1,100,000,000 committed, unsecured revolving line of credit facility (the “facility”) together with other funds of the Trust and certain registered investment companies having management agreements with GSAM or its affiliates. This facility is to be used for temporary emergency purposes, or to allow for an orderly liquidation of securities to meet redemption requests. The interest rate on borrowings is based on the federal funds rate. The facility also requires a fee to be paid by the Funds based on the amount of the commitment that has not been utilized. For the six months ended June 30, 2017, the Funds did not have any borrowings under the facility.
G. Other Transactions with Affiliates — The following table provides information about the investment in shares of issuers of which a Fund is an affiliate as of and for the six months ended June 30, 2017:
Fund | Name of Affiliated Issuer | Market Value 12/31/2016 | Purchases at Cost | Proceeds from Sales | Net Realized Gain (Loss) | Change in Unrealized Appreciation (Depreciation) | Market Value 6/30/2017 | Dividend Income | ||||||||||||||||||||||||
Equity Index | Goldman Sachs Group, Inc. (The) | $ | 758,338 | $ | — | $ | (44,184 | ) | $ | 21,177 | $ | (74,735 | ) | $ | 660,596 | $ | 4,288 |
The following table provides information about the Funds’ investment in the Goldman Sachs Financial Square Government Fund as of and for the six months ended June 30, 2017:
Fund | Market Value 12/31/2016 | Purchases at Cost | Proceeds from Sales | Market Value 6/30/2017 | Dividend Income | |||||||||||||||
Core Fixed Income | $ | 289 | $ | 23,806,460 | $ | (22,695,552 | ) | $ | 1,111,197 | $ | 10,829 | |||||||||
Growth Opportunities | 4,209,790 | 13,011,580 | (15,723,300 | ) | 1,498,070 | 2,407 | ||||||||||||||
High Quality Floating Rate | 2,927,684 | 17,674,609 | (14,537,395 | ) | 6,064,898 | 15,927 |
As of June 30, 2017, The Goldman Sachs Group, Inc. was the beneficial owner of approximately 13% and 46% of the Institutional Class Shares of the Core Fixed Income and High Quality Floating Rate Funds, respectively.
6. PORTFOLIO SECURITIES TRANSACTIONS
The cost of purchases and proceeds from sales and maturities of long-term securities for the six months ended June 30, 2017, were as follows:
Fund | Purchases of U.S. Government and Agency Obligations | Purchases (Excluding U.S. Government and Agency Obligations) | Sales and Maturities of U.S. Government and Agency Obligations | Sales and Maturities (Excluding U.S. Government and Agency Obligations) | ||||||||||||||
Core Fixed Income | $ | 134,490,432 | $ | 19,279,560 | $ | 124,047,290 | $ | 17,494,714 | ||||||||||
Equity Index | — | 2,197,062 | — | 11,384,960 | ||||||||||||||
Growth Opportunities | — | 53,678,032 | — | 63,164,135 | ||||||||||||||
High Quality Floating Rate | 4,722,714 | 10,982,665 | 7,347,164 | 5,898,038 |
64
GOLDMAN SACHS VARIABLE INSURANCE TRUST FUNDS
7. SECURITIES LENDING
The Growth Opportunities Fund may lend its securities through a securities lending agent, the Bank of New York Mellon (“BNYM”), to certain qualified borrowers. Pursuant to exemptive relief granted by the Securities and Exchange Commission (“SEC”) and the terms and conditions contained therein, the Equity Index Fund may lend its securities through a securities lending agent, Goldman Sachs Agency Lending (“GSAL”), a wholly-owned subsidiary of Goldman Sachs, to certain qualified borrowers including Goldman Sachs and affiliates. In accordance with the Funds’ securities lending procedures, the Funds receive cash collateral at least equal to the market value of the securities on loan. The market value of the loaned securities is determined at the close of business of the Funds, at their last sale price or official closing price on the principal exchange or system on which they are traded, and any additional required collateral is delivered to the Funds on the next business day. As with other extensions of credit, the Funds may experience delay in the recovery of their securities or incur a loss should the borrower of the securities breach its agreement with the Funds or become insolvent at a time when the collateral is insufficient to cover the cost of repurchasing securities on loan. Dividend income received from securities on loan may not be subject to withholding taxes and therefore withholding taxes paid may differ from the amounts listed in the Statements of Operations. Loans of securities are terminable at any time and as such 1) the remaining contractual maturities of the outstanding securities lending transactions are considered to be overnight and continuous and 2) the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.
The Equity Index and Growth Opportunities Funds invest the cash collateral received in connection with securities lending transactions in the Goldman Sachs Financial Square Government Fund (“Government Money Market Fund”), an affiliated series of the Trust. The Government Money Market Fund is registered under the Act as an open end investment company, is subject to Rule 2a-7 under the Act, and is managed by GSAM, for which GSAM may receive a management fee of up to 0.205% on an annualized basis of the average daily net assets of the Government Money Market Fund.
In the event of a default by a borrower with respect to any loan, GSAL will and BNYM may exercise any and all remedies provided under the applicable borrower agreement to make the Funds whole. These remedies include purchasing replacement securities by applying the collateral held from the defaulting broker against the purchase cost of the replacement securities. If GSAL or BNYM are unable to purchase replacement securities, GSAL and/or BNYM will indemnify the Funds by paying the Funds an amount equal to the market value of the securities loaned minus the value of cash collateral received from the borrower for the loan, subject to an exclusion for any shortfalls resulting from a loss of value in such cash collateral due to reinvestment risk. The amounts of the Funds’ overnight and continuous agreements represent the gross amounts of recognized liabilities for securities lending transactions outstanding as of June 30, 2017 are disclosed as “Payable upon return of securities loaned” on the Statements of Assets and Liabilities.
Each of the Equity Index and Growth Opportunities Funds and GSAL and BNYM received compensation relating to the lending of the Funds’ securities. The amounts earned, if any, by the Funds’ for the six months ended June 30, 2017, are reported under Investment Income on the Statements of Operations.
The table below details securities lending activity with affiliates of Goldman Sachs:
For the Six Months ended June 30, 2017 | ||||||||||||||
Fund | Earnings of GSAL Relating to Securities Loaned | Amounts Received by the Funds from Lending to Goldman Sachs | Amounts Payable to Goldman Sachs Upon Return of Securities Loaned as of June 30, 2017 | |||||||||||
Equity Index | $ | 126 | $ | 352 | $ | 54,125 |
The following table provides information about the Fund’s investment in the Government Money Market Fund for the six months ended June 30, 2017:
Fund | Market Value 12/31/2016 | Purchases at Cost | Proceeds from Sales | Market 6/30/2017 | ||||||||||||
Equity Index | $ | 153,725 | $ | 1,735,750 | $ | (1,584,900 | ) | $ | 304,575 | |||||||
Growth Opportunities | 3,236,725 | 24,652,448 | (23,349,073 | ) | 4,540,100 |
65
GOLDMAN SACHS VARIABLE INSURANCE TRUST FUNDS
Notes to Financial Statements (continued)
June 30, 2017 (Unaudited)
8. TAX INFORMATION
As of the Funds’ most recent fiscal year end, December 31, 2016, the Funds’ capital loss carryforwards and certain timing differences, on a tax-basis were as follows:
Core Fixed Income | Equity Index | Growth Opportunities | High Quality Floating Rate | |||||||||||||
Capital loss carryforwards: | ||||||||||||||||
Expiring 2018(1) | $ | (4,214,815 | ) | $ | — | $ | — | $ | — | |||||||
Perpetual short-term | — | — | (249,583 | ) | (206,576 | ) | ||||||||||
Perpetual long-term | — | — | — | (756,229 | ) | |||||||||||
Total capital loss carryforwards | $ | (4,214,815 | ) | $ | — | $ | (249,583 | ) | $ | (962,805 | ) | |||||
Timing differences (§ 857 (b)(9) deferred dividend, post October loss deferral, qualified late year loss and straddle loss deferrals) | (1,488,198 | ) | 2,338 | (711,289 | ) | (25,918 | ) |
(1) | Expiration occurs on December 31 of the year indicated. |
As of June 30, 2017, the Funds’ aggregate security unrealized gains and losses based on cost for U.S. federal income tax purposes were as follows:
Core Fixed Income | Equity Index | Growth Opportunities | High Quality Floating Rate | |||||||||||||
Tax cost | $ | 115,824,969 | $ | 77,565,957 | $ | 135,026,020 | $ | 70,690,103 | ||||||||
Gross unrealized gain | 2,021,949 | 101,804,592 | 40,406,920 | 347,862 | ||||||||||||
Gross unrealized loss | (574,737 | ) | (10,515,197 | ) | (2,678,715 | ) | (192,311 | ) | ||||||||
Net unrealized gain | $ | 1,447,212 | $ | 91,289,395 | $ | 37,728,205 | $ | 155,551 |
The difference between GAAP-basis and tax-basis unrealized gains (losses) is attributable primarily to wash sales, net mark to market gains (losses) on regulated futures and foreign currency contracts, and differences in the tax treatment of underlying fund investments, real estate investment trust investments, securities on loan and swaps.
GSAM has reviewed the Funds’ tax positions for all open tax years (the current and prior three years, as applicable) and has concluded that no provision for income tax is required in the Funds’ financial statements. Such open tax years remain subject to examination and adjustment by tax authorities.
9. OTHER RISKS
The Funds’ risks include, but are not limited to, the following:
Derivatives Risk — The Funds’ use of derivatives may result in loss. Derivative instruments, which may pose risks in addition to and greater than those associated with investing directly in securities, currencies or other instruments, may be illiquid or less liquid, volatile, difficult to price and leveraged so that small changes in the value of the underlying instruments may produce disproportionate losses to the Funds. Derivatives are also subject to counterparty risk, which is the risk that the other party in the transaction will not fulfill its contractual obligation. The use of derivatives is a highly specialized activity that involves investment techniques and risks different from those associated with investments in more traditional securities and instruments. Losses from derivatives can also result from a lack of correlation between changes in the value of derivative instruments and the portfolio assets (if any) being hedged.
Interest Rate Risk — When interest rates increase, fixed income securities or instruments held by a Fund will generally decline in value. Long-term fixed income securities or instruments will normally have more price volatility because of this risk than short-term fixed income securities or instruments. The risks associated with increasing rates are heightened given that interest rates
66
GOLDMAN SACHS VARIABLE INSURANCE TRUST FUNDS
9. OTHER RISKS (continued)
are near historic lows, but may be expected to increase in the future with unpredictable effects on the markets and a Fund’s investments. Fluctuations in interest rates may also affect the liquidity of fixed income securities and instruments held by the Funds.
Investments in Other Investment Companies — As a shareholder of another investment company, including an exchange traded fund (“ETF”), a Fund will indirectly bear its proportionate share of any net management fees and other expenses paid by such other investment companies, in addition to the fees and expenses regularly borne by the Fund. ETFs are subject to risks that do not apply to conventional mutual funds, including but not limited to the following: (i) the market price of the ETF’s shares may trade at a premium or a discount to their NAV; and (ii) an active trading market for an ETF’s shares may not develop or be maintained.
Large Shareholder Transactions Risk — A Fund may experience adverse effects when certain large shareholders, such as other funds, participating insurance companies, accounts and Goldman Sachs affiliates, purchase or redeem large amounts of shares of the Fund. Such large shareholder redemptions may cause a Fund to sell portfolio securities at times when it would not otherwise do so, which may negatively impact a Fund’s NAV and liquidity. These transactions may also accelerate the realization of taxable income to shareholders if such sales of investments resulted in gains, and may also increase transaction costs. In addition, a large redemption could result in a Fund’s current expenses being allocated over a smaller asset base, leading to an increase in the Fund’s expense ratio. Similarly, large Fund share purchases may adversely affect a Fund’s performance to the extent that the Fund is delayed in investing new cash and is required to maintain a larger cash position than it ordinarily would.
Liquidity Risk — A Fund may make investments that are illiquid or that may become less liquid in response to market developments or adverse investor perceptions. Illiquid investments may be more difficult to value. Liquidity risk may also refer to the risk that a Fund will not be able to pay redemption proceeds within the allowable time period because of unusual market conditions, an unusually high volume of redemption requests, or other reasons. To meet redemption requests, a Fund may be forced to sell investments at an unfavorable time and/or under unfavorable conditions. Liquidity risk may be the result of, among other things, the reduced number and capacity of traditional market participants to make a market in fixed income securities or the lack of an active market. The potential for liquidity risk may be magnified by a rising interest rate environment or other circumstances where investor redemptions from fixed income mutual funds may be higher than normal, potentially causing increased supply in the market due to selling activity.
Market and Credit Risks — In the normal course of business, a Fund trades financial instruments and enters into financial transactions where risk of potential loss exists due to changes in the market (market risk). Additionally, a Fund may also be exposed to credit risk in the event that an issuer or guarantor fails to perform or that an institution or entity with which the Fund has unsettled or open transactions defaults.
10. INDEMNIFICATIONS
Under the Trust’s organizational documents, its Trustees, officers, employees and agents are indemnified, to the extent permitted by the Act and state law, against certain liabilities that may arise out of performance of their duties to the Funds. Additionally, in the course of business, the Funds enter into contracts that contain a variety of indemnification clauses. The Funds’ maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Funds that have not yet occurred. However, GSAM believes the risk of loss under these arrangements to be remote.
11. SUBSEQUENT EVENTS
Subsequent events after the Statements of Assets and Liabilities date have been evaluated and GSAM has concluded that there is no impact requiring adjustment or disclosure in the financial statements.
67
GOLDMAN SACHS VARIABLE INSURANCE TRUST FUNDS
Notes to Financial Statements (continued)
June 30, 2017 (Unaudited)
12. SUMMARY OF SHARE TRANSACTIONS
Share activity is as follows:
Core Fixed Income Fund | ||||||||||||||||
For the Six Months Ended June 30, 2017 (Unaudited) | For the Fiscal Year Ended December 31, 2016 | |||||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||||
Institutional Shares | ||||||||||||||||
Shares sold | 11,678 | $ | 124,262 | 6,000 | $ | 64,838 | ||||||||||
Reinvestment of distributions | 306 | 3,250 | 66 | 712 | ||||||||||||
Shares redeemed | (1,151 | ) | (12,244 | ) | (18 | ) | (188 | ) | ||||||||
10,833 | 115,268 | 6,048 | 65,362 | |||||||||||||
Service Shares | ||||||||||||||||
Shares sold | 397,217 | 4,226,022 | 1,743,245 | 18,760,474 | ||||||||||||
Reinvestment of distributions | 184,950 | 1,957,630 | 206,845 | 2,237,128 | ||||||||||||
Shares redeemed | (645,767 | ) | (6,880,586 | ) | (1,488,768 | ) | (16,023,387 | ) | ||||||||
(63,600 | ) | (696,934 | ) | 461,322 | 4,974,215 | |||||||||||
NET INCREASE (DECREASE) | (52,767 | ) | $ | (581,666 | ) | 467,370 | $ | 5,039,577 |
Equity Index Fund | ||||||||||||||||
For the Six Months Ended June 30, 2017 (Unaudited) | For the Fiscal Year Ended December 31, 2016 | |||||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||||
Service Shares | ||||||||||||||||
Shares sold | 44,617 | $ | 677,243 | 232,981 | $ | 3,310,921 | ||||||||||
Reinvestment of distributions | — | — | 750,425 | 10,963,715 | ||||||||||||
Shares redeemed | (734,829 | ) | (11,275,886 | ) | (1,727,994 | ) | (24,627,725 | ) | ||||||||
NET DECREASE | (690,212 | ) | $ | (10,598,643 | ) | (744,588 | ) | $ | (10,353,089 | ) |
68
GOLDMAN SACHS VARIABLE INSURANCE TRUST FUNDS
12. SUMMARY OF SHARE TRANSACTIONS (continued)
Growth Opportunities Fund | ||||||||||||||||
For the Six Months Ended June 30, 2017 (Unaudited) | For the Fiscal Year Ended December 31, 2016 | |||||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||||
Institutional Shares | ||||||||||||||||
Shares sold | 47,711 | $ | 362,549 | 524,410 | $ | 3,733,669 | ||||||||||
Reinvestment of distributions | — | — | 3,423 | 23,519 | ||||||||||||
Shares redeemed | (16,851 | ) | (125,532 | ) | (13,935 | ) | (95,699 | ) | ||||||||
30,860 | 237,017 | 513,898 | 3,661,489 | |||||||||||||
Service Shares | ||||||||||||||||
Shares sold | 307,259 | 2,228,371 | 2,139,566 | 14,365,397 | ||||||||||||
Reinvestment of distributions | — | — | 153,762 | 1,048,654 | ||||||||||||
Shares redeemed | (1,925,776 | ) | (14,180,670 | ) | (4,384,503 | ) | (29,589,084 | ) | ||||||||
(1,618,517 | ) | (11,952,299 | ) | (2,091,175 | ) | (14,175,033 | ) | |||||||||
NET DECREASE | (1,587,657 | ) | $ | (11,715,282 | ) | (1,577,277 | ) | $ | (10,513,544 | ) |
High Quality Floating Rate Fund | ||||||||||||||||
For the Six Months Ended June 30, 2017 (Unaudited) | For the Fiscal Year Ended December 31, 2016 | |||||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||||
Institutional Shares | ||||||||||||||||
Shares sold | 6,015 | $ | 62,750 | — | $ | — | ||||||||||
Reinvestment of distributions | 48 | 500 | 31 | 314 | ||||||||||||
Shares redeemed | (3,164 | ) | (33,036 | ) | — | — | ||||||||||
2,899 | 30,214 | 31 | 314 | |||||||||||||
Service Shares | ||||||||||||||||
Shares sold | 280,029 | 2,916,256 | 615,563 | 6,386,630 | ||||||||||||
Reinvestment of distributions | 37,504 | 390,049 | 64,247 | 665,765 | ||||||||||||
Shares redeemed | (300,012 | ) | (3,124,776 | ) | (963,897 | ) | (9,999,019 | ) | ||||||||
17,521 | 181,529 | (284,087 | ) | (2,946,624 | ) | |||||||||||
Advisor Shares | ||||||||||||||||
Shares sold | 286,667 | 2,987,813 | 274,402 | 2,847,252 | ||||||||||||
Reinvestment of distributions | 1,749 | 18,213 | 1,533 | 15,910 | ||||||||||||
Shares redeemed | (110,084 | ) | (1,148,862 | ) | (243,055 | ) | (2,520,643 | ) | ||||||||
178,332 | 1,857,164 | 32,880 | 342,519 | |||||||||||||
NET INCREASE (DECREASE) | 198,752 | $ | 2,068,907 | (251,176 | ) | $ | (2,603,791 | ) |
69
GOLDMAN SACHS VARIABLE INSURANCE TRUST FUNDS
Fund Expenses — Six Month Period Ended June 30, 2017 (Unaudited) |
As a shareholder of Institutional, Service or Advisor Shares of the Fund, you incur ongoing costs, including management fees, distribution and/or service (12b-1) fees (with respect to Service and Advisor Shares) and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Institutional Shares, Service Shares and Advisor Shares of the Funds and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from January 1, 2017 through June 30, 2017, which represents a period of 181 days of a 365 day year.
Actual Expenses — The first line under each share class in the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000=8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes — The second line under each share class in the table below provides information about hypothetical account values and hypothetical expenses based on the Funds’ actual net expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Funds’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Funds and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only. As a shareholder of the Fund you do not incur any transaction costs, such as sales charges, redemption fees, or exchange fees, but shareholders of other funds may incur such costs. The second line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds whose shareholders may incur transaction costs.
Core Fixed Income Fund | Equity Index Fund | Growth Opportunities Fund | High Quality Floating Rate Fund | |||||||||||||||||||||||||||||||||||||||||||||
Share Class | Beginning Account Value 01/01/17 | Ending Account Value 06/30/17 | Expenses Paid for the 6 Months Ended 06/30/17* | Beginning Account Value 01/01/17 | Ending Account Value 06/30/17 | Expenses Paid for the 6 Months Ended 06/30/17* | Beginning Account Value 01/01/17 | Ending Account Value 06/30/17 | Expenses Paid for the 6 Months Ended 06/30/17* | Beginning Account Value 01/01/17 | Ending Account Value 06/30/17 | Expenses Paid for the 6 Months Ended 06/30/17* | ||||||||||||||||||||||||||||||||||||
Institutional | ||||||||||||||||||||||||||||||||||||||||||||||||
Actual | $ | 1,000 | $ | 1,024.00 | $ | 2.11 | N/A | N/A | N/A | $ | 1,000 | $ | 1,149.00 | $ | 4.69 | $ | 1,000 | $ | 1,008.00 | $ | 1.89 | |||||||||||||||||||||||||||
Hypothetical 5% return | 1,000 | 1,022.71 | + | 2.11 | N/A | N/A | N/A | 1,000 | 1,020.43 | + | 4.41 | 1,000 | 1,022.91 | + | 1.91 | |||||||||||||||||||||||||||||||||
Service | ||||||||||||||||||||||||||||||||||||||||||||||||
Actual | 1,000 | 1,022.80 | 3.36 | $ | 1,000 | $ | 1,091.10 | $ | 2.49 | 1,000 | 1,147.10 | 5.54 | 1,000 | 1,007.80 | 3.09 | |||||||||||||||||||||||||||||||||
Hypothetical 5% return | 1,000 | 1,021.47 | + | 3.36 | 1,000 | 1,022.41 | + | 2.41 | 1,000 | 1,019.64 | + | 5.21 | 1,000 | 1,021.72 | + | 3.11 | ||||||||||||||||||||||||||||||||
Advisor | ||||||||||||||||||||||||||||||||||||||||||||||||
Actual | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | 1,000 | 1,006.50 | 3.83 | ||||||||||||||||||||||||||||||||||||
Hypothetical 5% return | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | 1,000 | 1,020.98 | + | 3.86 |
* | Expenses are calculated using each Fund’s annualized net expense ratio for each class, which represents the ongoing expenses as a percentage of net assets for the six months ended June 30, 2017. Expenses are calculated by multiplying the annualized net expense ratio by the average account value for the period; then multiplying the result by the number of days in the most recent fiscal half year; and then dividing that result by the number of days in the fiscal year. The annualized net expense ratios for the period were as follows: |
Fund | Institutional | Service | Advisor | |||||||||
Core Fixed Income | 0.42 | % | 0.67 | % | N/A | |||||||
Equity Index | N/A | 0.48 | N/A | |||||||||
Growth Opportunities | 0.88 | 1.04 | N/A | |||||||||
High Quality Floating Rate | 0.38 | 0.62 | 0.77 | % |
+ | Hypothetical expenses are based on each Fund’s actual annualized net expense ratios and an assumed rate of return of 5% per year before expenses. |
70
GOLDMAN SACHS VARIABLE INSURANCE TRUST FUNDS
Statement Regarding Basis for Approval of Management Agreements (Unaudited)
Background
The Goldman Sachs Core Fixed Income, Goldman Sachs Equity Index, Goldman Sachs Growth Opportunities and Goldman Sachs High Quality Floating Rate Funds (the “Funds”) are investment portfolios of Goldman Sachs Variable Insurance Trust (the “Trust”). The Board of Trustees oversees the management of the Trust and reviews the investment performance and expenses of the Funds at regularly scheduled meetings held throughout the year. In addition, the Board of Trustees determines annually whether to approve the continuance of the Trust’s investment management agreements (the “Management Agreements”) with Goldman Sachs Asset Management, L.P. (the “Investment Adviser”) on behalf of the Funds and the sub-advisory agreement (the “Sub-Advisory Agreement,” and together with the Management Agreements, the “Agreements”) between the Investment Adviser and SSgA Funds Management, Inc. (the “Sub-Adviser”) on behalf of the Equity Index Fund.
The Agreements were most recently approved for continuation until June 30, 2018 by the Board of Trustees, including those Trustees who are not parties to the Agreements 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 June 14-15, 2017 (the “Annual Meeting”).
The review process undertaken by the Trustees spans the course of the year and culminates with the Annual Meeting. To assist the Trustees in their deliberations, the Trustees have established a Contract Review Committee (the “Committee”), comprised of the Independent Trustees. The Committee held four meetings over the course of the year since the Agreements were last approved. At those Committee meetings, regularly scheduled Board or other committee meetings, and/or the Annual Meeting, matters relevant to the renewal of the Agreements were considered by the Board, or the Independent Trustees, as applicable. With respect to each Fund, such matters included:
(a) | the nature and quality of the advisory, administrative, and other services provided to the Fund by the Investment Adviser and its affiliates, including information about: |
(i) | the structure, staff, and capabilities of the Investment Adviser and its portfolio management teams; |
(ii) | the groups within the Investment Adviser and its affiliates that support the portfolio management teams or provide other types of necessary services, including fund services groups (e.g., accounting and financial reporting, tax, shareholder services, and operations); controls and risk management groups (e.g., legal, compliance, valuation oversight, credit risk management, internal audit, compliance testing, market risk analysis, finance, and central funding); sales and distribution support groups, and others (e.g., information technology and training); |
(iii) | trends in employee headcount; |
(iv) | the Investment Adviser’s financial resources and ability to hire and retain talented personnel and strengthen its operations; and |
(v) | the parent company’s support of the Investment Adviser and its mutual fund business, as expressed by the firm’s senior management; |
(b) | information on the investment performance of the Fund, including comparisons to the performance of similar mutual funds, as provided by a third-party mutual fund data provider engaged as part of the contract review process (the “Outside Data Provider”), a benchmark performance index, and (in the case of the Growth Opportunities Fund) a composite of accounts with comparable investment strategies managed by the Investment Adviser; and information on general investment outlooks in the markets in which the Fund invests; |
(c) | information provided by the Investment Adviser indicating the Investment Adviser’s views on whether the Fund’s peer group and/or benchmark index had high, medium, or low relevance given the Fund’s particular investment strategy; |
(d) | the terms of the Agreements and other agreements with affiliated service providers entered into by the Trust on behalf of the Fund; |
(e) | fee and expense information for the Fund, including: |
(i) | the relative management fee and expense levels of the Fund as compared to those of comparable funds managed by other advisers, as provided by the Outside Data Provider; |
(ii) | the Fund’s expense trends over time; and |
(iii) | to the extent the Investment Adviser manages other types of accounts (such as bank collective trusts, private wealth management accounts, institutional separate accounts, sub-advised mutual funds, and non-U.S. funds) having investment objectives and policies similar to those of the Fund, comparative information on the advisory fees charged and services provided to those accounts by the Investment Adviser; |
(f) | with respect to the extensive investment performance and expense comparison data provided by the Outside Data Provider, its processes in producing that data for the Fund; |
(g) | the undertakings of the Investment Adviser and its affiliates to implement fee waivers and/or expense limitations; |
71
GOLDMAN SACHS VARIABLE INSURANCE TRUST FUNDS
Statement Regarding Basis for Approval of Management Agreements (Unaudited) (continued)
(h) | information relating to the profitability of the Management Agreements and the transfer agency and distribution and service arrangements of the Fund to the Investment Adviser and its affiliates; |
(i) | whether the Fund’s existing management fee schedule adequately addressed any economies of scale; |
(j) | a summary of the “fall-out” benefits derived by the Investment Adviser and its affiliates from their relationships with the Fund, including the fees received by the Investment Adviser’s affiliates from the Fund for transfer agency, securities lending (in the case of the Equity Index Fund), portfolio trading, distribution and other services; |
(k) | a summary of potential benefits derived by the Fund as a result of its relationship with the Investment Adviser; |
(l) | information regarding commissions paid by the Equity Index and Growth Opportunities Funds (the “Equity Funds”) and broker oversight, an update on the Investment Adviser’s soft dollars practices (with respect to the Growth Opportunities Fund), other information regarding portfolio trading, and how the Investment Adviser carries out its duty to seek best execution; |
(m) | portfolio manager ownership of Fund shares; the manner in which portfolio manager compensation is determined; and the number and types of accounts managed by the portfolio managers; |
(n) | the nature and quality of the services provided to the Fund by its unaffiliated service providers (including the Sub-Adviser for the Equity Index Fund), and the Investment Adviser’s general oversight and evaluation (including reports on due diligence) of those service providers as part of the administrative services provided under the Management Agreements; and |
(o) | the Investment Adviser’s processes and policies addressing various types of potential conflicts of interest; its approach to risk management; the annual review of the effectiveness of the Fund’s compliance program; and periodic compliance reports. |
The Trustees also received an overview of the Funds’ distribution arrangements. They received information regarding the Funds’ assets, share purchase and redemption activity, and payment of distribution and service fees. Information was also provided to the Trustees relating to revenue sharing payments made by and services provided by the Investment Adviser and its affiliates to intermediaries that promote the sale, distribution, and/or servicing of Fund shares. The Independent Trustees also discussed the broad range of other investment choices that are available to Fund investors, including the availability of comparable funds managed by other advisers.
The presentations made at the Board and Committee meetings and at the Annual Meeting encompassed the Funds and other mutual funds for which the Board of Trustees has responsibility. In evaluating the Management Agreements at the Annual Meeting, the Trustees relied upon their knowledge, resulting from their meetings and other interactions throughout the year, of the Investment Adviser and its affiliates, their services, and the Funds. In conjunction with these meetings, the Trustees received written materials and oral presentations on the topics covered, and the Investment Adviser addressed the questions and concerns of the Trustees, including concerns regarding the investment performance of certain of the funds they oversee. The Independent Trustees were advised by their independent legal counsel regarding their responsibilities and other regulatory requirements related to the approval and continuation of mutual fund investment management agreements under applicable law. In addition, the Investment Adviser and its affiliates provided the Independent Trustees with a written response to a formal request for information sent on behalf of the Independent Trustees by their independent legal counsel. During the course of their deliberations, the Independent Trustees met in executive sessions with their independent legal counsel, without representatives of the Investment Adviser or its affiliates present.
Nature, Extent, and Quality of the Services Provided Under the Management Agreements
As part of their review, the Trustees considered the nature, extent, and quality of the services provided to the Funds by the Investment Adviser. In this regard, the Trustees considered both the investment advisory services and non-advisory services (including, with respect to the Equity Index Fund, the Investment Adviser’s oversight of the Sub-Adviser) that are provided by the Investment Adviser and its affiliates. The Trustees noted the transition in the leadership and changes in personnel of various of the Investment Adviser’s portfolio management teams that had occurred in recent periods, and the ongoing recruitment efforts aimed at bringing high quality investment talent to the Investment Adviser. They also noted the Investment Adviser’s commitment to maintaining high quality systems and expending substantial resources to respond to ongoing changes to the regulatory and control environment in which the Funds and their service providers operate, as well as the efforts of the Investment Adviser and its affiliates to combat cyber security risks. The Trustees concluded that the Investment Adviser continued to commit substantial financial and operational resources to the Funds and expressed confidence that the Investment Adviser would continue to do so in the future. The Trustees also recognized that the Investment Adviser had made significant commitments to address regulatory compliance requirements applicable to the Funds and the Investment Adviser and its affiliates.
72
GOLDMAN SACHS VARIABLE INSURANCE TRUST FUNDS
Statement Regarding Basis for Approval of Management Agreements (Unaudited) (continued)
Investment Performance
The Trustees also considered the investment performance of the Funds. In this regard, they compared the investment performance of each Fund to its peers using rankings and ratings compiled by the Outside Data Provider as of December 31, 2016, and updated performance information prepared by the Investment Adviser using the peer group identified by the Outside Data Provider as of March 31, 2017. The information on each Fund’s investment performance was provided for the one-, three-, five-, and ten-year periods ending on the applicable dates, to the extent that each Fund had been in existence for those periods. The Trustees also reviewed each Fund’s investment performance relative to its performance benchmark. As part of this review, they considered the investment performance trends of the Funds over time, and reviewed the investment performance of each Fund in light of its investment objective and policies and market conditions. The Trustees also received information comparing the Growth Opportunities Fund’s performance to that of a composite of accounts with comparable investment strategies managed by the Investment Adviser.
In addition, the Trustees considered materials prepared and presentations made by the Investment Adviser’s senior management and portfolio management personnel in which Fund performance was assessed. The Trustees also considered the Investment Adviser’s periodic reports with respect to the Funds’ risk profiles, and how the Investment Adviser’s approach to risk monitoring and management influences portfolio management.
The Trustees observed that the Core Fixed Income Fund’s Institutional Shares had placed in the second quartile of the Fund’s peer group for the three-year period and in the third quartile for the one-year period, and had outperformed the Fund’s benchmark index for the one- and three-year periods ended March 31, 2017. They noted that the Equity Index Fund’s Service Shares had placed in the top half of the Fund’s peer group and had underperformed the Fund’s benchmark index by an amount approximately equal to Fund fees and expenses for the one-, three-, five-, and ten-year periods ended March 31, 2017. They also noted that the Equity Index Fund had experienced certain portfolio management changes in the first quarter of 2017. The Trustees noted that the Growth Opportunities Fund’s Institutional Shares had placed in the fourth quartile of the Fund’s peer group and had underperformed the Fund’s benchmark index for the one- and three-year periods ended March 31, 2017. They also observed that the High Quality Floating Rate Fund’s Institutional Shares had placed in the first quartile of the Fund’s peer group for the one-year period and in the third quartile for the three-year period, and had outperformed the Fund’s benchmark index for the one- and three-year periods ended March 31, 2017.
Costs of Services Provided and Competitive Information
The Trustees considered the contractual terms of the Agreements and the fee rates payable by each Fund thereunder and, with respect to the Equity Index Fund, payable by the Investment Adviser under the Sub-Advisory Agreement. In this regard, the Trustees considered information on the services rendered by the Investment Adviser to the Funds, which included both advisory and administrative services that were directed to the needs and operations of the Funds as registered mutual funds.
In particular, the Trustees reviewed analyses prepared by the Outside Data Provider regarding the expense rankings of the Funds. The analyses provided a comparison of each Fund’s management fee and breakpoints (as applicable) to those of a relevant peer group and category universe; an expense analysis which compared each Fund’s overall net and gross expenses to a peer group and a category universe; and data comparing each Fund’s net expenses to the peer and category medians. The analyses also compared each Fund’s transfer agency, custody, and distribution fees, other expenses and fee waivers/reimbursements to those of the peer group and category medians. The Trustees concluded that the comparisons provided by the Outside Data Provider were useful in evaluating the reasonableness of the management fees and total expenses paid by the Funds.
With respect to the Growth Opportunities and High Quality Floating Rate Funds, the Trustees noted that the management fee breakpoint schedules were being reduced at all asset levels. In addition, the Trustees considered the Investment Adviser’s undertakings to implement fee waivers and/or expense limitations. They also considered, to the extent that the Investment Adviser manages other types of accounts having investment objectives and policies similar to those of the Funds, comparative fee information for services provided by the Investment Adviser to those accounts, and information that indicated that services provided to the Funds differed in various significant respects from the services provided to other types of accounts which, in many cases, operated under less stringent legal and regulatory structures, required fewer services from the Investment Adviser to a smaller number of client contact points, and were less time-intensive.
In addition, the Trustees noted that shareholders are able to redeem their Fund shares at any time if shareholders believe that the Fund fees and expenses are too high or if they are dissatisfied with the performance of the Fund.
73
GOLDMAN SACHS VARIABLE INSURANCE TRUST FUNDS
Statement Regarding Basis for Approval of Management Agreements (Unaudited) (continued)
Profitability
The Trustees reviewed each Fund’s contribution to the Investment Adviser’s revenues and pre-tax profit margins. In this regard the Trustees noted that they had received, among other things, profitability analyses and summaries, revenue and expense schedules by Fund and by function (i.e., investment management, transfer agency and distribution and service), and information on the Investment Adviser’s expense allocation methodology. They observed that the profitability and expense figures are substantially similar to those used by the Investment Adviser for many internal purposes, including compensation decisions among various business groups, and are thus subject to a vigorous internal debate about how certain revenue and expenses should be allocated. The Trustees also noted that the internal audit group within the Goldman Sachs organization had audited the expense allocation methodology and that the internal audit group was satisfied with the reasonableness, consistency, and accuracy of the Investment Adviser’s expense allocation methodology and profitability analysis calculations. Profitability data for each Fund were provided for 2016 and 2015, and the Trustees considered this information in relation to the Investment Adviser’s overall profitability.
Economies of Scale
The Trustees considered the information that had been provided regarding the Investment Adviser’s profitability. The Trustees also considered the breakpoints in the fee rate payable under the Management Agreement for each of the Core Fixed Income, Growth Opportunities and High Quality Floating Rate Funds at the following annual percentage rates of the average daily net assets of the Funds:
Core Fixed Income Fund | High Quality Floating Rate Fund | |||||||
First $1 billion | 0.40 | % | 0.40 | % | ||||
Next $1 billion | 0.36 | 0.36 | ||||||
Next $3 billion | 0.34 | 0.34 | ||||||
Next $3 billion | 0.33 | 0.33 | ||||||
Over $8 billion | 0.32 | 0.32 |
Growth Opportunities Fund | ||||
First $2 billion | 1.00 | % | ||
Next $3 billion | 0.90 | |||
Next $3 billion | 0.86 | |||
Over $8 billion | 0.84 |
The Trustees noted that the breakpoints were designed to share potential economies of scale, if any, with the Funds and their shareholders as assets under management reach those asset levels. The Trustees considered the amounts of assets in the Funds; the Funds’ recent share purchase and redemption activity; the information provided by the Investment Adviser relating to the costs of the services provided by the Investment Adviser and its affiliates and their realized profits; information comparing fee rates charged by the Investment Adviser with fee rates charged to other funds in the peer groups; and the Investment Adviser’s undertakings to waive a portion of its management fee (with respect to the Equity Index, Growth Opportunities and High Quality Floating Rate Funds) and to limit certain expenses of the Funds that exceed specified levels as well as Goldman Sachs & Co. LLC’s (“Goldman Sachs”) undertaking to waive a portion of the distribution and service fees paid by the Growth Opportunities Fund’s Service Shares. Upon reviewing these matters at the Annual Meeting, the Trustees concluded that the fee breakpoints represented a means of assuring that benefits of scalability, if any, would be passed along to shareholders at the specified asset levels.
With respect to the Equity Index Fund, the Trustees noted that, while its Management Agreement did not have breakpoints, the Investment Adviser had agreed to waive a portion of its management fee in order to achieve the following effective annual rates: 0.21% on the first $400 million of average daily net assets and 0.20% of average daily net assets in excess of $400 million. The Trustees noted that, in addition to the Investment Adviser’s management fee waiver mentioned above, the Fund’s total expenses were further reduced by the Investment Adviser’s undertaking to limit certain expenses of the Fund that exceed a specified level.
Other Benefits to the Investment Adviser and Its Affiliates
The Trustees also considered the other benefits derived by the Investment Adviser and its affiliates from their relationships with the Funds as stated above, including: (a) transfer agency fees received by Goldman Sachs; (b) brokerage and futures
74
GOLDMAN SACHS VARIABLE INSURANCE TRUST FUNDS
Statement Regarding Basis for Approval of Management Agreements (Unaudited) (continued)
commissions earned by Goldman Sachs for executing securities transactions on behalf of the Equity Funds and futures transactions on behalf of the Funds; (c) research received by the Investment Adviser from broker-dealers in exchange for executing certain transactions on behalf of the Growth Opportunities Fund; (d) trading efficiencies resulting from aggregation of orders of the Funds with those for other funds or accounts managed by the Investment Adviser; (e) fees earned by Goldman Sachs Agency Lending (“GSAL”), an affiliate of the Investment Adviser, as securities lending agent for the Equity Index Fund (and fees earned by the Investment Adviser for managing the fund in which the Equity Index Fund’s cash collateral is invested); (f) the Investment Adviser’s ability to leverage the infrastructure designed to service the Funds on behalf of its other clients; (g) the Investment Adviser’s ability to cross-market other products and services to Fund shareholders; (h) Goldman Sachs’ retention of certain fees as Fund Distributor; (i) the Investment Adviser’s ability to negotiate better pricing with custodians on behalf of its other clients, as a result of the relationship with the Funds; and (j) the possibility that the working relationship between the Investment Adviser and the Funds’ third-party service providers may cause those service providers to be more likely to do business with other areas of Goldman Sachs. In the course of considering the foregoing, the Independent Trustees requested and received further information quantifying certain of these fall-out benefits.
Other Benefits to the Funds and Their Shareholders
The Trustees also noted that the Funds receive certain potential benefits as a result of their relationship with the Investment Adviser, including: (a) trading efficiencies resulting from aggregation of orders of the Funds with those of other funds or accounts managed by the Investment Adviser; (b) enhanced servicing from vendors because of the volume of business generated by the Investment Adviser and its affiliates; (c) enhanced servicing from broker-dealers because of the volume of business generated by the Investment Adviser and its affiliates; (d) the Investment Adviser’s ability to negotiate favorable terms with derivatives counterparties on behalf of the Funds as a result of the size and reputation of the Goldman Sachs organization; (e) the Investment Adviser’s knowledge and experience gained from managing other accounts and products; (f) the Investment Adviser’s ability to hire and retain qualified personnel to provide services to the Funds because of the reputation of the Goldman Sachs organization; (g) the Funds’ access, through the Investment Adviser, to certain firmwide resources (e.g., proprietary risk management systems and databases), subject to certain restrictions; (h) the Equity Index Fund’s ability to participate in the securities lending program administered by GSAL, as measured by the revenue received by the Fund in connection with the program; and (i) the Funds’ access to certain affiliated distribution channels. In addition, the Trustees noted the competitive nature of the mutual fund marketplace, and considered that many of the Funds’ shareholders invested in the Funds in part because of the Funds’ relationship with the Investment Adviser and that those shareholders have a general expectation that the relationship will continue.
Conclusion
In connection with their consideration of the Agreements, the Trustees gave weight to each of the factors described above, but did not identify any particular factor as controlling their decision. After deliberation and consideration of all of the information provided, including the factors described above, the Trustees concluded, in the exercise of their business judgment, that the management fees paid by each of the Funds were reasonable in light of the services provided to it by the Investment Adviser, the Investment Adviser’s costs and each Fund’s current and reasonably foreseeable asset levels. The Trustees unanimously concluded that the Investment Adviser’s continued management likely would benefit each Fund and its shareholders and that the Management Agreements should be approved and continued with respect to each Fund until June 30, 2018.
Sub-Advisory Agreement for the Equity Index Fund
Nature, Extent, and Quality of the Services Provided Under the Sub-Advisory Agreement and Investment Performance
In evaluating the Sub-Advisory Agreement, the Trustees relied upon materials furnished and presentations made by the Investment Adviser and the Sub-Adviser. In evaluating the nature, extent, and quality of services provided by the Sub-Adviser, the Trustees considered information on the services provided to the Equity Index Fund by the Sub-Adviser, including information about the Sub-Adviser’s (a) personnel and organizational structure; (b) experience in index investing and track record in tracking the performance of the Fund’s benchmark in line with the investment objective of the Fund; (c) policies and procedures in place to address potential conflicts of interest; and (d) compliance program and code of ethics. The Trustees noted that the Fund had commenced operations in January 2006, and reviewed the Fund’s operations and investment performance since its inception. The Trustees reviewed the services provided to the Fund under the Sub-Advisory Agreement. They noted that the Fund’s Service Shares had placed in the top half of the Fund’s peer group and had underperformed the Fund’s benchmark index by an amount approximately equal to Fund fees and expenses for the one-, three-, five-, and ten-year periods ended March 31, 2017.
75
GOLDMAN SACHS VARIABLE INSURANCE TRUST FUNDS
Statement Regarding Basis for Approval of Management Agreements (Unaudited) (continued)
Costs of Services Provided
The Trustees reviewed the terms of the Sub-Advisory Agreement, including the schedule of fees payable to the Sub-Adviser. They considered the breakpoints in the sub-advisory fee rate payable under the Sub-Advisory Agreement at the following annual percentage rates of the average daily net assets of the Fund:
Average Daily Net Assets | Sub-Advisory Fee Annual Rate | |||
First $50 Million | 0.030 | % | ||
Next $200 Million | 0.020 | % | ||
Next $750 Million | 0.010 | % | ||
Over $1 Billion | 0.008 | % |
The Trustees noted that the Sub-Adviser’s compensation is paid by the Investment Adviser, not by the Fund, and that the retention of the Sub-Adviser does not increase the fees incurred by the Fund for advisory services. They considered the Investment Adviser’s belief that the relationship between the management fees paid by the Fund and the sub-advisory fees paid by the Investment Adviser is appropriate given the level of services the Investment Adviser provides to the Fund and the significant differences in cost drivers and risks associated with the respective services offered by the Investment Adviser and the Sub-Adviser, as well as the management fee waivers and expense limitations that substantially reduce the fees retained by the Investment Adviser.
Conclusion
After deliberation and consideration of the information provided, the Trustees concluded that the sub-advisory fee to be paid by the Investment Adviser to the Sub-Adviser with respect to the Equity Index Fund is reasonable in light of the services to be provided by the Sub-Adviser and the Fund’s reasonably foreseeable asset levels, and that the Sub-Advisory Agreement should be approved and continued until June 30, 2018.
76
TRUSTEES | OFFICERS | |
Ashok N. Bakhru, Chairman | James A. McNamara, President | |
Kathryn A. Cassidy | Scott M. McHugh, Treasurer, Senior Vice | |
Diana M. Daniels | President and Principal Financial Officer | |
Herbert J. Markley James A. McNamara | Joseph F. DiMaria, Assistant Treasurer and Principal Accounting Officer | |
Jessica Palmer | Caroline L. Kraus, Secretary | |
Roy W. Templin | ||
Gregory G. Weaver |
GOLDMAN SACHS & CO. LLC
Distributor and Transfer Agent
GOLDMAN SACHS ASSET MANAGEMENT, L.P.
Investment Adviser
200 West Street, New York,
New York 10282
Visit our web site at www.GSAMFUNDS.com to obtain the most recent month-end returns.
The reports concerning the Funds included in this shareholder report may contain certain forward-looking statements about the factors that may affect the performance of the Funds in the future. These statements are based on Fund management’s predictions and expectations concerning certain future events and their expected impact on the Funds, such as performance of the economy as a whole and of specific industry sectors, changes in the levels of interest rates, the impact of developing world events, and other factors that may influence the future performance of the Funds. Management believes these forward-looking statements to be reasonable, although they are inherently uncertain and difficult to predict. Actual events may cause adjustments in portfolio management strategies from those currently expected to be employed.
A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities and information regarding how the Funds voted proxies relating to portfolio securities for the 12-month period ended June 30 is available (i) without charge, upon request by calling 1-800-621-2550; and (ii) on the Securities and Exchange Commission (“SEC”) web site at http://www.sec.gov.
The Funds file their complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Form N-Qs are available on the SEC’s web site at http://www.sec.gov within 60 days after the Funds’ first and third fiscal quarters. The Funds’ Form N-Qs may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may also be obtained by calling 1-800-SEC-0330. Form N-Qs may be obtained upon request and without charge by calling 1-800-621-2550.
The website links provided are for your convenience only and are not an endorsement or recommendation by GSAM of any of these websites or the products or services offered. GSAM is not responsible for the accuracy and validity of the content of these websites.
Fund holdings and allocations shown are as of June 30, 2017 and may not be representative of future investments. Fund holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities. Current and future holdings are subject to risk.
References to indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only and do not imply that the portfolio will achieve similar results. The index composition may not reflect the manner in which a portfolio is constructed. While an adviser seeks to design a portfolio which reflects appropriate risk and return features, portfolio characteristics may deviate from those of the benchmark.
The Global Industry Classification Standard (“GICS”) was developed by and is the exclusive property and a service mark of Morgan Stanley Capital International Inc. (“MSCI”) and Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. (“S&P”) and is licensed for use by Goldman Sachs. Neither MSCI, S&P nor any other party involved in making or compiling the GICS or any GICS classifications makes any express or implied warranties or representations with respect to such standard or classification (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of such standard or classification. Without limiting any of the foregoing, in no event shall MSCI, S&P, any of their affiliates or any third party involved in making or compiling the GICS or any GICS classifications have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.
The portfolio risk management process includes an effort to monitor and manage risk, but does not imply low risk.
Shares of the Goldman Sachs VIT Funds are offered to separate accounts of participating life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Shares of the Fund are not offered directly to the general public. The variable annuity contracts and variable life insurance policies are described in the separate prospectuses issued by participating insurance companies. You should refer to those prospectuses for information about surrender charges, mortality and expense risk fees and other charges that may be assessed by participating insurance companies under the variable annuity contracts or variable life insurance policies. Such fees or charges, if any, may affect the return you may realize with respect to your investments. Ask your representative for more complete information. Please consider a fund’s objectives, risks and charges and expenses, and read the prospectus carefully before investing. The prospectus contains this and other information about the Fund.
This material is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus or summary prospectus, if applicable. Investors should consider the Fund’s objective, risks, and charges and expenses, and read the summary prospectus, if available, and/or the prospectus carefully before investing or sending money. The summary prospectus, if available, and the prospectus contain this and other information about the Fund and may be obtained from your authorized dealer or from Goldman Sachs & Co. LLC by calling 1-800-621-2550.
THIS MATERIAL IS FOR INFORMATIONAL PURPOSES ONLY AND IS PROVIDED SOLELY ON THE BASIS THAT IT WILL NOT CONSTITUTE INVESTMENT OR OTHER ADVICE OR A RECOMMENDATION RELATING TO ANY PERSON’S OR PLAN’S INVESTMENT OR OTHER DECISIONS, AND GOLDMAN SACHS IS NOT A FIDUCIARY OR ADVISOR WITH RESPECT TO ANY PERSON OR PLAN BY REASON OF PROVIDING THE MATERIAL OR CONTENT HEREIN INCLUDING UNDER THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974 OR DEPARTMENT OF LABOR REGULATIONS. PLAN SPONSORS AND OTHER FIDUCIARIES SHOULD CONSIDER THEIR OWN CIRCUMSTANCES IN ASSESSING ANY POTENTIAL COURSE OF ACTION.
This report is prepared for the general information of contract owners and is not an offer of shares of the Goldman Sachs Variable Insurance Trust Funds.
© 2017 Goldman Sachs. All rights reserved.
VITMLTISAR-17/100758-TMPL-08/2017-585389/16.5k
Goldman
Sachs Variable Insurance Trust
Goldman Sachs
Small Cap Equity Insights Fund
Semi-Annual Report
June 30, 2017
GOLDMAN SACHS VARIABLE INSURANCE TRUST SMALL CAP EQUITY INSIGHTS FUND
INVESTMENT OBJECTIVE
The Fund seeks long-term growth of capital.
Portfolio Management Discussion and Analysis
Below, the Goldman Sachs Quantitative Investment Strategies Team discusses the Goldman Sachs Variable Insurance Trust — Goldman Sachs Small Cap Equity Insights Fund’s (the “Fund”) performance and positioning for the six-month period ended June 30, 2017 (the “Reporting Period”).
How did the Fund perform during the Reporting Period?
During the Reporting Period, the Fund’s Institutional and Service Shares generated cumulative total returns of 1.23% and 1.09%, respectively. These returns compare to the 4.99% cumulative total return of the Fund’s benchmark, the Russell 2000® Index (with dividends reinvested) (the “Russell Index”) during the same time period.
What economic and market factors most influenced the equity markets as a whole during the Reporting Period?
Representing the U.S. equity market, the S&P 500® Index gained 9.34% during the Reporting Period.
As the Reporting Period began in January 2017, U.S. equities rallied to new highs on the prospect of deregulation following executive orders on oil pipelines and on further optimism around infrastructure spending after a $1 trillion proposal from Senate Democrats. Despite political uncertainty and protectionism concerns, U.S. equities continued to rally in February 2017, driven by “risk on” sentiment, or reduced risk aversion, owing to potential U.S. tax reform and deregulation as well as by stronger economic data. In March 2017, the U.S. Federal Reserve (the “Fed”) raised interest rates for the third time since the 2008 global financial crisis, while maintaining projections for three rate hikes this year. However, a seemingly cautious stance on the future path of monetary tightening from Fed Chair Janet Yellen and the presence of a dissenter on the policy committee led to a dovish market reaction. (Dovish tends to suggest lower interest rates; opposite of hawkish.) Political risks subsequently drove U.S. equities lower in the wake of House Republicans’ struggle to schedule a vote on health care. For the month of March 2017, U.S. equities were virtually flat.
U.S. equities fell in April 2017, as Fed minutes suggested stocks were overvalued. However, U.S. equities subsequently rebounded on strong first quarter 2017 earnings results and receding European political risk following the French election. Although the U.S. labor market remained strong and wage growth accelerated, economic activity and inflation data appeared to be moderating during the second quarter of 2017. Core inflation softened to 1.7% year-over-year in May 2017, marking a third consecutive month of weakness, while core personal consumption expenditures remained below the Fed’s 2% target at just 1.4% year-over-year. In addition, market expectations for pro-growth U.S. fiscal policy were dampened by domestic political developments. Nonetheless, the Fed proceeded to raise the targeted federal funds rate by 25 basis points in June 2017, citing ongoing strength in the labor market and a pick-up in household spending and business fixed investment. (A basis point is 1/100th of a percentage point.) The results of the Fed’s 2017 Comprehensive Capital Analysis and Review (“CCAR”) stress test for banks were encouraging, with improving payout ratios. (Payout ratio is the proportion of earnings paid out as dividends to shareholders.)
For the Reporting Period overall, information technology, health care and consumer discretionary were the best performing sectors in the S&P 500® Index by a wide margin. The weakest performing sectors in the S&P 500® Index were energy and telecommunication services, the only two to post negative absolute returns, followed by real estate and financials, which were comparatively weak but generated positive returns during the Reporting Period.
Within the U.S. equity market, there was significant disparity in performance not only among sectors but also among the various capitalization and style segments. While all capitalization segments posted positive returns, large-cap stocks, as measured by the Russell 1000® Index, performed best, followed by mid-cap stocks, as measured by the Russell Midcap® Index, and then at some distance by small-cap stocks, as measured by the Russell 2000® Index. From a style perspective, growth-oriented stocks significantly outpaced value-oriented stocks across the capitalization spectrum. (All as measured by the Russell indices.)
What key factors were responsible for the Fund’s performance during the Reporting Period?
During the Reporting Period, the Fund underperformed the Russell Index on a relative basis. Four of our quantitative model’s six investment themes added to relative performance. However, the Fund underperformed the Index largely because of certain individual stock positions.
1
GOLDMAN SACHS VARIABLE INSURANCE TRUST SMALL CAP EQUITY INSIGHTS FUND
What impact did the Fund’s investment themes have on performance during the Reporting Period?
As expected, and in keeping with our investment approach, our quantitative model and its six investment themes — Valuation, Profitability, Quality, Management, Momentum and Sentiment — had the greatest impact on relative performance. We use these themes to take a long-term view of market patterns and look for inefficiencies, selecting stocks for the Fund and overweighting or underweighting the ones chosen by the model. Over time and by design, the performance of any one of the model’s investment themes tends to have a low correlation with the model’s other themes, demonstrating the diversification benefit of the Fund’s theme-driven quantitative model. The variance in performance supports our research indicating that the diversification provided by the Fund’s different investment themes is a significant investment advantage over the long term, even though the Fund may experience underperformance in the short term. Of course, diversification does not protect an investor from market risk nor does it ensure a profit.
During the Reporting Period, four of our six investment themes contributed positively to the Fund’s relative performance. The Valuation, Momentum and Quality themes contributed most positively to relative performance, followed by Management. Valuation attempts to capture potential mispricings of securities, typically by comparing a measure of the company’s intrinsic value to its market value. The Momentum theme seeks to predict drifts in stock prices caused by delayed investor reaction to company-specific information and information about related companies. The Quality theme assesses both firm and financial quality. The Management theme assesses the characteristics, policies and strategic decisions of company management.
The Fund’s Sentiment theme detracted most from the Fund’s relative performance, followed by Profitability. The Sentiment theme reflects selected investment views and decisions of individuals and financial intermediaries. The Profitability theme assesses whether a company is earning more than its cost of capital.
How did the Fund’s sector and industry allocations affect relative performance?
In constructing the Fund’s portfolio, we focus on picking stocks rather than making industry or sector bets. Consequently, the Fund is similar to its benchmark, the Russell Index, in terms of its sector allocation and style. We manage the Fund’s industry and sector exposure by including industry factors in our risk model and by explicitly penalizing industry and sector deviations from the benchmark index in optimization. Sector weights or changes in weights generally do not have a meaningful impact on relative performance.
Did stock selection help or hurt Fund performance during the Reporting Period?
We seek to outpace the Russell Index by overweighting stocks that we expect to outperform and underweighting those that we think may lag. We also build positions based on our thematic views. For example, the Fund aims to hold a basket of stocks with more favorable Momentum characteristics than the benchmark index. During the Reporting Period, certain individual stock positions detracted from relative performance. The Fund was hurt most by security selection in the consumer discretionary, information technology and industrials sectors. Conversely, security selection in the financials and real estate sectors bolstered relative returns. Having underweighted allocations to financials and consumer staples, which each lagged the Russell Index during the Reporting Period, also contributed positively to the Fund’s relative performance.
Which individual positions detracted from the Fund’s results during the Reporting Period?
Detracting most from the Fund’s results relative to its benchmark index were overweight positions in women’s casual clothing retailer Chico’s FAS, consumer fashion accessories company Fossil Group and re-insurance company Maiden Holdings. The Fund was overweight Chico’s FAS due to our positive views on Quality and Value. Our positive views on Momentum and Value led us to overweight Fossil Group. We chose to overweight Maiden Holdings because of our positive views on Value and Quality.
Which individual stock positions contributed the most to the Fund’s relative returns during the Reporting Period?
The Fund benefited most from overweight positions in development-stage biotechnology company Exelixis, gaming facilities owner and operator Penn National Gaming and technology hardware and equipment manufacturer Rogers. We chose to overweight Exelixis because of our positive views on Sentiment and Quality. Our positive views on Sentiment and Momentum led us to overweight Penn National Gaming. The Fund was overweight Rogers due to our positive views on Sentiment and Quality.
How did the Fund use derivatives during the Reporting Period?
During the Reporting Period, we did not use derivatives as part of an active management strategy to add value to the Fund’s results. However, we used equity index futures contracts, on an opportunistic basis, to equitize the Fund’s excess cash holdings. In other
2
GOLDMAN SACHS VARIABLE INSURANCE TRUST SMALL CAP EQUITY INSIGHTS FUND
words, we put the Fund’s excess cash holdings to work by using them as collateral for the purchase of stock futures. The use of these futures contracts did not have a material impact on the Fund’s performance during the Reporting Period.
Did you make any enhancements to your quantitative models during the Reporting Period?
We continuously look for ways to improve our investment process. During the Reporting Period, we made numerous enhancements to our models. As example, we made two enhancements to our Sentiment theme. The first enhancement introduced a signal in the U.S. region, which looks at characteristics of a company’s credit default swaps term structure to infer investor expectations regarding the health of that company. Secondly, we introduced an enhancement in the U.S. region that looks at the 10-K and 10-Q filings of companies as an indicator of stock price movements. We use natural language processing techniques to parse through quarterly filings in an effort to gauge various aspects of a company related to management sentiment, their outlook and their thoughts on upcoming risks.
We also enhanced our Valuation theme in the Japan region by evaluating the worth of companies’ patents. We utilize data on the exclusiveness of Japanese companies’ patent portfolios with the goal of determining which companies have the most valuable patent portfolios. We believe that companies with more exclusive patents tend to outperform in the long run.
What was the Fund’s sector positioning relative to its benchmark index at the end of the Reporting Period?
As of June 30, 2017, the Fund was overweight the consumer discretionary and information technology sectors relative to the Russell Index. The Fund was underweight financials, health care and utilities and was rather neutrally weighted in materials, real estate, energy, telecommunication services, industrials and consumer staples compared to the benchmark index on the same date.
Were there any changes to the Fund’s portfolio management team during the Reporting Period?
During the Reporting Period, one Vice President left the Equity Alpha team and one Vice President joined the team. QIS employs a globally integrated team of more than 90 professionals, with an additional 75-plus professionals dedicated to trading, information technology and development of analytical tools.
What is your strategy going forward for the Fund?
Looking ahead, we continue to believe that less expensive stocks should outpace more expensive stocks, and stocks with good momentum are likely to outperform those with poor momentum. We intend to maintain our focus on seeking companies about which fundamental research analysts are becoming more positive as well as profitable companies with sustainable earnings and a track record of using their capital to enhance shareholder value. As such, we anticipate remaining fully invested with long-term performance likely to be the result of stock selection rather than sector or capitalization allocations.
We stand behind our investment philosophy that sound economic investment principles, coupled with a disciplined quantitative approach, can provide strong, uncorrelated returns over the long term. Our research agenda is robust, and we continue to enhance our existing models, add new proprietary forecasting signals and improve our trading execution as we seek to provide the most value to our shareholders.
3
GOLDMAN SACHS VARIABLE INSURANCE TRUST SMALL CAP EQUITY INSIGHTS FUND
Index Definitions
The Russell 2000® Index (with dividends reinvested) is an unmanaged index of common stock prices that measures the performance of the 2000 smallest companies in the Russell 3000® Index. The figures for the index do not include any deduction for fees, expenses or taxes. It is not possible to invest directly in an index.
The S&P 500® Index (with dividends reinvested) is the Standard & Poor’s 500 Composite Index of 500 stocks, an unmanaged index of common stock prices. The figures for the index do not include any deduction for fees, expenses or taxes. It is not possible to invest directly in an index.
The Russell Midcap® Index measures the performance of the 800 smallest companies in the Russell 1000® Index, which represent approximately 25% of the total market capitalization of the Russell 1000 Index. It is not possible to invest directly in an index.
The Russell 1000® Index measures the performance of the 1,000 largest companies in the Russell 3000® Index, which represent approximately 92% of the total market capitalization of the Russell 3000 Index. It is not possible to invest directly in an index.
4
FUND BASICS
Small Cap Equity Insights Fund
as of June 30, 2017
STANDARDIZED TOTAL RETURNS1
For the period ended 6/30/17 | One Year | Five Years | Ten Years | Since Inception | Inception Date | |||||||||||||
Institutional | 20.86 | % | 13.12 | % | 6.20 | % | 6.81 | % | 2/13/98 | |||||||||
Service | 20.57 | 12.84 | N/A | 7.43 | 8/31/07 |
1 | The Standardized Total Returns are average annual total returns as of the most recent calendar quarter-end. They assume reinvestment of all distributions at net asset value (“NAV”). Because Institutional Shares and Service Shares do not involve a sales charge, such a charge is not applied to their Standardized Total Returns. |
Total return figures in the above chart represent past performance and do not indicate future results, which will vary. The investment return and principal value of an investment will fluctuate and, therefore, an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the total return figures in the above chart. Please visit www.GSAMFUNDS.com to obtain the most recent month-end returns. Performance reflects fee waivers and/or expense limitations in effect during the periods shown. In their absence, performance would be reduced.
EXPENSE RATIOS2
Net Expense Ratio (Current) | Gross Expense Ratio (Before Waivers) | |||||||
Institutional | 0.81 | % | 1.04 | % | ||||
Service | 1.06 | 1.29 |
2 | The expense ratios of the Fund, both current (net of any fee waivers and/or expense limitations) and before waivers (gross of any fee waivers and/or expense limitations) are as set forth above according to the most recent publicly available Prospectuses for the Fund and may differ from the expense ratios disclosed in the Financial Highlights in this report. Pursuant to a contractual arrangement, the Fund’s fee waivers and/or expense limitations will remain in place through at least April 28, 2018, and prior to such date, the Investment Adviser may not terminate the arrangements without the approval of the Fund’s Board of Trustees. If these arrangements are discontinued in the future, the expense ratios may change without shareholder approval. |
TOP TEN HOLDINGS AS OF 6/30/173,4
Holding | % of Net Assets | Line of Business | ||||
First Industrial Realty Trust, Inc. (REIT) | 0.8% | Real Estate | ||||
American Equity Investment Life Holding Co. | 0.8 | Insurance | ||||
Aaron’s, Inc. | 0.8 | Retailing | ||||
Rogers Corp. | 0.8 | Technology Hardware & Equipment | ||||
PS Business Parks, Inc. (REIT) | 0.8 | Real Estate | ||||
Sunstone Hotel Investors, Inc. (REIT) | 0.8 | Real Estate | ||||
Entegris, Inc. | 0.7 | Semiconductors & Semiconductor Equipment | ||||
Masimo Corp. | 0.7 | Health Care Equipment & Services | ||||
EMCOR Group, Inc. | 0.7 | Capital Goods | ||||
Benchmark Electronics, Inc. | 0.7 | Technology Hardware & Equipment |
3 | The top 10 holdings may not be representative of the Fund’s future investments. |
4 | The Fund’s overall top ten holdings differ from the table above due to the exclusion of the Goldman Sachs Financial Square Government Fund (a securities lending reinvestment vehicle) which represents 1.1% of the Fund’s net assets as of 06/30/2017. |
5
FUND BASICS
Small Cap Equity Insights Fund (continued)
as of June 30, 2017
FUND VS. BENCHMARK SECTOR ALLOCATIONS5
As of June 30, 2017
5 | The Fund is actively managed and, as such, its composition may differ over time. Consequently, the Fund’s overall sector allocations may differ from percentages contained in the graph above. The graph categorizes investments using Global Industry Classification Standard (“GICS”), however, the sector classifications used by the portfolio management team may differ from GICS. The percentage shown for each investment category reflects the value of investments in that category as a percentage of market value (excluding investments in the securities lending reinvestment vehicle, if any). Underlying sector allocations of exchange traded funds and investment companies held by the Fund are not reflected in the graph above. Investments in the securities lending reinvestment vehicle represented 1.1% of the Fund’s net assets at June 30, 2017. The graph depicts the Fund’s investments but may not represent the Fund’s market exposure due to the exclusion of certain derivatives, if any, as listed in the Additional Investment Information section of the Schedule of Investments. |
6
GOLDMAN SACHS VARIABLE INSURANCE TRUST SMALL CAP EQUITY INSIGHTS FUND
Schedule of Investments
June 30, 2017 (Unaudited)
Shares | Description | Value | ||||||
Common Stocks – 97.9% | ||||||||
Automobiles & Components – 1.8% | ||||||||
5,574 | Cooper-Standard Holdings, Inc.* | $ | 562,249 | |||||
724 | Dorman Products, Inc.* | 59,926 | ||||||
2,722 | LCI Industries | 278,733 | ||||||
13,446 | Superior Industries International, Inc. | 276,315 | ||||||
9,013 | Tenneco, Inc. | 521,222 | ||||||
|
| |||||||
1,698,445 | ||||||||
|
| |||||||
Banks – 9.0% | ||||||||
210 | BancFirst Corp. | 20,286 | ||||||
637 | Banner Corp. | 35,997 | ||||||
12,466 | Beneficial Bancorp, Inc. | 186,990 | ||||||
4,961 | BofI Holding, Inc.*(a) | 117,675 | ||||||
1,031 | CenterState Banks, Inc. | 25,631 | ||||||
20,596 | Central Pacific Financial Corp. | 648,156 | ||||||
26,295 | CVB Financial Corp. | 589,797 | ||||||
19,279 | Dime Community Bancshares, Inc. | 377,868 | ||||||
2,556 | Enterprise Financial Services Corp. | 104,285 | ||||||
12,471 | FCB Financial Holdings, Inc. Class A* | 595,490 | ||||||
558 | Federal Agricultural Mortgage Corp. Class C | 36,103 | ||||||
5,978 | First Busey Corp. | 175,275 | ||||||
1,730 | First Citizens BancShares, Inc. Class A | 644,771 | ||||||
13,231 | First Commonwealth Financial Corp. | 167,769 | ||||||
10,435 | Hanmi Financial Corp. | 296,876 | ||||||
243 | Heartland Financial USA, Inc. | 11,445 | ||||||
4,359 | Hilltop Holdings, Inc. | 114,249 | ||||||
2,432 | Home BancShares, Inc. | 60,557 | ||||||
2,620 | HomeStreet, Inc.* | 72,508 | ||||||
1,184 | IBERIABANK Corp. | 96,496 | ||||||
7,682 | International Bancshares Corp. | 269,254 | ||||||
4,648 | Meridian Bancorp, Inc. | 78,551 | ||||||
39,181 | OFG Bancorp | 391,810 | ||||||
100 | Peapack Gladstone Financial Corp. | 3,129 | ||||||
7,826 | Radian Group, Inc. | 127,955 | ||||||
8,216 | Sandy Spring Bancorp, Inc. | 334,063 | ||||||
100 | TriCo Bancshares | 3,515 | ||||||
2,605 | TrustCo Bank Corp. | 20,189 | ||||||
7,768 | UMB Financial Corp. | 581,512 | ||||||
22,267 | Umpqua Holdings Corp. | 408,822 | ||||||
20,607 | United Community Banks, Inc. | 572,875 | ||||||
12,393 | Walker & Dunlop, Inc.* | 605,150 | ||||||
8,552 | Wintrust Financial Corp. | 653,715 | ||||||
|
| |||||||
8,428,764 | ||||||||
|
| |||||||
Capital Goods – 7.6% | ||||||||
797 | American Woodmark Corp.* | 76,153 | ||||||
1,634 | Applied Industrial Technologies, Inc. | 96,488 | ||||||
8,024 | Argan, Inc. | 481,440 | ||||||
1,564 | Armstrong Flooring, Inc.* | 28,105 | ||||||
3,275 | Astec Industries, Inc. | 181,795 | ||||||
14,324 | BMC Stock Holdings, Inc.* | 312,979 | ||||||
2,652 | Briggs & Stratton Corp. | 63,913 | ||||||
499 | Caesarstone Ltd.* | 17,490 | ||||||
21,669 | Continental Building Products, Inc.* | 504,888 | ||||||
|
| |||||||
Common Stocks – (continued) | ||||||||
Capital Goods – (continued) | ||||||||
6,598 | Curtiss-Wright Corp. | 605,564 | ||||||
2,753 | Ducommun, Inc.* | 86,940 | ||||||
10,624 | EMCOR Group, Inc. | 694,597 | ||||||
6,604 | Esterline Technologies Corp.* | 626,059 | ||||||
735 | Generac Holdings, Inc.* | 26,556 | ||||||
1,277 | Gibraltar Industries, Inc.* | 45,525 | ||||||
14,910 | H&E Equipment Services, Inc. | 304,313 | ||||||
3,045 | Harsco Corp.* | 49,024 | ||||||
16,127 | Hillenbrand, Inc. | 582,185 | ||||||
2,582 | Kennametal, Inc. | 96,618 | ||||||
17,515 | LSI Industries, Inc. | 158,511 | ||||||
2,133 | Masonite International Corp.* | 161,042 | ||||||
5,300 | MasTec, Inc.* | 239,295 | ||||||
1,025 | Milacron Holdings Corp.* | 18,030 | ||||||
4,149 | Miller Industries, Inc. | 103,103 | ||||||
1,749 | MYR Group, Inc.* | 54,254 | ||||||
876 | Neff Corp. Class A* | 16,644 | ||||||
612 | Powell Industries, Inc. | 19,578 | ||||||
16,362 | Rush Enterprises, Inc. Class A* | 608,339 | ||||||
519 | SPX FLOW, Inc.* | 19,141 | ||||||
1,385 | TriMas Corp.* | 28,877 | ||||||
7,605 | Triumph Group, Inc. | 240,318 | ||||||
2,042 | Universal Forest Products, Inc. | 178,287 | ||||||
20,997 | Wabash National Corp. | 461,514 | ||||||
|
| |||||||
7,187,565 | ||||||||
|
| |||||||
Commercial & Professional Services – 5.2% | ||||||||
2,195 | Barrett Business Services, Inc. | 125,752 | ||||||
18,106 | Brady Corp. Class A | 613,793 | ||||||
840 | Brink’s Co. (The) | 56,280 | ||||||
3,852 | CBIZ, Inc.* | 57,780 | ||||||
6,156 | CECO Environmental Corp. | 56,512 | ||||||
2,539 | Essendant, Inc. | 37,653 | ||||||
374 | Exponent, Inc. | 21,804 | ||||||
7,602 | FTI Consulting, Inc.* | 265,766 | ||||||
2,080 | Heidrick & Struggles International, Inc. | 45,240 | ||||||
607 | HNI Corp. | 24,201 | ||||||
656 | ICF International, Inc.* | 30,898 | ||||||
936 | Kelly Services, Inc. Class A | 21,013 | ||||||
32,194 | Kimball International, Inc. Class B | 537,318 | ||||||
2,077 | Knoll, Inc. | 41,644 | ||||||
1,873 | Matthews International Corp. Class A | 114,721 | ||||||
15,221 | McGrath RentCorp | 527,103 | ||||||
7,467 | MSA Safety, Inc. | 606,096 | ||||||
8,465 | Navigant Consulting, Inc.* | 167,268 | ||||||
4,268 | On Assignment, Inc.* | 231,112 | ||||||
13,957 | Quad/Graphics, Inc. | 319,895 | ||||||
19,447 | RPX Corp.* | 271,286 | ||||||
1,840 | RR Donnelley & Sons Co. | 23,074 | ||||||
2,270 | Steelcase, Inc. Class A | 31,780 | ||||||
9,136 | TriNet Group, Inc.* | 299,113 | ||||||
3,176 | TrueBlue, Inc.* | 84,164 | ||||||
3,722 | WageWorks, Inc.* | 250,118 | ||||||
|
| |||||||
4,861,384 | ||||||||
|
|
The accompanying notes are an integral part of these financial statements. | 7 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST SMALL CAP EQUITY INSIGHTS FUND
Schedule of Investments (continued)
June 30, 2017 (Unaudited)
Shares | Description | Value | ||||||
Common Stocks – (continued) | ||||||||
Consumer Durables & Apparel – 3.7% | ||||||||
19,786 | Beazer Homes USA, Inc.* | $ | 271,464 | |||||
32,731 | Callaway Golf Co. | 418,302 | ||||||
6,989 | Deckers Outdoor Corp.* | 477,069 | ||||||
18,147 | Fossil Group, Inc.* | 187,822 | ||||||
4,291 | Installed Building Products, Inc.* | 227,209 | ||||||
3,778 | Libbey, Inc. | 30,451 | ||||||
737 | Malibu Boats, Inc. Class A* | 19,066 | ||||||
1,740 | MCBC Holdings, Inc.* | 34,017 | ||||||
15,722 | MDC Holdings, Inc. | 555,458 | ||||||
315 | Oxford Industries, Inc. | 19,684 | ||||||
8,155 | Steven Madden Ltd.* | 325,792 | ||||||
24,191 | Taylor Morrison Home Corp. Class A* | 580,826 | ||||||
10,203 | Wolverine World Wide, Inc. | 285,786 | ||||||
|
| |||||||
3,432,946 | ||||||||
|
| |||||||
Consumer Services – 4.3% | ||||||||
8,995 | Belmond Ltd. Class A* | 119,634 | ||||||
10,379 | Bridgepoint Education, Inc.* | 153,194 | ||||||
5,476 | Capella Education Co. | 468,746 | ||||||
8,235 | Chegg, Inc.* | 101,208 | ||||||
14,295 | International Speedway Corp. Class A | 536,777 | ||||||
21,290 | K12, Inc.* | 381,517 | ||||||
2,150 | Marriott Vacations Worldwide Corp. | 253,162 | ||||||
860 | Monarch Casino & Resort, Inc.* | 26,015 | ||||||
32,333 | Penn National Gaming, Inc.* | 691,926 | ||||||
5,678 | Red Rock Resorts, Inc. Class A | 133,717 | ||||||
36,950 | Regis Corp.* | 379,477 | ||||||
7,053 | Scientific Games Corp. Class A* | 184,083 | ||||||
2,212 | SeaWorld Entertainment, Inc. | 35,989 | ||||||
10,480 | Sotheby’s* | 562,462 | ||||||
|
| |||||||
4,027,907 | ||||||||
|
| |||||||
Diversified Financials – 4.9% | ||||||||
13,701 | AG Mortgage Investment Trust, Inc. (REIT) | 250,728 | ||||||
101,170 | Anworth Mortgage Asset Corp. (REIT)(b) | 608,032 | ||||||
1,717 | ARMOUR Residential REIT, Inc. (REIT) | 42,925 | ||||||
1,748 | Cherry Hill Mortgage Investment Corp. (REIT) | 32,285 | ||||||
14,031 | Enova International, Inc.* | 208,360 | ||||||
9,536 | Evercore Partners, Inc. Class A | 672,288 | ||||||
5,333 | GAMCO Investors, Inc. Class A | 157,857 | ||||||
18,092 | Greenhill & Co., Inc. | 363,649 | ||||||
950 | Houlihan Lokey, Inc. | 33,155 | ||||||
38,808 | Invesco Mortgage Capital, Inc. (REIT) | 648,482 | ||||||
12,688 | Moelis & Co. Class A | 492,929 | ||||||
22,399 | MTGE Investment Corp. (REIT) | 421,101 | ||||||
678 | Nelnet, Inc. Class A | 31,873 | ||||||
5,740 | Piper Jaffray Cos. | 344,113 | ||||||
14,784 | Western Asset Mortgage Capital Corp. (REIT) | 152,275 | ||||||
|
| |||||||
Common Stocks – (continued) | ||||||||
Diversified Financials – (continued) | ||||||||
1,702 | World Acceptance Corp.* | 127,497 | ||||||
|
| |||||||
4,587,549 | ||||||||
|
| |||||||
Energy – 3.9% | ||||||||
9,610 | Archrock, Inc. | 109,554 | ||||||
1,331 | C&J Energy Services, Inc.* | 45,613 | ||||||
10,429 | Clean Energy Fuels Corp.* | 26,490 | ||||||
12,673 | CVR Energy, Inc.(a) | 275,765 | ||||||
21,039 | Delek US Holdings, Inc. | 556,271 | ||||||
67,843 | Denbury Resources, Inc.* | 103,800 | ||||||
11,807 | EP Energy Corp. Class A*(a) | 43,214 | ||||||
5,729 | Exterran Corp.* | 152,964 | ||||||
24,570 | Fairmount Santrol Holdings, Inc.*(a) | 95,823 | ||||||
10,670 | Green Plains, Inc. | 219,269 | ||||||
86,583 | McDermott International, Inc.* | 620,800 | ||||||
5,566 | Newpark Resources, Inc.* | 40,910 | ||||||
28,199 | Oasis Petroleum, Inc.* | 227,002 | ||||||
4,149 | Oil States International, Inc.* | 112,645 | ||||||
8,236 | Pacific Ethanol, Inc.* | 51,475 | ||||||
30,808 | Pioneer Energy Services Corp.* | 63,156 | ||||||
1,757 | REX American Resources Corp.* | 169,656 | ||||||
10,026 | Rowan Cos. plc Class A* | 102,666 | ||||||
28,807 | Scorpio Tankers, Inc. | 114,364 | ||||||
3,831 | Smart Sand, Inc.* | 34,134 | ||||||
8,468 | Unit Corp.* | 158,606 | ||||||
8,719 | US Silica Holdings, Inc. | 309,437 | ||||||
|
| |||||||
3,633,614 | ||||||||
|
| |||||||
Food, Beverage & Tobacco – 1.2% | ||||||||
711 | Coca-Cola Bottling Co. Consolidated | 162,727 | ||||||
12,347 | Darling Ingredients, Inc.* | 194,342 | ||||||
1,372 | Dean Foods Co. | 23,324 | ||||||
5,685 | Fresh Del Monte Produce, Inc. | 289,423 | ||||||
1,583 | John B Sanfilippo & Son, Inc. | 99,903 | ||||||
838 | Lancaster Colony Corp. | 102,756 | ||||||
3,224 | National Beverage Corp. | 301,637 | ||||||
|
| |||||||
1,174,112 | ||||||||
|
| |||||||
Health Care Equipment & Services – 4.1% | ||||||||
25,510 | AngioDynamics, Inc.* | 413,517 | ||||||
174 | Atrion Corp. | 111,934 | ||||||
2,617 | Cantel Medical Corp. | 203,891 | ||||||
648 | Cardiovascular Systems, Inc.* | 20,885 | ||||||
10,233 | Community Health Systems, Inc.* | 101,921 | ||||||
3,196 | Halyard Health, Inc.* | 125,539 | ||||||
3,345 | K2M Group Holdings, Inc.* | 81,484 | ||||||
483 | Landauer, Inc. | 25,261 | ||||||
1,277 | Lantheus Holdings, Inc.* | 22,539 | ||||||
372 | LHC Group, Inc.* | 25,255 | ||||||
2,477 | Magellan Health, Inc.* | 180,573 | ||||||
7,629 | Masimo Corp.* | 695,612 | ||||||
2,442 | Medidata Solutions, Inc.* | 190,964 | ||||||
6,382 | Molina Healthcare, Inc.* | 441,507 | ||||||
1,401 | NuVasive, Inc.* | 107,765 | ||||||
4,252 | Orthofix International NV* | 197,633 | ||||||
9,896 | Owens & Minor, Inc. | 318,552 | ||||||
|
|
8 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST SMALL CAP EQUITY INSIGHTS FUND
Shares | Description | Value | ||||||
Common Stocks – (continued) | ||||||||
Health Care Equipment & Services – (continued) | ||||||||
5,814 | Quality Systems, Inc.* | $ | 100,059 | |||||
793 | Quidel Corp.* | 21,522 | ||||||
13,615 | Triple-S Management Corp. Class B* | 230,230 | ||||||
9,403 | Wright Medical Group NV* | 258,489 | ||||||
|
| |||||||
3,875,132 | ||||||||
|
| |||||||
Household & Personal Products – 0.4% | ||||||||
12,816 | Central Garden & Pet Co. Class A* | 384,736 | ||||||
434 | USANA Health Sciences, Inc.* | 27,820 | ||||||
|
| |||||||
412,556 | ||||||||
|
| |||||||
Insurance – 2.9% | ||||||||
28,612 | American Equity Investment Life Holding Co. | 751,923 | ||||||
10,757 | Argo Group International Holdings Ltd. | 651,874 | ||||||
25,608 | CNO Financial Group, Inc. | 534,695 | ||||||
551 | FBL Financial Group, Inc. Class A | 33,886 | ||||||
21,913 | Genworth Financial, Inc. Class A* | 82,612 | ||||||
3,324 | James River Group Holdings Ltd. | 132,063 | ||||||
30,451 | Maiden Holdings Ltd. | 338,006 | ||||||
4,075 | Stewart Information Services Corp. | 184,924 | ||||||
|
| |||||||
2,709,983 | ||||||||
|
| |||||||
Materials – 4.8% | ||||||||
5,186 | A Schulman, Inc. | 165,952 | ||||||
479 | Balchem Corp. | 37,223 | ||||||
4,702 | Carpenter Technology Corp. | 175,996 | ||||||
14,682 | Coeur Mining, Inc.* | 125,972 | ||||||
4,206 | Ferro Corp.* | 76,928 | ||||||
1,831 | Greif, Inc. Class A | 102,133 | ||||||
11,635 | Innophos Holdings, Inc. | 510,079 | ||||||
8,099 | KapStone Paper and Packaging Corp. | 167,082 | ||||||
2,441 | Koppers Holdings, Inc.* | 88,242 | ||||||
27,626 | Louisiana-Pacific Corp.* | 666,063 | ||||||
4,683 | Materion Corp. | 175,144 | ||||||
8,866 | Minerals Technologies, Inc. | 648,991 | ||||||
1,239 | Neenah Paper, Inc. | 99,430 | ||||||
1,076 | PolyOne Corp. | 41,684 | ||||||
2,683 | Rayonier Advanced Materials, Inc. | 42,177 | ||||||
20,910 | Schnitzer Steel Industries, Inc. Class A | 526,932 | ||||||
713 | Schweitzer-Mauduit International, Inc. | 26,545 | ||||||
2,602 | Stepan Co. | 226,738 | ||||||
19,396 | SunCoke Energy, Inc.* | 211,416 | ||||||
2,897 | Tronox Ltd. Class A | 43,803 | ||||||
7,206 | Worthington Industries, Inc. | 361,885 | ||||||
|
| |||||||
4,520,415 | ||||||||
|
| |||||||
Media – 0.8% | ||||||||
24,598 | MSG Networks, Inc. Class A* | 552,225 | ||||||
11,630 | Time, Inc. | 166,891 | ||||||
1,587 | tronc, Inc.* | 20,456 | ||||||
|
| |||||||
739,572 | ||||||||
|
| |||||||
Common Stocks – (continued) | ||||||||
Pharmaceuticals, Biotechnology & Life Sciences – 8.5% | ||||||||
13,743 | Akebia Therapeutics, Inc.* | 197,487 | ||||||
20,370 | AMAG Pharmaceuticals, Inc.* | 374,808 | ||||||
21,665 | Array BioPharma, Inc.* | 181,336 | ||||||
4,313 | BioSpecifics Technologies Corp.* | 213,537 | ||||||
2,315 | Bluebird Bio, Inc.* | 243,191 | ||||||
1,814 | Blueprint Medicines Corp.* | 91,915 | ||||||
3,715 | Calithera Biosciences, Inc.* | 55,168 | ||||||
18,615 | Catalent, Inc.* | 653,386 | ||||||
1,141 | Clovis Oncology, Inc.* | 106,832 | ||||||
1,699 | Corcept Therapeutics, Inc.* | 20,048 | ||||||
10,482 | Cytokinetics, Inc.* | 126,832 | ||||||
1,829 | CytomX Therapeutics, Inc.* | 28,349 | ||||||
1,058 | Emergent BioSolutions, Inc.* | 35,877 | ||||||
1,216 | Enanta Pharmaceuticals, Inc.* | 43,752 | ||||||
13,617 | Exact Sciences Corp.* | 481,633 | ||||||
20,767 | FibroGen, Inc.* | 670,774 | ||||||
1,128 | Five Prime Therapeutics, Inc.* | 33,964 | ||||||
18,104 | Genomic Health, Inc.* | 589,285 | ||||||
10,228 | Halozyme Therapeutics, Inc.* | 131,123 | ||||||
1,208 | Heska Corp.* | 123,301 | ||||||
491 | INC Research Holdings, Inc. Class A* | 28,724 | ||||||
13,273 | Innoviva, Inc.* | 169,894 | ||||||
4,209 | Inovio Pharmaceuticals, Inc.* | 32,999 | ||||||
790 | Intersect ENT, Inc.* | 22,081 | ||||||
615 | Ironwood Pharmaceuticals, Inc.* | 11,611 | ||||||
2,644 | Kite Pharma, Inc.* | 274,103 | ||||||
1,585 | Loxo Oncology, Inc.* | 127,101 | ||||||
23,403 | MiMedx Group, Inc.*(a) | 350,343 | ||||||
28,083 | Momenta Pharmaceuticals, Inc.* | 474,603 | ||||||
7,464 | Myriad Genetics, Inc.* | 192,870 | ||||||
491 | Pacira Pharmaceuticals, Inc.* | 23,421 | ||||||
87,665 | PDL BioPharma, Inc.* | 216,533 | ||||||
1,880 | Phibro Animal Health Corp. Class A | 69,654 | ||||||
4,924 | Portola Pharmaceuticals, Inc.* | 276,581 | ||||||
6,831 | Progenics Pharmaceuticals, Inc.* | 46,382 | ||||||
4,354 | PTC Therapeutics, Inc.* | 79,809 | ||||||
1,871 | Puma Biotechnology, Inc.* | 163,525 | ||||||
6,487 | Repligen Corp.* | 268,821 | ||||||
4,608 | Retrophin, Inc.* | 89,349 | ||||||
1,819 | Sage Therapeutics, Inc.* | 144,865 | ||||||
12,713 | SciClone Pharmaceuticals, Inc.* | 139,843 | ||||||
1,188 | Supernus Pharmaceuticals, Inc.* | 51,203 | ||||||
3,136 | Ultragenyx Pharmaceutical, Inc.* | 194,777 | ||||||
6,074 | Vanda Pharmaceuticals, Inc.* | 99,006 | ||||||
1,734 | Xencor, Inc.* | 36,605 | ||||||
|
| |||||||
7,987,301 | ||||||||
|
| |||||||
Real Estate – 7.7% | ||||||||
1,578 | Ashford Hospitality Prime, Inc. (REIT) | 16,238 | ||||||
6,106 | Chatham Lodging Trust (REIT) | 122,670 | ||||||
17,474 | Colony Starwood Homes (REIT) | 599,533 | ||||||
52,887 | DiamondRock Hospitality Co. (REIT) | 579,113 | ||||||
|
|
The accompanying notes are an integral part of these financial statements. | 9 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST SMALL CAP EQUITY INSIGHTS FUND
Schedule of Investments (continued)
June 30, 2017 (Unaudited)
Shares | Description | Value | ||||||
Common Stocks – (continued) | ||||||||
Real Estate – (continued) | ||||||||
5,529 | FelCor Lodging Trust, Inc. (REIT) | $ | 39,864 | |||||
27,286 | First Industrial Realty Trust, Inc. (REIT) | 780,925 | ||||||
5,329 | First Potomac Realty Trust (REIT) | 59,205 | ||||||
9,752 | Hersha Hospitality Trust (REIT) | 180,510 | ||||||
15,109 | Kennedy-Wilson Holdings, Inc. | 287,826 | ||||||
1,464 | National Storage Affiliates Trust (REIT) | 33,833 | ||||||
17,296 | New Senior Investment Group, Inc. (REIT) | 173,825 | ||||||
724 | NexPoint Residential Trust, Inc. (REIT) | 18,020 | ||||||
4,229 | Potlatch Corp. (REIT) | 193,265 | ||||||
5,374 | PS Business Parks, Inc. (REIT) | 711,464 | ||||||
11,821 | QTS Realty Trust, Inc. Class A (REIT) | 618,593 | ||||||
4,636 | Quality Care Properties, Inc. (REIT)* | 84,885 | ||||||
19,822 | Rexford Industrial Realty, Inc. (REIT) | 543,916 | ||||||
30,227 | RLJ Lodging Trust (REIT) | 600,610 | ||||||
337 | RMR Group, Inc. (The) Class A | 16,395 | ||||||
8,210 | Summit Hotel Properties, Inc. (REIT) | 153,116 | ||||||
44,066 | Sunstone Hotel Investors, Inc. (REIT) | 710,344 | ||||||
3,147 | Terreno Realty Corp. (REIT) | 105,928 | ||||||
1,106 | Tier REIT, Inc. (REIT) | 20,439 | ||||||
1,106 | Urstadt Biddle Properties, Inc. Class A (REIT) | 21,899 | ||||||
29,006 | Xenia Hotels & Resorts, Inc. (REIT) | 561,846 | ||||||
|
| |||||||
7,234,262 | ||||||||
|
| |||||||
Retailing – 4.9% | ||||||||
18,917 | Aaron’s, Inc. | 735,871 | ||||||
14,537 | American Eagle Outfitters, Inc. | 175,171 | ||||||
9,893 | Asbury Automotive Group, Inc.* | 559,449 | ||||||
6,753 | Big 5 Sporting Goods Corp. | 88,127 | ||||||
1,481 | Camping World Holdings, Inc. Class A | 45,689 | ||||||
15,126 | Cato Corp. (The) Class A | 266,066 | ||||||
41,969 | Chico’s FAS, Inc. | 395,348 | ||||||
16,833 | Finish Line, Inc. (The) Class A | 238,524 | ||||||
5,619 | Francesca’s Holdings Corp.* | 61,472 | ||||||
9,292 | FTD Cos., Inc.* | 185,840 | ||||||
5,944 | Group 1 Automotive, Inc. | 376,374 | ||||||
24,984 | Liberty TripAdvisor Holdings, Inc. Class A* | 289,814 | ||||||
3,562 | Nutrisystem, Inc. | 185,402 | ||||||
1,901 | Ollie’s Bargain Outlet Holdings, Inc.* | 80,982 | ||||||
9,172 | Pier 1 Imports, Inc. | 47,603 | ||||||
17,379 | Select Comfort Corp.* | 616,781 | ||||||
6,070 | Shutterfly, Inc.* | 288,325 | ||||||
|
| |||||||
4,636,838 | ||||||||
|
| |||||||
Semiconductors & Semiconductor Equipment – 3.6% | ||||||||
22,184 | Amkor Technology, Inc.* | 216,738 | ||||||
3,700 | Brooks Automation, Inc. | 80,253 | ||||||
|
| |||||||
Common Stocks – (continued) | ||||||||
Semiconductors & Semiconductor Equipment – (continued) | ||||||||
6,792 | Cabot Microelectronics Corp. | 501,453 | ||||||
7,969 | Cirrus Logic, Inc.* | 499,816 | ||||||
17,899 | Diodes, Inc.* | 430,113 | ||||||
31,992 | Entegris, Inc.* | 702,224 | ||||||
54,667 | Photronics, Inc.* | 513,870 | ||||||
5,436 | Silicon Laboratories, Inc.* | 371,551 | ||||||
1,359 | Ultra Clean Holdings, Inc.* | 25,481 | ||||||
834 | Veeco Instruments, Inc.* | 23,227 | ||||||
|
| |||||||
3,364,726 | ||||||||
|
| |||||||
Software & Services – 8.7% | ||||||||
2,075 | Acxiom Corp.* | 53,908 | ||||||
10,497 | Aspen Technology, Inc.* | 580,064 | ||||||
1,911 | Barracuda Networks, Inc.* | 44,068 | ||||||
15,736 | Blucora, Inc.* | 333,603 | ||||||
25,006 | Box, Inc. Class A* | 456,109 | ||||||
2,327 | CommVault Systems, Inc.* | 131,359 | ||||||
23,870 | Convergys Corp. | 567,629 | ||||||
15,510 | Cornerstone OnDemand, Inc.* | 554,482 | ||||||
13,160 | CSG Systems International, Inc. | 534,033 | ||||||
15,547 | EVERTEC, Inc. | 268,963 | ||||||
257 | Fair Isaac Corp. | 35,828 | ||||||
7,857 | Five9, Inc.* | 169,083 | ||||||
1,393 | Hortonworks, Inc.* | 17,942 | ||||||
8,486 | HubSpot, Inc.* | 557,955 | ||||||
10,499 | Imperva, Inc.* | 502,377 | ||||||
1,176 | MicroStrategy, Inc. Class A* | 225,404 | ||||||
8,015 | MINDBODY, Inc. Class A* | 218,008 | ||||||
12,391 | New Relic, Inc.* | 532,937 | ||||||
17,397 | NIC, Inc. | 329,673 | ||||||
4,590 | Paylocity Holding Corp.* | 207,376 | ||||||
3,416 | Perficient, Inc.* | 63,674 | ||||||
19,050 | Progress Software Corp. | 588,455 | ||||||
5,193 | QAD, Inc. Class A | 166,436 | ||||||
4,621 | Rubicon Project, Inc. (The)* | 23,752 | ||||||
688 | Sykes Enterprises, Inc.* | 23,069 | ||||||
598 | TeleTech Holdings, Inc. | 24,398 | ||||||
40,789 | Travelport Worldwide Ltd. | 561,257 | ||||||
2,604 | TrueCar, Inc.* | 51,898 | ||||||
511 | Varonis Systems, Inc.* | 19,009 | ||||||
7,321 | Web.com Group, Inc.* | 185,221 | ||||||
4,409 | Yelp, Inc.* | 132,358 | ||||||
|
| |||||||
8,160,328 | ||||||||
|
| |||||||
Technology Hardware & Equipment – 6.8% | ||||||||
3,511 | Applied Optoelectronics, Inc.*(a) | 216,945 | ||||||
13,144 | AVX Corp. | 214,773 | ||||||
2,763 | Belden, Inc. | 208,413 | ||||||
21,475 | Benchmark Electronics, Inc.* | 693,643 | ||||||
23,888 | Extreme Networks, Inc.* | 220,247 | ||||||
15,231 | Finisar Corp.* | 395,701 | ||||||
6,379 | InterDigital, Inc. | 493,097 | ||||||
3,328 | Itron, Inc.* | 225,472 | ||||||
17,149 | Kimball Electronics, Inc.* | 309,539 | ||||||
1,598 | Methode Electronics, Inc. | 65,838 | ||||||
8,738 | NetScout Systems, Inc.* | 300,587 | ||||||
|
|
10 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST SMALL CAP EQUITY INSIGHTS FUND
Shares | Description | Value | ||||||
Common Stocks – (continued) | ||||||||
Technology Hardware & Equipment – (continued) | ||||||||
10,300 | Plexus Corp.* | $ | 541,471 | |||||
6,577 | Rogers Corp.* | 714,394 | ||||||
13,713 | Sanmina Corp.* | 522,465 | ||||||
37,208 | TTM Technologies, Inc.* | 645,931 | ||||||
35,530 | Vishay Intertechnology, Inc. | 589,798 | ||||||
|
| |||||||
6,358,314 | ||||||||
|
| |||||||
Telecommunication Services – 0.9% | ||||||||
4,041 | Boingo Wireless, Inc.* | 60,453 | ||||||
13,443 | Cogent Communications Holdings, Inc. | 539,064 | ||||||
3,595 | IDT Corp. Class B | 51,660 | ||||||
8,328 | Spok Holdings, Inc. | 147,406 | ||||||
10,209 | Vonage Holdings Corp.* | 66,767 | ||||||
|
| |||||||
865,350 | ||||||||
|
| |||||||
Transportation – 1.1% | ||||||||
13,564 | Hawaiian Holdings, Inc.* | 636,830 | ||||||
3,792 | Marten Transport Ltd. | 103,901 | ||||||
8,889 | SkyWest, Inc. | 312,004 | ||||||
|
| |||||||
1,052,735 | ||||||||
|
| |||||||
Utilities – 1.1% | ||||||||
638 | Northwest Natural Gas Co. | 38,184 | ||||||
9,952 | Ormat Technologies, Inc. | 583,983 | ||||||
5,613 | Southwest Gas Holdings, Inc. | 410,086 | ||||||
|
| |||||||
1,032,253 | ||||||||
|
| |||||||
TOTAL COMMON STOCKS | ||||||||
(Cost $84,303,948) | $ | 91,982,051 | ||||||
|
|
Units | Description | Value | ||||||||||
Right* – 0.0% | ||||||||||||
Pharmaceuticals, Biotechnology & Life Sciences – 0.0% | ||||||||||||
1,561 | Dyax Corp., CVR | $ | 4,683 | |||||||||
(Cost $0) | ||||||||||||
| ||||||||||||
Shares | Distribution Rate | Value | ||||||||||
Investment Company(c)(d) – 0.8% | ||||||||||||
Goldman Sachs Financial Square Government Fund — Institutional Shares |
| |||||||||||
752,251 | 0.845 | % | $ | 752,251 | ||||||||
(Cost $752,251) | ||||||||||||
| ||||||||||||
TOTAL INVESTMENTS BEFORE SECURITIES LENDING REINVESTMENT VEHICLE | ||||||||||||
(Cost $85,056,199) | $ | 92,738,985 | ||||||||||
| ||||||||||||
Securities Lending Reinvestment Vehicle(c)(d) – 1.1% | ||||||||||||
Goldman Sachs Financial Square Government Fund — Institutional Shares |
| |||||||||||
1,063,850 | 0.845 | % | $ | 1,063,850 | ||||||||
(Cost $1,063,850) | ||||||||||||
| ||||||||||||
TOTAL INVESTMENTS – 99.8% | ||||||||||||
(Cost $86,120,049) | $ | 93,802,835 | ||||||||||
| ||||||||||||
OTHER ASSETS IN EXCESS OF LIABILITIES – 0.2% |
| 199,059 | ||||||||||
| ||||||||||||
NET ASSETS – 100.0% | $ | 94,001,894 | ||||||||||
|
The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. | ||
* | Non-income producing security. | |
(a) | All or a portion of security is on loan. | |
(b) | All or a portion of security is segregated as collateral for initial margin requirements on futures transactions. | |
(c) | Represents an affiliated issuer. | |
(d) | Variable rate security. Interest rate or distribution rate disclosed is that which is in effect on June 30, 2017. |
Investment Abbreviation: | ||
REIT | — Real Estate Investment Trust |
ADDITIONAL INVESTMENT INFORMATION
FUTURES CONTRACTS — At June 30, 2017, the Fund had the following futures contracts:
Type | Number of Contracts Long (Short) | Expiration Date | Current Value | Unrealized Gain (Loss) | ||||||||||
Russell 2000 Mini Index | 24 | September 2017 | $ | 1,697,160 | $ | (3,462 | ) |
The accompanying notes are an integral part of these financial statements. | 11 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST SMALL CAP EQUITY INSIGHTS FUND
Statement of Assets and Liabilities
June 30, 2017 (Unaudited)
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $84,303,948)(a) | $ | 91,986,734 | ||
Investments in affiliated issuers, at value (cost $752,251) | 752,251 | |||
Investments in affiliated securities lending reinvestment vehicle, at value (cost $1,063,850) | 1,063,850 | |||
Cash | 1,386,385 | |||
Receivables: | ||||
Dividends | 146,473 | |||
Investments sold | 88,696 | |||
Fund shares sold | 15,538 | |||
Reimbursement from investment adviser | 9,184 | |||
Securities lending income | 1,888 | |||
Other assets | 444 | |||
Total assets | 95,451,443 | |||
Liabilities: | ||||
Variation margin on certain derivative contracts | 4,440 | |||
Payables: | ||||
Payable upon return of securities loaned | 1,063,850 | |||
Investments purchased | 140,572 | |||
Fund shares redeemed | 101,323 | |||
Management fees | 53,921 | |||
Distribution and Service fees and Transfer Agency fees | 5,480 | |||
Accrued expenses | 79,963 | |||
Total liabilities | 1,449,549 | |||
Net Assets: | ||||
Paid-in capital | 77,018,337 | |||
Undistributed net investment income | 430,018 | |||
Accumulated net realized gain | 8,874,215 | |||
Net unrealized gain | 7,679,324 | |||
NET ASSETS | $ | 94,001,894 | ||
Net Assets: | ||||
Institutional | $ | 74,772,041 | ||
Service | 19,229,853 | |||
Total Net Assets | $ | 94,001,894 | ||
Shares outstanding $0.001 par value (unlimited shares authorized): | ||||
Institutional | 5,356,207 | |||
Service | 1,388,362 | |||
Net asset value, offering and redemption price per share: | ||||
Institutional | $13.96 | |||
Service | 13.85 |
(a) Includes loaned securities having a market value of $1,040,707.
12 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST SMALL CAP EQUITY INSIGHTS FUND
Statement of Operations
For the Six Months Ended June 30, 2017 (Unaudited)
Investment income: | ||||
Dividends — unaffiliated issuers (net of foreign taxes withheld of $487) | $ | 734,113 | ||
Securities lending income — affiliated issuer | 26,622 | |||
Dividends — affiliated issuers | 2,908 | |||
Total investment income | 763,643 | |||
Expenses: | ||||
Management fees | 355,338 | |||
Professional fees | 41,469 | |||
Custody, accounting and administrative services | 35,227 | |||
Distribution and Service fees — Service Shares | 24,320 | |||
Printing and mailing costs | 21,597 | |||
Transfer Agency fees(a) | 9,475 | |||
Trustee fees | 8,175 | |||
Other | 3,598 | |||
Total expenses | 499,199 | |||
Less — expense reductions | (90,465 | ) | ||
Net expenses | 408,734 | |||
NET INVESTMENT INCOME | 354,909 | |||
Realized and unrealized gain (loss): | ||||
Net realized gain from: | ||||
Investments | 7,421,756 | |||
Futures contracts | 53,996 | |||
Net change in unrealized gain (loss) on: | ||||
Investments | (6,703,050 | ) | ||
Futures contracts | 15,766 | |||
Net realized and unrealized gain | 788,468 | |||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 1,143,377 |
(a) Institutional and Service Shares incurred Transfer Agency fees of $7,530 and $1,945, respectively.
The accompanying notes are an integral part of these financial statements. | 13 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST SMALL CAP EQUITY INSIGHTS FUND
Statements of Changes in Net Assets
For the Six Months Ended June 30, 2017 (Unaudited) | For the Fiscal Year Ended December 31, 2016 | |||||||
From operations: | ||||||||
Net investment income | $ | 354,909 | $ | 585,304 | ||||
Net realized gain | 7,475,752 | 3,248,759 | ||||||
Net change in unrealized gain (loss) | (6,687,284 | ) | 15,333,955 | |||||
Net increase in net assets resulting from operations | 1,143,377 | 19,168,018 | ||||||
Distributions to shareholders: | ||||||||
From net investment income | ||||||||
Institutional Shares | — | (805,471 | ) | |||||
Service Shares | — | (170,271 | ) | |||||
From net realized gains | ||||||||
Institutional Shares | — | (1,921,693 | ) | |||||
Service Shares | — | (521,949 | ) | |||||
Total distributions to shareholders | — | (3,419,384 | ) | |||||
From share transactions: | ||||||||
Proceeds from sales of shares | 3,980,004 | 13,916,746 | ||||||
Reinvestment of distributions | — | 3,419,383 | ||||||
Cost of shares redeemed | (8,978,924 | ) | (27,985,318 | ) | ||||
Net decrease in net assets resulting from share transactions | (4,998,920 | ) | (10,649,189 | ) | ||||
TOTAL INCREASE (DECREASE) | (3,855,543 | ) | 5,099,445 | |||||
Net assets: | ||||||||
Beginning of period | 97,857,437 | 92,757,992 | ||||||
End of period | $ | 94,001,894 | $ | 97,857,437 | ||||
Undistributed net investment income | $ | 430,018 | $ | 75,109 |
14 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST SMALL CAP EQUITY INSIGHTS FUND
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
Income (loss) from investment operations | Distributions to shareholders | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year - Share Class | Net asset value, beginning of period | Net investment income(a) | Net realized and unrealized gain (loss) | Total from investment operations | From net investment income | From net realized gains | Total distributions | Net asset value, end of period | Total return(b) | Net assets, end of period (in 000s) | Ratio of net expenses to average net assets | Ratio of total expenses to average net assets | Ratio of net investment income to average net assets | Portfolio turnover rate(c) | ||||||||||||||||||||||||||||||||||||||||||
FOR THE SIX MONTHS ENDED JUNE 30, (UNAUDITED) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2017 - Institutional | $ | 13.79 | $ | 0.06 | $ | 0.11 | $ | 0.17 | $ | — | $ | — | $ | — | $ | 13.96 | 1.23 | % | $ | 74,772 | 0.81 | %(d) | 1.00 | %(d) | 0.80 | %(d) | 59 | % | ||||||||||||||||||||||||||||
2017 - Service | 13.70 | 0.04 | 0.11 | 0.15 | — | — | — | 13.85 | 1.09 | 19,230 | 1.06 | (d) | 1.25 | (d) | 0.55 | (d) | 59 | |||||||||||||||||||||||||||||||||||||||
FOR THE FISCAL YEARS ENDED DECEMBER 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2016 - Institutional | 11.60 | 0.11 | 2.59 | 2.70 | (0.15 | ) | (0.36 | ) | (0.51 | ) | 13.79 | 23.13 | 77,421 | 0.81 | 1.04 | 0.95 | 119 | |||||||||||||||||||||||||||||||||||||||
2016 - Service | 11.52 | 0.08 | 2.58 | 2.66 | (0.12 | ) | (0.36 | ) | (0.48 | ) | 13.70 | 22.92 | 20,437 | 1.06 | 1.29 | 0.70 | 119 | |||||||||||||||||||||||||||||||||||||||
2015 - Institutional | 13.67 | 0.08 | (e) | (0.37 | ) | (0.29 | ) | (0.04 | ) | (1.74 | ) | (1.78 | ) | 11.60 | (2.13 | ) | 73,270 | 0.81 | 0.99 | 0.59 | (e) | 124 | ||||||||||||||||||||||||||||||||||
2015 - Service | 13.60 | 0.05 | (e) | (0.39 | ) | (0.34 | ) | — | (f) | (1.74 | ) | (1.74 | ) | 11.52 | (2.49 | ) | 19,488 | 1.06 | 1.24 | 0.34 | (e) | 124 | ||||||||||||||||||||||||||||||||||
2014 - Institutional | 15.07 | 0.08 | 0.90 | 0.98 | (0.12 | ) | (2.26 | ) | (2.38 | ) | 13.67 | 6.93 | 89,043 | 0.83 | 1.04 | 0.53 | 119 | |||||||||||||||||||||||||||||||||||||||
2014 - Service | 15.00 | 0.04 | 0.90 | 0.94 | (0.08 | ) | (2.26 | ) | (2.34 | ) | 13.60 | 6.69 | 23,744 | 1.08 | 1.29 | 0.28 | 119 | |||||||||||||||||||||||||||||||||||||||
2013 - Institutional | 12.71 | 0.11 | 4.37 | 4.48 | (0.16 | ) | (1.96 | ) | (2.12 | ) | 15.07 | 35.62 | 98,114 | 0.82 | 0.98 | 0.77 | 152 | |||||||||||||||||||||||||||||||||||||||
2013 - Service | 12.65 | 0.08 | 4.34 | 4.42 | (0.11 | ) | (1.96 | ) | (2.07 | ) | 15.00 | 35.38 | 25,932 | 1.07 | 1.23 | 0.52 | 152 | |||||||||||||||||||||||||||||||||||||||
2012 - Institutional | 11.40 | 0.19 | (g) | 1.27 | (h) | 1.46 | (0.15 | ) | — | (0.15 | ) | 12.71 | 12.79 | (h) | 82,961 | 0.81 | 0.97 | 1.55 | (g) | 95 | ||||||||||||||||||||||||||||||||||||
2012 - Service | 11.35 | 0.17 | (g) | 1.25 | (h) | 1.42 | (0.12 | ) | — | (0.12 | ) | 12.65 | 12.47 | (h) | 22,674 | 1.06 | 1.22 | 1.34 | (g) | 95 |
(a) | Calculated based on the average shares outstanding methodology. |
(b) | Assumes investment at the net asset value at the beginning of the period, reinvestment of all distributions, and a complete redemption of the investment at the net asset value at the end of the period. Total returns for periods less than one full year are not annualized. |
(c) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short term investments and certain derivatives. If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
(d) | Annualized. |
(e) | Reflects income recognized from special dividends which amounted to $0.02 per share and 0.15% of average net assets. |
(f) | Amount is less than $0.005 per share. |
(g) | Reflects income recognized from special dividends which amounted to $0.08 per share and 0.62% of average net assets. |
(h) | Reflects payment from affiliate relating to certain investment transactions which amounted to $0.08 per share. Excluding such payment, the total return would have been 12.44% and 12.12%, respectively. |
The accompanying notes are an integral part of these financial statements. | 15 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST SMALL CAP EQUITY INSIGHTS FUND
Notes to Financial Statements
June 30, 2017 (Unaudited)
1. ORGANIZATION
Goldman Sachs Variable Insurance Trust (the “Trust” or “VIT”) is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company. The Trust includes the Goldman Sachs Small Cap Equity Insights Fund (the “Fund”). The Fund is a diversified portfolio under the Act offering two classes of shares — Institutional and Service Shares. Shares of the Trust are offered to separate accounts of participating life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies.
Goldman Sachs Asset Management, L.P. (“GSAM”), an affiliate of Goldman Sachs & Co. LLC (formerly Goldman, Sachs & Co.) (“Goldman Sachs”), serves as investment adviser to the Fund pursuant to a management agreement (the “Agreement”) with the Trust.
2. SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and require management to make estimates and assumptions that may affect the reported amounts and disclosures. Actual results may differ from those estimates and assumptions.
A. Investment Valuation — The Fund’s valuation policy is to value investments at fair value.
B. Investment Income and Investments — Investment income includes interest income, dividend income and securities lending income. Interest income is accrued daily and adjusted for amortization of premiums and accretion of discounts. Dividend income is recognized on ex-dividend date or, for certain foreign securities, as soon as such information is obtained subsequent to the ex-dividend date. Investment transactions are reflected on trade date. Realized gains and losses are calculated using identified cost. Investment transactions are recorded on the following business day for daily net asset value (“NAV”) calculations. Investment income is recorded net of any foreign withholding taxes, less any amounts reclaimable. The Fund may file withholding tax reclaims in certain jurisdictions to recover a portion of amounts previously withheld. Any foreign capital gains tax is accrued daily based upon net unrealized gains, and is payable upon sale of such investments. Distributions received from the Fund’s investments in United States (“U.S.”) real estate investment trusts (“REITs”) may be characterized as ordinary income, net capital gain or a return of capital. A return of capital is recorded by the Fund as a reduction to the cost basis of the REIT.
For derivative contracts, realized gains and losses are recorded upon settlement of the contract.
C. Class Allocations and Expenses — Investment income, realized and unrealized gain (loss), and non-class specific expenses of the Fund are allocated daily based upon the proportion of net assets of each class. Non-class specific expenses directly incurred by the Fund are charged to the Fund, while such expenses incurred by the Trust are allocated across the Fund on a straight-line and/or pro-rata basis depending upon the nature of the expenses. Class specific expenses, where applicable, are borne by the respective share classes and include Distribution and Service and Transfer Agency fees.
D. Federal Taxes and Distributions to Shareholders — It is the Fund’s policy to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Code”), applicable to regulated investment companies (mutual funds) and to distribute each year substantially all of its investment company taxable income and capital gains to its shareholders. Accordingly, the Fund is not required to make any provisions for the payment of federal income tax. Distributions to shareholders are recorded on the ex-dividend date. Income and capital gains distributions, if any, are declared and paid annually.
Net capital losses, if any, are carried forward to future fiscal years and may be used to the extent allowed by the Code to offset any future capital gains. Losses that are carried forward will retain their character as either short-term or long-term capital losses. Utilization of capital loss carryforwards will reduce the requirement of future capital gains distributions.
The characterization of distributions to shareholders for financial reporting purposes is determined in accordance with federal income tax rules, which may differ from GAAP. The source of the Fund’s distributions may be shown in the accompanying financial statements as either from net investment income, net realized gain or capital. Certain components of the Fund’s net assets on the Statement of Assets and Liabilities reflect permanent GAAP/tax differences based on the appropriate tax character.
16
GOLDMAN SACHS VARIABLE INSURANCE TRUST SMALL CAP EQUITY INSIGHTS FUND
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS
U.S. GAAP defines the fair value of a financial instrument as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price); the Fund’s policy is to use the market approach. GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The levels used for classifying investments are not necessarily an indication of the risk associated with investing in these investments. The three levels of the fair value hierarchy are described below:
Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 — Quoted prices in markets that are not active or financial instruments for which significant inputs are observable (including, but not limited to, quoted prices for similar investments, interest rates, foreign exchange rates, volatility and credit spreads), either directly or indirectly;
Level 3 — Prices or valuations that require significant unobservable inputs (including GSAM’s assumptions in determining fair value measurement).
Changes in valuation techniques may result in transfers into or out of an assigned level within the hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value hierarchy resulting from such changes are deemed to have occurred as of the beginning of the reporting period.
The Board of Trustees (“Trustees”) has approved Valuation Procedures that govern the valuation of the portfolio investments held by the Fund, including investments for which market quotations are not readily available. The Trustees have delegated to GSAM day-to-day responsibility for implementing and maintaining internal controls and procedures related to the valuation of the Fund’s portfolio investments. To assess the continuing appropriateness of pricing sources and methodologies, GSAM regularly performs price verification procedures and issues challenges as necessary to third party pricing vendors or brokers, and any differences are reviewed in accordance with the Valuation Procedures.
A. Level 1 and Level 2 Fair Value Investments — The valuation techniques and significant inputs used in determining the fair values for investments classified as Level 1 and Level 2 are as follows:
Equity Securities — Equity securities traded on a U.S. securities exchange or the NASDAQ system, or those located on certain foreign exchanges, including but not limited to the Americas, are valued daily at their last sale price or official closing price on the principal exchange or system on which they are traded. If there is no sale or official closing price or such price is believed by GSAM to not represent fair value, equity securities are valued at the last bid price for long positions and at the last ask price for short positions. To the extent these investments are actively traded, they are classified as Level 1 of the fair value hierarchy, otherwise they are generally classified as Level 2.
Unlisted equity securities for which market quotations are available are valued at the last sale price on the valuation date, or if no sale occurs, at the last bid price. These investments are generally classified as Level 2 of the fair value hierarchy.
Money Market Funds — Investments in the Goldman Sachs Financial Square Government Fund (“Underlying Fund”) are valued at the NAV of the Institutional Share class on the day of valuation. These investments are generally classified as Level 1 of the fair value hierarchy. For information regarding an Underlying Fund’s accounting policies and investment holdings, please see the Underlying Fund’s shareholder report.
Derivative Contracts — A derivative is an instrument whose value is derived from underlying assets, indices, reference rates or a combination of these factors. The Fund enters into derivative transactions to hedge against changes in interest rates, securities prices, and/or currency exchange rates, to increase total return, or to gain access to certain markets or attain exposure to other underliers.
Exchange-traded derivatives, including futures and options contracts, are valued at the last sale or settlement price and typically fall within Level 1 of the fair value hierarchy. Over-the-counter (“OTC”) and centrally cleared derivatives are valued using market transactions and other market evidence, including market-based inputs to models, calibration to market-clearing transactions, broker or dealer quotations, or other alternative pricing sources. Where models are used, the selection of a particular
17
GOLDMAN SACHS VARIABLE INSURANCE TRUST SMALL CAP EQUITY INSIGHTS FUND
Notes to Financial Statements (continued)
June 30, 2017 (Unaudited)
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS (continued)
model to value OTC and centrally cleared derivatives depends upon the contractual terms of, and specific risks inherent in, the instrument, as well as the availability of pricing information in the market. Valuation models require a variety of inputs, including contractual terms, market prices, yield curves, credit curves, measures of volatility, voluntary and involuntary prepayment rates, loss severity rates and correlations of such inputs. For OTC and centrally cleared derivatives that trade in liquid markets, model inputs can generally be verified and model selection does not involve significant management judgment. OTC and centrally cleared derivatives are classified within Level 2 of the fair value hierarchy when significant inputs are corroborated by market evidence.
i. Futures Contracts — Futures contracts are contracts to buy or sell a standardized quantity of a specified commodity or security and are valued based on exchanged settlement prices or independent market quotes. Futures contracts are valued at the last settlement price, or in the absence of a sale, the last bid price for long positions and at the last ask price for short positions, at the end of each day on the board of trade or exchange upon which they are traded. Upon entering into a futures contract, the Fund deposits cash or securities in an account on behalf of the broker in an amount sufficient to meet the initial margin requirement. Subsequent payments are made or received by the Fund equal to the daily change in the contract value and are recorded as variation margin receivable or payable with a corresponding offset to unrealized gains or losses. For financial reporting purposes, cash collateral that has been pledged to cover obligations of the Fund and cash collateral received, if any, is reported separately on the Statement of Assets and Liabilities as receivables/payables for collateral on certain derivative contracts. Non-cash collateral pledged by the Fund, if any, is noted in the Schedule of Investments.
B. Level 3 Fair Value Investments — To the extent that significant inputs to valuation models and other alternative pricing sources are unobservable, or if quotations are not readily available, or if GSAM believes that such quotations do not accurately reflect fair value, the fair value of the Fund’s investments may be determined under Valuation Procedures approved by the Trustees. GSAM, consistent with its procedures and applicable regulatory guidance, may make an adjustment to the most recent valuation prices of either domestic or foreign securities in light of significant events to reflect what it believes to be the fair value of the securities at the time of determining the Fund’s NAV. Significant events which could affect a large number of securities in a particular market may include, but are not limited to: significant fluctuations in U.S. or foreign markets; market dislocations; market disruptions; or unscheduled market closings. Significant events which could also affect a single issuer may include, but are not limited to: corporate actions such as reorganizations, mergers and buy-outs; ratings downgrades; and bankruptcies.
C. Fair Value Hierarchy — The following is a summary of the Fund’s investments and derivatives classified in the fair value hierarchy as of June 30, 2017:
Investment Type | Level 1 | Level 2 | Level 3 | |||||||||
Assets | ||||||||||||
Common Stock and/or Other Equity Investments(a) | ||||||||||||
Asia | $ | 17,490 | $ | — | $ | — | ||||||
Europe | 233,998 | — | — | |||||||||
North America | 91,730,563 | — | 4,683 | |||||||||
Investment Company | 752,251 | — | — | |||||||||
Securities Lending Reinvestment Vehicle | 1,063,850 | — | — | |||||||||
Total | $ | 93,798,152 | $ | — | $ | 4,683 | ||||||
Derivative Type | ||||||||||||
Liability(b) | ||||||||||||
Futures Contracts | $ | (3,462 | ) | $ | — | $ | — |
(a) | Amounts are disclosed by continent to highlight the impact of time zone differences between local market close and the calculation of NAV. Security valuations are based on the principal exchange or system on which they are traded, which may differ from country of domicile noted in the table. |
(b) | Amount shown represents unrealized gain (loss) at period end. |
For further information regarding security characteristics, see the Schedule of Investments.
18
GOLDMAN SACHS VARIABLE INSURANCE TRUST SMALL CAP EQUITY INSIGHTS FUND
4. INVESTMENTS IN DERIVATIVES
The following table sets forth, by certain risk types, the gross value of derivative contracts as of June 30, 2017. These instruments were used as part of the Fund’s investment strategies and to obtain and/or manage exposure related to the risks below. The values in the table below exclude the effects of cash collateral received or posted pursuant to these derivative contracts, and therefore are not representative of the Fund’s net exposure.
Risk | Statement of Assets and Liabilities | Assets | Statement of Assets and Liabilities | Liabilities(a) | ||||||||||
Equity | — | $ | — | Variation margin on certain derivative contracts | $ | (3,462 | ) |
(a) | Includes unrealized gain (loss) on futures contracts described in the Additional Investment Information section of the Schedule of Investments. Only the variation margin as of June 30, 2017 is reported within the Statement of Assets and Liabilities. |
The following table sets forth, by certain risk types, the Fund’s gains (losses) related to these derivatives and their indicative volumes for the six months ended June 30, 2017. These gains (losses) should be considered in the context that these derivative contracts may have been executed to create investment opportunities and/or economically hedge certain investments, and accordingly, certain gains (losses) on such derivative contracts may offset certain (losses) gains attributable to investments. These gains (losses) are included in “Net realized gain (loss)” or “Net change in unrealized gain (loss)” on the Statement of Operations:
Risk | Statement of Operations | Net Realized Gain (Loss) | Net Change in Unrealized Gain (Loss) | Average Number of Contracts(a) | ||||||||||
Equity | Net realized gain (loss) from futures contracts/Net change in unrealized gain (loss) on futures contracts | $ | 53,996 | $ | 15,766 | 24 |
(a) | Average number of contracts is based on the average of month end balances for the six months ended June 30, 2017. |
5. AGREEMENTS AND AFFILIATED TRANSACTIONS
A. Management Agreement — Under the Agreement, GSAM manages the Fund, subject to the general supervision of the Trustees.
As compensation for the services rendered pursuant to the Agreement, the assumption of the expenses related thereto and administration of the Fund’s business affairs, including providing facilities, GSAM is entitled to a management fee, accrued daily and paid monthly, equal to an annual percentage rate of the Fund’s average daily net assets.
For the six months ended June 30, 2017, contractual and effective net management fees with GSAM were at the following rates:
Contractual Management Rate | ||||||||||||||||||||||
First $2 billion | Next $3 billion | Next $3 billion | Over $8 billion | Effective Rate | Effective Net Management Rate^ | |||||||||||||||||
0.75% | 0.68 | % | 0.65 | % | 0.64 | % | 0.75 | % | 0.70 | %* |
^ | Effective Net Management Rate includes the impact of management fee waivers of affiliated Underlying Funds, if any. |
* | GSAM agreed to waive a portion of its management fee in order to achieve a net management rate, as defined in the Fund’s most recent prospectus. This waiver will be effective through at least April 28, 2018, and prior to such date GSAM may not terminate the arrangement without approval of the Trustees. For the six months ended June 30, 2017, GSAM waived $23,690, of its management fee. |
The Fund invests in Institutional Shares of the Goldman Sachs Financial Square Government Fund, which is an affiliated Underlying Fund. GSAM has agreed to waive a portion of its management fee payable by the Fund in an amount equal to the management fee it earns as an investment adviser to any of the affiliated Underlying Funds in which the Fund invests. For the six months ended June 30, 2017, GSAM waived $777 of the Fund’s management fee.
19
GOLDMAN SACHS VARIABLE INSURANCE TRUST SMALL CAP EQUITY INSIGHTS FUND
Notes to Financial Statements (continued)
June 30, 2017 (Unaudited)
5. AGREEMENTS AND AFFILIATED TRANSACTIONS (continued)
B. Distribution and/or Service (12b-1) Plan — The Trust, on behalf of Service Shares of the Fund, has adopted a Distribution and Service Plan subject to Rule 12b-1 under the Act. Under the Distribution and Service Plan, Goldman Sachs, which serves as distributor (the “Distributor”), is entitled to a fee accrued daily and paid monthly, for distribution services and personal and account maintenance services, which may then be paid by Goldman Sachs to authorized dealers, equal to, on an annual basis, 0.25% of the Fund’s average daily net assets attributable to Service Shares.
C. Transfer Agency Agreement — Goldman Sachs also serves as the transfer agent of the Fund for a fee pursuant to the Transfer Agency Agreement. The fees charged for such transfer agency services are accrued daily and paid monthly at an annual rate of 0.02% of the average daily net assets of Institutional and Service Shares.
D. Other Expense Agreements and Affiliated Transactions — GSAM has agreed to limit certain “Other Expenses” of the Fund (excluding acquired fund fees and expenses, transfer agency fees and expenses, taxes, interest, brokerage fees, shareholder meeting, litigation, indemnification and extraordinary expenses) to the extent such expenses exceed, on an annual basis, a percentage rate of the average daily net assets of the Fund. Such Other Expense reimbursements, if any, are accrued daily and paid monthly. In addition, the Fund is not obligated to reimburse GSAM for prior fiscal year expense reimbursements, if any. The Other Expense limitation as an annual percentage rate of average daily net assets for the Fund is 0.094%. The Other Expense limitation will remain in place through at least April 28, 2018, and prior to such date GSAM may not terminate the arrangement without the approval of the Trustees. For the six months ended June 30, 2017, GSAM reimbursed $65,526 to the Fund. In addition, the Fund has entered into certain offset arrangements with the custodian and the transfer agent, which may result in a reduction of the Fund’s expenses and are received irrespective of the application of the “Other Expense” limitation described above. For the six months ended June 30, 2017, custody fee credits were $472.
E. Line of Credit Facility — As of June 30, 2017, the Fund participated in a $1,100,000,000 committed, unsecured revolving line of credit facility (the “facility”) together with other funds of the Trust and certain registered investment companies having management agreements with GSAM or its affiliates. This facility is to be used for temporary emergency purposes, or to allow for an orderly liquidation of securities to meet redemption requests. The interest rate on borrowings is based on the federal funds rate. The facility also requires a fee to be paid by the Fund based on the amount of the commitment that has not been utilized. For the six months ended June 30, 2017, the Fund did not have any borrowings under the facility.
F. Other Transactions with Affiliates — The following table provides information about the Fund’s investment in the Goldman Sachs Financial Square Government Fund as of and for the six months ended June 30, 2017:
Market Value 12/31/2016 | Purchases at Cost | Proceeds from Sales | Market Value 6/30/2017 | Dividend Income | ||||||||||||||
$ | 1,221,911 | $ | 6,508,723 | $ | (6,978,383 | ) | $ | 752,251 | $ | 2,908 |
6. PORTFOLIO SECURITIES TRANSACTIONS
The cost of purchases and proceeds from sales and maturities of long-term securities for the six months ended June 30, 2017, were $55,342,467 and $59,388,691 respectively.
7. SECURITIES LENDING
Pursuant to exemptive relief granted by the Securities and Exchange Commission (“SEC”) and the terms and conditions contained therein, the Fund may lend its securities through a securities lending agent, Goldman Sachs Agency Lending (“GSAL”), a wholly-owned subsidiary of Goldman Sachs, to certain qualified borrowers including Goldman Sachs and affiliates. In accordance with the
20
GOLDMAN SACHS VARIABLE INSURANCE TRUST SMALL CAP EQUITY INSIGHTS FUND
7. SECURITIES LENDING (continued)
Fund’s securities lending procedures, the Fund receives cash collateral at least equal to the market value of the securities on loan. The market value of the loaned securities is determined at the close of business of the Fund, at their last sale price or official closing price on the principal exchange or system on which they are traded, and any additional required collateral is delivered to the Fund on the next business day. As with other extensions of credit, the Fund may experience delay in the recovery of its securities or incur a loss should the borrower of the securities breach its agreement with the Fund or become insolvent at a time when the collateral is insufficient to cover the cost of repurchasing securities on loan. Dividend income received from securities on loan may not be subject to withholding taxes and therefore withholding taxes paid may differ from the amounts listed in the Statement of Operations. Loans of securities are terminable at any time and as such 1) the remaining contractual maturities of the outstanding securities lending transactions are considered to be overnight and continuous and 2) the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.
The Fund invests the cash collateral received in connection with securities lending transactions in the Goldman Sachs Financial Square Government Fund (“Government Money Market Fund”), an affiliated series of the Trust. The Government Money Market Fund is registered under the Act as an open end investment company, is subject to Rule 2a-7 under the Act, and is managed by GSAM, for which GSAM may receive a management fee of up to 0.205% on an annualized basis of the average daily net assets of the Government Money Market Fund.
In the event of a default by a borrower with respect to any loan, GSAL will exercise any and all remedies provided under the applicable borrower agreement to make the Fund whole. These remedies include purchasing replacement securities by applying the collateral held from the defaulting broker against the purchase cost of the replacement securities. If GSAL is unable to purchase replacement securities, GSAL will indemnify the Fund by paying the Fund an amount equal to the market value of the securities loaned minus the value of cash collateral received from the borrower for the loan, subject to an exclusion for any shortfalls resulting from a loss of value in such cash collateral due to reinvestment risk. The amounts of the Fund’s overnight and continuous agreements represent the gross amounts of recognized liabilities for securities lending transactions outstanding as of June 30, 2017 are disclosed as “Payable upon return of securities loaned” on the Statement of Assets and Liabilities.
Both the Fund and GSAL received compensation relating to the lending of the Fund’s securities. The amounts earned, if any, by the Fund for the six months ended June 30, 2017, are reported under Investment Income on the Statement of Operations.
The table below details securities lending activity with affiliates of Goldman Sachs:
For the Six Months ended June 30, 2017 | ||||||||||
Earnings of GSAL Relating to Securities Loaned | Amounts Received by the Funds from Lending to Goldman Sachs | Amounts Payable to Goldman Sachs Upon Return of Securities Loaned as of June 30, 2017 | ||||||||
$2,954 | $ | 2,301 | $ | 305,275 |
The following table provides information about the Fund’s investment in the Government Money Market Fund for the six months ended June 30, 2017:
Market Value 12/31/2016 | Purchases at Cost | Proceeds from Sales | Market Value 6/30/2017 | |||||||||||
$ | 758,249 | $ | 7,986,951 | $ | (7,681,350 | ) | $ | 1,063,850 |
8. TAX INFORMATION
As of the Fund’s most recent fiscal year end, December 31, 2016, the Fund’s timing differences, on a tax-basis were as follows:
Timing differences (§ 857(b)(9) Deferred Dividend) | $ | 34,156 |
21
GOLDMAN SACHS VARIABLE INSURANCE TRUST SMALL CAP EQUITY INSIGHTS FUND
Notes to Financial Statements (continued)
June 30, 2017 (Unaudited)
8. TAX INFORMATION (continued)
As of June 30, 2017, the Fund’s aggregate security unrealized gains and losses based on cost for U.S. federal income tax purposes were as follows:
Tax cost | $ | 86,442,209 | ||
Gross unrealized gain | 12,014,485 | |||
Gross unrealized loss | (4,653,859 | ) | ||
Net unrealized security gain | $ | 7,360,626 |
The difference between GAAP-basis and tax-basis unrealized gains (losses) is attributable primarily to wash sales, net mark to market gains (losses) on regulated futures contracts and differences in the tax treatment of underlying fund investments, passive foreign investment company investments, and real estate investment trust investments.
GSAM has reviewed the Fund’s tax positions for all open tax years (the current and prior three years, as applicable) and has concluded that no provision for income tax is required in the Fund’s financial statements. Such open tax years remain subject to examination and adjustment by tax authorities.
9. OTHER RISKS
The Fund’s risks include, but are not limited to, the following:
Derivatives Risk — The Fund’s use of derivatives may result in loss. Derivative instruments, which may pose risks in addition to and greater than those associated with investing directly in securities, currencies or other instruments, may be illiquid or less liquid, volatile, difficult to price and leveraged so that small changes in the value of the underlying instruments may produce disproportionate losses to the Fund. Derivatives are also subject to counterparty risk, which is the risk that the other party in the transaction will not fulfill its contractual obligation. The use of derivatives is a highly specialized activity that involves investment techniques and risks different from those associated with investments in more traditional securities and instruments. Losses from derivatives can also result from a lack of correlation between changes in the value of derivative instruments and the portfolio assets (if any) being hedged.
Investments in Other Investment Companies — As a shareholder of another investment company, including an exchange-traded fund (“ETF”), the Fund will indirectly bear its proportionate share of any net management fees and other expenses paid by such other investment companies, in addition to the fees and expenses regularly borne by the Fund. ETFs are subject to risks that do not apply to conventional mutual funds, including but not limited to the following: (i) the market price of the ETF’s shares may trade at a premium or a discount to their NAV; and (ii) an active trading market for an ETF’s shares may not develop or be maintained.
Large Shareholder Transactions Risk — The Fund may experience adverse effects when certain large shareholders, such as other funds, participating insurance companies, accounts and Goldman Sachs affiliates, purchase or redeem large amounts of shares of the Fund. Such large shareholder redemptions may cause the Fund to sell portfolio securities at times when it would not otherwise do so, which may negatively impact the Fund’s NAV and liquidity. These transactions may also accelerate the realization of taxable income to shareholders if such sales of investments resulted in gains, and may also increase transaction costs. In addition, a large redemption could result in the Fund’s current expenses being allocated over a smaller asset base, leading to an increase in the Fund’s expense ratio. Similarly, large Fund share purchases may adversely affect the Fund’s performance to the extent that the Fund is delayed in investing new cash and is required to maintain a larger cash position than it ordinarily would.
Liquidity Risk — The Fund may make investments that are illiquid or that may become less liquid in response to market developments or adverse investor perceptions. Illiquid investments may be more difficult to value. Liquidity risk may also refer to the risk that the Fund will not be able to pay redemption proceeds within the allowable time period because of unusual market
22
GOLDMAN SACHS VARIABLE INSURANCE TRUST SMALL CAP EQUITY INSIGHTS FUND
9. OTHER RISKS (continued)
conditions, an unusually high volume of redemption requests, or other reasons. To meet redemption requests, the Fund may be forced to sell investments at an unfavorable time and/or under unfavorable conditions.
Market and Credit Risks — In the normal course of business, the Fund trades financial instruments and enters into financial transactions where risk of potential loss exists due to changes in the market (market risk). Additionally, the Fund may also be exposed to credit risk in the event that an issuer or guarantor fails to perform or that an institution or entity with which the Fund has unsettled or open transactions defaults.
10. INDEMNIFICATIONS
Under the Trust’s organizational documents, its Trustees, officers, employees and agents are indemnified, to the extent permitted by the Act and state law, against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the course of business, the Fund enters into contracts that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, GSAM believes the risk of loss under these arrangements to be remote.
11. SUBSEQUENT EVENTS
Subsequent events after the Statement of Assets and Liabilities date have been evaluated and GSAM has concluded that there is no impact requiring adjustment or disclosure in the financial statements.
12. SUMMARY OF SHARE TRANSACTIONS
Share activity is as follows:
For the Six Months Ended June 30, 2017 (Unaudited) | For the Fiscal Year Ended December 31, 2016 | |||||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||||
Institutional Shares | ||||||||||||||||
Shares sold | 253,645 | $ | 3,519,190 | 1,055,485 | $ | 13,309,062 | ||||||||||
Reinvestment of distributions | — | — | 196,058 | 2,727,164 | ||||||||||||
Shares redeemed | (512,017 | ) | (7,090,809 | ) | (1,955,267 | ) | (24,207,664 | ) | ||||||||
(258,372 | ) | (3,571,619 | ) | (703,724 | ) | (8,171,438 | ) | |||||||||
Service Shares | ||||||||||||||||
Shares sold | 33,363 | 460,814 | 52,803 | 607,684 | ||||||||||||
Reinvestment of distributions | — | — | 50,088 | 692,219 | ||||||||||||
Shares redeemed | (136,919 | ) | (1,888,115 | ) | (301,894 | ) | (3,777,654 | ) | ||||||||
(103,556 | ) | (1,427,301 | ) | (199,003 | ) | (2,477,751 | ) | |||||||||
NET DECREASE | (361,928 | ) | $ | (4,998,920 | ) | (902,727 | ) | $ | (10,649,189 | ) |
23
GOLDMAN SACHS VARIABLE INSURANCE TRUST SMALL CAP EQUITY INSIGHTS FUND
Fund Expenses — Six Month Period Ended June 30, 2017 (Unaudited) |
As a shareholder of Institutional or Service Shares of the Fund, you incur ongoing costs, including management fees, distribution and/or service (12b-1) fees (with respect to Service Shares) and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Institutional Shares and Service Shares of the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from January 1, 2017 through June 30, 2017, which represents a period of 181 days of a 365 day year.
Actual Expenses — The first line under each share class in the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000=8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes — The second line under each share class in the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual net expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only. As a shareholder of the Fund you do not incur any transaction costs, such as sales charges, redemption fees, or exchange fees, but shareholders of other funds may incur such costs. The second line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds whose shareholders may incur transaction costs.
Share Class | Beginning Account Value 01/01/17 | Ending Account Value 06/30/17 | Expenses Paid for the 6 Months Ended 06/30/17* | |||||||||
Institutional | ||||||||||||
Actual | $ | 1,000 | $ | 1,012.30 | $ | 4.04 | ||||||
Hypothetical 5% return | 1,000 | 1,020.78 | + | 4.06 | ||||||||
Service | ||||||||||||
Actual | 1,000 | 1,010.90 | 5.29 | |||||||||
Hypothetical 5% return | 1,000 | 1,019.54 | + | 5.31 |
* | Expenses are calculated using the Fund’s annualized net expense ratio for each class, which represents the ongoing expenses as a percentage of net assets for the six months ended June 30, 2017. Expenses are calculated by multiplying the annualized net expense ratio by the average account value for the period; then multiplying the result by the number of days in the most recent fiscal half year; and then dividing that result by the number of days in the fiscal year. The annualized net expense ratios for the period were 0.81% and 1.06% for the Institutional and Service Shares, respectively. |
+ | Hypothetical expenses are based on the Fund’s actual annualized net expense ratios and an assumed rate of return of 5% per year before expenses. |
24
GOLDMAN SACHS VARIABLE INSURANCE TRUST SMALL CAP EQUITY INSIGHTS FUND
Statement Regarding Basis for Approval of Management Agreement (Unaudited)
Background
The Goldman Sachs Small Cap Equity Insights Fund (the “Fund”) is an investment portfolio of Goldman Sachs Variable Insurance Trust (the “Trust”). The Board of Trustees oversees the management of the Trust and reviews the investment performance and expenses of the Fund at regularly scheduled meetings held throughout the year. In addition, the Board of Trustees determines annually whether to approve the continuance of the Trust’s investment management agreement (the “Management Agreement”) with Goldman Sachs Asset Management, L.P. (the “Investment Adviser”) on behalf of the Fund.
The Management Agreement was most recently approved for continuation until June 30, 2018 by the Board of Trustees, including those 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”), at a meeting held on June 14-15, 2017 (the “Annual Meeting”).
The review process undertaken by the Trustees spans the course of the year and culminates with the Annual Meeting. To assist the Trustees in their deliberations, the Trustees have established a Contract Review Committee (the “Committee”), comprised of the Independent Trustees. The Committee held four meetings over the course of the year since the Management Agreement was last approved. At those Committee meetings, regularly scheduled Board or other committee meetings, and/or the Annual Meeting, matters relevant to the renewal of the Management Agreement were considered by the Board, or the Independent Trustees, as applicable. With respect to the Fund, such matters included:
(a) | the nature and quality of the advisory, administrative, and other services provided to the Fund by the Investment Adviser and its affiliates, including information about: |
(i) | the structure, staff, and capabilities of the Investment Adviser and its portfolio management teams; |
(ii) | the groups within the Investment Adviser and its affiliates that support the portfolio management teams or provide other types of necessary services, including fund services groups (e.g., accounting and financial reporting, tax, shareholder services, and operations); controls and risk management groups (e.g., legal, compliance, valuation oversight, credit risk management, internal audit, compliance testing, market risk analysis, finance, and central funding); sales and distribution support groups, and others (e.g., information technology and training); |
(iii) | trends in employee headcount; |
(iv) | the Investment Adviser’s financial resources and ability to hire and retain talented personnel and strengthen its operations; and |
(v) | the parent company’s support of the Investment Adviser and its mutual fund business, as expressed by the firm’s senior management; |
(b) | information on the investment performance of the Fund, including comparisons to the performance of similar mutual funds, as provided by a third-party mutual fund data provider engaged as part of the contract review process (the “Outside Data Provider”) and a benchmark performance index; and information on general investment outlooks in the markets in which the Fund invests; |
(c) | information provided by the Investment Adviser indicating the Investment Adviser’s views on whether the Fund’s peer group and/or benchmark index had high, medium, or low relevance given the Fund’s particular investment strategy; |
(d) | the terms of the Management Agreement and other agreements with affiliated service providers entered into by the Trust on behalf of the Fund; |
(e) | fee and expense information for the Fund, including: |
(i) | the relative management fee and expense levels of the Fund as compared to those of comparable funds managed by other advisers, as provided by the Outside Data Provider; |
(ii) | the Fund’s expense trends over time; and |
(iii) | to the extent the Investment Adviser manages other types of accounts (such as bank collective trusts, private wealth management accounts, institutional separate accounts, sub-advised mutual funds, and non-U.S. funds) having investment objectives and policies similar to those of the Fund, comparative information on the advisory fees charged and services provided to those accounts by the Investment Adviser; |
(f) | with respect to the extensive investment performance and expense comparison data provided by the Outside Data Provider, its processes in producing that data for the Fund; |
(g) | the undertakings of the Investment Adviser and its affiliates to implement fee waivers and/or expense limitations; |
(h) | information relating to the profitability of the Management Agreement and the transfer agency and distribution and service arrangements of the Fund to the Investment Adviser and its affiliates; |
(i) | whether the Fund’s existing management fee schedule adequately addressed any economies of scale; |
25
GOLDMAN SACHS VARIABLE INSURANCE TRUST SMALL CAP EQUITY INSIGHTS FUND
Statement Regarding Basis for Approval of Management Agreement (Unaudited) (continued)
(j) | a summary of the “fall-out” benefits derived by the Investment Adviser and its affiliates from their relationships with the Fund, including the fees received by the Investment Adviser’s affiliates from the Fund for transfer agency, securities lending, portfolio trading, distribution and other services; |
(k) | a summary of potential benefits derived by the Fund as a result of its relationship with the Investment Adviser; |
(l) | information regarding commissions paid by the Fund and broker oversight, other information regarding portfolio trading, and how the Investment Adviser carries out its duty to seek best execution; |
(m) | the manner in which portfolio manager compensation is determined; and the number and types of accounts managed by the portfolio managers; |
(n) | the nature and quality of the services provided to the Fund by its unaffiliated service providers, and the Investment Adviser’s general oversight and evaluation (including reports on due diligence) of those service providers as part of the administrative services provided under the Management Agreement; and |
(o) | the Investment Adviser’s processes and policies addressing various types of potential conflicts of interest; its approach to risk management; the annual review of the effectiveness of the Fund’s compliance program; and periodic compliance reports. |
The Trustees also received an overview of the Fund’s distribution arrangements. They received information regarding the Fund’s assets, share purchase and redemption activity, and payment of distribution and service fees. Information was also provided to the Trustees relating to revenue sharing payments made by and services provided by the Investment Adviser and its affiliates to intermediaries that promote the sale, distribution, and/or servicing of Fund shares. The Independent Trustees also discussed the broad range of other investment choices that are available to Fund investors, including the availability of comparable funds managed by other advisers.
The presentations made at the Board and Committee meetings and at the Annual Meeting encompassed the Fund and other mutual funds for which the Board of Trustees has responsibility. In evaluating the Management Agreement at the Annual Meeting, the Trustees relied upon their knowledge, resulting from their meetings and other interactions throughout the year, of the Investment Adviser and its affiliates, their services, and the Fund. In conjunction with these meetings, the Trustees received written materials and oral presentations on the topics covered, and the Investment Adviser addressed the questions and concerns of the Trustees, including concerns regarding the investment performance of certain of the funds they oversee. The Independent Trustees were advised by their independent legal counsel regarding their responsibilities and other regulatory requirements related to the approval and continuation of mutual fund investment management agreements under applicable law. In addition, the Investment Adviser and its affiliates provided the Independent Trustees with a written response to a formal request for information sent on behalf of the Independent Trustees by their independent legal counsel. During the course of their deliberations, the Independent Trustees met in executive sessions with their independent legal counsel, without representatives of the Investment Adviser or its affiliates present.
Nature, Extent, and Quality of the Services Provided Under the Management Agreement
As part of their review, the Trustees considered the nature, extent, and quality of the services provided to the Fund by the Investment Adviser. In this regard, the Trustees considered both the investment advisory services and non-advisory services that are provided by the Investment Adviser and its affiliates. The Trustees noted the transition in the leadership and changes in personnel of various of the Investment Adviser’s portfolio management teams that had occurred in recent periods, and the ongoing recruitment efforts aimed at bringing high quality investment talent to the Investment Adviser. They also noted the Investment Adviser’s commitment to maintaining high quality systems and expending substantial resources to respond to ongoing changes to the regulatory and control environment in which the Fund and its service providers operate, as well as the efforts of the Investment Adviser and its affiliates to combat cyber security risks. The Trustees concluded that the Investment Adviser continued to commit substantial financial and operational resources to the Fund and expressed confidence that the Investment Adviser would continue to do so in the future. The Trustees also recognized that the Investment Adviser had made significant commitments to address regulatory compliance requirements applicable to the Fund and the Investment Adviser and its affiliates.
Investment Performance
The Trustees also considered the investment performance of the Fund. In this regard, they compared the investment performance of the Fund to its peers using rankings and ratings compiled by the Outside Data Provider as of December 31, 2016, and updated performance information prepared by the Investment Adviser using the peer group identified by the Outside Data Provider as of March 31, 2017. The information on the Fund’s investment performance was provided for the one-, three-, five-, and ten-year periods ending on the applicable dates. The Trustees also reviewed the Fund’s investment performance relative to its
26
GOLDMAN SACHS VARIABLE INSURANCE TRUST SMALL CAP EQUITY INSIGHTS FUND
Statement Regarding Basis for Approval of Management Agreement (Unaudited) (continued)
performance benchmark. As part of this review, they 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 and market conditions.
In addition, the Trustees considered materials prepared and presentations made by the Investment Adviser’s senior management and portfolio management personnel in which Fund performance was assessed. The Trustees also considered the Investment Adviser’s periodic reports with respect to the Fund’s risk profile, and how the Investment Adviser’s approach to risk monitoring and management influences portfolio management. They noted the efforts of the Fund’s portfolio management team to continue to enhance the investment model used in managing the Fund.
The Trustees observed that the Fund’s Institutional Shares had placed in the top half of the Fund’s peer group for the one-, three-, and five-year periods and in the third quartile for the ten-year period, and had outperformed the Fund’s benchmark index for the three-year period and underperformed for the one-, five-, and ten-year periods ended March 31, 2017.
Costs of Services Provided and Competitive Information
The Trustees considered the contractual terms of the Management Agreement and the fee rates payable by the Fund thereunder. 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 registered mutual fund.
In particular, the Trustees reviewed analyses prepared by the Outside Data Provider regarding the expense rankings of the Fund. The analyses provided a comparison of the Fund’s management fee and breakpoints to those of a relevant peer group and category universe; an expense analysis which compared the Fund’s overall net and gross expenses to a peer group and a category universe; and data comparing the Fund’s net expenses to the peer and category medians. The analyses also compared the Fund’s transfer agency, custody and distribution fees, other expenses and fee waivers/reimbursements to those of the peer group and category medians. The Trustees concluded that the comparisons provided by the Outside Data Provider were useful in evaluating the reasonableness of the management fees and total expenses paid by the Fund.
The Trustees noted that the management fee breakpoint schedule was being reduced at all asset levels. In addition, the Trustees considered the Investment Adviser’s undertakings to implement fee waivers and/or expense limitations. They also considered, to the extent that the Investment Adviser manages other types of accounts having investment objectives and policies similar to those of the Fund, comparative fee information for services provided by the Investment Adviser to those accounts, and information that indicated that services provided to the Fund differed in various significant respects from the services provided to other types of accounts which, in many cases, operated under less stringent legal and regulatory structures, required fewer services from the Investment Adviser to a smaller number of client contact points, and were less time-intensive.
In addition, the Trustees noted that shareholders are able to redeem their Fund shares at any time if shareholders believe that the Fund fees and expenses are too high or if they are dissatisfied with the performance of the Fund.
Profitability
The Trustees reviewed the Fund’s contribution to the Investment Adviser’s revenues and pre-tax profit margins. In this regard the Trustees noted that they had received, among other things, profitability analyses and summaries, revenue and expense schedules by Fund and by function (i.e., investment management, transfer agency and distribution and service), and information on the Investment Adviser’s expense allocation methodology. They observed that the profitability and expense figures are substantially similar to those used by the Investment Adviser for many internal purposes, including compensation decisions among various business groups, and are thus subject to a vigorous internal debate about how certain revenue and expenses should be allocated. The Trustees also noted that the internal audit group within the Goldman Sachs organization had audited the expense allocation methodology and that the internal audit group was satisfied with the reasonableness, consistency, and accuracy of the Investment Adviser’s expense allocation methodology and profitability analysis calculations. Profitability data for the Fund were provided for 2016 and 2015, and the Trustees considered this information in relation to the Investment Adviser’s overall profitability.
27
GOLDMAN SACHS VARIABLE INSURANCE TRUST SMALL CAP EQUITY INSIGHTS FUND
Statement Regarding Basis for Approval of Management Agreement (Unaudited) (continued)
Economies of Scale
The Trustees considered the information that had been provided regarding the Investment Adviser’s profitability. The Trustees also considered the breakpoints in the fee rate payable under the Management Agreement for the Fund at the following annual percentage rates of the average daily net assets of the Fund:
First $2 billion | 0.75 | % | ||
Next $3 billion | 0.68 | |||
Next $3 billion | 0.65 | |||
Over $8 billion | 0.64 |
The Trustees noted that the breakpoints were designed to share potential economies of scale, if any, with the Fund and its shareholders as assets under management reach those asset levels. The Trustees considered the amounts of assets in the Fund; the Fund’s recent share purchase and redemption activity; the information provided by the Investment Adviser relating to the costs of the services provided by the Investment Adviser and its affiliates and their realized profits; information comparing fee rates charged by the Investment Adviser with fee rates charged to other funds in the peer group; and the Investment Adviser’s undertakings to waive a portion of its management fee and to limit certain expenses of the Fund that exceed specified levels. Upon reviewing these matters at the Annual Meeting, the Trustees concluded that the fee breakpoints represented a means of assuring that benefits of scalability, if any, would be passed along to shareholders at the specified asset levels.
Other Benefits to the Investment Adviser and Its Affiliates
The Trustees also considered the other benefits derived by the Investment Adviser and its affiliates from their relationships with the Fund as stated above, including: (a) transfer agency fees received by Goldman Sachs & Co. LLC (“Goldman Sachs”); (b) brokerage and futures commissions earned by Goldman Sachs for executing securities and futures transactions on behalf of the Fund; (c) trading efficiencies resulting from aggregation of orders of the Fund with those for other funds or accounts managed by the Investment Adviser; (d) fees earned by Goldman Sachs Agency Lending (“GSAL”), an affiliate of the Investment Adviser, as securities lending agent (and fees earned by the Investment Adviser for managing the fund in which the Fund’s cash collateral is invested); (e) the Investment Adviser’s ability to leverage the infrastructure designed to service the Fund on behalf of its other clients; (f) the Investment Adviser’s ability to cross-market other products and services to Fund shareholders; (g) Goldman Sachs’ retention of certain fees as Fund Distributor; (h) the Investment Adviser’s ability to negotiate better pricing with custodians on behalf of its other clients, as a result of the relationship with the Fund; and (i) the possibility that the working relationship between the Investment Adviser and the Fund’s third-party service providers may cause those service providers to be more likely to do business with other areas of Goldman Sachs. In the course of considering the foregoing, the Independent Trustees requested and received further information quantifying certain of these fall-out benefits.
Other Benefits to the Fund and Its Shareholders
The Trustees also noted that the Fund receives certain potential benefits as a result of its relationship with the Investment Adviser, including: (a) trading efficiencies resulting from aggregation of orders of the Fund with those of other funds or accounts managed by the Investment Adviser; (b) enhanced servicing from vendors because of the volume of business generated by the Investment Adviser and its affiliates; (c) enhanced servicing from broker-dealers because of the volume of business generated by the Investment Adviser and its affiliates; (d) the Investment Adviser’s ability to negotiate favorable terms with derivatives counterparties on behalf of the Fund as a result of the size and reputation of the Goldman Sachs organization; (e) the Investment Adviser’s knowledge and experience gained from managing other accounts and products; (f) the Investment Adviser’s ability to hire and retain qualified personnel to provide services to the Fund because of the reputation of the Goldman Sachs organization; (g) the Fund’s access, through the Investment Adviser, to certain firmwide resources (e.g., proprietary risk management systems and databases), subject to certain restrictions; (h) the Fund’s ability to participate in the securities lending program administered by GSAL, as measured by the revenue received by the Fund in connection with the program; and (i) the Fund’s access to certain affiliated distribution channels. In addition, the Trustees noted the competitive nature of the mutual fund marketplace, and considered that many of the Fund’s shareholders invested in the Fund in part because of the Fund’s relationship with the Investment Adviser and that those shareholders have a general expectation that the relationship will continue.
28
GOLDMAN SACHS VARIABLE INSURANCE TRUST SMALL CAP EQUITY INSIGHTS FUND
Statement Regarding Basis for Approval of Management Agreement (Unaudited) (continued)
Conclusion
In connection with their consideration of the Management Agreement, the Trustees gave weight to each of the factors described above, but did not identify any particular factor as controlling their decision. After deliberation and consideration of all of the information provided, including the factors described above, the Trustees concluded, in the exercise of their business judgment, that the management fees paid by the Fund were reasonable in light of the services provided to it by the Investment Adviser, the Investment Adviser’s costs and the Fund’s current and reasonably foreseeable asset levels. The Trustees unanimously concluded that the Investment Adviser’s continued management likely would benefit the Fund and its shareholders and that the Management Agreement should be approved and continued with respect to the Fund until June 30, 2018.
29
TRUSTEES | OFFICERS | |
Ashok N. Bakhru, Chairman Kathryn A. Cassidy Diana M. Daniels Herbert J. Markley James A. McNamara Jessica Palmer Roy W. Templin Gregory G. Weaver | James A. McNamara, President Scott M. McHugh, Treasurer, Senior Vice President and Principal Financial Officer Joseph F. DiMaria, Assistant Treasurer and Principal Accounting Officer Caroline L. Kraus, Secretary |
GOLDMAN SACHS & CO. LLC
Distributor and Transfer Agent
GOLDMAN SACHS ASSET MANAGEMENT, L.P.
Investment Adviser
200 West Street, New York
New York 10282
Visit our web site at www.GSAMFUNDS.com to obtain the most recent month-end returns.
The reports concerning the Fund included in this shareholder report may contain certain forward-looking statements about the factors that may affect the performance of the Fund in the future. These statements are based on Fund management’s predictions and expectations concerning certain future events and their expected impact on the Fund, such as performance of the economy as a whole and of specific industry sectors, changes in the levels of interest rates, the impact of developing world events, and other factors that may influence the future performance of the Fund. Management believes these forward-looking statements to be reasonable, although they are inherently uncertain and difficult to predict. Actual events may cause adjustments in portfolio management strategies from those currently expected to be employed.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the Fund voted proxies relating to portfolio securities for the 12-month period ended June 30 is available (i) without charge, upon request by calling 1-800-621-2550; and (ii) on the Securities and Exchange Commission (“SEC”) web site at http://www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Form N-Qs are available on the SEC’s web site at http://www.sec.gov within 60 days after the Fund’s first and third fiscal quarters. The Fund’s Form N-Qs may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may also be obtained by calling 1-800-SEC-0330. Form N-Qs may be obtained upon request and without charge by calling 1-800-621-2550.
The website links provided are for your convenience only and are not an endorsement or recommendation by GSAM of any of these websites or the products or services offered. GSAM is not responsible for the accuracy and validity of the content of these websites.
Fund holdings and allocations shown are as of June 30, 2017 and may not be representative of future investments. Fund holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities. Current and future holdings are subject to risk.
References to indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only and do not imply that the portfolio will achieve similar results. The index composition may not reflect the manner in which a portfolio is constructed. While an adviser seeks to design a portfolio which reflects appropriate risk and return features, portfolio characteristics may deviate from those of the benchmark.
The Global Industry Classification Standard (“GICS”) was developed by and is the exclusive property and a service mark of Morgan Stanley Capital International Inc. (“MSCI”) and Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. (“S&P”) and is licensed for use by Goldman Sachs. Neither MSCI, S&P nor any other party involved in making or compiling the GICS or any GICS classifications makes any express or implied warranties or representations with respect to such standard or classification (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of such standard or classification. Without limiting any of the foregoing, in no event shall MSCI, S&P, any of their affiliates or any third party involved in making or compiling the GICS or any GICS classifications have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.
The portfolio risk management process includes an effort to monitor and manage risk, but does not imply low risk.
Shares of the Goldman Sachs VIT Funds are offered to separate accounts of participating life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Shares of the Fund are not offered directly to the general public. The variable annuity contracts and variable life insurance policies are described in the separate prospectuses issued by participating insurance companies. You should refer to those prospectuses for information about surrender charges, mortality and expense risk fees and other charges that may be assessed by participating insurance companies under the variable annuity contracts or variable life insurance policies. Such fees or charges, if any, may affect the return you may realize with respect to your investments. Ask your representative for more complete information. Please consider a fund’s objectives, risks and charges and expenses, and read the prospectus carefully before investing. The prospectus contains this and other information about the Fund.
This material is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus or summary prospectus, if applicable. Investors should consider the Fund’s objective, risks, and charges and expenses, and read the summary prospectus, if available, and/or the prospectus carefully before investing or sending money. The summary prospectus, if available, and the prospectus contain this and other information about the Fund and may be obtained from your authorized dealer or from Goldman Sachs & Co. LLC by calling 1-800-621-2550.
THIS MATERIAL IS FOR INFORMATIONAL PURPOSES ONLY AND IS PROVIDED SOLELY ON THE BASIS THAT IT WILL NOT CONSTITUTE INVESTMENT OR OTHER ADVICE OR A RECOMMENDATION RELATING TO ANY PERSON’S OR PLAN’S INVESTMENT OR OTHER DECISIONS, AND GOLDMAN SACHS IS NOT A FIDUCIARY OR ADVISOR WITH RESPECT TO ANY PERSON OR PLAN BY REASON OF PROVIDING THE MATERIAL OR CONTENT HEREIN INCLUDING UNDER THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974 OR DEPARTMENT OF LABOR REGULATIONS. PLAN SPONSORS AND OTHER FIDUCIARIES SHOULD CONSIDER THEIR OWN CIRCUMSTANCES IN ASSESSING ANY POTENTIAL COURSE OF ACTION.
This report is prepared for the general information of contract owners and is not an offer of shares of the Goldman Sachs Variable Insurance Trust — Goldman Sachs Small Cap Equity Insights Fund.
© 2017 Goldman Sachs. All rights reserved.
VITSCSAR-17/101228-TMPL-08/2017-587129/8.4k
Goldman
Sachs Variable Insurance Trust
Goldman Sachs
Strategic Growth Fund
Semi-Annual Report
June 30, 2017
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC GROWTH FUND
INVESTMENT OBJECTIVE
The Fund seeks long-term growth of capital.
Portfolio Management Discussion and Analysis
Below, the Goldman Sachs Growth Portfolio Management Team discusses the Goldman Sachs Variable Insurance Trust — Goldman Sachs Strategic Growth Fund’s (the “Fund”) performance and positioning for the six-month period ended June 30, 2017 (the “Reporting Period”).
How did the Fund perform during the Reporting Period?
During the Reporting Period, the Fund’s Institutional and Service Shares generated cumulative total returns of 16.55% and 16.47%, respectively. These returns compare to the 14.00% cumulative total return of the Fund’s benchmark, the Russell 1000® Growth Index (with dividends reinvested) (the “Russell Index”), during the same time period.
What economic and market factors most influenced the equity markets as a whole during the Reporting Period?
Representing the U.S. equity market, the S&P 500® Index gained 9.34% during the Reporting Period.
As the Reporting Period began in January 2017, U.S. equities rallied to new highs on the prospect of deregulation following executive orders on oil pipelines and on further optimism around infrastructure spending after a $1 trillion proposal from Senate Democrats. Despite political uncertainty and protectionism concerns, U.S. equities continued to rally in February 2017, driven by “risk on” sentiment, or reduced risk aversion, owing to potential U.S. tax reform and deregulation as well as by stronger economic data. In March 2017, the U.S. Federal Reserve (the “Fed”) raised interest rates for the third time since the 2008 global financial crisis, while maintaining projections for three rate hikes this year. However, a seemingly cautious stance on the future path of monetary tightening from Fed Chair Janet Yellen and the presence of a dissenter on the policy committee led to a dovish market reaction. (Dovish tends to suggest lower interest rates; opposite of hawkish.) Political risks subsequently drove U.S. equities lower in the wake of House Republicans’ struggle to schedule a vote on health care. For the month of March 2017, U.S. equities were virtually flat.
U.S. equities fell in April 2017, as Fed minutes suggested stocks were overvalued. However, U.S. equities subsequently rebounded on strong first quarter 2017 earnings results and on receding European political risk following the centrist candidate’s win in the French election. Although the U.S. labor market remained strong, economic activity and inflation data appeared to be moderating during the second quarter of 2017. Core inflation softened to 1.7% year-over-year in May 2017, marking a third consecutive month of weakness, while core personal consumption expenditures remained below the Fed’s 2% target at just 1.4% year-over-year. In addition, market expectations for pro-growth U.S. fiscal policy were dampened by domestic political developments. Nonetheless, the Fed proceeded to raise the targeted federal funds rate by 25 basis points in June 2017, citing ongoing strength in the labor market and a pick-up in household spending and business fixed investment. (A basis point is 1/100th of a percentage point.) The results of the Fed’s 2017 Comprehensive Capital Analysis and Review (“CCAR”) stress test for banks were encouraging, with improving payout ratios. (Payout ratio is the proportion of earnings paid out as dividends to shareholders.)
For the Reporting Period overall, information technology, health care and consumer discretionary were the best performing sectors in the S&P 500® Index by a wide margin. The weakest performing sectors in the S&P 500® Index were energy and telecommunication services, the only two to post negative absolute returns, followed by real estate and financials, which were comparatively weak but generated positive returns during the Reporting Period.
Within the U.S. equity market, there was significant disparity in performance not only among sectors but also among the various capitalization and style segments. While all capitalization segments posted positive returns, large-cap stocks, as measured by the Russell 1000® Index, performed best, followed by mid-cap stocks, as measured by the Russell Midcap® Index, and then at some distance by small-cap stocks, as measured by the Russell 2000® Index. From a style perspective, growth-oriented stocks significantly outpaced value-oriented stocks across the capitalization spectrum. (All as measured by the Russell indices.)
What key factors were responsible for the Fund’s performance during the Reporting Period?
The Fund outperformed the Russell Index during the Reporting Period attributable primarily to stock selection overall. Sector allocation as a whole detracted, albeit modestly.
1
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC GROWTH FUND
Which equity market sectors most significantly affected Fund performance?
Contributing most positively to the Fund’s relative results during the Reporting Period was effective stock selection in the information technology, industrials and real estate sectors. The only sector wherein stock selection detracted from the Fund’s relative results during the Reporting Period was financials. Having an overweighted allocation relative to the Russell Index in energy, which was the weakest sector by some distance during the Reporting Period, also hurt. Having an allocation to cash, albeit modest, during the Reporting Period when the Russell Index rallied, further dampened the Fund’s relative results.
What were some of the Fund’s best-performing individual stocks?
Among those stocks the Fund benefited most from relative to the Russell Index were positions in international freight transportation company CSX, pharmaceuticals company Vertex Pharmaceuticals and enterprise information management software supplier Oracle.
After being added to the Fund’s portfolio during the fourth quarter of 2016, CSX saw its stock price spike in January 2017, as Canadian Pacific Chief Executive Officer (“CEO”) Hunter Harrison resigned and was reportedly seeking a senior management position at CSX. Later in the Reporting Period, this story proved true, as Harrison was hired as CSX’s CEO. When the news first broke, the market viewed the potential move positively given Harrison’s strong reputation. The company also reported first fiscal quarter results that beat market expectations on revenues and earnings per share. At the end of the Reporting Period, we believed CSX was well positioned to potentially accelerate from a possible inflationary environment given its cyclical business model and also from potential tax reforms given its currently high tax rate. Overall, we were optimistic at the end of the Reporting Period about CSX’s growth outlook as well as about its operational improvement and strong free cash flow generation potential.
Vertex Pharmaceuticals announced earnings in January 2017 that were better than market estimates on earnings per share and total revenue. Most of the stock’s movement, however, occurred later in March 2017 when its price spiked on the company’s announcement about the successful clinical trial of one of its cystic fibrosis drugs. During the second half of the Reporting Period, its stock was buoyed by strong performance in the health care sector overall. At the end of the Reporting Period, we thought Vertex Pharmaceuticals had strong underlying fundamentals and a promising product pipeline with significant short-term and long-term catalysts, at an attractive valuation. We further believed the company, led by what we viewed as a capable management team, would likely continue to see growth given its dominant market share and geographic expansionary efforts, which have thus far contributed to meaningful profitability.
During the Reporting Period, Oracle reported quarterly results that beat market expectations on revenues and earnings. Its positive results were primarily led by better than market expected performance by its license business. We view this improvement as an encouraging sign that information technology spending is healthy, which we believe may well continue to act as a secular tailwind for Oracle. The company also continued to report strong progress on its cloud offering, which we view as an important piece of its business, as Oracle works to capitalize on its legacy user base through innovative new products. At the end of the Reporting Period, we remained positive on Oracle and believed it remained a high quality business with attractive growth prospects, as it continues to invest in innovation.
Which stocks detracted significantly from the Fund’s performance during the Reporting Period?
Detracting from the Fund’s results relative to the Russell Index were positions in oil well services company Schlumberger, off-price retail apparel and home accessories stores operator Ross Stores and kitchen equipment designer, manufacturer and distributor Middleby.
During the Reporting Period, Schlumberger announced fourth quarter 2016 earnings that were ahead of consensus expectations. However, its share price was weak, as it expressed a slower than company expected recovery in international oilfield activity. Also, like many companies in the energy sector, Schlumberger’s stock price faced pressure amidst volatility in global oil prices. While we believed at the end of the Reporting Period that both activity and pricing trends may stabilize and improve over the long term and believed Schlumberger is a high quality company, we continued to monitor the risk/reward situation the recent downturn in crude oil prices presents.
In May 2017, Ross Stores announced earnings that were positive, beating market expectations for same-store sales and earnings per share. Despite the strong earnings, however, fears of Amazon and other e-commerce companies displacing physical stores and
increasing competition persisted as a headwind for the stock, causing its price to decline in June 2017. At the end of the Reporting Period, we continued to believe Ross Stores is well positioned within its industry, relatively insulated from Amazon pressures as an off-price retailer. We also believed it remained attractively valued for a high quality company. We remained encouraged by Ross
2
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC GROWTH FUND
Stores’ consistent sales and earnings growth over time, strong free cash flows and demonstrated track record of returning capital to shareholders.
Middleby reported mixed first quarter 2017 results. The company delivered what we considered to be impressive margin expansion but failed to grow revenues at the pace most investors had expected. The weakness was explained by the company as being based on delayed capital expenditure spending by domestic restaurants. We view this as a short-term challenge and believed, at the end of the Reporting Period, that what we feel is the company’s best in class product line positions it well going forward. We further believed the recent decline in the company’s share price has presented a strong risk/reward opportunity at attractive valuations. We continued to believe Middleby’s market share gains, partnerships with strong franchises and what we view as innovative products position it as an industry leader.
How did the Fund use derivatives and similar instruments during the Reporting Period?
During the Reporting Period, we did not use derivatives as part of an active management strategy.
Did the Fund make any significant purchases or sales during the Reporting Period?
Among the purchases initiated during the Reporting Period, we established a Fund position in biopharmaceutical company Amgen. The company, which operates in the areas of oncology and bone, inflammatory and cardiovascular diseases, is one of the leaders in the biotechnology industry, and we are positive on its ability to continue to grow market share. We believe that with its new product cycles and existing growth franchises, the company should be able to offset any potential declines in its legacy business while seeking to grow both revenue and earnings. In our view, Amgen has robust free cash flow, a strong balance sheet and, at the time of purchase, was trading at an attractive valuation relative to its peers.
We initiated a Fund position in financial services technology company Fiserv. The company provides products and services used to process electronic payment transactions and other account processing services. Fiserv has, in our view, a strong long-term track record, and we believe it is poised to potentially accelerate organic revenue growth. We are also positive on the company’s ability to grow revenue and increase margins and see positive benefits should tax reforms be implemented given the company’s currently high tax rate.
Conversely, we sold the Fund’s position in First Republic Bank. The bank’s stock had experienced strong performance after the U.S. elections as did many financials companies. At the end of the Reporting Period, we continued to like the bank but due to its sharp stock price increase, we decided to exit the position to pursue companies with what we viewed as more favorable growth prospects.
We eliminated the Fund’s position in FleetCor Technologies, which is an independent global provider of specialized payment products and services to commercial fleets, major oil companies and petroleum markets. Our conviction in the company lessened during the Reporting Period, as we saw the company’s organic growth decline in recent quarters, and we became less optimistic on the company moving forward. We feel the company could continue to face headwinds from higher interest rates and taxes, which could impact future guidance. While we continued to believe at the end of the Reporting Period that the company was attractively valued, we took the opportunity to exit the position and allocate capital elsewhere.
Were there any notable changes in the Fund’s weightings during the Reporting Period?
In constructing the Fund’s portfolio, we focus on picking stocks rather than on making industry or sector bets. We seek to outpace the benchmark index by overweighting stocks that we expect to outperform and underweighting those that we think may lag. Consequently, changes in its sector weights are generally the direct result of individual stock selection or of stock appreciation or depreciation. That said, during the Reporting Period, the Fund’s exposure to health care and consumer staples increased compared to the Russell Index. The Fund’s allocations compared to the Russell Index in financials, energy, industrials, information technology and materials decreased. The Fund’s allocation to cash also decreased during the Reporting Period.
How was the Fund positioned relative to its benchmark index at the end of the Reporting Period?
At the end of June 2017, the Fund had overweighted positions relative to the Russell Index in the financials and consumer staples sectors. On the same date, the Fund had underweighted positions compared to the Russell Index in materials, information technology and industrials and was rather neutrally weighted to the Russell Index in consumer discretionary, energy, real estate and health care. The Fund had no exposure to the utilities and telecommunication services sectors at the end of the Reporting Period.
3
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC GROWTH FUND
What is the Fund’s tactical view and strategy for the months ahead?
At the end of the Reporting Period, our outlook for equities remained positive, supported by what we perceive as strong global earnings momentum, receding political risk and overly negative sentiment on the Administration’s proposals. Global economic growth has been strong, and the expansion appears to be broadening across regions, creating, in our view, a positive backdrop for corporate earnings growth. For the first year since 2010, consensus earnings per share growth forecasts were positive in all major global regions at the end of the Reporting Period.
While we were slightly more bullish on equities outside the U.S. at the end of the Reporting Period, we believe plummeting optimism on the Administration’s proposals have gone too far, resulting in an almost full unwinding of the rally seen earlier in the U.S. We believe the outperformance of value versus growth stocks and small cap versus large cap, seen in 2016, has reversed, not only during the Reporting Period but likely for the remainder of the calendar year 2017. At the end of the Reporting Period, we saw particularly attractive opportunities in specific sectors, such as financials, which we believe can reap significant benefits from a more clear and more effective implementation of existing regulatory legislation.
That said, what we view as expensive valuations make U.S. equities more vulnerable, in our opinion, to a moderation in growth on the one hand or to a sharper than consensus expected rise in bond yields on the other. These risks support our case for dynamic active management. Moreover, these aforementioned tailwinds of solid earnings growth and positive potential from any reforms implemented are not priced into valuations and can, we believe, offer upside.
Regardless of market direction, we remain committed to our core philosophy and process. We intend to maintain a long-term time horizon, rather than forecast the next quarter. We intend to continue to favor high quality growth businesses over breathtaking concepts. We intend to invest when we consider valuations to be attractive, rather than following the trend. These core beliefs have guided our team during the past 30 years; we believe they hold the answer for the next 30.
As always, we maintain our focus on seeking companies that we believe will generate long-term growth in today’s ever-changing market conditions.
4
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC GROWTH FUND
Index Definitions
The Russell 1000® Growth Index (with dividends reinvested) is an unmanaged market capitalization weighted index of the 1000 largest U.S. companies with higher price-to-book ratios and higher forecasted growth values. The figures for the index do not include any deduction for fees, expenses or taxes. It is not possible to invest directly in an index.
The Russell 2000® Index (with dividends reinvested) is an unmanaged index of common stock prices that measures the performance of the 2000 smallest companies in the Russell 3000® Index. The figures for the index do not include any deduction for fees, expenses or taxes. It is not possible to invest directly in an index.
The S&P 500® Index (with dividends reinvested) is the Standard & Poor’s 500 Composite Index of 500 stocks, an unmanaged index of common stock prices. The figures for the index do not include any deduction for fees, expenses or taxes. It is not possible to invest directly in an index.
The Russell Midcap® Index measures the performance of the 800 smallest companies in the Russell 1000® Index, which represent approximately 25% of the total market capitalization of the Russell 1000® Index. It is not possible to invest directly in an index.
The Russell 1000® Index measures the performance of the 1,000 largest companies in the Russell 3000® Index, which represent approximately 92% of the total market capitalization of the Russell 3000® Index. It is not possible to invest directly in an index.
5
FUND BASICS
Strategic Growth Fund
as of June 30, 2017
STANDARDIZED TOTAL RETURNS1
For the period ended 6/30/17 | One Year | Five Years | Ten Years | Since Inception | Inception Date | |||||||||||||
Institutional | 20.17 | % | 14.74 | % | 7.67 | % | 5.77 | % | 4/30/98 | |||||||||
Service | 19.90 | 14.46 | 7.41 | 7.61 | 1/09/06 |
1 | The Standardized Total Returns are average annual total returns as of the most recent calendar quarter-end. They assume reinvestment of all distributions at net asset value (“NAV”). Because Institutional Shares and Service Shares do not involve a sales charge, such a charge is not applied to their Standardized Total Returns. |
Total return figures in the above chart represent past performance and do not indicate future results, which will vary. The investment return and principal value of an investment will fluctuate and, therefore, an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the total return figures in the above chart. Please visit www.GSAMFUNDS.com to obtain the most recent month-end returns. Performance reflects fee waivers and/or expense limitations in effect during the periods shown. In their absence, performance would be reduced.
EXPENSE RATIOS2
Net Expense Ratio (Current) | Gross Expense Ratio (Before Waivers) | |||||||
Institutional | 0.74 | % | 0.83 | % | ||||
Service | 0.99 | 1.08 |
2 | The expense ratios of the Fund, both current (net of any fee waivers and/or expense limitations) and before waivers (gross of any fee waivers and/or expense limitations) are as set forth above according to the most recent publicly available Prospectuses for the Fund and may differ from the expense ratios disclosed in the Financial Highlights in this report. Pursuant to a contractual arrangement, the Fund’s fee waivers and/or expense limitations will remain in place through at least April 28, 2018, and prior to such date, the Investment Adviser may not terminate the arrangements without the approval of the Fund’s Board of Trustees. If these arrangements are discontinued in the future, the expense ratios may change without shareholder approval. |
TOP TEN HOLDINGS AS OF 6/30/173
Holding | % of Net Assets | Line of Business | ||||
Apple, Inc. | 6.8% | Technology Hardware & Equipment | ||||
Microsoft Corp. | 4.4 | Software & Services | ||||
Amazon.com, Inc. | 3.9 | Retailing | ||||
Facebook, Inc. Class A | 3.8 | Software & Services | ||||
Alphabet, Inc. Class A | 3.5 | Software & Services | ||||
Walt Disney Co. (The) | 2.6 | Media | ||||
Comcast Corp. Class A | 2.5 | Media | ||||
Mastercard, Inc. Class A | 2.4 | Software & Services | ||||
Alphabet, Inc. Class C | 2.4 | Software & Services | ||||
Eli Lilly & Co. | 2.0 | Pharmaceuticals, Biotechnology & Life Sciences |
3 | The top 10 holdings may not be representative of the Fund’s future investments. |
6
FUND BASICS
FUND vs. BENCHMARK SECTOR ALLOCATIONS4
As of June 30, 2017
4 | The Fund is actively managed and, as such, its composition may differ over time. Consequently, the Fund’s overall sector allocations may differ from percentages contained in the graph above. The graph categorizes investments using Global Industry Classification Standard (“GICS”), however, the sector classifications used by the portfolio management team may differ from GICS. The percentage shown for each investment category reflects the value of investments in that category as a percentage of market value. |
7
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC GROWTH FUND
Schedule of Investments
June 30, 2017 (Unaudited)
Shares | Description | Value | ||||||
Common Stocks – 99.6% | ||||||||
Banks – 1.0% | ||||||||
94,169 | SunTrust Banks, Inc. | $ | 5,341,266 | |||||
|
| |||||||
Capital Goods – 10.0% | ||||||||
22,595 | 3M Co. | 4,704,053 | ||||||
17,348 | Boeing Co. (The) | 3,430,567 | ||||||
57,581 | Fortive Corp. | 3,647,757 | ||||||
12,683 | General Dynamics Corp. | 2,512,502 | ||||||
74,928 | Honeywell International, Inc. | 9,987,153 | ||||||
42,420 | Middleby Corp. (The)* | 5,154,454 | ||||||
24,199 | Northrop Grumman Corp. | 6,212,125 | ||||||
26,922 | Roper Technologies, Inc. | 6,233,251 | ||||||
21,283 | WABCO Holdings, Inc.* | 2,713,795 | ||||||
130,176 | Xylem, Inc. | 7,215,656 | ||||||
|
| |||||||
51,811,313 | ||||||||
|
| |||||||
Consumer Durables & Apparel – 3.1% | ||||||||
60,205 | Newell Brands, Inc. | 3,228,192 | ||||||
150,730 | NIKE, Inc. Class B | 8,893,070 | ||||||
34,111 | PVH Corp. | 3,905,710 | ||||||
|
| |||||||
16,026,972 | ||||||||
|
| |||||||
Consumer Services – 2.0% | ||||||||
28,006 | Las Vegas Sands Corp. | 1,789,303 | ||||||
56,998 | McDonald’s Corp. | 8,729,814 | ||||||
|
| |||||||
10,519,117 | ||||||||
|
| |||||||
Diversified Financials – 3.7% | ||||||||
128,281 | Intercontinental Exchange, Inc. | 8,456,283 | ||||||
82,362 | Northern Trust Corp. | 8,006,410 | ||||||
17,702 | S&P Global, Inc. | 2,584,315 | ||||||
|
| |||||||
19,047,008 | ||||||||
|
| |||||||
Energy – 1.3% | ||||||||
21,866 | Concho Resources, Inc.* | 2,657,375 | ||||||
62,392 | Schlumberger Ltd. | 4,107,889 | ||||||
|
| |||||||
6,765,264 | ||||||||
|
| |||||||
Food & Staples Retailing – 2.4% | ||||||||
59,037 | Costco Wholesale Corp. | 9,441,787 | ||||||
39,581 | Walgreens Boots Alliance, Inc. | 3,099,588 | ||||||
|
| |||||||
12,541,375 | ||||||||
|
| |||||||
Food, Beverage & Tobacco – 4.9% | ||||||||
86,881 | Altria Group, Inc. | 6,470,028 | ||||||
54,228 | Coca-Cola Co. (The) | 2,432,126 | ||||||
38,630 | Kraft Heinz Co. (The) | 3,308,273 | ||||||
53,645 | Molson Coors Brewing Co. Class B | 4,631,709 | ||||||
113,266 | Monster Beverage Corp.* | 5,627,055 | ||||||
25,802 | Philip Morris International, Inc. | 3,030,445 | ||||||
|
| |||||||
25,499,636 | ||||||||
|
| |||||||
Health Care Equipment & Services – 4.9% | ||||||||
38,485 | Aetna, Inc. | 5,843,178 | ||||||
185,424 | Boston Scientific Corp.* | 5,139,953 | ||||||
84,840 | Danaher Corp. | 7,159,648 | ||||||
58,018 | Edwards Lifesciences Corp.* | 6,860,048 | ||||||
|
| |||||||
25,002,827 | ||||||||
|
| |||||||
Common Stocks – (continued) | ||||||||
Household & Personal Products – 1.5% | ||||||||
51,604 | Colgate-Palmolive Co. | $ | 3,825,405 | |||||
38,630 | Estee Lauder Cos., Inc. (The) Class A | 3,707,707 | ||||||
|
| |||||||
7,533,112 | ||||||||
|
| |||||||
Materials – 1.8% | ||||||||
16,618 | Sherwin-Williams Co. (The) | 5,832,253 | ||||||
144,592 | Valvoline, Inc. | 3,429,722 | ||||||
|
| |||||||
9,261,975 | ||||||||
|
| |||||||
Media – 5.1% | ||||||||
334,987 | Comcast Corp. Class A | 13,037,694 | ||||||
124,159 | Walt Disney Co. (The) | 13,191,894 | ||||||
|
| |||||||
26,229,588 | ||||||||
|
| |||||||
Pharmaceuticals, Biotechnology & Life Sciences – 9.7% | ||||||||
56,560 | Agilent Technologies, Inc. | 3,354,574 | ||||||
16,604 | Alexion Pharmaceuticals, Inc.* | 2,020,209 | ||||||
17,900 | Allergan plc | 4,351,311 | ||||||
43,004 | Amgen, Inc. | 7,406,579 | ||||||
127,114 | Eli Lilly & Co. | 10,461,482 | ||||||
35,049 | Illumina, Inc.* | 6,081,702 | ||||||
53,645 | Incyte Corp.* | 6,754,442 | ||||||
38,047 | Vertex Pharmaceuticals, Inc.* | 4,903,117 | ||||||
79,155 | Zoetis, Inc. | 4,937,689 | ||||||
|
| |||||||
50,271,105 | ||||||||
|
| |||||||
Real Estate Investment Trusts – 3.3% | ||||||||
68,514 | American Tower Corp. | 9,065,773 | ||||||
18,507 | Equinix, Inc. | 7,942,464 | ||||||
|
| |||||||
17,008,237 | ||||||||
|
| |||||||
Retailing – 8.9% | ||||||||
21,021 | Amazon.com, Inc.* | 20,348,328 | ||||||
23,324 | Home Depot, Inc. (The) | 3,577,902 | ||||||
37,903 | Netflix, Inc.* | 5,663,087 | ||||||
10,642 | O’Reilly Automotive, Inc.* | 2,327,831 | ||||||
4,079 | Priceline Group, Inc. (The)* | 7,629,851 | ||||||
107,872 | Ross Stores, Inc. | 6,227,451 | ||||||
|
| |||||||
45,774,450 | ||||||||
|
| |||||||
Semiconductors & Semiconductor Equipment – 2.6% | ||||||||
58,164 | Applied Materials, Inc. | 2,402,755 | ||||||
22,157 | NVIDIA Corp. | 3,203,016 | ||||||
100,626 | Texas Instruments, Inc. | 7,741,158 | ||||||
|
| |||||||
13,346,929 | ||||||||
|
| |||||||
Software & Services – 24.2% | ||||||||
40,963 | Adobe Systems, Inc.* | 5,793,807 | ||||||
19,567 | Alphabet, Inc. Class A* | 18,191,049 | ||||||
13,558 | Alphabet, Inc. Class C* | 12,320,561 | ||||||
55,103 | Electronic Arts, Inc.* | 5,825,489 | ||||||
130,659 | Facebook, Inc. Class A* | 19,726,896 | ||||||
46,064 | Fiserv, Inc.* | 5,635,470 | ||||||
29,117 | Global Payments, Inc. | 2,629,847 | ||||||
42,420 | Intuit, Inc. | 5,633,800 | ||||||
102,333 | Mastercard, Inc. Class A | 12,428,343 | ||||||
329,011 | Microsoft Corp. | 22,678,728 | ||||||
|
|
8 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC GROWTH FUND
Shares | Description | Value | ||||||
Common Stocks – (continued) | ||||||||
Software & Services – (continued) | ||||||||
161,809 | Oracle Corp. | $ | 8,113,103 | |||||
71,575 | salesforce.com, Inc.* | 6,198,395 | ||||||
|
| |||||||
125,175,488 | ||||||||
|
| |||||||
Technology Hardware & Equipment – 7.9% | ||||||||
41,837 | Amphenol Corp. Class A | 3,088,407 | ||||||
243,581 | Apple, Inc. | 35,080,536 | ||||||
75,948 | Cisco Systems, Inc. | 2,377,172 | ||||||
|
| |||||||
40,546,115 | ||||||||
|
| |||||||
Transportation – 1.3% | ||||||||
123,616 | CSX Corp. | 6,744,489 | ||||||
|
| |||||||
TOTAL INVESTMENTS – 99.6% | ||||||||
(Cost $352,926,735) | $ | 514,446,266 | ||||||
|
| |||||||
| OTHER ASSETS IN EXCESS OF | 1,975,451 | ||||||
|
| |||||||
NET ASSETS – 100.0% | $ | 516,421,717 | ||||||
|
|
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. |
The accompanying notes are an integral part of these financial statements. | 9 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC GROWTH FUND
Statement of Assets and Liabilities
June 30, 2017 (Unaudited)
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $352,926,735) | $ | 514,446,266 | ||
Cash | 2,680,684 | |||
Receivables: | ||||
Investments sold | 2,299,851 | |||
Dividends | 320,953 | |||
Reimbursement from investment adviser | 12,912 | |||
Fund shares sold | 4,983 | |||
Securities lending income | 60 | |||
Other assets | 2,387 | |||
Total assets | 519,768,096 | |||
Liabilities: | ||||
Payables: | ||||
Investments purchased | 2,623,458 | |||
Management fees | 306,266 | |||
Fund shares redeemed | 229,476 | |||
Distribution and Service fees and Transfer Agency fees | 93,782 | |||
Accrued expenses | 93,397 | |||
Total liabilities | 3,346,379 | |||
Net Assets: | ||||
Paid-in capital | 344,246,834 | |||
Undistributed net investment income | 1,351,853 | |||
Accumulated net realized gain | 9,303,499 | |||
Net unrealized gain | 161,519,531 | |||
NET ASSETS | $ | 516,421,717 | ||
Net Assets: | ||||
Institutional | $ | 108,807,532 | ||
Service | 407,614,185 | |||
Total Net Assets | $ | 516,421,717 | ||
Shares outstanding $0.001 par value (unlimited shares authorized): | ||||
Institutional | 5,896,156 | |||
Service | 22,167,359 | |||
Net asset value, offering and redemption price per share: | ||||
Institutional | $18.45 | |||
Service | 18.39 |
10 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC GROWTH FUND
Statement of Operations
For the Six Months Ended June 30, 2017 (Unaudited)
Investment income: | ||||
Dividends — unaffiliated issuers | $ | 3,368,393 | ||
Securities lending income — affiliated issuer | 64,937 | |||
Dividends — affiliated issuers | 2,015 | |||
Total investment income | 3,435,345 | |||
Expenses: | ||||
Management fees | 1,884,470 | |||
Distribution and Service fees — Service Shares | 496,631 | |||
Transfer Agency fees(a) | 50,249 | |||
Professional fees | 40,342 | |||
Printing and mailing costs | 32,526 | |||
Custody, accounting and administrative services | 31,693 | |||
Trustee fees | 8,563 | |||
Other | 8,673 | |||
Total expenses | 2,553,147 | |||
Less — expense reductions | (130,779 | ) | ||
Net expenses | 2,422,368 | |||
NET INVESTMENT INCOME | 1,012,977 | |||
Realized and unrealized gain: | ||||
Net realized gain from investments (including commissions recaptured of $7,169) | 20,477,626 | |||
Net change in unrealized gain on investments | 54,554,188 | |||
Net realized and unrealized gain | 75,031,814 | |||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 76,044,791 |
(a) Institutional and Service Shares incurred Transfer Agency fees of $10,522 and $39,727, respectively.
The accompanying notes are an integral part of these financial statements. | 11 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC GROWTH FUND
Statements of Changes in Net Assets
For the Six Months Ended June 30, 2017 (Unaudited) | For the Fiscal Year Ended December 31, 2016 | |||||||
From operations: | ||||||||
Net investment income | $ | 1,012,977 | $ | 1,246,433 | ||||
Net realized gain (loss) | 20,477,626 | (9,005,334 | ) | |||||
Net change in unrealized gain | 54,554,188 | 10,424,749 | ||||||
Net increase in net assets resulting from operations | 76,044,791 | 2,665,848 | ||||||
Distributions to shareholders: | ||||||||
From net investment income | ||||||||
Institutional Shares | — | (612,091 | ) | |||||
Service Shares | — | (1,456,157 | ) | |||||
From net realized gains | ||||||||
Institutional Shares | — | (9,912 | ) | |||||
Service Shares | — | (37,218 | ) | |||||
Total distributions to shareholders | — | (2,115,378 | ) | |||||
From share transactions: | ||||||||
Proceeds from sales of shares | 11,592,981 | 159,844,337 | ||||||
Reinvestment of distributions | — | 2,115,378 | ||||||
Cost of shares redeemed | (37,547,739 | ) | (166,944,892 | ) | ||||
Net decrease in net assets resulting from share transactions | (25,954,758 | ) | (4,985,177 | ) | ||||
TOTAL INCREASE (DECREASE) | 50,090,033 | (4,434,707 | ) | |||||
Net assets: | ||||||||
Beginning of period | 466,331,684 | 470,766,391 | ||||||
End of period | $ | 516,421,717 | $ | 466,331,684 | ||||
Undistributed net investment income | $ | 1,351,853 | $ | 338,876 |
12 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC GROWTH FUND
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
Income from investment operations | Distributions to shareholders | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year - Share Class | Net asset value, beginning of period | Net investment income(a) | Net realized and unrealized gain | Total from investment operations | From net investment income | From net | Total distributions | Net asset value, end of period | Total return(b) | Net assets, end of period (in 000s) | Ratio of net expenses to average net assets | Ratio of total expenses to average net assets | Ratio of net investment income to average net assets | Portfolio turnover rate(c) | ||||||||||||||||||||||||||||||||||||||||||
FOR THE SIX MONTHS ENDED JUNE 30, (UNAUDITED) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2017 - Institutional | $ | 15.83 | $ | 0.05 | (d) | $ | 2.57 | $ | 2.62 | $ | — | $ | — | $ | — | $ | 18.45 | 16.55 | % | $ | 108,808 | 0.77 | %(e) | 0.82 | %(e) | 0.60 | %(d)(e) | 21 | % | |||||||||||||||||||||||||||
2017 - Service | 15.79 | 0.03 | (d) | 2.57 | 2.60 | — | — | — | 18.39 | 16.47 | 407,614 | 1.02 | (e) | 1.07 | (e) | 0.35 | (d)(e) | 21 | ||||||||||||||||||||||||||||||||||||||
FOR THE FISCAL YEARS ENDED DECEMBER 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2016 - Institutional | 15.62 | 0.07 | 0.24 | 0.31 | (0.10 | ) | — | (f) | (0.10 | ) | 15.83 | 1.98 | 98,090 | 0.79 | 0.84 | 0.48 | 72 | |||||||||||||||||||||||||||||||||||||||
2016 - Service | 15.59 | 0.03 | 0.23 | 0.26 | (0.06 | ) | — | (f) | (0.06 | ) | 15.79 | 1.69 | 368,242 | 1.04 | 1.08 | 0.22 | 72 | |||||||||||||||||||||||||||||||||||||||
2015 - Institutional | 16.16 | 0.09 | (g) | 0.46 | 0.55 | (0.06 | ) | (1.03 | ) | (1.09 | ) | 15.62 | 3.40 | 109,801 | 0.79 | 0.83 | 0.55 | (g) | 56 | |||||||||||||||||||||||||||||||||||||
2015 - Service | 16.13 | 0.05 | (g) | 0.46 | 0.51 | (0.02 | ) | (1.03 | ) | (1.05 | ) | 15.59 | 3.14 | 360,966 | 1.04 | 1.08 | 0.29 | (g) | 56 | |||||||||||||||||||||||||||||||||||||
2014 - Institutional | 17.64 | 0.07 | 2.24 | 2.31 | (0.07 | ) | (3.72 | ) | (3.79 | ) | 16.16 | 13.64 | 119,934 | 0.79 | 0.81 | 0.37 | 48 | |||||||||||||||||||||||||||||||||||||||
2014 - Service | 17.61 | 0.02 | 2.24 | 2.26 | (0.02 | ) | (3.72 | ) | (3.74 | ) | 16.13 | 13.38 | 394,747 | 1.04 | 1.08 | 0.12 | 48 | |||||||||||||||||||||||||||||||||||||||
2013 - Institutional | 13.86 | 0.06 | 4.42 | 4.48 | (0.07 | ) | (0.63 | ) | (0.70 | ) | 17.64 | 32.42 | 122,220 | 0.80 | 0.84 | 0.35 | 66 | |||||||||||||||||||||||||||||||||||||||
2013 - Service | 13.85 | 0.02 | 4.40 | 4.42 | (0.03 | ) | (0.63 | ) | (0.66 | ) | 17.61 | 32.00 | 391,219 | 1.05 | 1.09 | 0.10 | 66 | |||||||||||||||||||||||||||||||||||||||
2012 - Institutional | 11.64 | 0.10 | (h) | 2.21 | 2.31 | (0.09 | ) | — | (0.09 | ) | 13.86 | 19.83 | 106,119 | 0.80 | 0.84 | 0.79 | (h) | 42 | ||||||||||||||||||||||||||||||||||||||
2012 - Service | 11.63 | 0.07 | (h) | 2.21 | 2.28 | (0.06 | ) | — | (0.06 | ) | 13.85 | 19.57 | 304,065 | 1.05 | 1.09 | 0.56 | (h) | 42 |
(a) | Calculated based on the average shares outstanding methodology. |
(b) | Assumes investment at the net asset value at the beginning of the period, reinvestment of all distributions, and a complete redemption of the investment at the net asset value at the end of the period. Total returns for periods less than one full year are not annualized. |
(c) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short term investments. If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
(d) | Reflects income recognized from special dividends which amounted to $0.02 per share and 0.09% of average net assets. |
(e) | Annualized. |
(f) | Amount is less than $0.005 per share. |
(g) | Reflects income recognized from special dividends which amounted to $0.03 per share and 0.20% of average net assets. |
(h) | Reflects income recognized from special dividends which amounted to $0.04 per share and 0.27% of average net assets. |
The accompanying notes are an integral part of these financial statements. | 13 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC GROWTH FUND
Notes to Financial Statements
June 30, 2017 (Unaudited)
1. ORGANIZATION
Goldman Sachs Variable Insurance Trust (the “Trust” or “VIT”) is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company. The Trust includes the Goldman Sachs Strategic Growth Fund (the “Fund”). The Fund is a diversified portfolio under the Act offering two classes of shares — Institutional and Service Shares. Shares of the Trust are offered to separate accounts of participating life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies.
Goldman Sachs Asset Management, L.P. (“GSAM”), an affiliate of Goldman Sachs & Co. LLC (formerly Goldman, Sachs & Co.) (“Goldman Sachs”), serves as investment adviser to the Fund pursuant to a management agreement (the “Agreement”) with the Trust.
2. SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and require management to make estimates and assumptions that may affect the reported amounts and disclosures. Actual results may differ from those estimates and assumptions.
A. Investment Valuation — The Fund’s valuation policy is to value investments at fair value.
B. Investment Income and Investments — Investment income includes interest income, dividend income and securities lending income. Interest income is accrued daily and adjusted for amortization of premiums and accretion of discounts. Dividend income is recognized on ex-dividend date or, for certain foreign securities, as soon as such information is obtained subsequent to the ex-dividend date. Investment transactions are reflected on trade date. Realized gains and losses are calculated using identified cost. Investment transactions are recorded on the following business day for daily net asset value (“NAV”) calculations. Distributions received from the Fund’s investments in United States (“U.S.”) real estate investment trusts (“REITs”) may be characterized as ordinary income, net capital gain or a return of capital. A return of capital is recorded by the Fund as a reduction to the cost basis of the REIT.
C. Class Allocations and Expenses — Investment income, realized and unrealized gain (loss), and non-class specific expenses of the Fund are allocated daily based upon the proportion of net assets of each class. Non-class specific expenses directly incurred by the Fund are charged to the Fund, while such expenses incurred by the Trust are allocated across the Fund on a straight-line and/or pro-rata basis depending upon the nature of the expenses. Class specific expenses, where applicable, are borne by the respective share classes and include Distribution and Service and Transfer Agency fees.
D. Federal Taxes and Distributions to Shareholders — It is the Fund’s policy to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Code”), applicable to regulated investment companies (mutual funds) and to distribute each year substantially all of its investment company taxable income and capital gains to its shareholders. Accordingly, the Fund is not required to make any provisions for the payment of federal income tax. Distributions to shareholders are recorded on the ex-dividend date. Income and capital gains distributions, if any, are declared and paid annually.
Net capital losses, if any, are carried forward to future fiscal years and may be used to the extent allowed by the Code to offset any future capital gains. Losses that are carried forward will retain their character as either short-term or long-term capital losses. Utilization of capital loss carryforwards will reduce the requirement of future capital gains distributions.
The characterization of distributions to shareholders for financial reporting purposes is determined in accordance with federal income tax rules, which may differ from GAAP. The source of the Fund’s distributions may be shown in the accompanying financial statements as either from net investment income, net realized gain or capital. Certain components of the Fund’s net assets on the Statement of Assets and Liabilities reflect permanent GAAP/tax differences based on the appropriate tax character.
E. Commission Recapture — GSAM, on behalf of certain Funds, may direct portfolio trades, subject to seeking best execution, to various brokers who have agreed to rebate a portion of the commissions generated. Such rebates are made directly to the Fund as cash payments and are included in net realized gain (loss) from investments on the Statement of Operations.
14
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC GROWTH FUND
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS
U.S. GAAP defines the fair value of a financial instrument as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price); the Fund’s policy is to use the market approach. GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The levels used for classifying investments are not necessarily an indication of the risk associated with investing in these investments. The three levels of the fair value hierarchy are described below:
Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 — Quoted prices in markets that are not active or financial instruments for which significant inputs are observable (including, but not limited to, quoted prices for similar investments, interest rates, foreign exchange rates, volatility and credit spreads), either directly or indirectly;
Level 3 — Prices or valuations that require significant unobservable inputs (including GSAM’s assumptions in determining fair value measurement).
Changes in valuation techniques may result in transfers into or out of an assigned level within the hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value hierarchy resulting from such changes are deemed to have occurred as of the beginning of the reporting period.
The Board of Trustees (“Trustees”) has approved Valuation Procedures that govern the valuation of the portfolio investments held by the Fund, including investments for which market quotations are not readily available. The Trustees have delegated to GSAM day-to-day responsibility for implementing and maintaining internal controls and procedures related to the valuation of the Fund’s portfolio investments. To assess the continuing appropriateness of pricing sources and methodologies, GSAM regularly performs price verification procedures and issues challenges as necessary to third party pricing vendors or brokers, and any differences are reviewed in accordance with the Valuation Procedures.
A. Level 1 and Level 2 Fair Value Investments — The valuation techniques and significant inputs used in determining the fair values for investments classified as Level 1 and Level 2 are as follows:
Equity Securities — Equity securities traded on a U.S. securities exchange or the NASDAQ system, or those located on certain foreign exchanges, including but not limited to the Americas, are valued daily at their last sale price or official closing price on the principal exchange or system on which they are traded. If there is no sale or official closing price or such price is believed by GSAM to not represent fair value, equity securities are valued at the last bid price for long positions and at the last ask price for short positions. To the extent these investments are actively traded, they are classified as Level 1 of the fair value hierarchy, otherwise they are generally classified as Level 2.
Unlisted equity securities for which market quotations are available are valued at the last sale price on the valuation date, or if no sale occurs, at the last bid price. These investments are generally classified as Level 2 of the fair value hierarchy.
Money Market Funds — Investments in the Goldman Sachs Financial Square Government Fund (“Underlying Fund”) are valued at the NAV of the Institutional Share class on the day of valuation. These investments are generally classified as Level 1 of the fair value hierarchy. For information regarding an Underlying Fund’s accounting policies and investment holdings, please see the Underlying Fund’s shareholder report.
B. Level 3 Fair Value Investments — To the extent that significant inputs to valuation models and other alternative pricing sources are unobservable, or if quotations are not readily available, or if GSAM believes that such quotations do not accurately reflect fair value, the fair value of the Fund’s investments may be determined under Valuation Procedures approved by the Trustees. GSAM, consistent with its procedures and applicable regulatory guidance, may make an adjustment to the most recent valuation prices of either domestic or foreign securities in light of significant events to reflect what it believes to be the fair value of the securities at the time of determining the Fund’s NAV. Significant events which could affect a large number of securities in a
15
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC GROWTH FUND
Notes to Financial Statements (continued)
June 30, 2017 (Unaudited)
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS (continued)
particular market may include, but are not limited to: significant fluctuations in U.S. or foreign markets; market dislocations; market disruptions; or unscheduled market closings. Significant events which could also affect a single issuer may include, but are not limited to: corporate actions such as reorganizations, mergers and buy-outs; ratings downgrades; and bankruptcies.
C. Fair Value Hierarchy — The following is a summary of the Fund’s investments classified in the fair value hierarchy as of June 30, 2017:
Investment Type | Level 1 | Level 2 | Level 3 | |||||||||
Assets | ||||||||||||
Common Stock and/or Other Equity Investments(a) | ||||||||||||
North America | $ | 514,446,266 | $ | — | $ | — |
(a) | Amounts are disclosed by continent to highlight the impact of time zone differences between local market close and the calculation of NAV. Security valuations are based on the principal exchange or system on which they are traded, which may differ from country of domicile noted in the table. |
For further information regarding security characteristics, see the Schedule of Investments.
4. AGREEMENTS AND AFFILIATED TRANSACTIONS
A. Management Agreement — Under the Agreement, GSAM manages the Fund, subject to the general supervision of the Trustees.
As compensation for the services rendered pursuant to the Agreement, the assumption of the expenses related thereto and administration of the Fund’s business affairs, including providing facilities, GSAM is entitled to a management fee, accrued daily and paid monthly, equal to an annual percentage rate of the Fund’s average daily net assets.
For the six months ended June 30, 2017, contractual and effective net management fees with GSAM were at the following rates:
Contractual Management Rate | Effective Net Management Rate^ | |||||||||||||||||||||||||
First $1 billion | Next $1 billion | Next $3 billion | Next $3 billion | Over $8 billion | Effective Rate | |||||||||||||||||||||
0.75% | 0.68 | % | 0.65 | % | 0.64 | % | 0.63 | % | 0.75 | % | 0.71 | %* |
^ | Effective Net Management Rate includes the impact of management fee waivers of affiliated Underlying Funds, if any. |
* | GSAM agreed to waive a portion of its management fee in order to achieve a net management rate, as defined in the Fund’s most recent prospectus. This waiver will be effective through at least April 28, 2018, and prior to such date GSAM may not terminate the arrangement without approval of the Trustees. For the six months ended June 30, 2017, GSAM waived $100,506 of its management fee. |
The Fund invests in Institutional Shares of the Goldman Sachs Financial Square Government Fund, which is an affiliated Underlying Fund. GSAM has agreed to waive a portion of its management fee payable by the Fund in an amount equal to the management fee it earns as an investment adviser to any of the affiliated Underlying Funds in which the Fund invests. For the six months ended June 30, 2017, GSAM waived $671 of the Fund’s management fee.
B. Distribution and/or Service (12b-1) Plan — The Trust, on behalf of Service Shares of the Fund, has adopted a Distribution and Service Plan subject to Rule 12b-1 under the Act. Under the Distribution and Service Plan, Goldman Sachs, which serves as distributor (the “Distributor”), is entitled to a fee accrued daily and paid monthly, for distribution services and personal and account maintenance services, which may then be paid by Goldman Sachs to authorized dealers, equal to, on an annual basis, 0.25% of the Fund’s average daily net assets attributable to Service Shares.
C. Transfer Agency Agreement — Goldman Sachs also serves as the transfer agent of the Fund for a fee pursuant to the Transfer Agency Agreement. The fees charged for such transfer agency services are accrued daily and paid monthly at an annual rate of 0.02% of the average daily net assets of Institutional and Service Shares.
16
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC GROWTH FUND
4. AGREEMENTS AND AFFILIATED TRANSACTIONS (continued)
D. Other Expense Agreements and Affiliated Transactions — GSAM has agreed to limit certain “Other Expenses” of the Fund (excluding acquired fund fees and expenses, transfer agency fees and expenses, taxes, interest, brokerage fees, shareholder meeting, litigation, indemnification and extraordinary expenses) to the extent such expenses exceed, on an annual basis, a percentage rate of the average daily net assets of the Fund. Such Other Expense reimbursements, if any, are accrued daily and paid monthly. In addition, the Fund is not obligated to reimburse GSAM for prior fiscal year expense reimbursements, if any. The Other Expense limitation as an annual percentage rate of average daily net assets for the Fund is 0.014%. Prior to April 28, 2017, the Other Expense limitation was 0.114% for the Fund. The Other Expense limitation will remain in place through at least April 28, 2018, and prior to such date GSAM may not terminate the arrangement without the approval of the Trustees. For the six months ended June 30, 2017, GSAM reimbursed $27,672 to the Fund. In addition, the Fund has entered into certain offset arrangements with the custodian and the transfer agent, which may result in a reduction of the Fund’s expenses and are received irrespective of the application of the “Other Expense” limitation described above. For the six months ended June 30, 2017, custody fee credits were $1,930.
E. Line of Credit Facility — As of June 30, 2017, the Fund participated in a $1,100,000,000 committed, unsecured revolving line of credit facility (the “facility”) together with other funds of the Trust and certain registered investment companies having management agreements with GSAM or its affiliates. This facility is to be used for temporary emergency purposes, or to allow for an orderly liquidation of securities to meet redemption requests. The interest rate on borrowings is based on the federal funds rate. The facility also requires a fee to be paid by the Fund based on the amount of the commitment that has not been utilized. For the six months ended June 30, 2017, the Fund did not have any borrowings under the facility.
F. Other Transactions with Affiliates — The following table provides information about the Fund’s investment in the Goldman Sachs Financial Square Government Fund as of and for the six months ended June 30, 2017:
Market Value 12/31/16 | Purchases at Cost | Proceeds from Sales | Market Value 6/30/17 | Dividend Income | ||||||||||||||
$ | 3,017,318 | $ | 7,757,023 | $ | (10,774,341 | ) | $ | — | $ | 2,015 |
5. PORTFOLIO SECURITIES TRANSACTIONS
The cost of purchases and proceeds from sales and maturities of long-term securities for the six months ended June 30, 2017 were $103,671,271 and $120,912,819, respectively.
6. SECURITIES LENDING
The Fund may lend its securities through a securities lending agent, the Bank of New York Mellon (“BNYM”), to certain qualified borrowers. In accordance with the Fund’s securities lending procedures, the Fund receives cash collateral at least equal to the market value of the securities on loan. The market value of the loaned securities is determined at the close of business of the Fund, at their last sale price or official closing price on the principal exchange or system on which they are traded, and any additional required collateral is delivered to the Fund on the next business day. As with other extensions of credit, the Fund may experience delay in the recovery of its securities or incur a loss should the borrower of the securities breach its agreement with the Fund or become insolvent at a time when the collateral is insufficient to cover the cost of repurchasing securities on loan. Dividend income received from securities on loan may not be subject to withholding taxes and therefore withholding taxes paid may differ from the amounts listed in the Statement of Operations. Loans of securities are terminable at any time and as such 1) the remaining contractual maturities of the outstanding securities lending transactions are considered to be overnight and continuous and 2) the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.
17
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC GROWTH FUND
Notes to Financial Statements (continued)
June 30, 2017 (Unaudited)
6. SECURITIES LENDING (continued)
The Fund invests the cash collateral received in connection with securities lending transactions in the Goldman Sachs Financial Square Government Fund (“Government Money Market Fund”), an affiliated series of the Trust. The Government Money Market Fund is registered under the Act as an open end investment company, is subject to Rule 2a-7 under the Act, and is managed by GSAM, for which GSAM may receive a management fee of up to 0.205% on an annualized basis of the average daily net assets of the Government Money Market Fund.
In the event of a default by a borrower with respect to any loan, BNYM may exercise any and all remedies provided under the applicable borrower agreement to make the Fund whole. These remedies include purchasing replacement securities by applying the collateral held from the defaulting broker against the purchase cost of the replacement securities. If BNYM is unable to purchase replacement securities, BNYM will indemnify the Fund by paying the Fund an amount equal to the market value of the securities loaned minus the value of cash collateral received from the borrower for the loan, subject to an exclusion for any shortfalls resulting from a loss of value in such cash collateral due to reinvestment risk. The amounts of the Fund’s overnight and continuous agreements represent the gross amounts of recognized liabilities for securities lending transactions outstanding as of June 30, 2017 are disclosed as “Payable upon return of securities loaned” on the Statement of Assets and Liabilities.
Both the Fund and BNYM received compensation relating to the lending of the Fund’s securities. The amounts earned, if any, by the Fund for the six months ended June 30, 2017, are reported under Investment Income on the Statement of Operations.
The following table provides information about the Fund’s investment in the Government Money Market Fund for the six months ended June 30, 2017:
Market Value 12/31/2016 | Purchases at Cost | Proceeds from Sales | Market Value 6/30/2017 | |||||||||||
$ | 1,612,600 | $ | 16,444,494 | $ | (18,057,094 | ) | $ | — |
7. TAX INFORMATION
As of the Fund’s most recent fiscal year end, December 31, 2016, the Fund’s capital loss carryforwards and certain timing differences, on a tax-basis were as follows:
Capital Loss Carryforward: | ||||
Perpetual short-term | $ | (7,500,559 | ) | |
Timing differences (Post October Loss Deferral) | (388,260 | ) |
As of June 30, 2017, the Fund’s aggregate security unrealized gains and losses based on cost for U.S. federal income tax purposes were as follows:
Tax cost | $ | 356,186,368 | ||
Gross unrealized gain | 164,998,139 | |||
Gross unrealized loss | (6,738,241 | ) | ||
Net unrealized security gain | $ | 158,259,898 |
The difference between GAAP-basis and tax-basis unrealized gains (losses) is attributable primarily to wash sales, and differences in the tax treatment of underlying fund investments.
GSAM has reviewed the Fund’s tax positions for all open tax years (the current and prior three years, as applicable) and has concluded that no provision for income tax is required in the Fund’s financial statements. Such open tax years remain subject to examination and adjustment by tax authorities.
18
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC GROWTH FUND
8. OTHER RISKS
The Fund’s risks include, but are not limited to, the following:
Investments in Other Investment Companies — As a shareholder of another investment company, including an exchange-traded fund (“ETF”), the Fund will indirectly bear its proportionate share of any net management fees and other expenses paid by such other investment companies, in addition to the fees and expenses regularly borne by the Fund. ETFs are subject to risks that do not apply to conventional mutual funds, including but not limited to the following: (i) the market price of the ETF’s shares may trade at a premium or a discount to their NAV; and (ii) an active trading market for an ETF’s shares may not develop or be maintained.
Large Shareholder Transactions Risk — The Fund may experience adverse effects when certain large shareholders, such as other funds, participating insurance companies, accounts and Goldman Sachs affiliates, purchase or redeem large amounts of shares of the Fund. Such large shareholder redemptions may cause the Fund to sell portfolio securities at times when it would not otherwise do so, which may negatively impact the Fund’s NAV and liquidity. These transactions may also accelerate the realization of taxable income to shareholders if such sales of investments resulted in gains, and may also increase transaction costs. In addition, a large redemption could result in the Fund’s current expenses being allocated over a smaller asset base, leading to an increase in the Fund’s expense ratio. Similarly, large Fund share purchases may adversely affect the Fund’s performance to the extent that the Fund is delayed in investing new cash and is required to maintain a larger cash position than it ordinarily would.
Liquidity Risk — The Fund may make investments that are illiquid or that may become less liquid in response to market developments or adverse investor perceptions. Illiquid investments may be more difficult to value. Liquidity risk may also refer to the risk that the Fund will not be able to pay redemption proceeds within the allowable time period because of unusual market conditions, an unusually high volume of redemption requests, or other reasons. To meet redemption requests, the Fund may be forced to sell investments at an unfavorable time and/or under unfavorable conditions.
Market and Credit Risks — In the normal course of business, the Fund trades financial instruments and enters into financial transactions where risk of potential loss exists due to changes in the market (market risk). Additionally, the Fund may also be exposed to credit risk in the event that an issuer or guarantor fails to perform or that an institution or entity with which the Fund has unsettled or open transactions defaults.
9. INDEMNIFICATIONS
Under the Trust’s organizational documents, its Trustees, officers, employees and agents are indemnified, to the extent permitted by the Act and state law, against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the course of business, the Fund enters into contracts that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, GSAM believes the risk of loss under these arrangements to be remote.
10. SUBSEQUENT EVENTS
Subsequent events after the Statement of Assets and Liabilities date have been evaluated and GSAM has concluded that there is no impact requiring adjustment or disclosure in the financial statements.
19
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC GROWTH FUND
Notes to Financial Statements (continued)
June 30, 2017 (Unaudited)
11. SUMMARY OF SHARE TRANSACTIONS
Share activity is as follows:
For the Six Months Ended June 30, 2017 (Unaudited) | For the Fiscal Year Ended December 31, 2016 | |||||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||||
Institutional Shares | ||||||||||||||||
Shares sold | 108,986 | $ | 1,898,126 | 278,581 | $ | 4,331,231 | ||||||||||
Reinvestment of distributions | — | — | 39,022 | 622,003 | ||||||||||||
Shares redeemed | (409,883 | ) | (7,179,791 | ) | (1,150,547 | ) | (17,834,315 | ) | ||||||||
(300,897 | ) | (5,281,665 | ) | (832,944 | ) | (12,881,081 | ) | |||||||||
Service Shares | ||||||||||||||||
Shares sold | 569,609 | 9,694,855 | 9,970,382 | 155,513,106 | ||||||||||||
Reinvestment of distributions | — | — | 93,923 | 1,493,375 | ||||||||||||
Shares redeemed | (1,721,214 | ) | (30,367,948 | ) | (9,905,667 | ) | (149,110,577 | ) | ||||||||
(1,151,605 | ) | (20,673,093 | ) | 158,638 | 7,895,904 | |||||||||||
NET DECREASE | (1,452,502 | ) | $ | (25,954,758 | ) | (674,306 | ) | $ | (4,985,177 | ) |
20
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC GROWTH FUND
Fund Expenses — Six Month Period Ended June 30, 2017 (Unaudited) |
As a shareholder of Institutional or Service Shares of the Fund, you incur ongoing costs, including management fees, distribution and/or service (12b-1) fees (with respect to Service Shares) and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Institutional Shares and Service Shares of the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from January 1, 2017 through June 30, 2017, which represents a period of 181 days of a 365 day year.
Actual Expenses — The first line under each share class in the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000=8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes — The second line under each share class in the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual net expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only. As a shareholder of the Fund you do not incur any transaction costs, such as sales charges, redemption fees, or exchange fees, but shareholders of other funds may incur such costs. The second line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds whose shareholders may incur transaction costs.
Share Class | Beginning Account Value 01/01/17 | Ending Account Value 06/30/17 | Expenses Paid for the 6 Months Ended 06/30/17* | |||||||||
Institutional | ||||||||||||
Actual | $ | 1,000 | $ | 1,165.50 | $ | 4.13 | ||||||
Hypothetical 5% return | 1,000 | 1,020.98 | + | 3.86 | ||||||||
Service | ||||||||||||
Actual | 1,000 | 1,164.70 | 5.47 | |||||||||
Hypothetical 5% return | 1,000 | 1,019.74 | + | 5.11 |
* | Expenses are calculated using the Fund’s annualized net expense ratio for each class, which represents the ongoing expenses as a percentage of net assets for the six months ended June 30, 2017. Expenses are calculated by multiplying the annualized net expense ratio by the average account value for the period; then multiplying the result by the number of days in the most recent fiscal half year; and then dividing that result by the number of days in the fiscal year. The annualized net expense ratios for the period were 0.77%, and 1.02% for the Institutional and Service Shares, respectively. |
+ | Hypothetical expenses are based on the Fund’s actual annualized net expense ratios and an assumed rate of return of 5% per year before expenses. |
21
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC GROWTH FUND
Statement Regarding Basis for Approval of Management Agreement (Unaudited)
Background
The Goldman Sachs Strategic Growth Fund (the “Fund”) is an investment portfolio of Goldman Sachs Variable Insurance Trust (the “Trust”). The Board of Trustees oversees the management of the Trust and reviews the investment performance and expenses of the Fund at regularly scheduled meetings held throughout the year. In addition, the Board of Trustees determines annually whether to approve the continuance of the Trust’s investment management agreement (the “Management Agreement”) with Goldman Sachs Asset Management, L.P. (the “Investment Adviser”) on behalf of the Fund.
The Management Agreement was most recently approved for continuation until June 30, 2018 by the Board of Trustees, including those 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”), at a meeting held on June 14-15, 2017 (the “Annual Meeting”).
The review process undertaken by the Trustees spans the course of the year and culminates with the Annual Meeting. To assist the Trustees in their deliberations, the Trustees have established a Contract Review Committee (the “Committee”), comprised of the Independent Trustees. The Committee held four meetings over the course of the year since the Management Agreement was last approved. At those Committee meetings, regularly scheduled Board or other committee meetings, and/or the Annual Meeting, matters relevant to the renewal of the Management Agreement were considered by the Board, or the Independent Trustees, as applicable. With respect to the Fund, such matters included:
(a) | the nature and quality of the advisory, administrative, and other services provided to the Fund by the Investment Adviser and its affiliates, including information about: |
(i) | the structure, staff, and capabilities of the Investment Adviser and its portfolio management teams; |
(ii) | the groups within the Investment Adviser and its affiliates that support the portfolio management teams or provide other types of necessary services, including fund services groups (e.g., accounting and financial reporting, tax, shareholder services, and operations); controls and risk management groups (e.g., legal, compliance, valuation oversight, credit risk management, internal audit, compliance testing, market risk analysis, finance, and central funding); sales and distribution support groups, and others (e.g., information technology and training); |
(iii) | trends in employee headcount; |
(iv) | the Investment Adviser’s financial resources and ability to hire and retain talented personnel and strengthen its operations; and |
(v) | the parent company’s support of the Investment Adviser and its mutual fund business, as expressed by the firm’s senior management; |
(b) | information on the investment performance of the Fund, including comparisons to the performance of similar mutual funds, as provided by a third-party mutual fund data provider engaged as part of the contract review process (the “Outside Data Provider”), a benchmark performance index, and a composite of accounts with comparable investment strategies managed by the Investment Adviser; and information on general investment outlooks in the markets in which the Fund invests; |
(c) | information provided by the Investment Adviser indicating the Investment Adviser’s views on whether the Fund’s peer group and/or benchmark index had high, medium, or low relevance given the Fund’s particular investment strategy; |
(d) | the terms of the Management Agreement and other agreements with affiliated service providers entered into by the Trust on behalf of the Fund; |
(e) | fee and expense information for the Fund, including: |
(i) | the relative management fee and expense levels of the Fund as compared to those of comparable funds managed by other advisers, as provided by the Outside Data Provider; |
(ii) | the Fund’s expense trends over time; and |
(iii) | to the extent the Investment Adviser manages other types of accounts (such as bank collective trusts, private wealth management accounts, institutional separate accounts, sub-advised mutual funds, and non-U.S. funds) having investment objectives and policies similar to those of the Fund, comparative information on the advisory fees charged and services provided to those accounts by the Investment Adviser; |
(f) | with respect to the extensive investment performance and expense comparison data provided by the Outside Data Provider, its processes in producing that data for the Fund; |
(g) | the undertakings of the Investment Adviser and its affiliates to implement fee waivers and/or expense limitations; |
(h) | information relating to the profitability of the Management Agreement and the transfer agency and distribution and service arrangements of the Fund to the Investment Adviser and its affiliates; |
(i) | whether the Fund’s existing management fee schedule adequately addressed any economies of scale; |
(j) | a summary of the “fall-out” benefits derived by the Investment Adviser and its affiliates from their relationships with the Fund, including the fees received by the Investment Adviser’s affiliates from the Fund for transfer agency, portfolio trading, distribution and other services; |
(k) | a summary of potential benefits derived by the Fund as a result of its relationship with the Investment Adviser; |
22
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC GROWTH FUND
Statement Regarding Basis for Approval of Management Agreement (Unaudited) (continued)
(l) | information regarding commissions paid by the Fund and broker oversight, an update on the Investment Adviser’s soft dollars practices, other information regarding portfolio trading, and how the Investment Adviser carries out its duty to seek best execution; |
(m) | the manner in which portfolio manager compensation is determined; and the number and types of accounts managed by the portfolio managers; |
(n) | the nature and quality of the services provided to the Fund by its unaffiliated service providers, and the Investment Adviser’s general oversight and evaluation (including reports on due diligence) of those service providers as part of the administrative services provided under the Management Agreement; and |
(o) | the Investment Adviser’s processes and policies addressing various types of potential conflicts of interest; its approach to risk management; the annual review of the effectiveness of the Fund’s compliance program; and periodic compliance reports. |
The Trustees also received an overview of the Fund’s distribution arrangements. They received information regarding the Fund’s assets, share purchase and redemption activity, and payment of distribution and service fees. Information was also provided to the Trustees relating to revenue sharing payments made by and services provided by the Investment Adviser and its affiliates to intermediaries that promote the sale, distribution, and/or servicing of Fund shares. The Independent Trustees also discussed the broad range of other investment choices that are available to Fund investors, including the availability of comparable funds managed by other advisers.
The presentations made at the Board and Committee meetings and at the Annual Meeting encompassed the Fund and other mutual funds for which the Board of Trustees has responsibility. In evaluating the Management Agreement at the Annual Meeting, the Trustees relied upon their knowledge, resulting from their meetings and other interactions throughout the year, of the Investment Adviser and its affiliates, their services, and the Fund. In conjunction with these meetings, the Trustees received written materials and oral presentations on the topics covered, and the Investment Adviser addressed the questions and concerns of the Trustees, including concerns regarding the investment performance of certain of the funds they oversee. The Independent Trustees were advised by their independent legal counsel regarding their responsibilities and other regulatory requirements related to the approval and continuation of mutual fund investment management agreements under applicable law. In addition, the Investment Adviser and its affiliates provided the Independent Trustees with a written response to a formal request for information sent on behalf of the Independent Trustees by their independent legal counsel. During the course of their deliberations, the Independent Trustees met in executive sessions with their independent legal counsel, without representatives of the Investment Adviser or its affiliates present.
Nature, Extent, and Quality of the Services Provided Under the Management Agreement
As part of their review, the Trustees considered the nature, extent, and quality of the services provided to the Fund by the Investment Adviser. In this regard, the Trustees considered both the investment advisory services and non-advisory services that are provided by the Investment Adviser and its affiliates. The Trustees noted the transition in the leadership and changes in personnel of various of the Investment Adviser’s portfolio management teams that had occurred in recent periods, and the ongoing recruitment efforts aimed at bringing high quality investment talent to the Investment Adviser. They also noted the Investment Adviser’s commitment to maintaining high quality systems and expending substantial resources to respond to ongoing changes to the regulatory and control environment in which the Fund and its service providers operate, as well as the efforts of the Investment Adviser and its affiliates to combat cyber security risks. The Trustees concluded that the Investment Adviser continued to commit substantial financial and operational resources to the Fund and expressed confidence that the Investment Adviser would continue to do so in the future. The Trustees also recognized that the Investment Adviser had made significant commitments to address regulatory compliance requirements applicable to the Fund and the Investment Adviser and its affiliates.
Investment Performance
The Trustees also considered the investment performance of the Fund. In this regard, they compared the investment performance of the Fund to its peers using rankings and ratings compiled by the Outside Data Provider as of December 31, 2016, and updated performance information prepared by the Investment Adviser using the peer group identified by the Outside Data Provider as of March 31, 2017. The information on the Fund’s investment performance was provided for the one-, three-, five-, and ten-year periods ending on the applicable dates. The Trustees also reviewed the Fund’s investment performance relative to its performance benchmark. As part of this review, they 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 and market conditions. The Trustees also received information comparing the Fund’s performance to that of a composite of accounts with comparable investment strategies managed by the Investment Adviser.
23
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC GROWTH FUND
Statement Regarding Basis for Approval of Management Agreement (Unaudited) (continued)
In addition, the Trustees considered materials prepared and presentations made by the Investment Adviser’s senior management and portfolio management personnel in which Fund performance was assessed. The Trustees also considered the Investment Adviser’s periodic reports with respect to the Fund’s risk profile, and how the Investment Adviser’s approach to risk monitoring and management influences portfolio management.
The Trustees observed that the Fund’s Institutional Shares had placed in the second quartile of the Fund’s peer group for the three-, five-, and ten-year periods and in the third quartile for the one-year period, and had underperformed the Fund’s benchmark index for the one-, three-, five-, and ten-year periods ended March 31, 2017.
Costs of Services Provided and Competitive Information
The Trustees considered the contractual terms of the Management Agreement and the fee rates payable by the Fund thereunder. 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.
In particular, the Trustees reviewed analyses prepared by the Outside Data Provider regarding the expense rankings of the Fund. The analyses provided a comparison of the Fund’s management fee and breakpoints to those of a relevant peer group and category universe; an expense analysis which compared the Fund’s overall net and gross expenses to a peer group and a category universe; and data comparing the Fund’s net expenses to the peer and category medians. The analyses also compared the Fund’s transfer agency, custody, and distribution fees, other expenses and fee waivers/reimbursements to those of the peer group and category medians. The Trustees concluded that the comparisons provided by the Outside Data Provider were useful in evaluating the reasonableness of the management fees and total expenses paid by the Fund.
With respect to the Fund, the Trustees noted that the management fee breakpoint schedule was being reduced at all asset levels. In addition, the Trustees considered the Investment Adviser’s undertakings to implement fee waivers and/or expense limitations. They also considered, to the extent that the Investment Adviser manages other types of accounts having investment objectives and policies similar to those of the Fund, comparative fee information for services provided by the Investment Adviser to those accounts, and information that indicated that services provided to the Fund differed in various significant respects from the services provided to other types of accounts which, in many cases, operated under less stringent legal and regulatory structures, required fewer services from the Investment Adviser to a smaller number of client contact points, and were less time-intensive.
In addition, the Trustees noted that shareholders are able to redeem their Fund shares at any time if shareholders believe that the Fund fees and expenses are too high or if they are dissatisfied with the performance of the Fund.
Profitability
The Trustees reviewed the Fund’s contribution to the Investment Adviser’s revenues and pre-tax profit margins. In this regard the Trustees noted that they had received, among other things, profitability analyses and summaries, revenue and expense schedules by Fund and by function (i.e., investment management, transfer agency and distribution and service), and information on the Investment Adviser’s expense allocation methodology. They observed that the profitability and expense figures are substantially similar to those used by the Investment Adviser for many internal purposes, including compensation decisions among various business groups, and are thus subject to a vigorous internal debate about how certain revenue and expenses should be allocated. The Trustees also noted that the internal audit group within the Goldman Sachs organization had audited the expense allocation methodology and that the internal audit group was satisfied with the reasonableness, consistency, and accuracy of the Investment Adviser’s expense allocation methodology and profitability analysis calculations. Profitability data for the Fund were provided for 2016 and 2015, and the Trustees considered this information in relation to the Investment Adviser’s overall profitability.
Economies of Scale
The Trustees considered the information that had been provided regarding the Investment Adviser’s profitability. The Trustees also considered the breakpoints in the fee rate payable under the Management Agreement for the Fund at the following annual percentage rates of the average daily net assets of the Fund:
First $1 billion | 0.75 | % | ||
Next $1 billion | 0.68 | |||
Next $3 billion | 0.65 | |||
Next $3 billion | 0.64 | |||
Over $8 billion | 0.63 |
24
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC GROWTH FUND
Statement Regarding Basis for Approval of Management Agreement (Unaudited) (continued)
The Trustees noted that the breakpoints were designed to share potential economies of scale, if any, with the Fund and its shareholders as assets under management reach those asset levels. The Trustees considered the amounts of assets in the Fund; the Fund’s recent share purchase and redemption activity; the information provided by the Investment Adviser relating to the costs of the services provided by the Investment Adviser and its affiliates and their realized profits; information comparing fee rates charged by the Investment Adviser with fee rates charged to other funds in the peer group; and the Investment Adviser’s undertakings to waive a portion of its management fee and to limit certain expenses of the Fund that exceed a specified level. Upon reviewing these matters at the Annual Meeting, the Trustees concluded that the fee breakpoints represented a means of assuring that benefits of scalability, if any, would be passed along to shareholders at the specified asset levels.
Other Benefits to the Investment Adviser and Its Affiliates
The Trustees also considered the other benefits derived by the Investment Adviser and its affiliates from their relationships with the Fund as stated above, including: (a) transfer agency fees received by Goldman Sachs & Co. LLC (“Goldman Sachs”); (b) brokerage and futures commissions earned by Goldman Sachs for executing securities and futures transactions on behalf of the Fund; (c) research received by the Investment Adviser from broker-dealers in exchange for executing certain transactions on behalf of the Fund; (d) trading efficiencies resulting from aggregation of orders of the Fund with those for other funds or accounts managed by the Investment Adviser; (e) the Investment Adviser’s ability to leverage the infrastructure designed to service the Fund on behalf of its other clients; (f) the Investment Adviser’s ability to cross-market other products and services to Fund shareholders; (g) Goldman Sachs’ retention of certain fees as Fund Distributor; (h) the Investment Adviser’s ability to negotiate better pricing with custodians on behalf of its other clients, as a result of the relationship with the Fund; and (i) the possibility that the working relationship between the Investment Adviser and the Fund’s third-party service providers may cause those service providers to be more likely to do business with other areas of Goldman Sachs. In the course of considering the foregoing, the Independent Trustees requested and received further information quantifying certain of these fall-out benefits.
Other Benefits to the Fund and Its Shareholders
The Trustees also noted that the Fund receives certain potential benefits as a result of its relationship with the Investment Adviser, including: (a) trading efficiencies resulting from aggregation of orders of the Fund with those of other funds or accounts managed by the Investment Adviser; (b) enhanced servicing from vendors because of the volume of business generated by the Investment Adviser and its affiliates; (c) enhanced servicing from broker-dealers because of the volume of business generated by the Investment Adviser and its affiliates; (d) the Investment Adviser’s ability to negotiate favorable terms with derivatives counterparties on behalf of the Fund as a result of the size and reputation of the Goldman Sachs organization; (e) the Investment Adviser’s knowledge and experience gained from managing other accounts and products; (f) the Investment Adviser’s ability to hire and retain qualified personnel to provide services to the Fund because of the reputation of the Goldman Sachs organization; (g) the Fund’s access, through the Investment Adviser, to certain firmwide resources (e.g., proprietary risk management systems and databases), subject to certain restrictions; and (h) the Fund’s access to certain affiliated distribution channels. In addition, the Trustees noted the competitive nature of the mutual fund marketplace, and considered that many of the Fund’s shareholders invested in the Fund in part because of the Fund’s relationship with the Investment Adviser and that those shareholders have a general expectation that the relationship will continue.
Conclusion
In connection with their consideration of the Management Agreement, the Trustees gave weight to each of the factors described above, but did not identify any particular factor as controlling their decision. After deliberation and consideration of all of the information provided, including the factors described above, the Trustees concluded, in the exercise of their business judgment, that the management fees paid by the Fund were reasonable in light of the services provided to it by the Investment Adviser, the Investment Adviser’s costs and the Fund’s current and reasonably foreseeable asset levels. The Trustees unanimously concluded that the Investment Adviser’s continued management likely would benefit the Fund and its shareholders and that the Management Agreement should be approved and continued with respect to the Fund until June 30, 2018.
25
TRUSTEES | OFFICERS | |
Ashok N. Bakhru, Chairman | James A. McNamara, President | |
Kathryn A. Cassidy | Scott M. McHugh, Treasurer, Senior Vice | |
Diana M. Daniels | President and Principal Financial Officer | |
Herbert J. Markley | Joseph F. DiMaria, Assistant Treasurer and | |
James A. McNamara | Principal Accounting Officer | |
Jessica Palmer | Caroline L. Kraus, Secretary | |
Roy W. Templin | ||
Gregory G. Weaver |
GOLDMAN SACHS & CO. LLC
Distributor and Transfer Agent
GOLDMAN SACHS ASSET MANAGEMENT, L.P.
Investment Adviser
200 West Street, New York
New York 10282
Visit our web site at www.GSAMFUNDS.com to obtain the most recent month-end returns.
The reports concerning the Fund included in this shareholder report may contain certain forward-looking statements about the factors that may affect the performance of the Fund in the future. These statements are based on Fund management’s predictions and expectations concerning certain future events and their expected impact on the Fund, such as performance of the economy as a whole and of specific industry sectors, changes in the levels of interest rates, the impact of developing world events, and other factors that may influence the future performance of the Fund. Management believes these forward-looking statements to be reasonable, although they are inherently uncertain and difficult to predict. Actual events may cause adjustments in portfolio management strategies from those currently expected to be employed.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the Fund voted proxies relating to portfolio securities for the 12-month period ended June 30 is available (i) without charge, upon request by calling 1-800-621-2550; and (ii) on the Securities and Exchange Commission (“SEC”) web site at http://www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Form N-Qs are available on the SEC’s web site at http://www.sec.gov within 60 days after the Fund’s first and third fiscal quarters. The Fund’s Form N-Qs may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may also be obtained by calling 1-800-SEC-0330. Form N-Qs may be obtained upon request and without charge by calling 1-800-621-2550.
The website links provided are for your convenience only and are not an endorsement or recommendation by GSAM of any of these websites or the products or services offered. GSAM is not responsible for the accuracy and validity of the content of these websites.
Fund holdings and allocations shown are as of June 30, 2017 and may not be representative of future investments. Fund holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities. Current and future holdings are subject to risk.
References to indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only and do not imply that the portfolio will achieve similar results. The index composition may not reflect the manner in which a portfolio is constructed. While an adviser seeks to design a portfolio which reflects appropriate risk and return features, portfolio characteristics may deviate from those of the benchmark.
The Global Industry Classification Standard (“GICS”) was developed by and is the exclusive property and a service mark of Morgan Stanley Capital International Inc. (“MSCI”) and Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. (“S&P”) and is licensed for use by Goldman Sachs. Neither MSCI, S&P nor any other party involved in making or compiling the GICS or any GICS classifications makes any express or implied warranties or representations with respect to such standard or classification (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of such standard or classification. Without limiting any of the foregoing, in no event shall MSCI, S&P, any of their affiliates or any third party involved in making or compiling the GICS or any GICS classifications have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.
The portfolio risk management process includes an effort to monitor and manage risk, but does not imply low risk.
Shares of the Goldman Sachs VIT Funds are offered to separate accounts of participating life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Shares of the Fund are not offered directly to the general public. The variable annuity contracts and variable life insurance policies are described in the separate prospectuses issued by participating insurance companies. You should refer to those prospectuses for information about surrender charges, mortality and expense risk fees and other charges that may be assessed by participating insurance companies under the variable annuity contracts or variable life insurance policies. Such fees or charges, if any, may affect the return you may realize with respect to your investments. Ask your representative for more complete information. Please consider a fund’s objectives, risks and charges and expenses, and read the prospectus carefully before investing. The prospectus contains this and other information about the Fund.
This material is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus or summary prospectus, if applicable. Investors should consider the Fund’s objective, risks, and charges and expenses, and read the summary prospectus, if available, and/or the prospectus carefully before investing or sending money. The summary prospectus, if available, and the prospectus contain this and other information about the Fund and may be obtained from your authorized dealer or from Goldman Sachs & Co. LLC by calling 1-800-621-2550.
THIS MATERIAL IS FOR INFORMATIONAL PURPOSES ONLY AND IS PROVIDED SOLELY ON THE BASIS THAT IT WILL NOT CONSTITUTE INVESTMENT OR OTHER ADVICE OR A RECOMMENDATION RELATING TO ANY PERSON’S OR PLAN’S INVESTMENT OR OTHER DECISIONS, AND GOLDMAN SACHS IS NOT A FIDUCIARY OR ADVISOR WITH RESPECT TO ANY PERSON OR PLAN BY REASON OF PROVIDING THE MATERIAL OR CONTENT HEREIN INCLUDING UNDER THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974 OR DEPARTMENT OF LABOR REGULATIONS. PLAN SPONSORS AND OTHER FIDUCIARIES SHOULD CONSIDER THEIR OWN CIRCUMSTANCES IN ASSESSING ANY POTENTIAL COURSE OF ACTION.
This report is prepared for the general information of contract owners and is not an offer of shares of the Goldman Sachs Variable Insurance Trust — Goldman Sachs Strategic Growth Fund.
©2017 Goldman Sachs. All rights reserved.
VITGRWSAR-17/102634-TMPL-08/2017-587234/33.3K
Goldman
Sachs Variable Insurance Trust
Goldman Sachs
Strategic Income Fund
Semi-Annual Report
June 30, 2017
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
INVESTMENT OBJECTIVE
The Fund seeks total return comprised of income and capital appreciation.
Portfolio Management Discussion and Analysis
Below, the Goldman Sachs Fixed Income Portfolio Management Team discusses the Goldman Sachs Variable Insurance Trust — Goldman Sachs Strategic Income Fund’s (the “Fund”) performance and positioning for the six-month period ended June 30, 2017 (the “Reporting Period”).
How did the Fund perform during the Reporting Period?
During the Reporting Period, the Fund’s Institutional, Service and Advisor Shares generated cumulative total returns of 0.26%, 0.25% and 0.20%, respectively. These returns compare to the 0.49% cumulative total return of the Fund’s benchmark, the BofA Merrill Lynch U.S. Dollar Three-Month LIBOR Constant Maturity Index (the “LIBOR Index”), during the same period.
We note that the Fund’s benchmark being the LIBOR Index is a means of emphasizing that the Fund has an unconstrained strategy. That said, this Fund employs a benchmark agnostic strategy and thus comparisons to a benchmark index are not particularly relevant.
What economic and market factors most influenced the Fund during the Reporting Period?
When the Reporting Period began in the first quarter of 2017, spread (or non-government bond) sectors generally posted gains. Investors focused on the prospect of pro-growth policies from the new U.S. Administration, which helped boost business and consumer sentiment to near record levels. Investors also evaluated the positive impact of earlier fiscal stimulus in China. Global purchasing managers’ indices pointed to solid and synchronized global expansion, led by developed markets, most notably the U.S. In Europe, economic data strengthened and political risk remained contained, as markets weathered the official start of Brexit negotiations. (Brexit refers to the U.K.’s efforts to exit the European Union.) The far right lost to centrists in the Netherlands’ election. In France, polls reflected a relatively low chance of victory for the far-right candidate in the country’s then-upcoming presidential vote. Monetary policy presented few surprises during the first calendar quarter, as the European Central Bank (“ECB”), Bank of Japan (“BoJ”) and Bank of England (“BoE”) kept their respective monetary policies unchanged. In March 2017, the ECB raised its economic growth and inflation forecast, while the U.S. Federal Reserve (the “Fed”) raised the target range for the federal funds rate by 25 basis points. (A basis point is 1/100th of a percentage point.) Minutes from the Fed’s meeting raised expectations that Fed balance sheet normalization would begin in 2017. Despite the Fed’s monetary policy tightening, the U.S. dollar weakened versus both developed and emerging markets currencies during the first calendar quarter.
In the second quarter of 2017, spread sectors overall recorded positive returns. Political developments led to temporary bouts of volatility early in the quarter, driving weakness in Brazilian, U.S. and U.K. fixed income assets as well as a credit rating downgrade of South Africa’s sovereign debt. Political risks receded in May 2017 on the centrist candidate’s victory in the French presidential election, which was supportive of French and European peripheral bonds broadly. On the economic front, U.S. core inflation weakened for the third consecutive month in May 2017, casting uncertainty over the pace of Fed monetary tightening. Nonetheless, comments included in minutes from the Fed’s May and June 2017 policy meetings suggested an announcement about how and when the Fed would begin reducing the size of its balance sheet would be made sooner than the markets had previously anticipated. In Europe, economic data continued to surprise to the upside. At its June 2017 policy meeting, the ECB provided a sanguine assessment of the risks to growth, but revised downward its medium-term inflation forecasts. The ECB, BoJ and BoE left their respective monetary policies unchanged during the second calendar quarter, while the Fed raised interest rates for the second time in 2017 and the fourth time in a decade at its June 2017 policy meeting. As the quarter came to an end, a string of comments from global central bankers triggered a hawkish market reaction. (A hawkish market reaction suggests investors expect higher interest rates; opposite of dovish.) Global interest rates rose as the market anticipated a faster-than-expected pace of monetary policy tightening by the BoE, ECB and Bank of Canada. During the second quarter of 2017, the U.S. dollar continued to weaken versus many global currencies.
For the Reporting Period overall, sovereign emerging markets debt and high yield corporate bonds produced solid gains, outperforming U.S. Treasury securities. Investment grade corporate bonds also outpaced U.S. Treasuries, followed at some distance by agency securities, asset-backed securities and commercial mortgage-backed securities. Mortgage-backed securities modestly underperformed U.S. Treasuries. The U.S. Treasury yield curve flattened slightly during the Reporting Period, as yields on longer-
1
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
and intermediate-term maturities fell and yields on shorter-term maturities rose. The yield on the bellwether 10-year U.S. Treasury fell approximately 32 basis points to end the Reporting Period at 2.11%. (A flattening yield curve is one wherein the differential in yields between longer-term and shorter-term maturities narrows. Yield curve is a spectrum of maturities.)
What key factors were responsible for the Fund’s performance during the Reporting Period?
During the Reporting Period, our combined tactical duration and yield curve positioning strategy detracted from performance. More specifically, the Fund was hampered by its short duration position during the second half of the Reporting Period. Duration is a measure of sensitivity to changes in interest rates.
Our currency strategy contributed most positively to returns, as the Fund benefited from long positions in emerging European currencies, such as the Polish zloty, Czech koruna and Hungarian forint. Our country strategy added modestly to performance. More specifically, the Fund was helped by relative value positions in the interest rates of various countries, including long positions in New Zealand and Sweden versus a short position in the U.K. These results were limited by the Fund’s long position in European interest rates versus its short position in U.S. interest rates as well as by its long position in Canadian interest rates versus its short position in U.S. interest rates.
Our sector strategy provided mixed results. Selection of municipal bonds hurt performance, while the Fund benefited from its overweight in the securitized sector. The Fund’s positioning within the government/swaps sector bolstered returns.
What fixed income market sectors most significantly affected Fund performance?
Issue selection among municipal bonds detracted from the Fund’s returns during the Reporting Period. The Fund held Puerto Rico municipal debt throughout the commonwealth’s bankruptcy negotiations, which significantly hurt performance, especially in the second half of the Reporting Period when deals to settle bond payments failed. The Fund was also hampered by our selection of emerging markets debt. In addition, during the Reporting Period, the Fund held credit default swaps as protection against the potential of an outsized negative credit event in China. The costs associated with the ownership of these credit default swaps detracted from results. An underweight position in corporate credit further hurt results as spreads, or yield differentials, between investment grade corporate bonds and high yield corporate bonds tightened.
On the positive side, the Fund saw meaningful returns from its overweight in securitized credit, including its investments in high-quality collateralized loan obligations (“CLOs”). An underweight in agency mortgage-backed securities also added value. Within our government/swaps strategy, the Fund benefited from steepening positions on the European and U.K. government bond yield curves. (A steepening yield curve is one wherein the differential in yields between longer-term and shorter-term maturities widens.)
Did the Fund’s duration and yield curve positioning strategy help or hurt its results during the Reporting Period?
The Fund’s combined tactical duration and yield curve positioning detracted from performance. In the first half of the Reporting Period, we tactically moved the Fund between a small short duration position and a modest long duration position on the U.S. Treasury yield curve. However, in the second half of the Reporting Period, the Fund was positioned for a hawkish Fed and continued strength in U.S. economic data and therefore held a short duration position on the U.S. Treasury yield curve. This positioning hurt results when several downside surprises in U.S. inflation data drove a decline in longer-term yields.
How did the Fund use derivatives and similar instruments during the Reporting Period?
We used derivatives and similar instruments for the efficient management of the Fund. These derivatives and similar instruments allowed us to manage interest rate, credit and currency risks more effectively by allowing us both to hedge and to apply active investment views with greater versatility and to afford greater risk management precision than we would otherwise be able to implement.
During the Reporting Period, we used interest rate and bond exchange traded futures contracts to implement duration and country strategies within the Fund, especially in the U.S. and Eurozone markets. Currency transactions were carried out using primarily over-the-counter (“OTC”) spot and forward foreign currency exchange contracts. Currency transactions were used as we sought both to enhance returns and to hedge the Fund’s portfolio against currency exchange rate fluctuations. In addition, the Fund employed credit default swaps to manage exposure to fluctuations in credit spreads (or the differential in yields between Treasury securities and non-Treasury securities that are identical in all respects except for quality rating). Credit default swaps were also used to manage the Fund’s exposure to an expected credit event in China. Interest rate swaps were employed to manage exposure to fluctuations in interest rates. Forward sales contracts were employed to implement long and short views within our currency strategy.
2
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
During the Reporting Period, our currency strategy, which is implemented through forward sales contracts, added to performance. Our duration strategy, which employs derivatives to implement interest rate views, had a negative effect on results. The credit default swaps we used to manage the Fund’s exposure to an expected credit event in China detracted from performance. Inflation-linked swaps, which we utilized to express our views on inflation, did not have a meaningful impact on performance.
Were there any notable changes in the Fund’s weightings during the Reporting Period?
The Fund is a broadly diversified, multi-sector portfolio designed to provide total return opportunities from across the fixed income spectrum, including government, securitized, corporate credit and emerging market fixed income sectors. During the Reporting Period, the Fund’s positioning was relatively consistent, with a cautious stance on corporate credit and a focus on generating income. In our view, investors might not find corporate credit attractive given that the U.S. is, we believe, in the later stages of the credit cycle. Accordingly, the Fund maintained short positions in high yield corporate bonds and investment grade corporate bonds during the Reporting Period. As for our efforts to generate income for the Fund, we favored the securitized sector, especially high quality CLOs, over corporate credit. In addition, during the Reporting Period, the Fund was positioned for continued divergence in global central bank monetary policy, with the Fed likely to continue raising rates and other central banks, such as the ECB, Bank of Canada and BoE, remaining in easing mode. In terms of duration, we tactically moved the Fund between a small short duration position and a modest long duration position on the U.S. Treasury yield curve during the first half of the Reporting Period and then adopted a short duration position during the second half of the Reporting Period. At the same time, we added long positions in U.K. and Canadian interest rates. In the middle of the Reporting Period, we increased the Fund’s holdings of emerging markets currencies, especially those of emerging Europe.
How was the Fund positioned at the end of the Reporting Period?
At the end of the Reporting Period, we believed that global monetary policy divergence would continue in the second half of 2017. We expressed this view primarily through the Fund’s positioning within our country and currency strategies. In addition, we believed relative value strategies overall would allow us to take advantage of potential dislocations in the global economic environment. In the near term, we plan to maintain the Fund’s cautious stance on corporate credit, as we believe the U.S. is in the later stages of the credit cycle, and we intend to look for opportunities in other segments of the fixed income market as we seek to generate income for the Fund.
What is the Fund’s tactical view and strategy for the months ahead?
At the end of the Reporting Period, we expected global economic growth to remain strong in the near term, largely driven by developed markets. In the U.S., we believe tightness in the labor market and easy financial conditions, which continued to loosen despite the Fed’s two interest rate hikes during the Reporting Period, will likely warrant further monetary policy tightening. We also see scope for U.S. inflation to rebound from its recent weakness, largely due to a healthy labor market supporting wage growth. Based on recent Fed communications, we expect policymakers to unveil in September 2017 a strategy for reducing its balance sheet holdings of U.S. Treasury and agency mortgage-backed securities, and we see increased likelihood of implementation from October 2017. As for Europe, economic growth surprised to the upside during the Reporting Period, but the inflation backdrop remained subdued, and we expect it to remain so, thereby warranting prolonged monetary policy accommodation by the ECB. At the end of the Reporting Period, we anticipated a slower pace of monetary policy tightening in Canada, the U.K. and Europe than the market appeared to believe. At the same time, we think the markets were underpricing the pace of Fed rate hikes.
Overall, we believe political risks shifted from Europe to the U.S. and U.K. during the Reporting Period. In our view, centrist victories in the French presidential and parliamentary elections have the potential to improve cohesion within the European Union, which appeared at risk at the start of 2017 due to rising support for populist parties. In the U.K., we expect uncertain Brexit negotiations to weigh on business sentiment, and we see consumption weakening as inflation rises and low wage growth puts pressure on household disposable incomes. In the U.S., we believe fiscal policy uncertainty persists, although we think low expectations regarding the Administration’s ability to implement its pro-growth agenda creates the potential for positive surprises.
3
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
Index Definitions
The BofA Merrill Lynch U.S. Dollar Three-Month LIBOR Constant Maturity Index is based on the assumed purchase of a synthetic instrument having three months to maturity and with a coupon equal to the closing quote for three-month LIBOR. That issue is sold the following day (priced at a yield equal to the current day closing three-month LIBOR rate) and is rolled into a new three-month instrument. The index, therefore, will always have a constant maturity equal to exactly three months.
4
FUND BASICS
Strategic Income Fund
as of June 30, 2017
STANDARDIZED TOTAL RETURNS1
For the period ended 6/30/17 | One Year | Since Inception | Inception Date | |||||||
Institutional | 2.80 | % | -0.27 | % | 4/14/14 | |||||
Service | 2.53 | -0.53 | 4/14/14 | |||||||
Advisor | 2.43 | -0.66 | 4/14/14 |
1 | The Standardized Total Returns are average annual total returns as of the most recent calendar quarter-end. They assume reinvestment of all distributions at net asset value (“NAV”). Because Institutional, Service and Advisor Shares do not involve a sales charge, such a charge is not applied to their Standardized Total Returns. |
Total return figures in the above chart represent past performance and do not indicate future results, which will vary. The investment return and principal value of an investment will fluctuate and, therefore, an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the total return figures in the above chart. Please visit www.GSAMFUNDS.com to obtain the most recent month-end returns. Performance reflects fee waivers and/or expense limitations in effect during the periods shown. In their absence, performance would be reduced.
EXPENSE RATIOS2
Net Expense Ratio (Current) | Gross Expense Ratio (Before Waivers) | |||||||
Institutional | 0.88 | % | 1.93 | % | ||||
Service | 1.13 | 2.18 | ||||||
Advisor | 1.28 | 2.33 |
2 | The expense ratios of the Fund, both current (net of any fee waivers and/or expense limitations) and before waivers (gross of any fee waivers and/or expense limitations) are as set forth above according to the most recent publicly available Prospectuses for the Fund and may differ from the expense ratios disclosed in the Financial Highlights in this report. Pursuant to a contractual arrangement, the Fund’s fee waivers and/or expense limitations will remain in place through at least April 28, 2018, and prior to such date, the Investment Adviser may not terminate the arrangements without the approval of the Fund’s Board of Trustees. If these arrangements are discontinued in the future, the expense ratios may change without shareholder approval. |
5
FUND BASICS
FUND COMPOSITION3
3 | The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. Underlying sector allocations of exchange traded funds and investment companies held by the Fund are not reflected in the graph above. Figures in the graph may not sum to 100% due to the exclusion of other assets and liabilities. The graph depicts the Fund’s investments but may not represent the Fund’s market exposure due to the exclusion of certain derivatives, if any, as listed in the Additional Investment Information section of the Schedule of Investments. |
4 | “U.S. Government Agency Securities” include agency securities offered by companies such as the Federal Home Loan Bank (“FHLB”), which operate under a government charter. While they are required to report to a government regulator, their assets are not explicitly guaranteed by the government, and they otherwise operate like any other publicly traded company. |
5 | “Mortgage-Backed Securities” are guaranteed by the Government National Mortgage Association (“GNMA”), Federal National Mortgage Association (“FNMA”) or Federal Home Loan Mortgage Corp. (“FHLMC”). GNMA instruments are backed by the full faith and credit of the United States Government. |
6
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
Schedule of Investments
June 30, 2017 (Unaudited)
Shares | Description | Value | ||||||
Common Stock – 0.2% | ||||||||
Energy – 0.2% | ||||||||
5,866 | Blue Ridge Mountain Resort* | $ | 52,794 | |||||
(Cost $58,500) | ||||||||
|
|
Principal Amount | Interest Rate | Maturity Date | Value | |||||||||||
Convertible Bond(a) – 0.2% | ||||||||||||||
Energy – 0.2% | ||||||||||||||
Nabors Industries, Inc. | ||||||||||||||
$ | 50,000 | 0.750 | % | 01/15/24 | $ | 39,781 | ||||||||
(Cost $52,375) | ||||||||||||||
|
| |||||||||||||
Corporate Bonds – 8.0% | ||||||||||||||
Consumer Services(b) – 0.2% | ||||||||||||||
MGM Resorts International | ||||||||||||||
$ | 50,000 | 8.625 | % | 02/01/19 | $ | 55,000 | ||||||||
|
| |||||||||||||
Electric(b) – 0.2% | ||||||||||||||
Dynegy, Inc. | ||||||||||||||
50,000 | 6.750 | 11/01/19 | 51,500 | |||||||||||
|
| |||||||||||||
Energy – 2.7% | ||||||||||||||
Carrizo Oil & Gas, Inc.(b) | ||||||||||||||
50,000 | 7.500 | 09/15/20 | 51,000 | |||||||||||
Halcon Resources Corp.(a)(b) | ||||||||||||||
50,000 | 6.750 | 02/15/25 | 45,000 | |||||||||||
Laredo Petroleum, Inc.(b) | ||||||||||||||
25,000 | 5.625 | 01/15/22 | 24,375 | |||||||||||
Petrobras Global Finance BV | ||||||||||||||
30,000 | 8.375 | 05/23/21 | 33,589 | |||||||||||
110,000 | 7.375 | 01/17/27 | 116,353 | |||||||||||
50,000 | 6.850 | 06/05/15 | 44,152 | |||||||||||
Petroleos de Venezuela SA | ||||||||||||||
890,000 | 6.000 | 10/28/22 | 295,918 | |||||||||||
Petroleos Mexicanos | ||||||||||||||
10,000 | 5.500 | 06/27/44 | 8,790 | |||||||||||
10,000 | 6.375 | 01/23/45 | 9,768 | |||||||||||
Whiting Petroleum Corp.(b) | ||||||||||||||
50,000 | 5.000 | 03/15/19 | 49,688 | |||||||||||
|
| |||||||||||||
678,633 | ||||||||||||||
|
| |||||||||||||
Financials – 1.0% | ||||||||||||||
Regatta IV Funding | ||||||||||||||
250,000 | 2.320 | 07/25/26 | 250,000 | |||||||||||
|
| |||||||||||||
Healthcare(b) – 0.8% | ||||||||||||||
Change Healthcare Holdings LLC(a) | ||||||||||||||
35,000 | 5.750 | 03/01/25 | 35,831 | |||||||||||
Tenet Healthcare Corp. | ||||||||||||||
50,000 | 6.250 | 11/01/18 | 52,750 | |||||||||||
Valeant Pharmaceuticals International, Inc.(a) | ||||||||||||||
50,000 | 6.375 | 10/15/20 | 48,500 | |||||||||||
50,000 | 6.500 | 03/15/22 | 52,438 | |||||||||||
|
| |||||||||||||
189,519 | ||||||||||||||
|
| |||||||||||||
Corporate Bonds – (continued) | ||||||||||||||
Materials – 0.2% | ||||||||||||||
Freeport-McMoRan, Inc. | ||||||||||||||
$ | 50,000 | 2.375 | % | 03/15/18 | $ | 49,750 | ||||||||
|
| |||||||||||||
Media – 0.4% | ||||||||||||||
DISH DBS Corp. | ||||||||||||||
50,000 | 4.625 | 07/15/17 | 50,025 | |||||||||||
iHeartCommunications, Inc.(b) | ||||||||||||||
50,000 | 9.000 | 12/15/19 | 39,250 | |||||||||||
|
| |||||||||||||
89,275 | ||||||||||||||
|
| |||||||||||||
Noncaptive-Financial – 0.6% | ||||||||||||||
CURO Financial Technologies Corp.(a)(b) | ||||||||||||||
50,000 | 12.000 | 03/01/22 | 52,250 | |||||||||||
Nationstar Mortgage LLC(b) | ||||||||||||||
50,000 | 6.500 | 08/01/18 | 50,000 | |||||||||||
Park Aerospace Holdings Ltd.(a) | ||||||||||||||
50,000 | 5.250 | 08/15/22 | 52,142 | |||||||||||
|
| |||||||||||||
154,392 | ||||||||||||||
|
| |||||||||||||
Pipelines(b) – 0.5% | ||||||||||||||
DCP Midstream Operating LP | ||||||||||||||
50,000 | 2.500 | 12/01/17 | 49,938 | |||||||||||
Enterprise Products Operating LLC Series A(c) | ||||||||||||||
75,000 | 4.877 | 08/01/66 | 75,281 | |||||||||||
|
| |||||||||||||
125,219 | ||||||||||||||
|
| |||||||||||||
Technology Hardware & Equipment – 0.0% | ||||||||||||||
Nokia OYJ | ||||||||||||||
10,000 | 3.375 | 06/12/22 | 10,075 | |||||||||||
|
| |||||||||||||
Wireless Telecommunications – 1.4% | ||||||||||||||
Frontier Communications Corp. | ||||||||||||||
25,000 | 8.125 | 10/01/18 | 26,375 | |||||||||||
Intelsat Jackson Holdings SA(b) | ||||||||||||||
50,000 | 7.500 | 04/01/21 | 46,250 | |||||||||||
Sprint Communications, Inc. | ||||||||||||||
50,000 | 8.375 | 08/15/17 | 50,375 | |||||||||||
50,000 | 9.000 | (a) | 11/15/18 | 54,250 | ||||||||||
50,000 | 7.000 | 08/15/20 | 55,000 | |||||||||||
Telecom Italia Capital SA(b) | ||||||||||||||
50,000 | 7.721 | 06/04/38 | 60,437 | |||||||||||
Windstream Services LLC(b) | ||||||||||||||
50,000 | 7.750 | 10/15/20 | 50,375 | |||||||||||
|
| |||||||||||||
343,062 | ||||||||||||||
|
| |||||||||||||
TOTAL CORPORATE BONDS | ||||||||||||||
(Cost $1,966,280) | $ | 1,996,425 | ||||||||||||
|
| |||||||||||||
Mortgage-Backed Security – 0.7% | ||||||||||||||
FNMA | ||||||||||||||
$ | 145,622 | 6.000 | % | 09/01/36 | $ | 165,772 | ||||||||
(Cost $163,302) | ||||||||||||||
|
|
The accompanying notes are an integral part of these financial statements. | 7 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
Schedule of Investments (continued)
June 30, 2017 (Unaudited)
Principal Amount | Interest Rate | Maturity Date | Value | |||||||||||
Collateralized Mortgage Obligations – 10.0% | ||||||||||||||
Adjustable Rate Non-Agency(b)(c) – 2.8% | ||||||||||||||
Alternative Loan Trust Series 2005-51, Class 2A1 | ||||||||||||||
$ | 43,794 | 1.512 | % | 11/20/35 | $ | 39,448 | ||||||||
Alternative Loan Trust Series 2006-HY11, Class A1 | ||||||||||||||
48,264 | 1.336 | 06/25/36 | 41,063 | |||||||||||
Alternative Loan Trust Series 2006-OA6, Class 1A2 | ||||||||||||||
272,770 | 1.426 | 07/25/46 | 251,653 | |||||||||||
HomeBanc Mortgage Trust Series 2006-1, Class 3A2 | ||||||||||||||
105,946 | 3.242 | 04/25/37 | 88,832 | |||||||||||
| IndyMac INDA Mortgage Loan Trust Series 2006-AR2, | | ||||||||||||
46,304 | 3.332 | 09/25/36 | 42,545 | |||||||||||
JP Morgan Alternative Loan Trust Series 2006-A5, Class 1A1 | ||||||||||||||
37,981 | 1.376 | 10/25/36 | 35,302 | |||||||||||
Lehman XS Trust Series 2005-7N, Class 1A1A | ||||||||||||||
41,843 | 1.486 | 12/25/35 | 40,187 | |||||||||||
Lehman XS Trust Series 2006-14N, Class 1A1A | ||||||||||||||
153,279 | 1.406 | 09/25/46 | 137,618 | |||||||||||
|
| |||||||||||||
676,648 | ||||||||||||||
|
| |||||||||||||
Interest Only(d) – 4.0% | ||||||||||||||
FHLMC REMIC Series 4314, Class SE(b) | ||||||||||||||
922,302 | 4.891 | 03/15/44 | 162,914 | |||||||||||
FHLMC REMIC Series 4320, Class SD(b) | ||||||||||||||
81,280 | 4.941 | 07/15/39 | 12,916 | |||||||||||
FHLMC REMIC Series 4583, Class ST(b) | ||||||||||||||
862,175 | 4.841 | 05/15/46 | 168,256 | |||||||||||
FNMA REMIC Series 2011-124, Class SC | ||||||||||||||
432,586 | 5.334 | 12/25/41 | 79,053 | |||||||||||
FNMA REMIC Series 2013-130, Class SN | ||||||||||||||
694,100 | 5.434 | 10/25/42 | 133,186 | |||||||||||
FNMA REMIC Series 2014-87, Class MS | ||||||||||||||
378,009 | 5.034 | 01/25/45 | 60,962 | |||||||||||
FNMA REMIC Series 2015-81, Class SA | ||||||||||||||
273,592 | 4.484 | 11/25/45 | 38,688 | |||||||||||
GNMA Series 2010-101, Class S(b) | ||||||||||||||
638,832 | 4.788 | 08/20/40 | 102,940 | |||||||||||
GNMA Series 2010-20, Class SE(b) | ||||||||||||||
353,793 | 5.038 | 02/20/40 | 59,733 | |||||||||||
GNMA Series 2010-31, Class SA(b) | ||||||||||||||
109,539 | 4.538 | 03/20/40 | 16,449 | |||||||||||
GNMA Series 2013-152, Class SG(b) | ||||||||||||||
90,568 | 4.938 | 06/20/43 | 15,036 | |||||||||||
GNMA Series 2013-181, Class SA(b) | ||||||||||||||
381,129 | 4.888 | 11/20/43 | 64,256 | |||||||||||
GNMA Series 2015-110, Class MS(b) | ||||||||||||||
405,666 | 4.498 | 08/20/45 | 61,676 | |||||||||||
GNMA Series 2015-159, Class HS(b) | ||||||||||||||
299,465 | 4.988 | 11/20/45 | 50,211 | |||||||||||
|
| |||||||||||||
1,026,276 | ||||||||||||||
|
| |||||||||||||
Regular Floater(b)(c) – 3.2% | ||||||||||||||
Alternative Loan Trust Series 2005-36, Class 2A1A | ||||||||||||||
59,268 | 1.526 | 08/25/35 | 49,692 | |||||||||||
Collateralized Mortgage Obligations – (continued) | ||||||||||||||
Regular Floater(b)(c) – (continued) | ||||||||||||||
Banc of America Alternative Loan Trust Series 2005-4, Class CB1 | ||||||||||||||
$ | 181,572 | 1.616 | % | 05/25/35 | $ | 151,316 | ||||||||
FNMA Series 2014-C03, Class 1M1 | ||||||||||||||
2,502 | 2.416 | 07/25/24 | 2,506 | |||||||||||
| Mortgage Repurchase Agreement Financing Trust Series 2016-1, | | ||||||||||||
150,000 | 2.017 | 04/10/19 | 150,017 | |||||||||||
| Mortgage Repurchase Agreement Financing Trust Series 2016-1, | | ||||||||||||
150,000 | 2.067 | 04/10/19 | 150,035 | |||||||||||
| Mortgage Repurchase Agreement Financing Trust Series 2016-2, | | ||||||||||||
150,000 | 2.417 | 03/10/19 | 150,022 | |||||||||||
| Mortgage Repurchase Agreement Financing Trust Series 2017-1, | | ||||||||||||
150,000 | 1.967 | 07/10/19 | 150,063 | |||||||||||
|
| |||||||||||||
803,651 | ||||||||||||||
|
| |||||||||||||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS | ||||||||||||||
(Cost $2,422,559) | $ | 2,506,575 | ||||||||||||
|
| |||||||||||||
U.S. Government Agency Security – 3.3% | ||||||||||||||
FHLB(c) | ||||||||||||||
$ | 825,000 | 1.090 | % | 10/27/17 | $ | 825,360 | ||||||||
(Cost $825,000) | ||||||||||||||
|
| |||||||||||||
Asset-Backed Securities – 27.2% | ||||||||||||||
Airlines(b) – 0.2% | ||||||||||||||
Continental Airlines Pass-Through Trust Series 2012-3, Class C | ||||||||||||||
$ | 50,000 | 6.125 | % | 04/29/18 | $ | 51,250 | ||||||||
|
| |||||||||||||
Collateralized Loan Obligations(a)(c) – 13.7% | ||||||||||||||
Acis CLO Ltd. Series 2014-4A, Class ACOM(b) | ||||||||||||||
150,000 | 2.655 | 05/01/26 | 149,310 | |||||||||||
Anchorage Capital CLO IV Ltd. Series 2014-4A, Class A1A(b) | ||||||||||||||
250,000 | 2.312 | 07/28/26 | 250,502 | |||||||||||
Apidos CLO X Series 2012-10A, Class A(b) | ||||||||||||||
266,424 | 2.592 | 10/30/22 | 266,461 | |||||||||||
Crown Point CLO III Ltd. Series 2015-3A, Class ACOM(b) | ||||||||||||||
250,000 | 2.694 | 12/31/27 | 249,950 | |||||||||||
Halcyon Loan Advisors Funding Ltd. Series 2015-2A, Class A(b) | ||||||||||||||
250,000 | 2.546 | 07/25/27 | 249,659 | |||||||||||
Monroe Capital BSL CLO Ltd. Series 2015-1A, Class ACOM | ||||||||||||||
200,000 | 2.725 | 05/22/27 | 200,120 | |||||||||||
Ocean Trails CLO IV Series 2013-4A, Class A(b) | ||||||||||||||
250,000 | 2.482 | 08/13/25 | 250,023 | |||||||||||
OCP CLO Ltd. Series 2015-8A, Class A1(b) | ||||||||||||||
250,000 | 2.688 | 04/17/27 | 250,100 | |||||||||||
OCP CLO Ltd. Series 2016-12A, Class A1(b) | ||||||||||||||
150,000 | 2.728 | 10/18/28 | 151,333 | |||||||||||
OFSI Fund VI Ltd. Series 2014-6A, Class A1(b) | ||||||||||||||
200,000 | 2.188 | 03/20/25 | 198,409 |
8 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
Principal Amount | Interest Rate | Maturity Date | Value | |||||||||||
Asset-Backed Securities – (continued) | ||||||||||||||
Collateralized Loan Obligations(a)(c) – (continued) | ||||||||||||||
OFSI Fund VII Ltd. Series 2014-7A, Class ACOM | ||||||||||||||
$ | 100,000 | 2.655 | % | 10/18/26 | $ | 99,790 | ||||||||
Regatta IV Funding Ltd. Series 2014-1A, Class ACOM(b) | ||||||||||||||
250,000 | 0.000 | 07/25/26 | 249,100 | |||||||||||
Trinitas CLO II Ltd. Series 2014-2A, Class ACOM(b) | ||||||||||||||
200,000 | 2.339 | 07/15/26 | 199,995 | |||||||||||
Trinitas CLO III Ltd. Series 2015-3A, Class A2(b) | ||||||||||||||
150,000 | 2.668 | 07/15/27 | 150,357 | |||||||||||
Voya CLO Ltd. Series 2014-4A, Class A1R | ||||||||||||||
250,000 | 0.000 | 10/14/26 | 250,000 | |||||||||||
Wasatch Ltd. Series 2006-1A, Class A1B | ||||||||||||||
122,290 | 1.422 | 11/14/22 | 121,709 | |||||||||||
| Z Capital Credit Partners CLO Ltd. Series 2015-1A, | | ||||||||||||
150,000 | 2.607 | 07/16/27 | 149,640 | |||||||||||
|
| |||||||||||||
3,436,458 | ||||||||||||||
|
| |||||||||||||
Home Equity(b) – 1.8% | ||||||||||||||
| Citigroup Mortgage Loan Trust, Inc. Series 2006-WFH1, | | ||||||||||||
100,000 | 1.616 | 01/25/36 | 99,853 | |||||||||||
| Credit-Based Asset Servicing & Securitization LLC | | ||||||||||||
6,469 | 3.896 | 12/25/35 | 6,548 | |||||||||||
| Credit-Based Asset Servicing & Securitization LLC | | ||||||||||||
25,000 | 3.896 | 12/25/35 | 25,408 | |||||||||||
Lehman XS Trust Series 2007-3, Class 1BA2(c) | ||||||||||||||
39,531 | 1.915 | 03/25/37 | 33,692 | |||||||||||
| Morgan Stanley Mortgage Loan Trust Series 2006-16AX, | | ||||||||||||
142,682 | 1.386 | 11/25/36 | 56,281 | |||||||||||
Saxon Asset Securities Trust Series 2007-2, Class A2C(c) | ||||||||||||||
78,466 | 1.456 | 05/25/47 | 62,153 | |||||||||||
| Structured Asset Securities Corp. Mortgage Loan Trust | | ||||||||||||
100,000 | 1.686 | 05/25/35 | 98,178 | |||||||||||
VOLT XXV LLC Series 2015-NPL8, Class A1(a)(e) | ||||||||||||||
57,115 | 3.500 | 06/26/45 | 57,124 | |||||||||||
|
| |||||||||||||
439,237 | ||||||||||||||
|
| |||||||||||||
Student Loans(b)(c) – 11.5% | ||||||||||||||
Academic Loan Funding Trust Series 2012-1A, Class A2(a) | ||||||||||||||
150,000 | 2.316 | 12/27/44 | 149,445 | |||||||||||
Access Group, Inc. Series 2015-1, Class A(a) | ||||||||||||||
67,754 | 1.916 | 07/25/56 | 67,316 | |||||||||||
AccessLex Institute Series 2006-1, Class A2 | ||||||||||||||
1,337 | 1.299 | 08/25/23 | 1,336 | |||||||||||
Bank of America Student Loan Trust Series 2010-1A, Class A(a) | ||||||||||||||
41,009 | 1.956 | 02/25/43 | 41,220 | |||||||||||
Brazos Higher Education Authority, Inc. Series 2005-2, Class A11 | ||||||||||||||
19,805 | 1.436 | 09/27/21 | 19,769 | |||||||||||
ECMC Group Student Loan Trust Series 2016-1A, Class A(a) | ||||||||||||||
130,204 | 2.566 | 07/26/66 | 130,895 | |||||||||||
Asset-Backed Securities – (continued) | ||||||||||||||
Student Loans(b)(c) – (continued) | ||||||||||||||
EFS Volunteer No. 2 LLC Series 2012-1, Class A2(a) | ||||||||||||||
$ | 250,000 | 2.566 | % | 03/25/36 | $ | 253,955 | ||||||||
| Montana Higher Education Student Assistance Corp. | | ||||||||||||
100,000 | 2.262 | 07/20/43 | 98,130 | |||||||||||
Navient Student Loan Trust Series 2016-5A, Class A(a) | ||||||||||||||
274,494 | 2.466 | 06/25/65 | 278,824 | |||||||||||
Navient Student Loan Trust Series 2016-7A, Class A(a) | ||||||||||||||
140,146 | 2.366 | 03/25/66 | 141,747 | |||||||||||
Nelnet Student Loan Trust Series 2006-1, Class A6(a) | ||||||||||||||
150,000 | 1.636 | 08/23/36 | 143,387 | |||||||||||
Northstar Education Finance, Inc. Series 2007-1, Class A1 | ||||||||||||||
100,000 | 1.272 | 04/28/30 | 98,509 | |||||||||||
PHEAA Student Loan Trust Series 2016-1A, Class A(a) | ||||||||||||||
170,415 | 2.366 | 09/25/65 | 172,435 | |||||||||||
Scholar Funding Trust Series 2010-A, Class A(a) | ||||||||||||||
48,806 | 1.922 | 10/28/41 | 48,100 | |||||||||||
SLM Student Loan Trust Series 2003-14, Class A5 | ||||||||||||||
19,672 | 1.386 | 01/25/23 | 19,672 | |||||||||||
SLM Student Loan Trust Series 2003-7A, Class A5A(a) | ||||||||||||||
148,264 | 2.446 | 12/15/33 | 149,780 | |||||||||||
SLM Student Loan Trust Series 2005-5, Class A5 | ||||||||||||||
100,000 | 1.906 | 10/25/40 | 97,756 | |||||||||||
SLM Student Loan Trust Series 2007-1, Class A5 | ||||||||||||||
202,559 | 1.246 | 01/26/26 | 201,811 | |||||||||||
SLM Student Loan Trust Series 2008-3, Class A3 | ||||||||||||||
72,792 | 2.156 | 10/25/21 | 72,775 | |||||||||||
SLM Student Loan Trust Series 2008-5, Class A4 | ||||||||||||||
199,343 | 2.856 | 07/25/23 | 204,230 | |||||||||||
SLM Student Loan Trust Series 2008-6, Class A4 | ||||||||||||||
100,000 | 2.256 | 07/25/23 | 100,546 | |||||||||||
SLM Student Loan Trust Series 2008-8, Class A | ||||||||||||||
100,000 | 2.656 | 04/25/23 | 102,275 | |||||||||||
SLM Student Loan Trust Series 2012-3, Class A | ||||||||||||||
118,786 | 1.866 | 12/27/38 | 119,270 | |||||||||||
SunTrust Student Loan Trust Series 2006-1A, Class A4(a) | ||||||||||||||
167,664 | 1.362 | 10/28/37 | 157,865 | |||||||||||
|
| |||||||||||||
2,871,048 | ||||||||||||||
|
| |||||||||||||
TOTAL ASSET-BACKED SECURITIES | ||||||||||||||
(Cost $6,713,025) | $ | 6,797,993 | ||||||||||||
|
| |||||||||||||
Foreign Government Securities – 3.3% | ||||||||||||||
Argentina Government International Bond(a) | ||||||||||||||
$ | 220,000 | 7.125 | % | 06/28/17 | $ | 199,870 | ||||||||
Brazilian Government International Bond(f) | ||||||||||||||
BRL | 32,000 | 10.000 | 01/01/27 | 9,379 | ||||||||||
174,000 | 6.000 | 08/15/50 | 163,952 | |||||||||||
Dominican Republic International Bond | ||||||||||||||
$ | 100,000 | 5.875 | 04/18/24 | 105,750 | ||||||||||
100,000 | 5.500 | 01/27/25 | 103,375 | |||||||||||
Ecuador Government International Bond | ||||||||||||||
200,000 | 9.650 | 12/13/26 | 200,750 |
The accompanying notes are an integral part of these financial statements. | 9 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
Schedule of Investments (continued)
June 30, 2017 (Unaudited)
Principal Amount | Interest Rate | Maturity Date | Value | |||||||||||
Foreign Government Securities – (continued) | ||||||||||||||
Mexico Government International Bond | ||||||||||||||
MXN | 223,400 | 7.750 | % | 11/23/34 | $ | 13,255 | ||||||||
207,100 | 8.500 | 11/18/38 | 13,066 | |||||||||||
8,200 | 8.000 | 11/07/47 | 496 | |||||||||||
|
| |||||||||||||
TOTAL FOREIGN GOVERNMENT SECURITIES | ||||||||||||||
(Cost $845,093) | $ | 809,893 | ||||||||||||
|
| |||||||||||||
Municipal Bonds(b) – 1.1% | ||||||||||||||
Puerto Rico – 1.1% | ||||||||||||||
| Puerto Rico Commonwealth Aqueduct & Sewer Authority RB | | ||||||||||||
$ | 10,000 | 5.500 | % | 07/01/28 | $ | 8,119 | ||||||||
5,000 | 5.000 | 07/01/33 | 3,887 | |||||||||||
5,000 | 5.125 | 07/01/37 | 3,888 | |||||||||||
10,000 | 5.750 | 07/01/37 | 7,975 | |||||||||||
Puerto Rico Commonwealth GO Bonds Series 2014 A(f) | ||||||||||||||
100,000 | 8.000 | 07/01/35 | 60,750 | |||||||||||
| Puerto Rico Commonwealth GO Refunding for Public | | ||||||||||||
20,000 | 5.500 | 07/01/32 | 11,775 | |||||||||||
| Puerto Rico Sales Tax Financing Corp. RB First | | ||||||||||||
15,000 | 5.500 | 08/01/28 | 3,863 | |||||||||||
25,000 | 6.000 | 08/01/42 | 6,437 | |||||||||||
| Puerto Rico Sales Tax Financing Corp. RB First | | ||||||||||||
15,000 | 5.500 | 08/01/37 | 3,862 | |||||||||||
155,000 | 5.375 | 08/01/39 | 39,912 | |||||||||||
105,000 | 5.500 | 08/01/42 | 27,038 | |||||||||||
| Puerto Rico Sales Tax Financing Corp. RB First | | ||||||||||||
10,000 | 5.375 | 08/01/38 | 2,575 | |||||||||||
55,000 | 6.000 | 08/01/39 | 14,162 | |||||||||||
105,000 | 5.250 | 08/01/41 | 27,038 | |||||||||||
| Puerto Rico Sales Tax Financing Corp. RB First | | ||||||||||||
170,000 | 5.000 | 08/01/43 | 43,775 | |||||||||||
| Puerto Rico Sales Tax Financing Corp. RB for Capital | | ||||||||||||
15,000 | 6.750 | 08/01/32 | 3,863 | |||||||||||
|
| |||||||||||||
TOTAL MUNICIPAL BONDS | ||||||||||||||
(Cost $488,779) | $ | 268,919 | ||||||||||||
|
| |||||||||||||
Loan Participations(b)(c)(f)(g) – 1.3% | ||||||||||||||
Electric – 0.1% | ||||||||||||||
Calpine Corp. | ||||||||||||||
$ | 18,182 | 2.980 | % | 11/30/17 | $ | 18,182 | ||||||||
|
| |||||||||||||
Energy – 0.2% | ||||||||||||||
American Energy — Marcellus, LLC | ||||||||||||||
23,614 | 5.338 | 08/04/20 | 15,074 | |||||||||||
Magnum Hunter Resources Corp | ||||||||||||||
9,151 | 16.000 | 04/15/19 | 9,151 | |||||||||||
Loan Participations(b)(c)(f)(g) – (continued) | ||||||||||||||
Energy – (continued) | ||||||||||||||
Murray Energy Corp | ||||||||||||||
$ | 24,934 | 8.546 | % | 04/16/20 | $ | 24,310 | ||||||||
|
| |||||||||||||
48,535 | ||||||||||||||
|
| |||||||||||||
Entertainment – 0.0% | ||||||||||||||
Lions Gate Entertainment Corp. | ||||||||||||||
14,688 | 4.226 | 12/08/23 | 14,765 | |||||||||||
|
| |||||||||||||
Media – 0.5% | ||||||||||||||
Charter Communications Operating LLC | ||||||||||||||
49,870 | 3.230 | 01/03/21 | 49,995 | |||||||||||
Checkout Holding Corp. | ||||||||||||||
25,000 | 7.976 | 04/11/22 | 15,969 | |||||||||||
Getty Images, Inc. | ||||||||||||||
57,363 | 4.796 | 10/18/19 | 52,739 | |||||||||||
|
| |||||||||||||
118,703 | ||||||||||||||
|
| |||||||||||||
Noncaptive-Financial – 0.2% | ||||||||||||||
Avolon | ||||||||||||||
25,000 | 3.462 | 09/16/20 | 25,088 | |||||||||||
25,000 | 3.962 | 03/21/22 | 25,146 | |||||||||||
|
| |||||||||||||
50,234 | ||||||||||||||
|
| |||||||||||||
Pipelines – 0.2% | ||||||||||||||
Williams Partners LP | ||||||||||||||
50,000 | 0.000 | 12/24/18 | 49,875 | |||||||||||
|
| |||||||||||||
Technology Hardware & Equipment – 0.1% | ||||||||||||||
MA FinanceCo. LLC | ||||||||||||||
3,224 | 0.000 | 06/21/24 | 3,228 | |||||||||||
Seattle Spinco, Inc. | ||||||||||||||
21,776 | 0.000 | 06/21/24 | 21,803 | |||||||||||
|
| |||||||||||||
25,031 | ||||||||||||||
|
| |||||||||||||
TOTAL LOAN PARTICIPATIONS | ||||||||||||||
(Cost $337,238) | $ | 325,325 | ||||||||||||
|
| |||||||||||||
U.S. Treasury Obligations – 32.5% | ||||||||||||||
U.S. Treasury Bonds | ||||||||||||||
$ | 250,000 | 3.000 | % | 05/15/45 | $ | 257,730 | ||||||||
130,000 | 2.875 | 08/15/45 | 130,755 | |||||||||||
310,000 | 2.875 | 11/15/46 | 311,813 | |||||||||||
170,000 | 3.000 | 05/15/47 | 175,517 | |||||||||||
U.S. Treasury Inflation Indexed Bonds (TIPS) | ||||||||||||||
30,389 | 0.875 | 02/15/47 | 29,540 | |||||||||||
U.S. Treasury Inflation Indexed Notes (TIPS) | ||||||||||||||
370,234 | 0.125 | 04/15/18 | 369,078 | |||||||||||
309,516 | 0.125 | 04/15/21 | 309,225 | |||||||||||
205,818 | 0.625 | 01/15/26 | 207,288 | |||||||||||
U.S. Treasury Notes | ||||||||||||||
200,000 | 0.875 | 11/30/17 | 199,804 | |||||||||||
200,000 | 1.000 | 12/31/17 | 199,834 | |||||||||||
200,000 | 1.750 | 09/30/19 | 201,476 | |||||||||||
800,000 | 1.375 | 04/30/21 | 789,872 | |||||||||||
1,240,000 | 2.250 | 01/31/24 | 1,251,743 |
10 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
Principal Amount | Interest Rate | Maturity Date | Value | |||||||||||
U.S. Treasury Obligations – (continued) | ||||||||||||||
U.S. Treasury Notes (continued) | ||||||||||||||
$ | 2,060,000 | 2.000 | % | 04/30/24 | $ | 2,044,467 | ||||||||
1,460,000 | 2.000 | 05/31/24 | 1,448,145 | |||||||||||
100,000 | 2.375 | 08/15/24 | 101,540 | |||||||||||
100,000 | 2.250 | 11/15/25 | 100,031 | |||||||||||
|
| |||||||||||||
TOTAL U.S. TREASURY OBLIGATIONS | ||||||||||||||
(Cost $8,135,837) | $ | 8,127,858 | ||||||||||||
|
|
Shares | Distribution Rate | Value | ||||||||
Investment Company (c)(h) – 3.5% | ||||||||||
| Goldman Sachs Financial Square Government Fund – | | ||||||||
885,317 | 0.845 | % | ||||||||
(Cost $885,317) | $ | 885,317 | ||||||||
|
| |||||||||
TOTAL INVESTMENTS – 91.3% | ||||||||||
(Cost $22,893,305) | $ | 22,802,012 | ||||||||
|
| |||||||||
| OTHER ASSETS IN EXCESS | | 2,185,872 | |||||||
|
| |||||||||
NET ASSETS – 100.0% | $ | 24,987,884 | ||||||||
|
|
The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. | ||
* | Non-income producing security. | |
(a) | Exempt from registration under Rule 144A of the Securities Act of 1933. Under procedures approved by the Board of Trustees, such securities may be deemed liquid by the Investment Adviser and may be resold, normally to qualified institutional buyers in transactions exempt from registration. Total market value of Rule 144A securities amounts to $6,408,750, which represents approximately 25.6% of net assets as of June 30, 2017. | |
(b) | Securities with “Call” features. Maturity dates disclosed are the final maturity dates. | |
(c) | Variable rate security. Interest rate or distribution rate disclosed is that which is in effect on June 30, 2017. | |
(d) | Inverse floating rate security. Interest rate disclosed is that which is in effect on June 30, 2017. | |
(e) | Step Bond. Coupon rate is fixed for an initial period then it resets at a specified date and rate. | |
(f) | Security is currently in default. | |
(g) | Bank Loans often require prepayments from excess cash flows or permit the borrower to repay at its election. The degree to which borrowers repay, whether as a contractual requirement or at their election, cannot be predicted with accuracy. As a result, the actual remaining maturity may be substantially less than the stated maturities shown. The stated interest rate represents the weighted average interest rate of all contracts within the loan facility on June 30, 2017. Bank Loans typically have rates of interest which are predetermined either daily, monthly, quarterly or semi-annually by reference to a base lending rate, plus a premium. These base lending rates are primarily the | |
London Interbank Offered Rate (“LIBOR”) and secondarily the prime rate offered by one or more major United States banks (the “Prime Rate”) and the certificate of deposit (“CD”) rate or other base lending rates used by commercial lenders. | ||
(h) | Represents an affiliated issuer. |
Investment Abbreviations: | ||
BA | —Banker Acceptance Rate | |
BBR | —Bank Bill Reference Rate | |
CD KSDA | —Certificates of Deposit by the Korean Securities Dealers Association | |
CDI | —Average One-Day Interbank Deposit | |
EURIBOR | —Euro Interbank Offered Rate | |
FHLB | —Federal Home Loan Bank | |
FHLMC | —Federal Home Loan Mortgage Corp. | |
FNMA | —Federal National Mortgage Association | |
GNMA | —Government National Mortgage Association | |
GO | —General Obligation | |
LIBOR | —London Interbank Offered Rate | |
RB | —Revenue Bond | |
REMIC | —Real Estate Mortgage Investment Conduit | |
STIBOR | —Stockholm Interbank Offered Rate | |
TIPS | —Treasury Inflation-Protected Securities | |
UK-RPI | —United Kingdom Retail Price Index | |
WIBOR | —Warsaw Interbank Offered Rate | |
Currency Abbreviations: | ||
ARS | —Argentina peso | |
AUD | —Australian Dollar | |
BRL | —Brazilian Real | |
CAD | —Canadian Dollar | |
CHF | —Swiss Franc | |
CLP | —Chilean Peso | |
CNH | —Chinese Renminbi | |
COP | —Colombian Peso | |
CZK | —Czech Koruna | |
EUR | —Euro | |
GBP | —British Pound | |
HKD | —Hong Kong Dollar | |
HUF | —Hungarian Forint | |
IDR | —Indonesian Rupiah | |
INR | —Indian Rupee | |
JPY | —Japanese Yen | |
KRW | —South Korean Won | |
MXN | —Mexican Peso | |
MYR | —Malaysian Ringgit | |
NOK | —Norwegian Krone | |
NZD | —New Zealand Dollar | |
PEN | —Peru nuevo sol | |
PHP | —Philippines peso | |
PLN | —Polish Zloty | |
RUB | —Russian Ruble | |
SEK | —Swedish Krona | |
SGD | —Singapore Dollar | |
TRY | —Turkish Lira | |
TWD | —Taiwan Dollar | |
USD | —United States Dollar | |
ZAR | —South African Rand |
The accompanying notes are an integral part of these financial statements. | 11 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
Schedule of Investments (continued)
June 30, 2017 (Unaudited)
ADDITIONAL INVESTMENT INFORMATION
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS — At June 30, 2017, the Fund had the following forward foreign currency exchange contracts:
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS WITH UNREALIZED GAIN
Counterparty | Currency Purchased | Currency Sold | Settlement Date | Current Value | Unrealized Gain | |||||||||||||||
Morgan Stanley Co., Inc. | AUD | 130,000 | NZD | 136,345 | 09/20/17 | $ | 99,819 | $ | 50 | |||||||||||
AU | D310,000 | USD | 231,895 | 07/27/17 | 238,192 | 6,297 | ||||||||||||||
AUD | 1,344,837 | USD | 1,019,455 | 09/20/17 | 1,032,618 | 13,163 | ||||||||||||||
BRL | 1,363,016 | USD | 410,000 | 07/05/17 | 411,427 | 1,427 | ||||||||||||||
CAD | 2,038,066 | USD | 1,526,311 | 09/20/17 | 1,573,572 | 47,261 | ||||||||||||||
CLP | 19,519,900 | USD | 29,071 | 08/30/17 | 29,359 | 288 | ||||||||||||||
CNH | 2,496,894 | USD | 363,983 | 09/20/17 | 366,719 | 2,736 | ||||||||||||||
COP | 57,940,000 | USD | 18,806 | 09/14/17 | 18,831 | 25 | ||||||||||||||
CZK | 2,537,199 | EUR | 94,737 | 07/03/17 | 110,945 | 2,740 | ||||||||||||||
CZK | 1,424,163 | EUR | 53,000 | 07/10/17 | 62,298 | 1,749 | ||||||||||||||
CZK | 14,635,276 | EUR | 554,163 | 09/20/17 | 643,238 | 7,682 | ||||||||||||||
CZK | 1,296,711 | EUR | 48,516 | 09/21/17 | 56,996 | 1,351 | ||||||||||||||
CZK | 2,449,313 | EUR | 91,000 | 10/03/17 | 107,427 | 3,236 | ||||||||||||||
CZK | 2,403,054 | EUR | 90,000 | 11/09/17 | 106,050 | 2,537 | ||||||||||||||
CZK | 4,910,115 | EUR | 183,550 | 11/21/17 | 216,913 | 5,658 | ||||||||||||||
CZK | 1,488,838 | EUR | 55,626 | 11/22/17 | 65,778 | 1,752 | ||||||||||||||
CZK | 5,859,083 | EUR | 219,685 | 01/03/18 | 257,108 | 5,548 | ||||||||||||||
EUR | 218,000 | CHF | 237,947 | 09/20/17 | 250,019 | 623 | ||||||||||||||
EUR | 44,000 | GBP | 38,577 | 09/20/17 | 50,463 | 96 | ||||||||||||||
EUR | 322,436 | JPY | 39,809,559 | 09/20/17 | 369,794 | 14,639 | ||||||||||||||
EUR | 27,000 | NOK | 257,283 | 09/20/17 | 30,966 | 101 | ||||||||||||||
EUR | 132,555 | PLN | 562,053 | 09/20/17 | 152,024 | 402 | ||||||||||||||
EUR | 1,141,649 | USD | 1,293,224 | 08/24/17 | 1,307,436 | 14,212 | ||||||||||||||
EUR | 871,708 | USD | 984,258 | 09/20/17 | 999,740 | 15,482 | ||||||||||||||
GBP | 32,562 | EUR | 36,684 | 09/20/17 | 42,513 | 441 | ||||||||||||||
GBP | 400,000 | USD | 510,318 | 08/10/17 | 521,609 | 11,291 | ||||||||||||||
GBP | 307,520 | USD | 390,517 | 09/20/17 | 401,498 | 10,981 | ||||||||||||||
HUF | 39,018,688 | USD | 143,112 | 09/20/17 | 144,771 | 1,659 | ||||||||||||||
INR | 29,697,166 | USD | 454,158 | 07/14/17 | 459,000 | 4,842 | ||||||||||||||
INR | 1,295,842 | USD | 20,000 | 07/20/17 | 20,015 | 15 | ||||||||||||||
INR | 11,753,506 | USD | 181,283 | 07/24/17 | 181,455 | 172 | ||||||||||||||
JPY | 17,122,228 | USD | 152,452 | 09/20/17 | 152,753 | 301 | ||||||||||||||
KRW | 4,915,704 | USD | 4,287 | 07/31/17 | 4,294 | 7 | ||||||||||||||
MXN | 9,256,230 | USD | 501,753 | 09/20/17 | 503,754 | 2,001 | ||||||||||||||
MYR | 148,674 | USD | 34,617 | 07/05/17 | 34,634 | 17 | ||||||||||||||
MYR | 101,925 | USD | 23,526 | 07/27/17 | 23,662 | 136 | ||||||||||||||
NOK | 683,735 | CAD | 106,007 | 09/20/17 | 82,023 | 176 | ||||||||||||||
NOK | 833,422 | CHF | 95,000 | 09/20/17 | 99,980 | 409 | ||||||||||||||
NOK | 2,878,901 | EUR | 299,606 | 09/20/17 | 345,361 | 1,751 | ||||||||||||||
NOK | 844,805 | USD | 100,000 | 09/20/17 | 101,345 | 1,345 | ||||||||||||||
NZD | 817,820 | USD | 589,291 | 09/20/17 | 598,436 | 9,145 |
12 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
ADDITIONAL INVESTMENT INFORMATION (continued)
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS WITH UNREALIZED GAIN (continued)
Counterparty | Currency Purchased | Currency Sold | Settlement Date | Current Value | Unrealized Gain | |||||||||||||||
Morgan Stanley Co., Inc. | PEN | 159,760 | USD | 48,244 | 08/29/17 | $ | 48,934 | $ | 690 | |||||||||||
(continued) | PHP | 5,024,527 | USD | 99,000 | 07/31/17 | 99,304 | 304 | |||||||||||||
PLN | 441,285 | EUR | 103,528 | 09/20/17 | 119,043 | 310 | ||||||||||||||
RUB | 11,205,325 | USD | 186,991 | 07/20/17 | 189,389 | 2,398 | ||||||||||||||
SEK | 21,445,047 | EUR | 2,200,598 | 09/20/17 | 2,556,625 | 33,029 | ||||||||||||||
SEK | 583,294 | NOK | 567,035 | 09/20/17 | 69,545 | 1,522 | ||||||||||||||
SEK | 1,042,000 | USD | 117,674 | 07/12/17 | 123,732 | 6,058 | ||||||||||||||
SGD | 138,780 | USD | 100,000 | 09/20/17 | 100,926 | 926 | ||||||||||||||
TRY | 819,192 | USD | 226,343 | 09/20/17 | 227,688 | 1,345 | ||||||||||||||
TWD | 757,275 | USD | 24,555 | 07/11/17 | 24,915 | 360 | ||||||||||||||
TWD | 3,045,025 | USD | 100,000 | 07/20/17 | 100,180 | 180 | ||||||||||||||
TWD | 117,246 | USD | 3,845 | 07/31/17 | 3,856 | 11 | ||||||||||||||
USD | 49,416 | ARS | 815,369 | 07/06/17 | 49,026 | 390 | ||||||||||||||
USD | 40,000 | ARS | 646,347 | 07/13/17 | 38,713 | 1,287 | ||||||||||||||
USD | 982,756 | BRL | 3,213,749 | 07/05/17 | 970,071 | 12,685 | ||||||||||||||
USD | 191,503 | BRL | 641,000 | 10/03/17 | 189,973 | 1,530 | ||||||||||||||
USD | 39,955 | CLP | 26,468,800 | 07/03/17 | 39,874 | 81 | ||||||||||||||
USD | 30,000 | CLP | 19,913,370 | 07/17/17 | 29,988 | 12 | ||||||||||||||
USD | 39,688 | CLP | 26,280,832 | 07/24/17 | 39,568 | 120 | ||||||||||||||
USD | 80,005 | CLP | 53,040,400 | 08/30/17 | 79,775 | 230 | ||||||||||||||
USD | 118,144 | CNH | 805,370 | 09/20/17 | 118,096 | 48 | ||||||||||||||
USD | 51,242 | COP | 149,602,227 | 08/11/17 | 48,818 | 2,424 | ||||||||||||||
USD | 19,628 | COP | 58,225,420 | 09/14/17 | 18,924 | 704 | ||||||||||||||
USD | 70,085 | EUR | 61,087 | 09/20/17 | 70,059 | 26 | ||||||||||||||
USD | 87,050 | HKD | 674,067 | 09/29/17 | 86,543 | 507 | ||||||||||||||
USD | 221,811 | HKD | 1,718,504 | 10/03/17 | 220,660 | 1,151 | ||||||||||||||
USD | 176,000 | HKD | 1,363,490 | 10/10/17 | 175,097 | 903 | ||||||||||||||
USD | 588,466 | HKD | 4,552,288 | 03/27/18 | 586,037 | 2,429 | ||||||||||||||
USD | 197,000 | HKD | 1,526,258 | 05/11/18 | 196,561 | 439 | ||||||||||||||
USD | 87,000 | IDR | 1,159,710,000 | 07/21/17 | 86,822 | 178 | ||||||||||||||
USD | 52,183 | IDR | 696,265,998 | 07/31/17 | 52,077 | 106 | ||||||||||||||
USD | 48,366 | IDR | 647,932,880 | 08/25/17 | 48,330 | 36 | ||||||||||||||
USD | 48,856 | INR | 3,151,190 | 07/14/17 | 48,705 | 151 | ||||||||||||||
USD | 20,000 | INR | 1,292,100 | 07/20/17 | 19,957 | 43 | ||||||||||||||
USD | 78,301 | JPY | 8,679,268 | 07/20/17 | 77,219 | 1,082 | ||||||||||||||
USD | 2,400,525 | JPY | 264,165,318 | 09/20/17 | 2,356,706 | 43,819 | ||||||||||||||
USD | 39,675 | KRW | 44,844,000 | 07/03/17 | 39,194 | 481 | ||||||||||||||
USD | 118,481 | KRW | 133,758,900 | 07/12/17 | 116,830 | 1,651 | ||||||||||||||
USD | 1,148,254 | KRW | 1,297,059,991 | 07/13/17 | 1,132,913 | 15,341 | ||||||||||||||
USD | 50,000 | KRW | 56,006,500 | 07/17/17 | 48,920 | 1,080 | ||||||||||||||
USD | 76,941 | KRW | 87,054,784 | 07/19/17 | 76,040 | 901 | ||||||||||||||
USD | 50,000 | KRW | 56,850,000 | 07/20/17 | 49,658 | 342 | ||||||||||||||
USD | 20,000 | KRW | 22,660,000 | 07/26/17 | 19,794 | 206 |
The accompanying notes are an integral part of these financial statements. | 13 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
Schedule of Investments (continued)
June 30, 2017 (Unaudited)
ADDITIONAL INVESTMENT INFORMATION (continued)
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS WITH UNREALIZED GAIN (continued)
Counterparty | Currency Purchased | Currency Sold | Settlement Date | Current Value | Unrealized Gain | |||||||||||||||
Morgan Stanley Co., Inc. | USD | 20,000 | KRW | 22,846,660 | 07/31/17 | $ | 19,958 | $ | 42 | |||||||||||
(continued) | USD | 368,049 | KRW | 413,871,383 | 08/24/17 | 361,660 | 6,389 | |||||||||||||
USD | 19,753 | KRW | 22,422,000 | 09/27/17 | 19,603 | 150 | ||||||||||||||
USD | 9,152 | MXN | 165,061 | 08/25/17 | 9,019 | 133 | ||||||||||||||
USD | 493,814 | MXN | 9,015,435 | 09/20/17 | 490,649 | 3,165 | ||||||||||||||
USD | 395,376 | RUB | 22,814,106 | 07/20/17 | 385,600 | 9,776 | ||||||||||||||
USD | 35,383 | TRY | 126,785 | 09/20/17 | 35,239 | 144 | ||||||||||||||
USD | 62,385 | TWD | 1,878,536 | 07/11/17 | 61,805 | 580 | ||||||||||||||
USD | 50,000 | TWD | 1,517,500 | 07/19/17 | 49,926 | 74 | ||||||||||||||
USD | 147,760 | TWD | 4,445,368 | 08/30/17 | 146,205 | 1,555 | ||||||||||||||
USD | 409,577 | TWD | 12,301,639 | 09/11/17 | 404,628 | 4,949 | ||||||||||||||
USD | 49,003 | TWD | 1,477,350 | 09/29/17 | 48,603 | 400 | ||||||||||||||
USD | 388,070 | TWD | 11,703,410 | 10/20/17 | 385,189 | 2,881 | ||||||||||||||
USD | 158,882 | ZAR | 2,084,086 | 09/20/17 | 157,214 | 1,668 | ||||||||||||||
TOTAL | �� | $ | 363,166 |
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS WITH UNREALIZED LOSS
Counterparty | Currency Purchased | Currency Sold | Settlement Date | Current Value | Unrealized Loss | |||||||||||||||
Morgan Stanley Co., Inc. | ARS | 815,369 | USD | 50,589 | 07/06/17 | $ | 49,026 | $ | (1,563 | ) | ||||||||||
ARS | 1,728,053 | USD | 105,610 | 07/13/17 | 103,502 | (2,108 | ) | |||||||||||||
BRL | 1,850,754 | USD | 561,686 | 07/05/17 | 558,650 | (3,036 | ) | |||||||||||||
BRL | 1,626,597 | USD | 490,971 | 08/02/17 | 487,837 | (3,134 | ) | |||||||||||||
CHF | 446,147 | EUR | 411,354 | 09/20/17 | 467,612 | (4,161 | ) | |||||||||||||
CLP | 26,468,800 | USD | 39,998 | 07/03/17 | 39,874 | (124 | ) | |||||||||||||
CLP | 13,198,400 | USD | 20,000 | 07/17/17 | 19,876 | (124 | ) | |||||||||||||
CLP | 117,362,253 | USD | 176,682 | 08/30/17 | 176,519 | (163 | ) | |||||||||||||
COP | 319,629,688 | USD | 108,510 | 08/11/17 | 104,301 | (4,209 | ) | |||||||||||||
COP | 257,972,343 | USD | 87,244 | 09/14/17 | 83,843 | (3,401 | ) | |||||||||||||
EUR | 96,508 | CZK | 2,537,199 | 07/03/17 | 110,227 | (717 | ) | |||||||||||||
EUR | 206,927 | CZK | 5,410,163 | 09/20/17 | 237,319 | (464 | ) | |||||||||||||
EUR | 78,300 | CZK | 2,095,304 | 09/21/17 | 89,805 | (2,292 | ) | |||||||||||||
EUR | 33,590 | HUF | 10,389,935 | 09/20/17 | 38,523 | (27 | ) | |||||||||||||
EUR | 580,697 | SEK | 5,610,693 | 09/20/17 | 665,984 | (2,967 | ) | |||||||||||||
EUR | 44,000 | USD | 50,472 | 09/20/17 | 50,463 | (9 | ) | |||||||||||||
HUF | 20,209,185 | EUR | 65,438 | 09/20/17 | 74,982 | (67 | ) | |||||||||||||
IDR | 4,649,031,775 | USD | 347,847 | 08/25/17 | 346,775 | (1,072 | ) | |||||||||||||
INR | 17,737,048 | USD | 275,000 | 07/14/17 | 274,144 | (856 | ) | |||||||||||||
INR | 6,401,363 | USD | 99,026 | 07/24/17 | 98,826 | (200 | ) | |||||||||||||
INR | 9,705,500 | USD | 150,000 | 07/31/17 | 149,718 | (282 | ) | |||||||||||||
JPY | 28,614,020 | EUR | 228,432 | 09/20/17 | 255,275 | (6,708 | ) |
14 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
ADDITIONAL INVESTMENT INFORMATION (continued)
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS WITH UNREALIZED LOSS (continued)
Counterparty | Currency Purchased | Currency Sold | Settlement Date | Current Value | Unrealized Loss | |||||||||||||||
Morgan Stanley Co., Inc. | JPY | 9,915,000 | USD | 89,449 | 07/20/17 | $ | 88,212 | $ | (1,237 | ) | ||||||||||
(continued) | JPY | 168,752,029 | USD | 1,519,136 | 09/20/17 | 1,505,495 | (13,641 | ) | ||||||||||||
KRW | 44,844,000 | USD | 39,402 | 07/03/17 | 39,194 | (208 | ) | |||||||||||||
KRW | 134,244,217 | USD | 118,745 | 07/12/17 | 117,254 | (1,491 | ) | |||||||||||||
KRW | 1,230,454,928 | USD | 1,089,778 | 07/13/17 | 1,074,736 | (15,042 | ) | |||||||||||||
KRW | 329,260,815 | USD | 289,068 | 07/20/17 | 287,607 | (1,461 | ) | |||||||||||||
KRW | 227,342,100 | USD | 200,000 | 07/26/17 | 198,591 | (1,409 | ) | |||||||||||||
KRW | 34,258,500 | USD | 30,000 | 07/31/17 | 29,927 | (73 | ) | |||||||||||||
KRW | 246,368,460 | USD | 217,218 | 09/27/17 | 215,395 | (1,823 | ) | |||||||||||||
MXN | 5,625,016 | USD | 308,070 | 09/20/17 | 306,132 | (1,938 | ) | |||||||||||||
MYR | 148,674 | USD | 34,535 | 07/27/17 | 34,514 | (21 | ) | |||||||||||||
NOK | 1,579,822 | CAD | 246,623 | 09/20/17 | 189,520 | (896 | ) | |||||||||||||
NOK | 10,380,411 | EUR | 1,093,702 | 09/20/17 | 1,245,262 | (9,077 | ) | |||||||||||||
NZD | 138,000 | CAD | 131,661 | 09/20/17 | 100,980 | (674 | ) | |||||||||||||
PHP | 4,887,995 | USD | 98,133 | 09/14/17 | 96,251 | (1,882 | ) | |||||||||||||
PLN | 6,279,791 | EUR | 1,489,637 | 09/20/17 | 1,694,063 | (14,363 | ) | |||||||||||||
RUB | 18,597,416 | USD | 323,282 | 07/20/17 | 314,331 | (8,951 | ) | |||||||||||||
TRY | 967,318 | USD | 270,000 | 09/20/17 | 268,859 | (1,141 | ) | |||||||||||||
TWD | 5,524,642 | USD | 182,633 | 07/11/17 | 181,763 | (870 | ) | |||||||||||||
TWD | 2,978,415 | USD | 99,000 | 07/17/17 | 97,995 | (1,005 | ) | |||||||||||||
TWD | 3,033,800 | USD | 100,000 | 07/20/17 | 99,811 | (189 | ) | |||||||||||||
TWD | 1,788,575 | USD | 59,146 | 08/17/17 | 58,825 | (321 | ) | |||||||||||||
USD | 252,092 | AUD | 337,000 | 07/27/17 | 258,937 | (6,845 | ) | |||||||||||||
USD | 1,277,723 | AUD | 1,692,193 | 09/20/17 | 1,299,335 | (21,612 | ) | |||||||||||||
USD | 16,663 | CAD | 22,684 | 07/14/17 | 17,495 | (832 | ) | |||||||||||||
USD | 1,626,005 | CAD | 2,150,619 | 09/20/17 | 1,660,472 | (34,467 | ) | |||||||||||||
USD | 199,000 | CHF | 190,085 | 09/20/17 | 199,230 | (230 | ) | |||||||||||||
USD | 40,000 | CLP | 26,605,920 | 07/17/17 | 40,066 | (66 | ) | |||||||||||||
USD | 395,155 | CNH | 2,709,033 | 09/20/17 | 397,240 | (2,085 | ) | |||||||||||||
USD | 1,170,963 | EUR | 1,035,000 | 08/24/17 | 1,185,301 | �� | (14,338 | ) | ||||||||||||
USD | 1,257,091 | EUR | 1,112,975 | 09/20/17 | 1,276,443 | (19,352 | ) | |||||||||||||
USD | 504,142 | GBP | 395,205 | 08/10/17 | 515,356 | (11,214 | ) | |||||||||||||
USD | 2,113,431 | GBP | 1,651,802 | 09/20/17 | 2,156,595 | (43,164 | ) | |||||||||||||
USD | 388,881 | INR | 25,912,163 | 07/14/17 | 400,499 | (11,618 | ) | |||||||||||||
USD | 49,820 | INR | 3,228,834 | 07/24/17 | 49,848 | (28 | ) | |||||||||||||
USD | 30,000 | JPY | 3,365,358 | 09/20/17 | 30,023 | (23 | ) | |||||||||||||
USD | 78,707 | KRW | 91,087,200 | 07/13/17 | 79,560 | (853 | ) | |||||||||||||
USD | 47,275 | KRW | 54,153,513 | 07/31/17 | 47,307 | (32 | ) | |||||||||||||
USD | 40,000 | MXN | 733,180 | 09/20/17 | 40,149 | (149 | ) | |||||||||||||
USD | 34,616 | MYR | 148,674 | 07/05/17 | 34,635 | (19 | ) | |||||||||||||
USD | 23,714 | MYR | 102,741 | 08/17/17 | 23,830 | (116 | ) | |||||||||||||
USD | 32,863 | NOK | 282,427 | 07/12/17 | 33,834 | (971 | ) | |||||||||||||
USD | 885,880 | NZD | 1,225,491 | 09/20/17 | 896,748 | (10,868 | ) |
The accompanying notes are an integral part of these financial statements. | 15 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
Schedule of Investments (continued)
June 30, 2017 (Unaudited)
ADDITIONAL INVESTMENT INFORMATION (continued)
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS WITH UNREALIZED LOSS (continued)
Counterparty | Currency Purchased | Currency Sold | Settlement Date | Current Value | Unrealized Loss | |||||||||||||||
Morgan Stanley Co., Inc. | USD | 47,797 | PLN | 180,521 | 09/20/17 | $ | 48,698 | $ | (901 | ) | ||||||||||
(continued) | USD | 30,000 | RUB | 1,783,500 | 07/20/17 | 30,144 | (144 | ) | ||||||||||||
USD | 111,611 | SEK | 988,315 | 07/12/17 | 117,357 | (5,746 | ) | |||||||||||||
USD | 246,552 | SGD | 341,151 | 09/20/17 | 248,099 | (1,547 | ) | |||||||||||||
USD | 70,000 | TRY | 252,829 | 09/20/17 | 70,272 | (272 | ) | |||||||||||||
USD | 110,453 | TWD | 3,372,519 | 07/11/17 | 110,957 | (504 | ) | |||||||||||||
USD | 50,000 | TWD | 1,520,250 | 07/20/17 | 50,016 | (16 | ) | |||||||||||||
USD | 140,000 | TWD | 4,263,550 | 07/31/17 | 140,237 | (237 | ) | |||||||||||||
USD | 440,095 | TWD | 13,422,503 | 08/17/17 | 441,458 | (1,363 | ) | |||||||||||||
USD | 20,000 | ZAR | 265,410 | 09/20/17 | 20,021 | (21 | ) | |||||||||||||
ZAR | 2,184,748 | USD | 167,456 | 09/20/17 | 164,806 | (2,650 | ) | |||||||||||||
TOTAL | $ | (307,680 | ) |
FUTURES CONTRACTS — At June 30, 2017, the Fund had the following futures contracts:
Type | Number of Contracts Long (Short) | Expiration Date | Current Value | Unrealized Gain (Loss) | ||||||||||||
3 Year Australian Government Bonds | 33 | September 2017 | $ | 2,831,942 | $ | (17,238 | ) | |||||||||
90 Day Eurodollar | (11 | ) | December 2018 | (2,700,500 | ) | (2,768 | ) | |||||||||
90 Day Sterling | 26 | March 2018 | 4,208,412 | (40 | ) | |||||||||||
U.S. Long Bonds | (14 | ) | September 2017 | (2,151,625 | ) | (3,571 | ) | |||||||||
U.S. Ultra Long Treasury Bonds | (4 | ) | September 2017 | (663,500 | ) | 4,946 | ||||||||||
2 Year U.S. Treasury Notes | (14 | ) | September 2017 | (3,025,531 | ) | 3,893 | ||||||||||
5 Year U.S. Treasury Notes | (126 | ) | September 2017 | (14,847,328 | ) | 40,054 | ||||||||||
10 Year U.S. Treasury Notes | 23 | September 2017 | 2,887,219 | (14,395 | ) | |||||||||||
10 Year U.S. Ultra Long Treasury Note | (1 | ) | September 2017 | (134,813 | ) | 169 | ||||||||||
TOTAL | $ | 11,050 |
SWAP CONTRACTS — At June 30, 2017, the Fund had the following swap contracts:
CENTRALLY CLEARED CREDIT DEFAULT SWAP CONTRACTS
Market Value | ||||||||||||||||||||||||
Referenced Obligation | Notional Amount (000’s) | Rates Received (Paid) | Termination Date | Credit 2017 | Upfront Payments Made (Received) | Unrealized Gain (Loss) | ||||||||||||||||||
Protection Purchased: |
| |||||||||||||||||||||||
CDX North America High Yield Index | $ | 1,800 | (5.000)% | 06/20/22 | 3.390% | $ | (123,888 | ) | $ | (3,061 | ) | |||||||||||||
Markit CDX Emerging Markets Index | 3,430 | (1.000) | 06/20/22 | 2.014 | 166,624 | (10,751 | ) | |||||||||||||||||
Protection Sold: | ||||||||||||||||||||||||
CDX North America Investment Grade Index | 265 | 1.000 | 12/20/21 | 0.518(a) | 3,825 | 1,712 | ||||||||||||||||||
TOTAL | $ | 46,561 | $ | (12,100 | ) |
16 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
ADDITIONAL INVESTMENT INFORMATION (continued)
(a) | Credit spread on the referenced obligation, together with the period of expiration, are indicators of payment/performance risk. The likelihood of a credit event occurring which would require a fund to make a payment or otherwise be required to perform under the swap contract is generally greater as the credit spread and term of the swap contract increase. |
OVER THE COUNTER CREDIT DEFAULT SWAP CONTRACTS
Market Value | ||||||||||||||||||||||||||||
Counterparty | Referenced Obligation | Notional Amount (000’s) | Rates Received (Paid) | Termination Date | Credit 2017 | Upfront Payments Made (Received) | Unrealized Gain (Loss) | |||||||||||||||||||||
Protection Purchased: | ||||||||||||||||||||||||||||
Bank of America NA | | People’s Republic of China, 4.250%, 10/14/28 | | $ | 210 | (1.000 | )% | 06/20/19 | 0.240 | % | $ | (529 | ) | $ | (2,665 | ) | ||||||||||||
| People’s Republic of China, 7.500%, 10/28/27 | | 170 | (1.000 | ) | 12/20/20 | 0.447 | 699 | (3,940 | ) | ||||||||||||||||||
Barclays Bank plc | | People’s Republic of China, 7.500%, 10/28/27 | | 120 | (1.000 | ) | 06/20/21 | 0.511 | 664 | (2,959 | ) | |||||||||||||||||
Deutsche Bank AG | | People’s Republic of China, 7.500%, 10/28/27 | | 170 | (1.000 | ) | 06/20/21 | 0.511 | (33 | ) | (3,219 | ) | ||||||||||||||||
| People’s Republic of China, 7.500%, 10/28/27 | | 50 | (1.000 | ) | 12/20/21 | 0.617 | 89 | (926 | ) | ||||||||||||||||||
JPMorgan Chase Bank NA | | People’s Republic of China, 4.250%, 10/14/28 | | 1,250 | (1.000 | ) | 06/20/19 | 0.240 | (2,368 | ) | (16,645 | ) | ||||||||||||||||
| People’s Republic of China, 7.500%, 10/28/27 | | 1,220 | (1.000 | ) | 12/20/20 | 0.447 | 7,601 | (30,859 | ) | ||||||||||||||||||
| People’s Republic of China, 7.500%, 10/28/27 | | 140 | (1.000 | ) | 06/20/21 | 0.511 | 445 | (3,123 | ) | ||||||||||||||||||
UBS AG | | People’s Republic of China, 7.500%, 10/28/27 | | 220 | (1.000 | ) | 06/20/21 | 0.511 | 839 | (5,049 | ) | |||||||||||||||||
TOTAL | $ | 7,407 | $ | (69,385 | ) |
CENTRALLY CLEARED INTEREST RATE SWAP CONTRACTS
Rates Exchanged | Market Value | |||||||||||||||
Notional Amount (000’s) | Termination Date | Payments Received | Payments Made | Upfront Made (Received) | Unrealized Gain (Loss) | |||||||||||
SEK | 16,750 | 06/15/18 | 0.050% | 3 Month STIBOR | $ | 8,860 | $ | 1,410 | ||||||||
12,080 | (a) | 09/15/18 | (0.330) | 3 Month STIBOR | 180 | 690 | ||||||||||
EUR | 4,570 | (a) | 03/14/19 | 0.010 | 6 Month EURIBOR | (530 | ) | 6,018 | ||||||||
CHF | 5,010 | (a) | 03/29/19 | (0.554) | 6 Month LIBOR | 197 | (2,723 | ) | ||||||||
$ | 3,490 | (a) | 05/11/19 | 3 Month LIBOR | 1.826 | (386 | ) | (2,887 | ) | |||||||
PLN | 90 | 06/17/19 | 3.048 | 6 Month WIBOR | 248 | 283 | ||||||||||
90 | 06/17/19 | 6 Month WIBOR | 3.045 | — | (530 | ) | ||||||||||
SEK | 10,130 | (a) | 06/29/19 | (0.100) | 3 Month STIBOR | 6 | (770 | ) | ||||||||
AUD | 4,180 | (a) | 09/20/19 | 3 Month BBR | 1.800 | 3,577 | 9,912 | |||||||||
CAD | 25,100 | (a) | 09/20/19 | 1.250 | 3 Month BA | (26,511 | ) | (67,347 | ) | |||||||
$ | 3,260 | (a) | 09/20/19 | 3 Month LIBOR | 1.750 | (8,838 | ) | 3,880 | ||||||||
8,010 | (a) | 12/20/19 | 2.250 | 3 Month LIBOR | 2,567 | 26,045 |
The accompanying notes are an integral part of these financial statements. | 17 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
Schedule of Investments (continued)
June 30, 2017 (Unaudited)
ADDITIONAL INVESTMENT INFORMATION (continued)
Rates Exchanged | Market Value | |||||||||||||||||
Notional Amount (000’s) | Termination Date | Payments Received | Payments Made | Upfront Made (Received) | Unrealized Gain (Loss) | |||||||||||||
EUR | 5,990 | (a) | 02/11/21 | 0.250% | 6 Month EURIBOR | $ | 615 | $ | (5,657 | ) | ||||||||
$ | 4,060 | (a) | 02/11/21 | 3 Month LIBOR | 2.250% | 6,696 | (24,788 | ) | ||||||||||
GBP | 1,040 | (a) | 03/11/21 | 6 Month LIBOR | 1.000 | (371 | ) | 1,791 | ||||||||||
AUD | 10 | (a) | 09/20/22 | 2.250 | 6 Month BBR | (16 | ) | (97 | ) | |||||||||
CAD | 1,340 | (a) | 09/20/22 | 1.500 | 3 Month BA | (4,278 | ) | (10,827 | ) | |||||||||
EUR | 4,980 | (a) | 09/20/22 | 0.250 | 6 Month EURIBOR | 20,179 | (42,687 | ) | ||||||||||
SEK | 24,110 | (a) | 09/20/22 | 0.250 | 3 Month STIBOR | (5,460 | ) | (31,931 | ) | |||||||||
$ | 8,390 | (a) | 09/20/22 | 3 Month LIBOR | 2.000 | (44,351 | ) | 41,740 | ||||||||||
EUR | 2,380 | (a) | 01/12/27 | 1.330 | 6 Month EURIBOR | (18,350 | ) | 3,490 | ||||||||||
GBP | 2,320 | (a) | 03/16/27 | 1.600 | 6 Month LIBOR | 8,043 | (21,747 | ) | ||||||||||
EUR | 2,930 | (a) | 09/20/27 | 1.000 | 6 Month EURIBOR | 66,385 | (48,701 | ) | ||||||||||
GBP | 2,050 | (a) | 09/20/27 | 6 Month LIBOR | 1.500 | (89,853 | ) | 60,983 | ||||||||||
$ | 470 | (a) | 09/20/27 | 2.500 | 3 Month LIBOR | 15,083 | (6,457 | ) | ||||||||||
1,160 | (a) | 12/20/28 | 3 Month LIBOR | 2.790 | (19,301 | ) | (14,857 | ) | ||||||||||
GBP | 1,860 | (a) | 01/11/32 | 6 Month LIBOR | 1.940 | 1,976 | 4,900 | |||||||||||
480 | (a) | 09/20/32 | 6 Month LIBOR | 1.500 | (10,793 | ) | 17,573 | |||||||||||
1,620 | (a) | 03/17/37 | 6 Month LIBOR | 1.750 | 1,990 | 32,698 | ||||||||||||
JPY | 18,170 | (a) | 09/20/37 | 6 Month LIBOR | 0.750% | (3,543 | ) | 1,071 | ||||||||||
GBP | 100 | (a) | 09/20/47 | 6 Month LIBOR | 1.500 | (2,952 | ) | 6,820 | ||||||||||
$ | 200 | (a) | 09/20/47 | 3 Month LIBOR | 2.500 | (3,904 | ) | 5,673 | ||||||||||
TOTAL | $ | (102,835 | ) | $ | (57,029 | ) |
(a) | Represents forward starting interest rate swaps whose effective dates of commencement of accruals and cash flows occur subsequent to June 30, 2017. |
CENTRALLY CLEARED INFLATION-LINKED SWAP CONTRACT
Rates Exchanged | ||||||||||||||
Notional (000’s) | Termination Date | Payments Received | Payments Made | Unrealized Gain (Loss)(b) | ||||||||||
GBP 110 | 06/15/27 | 3.364% | 1 Month UK-RPI | $ | (1,127 | ) |
(b) | There are no upfront payments on the swap contracts listed above, therefore the unrealized gains (losses) on the swap contracts are equal to their market value. |
18 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
ADDITIONAL INVESTMENT INFORMATION (continued)
OVER THE COUNTER INTEREST RATE SWAP CONTRACTS
Notional
| Rates Exchanged | |||||||||||||||||||
Counterparty | Termination Date | Payments Received | Payments Made | Unrealized Gain (Loss)(c) | ||||||||||||||||
Bank of America NA | BRL | 226 | 01/04/21 | 11.980 | % | 1 Day CDI | $ | 5,016 | ||||||||||||
KRW | 290,710 | 11/04/17 | 2.060 | 3 Month CD KSDA | 847 | |||||||||||||||
Deutsche Bank AG | KRW | 142,230 | 10/06/17 | 2.245 | 3 Month CD KSDA | 529 | ||||||||||||||
209,280 | 10/15/17 | 2.253 | 3 Month CD KSDA | 774 | ||||||||||||||||
173,640 | 11/04/17 | 2.075 | 3 Month CD KSDA | 517 | ||||||||||||||||
JPMorgan Chase Bank NA | BRL | 373 | 01/02/20 | 10.160 | 1 Day CDI | 1,854 | ||||||||||||||
KRW | 1,612,725 | 07/29/17 | 1.630 | 3 Month CD KSDA | 798 | |||||||||||||||
Morgan Stanley Co., Inc. | BRL | 482 | 01/04/21 | 9.883 | 1 Day CDI | (799 | ) | |||||||||||||
TOTAL | $ | 9,536 |
(c) | There are no upfront payments on the swap contracts listed above, therefore the unrealized gains (losses) on the swap contracts are equal to their market value. |
The accompanying notes are an integral part of these financial statements. | 19 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
Statement of Assets and Liabilities
June 30, 2017 (Unaudited)
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $22,007,988) | $ | 21,916,695 | ||
Investments in affiliated issuers, at value (cost $885,317) | 885,317 | |||
Cash | 559,647 | |||
Foreign currencies, at value (cost $119,383) | 120,637 | |||
Receivables: | ||||
Investments sold | 1,122,150 | |||
Collateral on certain derivative contracts(a) | 1,070,105 | |||
Due from custodian | 627,662 | |||
Interest and dividends | 107,576 | |||
Reimbursement from investment adviser | 15,226 | |||
Upfront payments made on swap contracts | 10,337 | |||
Fund shares sold | 1,343 | |||
Unrealized gain on forward foreign currency exchange contracts | 363,166 | |||
Variation margin on certain derivative contracts | 19,841 | |||
Unrealized gain on swap contracts | 10,335 | |||
Other assets | 225 | |||
Total assets | 26,830,262 | |||
Liabilities: | ||||
Unrealized loss on forward foreign currency exchange contracts | 307,680 | |||
Unrealized loss on swap contracts | 70,184 | |||
Variation margin on certain derivative contracts | 14,751 | |||
Payables: | ||||
Investments purchased | 704,181 | |||
Investments purchased on an extended-settlement basis | 598,749 | |||
Management fees | 11,910 | |||
Distribution and Service fees and Transfer Agency fees | 3,858 | |||
Upfront payments received on swap contracts | 2,930 | |||
Fund shares redeemed | 508 | |||
Accrued expenses | 127,627 | |||
Total liabilities | 1,842,378 | |||
Net Assets: | ||||
Paid-in capital | 27,434,992 | |||
Distributions in excess of net investment income | (323,666 | ) | ||
Accumulated net realized loss | (1,970,684 | ) | ||
Net unrealized loss | (152,758 | ) | ||
NET ASSETS | $ | 24,987,884 | ||
Net Assets: | ||||
Institutional | $ | 14,219,644 | ||
Service | 9,827 | |||
Advisor | 10,758,413 | |||
Total Net Assets | $ | 24,987,884 | ||
Shares outstanding $0.001 par value (unlimited shares authorized): | ||||
Institutional | 1,560,777 | |||
Service | 1,079 | |||
Advisor | 1,184,173 | |||
Net asset value, offering and redemption price per share: | ||||
Institutional | $9.11 | |||
Service | 9.11 | |||
Advisor | 9.09 |
(a) | Includes amounts segregated for initial margin and/or collateral on forward foreign currency exchange contract transactions, futures transactions and swaps transactions of $470,000, $179,667 and $420,438, respectively. |
20 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
Statement of Operations
For the Six Months Ended June 30, 2017 (Unaudited)
Investment income: | ||||
Interest | $ | 310,116 | ||
Dividends — affiliated issuers | 9,552 | |||
Total investment income | 319,668 | |||
Expenses: | ||||
Management fees | 77,255 | |||
Professional fees | 74,479 | |||
Custody, accounting and administrative services | 42,452 | |||
Distribution and Service fees(a) | 19,860 | |||
Printing and mailing costs | 17,629 | |||
Trustee fees | 8,159 | |||
Transfer Agency fees(a) | 2,576 | |||
Other | 2,471 | |||
Total expenses | 244,881 | |||
Less — expense reductions | (115,474 | ) | ||
Net expenses | 129,407 | |||
NET INVESTMENT INCOME | 190,261 | |||
Realized and unrealized gain (loss): | ||||
Net realized gain (loss) from: | ||||
Investments — unaffiliated issuers | 133,486 | |||
Futures contracts | (54,837 | ) | ||
Swap contracts | (174,668 | ) | ||
Forward foreign currency exchange contracts | 125,287 | |||
Foreign currency transactions | 13,673 | |||
Net change in unrealized gain (loss) on: | ||||
Investments — unaffiliated issuers | 144,641 | |||
Futures contracts | (69,392 | ) | ||
Swap contracts | 56,215 | |||
Forward foreign currency exchange contracts | (269,875 | ) | ||
Foreign currency translation | (676 | ) | ||
Net realized and unrealized loss | (96,146 | ) | ||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 94,115 |
(a) Class specific Distribution and Service, and Transfer Agency fees were as follows:
Distribution and Service Fees | Transfer Agency Fees | |||||||||||||||||
Service | Advisor | Institutional | Service | Advisor | ||||||||||||||
$ | 13 | $ | 19,847 | $ | 1,582 | $ | 2 | $ | 992 |
The accompanying notes are an integral part of these financial statements. | 21 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
Statements of Changes in Net Assets
For the Six Months Ended June 30, 2017 (Unaudited) | For the Fiscal Year Ended December 31, 2016 | |||||||
From operations: | ||||||||
Net investment income | $ | 190,261 | $ | 432,220 | ||||
Net realized gain (loss) | 42,941 | (995,929 | ) | |||||
Net change in unrealized gain (loss) | (139,087 | ) | 830,504 | |||||
Net increase in net assets resulting from operations | 94,115 | 266,795 | ||||||
Distributions to shareholders: | ||||||||
From net investment income | ||||||||
Institutional Shares | (99,329 | ) | (512,567 | ) | ||||
Service Shares | (56 | ) | (206 | ) | ||||
Advisor Shares | (54,713 | ) | (173,760 | ) | ||||
Total distributions to shareholders | (154,098 | ) | (686,533 | ) | ||||
From share transactions: | ||||||||
Proceeds from sales of shares | 1,946,237 | 6,037,854 | ||||||
Reinvestment of distributions | 154,098 | 686,533 | ||||||
Cost of shares redeemed | (5,323,047 | ) | (11,746,277 | ) | ||||
Net decrease in net assets resulting from share transactions | (3,222,712 | ) | (5,021,890 | ) | ||||
TOTAL DECREASE | (3,282,695 | ) | (5,441,628 | ) | ||||
Net assets: | ||||||||
Beginning of period | 28,270,579 | 33,712,207 | ||||||
End of period | $ | 24,987,884 | $ | 28,270,579 | ||||
Distributions in excess of net investment income | $ | (323,666 | ) | $ | (359,829 | ) |
22 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
Income (loss) from investment operations | ||||||||||||||||||||||||||||||||||||||||||||||||
Year - Share Class | Net asset value, beginning of period | Net investment income(a) | Net realized and unrealized loss | Total from investment operations | Distributions to shareholders from net investment income | Net asset value, end of period | Total return(b) | Net assets, end of period (in 000s) | Ratio of net expenses to average net assets | Ratio of total expenses to average net assets | Ratio of net investment income to average net assets | Portfolio turnover rate(c) | ||||||||||||||||||||||||||||||||||||
FOR THE SIX MONTHS ENDED JUNE 30, (UNAUDITED) | ||||||||||||||||||||||||||||||||||||||||||||||||
2017 - Institutional | $ | 9.15 | $ | 0.07 | $ | (0.05 | ) | $ | 0.02 | $ | (0.06 | ) | $ | 9.11 | 0.26 | % | $ | 14,220 | 0.85 | %(d) | 1.75 | %(d) | 1.62 | %(d) | 85 | % | ||||||||||||||||||||||
2017 - Service | 9.14 | 0.06 | (0.04 | ) | 0.02 | (0.05 | ) | 9.11 | 0.25 | 10 | 1.13 | (d) | 2.02 | (d) | 1.36 | (d) | 85 | |||||||||||||||||||||||||||||||
2017 - Advisor | 9.12 | 0.06 | (0.04 | ) | 0.02 | (0.05 | ) | 9.09 | 0.20 | 10,758 | 1.25 | (d) | 2.14 | (d) | 1.24 | (d) | 85 | |||||||||||||||||||||||||||||||
FOR THE FISCAL YEARS ENDED DECEMBER 31, | ||||||||||||||||||||||||||||||||||||||||||||||||
2016 - Institutional | 9.25 | 0.14 | (0.02 | ) | 0.12 | (0.22 | ) | 9.15 | 1.21 | 18,892 | 0.85 | 1.88 | 1.52 | 142 | ||||||||||||||||||||||||||||||||||
2016 - Service | 9.25 | 0.11 | (0.03 | ) | �� | 0.08 | (0.19 | ) | 9.14 | 0.93 | 10 | 1.13 | 2.20 | 1.22 | 142 | |||||||||||||||||||||||||||||||||
2016 - Advisor | 9.23 | 0.10 | (0.02 | ) | 0.08 | (0.19 | ) | 9.12 | 0.74 | 9,368 | 1.25 | 2.38 | 1.07 | 142 | ||||||||||||||||||||||||||||||||||
2015 - Institutional | 9.70 | 0.16 | (0.34 | ) | (0.18 | ) | (0.27 | ) | 9.25 | (1.81 | ) | 28,036 | 0.86 | 1.82 | 1.71 | 176 | ||||||||||||||||||||||||||||||||
2015 - Service | 9.70 | 0.14 | (0.35 | ) | (0.21 | ) | (0.24 | ) | 9.25 | (2.16 | ) | 10 | 1.14 | 2.09 | 1.44 | 176 | ||||||||||||||||||||||||||||||||
2015 - Advisor | 9.69 | 0.13 | (0.36 | ) | (0.23 | ) | (0.23 | ) | 9.23 | (2.25 | ) | 5,666 | 1.26 | 2.26 | 1.35 | 176 | ||||||||||||||||||||||||||||||||
FOR THE PERIOD ENDED DECEMBER 31, | ||||||||||||||||||||||||||||||||||||||||||||||||
2014 - Institutional (Commenced April 14, 2014) | 10.00 | 0.09 | (0.14 | ) | (0.05 | ) | (0.25 | ) | 9.70 | (0.51 | ) | 18,180 | 0.86 | (d) | 2.77 | (d) | 1.23 | (d) | 157 | |||||||||||||||||||||||||||||
2014 - Service (Commenced April 14, 2014) | 10.00 | 0.07 | (0.14 | ) | (0.07 | ) | (0.23 | ) | 9.70 | (0.70 | ) | 10 | 1.13 | (d) | 3.05 | (d) | 0.96 | (d) | 157 | |||||||||||||||||||||||||||||
2014 - Advisor (Commenced April 14, 2014) | 10.00 | 0.09 | (0.17 | ) | (0.08 | ) | (0.23 | ) | 9.69 | (0.79 | ) | 1,173 | 1.26 | (d) | 2.64 | (d) | 1.30 | (d) | 157 |
(a) | Calculated based on the average shares outstanding methodology. |
(b) | Assumes investment at the net asset value at the beginning of the period, reinvestment of all distributions, and a complete redemption of the investment at the net asset value at the end of the period. Total returns for periods less than one full year are not annualized. |
(c) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short term investments and certain derivatives. If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
(d) | Annualized. |
The accompanying notes are an integral part of these financial statements. | 23 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
Notes to Financial Statements
June 30, 2017 (Unaudited)
1. ORGANIZATION
Goldman Sachs Variable Insurance Trust (the “Trust” or “VIT”) is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company. The Trust includes the Goldman Sachs Strategic Income Fund (the “Fund”). The Fund is a diversified portfolio under the Act offering three classes of shares — Institutional, Service and Advisor Shares. Shares of the Trust are offered to separate accounts of participating life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies.
Goldman Sachs Asset Management, L.P. (“GSAM”), an affiliate of Goldman Sachs & Co. LLC (formerly Goldman, Sachs & Co.) (“Goldman Sachs”), serves as investment adviser to the Fund pursuant to a management agreement (the “Agreement”) with the Trust.
2. SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and require management to make estimates and assumptions that may affect the reported amounts and disclosures. Actual results may differ from those estimates and assumptions.
A. Investment Valuation — The Fund’s valuation policy is to value investments at fair value.
B. Investment Income and Investments — Investment income includes interest income, dividend income and securities lending income. Interest income is accrued daily and adjusted for amortization of premiums and accretion of discounts. Dividend income is recognized on ex-dividend date or, for certain foreign securities, as soon as such information is obtained subsequent to the ex-dividend date. Investment transactions are reflected on trade date. Realized gains and losses are calculated using identified cost. Investment transactions are recorded on the following business day for daily net asset value (“NAV”) calculations.
For derivative contracts, realized gains and losses are recorded upon settlement of the contract. Upfront payments, if any, are made or received upon entering into a swap agreement and are reflected in the Statement of Assets and Liabilities. Upfront payments are recognized over the contract’s term/event as realized gains or losses, with the exception of forward starting interest rate swaps whose realized gains or losses are recognized from the effective start date. For securities with paydown provisions, principal payments received are treated as a proportionate reduction to the cost basis of the securities, and excess or shortfall amounts are recorded as income. For treasury inflation protected securities (“TIPS”), adjustments to principal due to inflation/deflation are reflected as increases/decreases to interest income with a corresponding adjustment to cost.
C. Class Allocations and Expenses — Investment income, realized and unrealized gain (loss), and non-class specific expenses of the Fund are allocated daily based upon the proportion of net assets of each class. Non-class specific expenses directly incurred by the Fund are charged to the Fund, while such expenses incurred by the Trust are allocated across the Fund on a straight-line and/or pro-rata basis depending upon the nature of the expenses. Class specific expenses, where applicable, are borne by the respective share classes and include Distribution and Service and Transfer Agency fees.
D. Federal Taxes and Distributions to Shareholders — It is the Fund’s policy to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Code”), applicable to regulated investment companies (mutual funds) and to distribute each year substantially all of its investment company taxable income and capital gains to its shareholders. Accordingly, the Fund is not required to make any provisions for the payment of federal income tax. Distributions to shareholders are recorded on the ex-dividend date. Income distributions are declared and paid quarterly and capital gains distributions, if any, are declared and paid annually.
Net capital losses, if any, are carried forward to future fiscal years and may be used to the extent allowed by the Code to offset any future capital gains. Losses that are carried forward will retain their character as either short-term or long-term capital losses. Utilization of capital loss carryforwards will reduce the requirement of future capital gains distributions.
24
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
The characterization of distributions to shareholders for financial reporting purposes is determined in accordance with federal income tax rules, which may differ from GAAP. The source of the Fund’s distributions may be shown in the accompanying financial statements as either from net investment income, net realized gain or capital. Certain components of the Fund’s net assets on the Statement of Assets and Liabilities reflect permanent GAAP/tax differences based on the appropriate tax character.
E. Foreign Currency Translation — The accounting records and reporting currency of the Fund are maintained in United States (“U.S.”) dollars. Assets and liabilities denominated in foreign currencies are translated into U.S. dollars using the current exchange rates at the close of each business day. The effect of changes in foreign currency exchange rates on investments is included within net realized and unrealized gain (loss) on investments. Changes in the value of other assets and liabilities as a result of fluctuations in foreign exchange rates are included in the Statement of Operations within net change in unrealized gain (loss) on foreign currency translations. Transactions denominated in foreign currencies are translated into U.S. dollars on the date the transaction occurred, the effects of which are included within net realized gain (loss) on foreign currency transactions.
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS
U.S. GAAP defines the fair value of a financial instrument as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price); the Fund’s policy is to use the market approach. GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The levels used for classifying investments are not necessarily an indication of the risk associated with investing in these investments. The three levels of the fair value hierarchy are described below:
Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 — Quoted prices in markets that are not active or financial instruments for which significant inputs are observable (including, but not limited to, quoted prices for similar investments, interest rates, foreign exchange rates, volatility and credit spreads), either directly or indirectly;
Level 3 — Prices or valuations that require significant unobservable inputs (including GSAM’s assumptions in determining fair value measurement).
Changes in valuation techniques may result in transfers into or out of an assigned level within the hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value hierarchy resulting from such changes are deemed to have occurred as of the beginning of the reporting period.
The Board of Trustees (“Trustees”) has approved Valuation Procedures that govern the valuation of the portfolio investments held by the Fund, including investments for which market quotations are not readily available. The Trustees have delegated to GSAM day-to-day responsibility for implementing and maintaining internal controls and procedures related to the valuation of the Fund’s portfolio investments. To assess the continuing appropriateness of pricing sources and methodologies, GSAM regularly performs price verification procedures and issues challenges as necessary to third party pricing vendors or brokers, and any differences are reviewed in accordance with the Valuation Procedures.
A. Level 1 and Level 2 Fair Value Investments — The valuation techniques and significant inputs used in determining the fair values for investments classified as Level 1 and Level 2 are as follows:
Equity Securities — Equity securities traded on a U.S. securities exchange or the NASDAQ system, or those located on certain foreign exchanges, including but not limited to the Americas, are valued daily at their last sale price or official closing price on the principal exchange or system on which they are traded. If there is no sale or official closing price or such price is believed by GSAM to not represent fair value, equity securities are valued at the last bid price for long positions and at the last ask price for
25
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
Notes to Financial Statements (continued)
June 30, 2017 (Unaudited)
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS (continued)
short positions. To the extent these investments are actively traded, they are classified as Level 1 of the fair value hierarchy, otherwise they are generally classified as Level 2.
Unlisted equity securities for which market quotations are available are valued at the last sale price on the valuation date, or if no sale occurs, at the last bid price. These investments are generally classified as Level 2 of the fair value hierarchy.
Money Market Funds — Investments in the Goldman Sachs Financial Square Government Fund (“Underlying Fund”) are valued at the NAV of the Institutional Share class on the day of valuation. These investments are generally classified as Level 1 of the fair value hierarchy. For information regarding an Underlying Fund’s accounting policies and investment holdings, please see the Underlying Fund’s shareholder report.
Debt Securities — Debt securities for which market quotations are readily available are valued daily on the basis of quotations supplied by dealers or an independent pricing service approved by the Trustees. The pricing services may use valuation models or matrix pricing, which consider: (i) yield or price with respect to bonds that are considered comparable in characteristics such as rating, interest rate and maturity date or (ii) quotations from securities dealers to determine current value. With the exception of treasury securities of G8 countries, which are generally classified as Level 1, these investments are generally classified as Level 2 of the fair value hierarchy.
i. Bank Loans — Bank loans (“Loans”) are interests in amounts owed by corporate, governmental, or other borrowers to lenders or lending syndicates. Loans are arranged through private negotiations between the borrower and one or more financial institutions (“Lenders”). The Fund’s investments in Loans are in the form of either participations in Loans (“Participations”) or assignments of all or a portion of Loans from third parties (“Assignments”). With respect to Participations, the Fund has the right to receive payments of principal, interest and any fees to which it is entitled from the Lender selling the Participations and only upon receipt by the Lender of the payments from the borrower. The Fund generally has no right to enforce compliance by the borrower with the terms of the loan agreement with respect to Participations. Conversely, assignments result in the Fund having a direct contractual relationship with the borrower, and the Fund may be permitted to enforce compliance by the borrower with the terms of the loan agreement.
ii. Inverse Floaters — The interest rate on inverse floating rate securities (“inverse floaters”) resets in the opposite direction from the market rate of interest to which the inverse floaters are indexed. An inverse floater may be considered to be leveraged to the extent that its interest rate varies by a magnitude that exceeds the magnitude of the change in the index rate of interest. The higher the degree of leverage of an inverse floater, the greater the volatility of its market value.
iii. Mortgage-Backed and Asset-Backed Securities — Mortgage-backed securities represent direct or indirect participations in, or are collateralized by and payable from, mortgage loans secured by residential and/or commercial real estate property. Asset-backed securities include securities whose principal and interest payments are collateralized by pools of other assets or receivables. The value of certain mortgage-backed and asset-backed securities (including adjustable rate mortgage loans) may be particularly sensitive to changes in prevailing interest rates. The value of these securities may also fluctuate in response to the market’s perception of the creditworthiness of the issuers.
Asset-backed securities may present credit risks that are not presented by mortgage-backed securities because they generally do not have the benefit of a security interest in collateral that is comparable to mortgage assets. Some asset-backed securities may only have a subordinated claim on collateral.
Stripped mortgage-backed securities are usually structured with two different classes: one that receives substantially all interest payments (interest-only, or “IO” and/or high coupon rate with relatively low principal amount, or “IOette”), and the other that receives substantially all principal payments (principal-only, or “PO”) from a pool of mortgage loans. Little to no principal will be received at the maturity of an IO; as a result, periodic adjustments are recorded to reduce the cost of the security until maturity. These adjustments are included in interest income.
26
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS (continued)
iv. Treasury Inflation Protected Securities — TIPS are treasury securities in which the principal amount is adjusted daily to keep pace with inflation, as measured by the U.S. Consumer Pricing Index for Urban Consumers. The repayment of the original bond principal upon maturity is guaranteed by the full faith and credit of the U.S. Government.
v. When-Issued Securities and Forward Commitments — When-issued securities, including TBA (“To Be Announced”) securities, are securities that are authorized but not yet issued in the market and purchased in order to secure what is considered to be an advantageous price or yield to the Fund. A forward commitment involves entering into a contract to purchase or sell securities, typically on an extended settlement basis, for a fixed price at a future date. The purchase of securities on a when-issued or forward commitment basis involves a risk of loss if the value of the security to be purchased declines before the settlement date. Conversely, the sale of securities on a forward commitment basis involves the risk that the value of the securities sold may increase before the settlement date. Although the Fund will generally purchase securities on a when-issued or forward commitment basis with the intention of acquiring the securities for its portfolio, the Fund may dispose of when-issued securities or forward commitments prior to settlement, which may result in a realized gain or loss.
Derivative Contracts — A derivative is an instrument whose value is derived from underlying assets, indices, reference rates or a combination of these factors. The Fund enters into derivative transactions to hedge against changes in interest rates, securities prices, and/or currency exchange rates, to increase total return, or to gain access to certain markets or attain exposure to other underliers.
Exchange-traded derivatives, including futures and options contracts, are valued at the last sale or settlement price and typically fall within Level 1 of the fair value hierarchy. Over-the-counter (“OTC”) and centrally cleared derivatives are valued using market transactions and other market evidence, including market-based inputs to models, calibration to market-clearing transactions, broker or dealer quotations, or other alternative pricing sources. Where models are used, the selection of a particular model to value OTC and centrally cleared derivatives depends upon the contractual terms of, and specific risks inherent in, the instrument, as well as the availability of pricing information in the market. Valuation models require a variety of inputs, including contractual terms, market prices, yield curves, credit curves, measures of volatility, voluntary and involuntary prepayment rates, loss severity rates and correlations of such inputs. For OTC and centrally cleared derivatives that trade in liquid markets, model inputs can generally be verified and model selection does not involve significant management judgment. OTC and centrally cleared derivatives are classified within Level 2 of the fair value hierarchy when significant inputs are corroborated by market evidence.
i. Forward Contracts — A forward contract is a contract between two parties to buy or sell an asset at a specified price on a future date. A forward contract settlement can occur on a cash or delivery basis. Forward contracts are marked-to-market daily using independent vendor prices, and the change in value, if any, is recorded as an unrealized gain or loss. Cash and certain investments may be used to collateralize forward contracts.
A forward foreign currency contract is a forward contract in which the Fund agrees to receive or deliver a fixed quantity of one currency for another, at a pre-determined price at a future date. All forward foreign currency exchange contracts are marked-to-market daily at the applicable forward rate. Non-deliverable forward foreign currency exchange contracts are settled with the counterparty in cash without the delivery of foreign currency.
ii. Futures Contracts — Futures contracts are contracts to buy or sell a standardized quantity of a specified commodity or security and are valued based on exchanged settlement prices or independent market quotes. Futures contracts are valued at the last settlement price, or in the absence of a sale, the last bid price for long positions and at the last ask price for short positions, at the end of each day on the board of trade or exchange upon which they are traded. Upon entering into a futures contract, the Fund deposits cash or securities in an account on behalf of the broker in an amount sufficient to meet the initial margin requirement. Subsequent payments are made or received by the Fund equal to the daily change in the contract value and are recorded as variation margin receivable or payable with a corresponding offset to unrealized gains or losses. For financial reporting purposes, cash collateral that has been pledged to cover obligations of the Fund and cash collateral received, if any, is reported separately on the Statement of Assets and Liabilities as receivables/payables for collateral on certain derivative contracts. Non-cash collateral pledged by the Fund, if any, is noted in the Schedule of Investments.
27
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
Notes to Financial Statements (continued)
June 30, 2017 (Unaudited)
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS (continued)
iv. Swap Contracts — Bilateral swap contracts are agreements in which the Fund and a counterparty agree to exchange periodic payments on a specified notional amount or make a net payment upon termination. Bilateral swap transactions are privately negotiated in the OTC market and payments are settled through direct payments between the Fund and the counterparty. By contrast, certain swap transactions are subject to mandatory central clearing. These swaps are executed through a derivatives clearing member (“DCM”), acting in an agency capacity, and submitted to a central counterparty (“CCP”) (“centrally cleared swaps”), in which case all payments are settled with the CCP through the DCM. Swaps are marked-to-market daily using pricing vendor quotations, counterparty or clearinghouse prices or model prices, and the change in value, if any, is recorded as an unrealized gain or loss. Upon entering into a swap contract, the Fund is required to satisfy an initial margin requirement by delivering cash or securities to the counterparty (or in some cases, segregated in a triparty account on behalf of the counterparty), which can be adjusted by any mark-to-market gains or losses pursuant to bilateral or centrally cleared arrangements. For centrally cleared swaps the daily change in valuation, if any, is recorded as a receivable or payable for variation margin.
An interest rate swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals, based upon or calculated by reference to changes in interest rates on a specified notional principal amount. The payment flows are usually netted against each other, with the difference being paid by one party to the other.
A credit default swap is an agreement that involves one party (the buyer of protection) making a stream of payments to another party (the seller of protection) in exchange for the right to receive protection on a reference security or obligation, including a group of assets or exposure to the performance of an index. The Fund’s investment in credit default swaps may involve greater risks than if the Fund had invested in the referenced obligation directly. Credit events are contract specific but may include bankruptcy, failure to pay, restructuring and obligation acceleration. If the Fund buys protection through a credit default swap and no credit event occurs, its payments are limited to the periodic payments previously made to the counterparty. Upon the occurrence of a specified credit event, the Fund, as a buyer of credit protection, is entitled to receive an amount equal to the notional amount of the swap and deliver to the seller the defaulted reference obligation in a physically settled trade. The Fund may also receive a net settlement amount in the form of cash or securities equal to the notional amount of the swap reduced by the recovery value of the reference obligation in a cash settled trade.
As a seller of protection, the Fund generally receives a payment stream throughout the term of the swap, provided that there is no credit event. In addition, if the Fund sells protection through a credit default swap, the Fund could suffer a loss because the value of the referenced obligation and the premium payments received may be less than the notional amount of the swap paid to the buyer of protection. Upon the occurrence of a specified credit event, the Fund, as a seller of credit protection, may be required to take possession of the defaulted reference obligation and pay the buyer an amount equal to the notional amount of the swap in a physically settled trade. The Fund may also pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap reduced by the recovery value of the reference obligation in a cash settled trade. Recovery values are at times established through the credit event auction process in which market participants are ensured that a transparent price has been set for the defaulted security or obligation. In addition, the Fund is entitled to a return of any assets, which have been pledged as collateral to the counterparty upon settlement.
The maximum potential amount of future payments (undiscounted) that the Fund as seller of protection could be required to make under a credit default swap would be an amount equal to the notional amount of the agreement. These potential amounts would be partially offset by any recovery values of the respective referenced obligations or net amounts received from a settlement of a credit default swap for the same reference security or obligation where the Fund bought credit protection.
Short Term Investments — Short-term investments having a maturity of 60 days or less are valued using available market quotations as provided by a third party pricing vendor or broker. These investments are classified as Level 2 of the fair value hierarchy.
B. Level 3 Fair Value Investments — To the extent that significant inputs to valuation models and other alternative pricing sources are unobservable, or if quotations are not readily available, or if GSAM believes that such quotations do not accurately reflect fair value, the fair value of the Fund’s investments may be determined under Valuation Procedures approved by the Trustees. GSAM, consistent with its procedures and applicable regulatory guidance, may make an adjustment to the most recent valuation prices of either domestic or foreign securities in light of significant events to reflect what it believes to be the fair value of
28
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS (continued)
the securities at the time of determining the Fund’s NAV. Significant events which could affect a large number of securities in a particular market may include, but are not limited to: significant fluctuations in U.S. or foreign markets; market dislocations; market disruptions; or unscheduled market closings. Significant events which could also affect a single issuer may include, but are not limited to: corporate actions such as reorganizations, mergers and buy-outs; ratings downgrades; and bankruptcies. To the extent investments are valued using single source broker quotations obtained directly from the broker or passed through from third party pricing vendors, such investments are classified as Level 3 investments.
GSAM did not develop the unobservable inputs (examples include but are not limited to single source broker quotations, third party pricing, etc) for the valuation of Level 3 Assets and Liabilities.
C. Fair Value Hierarchy — The following is a summary of the Fund’s investments and derivatives classified in the fair value hierarchy as of June 30, 2017:
Investment Type | Level 1 | Level 2 | Level 3 | |||||||||
Assets | ||||||||||||
Common Stock and/or Other Equity Investments(a) | ||||||||||||
North America | $ | — | $ | 52,794 | $ | — | ||||||
Fixed Income | ||||||||||||
Convertible Bond | — | 39,781 | — | |||||||||
Corporate Bonds | — | 1,996,425 | — | |||||||||
Mortgage-Backed Security | — | 165,772 | — | |||||||||
Collateralized Mortgage Obligations | — | 2,506,575 | — | |||||||||
U.S. Treasury Obligations and/or Other U.S. Government Agencies | 8,127,858 | 825,360 | — | |||||||||
Asset-Backed Securities | — | 6,797,993 | — | |||||||||
Foreign Government Securities | — | 809,893 | — | |||||||||
Municipal Bonds | — | 268,919 | — | |||||||||
Loan Participations | — | 251,225 | 74,100 | |||||||||
Investment Company | 885,317 | — | — | |||||||||
Total | $ | 9,013,175 | $ | 13,714,737 | $ | 74,100 | ||||||
Derivative Type | ||||||||||||
Assets(b) | ||||||||||||
Forward Foreign Currency Exchange Contracts | $ | — | $ | 363,166 | $ | — | ||||||
Futures Contracts | 49,062 | — | — | |||||||||
Credit Default Swaps Contracts | — | 1,712 | — | |||||||||
Interest Rate Swaps Contracts | — | 235,312 | — | |||||||||
Total | $ | 49,062 | $ | 600,190 | $ | — | ||||||
Liabilities(b) | ||||||||||||
Forward Foreign Currency Exchange Contracts | $ | — | $ | (307,680 | ) | $ | — | |||||
Futures Contracts | (38,012 | ) | — | — | ||||||||
Credit Default Swaps Contracts | — | (83,197 | ) | — | ||||||||
Inflation-Linked Swap Contract | — | (1,127 | ) | — | ||||||||
Interest Rate Swaps Contracts | — | (282,805 | ) | — | ||||||||
Total | $ | (38,012 | ) | $ | (674,809 | ) | $ | — |
(a) | Amounts are disclosed by continent to highlight the impact of time zone differences between local market close and the calculation of NAV. Security valuations are based on the principal exchange or system on which they are traded, which may differ from country of domicile noted in the table. |
(b) | Amount shown represents unrealized gain (loss) at period end. |
29
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
Notes to Financial Statements (continued)
June 30, 2017 (Unaudited)
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS (continued)
For further information regarding security characteristics, see the Schedule of Investments.
4. INVESTMENTS IN DERIVATIVES
The following table sets forth, by certain risk types, the gross value of derivative contracts as of June 30, 2017. These instruments were used as part of the Fund’s investment strategies and to obtain and/or manage exposure related to the risks below. The values in the table below exclude the effects of cash collateral received or posted pursuant to these derivative contracts, and therefore are not representative of the Fund’s net exposure.
Risk | Statement of Assets and Liabilities | Assets | Statement of Assets and Liabilities | Liabilities | ||||||||||
Credit | Variation margin on certain derivative contracts | $ | 1,712 | Payable for unrealized loss on swap contracts and variation margin on certain derivative contracts | $ | (83,197 | )(a)(b) | |||||||
Currency | Receivable for unrealized gain on forward foreign currency exchange contracts | 363,166 | Payable for unrealized loss on forward foreign currency exchange contracts | (307,680 | ) | |||||||||
Interest Rate | Receivable for unrealized gain on swap contracts and variation margin on certain derivative contracts | 284,374 | (a) | Payable for unrealized loss on swap contracts and variation margin on certain derivative contracts | (321,944 | )(a)(b) | ||||||||
Total | $ | 649,252 | $ | (712,821 | ) |
(a) | Includes unrealized gain (loss) on futures contracts and centrally cleared swap contracts described in the Additional Investment Information section of the Schedule of Investments. Only the variation margin as of June 30, 2017 is reported within the Statement of Assets and Liabilities. |
(b) | Aggregate of amounts represents the payments to be made pursuant to bilateral agreements should counterparties exercise their “right to terminate” provisions based on, among others, the Fund’s performance, its failure to pay on its obligations or failure to pledge collateral. The amounts do not include incremental charges directly associated with the close-out of the agreements. They also do not reflect the fair value of any assets pledged as collateral which, through the daily margining process, substantially offsets the aforementioned amounts and for which the Fund is entitled to a full return. |
The following table sets forth, by certain risk types, the Fund’s gains (losses) related to these derivatives and their indicative volumes for the six months ended June 30, 2017. These gains (losses) should be considered in the context that these derivative contracts may have been executed to create investment opportunities and/or economically hedge certain investments, and accordingly, certain gains (losses) on such derivative contracts may offset certain (losses) gains attributable to investments. These gains (losses) are included in “Net realized gain (loss)” or “Net change in unrealized gain (loss)” on the Statement of Operations:
Risk | Statement of Operations | Net Realized Gain (Loss) | Net Change in Unrealized Gain (Loss) | Average Number of Contracts(a) | ||||||||||
Credit | Net realized gain (loss) from swap contracts/Net change in unrealized gain (loss) on swap contracts | $ | (159,921 | ) | $ | (25,497 | ) | 30 | ||||||
Currency | Net realized gain (loss) from forward foreign currency exchange contracts/Net change in unrealized gain (loss) on forward foreign currency exchange contracts | 125,287 | (269,875 | ) | 699 | |||||||||
Interest Rate | Net realized gain (loss) from future contracts and swap contracts/Net change in unrealized gain (loss) on future contracts and swap contracts | (69,584 | ) | 12,320 | 336 | |||||||||
Total | $ | (104,218 | ) | $ | (283,052 | ) | 1,065 |
(a) | Average number of contracts is based on the average of month end balances for the six months ended June 30, 2017. |
In order to better define its contractual rights and to secure rights that will help the Fund mitigate its counterparty risk, the Fund may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement with its derivatives counterparties. An ISDA Master Agreement is a bilateral agreement between the Fund and a counterparty that governs OTC derivatives (including forward foreign currency exchange contracts, and certain options and swaps),
30
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
4. INVESTMENTS IN DERIVATIVES (continued)
and typically contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of a default (close-out netting) or similar event, including the bankruptcy or insolvency of the counterparty.
Collateral and margin requirements differ between exchange traded derivatives and OTC derivatives. Margin requirements are established by the broker or clearing house for exchange-traded and centrally cleared derivatives (financial futures contracts, options and centrally cleared swaps) pursuant to governing agreements for those instrument types. Brokers can ask for margin in excess of the minimum in certain circumstances. Collateral terms are contract-specific for OTC derivatives. For derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the marked to market amount for each transaction under such agreement and comparing that amount to the value of any collateral currently pledged by the Fund and the counterparty. Additionally, the Fund may be required to post initial margin to the counterparty, the terms of which would be outlined in the confirmation of the OTC transaction.
For financial reporting purposes, cash collateral that has been pledged to cover obligations of the Fund and cash collateral received from the counterparty, if any, is reported separately on the Statement of Assets and Liabilities as receivables/payables for collateral on certain derivative contracts. Non-cash collateral pledged by the Fund, if any, is noted in the Schedule of Investments. Generally, the amount of collateral due from or to a counterparty must exceed a minimum transfer amount threshold before a transfer is required to be made. To the extent amounts due to the Fund from its counterparties are not fully collateralized, contractually or otherwise, the Fund bears the risk of loss from counterparty nonperformance. The Fund attempts to mitigate counterparty risk by only entering into agreements with counterparties that the Investment Adviser believes to be of good standing and by monitoring the financial stability of those counterparties.
Additionally, the netting of assets and liabilities and the offsetting of collateral pledged or received are based on contractual netting/set-off provisions in the ISDA Master Agreement or similar agreements. However, in the event of a default or insolvency of a counterparty, a court could determine that such rights are not enforceable due to the restrictions or prohibitions against the right of setoff that may be imposed in accordance with a particular jurisdiction’s bankruptcy or insolvency laws.
The following table sets forth the Fund’s net exposure for derivative instruments that are subject to enforceable master netting arrangements or similar agreements as of June 30, 2017.
Derivative Assets(1) | Derivative Liabilities(1) | |||||||||||||||||||||||||||
Counterparty | Forwards | Swaps | Forwards | Swaps | Net Derivative Assets (Liabilities) | Collateral (Received) Pledged(1) | Net Amount(2) | |||||||||||||||||||||
Bank of America N.A. | $ | — | $ | 5,863 | $ | — | $ | (6,605 | ) | $ | (742 | ) | $ | — | $ | (742 | ) | |||||||||||
Barclays Bank PLC | — | — | — | (2,959 | ) | (2,959 | ) | — | (2,959 | ) | ||||||||||||||||||
Deutsche Bank AG | — | 1,820 | — | (4,145 | ) | (2,325 | ) | — | (2,325 | ) | ||||||||||||||||||
JPMorgan Chase Bank N.A. | — | 2,652 | — | (50,627 | ) | (47,975 | ) | — | (47,975 | ) | ||||||||||||||||||
Morgan Stanley Co., Inc. | 363,166 | — | (307,680 | ) | (799 | ) | 54,687 | 307,680 | 362,367 | |||||||||||||||||||
UBS AG | — | — | — | (5,049 | ) | (5,049 | ) | — | (5,049 | ) | ||||||||||||||||||
Total | $ | 363,166 | $ | 10,335 | $ | (307,680 | ) | $ | (70,184 | ) | $ | (4,363 | ) | $ | 307,680 | $ | 303,317 |
(1) | Gross amounts available for offset but not netted in the Statement of Assets and Liabilities. |
(2) | Net amount represents the net amount due (to) from counterparty in the event of a default based on the contractual set-off rights under the agreement. |
5. AGREEMENTS AND AFFILIATED TRANSACTIONS
A. Management Agreement — Under the Agreement, GSAM manages the Fund, subject to the general supervision of the Trustees.
As compensation for the services rendered pursuant to the Agreement, the assumption of the expenses related thereto and administration of the Fund’s business affairs, including providing facilities, GSAM is entitled to a management fee, accrued daily and paid monthly, equal to an annual percentage rate of the Fund’s average daily net assets.
31
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
Notes to Financial Statements (continued)
June 30, 2017 (Unaudited)
5. AGREEMENTS AND AFFILIATED TRANSACTIONS (continued)
For the six months ended June 30, 2017, contractual and effective net management fees with GSAM were at the following rates:
Contractual Management Rate | Effective Net Management Rate^ | |||||||||||||||||||||||||
First $1 billion | Next $1 billion | Next $3 billion | Next $3 billion | Over $8 billion | Effective Rate | |||||||||||||||||||||
0.60% | 0.54 | % | 0.51 | % | 0.50 | % | 0.49 | % | 0.60 | % | 0.58 | % |
^ | Effective Net Management Rate includes the impact of management fee waivers of affiliated Underlying Funds, if any. |
The Fund invests in Institutional Shares of the Goldman Sachs Financial Square Government Fund, which is an affiliated Underlying Fund. GSAM has agreed to waive a portion of its management fee payable by the Fund in an amount equal to the management fee it earns as an investment adviser to any of the affiliated Underlying Funds in which the Fund invests. For the six months ended June 30, 2017, GSAM waived $2,849 of the Fund’s management fee.
B. Distribution and/or Service (12b-1) Plans — The Trust, on behalf of Service Shares of the Fund, has adopted a Distribution and Service Plan subject to Rule 12b-1 under the Act. Under the Distribution and Service Plan, Goldman Sachs, which serves as distributor (the “Distributor”), is entitled to a fee accrued daily and paid monthly, for distribution services and personal and account maintenance services, which may then be paid by Goldman Sachs to authorized dealers, equal to, on an annual basis, 0.25% of the Fund’s average daily net assets attributable to Service Shares.
The Trust, on behalf of Advisor Shares of the Fund, has adopted a Distribution Plan subject to Rule 12b-1 under the Act. Under the Distribution Plan, Goldman Sachs as Distributor is entitled to a fee accrued daily and paid monthly for distribution services, which may then be paid by Goldman Sachs to authorized dealers, equal to, on an annual basis, 0.15% of the Fund’s average daily net assets attributable to Advisor Shares.
C. Service Plans — The Trust, on behalf of Advisor Shares of the Fund, has adopted a Service Plan to allow Advisor Shares to compensate service organizations (including Goldman Sachs) for providing varying levels of personal and account maintenance and administration services to their customers who are beneficial owners of such shares. The Service Plan provides for compensation to the service organizations equal to 0.25% of the average daily net assets attributable to Advisor Shares of the Fund.
D. Transfer Agency Agreement — Goldman Sachs also serves as the transfer agent of the Fund for a fee pursuant to the Transfer Agency Agreement. The fees charged for such transfer agency services are accrued daily and paid monthly at an annual rate of 0.02% of the average daily net assets of Institutional, Service and Advisor Shares.
E. Other Expense Agreements and Affiliated Transactions — GSAM has agreed to limit certain “Other Expenses” of the Fund (excluding acquired fund fees and expenses, transfer agency fees and expenses, taxes, interest, brokerage fees, shareholder meeting, litigation, indemnification and extraordinary expenses) to the extent such expenses exceed, on an annual basis, a percentage rate of the average daily net assets of the Fund. Such Other Expense reimbursements, if any, are accrued daily and paid monthly. In addition, the Fund is not obligated to reimburse GSAM for prior fiscal year expense reimbursements, if any. The Other Expense limitation as an annual percentage rate of average daily net assets for the Fund is 0.254%. The Other Expense limitation will remain in place through at least April 28, 2018, and prior to such date GSAM may not terminate the arrangement without the approval of the Trustees. For the six months ended June 30, 2017, GSAM reimbursed $112,487 to the Fund. In addition, the Fund has entered into certain offset arrangements with the custodian and the transfer agent, which may result in a reduction of the Fund’s expenses and are received irrespective of the application of the “Other Expense” limitation described above. For the six months ended June 30, 2017, custody fee credits were $138.
F. Line of Credit Facility — As of June 30, 2017, the Fund participated in a $1,100,000,000 committed, unsecured revolving line of credit facility (the “facility”) together with other funds of the Trust and certain registered investment companies having management agreements with GSAM or its affiliates. This facility is to be used for temporary emergency purposes, or to allow for
32
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
5. AGREEMENTS AND AFFILIATED TRANSACTIONS (continued)
an orderly liquidation of securities to meet redemption requests. The interest rate on borrowings is based on the federal funds rate. The facility also requires a fee to be paid by the Fund based on the amount of the commitment that has not been utilized. For the six months ended June 30, 2017, the Fund did not have any borrowings under the facility.
G. Other Transactions with Affiliates — The following table provides information about the Fund’s investment in the Goldman Sachs Financial Square Government Fund as of and for the six months ended June 30, 2017:
Market Value 12/31/16 | Purchases at Cost | Proceeds from Sales | Market Value 6/30/17 | Dividend Income | ||||||||||||||
$ | 143,083 | $ | 31,448,122 | $ | (30,705,888 | ) | $ | 885,317 | $ | 9,552 |
As of June 30, 2017, The Goldman Sachs Group, Inc. was the beneficial owner of approximately 27% of the Institutional Class Shares and 100% of the Service Class Shares of the Fund.
6. PORTFOLIO SECURITIES TRANSACTIONS
The cost of purchases and proceeds from sales and maturities of long-term securities for the six months ended June 30, 2017, were as follows:
Purchases of U.S. Government and Agency Obligations | Purchases (Excluding U.S. Government and Agency Obligations) | Sales and Maturities of U.S. Government and Agency Obligations | Sales and Maturities (Excluding U.S. Government and Agency Obligations) | |||||||||||
$ | 14,776,849 | $ | 5,553,095 | $ | 13,411,961 | $ | 3,513,014 |
7. TAX INFORMATION
As of the Fund’s most recent fiscal year end, December 31, 2016, the Fund’s capital loss carryforwards and certain timing differences, on a tax-basis were as follows:
Capital loss carryforwards:(1) | ||||
Perpetual short-term | $ | (1,452,510 | ) | |
Perpetual long-term | (416,804 | ) | ||
Total capital loss carryforwards | $ | (1,869,314 | ) | |
Timing differences (Straddle Deferral) | $ | (73,301 | ) |
(1) | Losses may be limited due to limitations under IRC Sections 381-384 |
As of June 30, 2017, the Fund’s aggregate security unrealized gains and losses based on cost for U.S. federal income tax purposes were as follows:
Tax cost | $ | 22,912,450 | ||
Gross unrealized gain | 295,941 | |||
Gross unrealized loss | (406,379 | ) | ||
Net unrealized security loss | $ | (110,438 | ) |
33
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
Notes to Financial Statements (continued)
June 30, 2017 (Unaudited)
7. TAX INFORMATION (continued)
The difference between GAAP-basis and tax-basis unrealized gains (losses) is attributable primarily to wash sales, net mark to market gains (losses) on regulated futures and foreign currency contracts, and differences in the tax treatment of swap transactions.
GSAM has reviewed the Fund’s tax positions for all open tax years (the current and prior three years, as applicable) and has concluded that no provision for income tax is required in the Fund’s financial statements. Such open tax years remain subject to examination and adjustment by tax authorities.
8. OTHER RISKS
The Fund’s risks include, but are not limited to, the following:
Derivatives Risk — The Fund’s use of derivatives may result in loss. Derivative instruments, which may pose risks in addition to and greater than those associated with investing directly in securities, currencies or other instruments, may be illiquid or less liquid, volatile, difficult to price and leveraged so that small changes in the value of the underlying instruments may produce disproportionate losses to the Fund. Derivatives are also subject to counterparty risk, which is the risk that the other party in the transaction will not fulfill its contractual obligation. The use of derivatives is a highly specialized activity that involves investment techniques and risks different from those associated with investments in more traditional securities and instruments. Losses from derivatives can also result from a lack of correlation between changes in the value of derivative instruments and the portfolio assets (if any) being hedged.
Foreign and Emerging Countries Risk — Investing in foreign markets may involve special risks and considerations not typically associated with investing in the U.S. Foreign securities may be subject to risk of loss because of more or less foreign government regulation, less public information and less economic, political and social stability in the countries in which the Fund invests. The imposition of exchange controls, confiscations, trade restrictions (including tariffs) and other government restrictions by the U.S. or other governments, or from problems in share registration, settlement or custody, may also result in losses. Foreign risk also involves the risk of negative foreign currency rate fluctuations, which may cause the value of securities denominated in such foreign currency (or other instruments through which the Fund has exposure to foreign currencies) to decline in value. Currency exchange rates may fluctuate significantly over short periods of time. To the extent that the Fund also invests in securities of issuers located in emerging markets, these risks may be more pronounced.
Foreign Custody Risk — If the Fund invests in foreign securities, the Fund may hold such securities and cash with foreign banks, agents, and securities depositories appointed by the Fund’s custodian (each a “Foreign Custodian”). Some foreign custodians may be recently organized or new to the foreign custody business. In some countries, Foreign Custodians may be subject to little or no regulatory oversight over, or independent evaluation of, their operations. Further, the laws of certain countries may place limitations on the Fund’s ability to recover its assets if a Foreign Custodian enters bankruptcy. Investments in emerging markets may be subject to even greater custody risks than investments in more developed markets. Custody services in emerging market countries are very often undeveloped and may be considerably less well regulated than in more developed countries, and thus may not afford the same level of investor protection as would apply in developed countries.
Interest Rate Risk — When interest rates increase, fixed income securities or instruments held by the Fund will generally decline in value. Long-term fixed income securities or instruments will normally have more price volatility because of this risk than short-term fixed income securities or instruments. The risks associated with increasing rates are heightened given that interest rates are near historic lows, but may be expected to increase in the future with unpredictable effects on the markets and the Fund’s investments. Fluctuations in interest rates may also affect the liquidity of fixed income securities and instruments held by the Fund.
Investments in Other Investment Companies — As a shareholder of another investment company, including an exchange-traded fund (“ETF”), the Fund will indirectly bear its proportionate share of any net management fees and other expenses paid by such other investment companies, in addition to the fees and expenses regularly borne by the Fund. ETFs are subject to risks that do not apply to conventional mutual funds, including but not limited to the following: (i) the market price of the ETF’s shares may trade at a premium or a discount to their NAV; and (ii) an active trading market for an ETF’s shares may not develop or be maintained.
34
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
8. OTHER RISKS (continued)
Large Shareholder Transactions Risk — The Fund may experience adverse effects when certain large shareholders, such as other funds, participating insurance companies, accounts and Goldman Sachs affiliates, purchase or redeem large amounts of shares of the Fund. Such large shareholder redemptions may cause the Fund to sell portfolio securities at times when it would not otherwise do so, which may negatively impact the Fund’s NAV and liquidity. These transactions may also accelerate the realization of taxable income to shareholders if such sales of investments resulted in gains, and may also increase transaction costs. In addition, a large redemption could result in the Fund’s current expenses being allocated over a smaller asset base, leading to an increase in the Fund’s expense ratio. Similarly, large Fund share purchases may adversely affect the Fund’s performance to the extent that the Fund is delayed in investing new cash and is required to maintain a larger cash position than it ordinarily would.
Leverage Risk — Leverage creates exposure to potential gains and losses in excess of the initial amount invested. Borrowing and the use of derivatives may result in leverage and may make the Fund more volatile. When the Fund uses leverage, the sum of the Fund’s investment exposure may significantly exceed the amount of assets invested in the Fund, although these exposures may vary over time. Relatively small market movements may result in large changes in the value of a leveraged investment. The Fund will identify liquid assets on its books or otherwise cover transactions that may give rise to such risk, to the extent required by applicable law. The use of leverage may cause the Fund to liquidate portfolio positions to satisfy its obligations or to meet segregation requirements when it may not be advantageous to do so. The use of leverage by the Fund can substantially increase the adverse impact to which the Fund’s investment portfolio may be subject
Liquidity Risk — The Fund may make investments that are illiquid or that may become less liquid in response to market developments or adverse investor perceptions. Illiquid investments may be more difficult to value. Liquidity risk may also refer to the risk that the Fund will not be able to pay redemption proceeds within the allowable time period because of unusual market conditions, an unusually high volume of redemption requests, or other reasons. To meet redemption requests, the Fund may be forced to sell investments at an unfavorable time and/or under unfavorable conditions. Liquidity risk may be the result of, among other things, the reduced number and capacity of traditional market participants to make a market in fixed income securities or the lack of an active market. The potential for liquidity risk may be magnified by a rising interest rate environment or other circumstances where investor redemptions from fixed income mutual funds may be higher than normal, potentially causing increased supply in the market due to selling activity.
Loan-Related Investments Risk — In addition to risks generally associated with debt investments, loan-related investments such as loan participations and assignments are subject to other risks. Although a loan obligation may be fully collateralized at the time of acquisition, the collateral may decline in value, be relatively illiquid, or lose all or substantially all of its value subsequent to investment. Many loan investments are subject to legal or contractual restrictions on resale and may be relatively illiquid and difficult to value. There is less readily available, reliable information about most loan investments than is the case for many other types of securities. Substantial increases in interest rates may cause an increase in loan obligation defaults. With respect to loan participations, the Fund may not always have direct recourse against a borrower if the borrower fails to pay scheduled principal and/or interest; may be subject to greater delays, expenses and risks than if the Fund had purchased a direct obligation of the borrower; and may be regarded as the creditor of the agent lender (rather than the borrower), subjecting the Fund to the creditworthiness of that lender as well. Investors in loans, such as the Fund, may not be entitled to rely on the anti-fraud protections of the federal securities laws, although they may be entitled to certain contractual remedies. The market for loan obligations may be subject to irregular trading activity, wide bid/ask spreads and extended trade settlement periods. Because transactions in many loans are subject to extended trade settlement periods, the Fund may not receive the proceeds from the sale of a loan for a period after the sale. As a result, sale proceeds related to the sale of loans may not be available to make additional investments or to meet the Fund’s redemption obligations for a period after the sale of the loans, and, as a result, the Fund may have to sell other investments or engage in borrowing transactions, such as borrowing from its credit facility, if necessary to raise cash to meet its obligations.
Senior Loans hold the most senior position in the capital structure of a business entity, and are typically secured with specific collateral, but are nevertheless usually rated below investment grade. Because Second Lien Loans are subordinated or unsecured and thus lower in priority of payment to Senior Loans, they are subject to the additional risk that the cash flow of the borrower and
35
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
Notes to Financial Statements (continued)
June 30, 2017 (Unaudited)
8. OTHER RISKS (continued)
property securing the loan or debt, if any, may be insufficient to meet scheduled payments after giving effect to the senior secured obligations of the borrower. Second Lien Loans generally have greater price volatility than Senior Loans and may be less liquid.
Market and Credit Risks — In the normal course of business, the Fund trades financial instruments and enters into financial transactions where risk of potential loss exists due to changes in the market (market risk). Additionally, the Fund may also be exposed to credit risk in the event that an issuer or guarantor fails to perform or that an institution or entity with which the Fund has unsettled or open transactions defaults.
Short Position Risk — The Fund may enter into a short position through a futures contract, an option or swap agreement or through short sales of any instrument that the Fund may purchase for investment. Taking short positions involves leverage of the Fund’s assets and presents various risks, including counterparty risk. If the value of the underlying instrument or market in which the Fund has taken a short position increases, then the Fund will incur a loss equal to the increase in value from the time that the short position was entered into plus any related interest payments or other fees. Taking short positions involves the risk that losses may be disproportionate, may exceed the amount invested, and may be unlimited.
9. INDEMNIFICATIONS
Under the Trust’s organizational documents, its Trustees, officers, employees and agents are indemnified, to the extent permitted by the Act and state law, against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the course of business, the Fund enters into contracts that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, GSAM believes the risk of loss under these arrangements to be remote.
10. SUBSEQUENT EVENTS
Subsequent events after the Statement of Assets and Liabilities date have been evaluated and GSAM has concluded that there is no impact requiring adjustment or disclosure in the financial statements.
36
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
11. SUMMARY OF SHARE TRANSACTIONS
Share activity is as follows:
For the Six Months Ended June 30, 2017 (Unaudited) | For the Fiscal Year Ended December 31, 2016 | |||||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||||
Institutional Shares | ||||||||||||||||
Shares sold | 15,520 | $ | 141,540 | 70,360 | $ | 639,958 | ||||||||||
Reinvestment of distributions | 10,891 | 99,329 | 56,312 | 512,567 | ||||||||||||
Shares redeemed | (531,209 | ) | (4,896,902 | ) | (1,090,570 | ) | (9,938,886 | ) | ||||||||
(504,798 | ) | (4,656,033 | ) | (963,898 | ) | (8,786,361 | ) | |||||||||
Service Shares | ||||||||||||||||
Reinvestment of distributions | 6 | 56 | 23 | 206 | ||||||||||||
6 | 56 | 23 | 206 | |||||||||||||
Advisor Shares | ||||||||||||||||
Shares sold | 197,851 | 1,804,697 | 592,401 | 5,397,896 | ||||||||||||
Reinvestment of distributions | 6,011 | 54,713 | 19,125 | 173,760 | ||||||||||||
Shares redeemed | (46,743 | ) | (426,145 | ) | (198,105 | ) | (1,807,391 | ) | ||||||||
157,119 | 1,433,265 | 413,421 | 3,764,265 | |||||||||||||
NET DECREASE | (347,673 | ) | $ | (3,222,712 | ) | (550,454 | ) | $ | (5,021,890 | ) |
37
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
Fund Expenses — Six Month Period Ended June 30, 2017 (Unaudited) |
As a shareholder of Institutional, Service or Advisor Shares of the Fund, you incur ongoing costs, including management fees, distribution and/or service (12b-1) fees (with respect to Service and Advisor Shares) and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Institutional, Service and Advisor Shares of the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from January 1, 2017 through June 30, 2017, which represents a period of 181 days of a 365 day year.
Actual Expenses — The first line under each share class in the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000=8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes — The second line under each share class in the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual net expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only. As a shareholder of the Fund you do not incur any transaction costs, such as sales charges, redemption fees, or exchange fees, but shareholders of other funds may incur such costs. The second line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds whose shareholders may incur transaction costs.
Share Class | Beginning Account Value 01/01/17 | Ending Account Value 06/30/17 | Expenses Paid for the 6 Months Ended 06/30/17* | |||||||||
Institutional | ||||||||||||
Actual | $ | 1,000 | $ | 1,002.60 | $ | 4.22 | ||||||
Hypothetical 5% return | 1,000 | 1,020.58 | + | 4.26 | ||||||||
Service | ||||||||||||
Actual | 1,000 | 1,002.50 | 5.61 | |||||||||
Hypothetical 5% return | 1,000 | 1,019.19 | + | 5.66 | ||||||||
Advisor | ||||||||||||
Actual | 1,000 | 1,002.00 | 6.20 | |||||||||
Hypothetical 5% return | 1,000 | 1,018.60 | + | 6.26 |
* | Expenses are calculated using the Fund’s annualized net expense ratio for each class, which represents the ongoing expenses as a percentage of net assets for the six months ended June 30, 2017. Expenses are calculated by multiplying the annualized net expense ratio by the average account value for the period; then multiplying the result by the number of days in the most recent fiscal half year; and then dividing that result by the number of days in the fiscal year. The annualized net expense ratios for the period were 0.85%, 1.13% and 1.25% for the Institutional, Service and Advisor Shares, respectively. |
+ | Hypothetical expenses are based on the Fund’s actual annualized net expense ratios and an assumed rate of return of 5% per year before expenses. |
38
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
Statement Regarding Basis for Approval of Management Agreement (Unaudited)
Background
The Goldman Sachs Strategic Income Fund (the “Fund”) is an investment portfolio of Goldman Sachs Variable Insurance Trust (the “Trust”). The Board of Trustees oversees the management of the Trust and reviews the investment performance and expenses of the Fund at regularly scheduled meetings held throughout the year. In addition, the Board of Trustees determines annually whether to approve the continuance of the Trust’s investment management agreement (the “Management Agreement”) with Goldman Sachs Asset Management, L.P. (the “Investment Adviser”) on behalf of the Fund.
The Management Agreement was most recently approved for continuation until June 30, 2018 by the Board of Trustees, including those 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”), at a meeting held on June 14-15, 2017 (the “Annual Meeting”).
The review process undertaken by the Trustees spans the course of the year and culminates with the Annual Meeting. To assist the Trustees in their deliberations, the Trustees have established a Contract Review Committee (the “Committee”), comprised of the Independent Trustees. The Committee held four meetings over the course of the year since the Management Agreement was last approved. At those Committee meetings, regularly scheduled Board or other committee meetings, and/or the Annual Meeting, matters relevant to the renewal of the Management Agreement were considered by the Board, or the Independent Trustees, as applicable. With respect to the Fund, such matters included:
(a) | the nature and quality of the advisory, administrative, and other services provided to the Fund by the Investment Adviser and its affiliates, including information about: |
(i) | the structure, staff, and capabilities of the Investment Adviser and its portfolio management teams; |
(ii) | the groups within the Investment Adviser and its affiliates that support the portfolio management teams or provide other types of necessary services, including fund services groups (e.g., accounting and financial reporting, tax, shareholder services, and operations); controls and risk management groups (e.g., legal, compliance, valuation oversight, credit risk management, internal audit, compliance testing, market risk analysis, finance, and central funding); sales and distribution support groups, and others (e.g., information technology and training); |
(iii) | trends in employee headcount; |
(iv) | the Investment Adviser’s financial resources and ability to hire and retain talented personnel and strengthen its operations; and |
(v) | the parent company’s support of the Investment Adviser and its mutual fund business, as expressed by the firm’s senior management; |
(b) | information on the investment performance of the Fund, including comparisons to the performance of similar mutual funds, as provided by a third-party mutual fund data provider engaged as part of the contract review process (the “Outside Data Provider”), a benchmark performance index, and a composite of accounts with comparable investment strategies managed by the Investment Adviser; and information on general investment outlooks in the markets in which the Fund invests; |
(c) | information provided by the Investment Adviser indicating the Investment Adviser’s views on whether the Fund’s peer group and/or benchmark index had high, medium, or low relevance given the Fund’s particular investment strategy; |
(d) | the terms of the Management Agreement and other agreements with affiliated service providers entered into by the Trust on behalf of the Fund; |
(e) | fee and expense information for the Fund, including: |
(i) | the relative management fee and expense levels of the Fund as compared to those of comparable funds managed by other advisers, as provided by the Outside Data Provider; |
(ii) | the Fund’s expense trends over time; and |
(iii) | to the extent the Investment Adviser manages other types of accounts (such as bank collective trusts, private wealth management accounts, institutional separate accounts, sub-advised mutual funds, and non-U.S. funds) having investment objectives and policies similar to those of the Fund, comparative information on the advisory fees charged and services provided to those accounts by the Investment Adviser; |
39
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
Statement Regarding Basis for Approval of Management Agreement (Unaudited) (continued)
(f) | with respect to the extensive investment performance and expense comparison data provided by the Outside Data Provider, its processes in producing that data for the Fund; |
(g) | the undertakings of the Investment Adviser and its affiliates to implement fee waivers and/or expense limitations; |
(h) | information relating to the profitability of the Management Agreement and the transfer agency and distribution and service arrangements of the Fund to the Investment Adviser and its affiliates; |
(i) | whether the Fund’s existing management fee schedule adequately addressed any economies of scale; |
(j) | a summary of the “fall-out” benefits derived by the Investment Adviser and its affiliates from their relationships with the Fund, including the fees received by the Investment Adviser’s affiliates from the Fund for transfer agency, portfolio trading, distribution and other services; |
(k) | a summary of potential benefits derived by the Fund as a result of its relationship with the Investment Adviser; |
(l) | information regarding portfolio trading and how the Investment Adviser carries out its duty to seek best execution; |
(m) | the manner in which portfolio manager compensation is determined; and the number and types of accounts managed by the portfolio managers; |
(n) | the nature and quality of the services provided to the Fund by its unaffiliated service providers, and the Investment Adviser’s general oversight and evaluation (including reports on due diligence) of those service providers as part of the administrative services provided under the Management Agreement; and |
(o) | the Investment Adviser’s processes and policies addressing various types of potential conflicts of interest; its approach to risk management; the annual review of the effectiveness of the Fund’s compliance program; and periodic compliance reports. |
The Trustees also received an overview of the Fund’s distribution arrangements. They received information regarding the Fund’s assets, share purchase and redemption activity, and payment of distribution and service fees. Information was also provided to the Trustees relating to revenue sharing payments made by and services provided by the Investment Adviser and its affiliates to intermediaries that promote the sale, distribution, and/or servicing of Fund shares. The Independent Trustees also discussed the broad range of other investment choices that are available to Fund investors, including the availability of comparable funds managed by other advisers.
The presentations made at the Board and Committee meetings and at the Annual Meeting encompassed the Fund and other mutual funds for which the Board of Trustees has responsibility. In evaluating the Management Agreement at the Annual Meeting, the Trustees relied upon their knowledge, resulting from their meetings and other interactions throughout the year, of the Investment Adviser and its affiliates, their services, and the Fund. In conjunction with these meetings, the Trustees received written materials and oral presentations on the topics covered, and the Investment Adviser addressed the questions and concerns of the Trustees, including concerns regarding the investment performance of certain of the funds they oversee. The Independent Trustees were advised by their independent legal counsel regarding their responsibilities and other regulatory requirements related to the approval and continuation of mutual fund investment management agreements under applicable law. In addition, the Investment Adviser and its affiliates provided the Independent Trustees with a written response to a formal request for information sent on behalf of the Independent Trustees by their independent legal counsel. During the course of their deliberations, the Independent Trustees met in executive sessions with their independent legal counsel, without representatives of the Investment Adviser or its affiliates present.
40
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
Statement Regarding Basis for Approval of Management Agreement (Unaudited) (continued)
Nature, Extent, and Quality of the Services Provided Under the Management Agreement
As part of their review, the Trustees considered the nature, extent, and quality of the services provided to the Fund by the Investment Adviser. In this regard, the Trustees considered both the investment advisory services and non-advisory services that are provided by the Investment Adviser and its affiliates. The Trustees noted the transition in the leadership and changes in personnel of various of the Investment Adviser’s portfolio management teams that had occurred in recent periods, and the ongoing recruitment efforts aimed at bringing high quality investment talent to the Investment Adviser. They also noted the Investment Adviser’s commitment to maintaining high quality systems and expending substantial resources to respond to ongoing changes to the regulatory and control environment in which the Fund and its service providers operate, as well as the efforts of the Investment Adviser and its affiliates to combat cyber security risks. The Trustees concluded that the Investment Adviser continued to commit substantial financial and operational resources to the Fund and expressed confidence that the Investment Adviser would continue to do so in the future. The Trustees also recognized that the Investment Adviser had made significant commitments to address regulatory compliance requirements applicable to the Fund and the Investment Adviser and its affiliates.
Investment Performance
The Trustees also considered the investment performance of the Fund. In this regard, they compared the investment performance of the Fund to its peers using rankings compiled by the Outside Data Provider as of December 31, 2016, and updated performance information prepared by the Investment Adviser using the peer group identified by the Outside Data Provider as of March 31, 2017. The information on the Fund’s investment performance was provided for the one-year period ending on the applicable date. The Trustees also reviewed the Fund’s investment performance relative to its performance benchmark. As part of this review, they 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 and market conditions. The Trustees also received information comparing the Fund’s performance to that of a composite of accounts with comparable investment strategies managed by the Investment Adviser.
In addition, the Trustees considered materials prepared and presentations made by the Investment Adviser’s senior management and portfolio management personnel in which Fund performance was assessed. The Trustees also considered the Investment Adviser’s periodic reports with respect to the Fund’s risk profile, and how the Investment Adviser’s approach to risk monitoring and management influences portfolio management.
The Trustees noted that the Fund’s Institutional Shares had placed in the fourth quartile of the Fund’s peer group and outperformed the Fund’s benchmark index for the one-year period ending March 31, 2017.
Costs of Services Provided and Competitive Information
The Trustees considered the contractual terms of the Management Agreement and the fee rates payable by the Fund thereunder. 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.
In particular, the Trustees reviewed analyses prepared by the Outside Data Provider regarding the expense rankings of the Fund. The analyses provided a comparison of the Fund’s management fee and breakpoints to those of a relevant peer group and category universe; an expense analysis which compared the Fund’s overall net and gross expenses to a peer group and a category universe; and data comparing the Fund’s net expenses to the peer and category medians. The analyses also compared the Fund’s transfer agency, custody, and distribution fees, other expenses and fee waivers/reimbursements to those of the peer group and category medians. The Trustees concluded that the comparisons provided by the Outside Data Provider were useful in evaluating the reasonableness of the management fees and total expenses paid by the Fund.
41
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
Statement Regarding Basis for Approval of Management Agreement (Unaudited) (continued)
In addition, the Trustees considered the Investment Adviser’s undertakings to implement fee waivers and/or expense limitations. The Trustees also noted that certain changes were being made to existing fee waiver or expense limitation arrangements of the Fund that would have the effect of decreasing total Fund expenses, with such changes taking effect in connection with the Fund’s next annual registration statement update. They also considered, to the extent that the Investment Adviser manages other types of accounts having investment objectives and policies similar to those of the Fund, comparative fee information for services provided by the Investment Adviser to those accounts, and information that indicated that services provided to the Fund differed in various significant respects from the services provided to other types of accounts which, in many cases, operated under less stringent legal and regulatory structures, required fewer services from the Investment Adviser to a smaller number of client contact points, and were less time-intensive.
In addition, the Trustees noted that shareholders are able to redeem their Fund shares at any time if shareholders believe that the Fund fees and expenses are too high or if they are dissatisfied with the performance of the Fund.
Profitability
The Trustees reviewed the Fund’s contribution to the Investment Adviser’s revenues and pre-tax profit margins. In this regard the Trustees noted that they had received, among other things, profitability analyses and summaries, revenue and expense schedules by Fund and by function (i.e., investment management, transfer agency and distribution and service), and information on the Investment Adviser’s expense allocation methodology. They observed that the profitability and expense figures are substantially similar to those used by the Investment Adviser for many internal purposes, including compensation decisions among various business groups, and are thus subject to a vigorous internal debate about how certain revenue and expenses should be allocated. The Trustees also noted that the internal audit group within the Goldman Sachs organization had audited the expense allocation methodology and that the internal audit group was satisfied with the reasonableness, consistency, and accuracy of the Investment Adviser’s expense allocation methodology and profitability analysis calculations. Profitability data for the Fund were provided for 2016 and 2015, and the Trustees considered this information in relation to the Investment Adviser’s overall profitability.
Economies of Scale
The Trustees considered the information that had been provided regarding the Investment Adviser’s profitability. The Trustees also considered the breakpoints in the fee rate payable under the Management Agreement for the Fund at the following annual percentage rates of the average daily net assets of the Fund:
First $1 billion | 0.60 | % | ||
Next $1 billion | 0.54 | |||
Next $3 billion | 0.51 | |||
Next $3 billion | 0.50 | |||
Over $8 billion | 0.49 |
The Trustees noted that the breakpoints were designed to share potential economies of scale, if any, with the Fund and its shareholders as assets under management reach those asset levels. The Trustees considered the amounts of assets in the Fund; the Fund’s recent share purchase and redemption activity; the information provided by the Investment Adviser relating to the costs of the services provided by the Investment Adviser and its affiliates and their realized profits; information comparing fee rates charged by the Investment Adviser with fee rates charged to other funds in the peer group; and the Investment Adviser’s undertaking to limit certain expenses of the Fund that exceed a specified level. Upon reviewing these matters at the Annual Meeting, the Trustees concluded that the fee breakpoints represented a means of assuring that benefits of scalability, if any, would be passed along to shareholders at the specified asset levels.
42
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
Statement Regarding Basis for Approval of Management Agreement (Unaudited) (continued)
Other Benefits to the Investment Adviser and Its Affiliates
The Trustees also considered the other benefits derived by the Investment Adviser and its affiliates from their relationships with the Fund as stated above, including: (a) transfer agency fees received by Goldman Sachs & Co. LLC (“Goldman Sachs”); (b) futures commissions earned by Goldman Sachs for executing futures transactions on behalf of the Fund; (c) trading efficiencies resulting from aggregation of orders of the Fund with those for other funds or accounts managed by the Investment Adviser; (d) the Investment Adviser’s ability to leverage the infrastructure designed to service the Fund on behalf of its other clients; (e) the Investment Adviser’s ability to cross-market other products and services to Fund shareholders; (f) Goldman Sachs’ retention of certain fees as Fund Distributor; (g) the Investment Adviser’s ability to negotiate better pricing with custodians on behalf of its other clients, as a result of the relationship with the Fund; and (h) the possibility that the working relationship between the Investment Adviser and the Fund’s third-party service providers may cause those service providers to be more likely to do business with other areas of Goldman Sachs. In the course of considering the foregoing, the Independent Trustees requested and received further information quantifying certain of these fall-out benefits.
Other Benefits to the Fund and Its Shareholders
The Trustees also noted that the Fund receives certain potential benefits as a result of its relationship with the Investment Adviser, including: (a) trading efficiencies resulting from aggregation of orders of the Fund with those of other funds or accounts managed by the Investment Adviser; (b) enhanced servicing from vendors because of the volume of business generated by the Investment Adviser and its affiliates; (c) enhanced servicing from broker-dealers because of the volume of business generated by the Investment Adviser and its affiliates; (d) the Investment Adviser’s ability to negotiate favorable terms with derivatives counterparties on behalf of the Fund as a result of the size and reputation of the Goldman Sachs organization; (e) the Investment Adviser’s knowledge and experience gained from managing other accounts and products; (f) the Investment Adviser’s ability to hire and retain qualified personnel to provide services to the Fund because of the reputation of the Goldman Sachs organization; (g) the Fund’s access, through the Investment Adviser, to certain firmwide resources (e.g., proprietary risk management systems and databases), subject to certain restrictions; and (h) the Fund’s access to certain affiliated distribution channels. In addition, the Trustees noted the competitive nature of the mutual fund marketplace, and considered that many of the Fund’s shareholders invested in the Fund in part because of the Fund’s relationship with the Investment Adviser and that those shareholders have a general expectation that the relationship will continue.
43
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INCOME FUND
Statement Regarding Basis for Approval of Management Agreement (Unaudited) (continued)
Conclusion
In connection with their consideration of the Management Agreement, the Trustees gave weight to each of the factors described above, but did not identify any particular factor as controlling their decision. After deliberation and consideration of all of the information provided, including the factors described above, the Trustees concluded, in the exercise of their business judgment, that the management fees paid by the Fund were reasonable in light of the services provided to it by the Investment Adviser, the Investment Adviser’s costs and the Fund’s current and reasonably foreseeable asset levels. The Trustees unanimously concluded that the Investment Adviser’s continued management likely would benefit the Fund and its shareholders and that the Management Agreement should be approved and continued with respect to the Fund until June 30, 2018.
44
TRUSTEES | OFFICERS | |
Ashok N. Bakhru, Chairman | James A. McNamara, President | |
Kathryn A. Cassidy | Scott M. McHugh, Treasurer, Senior Vice | |
Diana M. Daniels | President and Principal Financial Officer | |
Herbert J. Markley James A. McNamara | Joseph F. DiMaria, Assistant Treasurer and | |
Jessica Palmer | Caroline L. Kraus, Secretary | |
Roy W. Templin | ||
Gregory G. Weaver |
GOLDMAN SACHS & CO. LLC
Distributor and Transfer Agent
GOLDMAN SACHS ASSET MANAGEMENT, L.P.
Investment Adviser
200 West Street, New York
New York 10282
Visit our web site at www.GSAMFUNDS.com to obtain the most recent month-end returns.
The reports concerning the Fund included in this shareholder report may contain certain forward-looking statements about the factors that may affect the performance of the Fund in the future. These statements are based on Fund management’s predictions and expectations concerning certain future events and their expected impact on the Fund, such as performance of the economy as a whole and of specific industry sectors, changes in the levels of interest rates, the impact of developing world events, and other factors that may influence the future performance of the Fund. Management believes these forward-looking statements to be reasonable, although they are inherently uncertain and difficult to predict. Actual events may cause adjustments in portfolio management strategies from those currently expected to be employed.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the Fund voted proxies relating to portfolio securities for the 12-month period ended June 30 is available (i) without charge, upon request by calling 1-800-621-2550; and (ii) on the Securities and Exchange Commission (“SEC”) web site at http://www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Form N-Qs are available on the SEC’s web site at http://www.sec.gov within 60 days after the Fund’s first and third fiscal quarters. The Fund’s Form N-Qs may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may also be obtained by calling 1-800-SEC-0330. Form N-Qs may be obtained upon request and without charge by calling 1-800-621-2550.
The website links provided are for your convenience only and are not an endorsement or recommendation by GSAM of any of these websites or the products or services offered. GSAM is not responsible for the accuracy and validity of the content of these websites.
Fund holdings and allocations shown are as of June 30, 2017 and may not be representative of future investments. Fund holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities. Current and future holdings are subject to risk.
References to indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only and do not imply that the portfolio will achieve similar results. The index composition may not reflect the manner in which a portfolio is constructed. While an adviser seeks to design a portfolio which reflects appropriate risk and return features, portfolio characteristics may deviate from those of the benchmark.
The Global Industry Classification Standard (“GICS”) was developed by and is the exclusive property and a service mark of Morgan Stanley Capital International Inc. (“MSCI”) and Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. (“S&P”) and is licensed for use by Goldman Sachs. Neither MSCI, S&P nor any other party involved in making or compiling the GICS or any GICS classifications makes any express or implied warranties or representations with respect to such standard or classification (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of such standard or classification. Without limiting any of the foregoing, in no event shall MSCI, S&P, any of their affiliates or any third party involved in making or compiling the GICS or any GICS classifications have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.
The portfolio risk management process includes an effort to monitor and manage risk, but does not imply low risk.
Shares of the Goldman Sachs VIT Funds are offered to separate accounts of participating life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Shares of the Fund are not offered directly to the general public. The variable annuity contracts and variable life insurance policies are described in the separate prospectuses issued by participating insurance companies. You should refer to those prospectuses for information about surrender charges, mortality and expense risk fees and other charges that may be assessed by participating insurance companies under the variable annuity contracts or variable life insurance policies. Such fees or charges, if any, may affect the return you may realize with respect to your investments. Ask your representative for more complete information. Please consider a fund’s objectives, risks and charges and expenses, and read the prospectus carefully before investing. The prospectus contains this and other information about the Fund.
This material is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus or summary prospectus, if applicable. Investors should consider the Fund’s objective, risks, and charges and expenses, and read the summary prospectus, if available, and/or the prospectus carefully before investing or sending money. The summary prospectus, if available, and the prospectus contain this and other information about the Fund and may be obtained from your authorized dealer or from Goldman Sachs & Co. LLC by calling 1-800-621-2550.
THIS MATERIAL IS FOR INFORMATIONAL PURPOSES ONLY AND IS PROVIDED SOLELY ON THE BASIS THAT IT WILL NOT CONSTITUTE INVESTMENT OR OTHER ADVICE OR A RECOMMENDATION RELATING TO ANY PERSON’S OR PLAN’S INVESTMENT OR OTHER DECISIONS, AND GOLDMAN SACHS IS NOT A FIDUCIARY OR ADVISOR WITH RESPECT TO ANY PERSON OR PLAN BY REASON OF PROVIDING THE MATERIAL OR CONTENT HEREIN INCLUDING UNDER THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974 OR DEPARTMENT OF LABOR REGULATIONS. PLAN SPONSORS AND OTHER FIDUCIARIES SHOULD CONSIDER THEIR OWN CIRCUMSTANCES IN ASSESSING ANY POTENTIAL COURSE OF ACTION.
This report is prepared for the general information of contract owners and is not an offer of shares of the Goldman Sachs Variable Insurance Trust – Goldman Sachs Strategic Income Fund.
© 2017 Goldman Sachs. All rights reserved.
VITSTISAR-17/102641-TMPL-08/2017-587263/379
Goldman
Sachs Variable Insurance Trust
Goldman Sachs
Strategic International Equity Fund
Semi-Annual Report
June 30, 2017
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INTERNATIONAL EQUITY FUND
INVESTMENT OBJECTIVE
The Fund seeks long-term growth of capital.
Portfolio Management Discussion and Analysis
Below, the Goldman Sachs International Equity Portfolio Management Team discusses the Goldman Sachs Variable Insurance Trust —Goldman Sachs Strategic International Equity Fund’s (the “Fund”) performance and positioning for the six-month period ended June 30, 2017 (the “Reporting Period”).
How did the Fund perform during the Reporting Period?
During the Reporting Period, the Fund’s Institutional and Service Shares generated cumulative total returns of 15.77% and 15.60%, respectively. These returns compare to the 13.81% cumulative total return of the Fund’s benchmark, the MSCI Europe, Australasia, Far East (“EAFE”) Index (Net, USD, Unhedged) (the “MSCI EAFE Index”), during the same time period.
What economic and market factors most influenced the international equity markets as a whole during the Reporting Period?
International equities, as measured by the MSCI EAFE Index, posted a return of 13.81% in U.S. dollar terms for the Reporting Period as a whole.
As the Reporting Period began in January 2017, international equities rallied on the prospect of deregulation following U.S. executive orders on oil pipelines and further optimism around infrastructure. However, equity markets subsequently retreated on political uncertainty and protectionism concerns. In February 2017, international equities were buoyed by “risk on” sentiment, or reduced risk aversion, owing to potential U.S. tax reform and deregulation as well as by stronger economic data. In March 2017, the U.S. Federal Reserve (the “Fed”) raised interest rates for the third time since the 2008 financial crisis. However, a seemingly cautious stance on the future path of monetary tightening from Fed Chair Janet Yellen and the presence of a dissenter on the policy committee led to a dovish market reaction and Japanese yen appreciation, despite the Bank of Japan maintaining its policy rate. (Dovish tends to suggest lower interest rates; opposite of hawkish.) Meanwhile the European Central Bank (“ECB”) kept its policy unchanged at its March 2017 meeting but revised its growth and inflation forecasts upwards. Markets interpreted the positive economic assessment as hawkish, sparking concerns around the sequencing of the ECB’s policy steps — namely, whether rates will rise before quantitative easing ends. Still, international equities gained ground in March 2017.
During the second quarter of 2017, international equities were buoyed by receding political risk, as the centrist candidate defeated the nationalist candidate in the French election and successfully secured a parliamentary majority. Political risk also declined in Italy, as the anti-establishment Five Star Movement saw a setback in local elections, and expectations for parliamentary elections this year declined. However, market optimism for pro-growth fiscal policy was dampened by political developments in the U.S. Strong first quarter 2017 corporate earnings results, with double-digit growth across virtually all major developed market regions, were supportive for international equity markets. The U.S. labor market remained strong during the second quarter of 2017, but economic activity and inflation data appeared to be moderating. Nonetheless, the Fed proceeded to raise the targeted federal funds rate by 25 basis points in June 2017. (A basis point is 1/100th of a percentage point.) In the same month, European markets reacted hawkishly to ECB President Mario Draghi’s sanguine outlook for recovering inflation and cautious reference to tapering of asset purchases. Japanese equities saw a temporary pullback in June 2017, as market sentiment deteriorated and as the Japanese yen strengthened immediately after the Fed interest rate hike, but quickly rebounded.
For the Reporting Period overall, information technology, consumer staples, industrials and health care were the best performing sectors in the MSCI EAFE Index. The weakest performing sector in the MSCI EAFE Index during the Reporting Period was energy, the only one to post a negative absolute return during the Reporting Period. Telecommunication services, consumer discretionary and real estate were relatively weak compared to the MSCI EAFE Index, but each still generated a double-digit gain.
From a country perspective, China was the best performing equity market in the MSCI EAFE Index by a wide margin during the Reporting Period, followed by Spain, Denmark, Finland and Hong Kong. Ireland was the weakest individual country constituent in the MSCI EAFE Index during the Reporting Period, followed by Australia, Japan and the U.K.
What key factors were responsible for the Fund’s performance during the Reporting Period?
The Fund’s outperformance of the MSCI EAFE Index during the Reporting Period can be primarily attributed to individual stock selection.
1
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INTERNATIONAL EQUITY FUND
What were some of the Fund’s best-performing individual stocks?
Among the greatest contributors to Fund performance relative to the MSCI EAFE Index during the Reporting Period were Swiss manufacturer AMS, Italian bank UniCredit and Italian beverage company Davide Campari-Milano.
AMS is a leading manufacturer of high performance sensor and analog solutions. During the Reporting Period, AMS reported solid quarterly earnings results that were well ahead of market estimates, and its management guided above expectations on revenue growth for its fiscal year 2017. AMS’ share price was additionally bolstered by market expectations of increasing content at Apple for which AMS is a supplier. AMS’ management further confirmed that it expected its newly acquired optical packaging business, Heptagon, to add substantial growth. We took advantage of the share price gain to exit the Fund’s position and allocate the proceeds into other stocks that we believe have relatively more compelling risk/reward scenarios.
UniCredit is a holding company focused on the provision of commercial banking services. Its stock performed well during the Reporting period on relative and absolute bases on the back of material improvements in costs and asset quality. To address the former, its management cut thousands of jobs and closed numerous stores without compromising investments, especially in technology. In December 2016, UniCredit had announced the sale of Pioneer, its asset management division, to Amundi, a subsidiary of French bank Credit Agricole. The deal signaled progress with the asset disposal process initiated by UniCredit’s Chief Executive Officer (“CEO”), who was newly appointed in the summer of 2016. Moreover, in its new business plan, its management underscored its focus on profitability improvement and increased efficiency. For all these reasons, we continued to like UniCredit at the end of the Reporting Period.
Davide Campari-Milano, a new purchase for the Fund during the Reporting Period, is a producer and distributor of alcoholic and non-alcoholic beverages. Its strong performance and top-line growth during the Reporting Period were driven by higher margin countries and brands, such as Aperol. Its sales in the U.S. benefited from a shipment catch-up after destocking in the fourth quarter of 2016 ahead of route-to-market changes in the U.S. (Route-to-market is an alternative term for distribution channel; a path or pipeline through which goods and services flow from vendor to consumer.) Despite short-term concerns surrounding the integration of its new acquisition, Grand Marnier, given large inventories, proper execution has led to a positive integration thus far. Additionally, its management has kept its focus on streamlining the company’s portfolio and generating cash. Tax relief from “patent box,” an agreement reached with the Italian authorities, drove its shares as well, representing a non-recurring cash benefit. (A patent box is a special tax regime for intellectual property revenues.) At the end of the Reporting Period, we continued to like the company and were incrementally comfortable with its CEO’s abilities to run the business. We believe the company is disciplined in its acquisitions and able to extract good upside from deals. Its management team has done several accretive acquisitions of “dusty,” or old-time, brands in which they see long-term value. Further, with a compelling portfolio of assets, we were encouraged by the company’s increased global presence versus that of the Italian market, where the company dominates.
Which stocks detracted significantly from the Fund’s performance during the Reporting Period?
Among the biggest detractors from Fund performance relative to the MSCI EAFE Index during the Reporting Period were Netherlands-based integrated energy company Royal Dutch Shell, Japanese diversified real estate landlord and developer Mitsubishi Estate and U.S.-based biopharmaceutical company Shire.
Royal Dutch Shell, one of the largest oil and natural gas production companies, detracted most from the Fund’s results during the Reporting Period. Early in the Reporting Period, Royal Dutch Shell reported earnings that missed market estimates, driven by weak performance in its refining and upstream businesses. (The upstream component of the energy industry is usually defined as those operations stages in the oil and gas industry that involve exploration and production. Upstream operations deal primarily with the exploration stages of the oil and gas industry, with upstream firms taking the first steps to locate, test and drill for oil and gas. Later, once reserves are proven, upstream firms will extract any oil and gas from the reserve.) The company’s share price was additionally impacted by a decline in oil prices. In May 2017, the company posted strong first quarter 2017 results, with earnings ahead of market expectations on the back of material profits in its upstream businesses. A significant decrease in capital expenditures and a reduction in taxes further bolstered its free cash flow. We remained positive on the company’s continued progress in its $30 billion
asset disposal program and believed the company had made impressive progress in reducing costs. At the end of the Reporting Period, we believed Royal Dutch Shell’s consistent cash flow growth and longer-term demand for its products warranted a positive outlook for the company.
Mitsubishi Estate focuses on prime Tokyo office space. After posting strong performance in the fourth quarter of 2016, the company saw its share price correct in early 2017 as foreign exchange movements affected market expectations for Japan’s economic strength and inflation. However, Tokyo office market fundamentals remained strong, with vacancies at historically low levels. Although rental growth was progressing at a tepid rate and new supply, in our opinion, is expected to be gradually on the
2
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INTERNATIONAL EQUITY FUND
rise during the next three years, we believed at the end of the Reporting Period that Mitsubishi Estate continues to benefit as a landlord and remained attractively valued relative to its peers.
Shire focuses on developing and marketing innovative medicines for patients with rare diseases. Early in the Reporting Period, the company’s share price reacted negatively to wider circulation of a previously disclosed settlement being finalized by the Department of Justice. Uncertainty surrounding drug pricing and alleged patent infringement issues with rival companies additionally weighed on the stock. On a positive note, the company reported solid financial results during the Reporting Period, with sales and earnings ahead of market estimates. Our investment thesis for Shire remained unchanged during the Reporting Period, and we continued to believe at the end of the Reporting Period that drug pricing and potential tax reforms may not meaningfully affect Shire. We were also positive on the company’s acquisition of Baxalta, which could be supportive over the long term, as Baxalta, in our view, should improve Shire’s organic sales growth potential. Overall, we believe Shire remains a solid business with a strong pipeline and an experienced management team focused on addressing key issues.
Which equity market sectors most significantly affected Fund performance?
Effective stock selection in the information technology, consumer discretionary and consumer staples sectors contributed most positively to the Fund’s performance relative to the MSCI EAFE Index during the Reporting Period. Having an underweight to the consumer discretionary sector, which lagged the MSCI EAFE Index during the Reporting Period, and having an overweight to consumer staples, which outpaced the MSCI EAFE Index during the Reporting Period, also helped. Partially offsetting these positive contributors was weaker stock selection in the real estate, telecommunication services and financials sectors, which detracted from the Fund’s performance relative to the MSCI EAFE Index during the Reporting Period. Having an allocation to cash during the Reporting Period when the MSCI EAFE Index rallied also dampened the Fund’s relative results.
Which countries or regions most affected the Fund’s performance during the Reporting Period?
Typically, the Fund’s individual stock holdings will significantly influence the Fund’s performance within a particular country or region relative to the MSCI EAFE Index. This effect may be even more pronounced in countries that represent only a modest proportion of the MSCI EAFE Index.
That said, strong stock selection in Japan, Italy and Germany contributed most positively to the Fund’s returns relative to the MSCI EAFE Index. The countries that detracted most from the Fund’s relative performance during the Reporting Period were Spain, Hong Kong and the U.K., where stock selection overall hurt.
How did the Fund use derivatives and similar instruments during the Reporting Period?
During the Reporting Period, we did not use derivatives to hedge positions or as part of an active management strategy.
Did the Fund make any significant purchases or sales during the Reporting Period?
In addition to the purchase of Davide Campari-Milano already mentioned, among the Fund’s other purchases during the Reporting Period was that of Reckitt Benckiser. Reckitt Benckiser, headquartered in the U.K., is a global leader in household and personal care products, with leading brands across fabric care, surface care, dishwashing, home care and health and personal care. We initiated a Fund position in the company given what we considered to be its strong business fundamentals. We also believe the company’s recent acquisition of Mead Johnson, an infant and baby food maker, should deliver significant synergies that could allow the company to grow its earnings during the next several years. Moreover, we expect growth to be driven by Reckitt Benckiser’s innovation and market execution, which could result in category growth, margin expansion and market share gains.
In addition to the sale of AMS already mentioned, we exited the Fund’s positions in Banco Popular Espanol and Commerzbank.
Banco Popular Espanol’s shares performed poorly during the Reporting Period, partially attributable to increased regulatory pressure, which is creating a challenging environment for European banks. Moreover, in our view, the bank has a poor balance sheet given its inability to deal with existing non-performing loans and its weak capital position. Following its CEO’s resignation at the beginning of April 2017, we were less confident with the strategy of the company moving forward and thus decided to exit the position.
Conversely, Commerzbank, a global banking and financial services company in Germany, was a top contributor to the Fund’s relative returns during the Reporting Period. Commerzbank reported fourth quarter 2016 results, with earnings ahead of market estimates on the back of higher than expected revenues. A key highlight of its results was a better core Tier 1 capital ratio, which adds buffer as the bank undergoes its restructuring changes through cost cutting programs. (The Tier 1 capital ratio is the comparison between a banking firm’s core equity capital and its total risk-weighted assets. A firm’s core equity capital is known as its Tier 1 capital and is the measure of a bank’s financial strength based on the sum of its equity capital and disclosed reserves, and
3
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INTERNATIONAL EQUITY FUND
sometimes non-redeemable, non-cumulative preferred stock.) Commerzbank additionally benefited from advising on the acquisition of Concardis by Bain Capital and Advent International, which was cleared by the European Union. While we remained positive at the end of the Reporting Period on the bank’s investments in technology, cost cutting and efforts to increase revenue, we took the opportunity of its share price rise to exit the Fund’s position for higher conviction ideas.
Were there any notable changes in the Fund’s weightings during the Reporting Period?
In constructing the Fund’s portfolio, we focus on picking stocks rather than on making regional, country, sector or industry bets. We seek to outpace the benchmark index by overweighting stocks that we expect to outperform and underweighting those that we think may lag. Consequently, changes in its sector or country weights are generally the direct result of individual stock selection or of stock appreciation or depreciation. That said, the Fund’s allocations relative to the MSCI EAFE Index in consumer staples, industrials, consumer discretionary and utilities increased, and its allocations relative to the MSCI EAFE Index in financials and materials decreased during the Reporting Period. From a country perspective, there were no significant changes in weightings relative to the MSCI EAFE Index during the Reporting Period.
How was the Fund positioned relative to its benchmark index at the end of the Reporting Period?
At the end of June 2017, the Fund had greater weightings than the MSCI EAFE Index in the consumer staples and health care sectors. The Fund had underweighted allocations to the financials, materials, consumer discretionary and information technology sectors and was rather neutrally weighted to the MSCI EAFE Index in the industrials, real estate, energy, telecommunication services and utilities sectors at the end of the Reporting Period.
From a country perspective, the Fund had greater positions in Italy, the U.K., Ireland, Belgium and Portugal relative to the MSCI EAFE Index at the end of June 2017. The Fund had less exposure to Australia, Japan, Hong Kong, the Netherlands, Switzerland and Germany than the MSCI EAFE Index and was rather neutrally weighted to the MSCI EAFE Index in the remaining constituents of the MSCI EAFE Index at the end of the Reporting Period.
As always, we remained focused on individual stock selection, with sector and country positioning being a secondary, but closely monitored, effect.
What is the Fund’s tactical view and strategy for the months ahead?
At the end of the Reporting Period, our outlook for equities remained positive, supported by what we perceive as a strong global earnings momentum, receding political risk and what we perceive as overly negative sentiment on the U.S. Administration’s proposals. Global economic growth has been strong, and the expansion appears to be broadening across regions, creating, in our view, a positive backdrop for corporate earnings growth. For the first year since 2010, consensus earnings per share growth forecasts were positive in all major global regions at the end of the Reporting Period. We were slightly more bullish on equities outside the U.S. at the end of the Reporting Period.
In Europe, we were finally seeing a much-awaited earnings rebound, led by cyclicals. First quarter 2017 earnings results were the best in three years, and consensus estimates saw year-to-date through June 2017 upgrades, a departure from the persistent downgrades of previous years. Political risk appeared to be receding — the French presidential election result and declining likelihood of an Italian election before 2018 lowered risks in Europe considerably, in our view. We believe this lowered risk should be supportive for corporate confidence, in turn boosting investment, mergers and acquisitions and earnings growth. Rising valuations and increasing investor positioning suggest to us growing recognition of these tailwinds, but significant potential remains, in our view, for an earnings-driven recovery.
In Japan, we were encouraged at the end of the Reporting Period by ongoing progress on its economic and corporate reform. Japanese companies have lagged companies in other developed market countries with respect to returns on capital, but appear to be catching up. We believe valuations on Japanese equities remained relatively attractive at the end of the Reporting Period. While Japanese equities have rerated, they remained less expensive than those of many other markets.
What we view as higher aggregate valuations make international equities more vulnerable, in our opinion, to a moderation in growth on the one hand or to a sharper than consensus expected rise in bond yields on the other. These risks support our case for dynamic active management.
As always, we maintain our focus on seeking companies that we believe will generate long-term growth in today’s ever-changing market conditions.
4
FUND BASICS
Strategic International Equity Fund
as of June 30, 2017
STANDARDIZED TOTAL RETURNS1
For the period ended 06/30/17 | One Year | Five Years | Ten Years | Since Inception | Inception Date | |||||||||||||
Institutional | 16.94 | % | 8.03 | % | 0.45 | % | 3.82 | % | 1/12/98 | |||||||||
Service | 16.73 | 7.79 | 0.22 | 2.04 | 1/9/06 |
1 | The Standardized Total Returns are average annual total returns as of the most recent calendar quarter-end. They assume reinvestment of all distributions at net asset value (“NAV”). Because Institutional Shares and Service Shares do not involve a sales charge, such a charge is not applied to their Standardized Total Returns. |
Total return figures in the above chart represent past performance and do not indicate future results, which will vary. The investment return and principal value of an investment will fluctuate and, therefore, an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the total return figures in the above chart. Please visit www.GSAMFUNDS.com to obtain the most recent month-end returns.
Performance reflects fee waivers and/or expense limitations in effect during the periods shown. In their absence, performance would be reduced.
EXPENSE RATIOS2
Net Expense Ratio (Current) | Gross Expense Ratio (Before Waivers) | |||||||||||
Institutional | 0.88 | % | 1.07 | % | ||||||||
Service | 1.13 | 1.32 |
2 | The expense ratios of the Fund, both current (net of any fee waivers and/or expense limitations) and before waivers (gross of any fee waivers and/or expense limitations) are as set forth above according to the most recent publicly available Prospectuses for the Fund and may differ from the expense ratios disclosed in the Financial Highlights in this report. Pursuant to a contractual arrangement, the Fund’s fee waivers and/or expense limitations will remain in place through at least April 28, 2018, and prior to such date, the Investment Adviser may not terminate the arrangements without the approval of the Fund’s Board of Trustees. If these arrangements are discontinued in the future, the expense ratios may change without shareholder approval. |
TOP TEN HOLDINGS AS OF 06/30/173
Holding | % of Net Assets | Line of Business | Country | |||||
Royal Dutch Shell plc Class A | 4.9% | Energy | Netherlands | |||||
Novartis AG (Registered) | 3.0 | Pharmaceuticals, Biotechnology & Life Sciences | Switzerland | |||||
Bayer AG (Registered) | 2.7 | Pharmaceuticals, Biotechnology & Life Sciences | Germany | |||||
Beiersdorf AG | 2.6 | Household & Personal Products | Germany | |||||
Anheuser-Busch InBev SA/NV | 2.5 | Food, Beverage & Tobacco | Belgium | |||||
UBS Group AG (Registered) | 2.4 | Diversified Financials | Switzerland | |||||
Japan Tobacco, Inc. | 2.3 | Food, Beverage & Tobacco | Japan | |||||
Kerry Group plc Class A | 2.2 | Food, Beverage & Tobacco | Ireland | |||||
DBS Group Holdings Ltd. | 2.2 | Banks | Singapore | |||||
Hoya Corp. | 2.1 | Health Care Equipment & Services | Japan |
3 | The top 10 holdings may not be representative of the Fund’s future investments. |
5
FUND BASICS
FUND VS. BENCHMARK SECTOR ALLOCATIONS4
As of June 30, 2017
4 | The Fund is actively managed and, as such, its composition may differ over time. Consequently, the Fund’s overall sector allocations may differ from percentages contained in the graph above. The graph categorizes investments using Global Industry Classification Standard (“GICS”), however, the sector classifications used by the portfolio management team may differ from GICS. The percentage shown for each investment category reflects the value of investments in that category as a percentage of market value (excluding investments in the securities lending reinvestment vehicle, if any). Underlying sector allocations of exchange traded funds and investment companies held by the Fund are not reflected in the graph above. Investments in the securities lending reinvestment vehicle represented 1.5% of the Fund’s net assets at June 30, 2017. |
6
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INTERNATIONAL EQUITY FUND
Schedule of Investments
June 30, 2017 (Unaudited)
Shares | Description | Value | ||||||
Common Stocks – 97.3% | ||||||||
Australia – 3.0% | ||||||||
115,676 | Australia & New Zealand Banking Group Ltd. (Banks) | $ | 2,553,165 | |||||
65,306 | BHP Billiton plc (Materials) | 1,000,534 | ||||||
117,578 | Computershare Ltd. (Software & Services) | 1,277,806 | ||||||
|
| |||||||
4,831,505 | ||||||||
|
| |||||||
Belgium – 2.5% | ||||||||
37,103 | Anheuser-Busch InBev SA/NV (Food, Beverage & Tobacco) | 4,097,972 | ||||||
|
| |||||||
China – 0.6% | ||||||||
486,000 | China Mengniu Dairy Co. Ltd. (Food, Beverage & Tobacco)* | 952,922 | ||||||
|
| |||||||
Denmark – 2.7% | ||||||||
69,077 | Novo Nordisk A/S Class B (Pharmaceuticals, Biotechnology & Life Sciences) | 2,968,051 | ||||||
30,071 | Novozymes A/S Class B (Materials) | 1,315,580 | ||||||
|
| |||||||
4,283,631 | ||||||||
|
| |||||||
Finland – 1.4% | ||||||||
366,585 | Nokia OYJ (Technology Hardware & Equipment) | 2,247,800 | ||||||
|
| |||||||
France – 11.2% | ||||||||
20,800 | Air Liquide SA (Materials) | 2,570,798 | ||||||
22,845 | BNP Paribas SA (Banks) | 1,644,674 | ||||||
7,610 | Iliad SA (Telecommunication Services) | 1,798,458 | ||||||
75,301 | Klepierre (REIT) | 3,086,270 | ||||||
39,529 | Publicis Groupe SA (Media)(a) | 2,946,217 | ||||||
54,369 | Rexel SA (Capital Goods) | 888,516 | ||||||
26,908 | Safran SA (Capital Goods)(a) | 2,467,633 | ||||||
30,647 | Vinci SA (Capital Goods) | 2,614,235 | ||||||
|
| |||||||
18,016,801 | ||||||||
|
| |||||||
Germany – 8.5% | ||||||||
34,064 | Bayer AG (Registered) (Pharmaceuticals, Biotechnology & Life Sciences) | 4,415,042 | ||||||
39,448 | Beiersdorf AG (Household & Personal Products) | 4,149,204 | ||||||
45,787 | GEA Group AG (Capital Goods) | 1,880,064 | ||||||
12,092 | HeidelbergCement AG (Materials) | 1,172,185 | ||||||
19,713 | SAP SE (Software & Services) | 2,063,386 | ||||||
|
| |||||||
13,679,881 | ||||||||
|
| |||||||
Hong Kong – 0.8% | ||||||||
1,313,500 | HKBN Ltd. (Telecommunication Services) | 1,314,470 | ||||||
|
| |||||||
Ireland – 3.5% | ||||||||
7,757,848 | Bank of Ireland (Banks)* | 2,039,415 | ||||||
|
| |||||||
Common Stocks – (continued) | ||||||||
Ireland – (continued) | ||||||||
41,081 | Kerry Group plc Class A (Food, Beverage & Tobacco) | 3,534,533 | ||||||
|
| |||||||
5,573,948 | ||||||||
|
| |||||||
Italy – 8.3% | ||||||||
330,652 | Davide Campari-Milano SpA (Food, Beverage & Tobacco) | 2,337,604 | ||||||
375,641 | Enav SpA (Transportation)(b) | 1,619,969 | ||||||
599,820 | Enel SpA (Utilities) | 3,217,133 | ||||||
71,896 | Moncler SpA (Consumer Durables & Apparel) | 1,686,575 | ||||||
2,295,502 | Telecom Italia SpA (Telecommunication Services)* | 2,123,735 | ||||||
127,360 | UniCredit SpA (Banks)* | 2,385,613 | ||||||
|
| |||||||
13,370,629 | ||||||||
|
| |||||||
Japan – 19.3% | ||||||||
15,100 | Dentsu, Inc. (Media) | 724,392 | ||||||
17,100 | East Japan Railway Co. (Transportation) | 1,638,116 | ||||||
20,800 | Hoshizaki Corp. (Capital Goods) | 1,887,203 | ||||||
66,400 | Hoya Corp. (Health Care Equipment & Services) | 3,456,875 | ||||||
103,500 | Japan Tobacco, Inc. (Food, Beverage & Tobacco) | 3,637,829 | ||||||
57,400 | Kao Corp. (Household & Personal Products) | 3,412,909 | ||||||
62,800 | KDDI Corp. (Telecommunication Services) | 1,660,911 | ||||||
131,000 | Mitsubishi Estate Co. Ltd. (Real Estate) | 2,448,757 | ||||||
24,600 | Nidec Corp. (Capital Goods) | 2,527,404 | ||||||
6,900 | Nintendo Co. Ltd. (Software & Services) | 2,310,062 | ||||||
127,600 | ORIX Corp. (Diversified Financials) | 1,985,438 | ||||||
59,000 | Pola Orbis Holdings, Inc. (Household & Personal Products) | 1,560,939 | ||||||
63,100 | Sumitomo Mitsui Financial Group, Inc. (Banks) | 2,463,706 | ||||||
29,000 | Suzuki Motor Corp. (Automobiles & Components) | 1,381,501 | ||||||
|
| |||||||
31,096,042 | ||||||||
|
| |||||||
Netherlands – 7.0% | ||||||||
41,078 | Aalberts Industries NV (Capital Goods) | 1,634,587 | ||||||
97,463 | ING Groep NV (Banks) | 1,682,481 | ||||||
298,876 | Royal Dutch Shell plc Class A (Energy) | 7,940,750 | ||||||
|
| |||||||
11,257,818 | ||||||||
|
| |||||||
Singapore – 2.2% | ||||||||
230,885 | DBS Group Holdings Ltd. (Banks) | 3,474,999 | ||||||
|
| |||||||
Spain – 1.2% | ||||||||
234,615 | EDP Renovaveis SA (Utilities) | 1,864,904 | ||||||
|
|
The accompanying notes are an integral part of these financial statements. | 7 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INTERNATIONAL EQUITY FUND
Schedule of Investments (continued)
June 30, 2017 (Unaudited)
Shares | Description | Value | ||||||
Common Stocks – (continued) | ||||||||
Switzerland – 8.7% | ||||||||
199,707 | Credit Suisse Group AG (Registered) (Diversified Financials)* | $ | 2,905,935 | |||||
57,513 | Novartis AG (Registered) (Pharmaceuticals, Biotechnology & Life Sciences) | 4,803,866 | ||||||
229,602 | UBS Group AG (Registered) (Diversified Financials)* | 3,904,585 | ||||||
39,426 | Wolseley plc (Capital Goods) | 2,419,879 | ||||||
|
| |||||||
14,034,265 | ||||||||
|
| |||||||
United Kingdom – 15.0% | ||||||||
274,524 | Aviva plc (Insurance) | 1,883,062 | ||||||
131,750 | BTG plc (Pharmaceuticals, Biotechnology & Life Sciences)* | 1,197,373 | ||||||
122,124 | Compass Group plc (Consumer Services) | 2,577,740 | ||||||
54,343 | InterContinental Hotels Group plc (Consumer Services) | 3,017,864 | ||||||
429,006 | Melrose Industries plc (Capital Goods) | 1,354,990 | ||||||
389,086 | Merlin Entertainments plc (Consumer Services)(b) | 2,435,628 | ||||||
172,244 | Pennon Group plc (Utilities) | 1,851,087 | ||||||
27,453 | Reckitt Benckiser Group plc (Household & Personal Products) | 2,782,997 | ||||||
473,096 | Rentokil Initial plc (Commercial & Professional Services) | 1,683,541 | ||||||
34,705 | Rio Tinto plc (Materials) | 1,469,820 | ||||||
240,770 | UBM plc (Media) | 2,163,747 | ||||||
266,910 | Virgin Money Holdings UK plc (Banks) | 926,769 | ||||||
300,607 | Vodafone Group plc (Telecommunication Services) | 853,710 | ||||||
|
| |||||||
24,198,328 | ||||||||
|
| |||||||
United States – 1.4% | ||||||||
42,295 | Shire plc (Pharmaceuticals, Biotechnology & Life Sciences) | 2,332,103 | ||||||
|
| |||||||
TOTAL COMMON STOCKS | ||||||||
(Cost $141,918,586) | $ | 156,628,018 | ||||||
|
| |||||||
Exchange Traded Fund – 1.0% | ||||||||
United States – 1.0% | ||||||||
30,090 | iShares MSCI Japan Fund | $ | 1,614,328 | |||||
(Cost $1,535,490) | ||||||||
|
| |||||||
Shares | Distribution Rate | Value | ||||||
Investment Company(c)(d) – 0.0% | ||||||||
Goldman Sachs Financial Square Government Fund — Institutional Shares |
| |||||||
690 | 0.845 | % | $ | 690 | ||||
(Cost $690) | ||||||||
| ||||||||
TOTAL INVESTMENTS BEFORE SECURITIES LENDING REINVESTMENT VEHICLE | ||||||||
(Cost $143,454,766) | $ | 158,243,036 | ||||||
| ||||||||
Securities Lending Reinvestment Vehicle(c)(d) – 1.5% | ||||||||
Goldman Sachs Financial Square Government Fund — Institutional Shares |
| |||||||
2,404,580 | 0.845 | % | $ | 2,404,580 | ||||
(Cost $2,404,580) | ||||||||
| ||||||||
TOTAL INVESTMENTS – 99.8% | ||||||||
(Cost $145,859,346) | $ | 160,647,616 | ||||||
| ||||||||
OTHER ASSETS IN EXCESS OF LIABILITIES – 0.2% |
| 277,758 | ||||||
| ||||||||
NET ASSETS – 100.0% | $ | 160,925,374 | ||||||
|
The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. | ||
* | Non-income producing security. | |
(a) | All or a portion of security is on loan. | |
(b) | Exempt from registration under Rule 144A of the Securities Act of 1933. Under procedures approved by the Board of Trustees, such securities may be deemed liquid by the Investment Adviser and may be resold, normally to qualified institutional buyers in transactions exempt from registration. Total market value of Rule 144A securities amounts to $4,055,597, which represents approximately 2.5% of net assets as of June 30, 2017. | |
(c) | Represents an affiliated issuer. | |
(d) | Variable rate security. Interest rate or distribution rate disclosed is that which is in effect on June 30, 2017. |
Investment Abbreviations: | ||
REIT | —Real Estate Investment Trust |
8 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INTERNATIONAL EQUITY FUND
Statement of Assets and Liabilities
June 30, 2017 (Unaudited)
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $143,454,076)(a) | $ | 158,242,346 | ||
Investments in affiliated issuers, at value (cost $690) | 690 | |||
Investments in affiliated securities lending reinvestment vehicle, at value (cost $2,404,580) | 2,404,580 | |||
Cash | 1,863,072 | |||
Foreign currencies, at value (cost $191,551) | 196,415 | |||
Receivables: | ||||
Dividends | 559,854 | |||
Foreign tax reclaims | 382,707 | |||
Reimbursement from investment adviser | 13,260 | |||
Securities lending income | 6,763 | |||
Fund shares sold | 241 | |||
Other assets | 622 | |||
Total assets | 163,670,550 | |||
Liabilities: | ||||
Payables: | ||||
Payable upon return of securities loaned | 2,404,580 | |||
Fund shares redeemed | 109,769 | |||
Management fees | 108,760 | |||
Distribution and Service fees and Transfer Agency fees | 27,832 | |||
Accrued expenses | 94,235 | |||
Total liabilities | 2,745,176 | |||
Net Assets: | ||||
Paid-in capital | 215,256,575 | |||
Undistributed net investment income | 2,039,036 | |||
Accumulated net realized loss | (71,160,400 | ) | ||
Net unrealized gain | 14,790,163 | |||
NET ASSETS | $ | 160,925,374 | ||
Net Assets: | ||||
Institutional | $ | 40,561,347 | ||
Service | 120,364,027 | |||
Total Net Assets | $ | 160,925,374 | ||
Shares outstanding $0.001 par value (unlimited shares authorized): | ||||
Institutional | 4,003,159 | |||
Service | 11,863,744 | |||
Net asset value, offering and redemption price per share: | ||||
Institutional | $10.13 | |||
Service | 10.15 |
(a) Includes loaned securities having a market value of $2,297,517.
The accompanying notes are an integral part of these financial statements. | 9 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INTERNATIONAL EQUITY FUND
Statement of Operations
For the Six Months Ended June 30, 2017 (Unaudited)
Investment income: | ||||
Dividends — unaffiliated issuers (net of foreign taxes withheld of $251,991) | $ | 2,825,160 | ||
Securities lending income — affiliated issuer | 48,251 | |||
Dividends — affiliated issuers | 2,354 | |||
Total investment income | 2,875,765 | |||
Expenses: | ||||
Management fees | 656,651 | |||
Distribution and Service fees — Service Shares | 144,440 | |||
Professional fees | 44,368 | |||
Custody, accounting and administrative services | 38,522 | |||
Printing and mailing costs | 22,401 | |||
Transfer Agency fees(a) | 15,449 | |||
Trustee fees | 8,284 | |||
Other | 5,926 | |||
Total expenses | 936,041 | |||
Less — expense reductions | (117,539 | ) | ||
Net expenses | 818,502 | |||
NET INVESTMENT INCOME | 2,057,263 | |||
Realized and unrealized gain (loss): | ||||
Net realized gain (loss) from: | ||||
Investments | (3,051,975 | ) | ||
Foreign currency transactions | 48,003 | |||
Net change in unrealized gain on: | ||||
Investments | 23,415,869 | |||
Foreign currency translation | 46,132 | |||
Net realized and unrealized gain | 20,458,029 | |||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 22,515,292 |
(a) Institutional and Service Shares incurred Transfer Agency fees of $3,895 and $11,554, respectively.
10 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INTERNATIONAL EQUITY FUND
Statements of Changes in Net Assets
For the Six Months Ended June 30, 2017 (Unaudited) | For the Fiscal Year Ended December 31, 2016 | |||||||
From operations: | ||||||||
Net investment income | $ | 2,057,263 | $ | 2,594,460 | ||||
Net realized loss | (3,003,972 | ) | (4,074,588 | ) | ||||
Net change in unrealized gain (loss) | 23,462,001 | (3,160,383 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 22,515,292 | (4,640,511 | ) | |||||
Distributions to shareholders: | ||||||||
From net investment income | ||||||||
Institutional Shares | — | (781,242 | ) | |||||
Service Shares | — | (1,944,283 | ) | |||||
Total distributions to shareholders | — | (2,725,525 | ) | |||||
From share transactions: | ||||||||
Proceeds from sales of shares | 6,442,207 | 10,750,740 | ||||||
Reinvestment of distributions | — | 2,725,525 | ||||||
Cost of shares redeemed | (10,455,064 | ) | (22,234,915 | ) | ||||
Net decrease in net assets resulting from share transactions | (4,012,857 | ) | (8,758,650 | ) | ||||
TOTAL INCREASE (DECREASE) | 18,502,435 | (16,124,686 | ) | |||||
Net assets: | ||||||||
Beginning of period | 142,422,939 | 158,547,625 | ||||||
End of period | $ | 160,925,374 | $ | 142,422,939 | ||||
Undistributed (distributions in excess of) net investment income | $ | 2,039,036 | $ | (18,227 | ) |
The accompanying notes are an integral part of these financial statements. | 11 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INTERNATIONAL EQUITY FUND
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
Income (loss) from investment operations | ||||||||||||||||||||||||||||||||||||||||||||||||
Year - Share Class | Net asset value, beginning of period | Net investment income(a) | Net realized and unrealized gain (loss) | Total from investment operations | Distributions to shareholders from net investment income | Net asset value, end of period | Total return(b) | Net assets, end of period (in 000s) | Ratio of net expenses to average net assets | Ratio of total expenses to average net assets | Ratio of net investment income to average net assets | Portfolio turnover rate(c) | ||||||||||||||||||||||||||||||||||||
FOR THE SIX MONTHS ENDED JUNE 30, (UNAUDITED) | ||||||||||||||||||||||||||||||||||||||||||||||||
2017 - Institutional | $ | 8.75 | 0.13 | $ | 1.25 | $ | 1.38 | $ | — | $ | 10.13 | 15.77 | % | $ | 40,561 | 0.87 | %(d) | 1.02 | %(d) | 2.84 | %(d) | 20 | % | |||||||||||||||||||||||||
2017 - Service | 8.78 | 0.12 | 1.25 | 1.37 | — | 10.15 | 15.60 | 120,364 | 1.12 | (d) | 1.27 | (d) | 2.60 | (d) | 20 | |||||||||||||||||||||||||||||||||
FOR THE FISCAL YEARS ENDED DECEMBER 31, | ||||||||||||||||||||||||||||||||||||||||||||||||
2016 - Institutional | 9.19 | 0.17 | (e) | (0.42 | ) | (0.25 | ) | (0.19 | ) | 8.75 | (2.72 | ) | 37,061 | 0.89 | 1.06 | 1.94 | (e) | 39 | ||||||||||||||||||||||||||||||
2016 - Service | 9.21 | 0.15 | (e) | (0.42 | ) | (0.27 | ) | (0.16 | ) | 8.78 | (2.86 | ) | 105,362 | 1.14 | 1.31 | 1.68 | (e) | 39 | ||||||||||||||||||||||||||||||
2015 - Institutional | 9.26 | 0.14 | (f) | (0.04 | ) | 0.10 | (0.17 | ) | 9.19 | 1.05 | 41,737 | 0.89 | 1.06 | 1.42 | (f) | 58 | ||||||||||||||||||||||||||||||||
2015 - Service | 9.28 | 0.12 | (f) | (0.05 | ) | 0.07 | (0.14 | ) | 9.21 | 0.77 | 116,811 | 1.14 | 1.31 | 1.18 | (f) | 58 | ||||||||||||||||||||||||||||||||
2014 - Institutional | 10.43 | 0.39 | (g) | (1.18 | ) | (0.79 | ) | (0.38 | ) | 9.26 | (7.54 | ) | 46,871 | 0.99 | 1.04 | 3.75 | (g) | 74 | ||||||||||||||||||||||||||||||
2014 - Service | 10.44 | 0.36 | (g) | (1.17 | ) | (0.81 | ) | (0.35 | ) | 9.28 | (7.70 | ) | 126,230 | 1.24 | 1.29 | 3.47 | (g) | 74 | ||||||||||||||||||||||||||||||
2013 - Institutional | 8.56 | 0.16 | 1.89 | 2.05 | (0.18 | ) | 10.43 | 24.20 | 59,187 | 0.98 | 1.05 | 1.67 | 95 | |||||||||||||||||||||||||||||||||||
2013 - Service | 8.57 | 0.13 | 1.90 | 2.03 | (0.16 | ) | 10.44 | 23.73 | 152,513 | 1.23 | 1.30 | 1.42 | 95 | |||||||||||||||||||||||||||||||||||
2012 - Institutional | 7.20 | 0.16 | 1.38 | 1.54 | (0.18 | ) | 8.56 | 21.17 | 56,872 | 0.97 | 1.03 | 2.06 | 110 | |||||||||||||||||||||||||||||||||||
2012 - Service | 7.22 | 0.14 | 1.37 | 1.51 | (0.16 | ) | 8.57 | 20.82 | 139,250 | 1.22 | 1.28 | 1.80 | 110 |
(a) | Calculated based on the average shares outstanding methodology. |
(b) | Assumes investment at the net asset value at the beginning of the period, reinvestment of all distributions, and a complete redemption of the investment at the net asset value at the end of the period. Total returns for periods less than one full year are not annualized. |
(c) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short term investments. If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
(d) | Annualized. |
(e) | Reflects income recognized from corporate actions which amounted to $0.03 per share and 0.36% of average net assets. |
(f) | Reflects income recognized from corporate action which amounted to $0.02 per share and 0.17% of average net assets. |
(g) | Reflects income recognized from corporate action which amounted to $0.22 per share and 2.10% of average net assets. |
The accompanying notes are an integral part of these financial statements. | 12 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INTERNATIONAL EQUITY FUND
Notes to Financial Statements
June 30, 2017 (Unaudited)
1. ORGANIZATION
Goldman Sachs Variable Insurance Trust (the “Trust” or “VIT”) is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company. The Trust includes the Goldman Sachs Strategic International Equity Fund (the “Fund”). The Fund is a diversified portfolio under the Act offering two classes of shares — Institutional and Service Shares. Shares of the Trust are offered to separate accounts of participating life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies.
Goldman Sachs Asset Management International (“GSAMI”), an affiliate of Goldman Sachs & Co. LLC (formerly Goldman, Sachs & Co.) (“Goldman Sachs”), serves as investment adviser to the Fund pursuant to a management agreement (the “Agreement”) with the Trust.
2. SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and require management to make estimates and assumptions that may affect the reported amounts and disclosures. Actual results may differ from those estimates and assumptions.
A. Investment Valuation — The Fund’s valuation policy is to value investments at fair value.
B. Investment Income and Investments — Investment income includes interest income, dividend income and securities lending income. Interest income is accrued daily and adjusted for amortization of premiums and accretion of discounts. Dividend income is recognized on ex-dividend date or, for certain foreign securities, as soon as such information is obtained subsequent to the ex-dividend date. Investment transactions are reflected on trade date. Realized gains and losses are calculated using identified cost. Investment transactions are recorded on the following business day for daily net asset value (“NAV”) calculations. Investment income is recorded net of any foreign withholding taxes, less any amounts reclaimable. The Fund may file withholding tax reclaims in certain jurisdictions to recover a portion of amounts previously withheld. Any foreign capital gains tax is accrued daily based upon net unrealized gains, and is payable upon sale of such investments.
C. Class Allocations and Expenses — Investment income, realized and unrealized gain (loss), and non-class specific expenses of the Fund are allocated daily based upon the proportion of net assets of each class. Non-class specific expenses directly incurred by the Fund are charged to the Fund, while such expenses incurred by the Trust are allocated across the Fund on a straight-line and/or pro-rata basis depending upon the nature of the expenses. Class specific expenses, where applicable, are borne by the respective share classes and include Distribution and Service and Transfer Agency fees.
D. Federal Taxes and Distributions to Shareholders — It is the Fund’s policy to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Code”), applicable to regulated investment companies (mutual funds) and to distribute each year substantially all of its investment company taxable income and capital gains to its shareholders. Accordingly, the Fund is not required to make any provisions for the payment of federal income tax. Distributions to shareholders are recorded on the ex-dividend date. Income and capital gains distributions, if any, are declared and paid annually.
Net capital losses, if any, are carried forward to future fiscal years and may be used to the extent allowed by the Code to offset any future capital gains. Losses that are carried forward will retain their character as either short-term or long-term capital losses. Utilization of capital loss carryforwards will reduce the requirement of future capital gains distributions.
The characterization of distributions to shareholders for financial reporting purposes is determined in accordance with federal income tax rules, which may differ from GAAP. The source of the Fund’s distributions may be shown in the accompanying financial statements as either from net investment income, net realized gain or capital. Certain components of the Fund’s net assets on the Statement of Assets and Liabilities reflect permanent GAAP/tax differences based on the appropriate tax character.
E. Foreign Currency Translation — The accounting records and reporting currency of the Fund are maintained in United States (“U.S.”) dollars. Assets and liabilities denominated in foreign currencies are translated into U.S. dollars using the current exchange rates at the close of each business day. The effect of changes in foreign currency exchange rates on investments is included within net realized and unrealized gain (loss) on investments. Changes in the value of other assets and liabilities as a result of fluctuations
13
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INTERNATIONAL EQUITY FUND
Notes to Financial Statements (continued)
June 30, 2017 (Unaudited)
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
in foreign exchange rates are included in the Statement of Operations within net change in unrealized gain (loss) on foreign currency translations. Transactions denominated in foreign currencies are translated into U.S. dollars on the date the transaction occurred, the effects of which are included within net realized gain (loss) on foreign currency transactions.
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS
U.S. GAAP defines the fair value of a financial instrument as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price); the Fund’s policy is to use the market approach. GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The levels used for classifying investments are not necessarily an indication of the risk associated with investing in these investments. The three levels of the fair value hierarchy are described below:
Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 — Quoted prices in markets that are not active or financial instruments for which significant inputs are observable (including, but not limited to, quoted prices for similar investments, interest rates, foreign exchange rates, volatility and credit spreads), either directly or indirectly;
Level 3 — Prices or valuations that require significant unobservable inputs (including GSAMI’s assumptions in determining fair value measurement).
Changes in valuation techniques may result in transfers into or out of an assigned level within the hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value hierarchy resulting from such changes are deemed to have occurred as of the beginning of the reporting period.
The Board of Trustees (“Trustees”) has approved Valuation Procedures that govern the valuation of the portfolio investments held by the Fund, including investments for which market quotations are not readily available. The Trustees have delegated to GSAMI day-to-day responsibility for implementing and maintaining internal controls and procedures related to the valuation of the Fund’s portfolio investments. To assess the continuing appropriateness of pricing sources and methodologies, GSAMI regularly performs price verification procedures and issues challenges as necessary to third party pricing vendors or brokers, and any differences are reviewed in accordance with the Valuation Procedures.
A. Level 1 and Level 2 Fair Value Investments — The valuation techniques and significant inputs used in determining the fair values for investments classified as Level 1 and Level 2 are as follows:
Equity Securities — Equity securities traded on a U.S. securities exchange or the NASDAQ system, or those located on certain foreign exchanges, including but not limited to the Americas, are valued daily at their last sale price or official closing price on the principal exchange or system on which they are traded. If there is no sale or official closing price or such price is believed by GSAMI to not represent fair value, equity securities are valued at the last bid price for long positions and at the last ask price for short positions. To the extent these investments are actively traded, they are classified as Level 1 of the fair value hierarchy, otherwise they are generally classified as Level 2.
Unlisted equity securities for which market quotations are available are valued at the last sale price on the valuation date, or if no sale occurs, at the last bid price. Securities traded on certain foreign securities exchanges are valued daily at fair value determined by an independent fair value service (if available) under Valuation Procedures approved by the Trustees and consistent with applicable regulatory guidance. The independent fair value service takes into account multiple factors including, but not limited to, movements in the securities markets, certain depositary receipts, futures contracts and foreign currency exchange rates that have occurred subsequent to the close of the foreign securities exchange. These investments are generally classified as Level 2 of the fair value hierarchy.
14
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INTERNATIONAL EQUITY FUND
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS (continued)
Underlying Funds (including Money Market Funds) — Underlying Funds (“Underlying Funds”) include other investment companies and exchange-traded funds (“ETFs”). Investments in the Underlying Funds (except ETFs) are valued at the NAV per share of the Institutional Share class on the day of valuation. ETFs are valued daily at the last sale price or official closing price on the principal exchange or system on which the investment is traded. Because the Fund invests in Underlying Funds that fluctuate in value, the Fund’s shares will correspondingly fluctuate in value. To the extent these investments are actively traded, they are classified as Level 1 of the fair value hierarchy, otherwise they are generally classified as Level 2. For information regarding an Underlying Fund’s accounting policies and investment holdings, please see the Underlying Fund’s shareholder report.
B. Level 3 Fair Value Investments — To the extent that significant inputs to valuation models and other alternative pricing sources are unobservable, or if quotations are not readily available, or if GSAMI believes that such quotations do not accurately reflect fair value, the fair value of the Fund’s investments may be determined under Valuation Procedures approved by the Trustees. GSAMI, consistent with its procedures and applicable regulatory guidance, may make an adjustment to the most recent valuation prices of either domestic or foreign securities in light of significant events to reflect what it believes to be the fair value of the securities at the time of determining the Fund’s NAV. Significant events which could affect a large number of securities in a particular market may include, but are not limited to: significant fluctuations in U.S. or foreign markets; market dislocations; market disruptions; or unscheduled market closings. Significant events which could also affect a single issuer may include, but are not limited to: corporate actions such as reorganizations, mergers and buy-outs; ratings downgrades; and bankruptcies.
C. Fair Value Hierarchy — The following is a summary of the Fund’s investments classified in the fair value hierarchy as of June 30, 2017:
Investment Type | Level 1 | Level 2 | Level 3 | |||||||||
Assets | ||||||||||||
Common Stock and/or Other Equity Investments(a) | ||||||||||||
Asia | $ | — | $ | 36,838,433 | $ | — | ||||||
Australia and Oceania | — | 4,831,505 | — | |||||||||
Europe | — | 112,625,977 | — | |||||||||
North America | 1,614,328 | 2,332,103 | — | |||||||||
Investment Company | 690 | — | — | |||||||||
Securities Lending Reinvestment Vehicle | 2,404,580 | — | — | |||||||||
Total | $ | 4,019,598 | $ | 156,628,018 | $ | — |
(a) | Amounts are disclosed by continent to highlight the impact of time zone differences between local market close and the calculation of NAV. Security valuations are based on the principal exchange or system on which they are traded, which may differ from country of domicile noted in the table. The Fund utilizes fair value model prices provided by an independent fair value service for certain international equity securities, resulting in a Level 2 classification. |
For further information regarding security characteristics, see the Schedule of Investments.
4. AGREEMENTS AND AFFILIATED TRANSACTIONS
A. Management Agreement — Under the Agreement, GSAMI manages the Fund, subject to the general supervision of the Trustees.
As compensation for the services rendered pursuant to the Agreement, the assumption of the expenses related thereto and administration of the Fund’s business affairs, including providing facilities, GSAMI is entitled to a management fee, accrued daily and paid monthly, equal to an annual percentage rate of the Fund’s average daily net assets.
15
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INTERNATIONAL EQUITY FUND
Notes to Financial Statements (continued)
June 30, 2017 (Unaudited)
4. AGREEMENTS AND AFFILIATED TRANSACTIONS (continued)
For the six months ended June 30, 2017, contractual and effective net management fees with GSAMI were at the following rates:
Contractual Management Rate | ||||||||||||||||||||||||
First $1 billion | Next $1 billion | Next $3 billion | Next $3 billion | Over $8 billion | Effective Rate | Effective Net Management Rate^ | ||||||||||||||||||
0.85% | 0.77 | % | 0.73 | % | 0.72 | % | 0.71 | % | 0.85 | % | 0.81 | %* |
^ | Effective Net Management Rate includes the impact of management fee waivers of affiliated Underlying Funds, if any. |
* | GSAMI agreed to waive a portion of its management fee in order to achieve a net management rate, as defined in the Fund’s most recent prospectus. This waiver will be effective through at least April 28, 2018 and prior to such date GSAMI may not terminate the arrangement without approval of the Trustees. For the six months ended June 30, 2017, GSAMI waived $30,901 of its management fee. |
The Fund invests in Institutional Shares of the Goldman Sachs Financial Square Government Fund, which is an affiliated Underlying Fund. GSAMI has agreed to waive a portion of its management fee payable by the Fund in an amount equal to the management fee it earns as an investment adviser to any of the affiliated Underlying Funds in which the Fund invests. For the six months ended June 30, 2017, GSAMI waived $656 of the Fund’s management fee.
B. Distribution and/or Service (12b-1) Plan — The Trust, on behalf of Service Shares of the Fund, has adopted a Distribution and Service Plan subject to Rule 12b-1 under the Act. Under the Distribution and Service Plan, Goldman Sachs, which serves as distributor (the “Distributor”), is entitled to a fee accrued daily and paid monthly, for distribution services and personal and account maintenance services, which may then be paid by Goldman Sachs to authorized dealers, equal to, on an annual basis, 0.25% of the Fund’s average daily net assets attributable to Service Shares.
C. Transfer Agency Agreement — Goldman Sachs also serves as the transfer agent of the Fund for a fee pursuant to the Transfer Agency Agreement. The fees charged for such transfer agency services are accrued daily and paid monthly at an annual rate of 0.02% of the average daily net assets of Institutional and Service Shares.
D. Other Expense Agreements and Affiliated Transactions — GSAMI has agreed to limit certain “Other Expenses” of the Fund (excluding acquired fund fees and expenses, transfer agency fees and expenses, taxes, interest, brokerage fees, shareholder meeting, litigation, indemnification and extraordinary expenses) to the extent such expenses exceed, on an annual basis, a percentage rate of the average daily net assets of the Fund. Such Other Expense reimbursements, if any, are accrued daily and paid monthly. In addition, the Fund is not obligated to reimburse GSAMI for prior fiscal year expense reimbursements, if any. The Other Expense limitation as an annual percentage rate of average daily net assets for the Fund is 0.044%. The Other Expense limitation will remain in place through at least April 28, 2018, and prior to such date GSAMI may not terminate the arrangement without the approval of the Trustees. For the six months ended June 30, 2017, GSAMI reimbursed $85,482 to the Fund. In addition, the Fund has entered into certain offset arrangements with the custodian and the transfer agent, which may result in a reduction of the Fund’s expenses and are received irrespective of the application of the “Other Expense” limitation described above. For the six months ended June 30, 2017, custody fee credits were $500.
E. Line of Credit Facility — As of June 30, 2017, the Fund participated in a $1,100,000,000 committed, unsecured revolving line of credit facility (the “facility”) together with other funds of the Trust and certain registered investment companies having management agreements with GSAMI or its affiliates. This facility is to be used for temporary emergency purposes, or to allow for an orderly liquidation of securities to meet redemption requests. The interest rate on borrowings is based on the federal funds rate. The facility also requires a fee to be paid by the Fund based on the amount of the commitment that has not been utilized. For the six months ended June 30, 2017, the Fund did not have any borrowings under the facility.
16
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INTERNATIONAL EQUITY FUND
4. AGREEMENTS AND AFFILIATED TRANSACTIONS (continued)
F. Other Transactions with Affiliates — The following table provides information about the Fund’s investment in the Goldman Sachs Financial Square Government Fund as of and for the six months ended June 30, 2017:
Market Value 12/31/2016 | Purchases at Cost | Proceeds from Sales | Market Value 6/30/2017 | Dividend Income | ||||||||||||||
$ | 10 | $ | 12,706,558 | $ | (12,705,878 | ) | $ | 690 | $ | 2,354 |
5. PORTFOLIO SECURITIES TRANSACTIONS
The cost of purchases and proceeds from sales and maturities of long-term securities for the six months ended June 30, 2017, were $31,018,227 and $34,237,716, respectively.
6. SECURITIES LENDING
Pursuant to exemptive relief granted by the Securities and Exchange Commission (“SEC”) and the terms and conditions contained therein, the Fund may lend its securities through a securities lending agent, Goldman Sachs Agency Lending (“GSAL”), a wholly-owned subsidiary of Goldman Sachs, to certain qualified borrowers including Goldman Sachs and affiliates. In accordance with the Fund’s securities lending procedures, the Fund receives cash collateral at least equal to the market value of the securities on loan. The market value of the loaned securities is determined at the close of business of the Fund, at their last sale price or official closing price on the principal exchange or system on which they are traded, and any additional required collateral is delivered to the Fund on the next business day. As with other extensions of credit, the Fund may experience delay in the recovery of its securities or incur a loss should the borrower of the securities breach its agreement with the Fund or become insolvent at a time when the collateral is insufficient to cover the cost of repurchasing securities on loan. Dividend income received from securities on loan may not be subject to withholding taxes and therefore withholding taxes paid may differ from the amounts listed in the Statement of Operations. Loans of securities are terminable at any time and as such 1) the remaining contractual maturities of the outstanding securities lending transactions are considered to be overnight and continuous and 2) the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.
The Fund invests the cash collateral received in connection with securities lending transactions in the Goldman Sachs Financial Square Government Fund (“Government Money Market Fund”), an affiliated series of the Trust. The Government Money Market Fund is registered under the Act as an open end investment company, is subject to Rule 2a-7 under the Act, and is managed by Goldman Sachs Asset Management, L.P. (“GSAM”), an affiliate of Goldman Sachs, for which GSAM may receive a management fee of up to 0.205% on an annualized basis of the average daily net assets of the Government Money Market Fund.
In the event of a default by a borrower with respect to any loan, GSAL will exercise any and all remedies provided under the applicable borrower agreement to make the Fund whole. These remedies include purchasing replacement securities by applying the collateral held from the defaulting broker against the purchase cost of the replacement securities. If GSAL is unable to purchase replacement securities, GSAL will indemnify the Fund by paying the Fund an amount equal to the market value of the securities loaned minus the value of cash collateral received from the borrower for the loan, subject to an exclusion for any shortfalls resulting from a loss of value in such cash collateral due to reinvestment risk. The amounts of the Fund’s overnight and continuous agreements represent the gross amounts of recognized liabilities for securities lending transactions outstanding as of June 30, 2017 are disclosed as “Payable upon return of securities loaned” on the Statement of Assets and Liabilities.
Both the Fund and GSAL received compensation relating to the lending of the Fund’s securities. The amounts earned, if any, by the Fund for the six months ended June 30, 2017, are reported under Investment Income on the Statement of Operations.
17
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INTERNATIONAL EQUITY FUND
Notes to Financial Statements (continued)
June 30, 2017 (Unaudited)
6. SECURITIES LENDING (continued)
The table below details securities lending activity with affiliates of Goldman Sachs:
For the Six Months ended June 30, 2017 | ||||||||||
Earnings of GSAL Relating to Securities Loaned | Amounts Received by the Fund from Lending to Goldman Sachs | Amounts Payable to Goldman Sachs Upon Return of Securities Loaned as of June 30, 2017 | ||||||||
$ | 5,361 | $ | 8,985 | $ | 2,404,580 |
The following table provides information about the Fund’s investment in the Government Money Market Fund for the six months ended June 30, 2017:
Market Value 12/31/2016 | Purchases at Cost | Proceeds from Sales | Market Value 6/30/2017 | |||||||||||
$ | 764,701 | $ | 33,064,201 | $ | (31,424,322 | ) | $ | 2,404,580 |
7. TAX INFORMATION
As of the Fund’s most recent fiscal year end, December 31, 2016, the Fund’s capital loss carryforwards and certain timing differences, on a tax-basis were as follows:
Capital loss carryforwards: | ||||
Expiring 2017(1) | $ | (63,558,058 | ) | |
Perpetual long-term | (3,977,388 | ) | ||
Total capital loss carryforwards | $ | (67,535,446 | ) | |
Timing differences (Qualified Late Year Loss Deferral/Post October Loss Deferral) | (163,996 | ) |
(1) | Expiration occurs on December 31 of the year indicated. |
As of June 30, 2017, the Fund’s aggregate security unrealized gains and losses based on cost for U.S. federal income tax purposes were as follows:
Tax cost | $ | 146,483,935 | ||
Gross unrealized gain | 22,234,962 | |||
Gross unrealized loss | (8,071,281 | ) | ||
Net unrealized gain | $ | 14,163,681 |
The difference between GAAP-basis and tax-basis unrealized gains (losses) is attributable primarily to wash sales and differences in the tax treatment of passive foreign investment company investments.
GSAMI has reviewed the Fund’s tax positions for all open tax years (the current and prior three years, as applicable) and has concluded that no provision for income tax is required in the Fund’s financial statements. Such open tax years remain subject to examination and adjustment by tax authorities.
18
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INTERNATIONAL EQUITY FUND
8. OTHER RISKS
The Fund’s risks include, but are not limited to, the following:
Foreign and Emerging Countries Risk — Investing in foreign markets may involve special risks and considerations not typically associated with investing in the U.S. Foreign securities may be subject to risk of loss because of more or less foreign government regulation, less public information and less economic, political and social stability in the countries in which the Fund invests. The imposition of exchange controls, confiscations, trade restrictions (including tariffs) and other government restrictions by the U.S. or other governments, or from problems in share registration, settlement or custody, may also result in losses. Foreign risk also involves the risk of negative foreign currency rate fluctuations, which may cause the value of securities denominated in such foreign currency (or other instruments through which the Fund has exposure to foreign currencies) to decline in value. Currency exchange rates may fluctuate significantly over short periods of time. To the extent that the Fund also invests in securities of issuers located in emerging markets, these risks may be more pronounced.
Foreign Custody Risk — If the Fund invests in foreign securities, the Fund may hold such securities and cash with foreign banks, agents, and securities depositories appointed by the Fund’s custodian (each a “Foreign Custodian”). Some foreign custodians may be recently organized or new to the foreign custody business. In some countries, Foreign Custodians may be subject to little or no regulatory oversight over, or independent evaluation of, their operations. Further, the laws of certain countries may place limitations on the Fund’s ability to recover its assets if a Foreign Custodian enters bankruptcy. Investments in emerging markets may be subject to even greater custody risks than investments in more developed markets. Custody services in emerging market countries are very often undeveloped and may be considerably less well regulated than in more developed countries, and thus may not afford the same level of investor protection as would apply in developed countries.
Investments in Other Investment Companies — As a shareholder of another investment company, including an exchange-traded fund (“ETF”), the Fund will indirectly bear its proportionate share of any net management fees and other expenses paid by such other investment companies, in addition to the fees and expenses regularly borne by the Fund. ETFs are subject to risks that do not apply to conventional mutual funds, including but not limited to the following: (i) the market price of the ETF’s shares may trade at a premium or a discount to their NAV; and (ii) an active trading market for an ETF’s shares may not develop or be maintained.
Large Shareholder Transactions Risk — The Fund may experience adverse effects when certain large shareholders, such as other funds, participating insurance companies, accounts and Goldman Sachs affiliates, purchase or redeem large amounts of shares of the Fund. Such large shareholder redemptions may cause the Fund to sell portfolio securities at times when it would not otherwise do so, which may negatively impact the Fund’s NAV and liquidity. These transactions may also accelerate the realization of taxable income to shareholders if such sales of investments resulted in gains, and may also increase transaction costs. In addition, a large redemption could result in the Fund’s current expenses being allocated over a smaller asset base, leading to an increase in the Fund’s expense ratio. Similarly, large Fund share purchases may adversely affect the Fund’s performance to the extent that the Fund is delayed in investing new cash and is required to maintain a larger cash position than it ordinarily would.
Liquidity Risk — The Fund may make investments that are illiquid or that may become less liquid in response to market developments or adverse investor perceptions. Illiquid investments may be more difficult to value. Liquidity risk may also refer to the risk that the Fund will not be able to pay redemption proceeds within the allowable time period because of unusual market conditions, an unusually high volume of redemption requests, or other reasons. To meet redemption requests, the Fund may be forced to sell investments at an unfavorable time and/or under unfavorable conditions.
Market and Credit Risks — In the normal course of business, the Fund trades financial instruments and enters into financial transactions where risk of potential loss exists due to changes in the market (market risk). Additionally, the Fund may also be exposed to credit risk in the event that an issuer or guarantor fails to perform or that an institution or entity with which the Fund has unsettled or open transactions defaults.
19
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INTERNATIONAL EQUITY FUND
Notes to Financial Statements (continued)
June 30, 2017 (Unaudited)
9. INDEMNIFICATIONS
Under the Trust’s organizational documents, its Trustees, officers, employees and agents are indemnified, to the extent permitted by the Act and state law, against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the course of business, the Fund enters into contracts that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, GSAMI believes the risk of loss under these arrangements to be remote.
10. SUBSEQUENT EVENTS
Subsequent events after the Statement of Assets and Liabilities date have been evaluated and GSAMI has concluded that there is no impact requiring adjustment or disclosure in the financial statements.
11. SUMMARY OF SHARE TRANSACTIONS
Share activity is as follows:
For the Six Months Ended June 30, 2017 (Unaudited) | For the Fiscal Year Ended December 31, 2016 | |||||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||||
Institutional Shares | ||||||||||||||||
Shares sold | 25,646 | $ | 236,329 | 110,254 | $ | 974,934 | ||||||||||
Reinvestment of distributions | — | — | 89,902 | 781,242 | ||||||||||||
Shares redeemed | (255,812 | ) | (2,460,332 | ) | (510,122 | ) | (4,546,751 | ) | ||||||||
(230,166 | ) | (2,224,003 | ) | (309,966 | ) | (2,790,575 | ) | |||||||||
Service Shares | ||||||||||||||||
Shares sold | 685,065 | 6,205,878 | 1,080,345 | 9,775,806 | ||||||||||||
Reinvestment of distributions | — | — | 223,224 | 1,944,283 | ||||||||||||
Shares redeemed | (825,755 | ) | (7,994,732 | ) | (1,984,717 | ) | (17,688,164 | ) | ||||||||
(140,690 | ) | (1,788,854 | ) | (681,148 | ) | (5,968,075 | ) | |||||||||
NET DECREASE | (370,856 | ) | $ | (4,012,857 | ) | (991,114 | ) | $ | (8,758,650 | ) |
20
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INTERNATIONAL EQUITY FUND
Fund Expenses — Six Month Period Ended June 30, 2017 (Unaudited) |
As a shareholder of Institutional or Service Shares of the Fund, you incur ongoing costs, including management fees, distribution and/or service (12b-1) fees (with respect to Service Shares) and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Institutional Shares and Service Shares of the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from January 1, 2017 through June 30, 2017, which represents a period of 181 days of a 365 day year.
Actual Expenses — The first line under each share class in the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000=8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes — The second line under each share class in the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual net expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only. As a shareholder of the Fund you do not incur any transaction costs, such as sales charges, redemption fees, or exchange fees, but shareholders of other funds may incur such costs. The second line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds whose shareholders may incur transaction costs.
Share Class | Beginning Account Value 01/01/17 | Ending Account Value 06/30/17 | Expenses Paid for the 6 Months Ended 06/30/17* | |||||||||
Institutional | ||||||||||||
Actual | $ | 1,000 | $ | 1,157.70 | $ | 4.65 | ||||||
Hypothetical 5% return | 1,000 | 1,020.48 | + | 4.36 | ||||||||
Service | ||||||||||||
Actual | 1,000 | 1,156.00 | 5.99 | |||||||||
Hypothetical 5% return | 1,000 | 1,019.24 | + | 5.61 |
* | Expenses are calculated using the Fund’s annualized net expense ratio for each class, which represents the ongoing expenses as a percentage of net assets for the six months ended June 30, 2017. Expenses are calculated by multiplying the annualized net expense ratio by the average account value for the period; then multiplying the result by the number of days in the most recent fiscal half year; and then dividing that result by the number of days in the fiscal year. The annualized net expense ratios for the period were 0.87% and 1.12% for the Institutional and Service Shares, respectively. |
+ | Hypothetical expenses are based on the Fund’s actual annualized net expense ratios and an assumed rate of return of 5% per year before expenses. |
21
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INTERNATIONAL EQUITY FUND
Statement Regarding Basis for Approval of Management Agreement (Unaudited)
Background
The Goldman Sachs Strategic International Equity Fund (the “Fund”) is an investment portfolio of Goldman Sachs Variable Insurance Trust (the “Trust”). The Board of Trustees oversees the management of the Trust and reviews the investment performance and expenses of the Fund at regularly scheduled meetings held throughout the year. In addition, the Board of Trustees determines annually whether to approve the continuance of the Trust’s investment management agreement (the “Management Agreement”) with Goldman Sachs Asset Management International (the “Investment Adviser”) on behalf of the Fund.
The Management Agreement was most recently approved for continuation until June 30, 2018 by the Board of Trustees, including those 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”), at a meeting held on June 14-15, 2017 (the “Annual Meeting”).
The review process undertaken by the Trustees spans the course of the year and culminates with the Annual Meeting. To assist the Trustees in their deliberations, the Trustees have established a Contract Review Committee (the “Committee”), comprised of the Independent Trustees. The Committee held four meetings over the course of the year since the Management Agreement was last approved. At those Committee meetings, regularly scheduled Board or other committee meetings, and/or the Annual Meeting, matters relevant to the renewal of the Management Agreement were considered by the Board, or the Independent Trustees, as applicable. With respect to the Fund, such matters included:
(a) | the nature and quality of the advisory, administrative, and other services provided to the Fund by the Investment Adviser and its affiliates, including information about: |
(i) | the structure, staff, and capabilities of the Investment Adviser and its portfolio management teams; |
(ii) | the groups within the Investment Adviser and its affiliates that support the portfolio management teams or provide other types of necessary services, including fund services groups (e.g., accounting and financial reporting, tax, shareholder services, and operations); controls and risk management groups (e.g., legal, compliance, valuation oversight, credit risk management, internal audit, compliance testing, market risk analysis, finance, and central funding); sales and distribution support groups, and others (e.g., information technology and training); |
(iii) | trends in employee headcount; |
(iv) | the Investment Adviser’s financial resources and ability to hire and retain talented personnel and strengthen its operations; and |
(v) | the parent company’s support of the Investment Adviser and its mutual fund business, as expressed by the firm’s senior management; |
(b) | information on the investment performance of the Fund, including comparisons to the performance of similar mutual funds, as provided by a third-party mutual fund data provider engaged as part of the contract review process (the “Outside Data Provider”), and a benchmark performance index; and information on general investment outlooks in the markets in which the Fund invests; |
(c) | information provided by the Investment Adviser indicating the Investment Adviser’s views on whether the Fund’s peer group and/or benchmark index had high, medium, or low relevance given the Fund’s particular investment strategy; |
(d) | the terms of the Management Agreement and other agreements with affiliated service providers entered into by the Trust on behalf of the Fund; |
(e) | fee and expense information for the Fund, including: |
(i) | the relative management fee and expense levels of the Fund as compared to those of comparable funds managed by other advisers, as provided by the Outside Data Provider; |
(ii) | the Fund’s expense trends over time; and |
(iii) | to the extent the Investment Adviser manages other types of accounts (such as bank collective trusts, private wealth management accounts, institutional separate accounts, sub-advised mutual funds, and non-U.S. funds) having investment objectives and policies similar to those of the Fund, comparative information on the advisory fees charged and services provided to those accounts by the Investment Adviser; |
(f) | with respect to the extensive investment performance and expense comparison data provided by the Outside Data Provider, its processes in producing that data for the Fund; |
(g) | the undertakings of the Investment Adviser and its affiliates to implement fee waivers and/or expense limitations; |
(h) | information relating to the profitability of the Management Agreement and the transfer agency and distribution and service arrangements of the Fund to the Investment Adviser and its affiliates; |
(i) | whether the Fund’s existing management fee schedule adequately addressed any economies of scale; |
(j) | a summary of the “fall-out” benefits derived by the Investment Adviser and its affiliates from their relationships with the Fund, including the fees received by the Investment Adviser’s affiliates from the Fund for transfer agency, securities lending, portfolio trading, distribution and other services; |
22
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INTERNATIONAL EQUITY FUND
Statement Regarding Basis for Approval of Management Agreement (Unaudited) (continued)
(k) | a summary of potential benefits derived by the Fund as a result of its relationship with the Investment Adviser; |
(l) | information regarding commissions paid by the Fund and broker oversight, an update on the Investment Adviser’s soft dollars practices, other information regarding portfolio trading, and how the Investment Adviser carries out its duty to seek best execution; |
(m) | the manner in which portfolio manager compensation is determined; and the number and types of accounts managed by the portfolio managers; |
(n) | the nature and quality of the services provided to the Fund by its unaffiliated service providers, and the Investment Adviser’s general oversight and evaluation (including reports on due diligence) of those service providers as part of the administrative services provided under the Management Agreement; and |
(o) | the Investment Adviser’s processes and policies addressing various types of potential conflicts of interest; its approach to risk management; the annual review of the effectiveness of the Fund’s compliance program; and periodic compliance reports. |
The Trustees also received an overview of the Fund’s distribution arrangements. They received information regarding the Fund’s assets, share purchase and redemption activity, and payment of distribution and service fees. Information was also provided to the Trustees relating to revenue sharing payments made by and services provided by the Investment Adviser and its affiliates to intermediaries that promote the sale, distribution, and/or servicing of Fund shares. The Independent Trustees also discussed the broad range of other investment choices that are available to Fund investors, including the availability of comparable funds managed by other advisers.
The presentations made at the Board and Committee meetings and at the Annual Meeting encompassed the Fund and other mutual funds for which the Board of Trustees has responsibility. In evaluating the Management Agreement at the Annual Meeting, the Trustees relied upon their knowledge, resulting from their meetings and other interactions throughout the year, of the Investment Adviser and its affiliates, their services, and the Fund. In conjunction with these meetings, the Trustees received written materials and oral presentations on the topics covered, and the Investment Adviser addressed the questions and concerns of the Trustees, including concerns regarding the investment performance of certain of the funds they oversee. The Independent Trustees were advised by their independent legal counsel regarding their responsibilities and other regulatory requirements related to the approval and continuation of mutual fund investment management agreements under applicable law. In addition, the Investment Adviser and its affiliates provided the Independent Trustees with a written response to a formal request for information sent on behalf of the Independent Trustees by their independent legal counsel. During the course of their deliberations, the Independent Trustees met in executive sessions with their independent legal counsel, without representatives of the Investment Adviser or its affiliates present.
Nature, Extent, and Quality of the Services Provided Under the Management Agreement
As part of their review, the Trustees considered the nature, extent, and quality of the services provided to the Fund by the Investment Adviser. In this regard, the Trustees considered both the investment advisory services and non-advisory services that are provided by the Investment Adviser and its affiliates. The Trustees noted the transition in the leadership and changes in personnel of various of the Investment Adviser’s portfolio management teams that had occurred in recent periods, and the ongoing recruitment efforts aimed at bringing high quality investment talent to the Investment Adviser. They also noted the Investment Adviser’s commitment to maintaining high quality systems and expending substantial resources to respond to ongoing changes to the regulatory and control environment in which the Fund and its service providers operate, as well as the efforts of the Investment Adviser and its affiliates to combat cyber security risks. The Trustees concluded that the Investment Adviser continued to commit substantial financial and operational resources to the Fund and expressed confidence that the Investment Adviser would continue to do so in the future. The Trustees also recognized that the Investment Adviser had made significant commitments to address regulatory compliance requirements applicable to the Fund and the Investment Adviser and its affiliates.
Investment Performance
The Trustees also considered the investment performance of the Fund. In this regard, they compared the investment performance of the Fund to its peers using rankings and ratings compiled by the Outside Data Provider as of December 31, 2016, and updated performance information prepared by the Investment Adviser using the peer group identified by the Outside Data Provider as of March 31, 2017. The information on the Fund’s investment performance was provided for the one-, three-, five-, and ten-year periods ending on the applicable dates. The Trustees also reviewed the Fund’s investment performance relative to its performance benchmark. As part of this review, they 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 and market conditions.
In addition, the Trustees considered materials prepared and presentations made by the Investment Adviser’s senior management and portfolio management personnel in which Fund performance was assessed. The Trustees also considered the
23
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INTERNATIONAL EQUITY FUND
Statement Regarding Basis for Approval of Management Agreement (Unaudited) (continued)
Investment Adviser’s periodic reports with respect to the Fund’s risk profile, and how the Investment Adviser’s approach to risk monitoring and management influences portfolio management.
The Trustees observed that the Fund’s Institutional Shares had placed in the second quartile of the Fund’s peer group for the five-year period, in the third quartile for the ten-year period, and in the fourth quartile for the one- and three-year periods, and had underperformed the Fund’s benchmark index for the one-, three-, five-, and ten-year periods ended March 31, 2017.
Costs of Services Provided and Competitive Information
The Trustees considered the contractual terms of the Management Agreement and the fee rates payable by the Fund thereunder. 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.
In particular, the Trustees reviewed analyses prepared by the Outside Data Provider regarding the expense rankings of the Fund. The analyses provided a comparison of the Fund’s management fee and breakpoints to those of a relevant peer group and category universe; an expense analysis which compared the Fund’s overall net and gross expenses to a peer group and a category universe; and data comparing the Fund’s net expenses to the peer and category medians. The analyses also compared the Fund’s transfer agency, custody, and distribution fees, other expenses and fee waivers/reimbursements to those of the peer group and category medians. The Trustees concluded that the comparisons provided by the Outside Data Provider were useful in evaluating the reasonableness of the management fees and total expenses paid by the Fund.
The Trustees noted that the management fee breakpoint schedule was being reduced at all asset levels. In addition, the Trustees considered the Investment Adviser’s undertakings to implement fee waivers and/or expense limitations. They also considered, to the extent that the Investment Adviser manages other types of accounts having investment objectives and policies similar to those of the Fund, comparative fee information for services provided by the Investment Adviser to those accounts, and information that indicated that services provided to the Fund differed in various significant respects from the services provided to other types of accounts which, in many cases, operated under less stringent legal and regulatory structures, required fewer services from the Investment Adviser to a smaller number of client contact points, and were less time-intensive.
In addition, the Trustees noted that shareholders are able to redeem their Fund shares at any time if shareholders believe that the Fund fees and expenses are too high or if they are dissatisfied with the performance of the Fund.
Profitability
The Trustees reviewed the Fund’s contribution to the Investment Adviser’s revenues and pre-tax profit margins. In this regard the Trustees noted that they had received, among other things, profitability analyses and summaries, revenue and expense schedules by Fund and by function (i.e., investment management, transfer agency and distribution and service), and information on the Investment Adviser’s expense allocation methodology. They observed that the profitability and expense figures are substantially similar to those used by the Investment Adviser for many internal purposes, including compensation decisions among various business groups, and are thus subject to a vigorous internal debate about how certain revenue and expenses should be allocated. The Trustees also noted that the internal audit group within the Goldman Sachs organization had audited the expense allocation methodology and that the internal audit group was satisfied with the reasonableness, consistency, and accuracy of the Investment Adviser’s expense allocation methodology and profitability analysis calculations. Profitability data for the Fund were provided for 2016 and 2015, and the Trustees considered this information in relation to the Investment Adviser’s overall profitability.
Economies of Scale
The Trustees considered the information that had been provided regarding the Investment Adviser’s profitability. The Trustees also considered the breakpoints in the fee rate payable under the Management Agreement for the Fund at the following annual percentage rates of the average daily net assets of the Fund:
First $1 billion | 0.85 | % | ||
Next $1 billion | 0.77 | |||
Next $3 billion | 0.73 | |||
Next $3 billion | 0.72 | |||
Over $8 billion | 0.71 |
24
GOLDMAN SACHS VARIABLE INSURANCE TRUST STRATEGIC INTERNATIONAL EQUITY FUND
Statement Regarding Basis for Approval of Management Agreement (Unaudited) (continued)
The Trustees noted that the breakpoints were designed to share potential economies of scale, if any, with the Fund and its shareholders as assets under management reach those asset levels. The Trustees considered the amounts of assets in the Fund; the Fund’s recent share purchase and redemption activity; the information provided by the Investment Adviser relating to the costs of the services provided by the Investment Adviser and its affiliates and their realized profits; information comparing fee rates charged by the Investment Adviser with fee rates charged to other funds in the peer group; and the Investment Adviser’s undertakings to waive a portion of its management fee and to limit certain expenses of the Fund that exceed a specified level. Upon reviewing these matters at the Annual Meeting, the Trustees concluded that the fee breakpoints represented a means of assuring that benefits of scalability, if any, would be passed along to shareholders at the specified asset levels.
Other Benefits to the Investment Adviser and Its Affiliates
The Trustees also considered the other benefits derived by the Investment Adviser and its affiliates from their relationships with the Fund as stated above, including: (a) transfer agency fees received by Goldman Sachs & Co. LLC (“Goldman Sachs”); (b) brokerage and futures commissions earned by Goldman Sachs for executing securities and futures transactions on behalf of the Fund; (c) research received by the Investment Adviser from broker-dealers in exchange for executing certain transactions on behalf of the Fund; (d) trading efficiencies resulting from aggregation of orders of the Fund with those for other funds or accounts managed by the Investment Adviser; (e) fees earned by Goldman Sachs Agency Lending (“GSAL”), an affiliate of the Investment Adviser, as securities lending agent (and fees earned by the Investment Adviser for managing the fund in which the Fund’s cash collateral is invested); (f) the Investment Adviser’s ability to leverage the infrastructure designed to service the Fund on behalf of its other clients; (g) the Investment Adviser’s ability to cross-market other products and services to Fund shareholders; (h) Goldman Sachs’ retention of certain fees as Fund Distributor; (i) the Investment Adviser’s ability to negotiate better pricing with custodians on behalf of its other clients, as a result of the relationship with the Fund; and (j) the possibility that the working relationship between the Investment Adviser and the Fund’s third-party service providers may cause those service providers to be more likely to do business with other areas of Goldman Sachs. In the course of considering the foregoing, the Independent Trustees requested and received further information quantifying certain of these fall-out benefits.
Other Benefits to the Fund and Its Shareholders
The Trustees also noted that the Fund receives certain potential benefits as a result of its relationship with the Investment Adviser, including: (a) trading efficiencies resulting from aggregation of orders of the Fund with those of other funds or accounts managed by the Investment Adviser; (b) enhanced servicing from vendors because of the volume of business generated by the Investment Adviser and its affiliates; (c) enhanced servicing from broker-dealers because of the volume of business generated by the Investment Adviser and its affiliates; (d) the Investment Adviser’s ability to negotiate favorable terms with derivatives counterparties on behalf of the Fund as a result of the size and reputation of the Goldman Sachs organization; (e) the Investment Adviser’s knowledge and experience gained from managing other accounts and products; (f) the Investment Adviser’s ability to hire and retain qualified personnel to provide services to the Fund because of the reputation of the Goldman Sachs organization; (g) the Fund’s access, through the Investment Adviser, to certain firmwide resources (e.g., proprietary risk management systems and databases), subject to certain restrictions; (h) the Fund’s ability to participate in the securities lending program administered by GSAL, as measured by the revenue received by the Fund in connection with the program; and (i) the Fund’s access to certain affiliated distribution channels. In addition, the Trustees noted the competitive nature of the mutual fund marketplace, and considered that many of the Fund’s shareholders invested in the Fund in part because of the Fund’s relationship with the Investment Adviser and that those shareholders have a general expectation that the relationship will continue.
Conclusion
In connection with their consideration of the Management Agreement, the Trustees gave weight to each of the factors described above, but did not identify any particular factor as controlling their decision. After deliberation and consideration of all of the information provided, including the factors described above, the Trustees concluded, in the exercise of their business judgment, that the management fees paid by the Fund were reasonable in light of the services provided to it by the Investment Adviser, the Investment Adviser’s costs and the Fund’s current and reasonably foreseeable asset levels. The Trustees unanimously concluded that the Investment Adviser’s continued management likely would benefit the Fund and its shareholders and that the Management Agreement should be approved and continued with respect to the Fund until June 30, 2018.
25
TRUSTEES | OFFICERS | |
Ashok N. Bakhru, Chairman | James A. McNamara, President | |
Kathryn A. Cassidy | Scott M. McHugh, Treasurer, Senior Vice | |
Diana M. Daniels | President and Principal Financial Officer | |
Herbert J. Markley | Joseph F. DiMaria, Assistant Treasurer and | |
James A. McNamara | Principal Accounting Officer | |
Jessica Palmer | Caroline L. Kraus, Secretary | |
Roy W. Templin | ||
Gregory G. Weaver |
GOLDMAN SACHS & CO. LLC
Distributor and Transfer Agent
GOLDMAN SACHS ASSET MANAGEMENT INTERNATIONAL
Investment Adviser
Christchurch Court, 10-15 Newgate Street London, EC1A 7HD, England, United Kingdom
Visit our web site at www.GSAMFUNDS.com to obtain the most recent month-end returns.
The reports concerning the Fund included in this shareholder report may contain certain forward-looking statements about the factors that may affect the performance of the Fund in the future. These statements are based on Fund management’s predictions and expectations concerning certain future events and their expected impact on the Fund, such as performance of the economy as a whole and of specific industry sectors, changes in the levels of interest rates, the impact of developing world events, and other factors that may influence the future performance of the Fund. Management believes these forward-looking statements to be reasonable, although they are inherently uncertain and difficult to predict. Actual events may cause adjustments in portfolio management strategies from those currently expected to be employed.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available (i) without charge, upon request by calling 1-800-621-2550; and (ii) on the Securities and Exchange Commission (“SEC”) web site at http://www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Form N-Qs are available on the SEC’s web site at http://www.sec.gov within 60 days after the Fund’s first and third fiscal quarters. The Fund’s Form N-Qs may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may also be obtained by calling 1-800-SEC-0330. Form N-Qs may be obtained upon request and without charge by calling 1-800-621-2550.
The website links provided are for your convenience only and are not an endorsement or recommendation by GSAMI of any of these websites or the products or services offered. GSAMI is not responsible for the accuracy and validity of the content of these websites.
Economic and market forecasts presented herein reflect our judgment as of the date of this presentation and are subject to change without notice. These forecasts do not take into account the specific investment objectives, restrictions, tax and financial situation or other needs of any specific client. Actual data will vary and may not be reflected here. These forecasts are subject to high levels of uncertainty that may affect actual performance. Accordingly, these forecasts should be viewed as merely representative of a broad range of possible outcomes. These forecasts are estimated, based on assumptions, and are subject to significant revision and may change materially as economic and market conditions change. Goldman Sachs has no obligation to provide updates or changes to these forecasts. Case studies and examples are for illustrative purposes only.
Fund holdings and allocations shown are as of June 30, 2017 and may not be representative of future investments. Fund holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities. Current and future holdings are subject to risk.
References to indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only and do not imply that the portfolio will achieve similar results. The index composition may not reflect the manner in which a portfolio is constructed. While an adviser seeks to design a portfolio which reflects appropriate risk and return features, portfolio characteristics may deviate from those of the benchmark.
The Global Industry Classification Standard (“GICS”) was developed by and is the exclusive property and a service mark of Morgan Stanley Capital International Inc. (“MSCI”) and Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. (“S&P”) and is licensed for use by Goldman Sachs. Neither MSCI, S&P nor any other party involved in making or compiling the GICS or any GICS classifications makes any express or implied warranties or representations with respect to such standard or classification (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of such standard or classification. Without limiting any of the foregoing, in no event shall MSCI, S&P, any of their affiliates or any third party involved in making or compiling the GICS or any GICS classifications have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.
The portfolio risk management process includes an effort to monitor and manage risk, but does not imply low risk.
Shares of the Goldman Sachs VIT Funds are offered to separate accounts of participating life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Shares of the Fund are not offered directly to the general public. The variable annuity contracts and variable life insurance policies are described in the separate prospectuses issued by participating insurance companies. You should refer to those prospectuses for information about surrender charges, mortality and expense risk fees and other charges that may be assessed by participating insurance companies under the variable annuity contracts or variable life insurance policies. Such fees or charges, if any, may affect the return you may realize with respect to your investments. Ask your representative for more complete information. Please consider a fund’s objectives, risks and charges and expenses, and read the prospectus carefully before investing. The prospectus contains this and other information about the Fund.
This material is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus or summary prospectus, if applicable. Investors should consider the Fund’s objective, risks, and charges and expenses, and read the summary prospectus, if available, and/or the prospectus carefully before investing or sending money. The summary prospectus, if available, and the prospectus contain this and other information about the Fund and may be obtained from your authorized dealer or from Goldman Sachs & Co. LLC by calling 1-800-621-2550.
THIS MATERIAL IS FOR INFORMATIONAL PURPOSES ONLY AND IS PROVIDED SOLELY ON THE BASIS THAT IT WILL NOT CONSTITUTE INVESTMENT OR OTHER ADVICE OR A RECOMMENDATION RELATING TO ANY PERSON’S OR PLAN’S INVESTMENT OR OTHER DECISIONS, AND GOLDMAN SACHS IS NOT A FIDUCIARY OR ADVISOR WITH RESPECT TO ANY PERSON OR PLAN BY REASON OF PROVIDING THE MATERIAL OR CONTENT HEREIN INCLUDING UNDER THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974 OR DEPARTMENT OF LABOR REGULATIONS. PLAN SPONSORS AND OTHER FIDUCIARIES SHOULD CONSIDER THEIR OWN CIRCUMSTANCES IN ASSESSING ANY POTENTIAL COURSE OF ACTION.
This report is prepared for the general information of contract owners and is not an offer of shares of the Goldman Sachs Variable Insurance Trust — Goldman Sachs Strategic International Equity Fund.
© 2017 Goldman Sachs. All rights reserved.
VITINTLSAR-17/100577-TMPL-08/2017-585384/11.3K
Goldman
Sachs Variable Insurance Trust
Goldman Sachs
U.S. Equity Insights Fund
Semi-Annual Report
June 30, 2017
GOLDMAN SACHS VARIABLE INSURANCE TRUST U.S. EQUITY INSIGHTS FUND
INVESTMENT OBJECTIVE
The Fund seeks long-term growth of capital and dividend income.
Portfolio Management Discussion and Analysis
Below, the Goldman Sachs Quantitative Investment Strategies Team discusses the Goldman Sachs Variable Insurance Trust — Goldman Sachs U.S. Equity Insights Fund’s (the “Fund”) performance and positioning for the six-month period ended June 30, 2017 (the “Reporting Period”).
How did the Fund perform during the Reporting Period?
During the Reporting Period, the Fund’s Institutional and Service Shares generated cumulative total returns of 10.71% and 10.62%, respectively. These returns compare to the 9.34% cumulative total return of the Fund’s benchmark, the Standard & Poor’s 500® Index (with dividends reinvested) (the “S&P 500® Index”) during the same time period.
What economic and market factors most influenced the equity markets as a whole during the Reporting Period?
Representing the U.S. equity market, the S&P 500® Index gained 9.34% during the Reporting Period.
As the Reporting Period began in January 2017, U.S. equities rallied to new highs on the prospect of deregulation following executive orders on oil pipelines and on further optimism around infrastructure spending after a $1 trillion proposal from Senate Democrats. Despite political uncertainty and protectionism concerns, U.S. equities continued to rally in February 2017, driven by “risk on” sentiment, or reduced risk aversion, owing to potential U.S. tax reform and deregulation as well as by stronger economic data. In March 2017, the U.S. Federal Reserve (the “Fed”) raised interest rates for the third time since the 2008 global financial crisis, while maintaining projections for three rate hikes this year. However, a seemingly cautious stance on the future path of monetary tightening from Fed Chair Janet Yellen and the presence of a dissenter on the policy committee led to a dovish market reaction. (Dovish tends to suggest lower interest rates; opposite of hawkish.) Political risks subsequently drove U.S. equities lower in the wake of House Republicans’ struggle to schedule a vote on health care. For the month of March 2017, U.S. equities were virtually flat.
U.S. equities fell in April 2017, as Fed minutes suggested stocks were overvalued. However, U.S. equities subsequently rebounded on strong first quarter 2017 earnings results and receding European political risk following the French election. Although the U.S. labor market remained strong and wage growth accelerated, economic activity and inflation data appeared to be moderating during the second quarter of 2017. Core inflation softened to 1.7% year-over-year in May 2017, marking a third consecutive month of weakness, while core personal consumption expenditures remained below the Fed’s 2% target at just 1.4% year-over-year. In addition, market expectations for pro-growth U.S. fiscal policy were dampened by domestic political developments. Nonetheless, the Fed proceeded to raise the targeted federal funds rate by 25 basis points in June 2017, citing ongoing strength in the labor market and a pick-up in household spending and business fixed investment. (A basis point is 1/100th of a percentage point.) The results of the Fed’s 2017 Comprehensive Capital Analysis and Review (“CCAR”) stress test for banks were encouraging, with improving payout ratios. (Payout ratio is the proportion of earnings paid out as dividends to shareholders.)
For the Reporting Period overall, information technology, health care and consumer discretionary were the best performing sectors in the S&P 500® Index by a wide margin. The weakest performing sectors in the S&P 500® Index were energy and telecommunication services, the only two to post negative absolute returns, followed by real estate and financials, which were comparatively weak but generated positive returns during the Reporting Period.
Within the U.S. equity market, there was significant disparity in performance not only among sectors but also among the various capitalization and style segments. While all capitalization segments posted positive returns, large-cap stocks, as measured by the Russell 1000® Index, performed best, followed by mid-cap stocks, as measured by the Russell Midcap® Index, and then at some distance by small-cap stocks, as measured by the Russell 2000® Index. From a style perspective, growth-oriented stocks significantly outpaced value-oriented stocks across the capitalization spectrum. (All as measured by the Russell indices.)
What key factors were responsible for the Fund’s performance during the Reporting Period?
During the Reporting Period, the Fund outperformed the S&P 500® Index largely due to stock selection driven by our quantitative model and four of our quantitative model’s six investment themes. None of our quantitative model’s six investment themes detracted significantly from the Fund’s relative returns.
1
GOLDMAN SACHS VARIABLE INSURANCE TRUST U.S. EQUITY INSIGHTS FUND
What impact did the Fund’s investment themes have on performance during the Reporting Period?
As expected, and in keeping with our investment approach, our quantitative model and its six investment themes — Valuation, Profitability, Quality, Management, Momentum and Sentiment — had the greatest impact on relative performance. We use these themes to take a long-term view of market patterns and look for inefficiencies, selecting stocks for the Fund and overweighting or underweighting the ones chosen by the model. Over time and by design, the performance of any one of the model’s investment themes tends to have a low correlation with the model’s other themes, demonstrating the diversification benefit of the Fund’s theme-driven quantitative model. The variance in performance supports our research indicating that the diversification provided by the Fund’s different investment themes is a significant investment advantage over the long term, even though the Fund may experience underperformance in the short term. Of course, diversification does not protect an investor from market risk nor does it ensure a profit.
During the Reporting Period, four of our six investment themes contributed positively to relative returns. Momentum contributed most positively to relative performance, followed by Valuation. The Quality and Sentiment themes also contributed positively, albeit to a lesser extent. The Momentum theme seeks to predict drifts in stock prices caused by delayed investor reaction to company-specific information and information about related companies. The Valuation theme attempts to capture potential mispricings of securities, typically by comparing a measure of the company’s intrinsic value to its market value. The Quality theme assesses both firm and financial quality. The Sentiment theme reflects selected investment views and decisions of individuals and financial intermediaries.
No investment themes detracted significantly from the Fund’s relative returns during the Reporting Period. The Management and Profitability themes had a rather neutral effect on results during the Reporting Period. The Management theme assesses the characteristics, policies and strategic decisions of company managements. The Profitability theme assesses whether a company is earning more than its cost of capital.
How did the Fund’s sector and industry allocations affect relative performance?
In constructing the Fund’s portfolio, we focus on picking stocks rather than making industry or sector bets. Consequently, the Fund is similar to its benchmark, the S&P 500® Index, in terms of its industry and sector allocation and style. We manage the Fund’s industry and sector exposure by including industry factors in our risk model and by explicitly penalizing industry and sector deviations from the benchmark index in optimization. Sector weights or changes in sector weights generally do not have a meaningful impact on relative performance.
Did stock selection help or hurt Fund performance during the Reporting Period?
We seek to outpace the S&P 500® Index by overweighting stocks that we expect to outperform and underweighting those that we think may lag. We also build positions based on our thematic views. For example, the Fund aims to hold a basket of stocks with more favorable Momentum characteristics than the benchmark index. During the Reporting Period, stock selection overall contributed positively to the Fund’s relative performance.
Effective stock selection in the energy, consumer discretionary and real estate sectors contributed most positively to the Fund’s results relative to the S&P 500® Index. Having an underweight to energy, the weakest sector in the S&P 500® Index during the Reporting Period, also helped. Partially offsetting these positive contributors was stock selection in the consumer staples and health care sectors, which detracted from the Fund’s results relative to the S&P 500® Index during the Reporting Period.
Which individual stock positions contributed the most to the Fund’s relative returns during the Reporting Period?
The Fund benefited most from underweight positions in telecommunications giant Verizon Communications and diversified industrial and financial services conglomerate General Electric (“GE”) and from an overweight position in health care equipment and services provider Baxter International. We chose to underweight Verizon Communications due to our negative view on Profitability. The Fund was underweight General Electric given our negative views on Value and Management. The overweight in Baxter International was established because of our positive views on Sentiment and Profitability.
Which individual positions detracted from the Fund’s results during the Reporting Period?
Detracting most from the Fund’s results relative to the S&P 500® Index were overweight positions in oilfield products and services provider Baker Hughes a GE Co, packaged foods manufacturer Conagra Brands and computerized gaming equipment, software and network systems manufacturer and distributor International Game Technology. We chose to overweight Baker Hughes a GE Co due to our positive views on Quality and Sentiment. The Fund had an overweight position in Conagra Brands based on our positive views on Sentiment and Quality. Positive views on Momentum and Value drove the Fund’s overweight position in International Game Technology.
2
GOLDMAN SACHS VARIABLE INSURANCE TRUST U.S. EQUITY INSIGHTS FUND
How did the Fund use derivatives during the Reporting Period?
During the Reporting Period, we did not use derivatives as part of an active management strategy to add value to the Fund’s results. However, we used equity index futures contracts, on an opportunistic basis, to equitize the Fund’s excess cash holdings. In other words, we put the Fund’s excess cash holdings to work by using them as collateral for the purchase of stock futures. The use of these futures contracts did not have a material impact on the Fund’s performance during the Reporting Period.
Did you make any enhancements to your quantitative models during the Reporting Period?
We continuously look for ways to improve our investment process. During the Reporting Period, we made numerous enhancements to our models. As example, we made two enhancements to our Sentiment theme. The first enhancement introduced a signal in the U.S. region, which looks at characteristics of a company’s credit default swaps term structure to infer investor expectations regarding the health of that company. Secondly, we introduced an enhancement in the U.S. region that looks at the 10-K and 10-Q filings of companies as an indicator of stock price movements. We use natural language processing techniques to parse through quarterly filings in an effort to gauge various aspects of a company related to management sentiment, their outlook and their thoughts on upcoming risks.
We also enhanced our Valuation theme in the Japan region by evaluating the worth of companies’ patents. We utilize data on the exclusiveness of Japanese companies’ patent portfolios with the goal of determining which companies have the most valuable patent portfolios. We believe that companies with more exclusive patents tend to outperform in the long run.
What was the Fund’s sector positioning relative to its benchmark index at the end of the Reporting Period?
As of June 30, 2017, the Fund was overweight the health care, consumer discretionary and real estate sectors relative to the S&P 500® Index. The Fund was underweight financials, utilities and industrials and was rather neutrally weighted in information technology, energy, consumer staples, telecommunication services and materials compared to the benchmark index on the same date.
Were there any changes to the Fund’s portfolio management team during the Reporting Period?
During the Reporting Period, one Vice President left the Equity Alpha team and one Vice President joined the team. QIS employs a globally integrated team of more than 90 professionals, with an additional 75-plus professionals dedicated to trading, information technology and development of analytical tools.
What is your strategy going forward for the Fund?
Looking ahead, we continue to believe that less expensive stocks should outpace more expensive stocks, and stocks with good momentum are likely to outperform those with poor momentum. We intend to maintain our focus on seeking companies about which fundamental research analysts are becoming more positive as well as profitable companies with sustainable earnings and a track record of using their capital to enhance shareholder value. As such, we anticipate remaining fully invested with long-term performance likely to be the result of stock selection rather than sector or capitalization allocations.
We stand behind our investment philosophy that sound economic investment principles, coupled with a disciplined quantitative approach, can provide strong, uncorrelated returns over the long term. Our research agenda is robust, and we continue to enhance our existing models, add new proprietary forecasting signals and improve our trading execution as we seek to provide the most value to our shareholders.
3
GOLDMAN SACHS VARIABLE INSURANCE TRUST U.S. EQUITY INSIGHTS FUND
Index Definitions
The S&P 500® Index (with dividends reinvested) is the Standard & Poor’s 500 Composite Index of 500 stocks, an unmanaged index of common stock prices. The figures for the index do not include any deduction for fees, expenses or taxes. It is not possible to invest directly in an index.
The Russell 2000® Index (with dividends reinvested) is an unmanaged index of common stock prices that measures the performance of the 2000 smallest companies in the Russell 3000® Index. The figures for the index do not include any deduction for fees, expenses or taxes. It is not possible to invest directly in an index.
The Russell Midcap® Index measures the performance of the 800 smallest companies in the Russell 1000® Index, which represent approximately 25% of the total market capitalization of the Russell 1000 Index. It is not possible to invest directly in an index.
The Russell 1000® Index measures the performance of the 1,000 largest companies in the Russell 3000® Index, which represent approximately 92% of the total market capitalization of the Russell 3000 Index. It is not possible to invest directly in an index.
4
FUND BASICS
U.S. Equity Insights Fund
as of June 30, 2017
STANDARDIZED TOTAL RETURNS1
For the period ended 6/30/17 | One Year | Five Years | Ten Years | Since Inception | Inception Date | |||||||||||||
Institutional | 20.50 | % | 15.68 | % | 6.52 | % | 6.07 | % | 02/13/98 | |||||||||
Service | 20.26 | 15.45 | 6.31 | 6.75 | 01/09/06 |
1 | The Standardized Total Returns are average annual total returns as of the most recent calendar quarter-end. They assume reinvestment of all distributions at net asset value (“NAV”). Because Institutional and Service Shares do not involve a sales charge, such a charge is not applied to their Standardized Total Returns. |
Total return figures in the above chart represent past performance and do not indicate future results, which will vary. The investment return and principal value of an investment will fluctuate and, therefore, an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the total return figures in the above chart. Please visit www.GSAMFUNDS.com to obtain the most recent month-end returns. Performance reflects fee waivers and/or expense limitations in effect during the periods shown. In their absence, performance would be reduced.
EXPENSE RATIOS2
Net Expense Ratio (Current) | Gross Expense Ratio (Before Waivers) | |||||||
Institutional | 0.60 | % | 0.70 | % | ||||
Service | 0.81 | 0.95 |
2 | The expense ratios of the Fund, both current (net of any fee waivers and/or expense limitations) and before waivers (gross of any fee waivers and/or expense limitations) are as set forth above according to the most recent publicly available Prospectuses for the Fund and may differ from the expense ratios disclosed in the Financial Highlights in this report. Pursuant to a contractual arrangement, the Fund’s fee waivers and/or expense limitations will remain in place through at least April 28, 2018, and prior to such date, the Investment Adviser may not terminate the arrangements without the approval of the Fund’s Board of Trustees. If these arrangements are discontinued in the future, the expense ratios may change without shareholder approval. |
TOP TEN HOLDINGS AS OF 6/30/173
Holding | % of Net Assets | Line of Business | ||||
Apple, Inc. | 3.7% | Technology Hardware & Equipment | ||||
JPMorgan Chase & Co. | 2.3 | Banks | ||||
Comcast Corp. Class A | 1.8 | Media | ||||
Amazon.com, Inc. | 1.8 | Retailing | ||||
Facebook, Inc. Class A | 1.7 | Software & Services | ||||
Amgen, Inc. | 1.6 | Pharmaceuticals, Biotechnology & Life Sciences | ||||
Microsoft Corp. | 1.6 | Software & Services | ||||
Boeing Co. (The) | 1.5 | Capital Goods | ||||
Celgene Corp. | 1.5 | Pharmaceuticals, Biotechnology & Life Sciences | ||||
Johnson & Johnson | 1.5 | Pharmaceuticals, Biotechnology & Life Sciences |
3 | The top 10 holdings may not be representative of the Fund’s future investments. |
5
FUND BASICS
FUND vs. BENCHMARK SECTOR ALLOCATIONS4
As of June 30, 2017
4 | The Fund is actively managed and, as such, its composition may differ over time. Consequently, the Fund’s overall sector allocations may differ from percentages contained in the graph above. The graph categorizes investments using Global Industry Classification Standard (“GICS”), however, the sector classifications used by the portfolio management team may differ from GICS. The percentage shown for each investment category reflects the value of investments in that category as a percentage of market value. Underlying sector allocations of exchange traded funds and investment companies held by the Fund are not reflected in the graph above. The graph depicts the Fund’s investments but may not represent the Fund’s market exposure due to the exclusion of certain derivatives, if any, as listed in the Additional Investment Information section of the Schedule of Investments. |
6
GOLDMAN SACHS VARIABLE INSURANCE TRUST U.S. EQUITY INSIGHTS FUND
Schedule of Investments
June 30, 2017 (Unaudited)
Shares | Description | Value | ||||||
Common Stocks – 97.8% | ||||||||
Automobiles & Components – 2.3% | ||||||||
38,709 | BorgWarner, Inc. | $ | 1,639,713 | |||||
35,920 | Delphi Automotive plc | 3,148,388 | ||||||
4,499 | Goodyear Tire & Rubber Co. (The) | 157,285 | ||||||
28,321 | Lear Corp. | 4,023,848 | ||||||
|
| |||||||
8,969,234 | ||||||||
|
| |||||||
Banks – 4.4% | ||||||||
27,220 | Bank of America Corp. | 660,357 | ||||||
118,247 | Citizens Financial Group, Inc. | 4,219,053 | ||||||
4,153 | Comerica, Inc. | 304,166 | ||||||
98,619 | JPMorgan Chase & Co. | 9,013,777 | ||||||
60,633 | Regions Financial Corp. | 887,667 | ||||||
26,593 | SunTrust Banks, Inc. | 1,508,355 | ||||||
14,891 | Wells Fargo & Co. | 825,110 | ||||||
|
| |||||||
17,418,485 | ||||||||
|
| |||||||
Capital Goods – 6.9% | ||||||||
29,848 | AerCap Holdings NV* | 1,385,843 | ||||||
7,977 | Allegion plc | 647,094 | ||||||
11,125 | Allison Transmission Holdings, Inc. | 417,299 | ||||||
53,679 | AMETEK, Inc. | 3,251,337 | ||||||
30,718 | Boeing Co. (The) | 6,074,484 | ||||||
12,789 | Caterpillar, Inc. | 1,374,306 | ||||||
3,253 | Fortive Corp. | 206,078 | ||||||
46,734 | General Electric Co. | 1,262,285 | ||||||
11,715 | Honeywell International, Inc. | 1,561,492 | ||||||
108,210 | Masco Corp. | 4,134,704 | ||||||
25,186 | Spirit AeroSystems Holdings, Inc. Class A | 1,459,277 | ||||||
46,555 | United Technologies Corp. | 5,684,831 | ||||||
|
| |||||||
27,459,030 | ||||||||
|
| |||||||
Consumer Durables & Apparel – 2.0% | ||||||||
17,795 | Mohawk Industries, Inc.* | 4,300,874 | ||||||
36,262 | NIKE, Inc. Class B | 2,139,458 | ||||||
12,199 | PVH Corp. | 1,396,785 | ||||||
|
| |||||||
7,837,117 | ||||||||
|
| |||||||
Consumer Services – 2.3% | ||||||||
13,467 | Carnival Corp. | 883,031 | ||||||
3,351 | Domino’s Pizza, Inc. | 708,837 | ||||||
35,360 | Hilton Worldwide Holdings, Inc. | 2,187,016 | ||||||
65,265 | International Game Technology plc | 1,194,350 | ||||||
62,144 | Las Vegas Sands Corp. | 3,970,380 | ||||||
|
| |||||||
8,943,614 | ||||||||
|
| |||||||
Diversified Financials – 4.9% | ||||||||
99,660 | AGNC Investment Corp. (REIT) | 2,121,762 | ||||||
45,312 | Ally Financial, Inc. | 947,021 | ||||||
16,138 | Bank of New York Mellon Corp. (The) | 823,361 | ||||||
12,757 | Berkshire Hathaway, Inc. Class B* | 2,160,653 | ||||||
2,252 | Discover Financial Services | 140,052 | ||||||
73,024 | Intercontinental Exchange, Inc. | 4,813,742 | ||||||
31,830 | Leucadia National Corp. | 832,673 | ||||||
10,543 | Northern Trust Corp. | 1,024,885 | ||||||
|
| |||||||
Common Stocks – (continued) | ||||||||
Diversified Financials – (continued) | ||||||||
27,987 | S&P Global, Inc. | $ | 4,085,822 | |||||
34,861 | Santander Consumer USA Holdings, Inc.* | 444,826 | ||||||
67,698 | Synchrony Financial | 2,018,754 | ||||||
|
| |||||||
19,413,551 | ||||||||
|
| |||||||
Energy – 6.0% | ||||||||
80,368 | Baker Hughes, Inc. | 4,380,860 | ||||||
23,504 | Chevron Corp. | 2,452,172 | ||||||
32,411 | Exxon Mobil Corp. | 2,616,540 | ||||||
84,005 | Marathon Petroleum Corp. | 4,395,981 | ||||||
31,174 | Newfield Exploration Co.* | 887,212 | ||||||
54,517 | Phillips 66 | 4,508,011 | ||||||
67,439 | Valero Energy Corp. | 4,549,435 | ||||||
|
| |||||||
23,790,211 | ||||||||
|
| |||||||
Food & Staples Retailing – 2.6% | ||||||||
69,219 | CVS Health Corp. | 5,569,361 | ||||||
56,971 | Walgreens Boots Alliance, Inc. | 4,461,399 | ||||||
2,215 | Wal-Mart Stores, Inc. | 167,631 | ||||||
|
| |||||||
10,198,391 | ||||||||
|
| |||||||
Food, Beverage & Tobacco – 4.4% | ||||||||
113,061 | Conagra Brands, Inc. | 4,043,061 | ||||||
44,439 | Kellogg Co. | 3,086,733 | ||||||
49,438 | Molson Coors Brewing Co. Class B | 4,268,477 | ||||||
23,939 | Philip Morris International, Inc. | 2,811,636 | ||||||
50,525 | Tyson Foods, Inc. Class A | 3,164,381 | ||||||
|
| |||||||
17,374,288 | ||||||||
|
| |||||||
Health Care Equipment & Services – 6.9% | ||||||||
75,751 | Baxter International, Inc. | 4,585,965 | ||||||
21,012 | Centene Corp.* | 1,678,439 | ||||||
28,684 | Cigna Corp. | 4,801,415 | ||||||
57,562 | Danaher Corp. | 4,857,657 | ||||||
19,265 | Humana, Inc. | 4,635,544 | ||||||
7,860 | IDEXX Laboratories, Inc.* | 1,268,761 | ||||||
25,321 | UnitedHealth Group, Inc. | 4,695,020 | ||||||
5,261 | WellCare Health Plans, Inc.* | 944,665 | ||||||
|
| |||||||
27,467,466 | ||||||||
|
| |||||||
Household & Personal Products – 1.9% | ||||||||
68,071 | Colgate-Palmolive Co. | 5,046,103 | ||||||
1,457 | Estee Lauder Cos., Inc. (The) Class A | 139,843 | ||||||
25,915 | Procter & Gamble Co. (The) | 2,258,492 | ||||||
|
| |||||||
7,444,438 | ||||||||
|
| |||||||
Insurance – 2.2% | ||||||||
22,403 | Aon plc | 2,978,479 | ||||||
59,487 | Marsh & McLennan Cos., Inc. | 4,637,606 | ||||||
28,755 | XL Group Ltd. | 1,259,469 | ||||||
|
| |||||||
8,875,554 | ||||||||
|
| |||||||
Materials – 1.9% | ||||||||
11,798 | Celanese Corp. Series A | 1,120,102 | ||||||
8,108 | EI du Pont de Nemours & Co. | 654,397 | ||||||
86,894 | Freeport-McMoRan, Inc.* | 1,043,597 | ||||||
|
|
The accompanying notes are an integral part of these financial statements. | 7 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST U.S. EQUITY INSIGHTS FUND
Schedule of Investments (continued)
June 30, 2017 (Unaudited)
Shares | Description | Value | ||||||
Common Stocks – (continued) | ||||||||
Materials – (continued) | ||||||||
13,141 | Huntsman Corp. | $ | 339,564 | |||||
47,309 | Owens-Illinois, Inc.* | 1,131,631 | ||||||
23,183 | Sealed Air Corp. | 1,037,671 | ||||||
1,274 | Sherwin-Williams Co. (The) | 447,123 | ||||||
27,246 | WestRock Co. | 1,543,758 | ||||||
|
| |||||||
7,317,843 | ||||||||
|
| |||||||
Media – 3.4% | ||||||||
186,152 | Comcast Corp. Class A | 7,245,036 | ||||||
167,550 | Interpublic Group of Cos., Inc. (The) | 4,121,730 | ||||||
24,921 | Omnicom Group, Inc. | 2,065,951 | ||||||
|
| |||||||
13,432,717 | ||||||||
|
| |||||||
Pharmaceuticals, Biotechnology & Life Sciences – 10.6% | ||||||||
18,030 | Agilent Technologies, Inc. | 1,069,359 | ||||||
21,901 | Alexion Pharmaceuticals, Inc.* | 2,664,695 | ||||||
36,867 | Amgen, Inc. | 6,349,603 | ||||||
17,603 | Biogen, Inc.* | 4,776,750 | ||||||
46,188 | Bristol-Myers Squibb Co. | 2,573,595 | ||||||
44,897 | Celgene Corp.* | 5,830,773 | ||||||
41,376 | Eli Lilly & Co. | 3,405,245 | ||||||
43,751 | Johnson & Johnson | 5,787,820 | ||||||
59,254 | Merck & Co., Inc. | 3,797,589 | ||||||
801 | Mettler-Toledo International, Inc.* | 471,421 | ||||||
30,330 | Thermo Fisher Scientific, Inc. | 5,291,675 | ||||||
|
| |||||||
42,018,525 | ||||||||
|
| |||||||
Real Estate – 4.6% | ||||||||
81,325 | American Homes 4 Rent Class A (REIT) | 1,835,505 | ||||||
37,861 | American Tower Corp. (REIT) | 5,009,768 | ||||||
42,539 | CBRE Group, Inc. Class A* | 1,548,420 | ||||||
7,750 | Equinix, Inc. (REIT) | 3,325,990 | ||||||
40,931 | Forest City Realty Trust, Inc. Class A (REIT) | 989,302 | ||||||
68,176 | Host Hotels & Resorts, Inc. (REIT) | 1,245,576 | ||||||
37,014 | Park Hotels & Resorts, Inc. (REIT) | 997,897 | ||||||
7,747 | Prologis, Inc. (REIT) | 454,284 | ||||||
3,571 | Quality Care Properties, Inc. (REIT)* | 65,385 | ||||||
20,000 | SBA Communications Corp. (REIT)* | 2,698,000 | ||||||
|
| |||||||
18,170,127 | ||||||||
|
| |||||||
Retailing – 4.5% | ||||||||
7,481 | Amazon.com, Inc.* | 7,241,608 | ||||||
34,544 | Best Buy Co., Inc. | 1,980,407 | ||||||
3,333 | Burlington Stores, Inc.* | 306,603 | ||||||
3,024 | Expedia, Inc. | 450,425 | ||||||
3,554 | Home Depot, Inc. (The) | 545,184 | ||||||
7,838 | Netflix, Inc.* | 1,171,075 | ||||||
1,009 | Priceline Group, Inc. (The)* | 1,887,355 | ||||||
79,263 | Target Corp. | 4,144,662 | ||||||
|
| |||||||
17,727,319 | ||||||||
|
| |||||||
Semiconductors & Semiconductor Equipment – 3.4% | ||||||||
96,118 | Applied Materials, Inc. | 3,970,635 | ||||||
15,179 | Broadcom Ltd. | 3,537,466 | ||||||
|
| |||||||
Common Stocks – (continued) | ||||||||
Semiconductors & Semiconductor Equipment – (continued) | ||||||||
85,107 | Maxim Integrated Products, Inc. | $ | 3,821,304 | |||||
28,359 | Texas Instruments, Inc. | 2,181,658 | ||||||
|
| |||||||
13,511,063 | ||||||||
|
| |||||||
Software & Services – 10.7% | ||||||||
36,628 | Activision Blizzard, Inc. | 2,108,674 | ||||||
37,716 | Adobe Systems, Inc.* | 5,334,551 | ||||||
6,096 | Alphabet, Inc. Class A* | 5,667,329 | ||||||
6,119 | Alphabet, Inc. Class C* | 5,560,519 | ||||||
3,979 | Cadence Design Systems, Inc.* | 133,257 | ||||||
44,290 | Citrix Systems, Inc.* | 3,524,598 | ||||||
23,662 | eBay, Inc.* | 826,277 | ||||||
4,975 | Electronic Arts, Inc.* | 525,957 | ||||||
44,901 | Facebook, Inc. Class A* | 6,779,153 | ||||||
5,826 | Fidelity National Information Services, Inc. | 497,540 | ||||||
90,694 | Microsoft Corp. | 6,251,537 | ||||||
7,172 | ServiceNow, Inc.* | 760,232 | ||||||
4,293 | Vantiv, Inc. Class A* | 271,919 | ||||||
30,763 | VeriSign, Inc.* | 2,859,729 | ||||||
58,837 | Western Union Co. (The) | 1,120,845 | ||||||
|
| |||||||
42,222,117 | ||||||||
|
| |||||||
Technology Hardware & Equipment – 7.9% | ||||||||
100,775 | Apple, Inc. | 14,513,615 | ||||||
32,290 | F5 Networks, Inc.* | 4,102,767 | ||||||
241,886 | Flex Ltd.* | 3,945,161 | ||||||
128,862 | Jabil, Inc. | 3,761,482 | ||||||
139,704 | Juniper Networks, Inc. | 3,894,948 | ||||||
24,571 | Seagate Technology plc | 952,126 | ||||||
|
| |||||||
31,170,099 | ||||||||
|
| |||||||
Telecommunication Services – 1.2% | ||||||||
116,210 | AT&T, Inc.(a) | 4,384,603 | ||||||
5,696 | Level 3 Communications, Inc.* | 337,773 | ||||||
|
| |||||||
4,722,376 | ||||||||
|
| |||||||
Transportation – 1.4% | ||||||||
120,953 | JetBlue Airways Corp.* | 2,761,357 | ||||||
7,173 | Norfolk Southern Corp. | 872,954 | ||||||
27,061 | Southwest Airlines Co. | 1,681,571 | ||||||
3,957 | United Continental Holdings, Inc.* | 297,764 | ||||||
|
| |||||||
5,613,646 | ||||||||
|
| |||||||
Utilities – 1.4% | ||||||||
251,405 | AES Corp. | 2,793,110 | ||||||
61,117 | CenterPoint Energy, Inc. | 1,673,384 | ||||||
6,149 | CMS Energy Corp. | 284,391 | ||||||
23,737 | NiSource, Inc. | 601,970 | ||||||
|
| |||||||
5,352,855 | ||||||||
|
| |||||||
TOTAL COMMON STOCKS | ||||||||
(Cost $341,295,118) | $ | 386,450,066 | ||||||
|
|
8 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST U.S. EQUITY INSIGHTS FUND
Shares | Distribution Rate | Value | ||||||
Investment Company(b)(c) – 0.7% | ||||||||
Goldman Sachs Financial Square Government Fund — Institutional Shares |
| |||||||
2,762,001 | 0.845 | % | $ | 2,762,001 | ||||
(Cost $2,762,001) | ||||||||
| ||||||||
TOTAL INVESTMENTS – 98.5% | ||||||||
(Cost $344,057,119) | $ | 389,212,067 | ||||||
| ||||||||
OTHER ASSETS IN EXCESS OF LIABILITIES – 1.5% |
| 6,063,127 | ||||||
| ||||||||
NET ASSETS – 100.0% | $ | 395,275,194 | ||||||
|
The percentage shown for each investment category reflects the value of investments in that category as a percentage of net assets. | ||
* | Non-income producing security. | |
(a) | All or a portion of security is segregated as collateral for initial margin requirements on futures transactions. | |
(b) | Represents an affiliated issuer. | |
(c) | Variable rate security. Interest rate or distribution rate disclosed is that which is in effect on June 30, 2017. |
Investment Abbreviation: | ||
REIT | —Real Estate Investment Trust |
ADDITIONAL INVESTMENT INFORMATION
FUTURES CONTRACTS — At June 30, 2017, the Fund had the following futures contracts:
Type | Number of Contracts Long (Short) | Expiration Date | Current Value | Unrealized Gain (Loss) | ||||||||||
S&P 500 E-Mini Index | 41 | September 2017 | $ | 4,962,845 | $ | (35,136 | ) |
The accompanying notes are an integral part of these financial statements. | 9 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST U.S. EQUITY INSIGHTS FUND
Statement of Assets and Liabilities
June 30, 2017 (Unaudited)
Assets: | ||||
Investments in unaffiliated issuers, at value (cost $341,295,118) | $ | 386,450,066 | ||
Investments in affiliated issuers, at value (cost $2,762,001) | 2,762,001 | |||
Cash | 5,918,066 | |||
Receivables: | ||||
Investments sold | 10,144,440 | |||
Dividends | 255,162 | |||
Reimbursement from investment adviser | 18,679 | |||
Fund shares sold | 16,224 | |||
Variation margin on certain derivative contracts | 1,846 | |||
Other assets | 1,210 | |||
Total assets | 405,567,694 | |||
Liabilities: | ||||
Payables: | ||||
Investments purchased | 9,421,402 | |||
Fund shares redeemed | 571,477 | |||
Management fees | 189,461 | |||
Distribution and Service fees and Transfer Agency fees | 29,224 | |||
Accrued expenses | 80,936 | |||
Total liabilities | 10,292,500 | |||
Net Assets: | ||||
Paid-in capital | 318,630,468 | |||
Undistributed net investment income | 2,342,822 | |||
Accumulated net realized gain | 29,182,092 | |||
Net unrealized gain | 45,119,812 | |||
NET ASSETS | $ | 395,275,194 | ||
Net Assets: | ||||
Institutional | $ | 264,712,555 | ||
Service | 130,562,639 | |||
Total Net Assets | $ | 395,275,194 | ||
Shares outstanding $0.001 par value (unlimited shares authorized): | ||||
Institutional | 13,548,545 | |||
Service | 6,666,375 | |||
Net asset value, offering and redemption price per share: | ||||
Institutional | $19.54 | |||
Service | 19.59 |
10 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST U.S. EQUITY INSIGHTS FUND
Statement of Operations
For the Six Months Ended June 30, 2017 (Unaudited)
Investment income: | ||||
Dividends — unaffiliated issuers (net of foreign taxes withheld of $5,210) | $ | 3,339,939 | ||
Dividends — affiliated issuers | 8,511 | |||
Securities lending income — affiliated issuer | 674 | |||
Total investment income | 3,349,124 | |||
Expenses: | ||||
Management fees | 1,203,029 | |||
Distribution and Service fees — Service Shares | 158,073 | |||
Professional fees | 40,642 | |||
Transfer Agency fees(a) | 38,804 | |||
Custody, accounting and administrative services | 33,608 | |||
Printing and mailing costs | 30,657 | |||
Trustee fees | 8,428 | |||
Other | 6,428 | |||
Total expenses | 1,519,669 | |||
Less — expense reductions | (169,168 | ) | ||
Net expenses | 1,350,501 | |||
NET INVESTMENT INCOME | 1,998,623 | |||
Realized and unrealized gain (loss): | ||||
Net realized gain from: | ||||
Investments | 23,322,143 | |||
Futures contracts | 394,576 | |||
Net change in unrealized gain (loss) on: | ||||
Investments | 13,574,999 | |||
Futures contracts | (5,565 | ) | ||
Net realized and unrealized gain | 37,286,153 | |||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 39,284,776 |
(a) Institutional and Service Shares incurred Transfer Agency fees of $26,159 and $12,645, respectively.
The accompanying notes are an integral part of these financial statements. | 11 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST U.S. EQUITY INSIGHTS FUND
Statements of Changes in Net Assets
For the Six Months Ended June 30, 2017 (Unaudited) | For the Fiscal Year Ended December 31, 2016 | |||||||
From operations: | ||||||||
Net investment income | $ | 1,998,623 | $ | 4,419,244 | ||||
Net realized gain | 23,716,719 | 19,576,686 | ||||||
Net change in unrealized gain | 13,569,434 | 13,561,997 | ||||||
Net increase in net assets resulting from operations | 39,284,776 | 37,557,927 | ||||||
Distributions to shareholders: | ||||||||
From net investment income | ||||||||
Institutional Shares | — | (3,237,561 | ) | |||||
Service Shares | — | (1,277,330 | ) | |||||
From net realized gains | ||||||||
Institutional Shares | — | (8,734,468 | ) | |||||
Service Shares | — | (4,117,588 | ) | |||||
Total distributions to shareholders | — | (17,366,947 | ) | |||||
From share transactions: | ||||||||
Proceeds from sales of shares | 12,630,395 | 15,918,402 | ||||||
Reinvestment of distributions | — | 17,366,947 | ||||||
Cost of shares redeemed | (32,591,993 | ) | (69,293,004 | ) | ||||
Net decrease in net assets resulting from share transactions | (19,961,598 | ) | (36,007,655 | ) | ||||
TOTAL INCREASE (DECREASE) | 19,323,178 | (15,816,675 | ) | |||||
Net assets: | ||||||||
Beginning of period | 375,952,016 | 391,768,691 | ||||||
End of period | $ | 395,275,194 | $ | 375,952,016 | ||||
Undistributed net investment income | $ | 2,342,822 | $ | 344,199 |
12 | The accompanying notes are an integral part of these financial statements. |
GOLDMAN SACHS VARIABLE INSURANCE TRUST U.S. EQUITY INSIGHTS FUND
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
Income (loss) from investment operations | Distributions to shareholders | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year - Share Class | Net asset value, beginning of period | Net investment income(a) | Net realized and unrealized gain (loss) | Total from investment operations | From net investment income | From net | Total distributions | Net asset value, end of period | Total return(b) | Net assets, end of period (in 000s) | Ratio of net expenses to average net assets | Ratio of total expenses to average net assets | Ratio of net investment income to average net assets | Portfolio turnover rate(c) | ||||||||||||||||||||||||||||||||||||||||||
FOR THE SIX MONTHS ENDED JUNE 30, (UNAUDITED) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2017 - Institutional | $ | 17.65 | $ | 0.10 | $ | 1.79 | $ | 1.89 | $ | — | $ | — | $ | — | $ | 19.54 | 10.71 | % | $ | 264,713 | 0.63 | %(d) | 0.70 | %(d) | 1.10 | %(d) | 97 | % | ||||||||||||||||||||||||||||
2017 - Service | 17.71 | 0.08 | 1.80 | 1.88 | — | — | — | 19.59 | 10.62 | 130,563 | 0.84 | (d) | 0.95 | (d) | 0.89 | (d) | 97 | |||||||||||||||||||||||||||||||||||||||
FOR THE FISCAL YEARS ENDED DECEMBER 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2016 - Institutional | 16.71 | 0.22 | 1.58 | 1.80 | (0.23 | ) | (0.63 | ) | (0.86 | ) | 17.65 | 10.70 | 255,565 | 0.64 | 0.70 | 1.25 | 204 | |||||||||||||||||||||||||||||||||||||||
2016 - Service | 16.77 | 0.18 | 1.59 | 1.77 | (0.20 | ) | (0.63 | ) | (0.83 | ) | 17.71 | 10.44 | 120,387 | 0.85 | 0.95 | 1.04 | 204 | |||||||||||||||||||||||||||||||||||||||
2015 - Institutional | 18.12 | 0.23 | (0.27 | ) | (0.04 | ) | (0.25 | ) | (1.12 | ) | (1.37 | ) | 16.71 | (0.20 | ) | 269,238 | 0.64 | 0.71 | 1.29 | 200 | ||||||||||||||||||||||||||||||||||||
2015 - Service | 18.17 | 0.20 | (0.28 | ) | (0.08 | ) | (0.20 | ) | (1.12 | ) | (1.32 | ) | 16.77 | (0.41 | ) | 122,531 | 0.85 | 0.96 | 1.08 | 200 | ||||||||||||||||||||||||||||||||||||
2014 - Institutional | 16.52 | 0.21 | 2.47 | 2.68 | (0.26 | ) | (0.82 | ) | (1.08 | ) | 18.12 | 16.37 | 312,370 | 0.65 | 0.71 | 1.21 | 214 | |||||||||||||||||||||||||||||||||||||||
2014 - Service | 16.55 | 0.18 | 2.47 | 2.65 | (0.21 | ) | (0.82 | ) | (1.03 | ) | 18.17 | 16.18 | 138,725 | 0.86 | 0.96 | 1.01 | 214 | |||||||||||||||||||||||||||||||||||||||
2013 - Institutional | 12.14 | 0.20 | 4.35 | 4.55 | (0.17 | ) | — | (0.17 | ) | 16.52 | 37.52 | 307,589 | 0.65 | 0.71 | 1.36 | 207 | ||||||||||||||||||||||||||||||||||||||||
2013 - Service | 12.16 | 0.17 | 4.35 | 4.52 | (0.13 | ) | — | (0.13 | ) | 16.55 | 37.23 | 125,748 | 0.86 | 0.96 | 1.15 | 207 | ||||||||||||||||||||||||||||||||||||||||
2012 - Institutional | 10.80 | 0.20 | 1.36 | (e) | 1.56 | (0.22 | ) | — | (0.22 | ) | 12.14 | 14.42 | (e) | 262,759 | 0.64 | 0.72 | 1.71 | 134 | ||||||||||||||||||||||||||||||||||||||
2012 - Service | 10.82 | 0.18 | 1.35 | (e) | 1.53 | (0.19 | ) | — | (0.19 | ) | 12.16 | 14.10 | (e) | 99,892 | 0.85 | 0.97 | 1.51 | 134 |
(a) | Calculated based on the average shares outstanding methodology. |
(b) | Assumes investment at the net asset value at the beginning of the period, reinvestment of all distributions, and a complete redemption of the investment at the net asset value at the end of the period. Total returns for periods less than one full year are not annualized. |
(c) | The Fund’s portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short term investments and certain derivatives. If such transactions were included, the Fund’s portfolio turnover rate may be higher. |
(d) | Annualized. |
(e) | Reflects payment from affiliate relating to certain investment transactions which amounted to $0.01 per share and 0.07% of average net assets. Excluding such payment, the total return would have been 14.32% and 14.01%, respectively. |
The accompanying notes are an integral part of these financial statements. | 13 |
GOLDMAN SACHS VARIABLE INSURANCE TRUST U.S. EQUITY INSIGHTS FUND
Notes to Financial Statements
June 30, 2017 (Unaudited)
1. ORGANIZATION
Goldman Sachs Variable Insurance Trust (the “Trust” or “VIT”) is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company. The Trust includes the Goldman Sachs U.S. Equity Insights Fund (the “Fund”). The Fund is a diversified portfolio under the Act offering two classes of shares — Institutional and Service Shares. Shares of the Trust are offered to separate accounts of participating life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies.
Goldman Sachs Asset Management, L.P. (“GSAM”), an affiliate of Goldman Sachs & Co. LLC (formerly Goldman, Sachs & Co.) (“Goldman Sachs”), serves as investment adviser to the Fund pursuant to a management agreement (the “Agreement”) with the Trust.
2. SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and require management to make estimates and assumptions that may affect the reported amounts and disclosures. Actual results may differ from those estimates and assumptions.
A. Investment Valuation — The Fund’s valuation policy is to value investments at fair value.
B. Investment Income and Investments — Investment income includes interest income, dividend income and securities lending income. Interest income is accrued daily and adjusted for amortization of premiums and accretion of discounts. Dividend income is recognized on ex-dividend date or, for certain foreign securities, as soon as such information is obtained subsequent to the ex-dividend date. Investment transactions are reflected on trade date. Realized gains and losses are calculated using identified cost. Investment transactions are recorded on the following business day for daily net asset value (“NAV”) calculations. Investment income is recorded net of any foreign withholding taxes, less any amounts reclaimable. The Fund may file withholding tax reclaims in certain jurisdictions to recover a portion of amounts previously withheld. Any foreign capital gains tax is accrued daily based upon net unrealized gains, and is payable upon sale of such investments. Distributions received from the Fund’s investments in United States (“U.S.”) real estate investment trusts (“REITs”) may be characterized as ordinary income, net capital gain or a return of capital. A return of capital is recorded by the Fund as a reduction to the cost basis of the REIT.
For derivative contracts, realized gains and losses are recorded upon settlement of the contract.
C. Class Allocations and Expenses — Investment income, realized and unrealized gain (loss), and non-class specific expenses of the Fund are allocated daily based upon the proportion of net assets of each class. Non-class specific expenses directly incurred by the Fund are charged to the Fund, while such expenses incurred by the Trust are allocated across the Fund on a straight-line and/or pro-rata basis depending upon the nature of the expenses. Class specific expenses, where applicable, are borne by the respective share classes and include Distribution and Service and Transfer Agency fees.
14
GOLDMAN SACHS VARIABLE INSURANCE TRUST U.S. EQUITY INSIGHTS FUND
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
D. Federal Taxes and Distributions to Shareholders — It is the Fund’s policy to comply with the requirements of the Internal Revenue Code of 1986, as amended (the “Code”), applicable to regulated investment companies (mutual funds) and to distribute each year substantially all of its investment company taxable income and capital gains to its shareholders. Accordingly, the Fund is not required to make any provisions for the payment of federal income tax. Distributions to shareholders are recorded on the ex-dividend date. Income and capital gains distributions, if any, are declared and paid annually.
Net capital losses, if any, are carried forward to future fiscal years and may be used to the extent allowed by the Code to offset any future capital gains. Losses that are carried forward will retain their character as either short-term or long-term capital losses. Utilization of capital loss carryforwards will reduce the requirement of future capital gains distributions.
The characterization of distributions to shareholders for financial reporting purposes is determined in accordance with federal income tax rules, which may differ from GAAP. The source of the Fund’s distributions may be shown in the accompanying financial statements as either from net investment income, net realized gain or capital. Certain components of the Fund’s net assets on the Statement of Assets and Liabilities reflect permanent GAAP/tax differences based on the appropriate tax character.
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS
U.S. GAAP defines the fair value of a financial instrument as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price); the Fund’s policy is to use the market approach. GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The levels used for classifying investments are not necessarily an indication of the risk associated with investing in these investments. The three levels of the fair value hierarchy are described below:
Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 — Quoted prices in markets that are not active or financial instruments for which significant inputs are observable (including, but not limited to, quoted prices for similar investments, interest rates, foreign exchange rates, volatility and credit spreads), either directly or indirectly;
Level 3 — Prices or valuations that require significant unobservable inputs (including GSAM’s assumptions in determining fair value measurement).
Changes in valuation techniques may result in transfers into or out of an assigned level within the hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value hierarchy resulting from such changes are deemed to have occurred as of the beginning of the reporting period.
The Board of Trustees (“Trustees”) has approved Valuation Procedures that govern the valuation of the portfolio investments held by the Fund, including investments for which market quotations are not readily available. The Trustees have delegated to GSAM day-to-day responsibility for implementing and maintaining internal controls and procedures related to the valuation of the Fund’s portfolio investments. To assess the continuing appropriateness of pricing sources and methodologies, GSAM regularly performs price verification procedures and issues challenges as necessary to third party pricing vendors or brokers, and any differences are reviewed in accordance with the Valuation Procedures.
15
GOLDMAN SACHS VARIABLE INSURANCE TRUST U.S. EQUITY INSIGHTS FUND
Notes to Financial Statements (continued)
June 30, 2017 (Unaudited)
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS (continued)
A. Level 1 and Level 2 Fair Value Investments — The valuation techniques and significant inputs used in determining the fair values for investments classified as Level 1 and Level 2 are as follows:
Equity Securities — Equity securities traded on a U.S. securities exchange or the NASDAQ system, or those located on certain foreign exchanges, including but not limited to the Americas, are valued daily at their last sale price or official closing price on the principal exchange or system on which they are traded. If there is no sale or official closing price or such price is believed by GSAM to not represent fair value, equity securities are valued at the last bid price for long positions and at the last ask price for short positions. To the extent these investments are actively traded, they are classified as Level 1 of the fair value hierarchy, otherwise they are generally classified as Level 2.
Unlisted equity securities for which market quotations are available are valued at the last sale price on the valuation date, or if no sale occurs, at the last bid price. These investments are generally classified as Level 2 of the fair value hierarchy.
Money Market Funds — Investments in the Goldman Sachs Financial Square Government Fund (“Underlying Fund”) are valued at the NAV of the Institutional Share class on the day of valuation. These investments are generally classified as Level 1 of the fair value hierarchy. For information regarding an Underlying Fund’s accounting policies and investment holdings, please see the Underlying Fund’s shareholder report.
Derivative Contracts — A derivative is an instrument whose value is derived from underlying assets, indices, reference rates or a combination of these factors. The Fund enters into derivative transactions to hedge against changes in interest rates, securities prices, and/or currency exchange rates, to increase total return, or to gain access to certain markets or attain exposure to other underliers.
Exchange-traded derivatives, including futures and options contracts, are valued at the last sale or settlement price and typically fall within Level 1 of the fair value hierarchy. Over-the-counter (“OTC”) and centrally cleared derivatives are valued using market transactions and other market evidence, including market-based inputs to models, calibration to market-clearing transactions, broker or dealer quotations, or other alternative pricing sources. Where models are used, the selection of a particular model to value OTC and centrally cleared derivatives depends upon the contractual terms of, and specific risks inherent in, the instrument, as well as the availability of pricing information in the market. Valuation models require a variety of inputs, including contractual terms, market prices, yield curves, credit curves, measures of volatility, voluntary and involuntary prepayment rates, loss severity rates and correlations of such inputs. For OTC and centrally cleared derivatives that trade in liquid markets, model inputs can generally be verified and model selection does not involve significant management judgment. OTC and centrally cleared derivatives are classified within Level 2 of the fair value hierarchy when significant inputs are corroborated by market evidence.
i. Futures Contracts — Futures contracts are contracts to buy or sell a standardized quantity of a specified commodity or security and are valued based on exchanged settlement prices or independent market quotes. Futures contracts are valued at the last settlement price, or in the absence of a sale, the last bid price for long positions and at the last ask price for short positions, at the end of each day on the board of trade or exchange upon which they are traded. Upon entering into a futures contract, the Fund deposits cash or securities in an account on behalf of the broker in an amount sufficient to meet the initial margin requirement. Subsequent payments are made or received by the Fund equal to the daily change in the contract value and are recorded as variation margin receivable or payable with a corresponding offset to unrealized gains or losses. For financial reporting purposes, cash collateral that has been pledged to cover obligations of the Fund and cash collateral received, if any, is reported separately on the Statement of Assets and Liabilities as receivables/payables for collateral on certain derivative contracts. Non-cash collateral pledged by the Fund, if any, is noted in the Schedule of Investments.
16
GOLDMAN SACHS VARIABLE INSURANCE TRUST U.S. EQUITY INSIGHTS FUND
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS (continued)
B. Level 3 Fair Value Investments — To the extent that significant inputs to valuation models and other alternative pricing sources are unobservable, or if quotations are not readily available, or if GSAM believes that such quotations do not accurately reflect fair value, the fair value of the Fund’s investments may be determined under Valuation Procedures approved by the Trustees. GSAM, consistent with its procedures and applicable regulatory guidance, may make an adjustment to the most recent valuation prices of either domestic or foreign securities in light of significant events to reflect what it believes to be the fair value of the securities at the time of determining the Fund’s NAV. Significant events which could affect a large number of securities in a particular market may include, but are not limited to: significant fluctuations in U.S. or foreign markets; market dislocations; market disruptions; or unscheduled market closings. Significant events which could also affect a single issuer may include, but are not limited to: corporate actions such as reorganizations, mergers and buy-outs; ratings downgrades; and bankruptcies.
C. Fair Value Hierarchy — The following is a summary of the Fund’s investments and derivatives classified in the fair value hierarchy as of June 30, 2017:
Investment Type | Level 1 | Level 2 | Level 3 | |||||||||
Assets | ||||||||||||
Common Stock(a) | ||||||||||||
Europe | $ | 1,385,843 | $ | — | $ | — | ||||||
North America | 385,064,223 | — | — | |||||||||
Investment Company | 2,762,001 | — | — | |||||||||
Total | $ | 389,212,067 | $ | — | $ | — | ||||||
Derivative Type | ||||||||||||
Liability(b) | ||||||||||||
Futures Contracts | $ | (35,136 | ) | $ | — | $ | — |
(a) | Amounts are disclosed by continent to highlight the impact of time zone differences between local market close and the calculation of NAV. Security valuations are based on the principal exchange or system on which they are traded, which may differ from country of domicile noted in the table. |
(b) | Amount shown represents unrealized gain (loss) at period end. |
4. INVESTMENTS IN DERIVATIVES
For further information regarding security characteristics, see the Schedule of Investments.
The following table sets forth, by certain risk types, the gross value of derivative contracts as of June 30, 2017. These instruments were used as part of the Fund’s investment strategies and to obtain and/or manage exposure related to the risks below. The values in the table below exclude the effects of cash collateral received or posted pursuant to these derivative contracts, and therefore are not representative of the Fund’s net exposure.
Risk | Statement of Assets and Liabilities | Assets | Statement of Assets and Liabilities | Liabilities(a) | ||||||||||
Equity | — | $ | — | Variation margin on certain derivative contracts | $ | (35,136 | ) |
(a) | Includes unrealized gain (loss) on futures contracts described in the Additional Investment Information section of the Schedule of Investments. Only the variation margin as of June 30, 2017 is reported within the Statement of Assets and Liabilities. |
17
GOLDMAN SACHS VARIABLE INSURANCE TRUST U.S. EQUITY INSIGHTS FUND
Notes to Financial Statements (continued)
June 30, 2017 (Unaudited)
4. INVESTMENTS IN DERIVATIVES (continued)
The following table sets forth, by certain risk types, the Fund’s gains (losses) related to these derivatives and their indicative volumes for the six months ended June 30, 2017. These gains (losses) should be considered in the context that these derivative contracts may have been executed to create investment opportunities and/or economically hedge certain investments, and accordingly, certain gains (losses) on such derivative contracts may offset certain (losses) gains attributable to investments. These gains (losses) are included in “Net realized gain (loss)” or “Net change in unrealized gain (loss)” on the Statement of Operations:
Risk | Statement of Operations | Net Realized Gain (Loss) | Net Change in Unrealized Gain (Loss) | Average Number of Contracts(a) | ||||||
Equity | Net realized gain (loss) from futures contracts/Net change in unrealized gain (loss) on futures contracts | $394,576 | $ | (5,565 | ) | 41 |
(a) | Average number of contracts is based on the average of month end balances for the six months ended June 30, 2017. |
5. AGREEMENTS AND AFFILIATED TRANSACTIONS
A. Management Agreement — Under the Agreement, GSAM manages the Fund, subject to the general supervision of the Trustees.
As compensation for the services rendered pursuant to the Agreement, the assumption of the expenses related thereto and administration of the Fund’s business affairs, including providing facilities, GSAM is entitled to a management fee, accrued daily and paid monthly, equal to an annual percentage rate of the Fund’s average daily net assets.
For the six months ended June 30, 2017, contractual and effective net management fees with GSAM were at the following rates:
Contractual Management Rate | Effective Net Management Rate^ | |||||||||||
First $1 billion | Next $1 billion | Next $3 billion | Next $3 billion | Over $8 billion | Effective Rate | |||||||
0.62% | 0.59% | 0.56% | 0.55% | 0.54% | 0.62% | 0.60* |
^ | Effective Net Management Rate includes the impact of management fee waivers of affiliated Underlying Funds, if any. |
* | GSAM agreed to waive a portion of its management fee in order to achieve a net management rate, as defined in the Fund’s most recent prospectus. This waiver will be effective through at least April 28, 2018, and prior to such date GSAM may not terminate the arrangement without approval of the Trustees. For the six months ended June 30, 2017, GSAM waived $27,762 of its management fee. |
The Fund invests in Institutional Shares of the Goldman Sachs Financial Square Government Fund, which is an affiliated Underlying Fund. GSAM has agreed to waive a portion of its management fee payable by the Fund in an amount equal to the management fee it earns as an investment adviser to any of the affiliated Underlying Funds in which the Fund invests. For the six months ended June 30, 2017, GSAM waived $2,228 of the Fund’s management fee.
18
GOLDMAN SACHS VARIABLE INSURANCE TRUST U.S. EQUITY INSIGHTS FUND
5. AGREEMENTS AND AFFILIATED TRANSACTIONS (continued)
B. Distribution and/or Service (12b-1) Plan — The Trust, on behalf of Service Shares of the Fund, has adopted a Distribution and Service Plan subject to Rule 12b-1 under the Act. Under the Distribution and Service Plan, Goldman Sachs, which serves as distributor (the “Distributor”), is entitled to a fee accrued daily and paid monthly, for distribution services and personal and account maintenance services, which may then be paid by Goldman Sachs to authorized dealers, equal to, on an annual basis, 0.25% of the Fund’s average daily net assets attributable to Service Shares. For the six months ended June 30, 2017 for the Fund, Goldman Sachs agreed to waive distribution and service fees so as not to exceed an annual rate of 0.21% of average daily net assets of the Fund. This distribution and service fee waiver will remain in place through at least April 28, 2018, and prior to such date Goldman Sachs may not terminate the arrangement without the approval of the Trustees. For the six months ended June 30, 2017, Goldman Sachs waived $25,292 in distribution and service fees for the Fund’s Service Shares.
C. Transfer Agency Agreement — Goldman Sachs also serves as the transfer agent of the Fund for a fee pursuant to the Transfer Agency Agreement. The fees charged for such transfer agency services are accrued daily and paid monthly at an annual rate of 0.02% of the average daily net assets of Institutional and Service Shares.
D. Other Expense Agreements and Affiliated Transactions — GSAM has agreed to limit certain “Other Expenses” of the Fund (excluding acquired fund fees and expenses, transfer agency fees and expenses, taxes, interest, brokerage fees, shareholder meeting, litigation, indemnification and extraordinary expenses) to the extent such expenses exceed, on an annual basis, a percentage rate of the average daily net assets of the Fund. Such Other Expense reimbursements, if any, are accrued daily and paid monthly. In addition, the Fund is not obligated to reimburse GSAM for prior fiscal year expense reimbursements, if any. The Other Expense limitation as an annual percentage rate of average daily net assets for the Fund is 0.004%. The Other Expense limitation will remain in place through at least April 28, 2018, and prior to such date GSAM may not terminate the arrangement without the approval of the Trustees. For the six months ended June 30, 2017, GSAM reimbursed $111,995 to the Fund. In addition, the Fund has entered into certain offset arrangements with the custodian and the transfer agent, which may result in a reduction of the Fund’s expenses and are received irrespective of the application of the “Other Expense” limitation described above. For the six months ended June 30, 2017, custody fee credits were $1,891.
E. Line of Credit Facility — As of June 30, 2017, the Fund participated in a $1,100,000,000 committed, unsecured revolving line of credit facility (the “facility”) together with other funds of the Trust and certain registered investment companies having management agreements with GSAM or its affiliates. This facility is to be used for temporary emergency purposes, or to allow for an orderly liquidation of securities to meet redemption requests. The interest rate on borrowings is based on the federal funds rate. The facility also requires a fee to be paid by the Fund based on the amount of the commitment that has not been utilized. For the six months ended June 30, 2017, the Fund did not have any borrowings under the facility.
F. Other Transactions with Affiliates — The following table provides information about the Fund’s investment in the Goldman Sachs Financial Square Government Fund as of and for the six months ended June 30, 2017:
Market Value 12/31/2016 | Purchases at Cost | Proceeds from Sales | Market Value 6/30/2017 | Dividend Income | ||||||||||||||
$ | 1,470,057 | $ | 26,315,085 | $ | (25,023,141 | ) | $ | 2,762,001 | $ | 8,511 |
6. PORTFOLIO SECURITIES TRANSACTIONS
The cost of purchases and proceeds from sales and maturities of long-term securities for the six months ended June 30, 2017, were $369,563,293 and $388,907,808, respectively.
19
GOLDMAN SACHS VARIABLE INSURANCE TRUST U.S. EQUITY INSIGHTS FUND
Notes to Financial Statements (continued)
June 30, 2017 (Unaudited)
7. SECURITIES LENDING
Pursuant to exemptive relief granted by the Securities and Exchange Commission (“SEC”) and the terms and conditions contained therein, the Fund may lend its securities through a securities lending agent, Goldman Sachs Agency Lending (“GSAL”), a wholly-owned subsidiary of Goldman Sachs, to certain qualified borrowers including Goldman Sachs and affiliates. In accordance with the Fund’s securities lending procedures, the Fund receives cash collateral at least equal to the market value of the securities on loan. The market value of the loaned securities is determined at the close of business of the Fund, at their last sale price or official closing price on the principal exchange or system on which they are traded, and any additional required collateral is delivered to the Fund on the next business day. As with other extensions of credit, the Fund may experience delay in the recovery of its securities or incur a loss should the borrower of the securities breach its agreement with the Fund or become insolvent at a time when the collateral is insufficient to cover the cost of repurchasing securities on loan. Dividend income received from securities on loan may not be subject to withholding taxes and therefore withholding taxes paid may differ from the amounts listed in the Statement of Operations. Loans of securities are terminable at any time and as such 1) the remaining contractual maturities of the outstanding securities lending transactions are considered to be overnight and continuous and 2) the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.
The Fund invests the cash collateral received in connection with securities lending transactions in the Goldman Sachs Financial Square Government Fund (“Government Money Market Fund”), an affiliated series of the Trust. The Government Money Market Fund is registered under the Act as an open end investment company, is subject to Rule 2a-7 under the Act, and is managed by GSAM, for which GSAM may receive a management fee of up to 0.205% on an annualized basis of the average daily net assets of the Government Money Market Fund.
In the event of a default by a borrower with respect to any loan, GSAL will exercise any and all remedies provided under the applicable borrower agreement to make the Fund whole. These remedies include purchasing replacement securities by applying the collateral held from the defaulting broker against the purchase cost of the replacement securities. If GSAL is unable to purchase replacement securities, GSAL will indemnify the Fund by paying the Fund an amount equal to the market value of the securities loaned minus the value of cash collateral received from the borrower for the loan, subject to an exclusion for any shortfalls resulting from a loss of value in such cash collateral due to reinvestment risk. The amounts of the Fund’s overnight and continuous agreements represent the gross amounts of recognized liabilities for securities lending transactions outstanding as of June 30, 2017 are disclosed as “Payable upon return of securities loaned” on the Statement of Assets and Liabilities.
Both the Fund and GSAL received compensation relating to the lending of the Fund’s securities. The amounts earned, if any, by the Fund for the six months ended June 30, 2017, are reported under Investment Income on the Statement of Operations.
The table below details securities lending activity with affiliates of Goldman Sachs:
For the Six months ended June 30, 2017 | ||||
Earnings of GSAL Relating to Securities Loaned | Amounts Received by the Funds from Lending to Goldman Sachs | Amounts Payable to Goldman Sachs Upon Return of Securities Loaned as of 6/30/17 | ||
$75 | $— | $— |
The following table provides information about the Fund’s investment in the Government Money Market Fund for the six months ended June 30, 2017:
Market Value 12/31/16 | Purchases at Cost | Proceeds from Sales | Market Value 6/30/17 | |||
$— | $2,564,175 | $(2,564,175) | $— |
20
GOLDMAN SACHS VARIABLE INSURANCE TRUST U.S. EQUITY INSIGHTS FUND
8. TAX INFORMATION
As of the Fund’s most recent fiscal year end, December 31, 2016, the Fund’s timing differences, on a tax-basis were as follows:
Timing differences (Deferred REIT Disbutions) | $ | 12,659 |
As of June 30, 2017, the Fund’s aggregate security unrealized gains and losses based on cost for U.S. federal income tax purposes were as follows:
Tax cost | $ | 345,336,928 | ||
Gross unrealized gain | 48,301,016 | |||
Gross unrealized loss | (4,425,877 | ) | ||
Net unrealized security gain | $ | 43,875,139 |
The difference between GAAP-basis and tax-basis unrealized gains (losses) is attributable primarily to wash sales and net mark to market gains (losses) on regulated futures contracts.
GSAM has reviewed the Fund’s tax positions for all open tax years (the current and prior three years, as applicable) and has concluded that no provision for income tax is required in the Fund’s financial statements. Such open tax years remain subject to examination and adjustment by tax authorities.
9. OTHER RISKS
The Fund’s risks include, but are not limited to, the following:
Derivatives Risk — The Fund’s use of derivatives may result in loss. Derivative instruments, which may pose risks in addition to and greater than those associated with investing directly in securities, currencies or other instruments, may be illiquid or less liquid, volatile, difficult to price and leveraged so that small changes in the value of the underlying instruments may produce disproportionate losses to the Fund. Derivatives are also subject to counterparty risk, which is the risk that the other party in the transaction will not fulfill its contractual obligation. The use of derivatives is a highly specialized activity that involves investment techniques and risks different from those associated with investments in more traditional securities and instruments. Losses from derivatives can also result from a lack of correlation between changes in the value of derivative instruments and the portfolio assets (if any) being hedged.
Investments in Other Investment Companies — As a shareholder of another investment company, including an exchange-traded fund (“ETF”), the Fund will indirectly bear its proportionate share of any net management fees and other expenses paid by such other investment companies, in addition to the fees and expenses regularly borne by the Fund. ETFs are subject to risks that do not apply to conventional mutual funds, including but not limited to the following: (i) the market price of the ETF’s shares may trade at a premium or a discount to their NAV; and (ii) an active trading market for an ETF’s shares may not develop or be maintained.
Large Shareholder Transactions Risk — The Fund may experience adverse effects when certain large shareholders, such as other funds, participating insurance companies, accounts and Goldman Sachs affiliates, purchase or redeem large amounts of shares of the Fund. Such large shareholder redemptions may cause the Fund to sell portfolio securities at times when it would not otherwise do so, which may negatively impact the Fund’s NAV and liquidity. These transactions may also accelerate the realization of taxable income to shareholders if such sales of investments resulted in gains, and may also increase transaction costs. In addition, a large redemption could result in the Fund’s current expenses being allocated over a smaller asset base, leading to an increase in the Fund’s expense ratio. Similarly, large Fund share purchases may adversely affect the Fund’s performance to the extent that the Fund is delayed in investing new cash and is required to maintain a larger cash position than it ordinarily would.
21
GOLDMAN SACHS VARIABLE INSURANCE TRUST U.S. EQUITY INSIGHTS FUND
Notes to Financial Statements (continued)
June 30, 2017 (Unaudited)
9. OTHER RISKS (continued)
Liquidity Risk — The Fund may make investments that are illiquid or that may become less liquid in response to market developments or adverse investor perceptions. Illiquid investments may be more difficult to value. Liquidity risk may also refer to the risk that the Fund will not be able to pay redemption proceeds within the allowable time period because of unusual market conditions, an unusually high volume of redemption requests, or other reasons. To meet redemption requests, the Fund may be forced to sell investments at an unfavorable time and/or under unfavorable conditions.
Market and Credit Risks — In the normal course of business, the Fund trades financial instruments and enters into financial transactions where risk of potential loss exists due to changes in the market (market risk). Additionally, the Fund may also be exposed to credit risk in the event that an issuer or guarantor fails to perform or that an institution or entity with which the Fund has unsettled or open transactions defaults.
10. INDEMNIFICATIONS
Under the Trust’s organizational documents, its Trustees, officers, employees and agents are indemnified, to the extent permitted by the Act and state law, against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the course of business, the Fund enters into contracts that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, GSAM believes the risk of loss under these arrangements to be remote.
11. SUBSEQUENT EVENTS
Subsequent events after the Statement of Assets and Liabilities date have been evaluated and GSAM has concluded that there is no impact requiring adjustment or disclosure in the financial statements.
12. SUMMARY OF SHARE TRANSACTIONS
Share activity is as follows:
For the Six Months Ended June 30, 2017 (Unaudited) | For the Fiscal Year Ended December 31, 2016 | |||||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||||
Institutional Shares | ||||||||||||||||
Shares sold | 242,373 | $ | 4,457,121 | 316,144 | $ | 5,403,266 | ||||||||||
Reinvestment of distributions | — | — | 671,831 | 11,972,029 | ||||||||||||
Shares redeemed | (1,170,617 | ) | (21,939,238 | ) | (2,619,254 | ) | (44,715,813 | ) | ||||||||
(928,244 | ) | (17,482,117 | ) | (1,631,279 | ) | (27,340,518 | ) | |||||||||
Service Shares | ||||||||||||||||
Shares sold | 434,606 | 8,173,274 | 615,221 | 10,515,136 | ||||||||||||
Reinvestment of distributions | — | — | 301,729 | 5,394,918 | ||||||||||||
Shares redeemed | (564,173 | ) | (10,652,755 | ) | (1,427,118 | ) | (24,577,191 | ) | ||||||||
(129,567 | ) | (2,479,481 | ) | (510,168 | ) | (8,667,137 | ) | |||||||||
NET DECREASE | (1,057,811 | ) | $ | (19,961,598 | ) | (2,141,447 | ) | $ | (36,007,655 | ) |
22
GOLDMAN SACHS VARIABLE INSURANCE TRUST U.S. EQUITY INSIGHTS FUND
Fund Expenses — Six Month Period Ended June 30, 2017 (Unaudited) |
As a shareholder of Institutional or Service Shares of the Fund, you incur ongoing costs, including management fees, distribution and/or service (12b-1) fees (with respect to Service Shares) and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Institutional Shares and Service Shares of the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from January 1, 2017 through June 30, 2017, which represents a period of 181 days of a 365 day year.
Actual Expenses — The first line under each share class in the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000=8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes — The second line under each share class in the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual net expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only. As a shareholder of the Fund you do not incur any transaction costs, such as sales charges, redemption fees, or exchange fees, but shareholders of other funds may incur such costs. The second line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds whose shareholders may incur transaction costs.
Share Class | Beginning Account Value 01/01/17 | Ending Account Value 06/30/17 | Expenses Paid for the 6 Months Ended 06/30/17* | |||||||||
Institutional | ||||||||||||
Actual | $ | 1,000 | $ | 1,107.10 | $ | 3.29 | ||||||
Hypothetical 5% return | 1,000 | 1,021.67 | + | 3.16 | ||||||||
Service | ||||||||||||
Actual | 1,000 | 1,106.20 | 4.39 | |||||||||
Hypothetical 5% return | 1,000 | 1,020.63 | + | 4.21 |
* | Expenses are calculated using the Fund’s annualized net expense ratio for each class, which represents the ongoing expenses as a percentage of net assets for the six months ended June 30, 2017. Expenses are calculated by multiplying the annualized net expense ratio by the average account value for the period; then multiplying the result by the number of days in the most recent fiscal half year; and then dividing that result by the number of days in the fiscal year. The annualized net expense ratios for the period were 0.63% and 0.84% for Institutional and Service Shares, respectively. |
+ | Hypothetical expenses are based on the Fund’s actual annualized net expense ratios and an assumed rate of return of 5% per year before expenses. |
23
GOLDMAN SACHS VARIABLE INSURANCE TRUST U.S. EQUITY INSIGHTS FUND
Statement Regarding Basis for Approval of Management Agreement (Unaudited)
Background
The Goldman Sachs U.S. Equity Insights Fund (the “Fund”) is an investment portfolio of Goldman Sachs Variable Insurance Trust (the “Trust”). The Board of Trustees oversees the management of the Trust and reviews the investment performance and expenses of the Fund at regularly scheduled meetings held throughout the year. In addition, the Board of Trustees determines annually whether to approve the continuance of the Trust’s investment management agreement (the “Management Agreement”) with Goldman Sachs Asset Management, L.P. (the “Investment Adviser”) on behalf of the Fund.
The Management Agreement was most recently approved for continuation until June 30, 2018 by the Board of Trustees, including those 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”), at a meeting held on June 14-15, 2017 (the “Annual Meeting”).
The review process undertaken by the Trustees spans the course of the year and culminates with the Annual Meeting. To assist the Trustees in their deliberations, the Trustees have established a Contract Review Committee (the “Committee”), comprised of the Independent Trustees. The Committee held four meetings over the course of the year since the Management Agreement was last approved. At those Committee meetings, regularly scheduled Board or other committee meetings, and/or the Annual Meeting, matters relevant to the renewal of the Management Agreement were considered by the Board, or the Independent Trustees, as applicable. With respect to the Fund, such matters included:
(a) | the nature and quality of the advisory, administrative, and other services provided to the Fund by the Investment Adviser and its affiliates, including information about: |
(i) | the structure, staff, and capabilities of the Investment Adviser and its portfolio management teams; |
(ii) | the groups within the Investment Adviser and its affiliates that support the portfolio management teams or provide other types of necessary services, including fund services groups (e.g., accounting and financial reporting, tax, shareholder services, and operations); controls and risk management groups (e.g., legal, compliance, valuation oversight, credit risk management, internal audit, compliance testing, market risk analysis, finance, and central funding); sales and distribution support groups, and others (e.g., information technology and training); |
(iii) | trends in employee headcount; |
(iv) | the Investment Adviser’s financial resources and ability to hire and retain talented personnel and strengthen its operations; and |
(v) | the parent company’s support of the Investment Adviser and its mutual fund business, as expressed by the firm’s senior management; |
(b) | information on the investment performance of the Fund, including comparisons to the performance of similar mutual funds, as provided by a third-party mutual fund data provider engaged as part of the contract review process (the “Outside Data Provider”), and a benchmark performance index; and information on general investment outlooks in the markets in which the Fund invests; |
(c) | information provided by the Investment Adviser indicating the Investment Adviser’s views on whether the Fund’s peer group and/or benchmark index had high, medium, or low relevance given the Fund’s particular investment strategy; |
(d) | the terms of the Management Agreement and other agreements with affiliated service providers entered into by the Trust on behalf of the Fund; |
(e) | fee and expense information for the Fund, including: |
(i) | the relative management fee and expense levels of the Fund as compared to those of comparable funds managed by other advisers, as provided by the Outside Data Provider; |
(ii) | the Fund’s expense trends over time; and |
(iii) | to the extent the Investment Adviser manages other types of accounts (such as bank collective trusts, private wealth management accounts, institutional separate accounts, sub-advised mutual funds, and non-U.S. funds) having investment objectives and policies similar to those of the Fund, comparative information on the advisory fees charged and services provided to those accounts by the Investment Adviser; |
(f) | with respect to the extensive investment performance and expense comparison data provided by the Outside Data Provider, its processes in producing that data for the Fund; |
(g) | the undertakings of the Investment Adviser and its affiliates to implement fee waivers and/or expense limitations; |
(h) | information relating to the profitability of the Management Agreement and the transfer agency and distribution and service arrangements of the Fund to the Investment Adviser and its affiliates; |
(i) | whether the Fund’s existing management fee schedule adequately addressed any economies of scale; |
24
GOLDMAN SACHS VARIABLE INSURANCE TRUST U.S. EQUITY INSIGHTS FUND
Statement Regarding Basis for Approval of Management Agreement (Unaudited) (continued)
(j) | a summary of the “fall-out” benefits derived by the Investment Adviser and its affiliates from their relationships with the Fund, including the fees received by the Investment Adviser’s affiliates from the Fund for transfer agency, securities lending, portfolio trading, distribution and other services; |
(k) | a summary of potential benefits derived by the Fund as a result of its relationship with the Investment Adviser; |
(l) | information regarding commissions paid by the Fund and broker oversight, other information regarding portfolio trading, and how the Investment Adviser carries out its duty to seek best execution; |
(m) | the manner in which portfolio manager compensation is determined; and the number and types of accounts managed by the portfolio managers; |
(n) | the nature and quality of the services provided to the Fund by its unaffiliated service providers, and the Investment Adviser’s general oversight and evaluation (including reports on due diligence) of those service providers as part of the administrative services provided under the Management Agreement; and |
(o) | the Investment Adviser’s processes and policies addressing various types of potential conflicts of interest; its approach to risk management; the annual review of the effectiveness of the Fund’s compliance program; and periodic compliance reports. |
The Trustees also received an overview of the Fund’s distribution arrangements. They received information regarding the Fund’s assets, share purchase and redemption activity, and payment of distribution and service fees. Information was also provided to the Trustees relating to revenue sharing payments made by and services provided by the Investment Adviser and its affiliates to intermediaries that promote the sale, distribution, and/or servicing of Fund shares. The Independent Trustees also discussed the broad range of other investment choices that are available to Fund investors, including the availability of comparable funds managed by other advisers.
The presentations made at the Board and Committee meetings and at the Annual Meeting encompassed the Fund and other mutual funds for which the Board of Trustees has responsibility. In evaluating the Management Agreement at the Annual Meeting, the Trustees relied upon their knowledge, resulting from their meetings and other interactions throughout the year, of the Investment Adviser and its affiliates, their services, and the Fund. In conjunction with these meetings, the Trustees received written materials and oral presentations on the topics covered, and the Investment Adviser addressed the questions and concerns of the Trustees, including concerns regarding the investment performance of certain of the funds they oversee. The Independent Trustees were advised by their independent legal counsel regarding their responsibilities and other regulatory requirements related to the approval and continuation of mutual fund investment management agreements under applicable law. In addition, the Investment Adviser and its affiliates provided the Independent Trustees with a written response to a formal request for information sent on behalf of the Independent Trustees by their independent legal counsel. During the course of their deliberations, the Independent Trustees met in executive sessions with their independent legal counsel, without representatives of the Investment Adviser or its affiliates present.
Nature, Extent, and Quality of the Services Provided Under the Management Agreement
As part of their review, the Trustees considered the nature, extent, and quality of the services provided to the Fund by the Investment Adviser. In this regard, the Trustees considered both the investment advisory services and non-advisory services that are provided by the Investment Adviser and its affiliates. The Trustees noted the transition in the leadership and changes in personnel of various of the Investment Adviser’s portfolio management teams that had occurred in recent periods, and the ongoing recruitment efforts aimed at bringing high quality investment talent to the Investment Adviser. They also noted the Investment Adviser’s commitment to maintaining high quality systems and expending substantial resources to respond to ongoing changes to the regulatory and control environment in which the Fund and its service providers operate, as well as the efforts of the Investment Adviser and its affiliates to combat cyber security risks. The Trustees concluded that the Investment Adviser continued to commit substantial financial and operational resources to the Fund and expressed confidence that the Investment Adviser would continue to do so in the future. The Trustees also recognized that the Investment Adviser had made significant commitments to address regulatory compliance requirements applicable to the Fund and the Investment Adviser and its affiliates.
Investment Performance
The Trustees also considered the investment performance of the Fund. In this regard, they compared the investment performance of the Fund to its peers using rankings and ratings compiled by the Outside Data Provider as of December 31, 2016, and updated performance information prepared by the Investment Adviser using the peer group identified by the Outside Data Provider as of March 31, 2017. The information on the Fund’s investment performance was provided for the one-, three-, five-, and ten-year periods ending on the applicable dates. The Trustees also reviewed the Fund’s investment performance relative to its
25
GOLDMAN SACHS VARIABLE INSURANCE TRUST U.S. EQUITY INSIGHTS FUND
Statement Regarding Basis for Approval of Management Agreement (Unaudited) (continued)
performance benchmark. As part of this review, they 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 and market conditions.
In addition, the Trustees considered materials prepared and presentations made by the Investment Adviser’s senior management and portfolio management personnel in which Fund performance was assessed. The Trustees also considered the Investment Adviser’s periodic reports with respect to the Fund’s risk profile, and how the Investment Adviser’s approach to risk monitoring and management influences portfolio management. They noted the efforts of the Fund’s portfolio management team to continue to enhance the investment model used in managing the Fund.
The Trustees observed that the Fund’s Institutional Shares had placed in the top half of the Fund’s peer group for the one-, three-, five-, and ten-year periods, and had outperformed the Fund’s benchmark index for the one- and five-year periods and underperformed for the three- and ten-year periods ended March 31, 2017.
Costs of Services Provided and Competitive Information
The Trustees considered the contractual terms of the Management Agreement and the fee rates payable by the Fund thereunder. 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.
In particular, the Trustees reviewed analyses prepared by the Outside Data Provider regarding the expense rankings of the Fund. The analyses provided a comparison of the Fund’s management fee and breakpoints to those of a relevant peer group and category universe; an expense analysis which compared the Fund’s overall net and gross expenses to a peer group and a category universe; and data comparing the Fund’s net expenses to the peer and category medians. The analyses also compared the Fund’s transfer agency, custody, and distribution fees, other expenses and fee waivers/reimbursements to those of the peer group and category medians. The Trustees concluded that the comparisons provided by the Outside Data Provider were useful in evaluating the reasonableness of the management fees and total expenses paid by the Fund.
In addition, the Trustees considered the Investment Adviser’s undertakings to implement fee waivers and/or expense limitations. The Trustees also noted that certain changes were being made to existing fee waiver or expense limitation arrangements of the Fund that would have the effect of decreasing total Fund expenses, with such changes taking effect in connection with the Fund’s next annual registration statement update. They also considered, to the extent that the Investment Adviser manages other types of accounts having investment objectives and policies similar to those of the Fund, comparative fee information for services provided by the Investment Adviser to those accounts, and information that indicated that services provided to the Fund differed in various significant respects from the services provided to other types of accounts which, in many cases, operated under less stringent legal and regulatory structures, required fewer services from the Investment Adviser to a smaller number of client contact points, and were less time-intensive.
In addition, the Trustees noted that shareholders are able to redeem their Fund shares at any time if shareholders believe that the Fund fees and expenses are too high or if they are dissatisfied with the performance of the Fund.
Profitability
The Trustees reviewed the Fund’s contribution to the Investment Adviser’s revenues and pre-tax profit margins. In this regard the Trustees noted that they had received, among other things, profitability analyses and summaries, revenue and expense schedules by Fund and by function (i.e., investment management, transfer agency and distribution and service), and information on the Investment Adviser’s expense allocation methodology. They observed that the profitability and expense figures are substantially similar to those used by the Investment Adviser for many internal purposes, including compensation decisions among various business groups, and are thus subject to a vigorous internal debate about how certain revenue and expenses should be allocated. The Trustees also noted that the internal audit group within the Goldman Sachs organization had audited the expense allocation methodology and that the internal audit group was satisfied with the reasonableness, consistency, and accuracy of the Investment Adviser’s expense allocation methodology and profitability analysis calculations. Profitability data for the Fund were provided for 2016 and 2015, and the Trustees considered this information in relation to the Investment Adviser’s overall profitability.
26
GOLDMAN SACHS VARIABLE INSURANCE TRUST U.S. EQUITY INSIGHTS FUND
Statement Regarding Basis for Approval of Management Agreement (Unaudited) (continued)
Economies of Scale
The Trustees considered the information that had been provided regarding the Investment Adviser’s profitability. The Trustees also considered the breakpoints in the fee rate payable under the Management Agreement for the Fund at the following annual percentage rates of the average daily net assets of the Fund:
First $1 billion | 0.62 | % | ||
Next $1 billion | 0.59 | |||
Next $3 billion | 0.56 | |||
Next $3 billion | 0.55 | |||
Over $8 billion | 0.54 |
The Trustees noted that the breakpoints were designed to share potential economies of scale, if any, with the Fund and its shareholders as assets under management reach those asset levels. The Trustees considered the amounts of assets in the Fund; the Fund’s recent share purchase and redemption activity; the information provided by the Investment Adviser relating to the costs of the services provided by the Investment Adviser and its affiliates and their realized profits; information comparing fee rates charged by the Investment Adviser with fee rates charged to other funds in the peer group; and the Investment Adviser’s undertakings to waive a portion of its management fee and to limit certain expenses of the Fund that exceed a specified level as well as Goldman Sachs & Co. LLC’s (“Goldman Sachs”) undertaking to waive a portion of the distribution and service fees paid by the Fund’s Service Shares. Upon reviewing these matters at the Annual Meeting, the Trustees concluded that the fee breakpoints represented a means of assuring that benefits of scalability, if any, would be passed along to shareholders at the specified asset levels.
Other Benefits to the Investment Adviser and Its Affiliates
The Trustees also considered the other benefits derived by the Investment Adviser and its affiliates from their relationships with the Fund as stated above, including: (a) transfer agency fees received by Goldman Sachs; (b) brokerage and futures commissions earned by Goldman Sachs for executing securities and futures transactions on behalf of the Fund; (c) trading efficiencies resulting from aggregation of orders of the Fund with those for other funds or accounts managed by the Investment Adviser; (d) fees earned by Goldman Sachs Agency Lending (“GSAL”), an affiliate of the Investment Adviser, as securities lending agent (and fees earned by the Investment Adviser for managing the fund in which the Fund’s cash collateral is invested); (e) the Investment Adviser’s ability to leverage the infrastructure designed to service the Fund on behalf of its other clients; (f) the Investment Adviser’s ability to cross-market other products and services to Fund shareholders; (g) Goldman Sachs’ retention of certain fees as Fund Distributor; (h) the Investment Adviser’s ability to negotiate better pricing with custodians on behalf of its other clients, as a result of the relationship with the Fund; and (i) the possibility that the working relationship between the Investment Adviser and the Fund’s third-party service providers may cause those service providers to be more likely to do business with other areas of Goldman Sachs. In the course of considering the foregoing, the Independent Trustees requested and received further information quantifying certain of these fall-out benefits.
Other Benefits to the Fund and Its Shareholders
The Trustees also noted that the Fund receives certain potential benefits as a result of its relationship with the Investment Adviser, including: (a) trading efficiencies resulting from aggregation of orders of the Fund with those of other funds or accounts managed by the Investment Adviser; (b) enhanced servicing from vendors because of the volume of business generated by the Investment Adviser and its affiliates; (c) enhanced servicing from broker-dealers because of the volume of business generated by the Investment Adviser and its affiliates; (d) the Investment Adviser’s ability to negotiate favorable terms with derivatives counterparties on behalf of the Fund as a result of the size and reputation of the Goldman Sachs organization; (e) the Investment Adviser’s knowledge and experience gained from managing other accounts and products; (f) the Investment Adviser’s ability to hire and retain qualified personnel to provide services to the Fund because of the reputation of the Goldman Sachs organization; (g) the Fund’s access, through the Investment Adviser, to certain firmwide resources (e.g., proprietary risk management systems and databases), subject to certain restrictions; (h) the Fund’s ability to participate in the securities lending program administered by GSAL, as measured by the revenue received by the Fund in connection with the program; and (i) the Fund’s access to certain affiliated distribution channels. In addition, the Trustees noted the competitive nature of the mutual fund marketplace, and considered that many of the Fund’s shareholders invested in the Fund in part because of the Fund’s relationship with the Investment Adviser and that those shareholders have a general expectation that the relationship will continue.
27
GOLDMAN SACHS VARIABLE INSURANCE TRUST U.S. EQUITY INSIGHTS FUND
Statement Regarding Basis for Approval of Management Agreement (Unaudited) (continued)
Conclusion
In connection with their consideration of the Management Agreement, the Trustees gave weight to each of the factors described above, but did not identify any particular factor as controlling their decision. After deliberation and consideration of all of the information provided, including the factors described above, the Trustees concluded, in the exercise of their business judgment, that the management fees paid by the Fund were reasonable in light of the services provided to it by the Investment Adviser, the Investment Adviser’s costs and the Fund’s current and reasonably foreseeable asset levels. The Trustees unanimously concluded that the Investment Adviser’s continued management likely would benefit the Fund and its shareholders and that the Management Agreement should be approved and continued with respect to the Fund until June 30, 2018.
28
TRUSTEES | OFFICERS | |
Ashok N. Bakhru, Chairman | James A. McNamara, President | |
Kathryn A. Cassidy | Scott M. McHugh, Treasurer, Senior Vice | |
Diana M. Daniels | President and Principal Financial Officer | |
Herbert J. Markley | Joseph F. DiMaria, Assistant Treasurer and | |
James A. McNamara | Principal Accounting Officer | |
Jessica Palmer | Caroline L. Kraus, Secretary | |
Roy W. Templin | ||
Gregory G. Weaver |
GOLDMAN SACHS & CO. LLC
Distributor and Transfer Agent
GOLDMAN SACHS ASSET MANAGEMENT, L.P.
Investment Adviser
200 West Street, New York
New York 10282
Visit our web site at www.GSAMFUNDS.com to obtain the most recent month-end returns.
The reports concerning the Fund included in this shareholder report may contain certain forward-looking statements about the factors that may affect the performance of the Fund in the future. These statements are based on Fund management’s predictions and expectations concerning certain future events and their expected impact on the Fund, such as performance of the economy as a whole and of specific industry sectors, changes in the levels of interest rates, the impact of developing world events, and other factors that may influence the future performance of the Fund. Management believes these forward-looking statements to be reasonable, although they are inherently uncertain and difficult to predict. Actual events may cause adjustments in portfolio management strategies from those currently expected to be employed.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the Fund voted proxies relating to portfolio securities for the 12-month period ended June 30 is available (i) without charge, upon request by calling 1-800-621-2550; and (ii) on the Securities and Exchange Commission (“SEC”) web site at http://www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Form N-Qs are available on the SEC’s web site at http://www.sec.gov within 60 days after the Fund’s first and third fiscal quarters. The Fund’s Form N-Qs may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may also be obtained by calling 1-800-SEC-0330. Form N-Qs may be obtained upon request and without charge by calling 1-800-621-2550.
The website links provided are for your convenience only and are not an endorsement or recommendation by GSAM of any of these websites or the products or services offered. GSAM is not responsible for the accuracy and validity of the content of these websites.
Fund holdings and allocations shown are as of June 30, 2017 and may not be representative of future investments. Fund holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities. Current and future holdings are subject to risk.
References to indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only and do not imply that the portfolio will achieve similar results. The index composition may not reflect the manner in which a portfolio is constructed. While an adviser seeks to design a portfolio which reflects appropriate risk and return features, portfolio characteristics may deviate from those of the benchmark.
The Global Industry Classification Standard (“GICS”) was developed by and is the exclusive property and a service mark of Morgan Stanley Capital International Inc. (“MSCI”) and Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. (“S&P”) and is licensed for use by Goldman Sachs. Neither MSCI, S&P nor any other party involved in making or compiling the GICS or any GICS classifications makes any express or implied warranties or representations with respect to such standard or classification (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of such standard or classification. Without limiting any of the foregoing, in no event shall MSCI, S&P, any of their affiliates or any third party involved in making or compiling the GICS or any GICS classifications have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.
The portfolio risk management process includes an effort to monitor and manage risk, but does not imply low risk.
Shares of the Goldman Sachs VIT Funds are offered to separate accounts of participating life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Shares of the Fund are not offered directly to the general public. The variable annuity contracts and variable life insurance policies are described in the separate prospectuses issued by participating insurance companies. You should refer to those prospectuses for information about surrender charges, mortality and expense risk fees and other charges that may be assessed by participating insurance companies under the variable annuity contracts or variable life insurance policies. Such fees or charges, if any, may affect the return you may realize with respect to your investments. Ask your representative for more complete information. Please consider a fund’s objectives, risks and charges and expenses, and read the prospectus carefully before investing. The prospectus contains this and other information about the Fund.
This material is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus or summary prospectus, if applicable. Investors should consider the Fund’s objective, risks, and charges and expenses, and read the summary prospectus, if available, and/or the prospectus carefully before investing or sending money. The summary prospectus, if available, and the prospectus contain this and other information about the Fund and may be obtained from your authorized dealer or from Goldman Sachs & Co. LLC by calling 1-800-621-2550.
THIS MATERIAL IS FOR INFORMATIONAL PURPOSES ONLY AND IS PROVIDED SOLELY ON THE BASIS THAT IT WILL NOT CONSTITUTE INVESTMENT OR OTHER ADVICE OR A RECOMMENDATION RELATING TO ANY PERSON’S OR PLAN’S INVESTMENT OR OTHER DECISIONS, AND GOLDMAN SACHS IS NOT A FIDUCIARY OR ADVISOR WITH RESPECT TO ANY PERSON OR PLAN BY REASON OF PROVIDING THE MATERIAL OR CONTENT HEREIN INCLUDING UNDER THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974 OR DEPARTMENT OF LABOR REGULATIONS. PLAN SPONSORS AND OTHER FIDUCIARIES SHOULD CONSIDER THEIR OWN CIRCUMSTANCES IN ASSESSING ANY POTENTIAL COURSE OF ACTION.
This report is prepared for the general information of contract owners and is not an offer of shares of the Goldman Sachs Variable Insurance Trust — Goldman Sachs U.S. Equity Insights Fund.
© 2017 Goldman Sachs. All rights reserved.
VITUSSAR-17/101232-TMPL-08/2017-587127/7.8k
ITEM 2. | CODE OF ETHICS. |
(a) | As of the end of the period covered by this report, the registrant has adopted a code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party (the “Code of Ethics”). |
(b) | During the period covered by this report, no amendments were made to the provisions of the Code of Ethics. |
(c) | During the period covered by this report, the registrant did not grant any waivers, including an implicit waiver, from any provision of the Code of Ethics. |
(d) | A copy of the Code of Ethics is available as provided in Item 12(a)(1) of this report. |
ITEM 3. | AUDIT COMMITTEE FINANCIAL EXPERT. |
The registrant’s board of trustees has determined that the registrant has at least one “audit committee financial expert” (as defined in Item 3 of Form N-CSR) serving on its audit committee. Gregory G. Weaver is the “audit committee financial expert” and is “independent” (as each term is defined in Item 3 of Form N-CSR). |
ITEM 4. | PRINCIPAL ACCOUNTANT FEES AND SERVICES. |
The information required by this Item is only required in an annual report on this Form N-CSR. |
ITEM 5. | AUDIT COMMITTEE OF LISTED REGISTRANTS. |
Not applicable.
ITEM 6. | SCHEDULE OF INVESTMENTS |
Schedule of Investments is included as part of the Reports to Shareholders filed under Item 1.
ITEM 7. | DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable.
ITEM 8. | PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES |
Not applicable.
ITEM 9. | PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS |
Not applicable.
ITEM 10. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. |
There have been no material changes to the procedures by which shareholders may recommend nominees to the registrant’s board of trustees.
ITEM 11. | CONTROLS AND PROCEDURES. |
(a) | The registrant’s principal executive and principal financial officers or persons performing similar functions have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”)) are effective as of a date within 90 days of the filing date of this report that includes the disclosure required by this paragraph, based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act and 15d-15(b) under the Securities Exchange Act of 1934, as amended. |
(b) | There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the registrant’s second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect the registrant’s internal control over financial reporting. |
ITEM 12. | EXHIBITS. |
(a)(1) | Goldman Sachs Variable Insurance Trust’s Code of Ethics for Principal Executive and Senior Financial Officers is incorporated by reference to Exhibit 12(a)(1) of the registrant’s Form N-CSR filed on February 27, 2015. | |||
(a)(2) | Exhibit 99.CERT | Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 filed herewith | ||
Exhibit 99.906CERT | Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 filed herewith |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Goldman Sachs Variable Insurance Trust
/s/ James A. McNamara | ||
By: James A. McNamara | ||
Chief Executive Officer of | ||
Goldman Sachs Variable Insurance Trust | ||
Date: August 24, 2017 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
/s/ James A. McNamara | ||
By: James A. McNamara | ||
Chief Executive Officer of | ||
Goldman Sachs Variable Insurance Trust | ||
Date: August 24, 2017 | ||
/s/ Scott McHugh | ||
By: Scott McHugh | ||
Principal Financial Officer of | ||
Goldman Sachs Variable Insurance Trust | ||
Date: August 24, 2017 |